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| Release Date:2010/07/23 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FOR IMMEDIATE RELEASE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEACOAST REPORTS RESULTS FOR SECOND QUARTER 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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“Consistent with the specific plans we have been executing to reduce credit risk, we made significant progress this quarter in further reducing our exposures to construction and development loans”, said Dennis S. Hudson, III, Chairman and Chief Executive Officer. “This effort, which started over two years ago, along with $50 million in gross proceeds from a capital raise in the second quarter, reduced our total exposure to construction and development loans and commercial real estate loans significantly below regulatory concentration thresholds. Our continued progress in reducing exposures to construction and development loans will be key to lower credit costs and earnings improvements in future quarters.” Highlights include:
We have for some time been focused on building upon our strong deposit customer franchise with specific initiatives designed to further improve performance in response to significant consolidation of larger competitors and the failure of smaller banks in our markets. Growth rates for core deposit products accelerated during the quarter which significantly improved deposit mix and reduced our deposit cost below 1% for the first time in the company’s history. Highlights include:
Construction and land development loans have been reduced through early recognition of the potential for portfolio weakness in the first quarter of 2007 when the housing market began to slow, aggressive collection and liquidation activities with borrowers, together with liquidations achieved through the sale of larger problem loans since 2008. Total construction and land development loans have been reduced 83 percent to $106.9 million, compared with the high point in 2007, with over $200 million of these reductions over the past four quarters. Residential construction and land development loans, which have produced extremely high loss experience over the past two years, have been reduced to $32.5 million or down by 91 percent compared to the high point in 2007. Portfolio liquidation for residential construction and development loans has also been focused on large loan exposures. Large balance (over $4 million) residential construction and land development loans have been reduced by $40.2 million to only $10.2 million over the past six quarters, all of which is classified nonaccrual. Commercial real estate mortgage loans remain well diversified (as shown in the attached table) with all but three categories of exposure at less than 25 percent of tier one capital and the allowance for loan losses. As of June 30, 2010 total exposure for this portfolio represents 213% of tier one capital and the allowance for loan losses. While, over time, the Company may see further deterioration in this portfolio as a result of continuing economic weakness, we expect a much lower level of loss potential than has been experienced for the construction and land development portfolios. blem Loan Management and Loss Mitigation Update Nonaccrual Loans June 30, 2010
*Loans classified as nonaccrual and less than 30 days past due. Nonperforming loans declined by $5.4 million from March 31, 2010 to $90.9 million at June 30, 2010. Nonperforming loans also include restructured loans that are currently classified as nonaccruing. Company policy requires troubled debt restructures to be classified as nonaccrual loans (under certain circumstances) until performance can be verified (typically six months). We will continue to pursue troubled debt restructures in selected cases where we expect to achieve better liquidation values than may be expected through other traditional collection activities. During the quarter, we also worked with retail mortgage customers, when possible, to achieve lower payment structures in an effort to avoid foreclosure and keep families in their homes. Restructured accruing loans totaled $64.9 million at June 30, 2010, up $4.8 million, all related to retail mortgage customers. A total of 28 applications were received seeking restructured mortgages, compared to 37 the first quarter and 48 in the fourth quarter of last year. Restructured loans included in nonaccruing loans totaled $30.1 million at June 30, 2010, compared with $35.5 million at March 31, 2010. During the quarter we saw improvements in past due loans. Early stage delinquency improved in the residential mortgage loan portfolio and remained modest in other loan portfolios. Accruing residential mortgage loans (including home equity lines) 30-89 days past due declined to $5.1 million from $5.3 million, and loans 90 days past due declined to zero from $163,000 on a linked quarter basis. Other real estate owned (“OREO”) was unchanged from March 31, 2010, but declined by $4.2 million to $19.0 million year over year, reflecting ongoing sales and liquidations. OREO is expected to increase over the next few quarters as we conclude liquidation and resolution of nonaccrual loans. During the quarter and over the past year, resources were positioned to help accelerate the marketing and liquidation of assets in this portfolio and the nonperforming loans. Earnings (before the provision for loan losses, goodwill impairment and taxes) for the quarter totaled approximately $3.0 million, down from $4.3 million in the second quarter 2009, the result of lower net interest income of $2.7 million, lower operating expenses of $2.0 million (noninterest expenses excluding goodwill impairment taken in the second quarter of 2009) and lower noninterest income down approximately $600,000 over the second quarter of 2009. Net interest income did benefit from the improved deposit mix and deposit re-pricing during the quarter, but was offset by negative loan growth, and declining asset yields due to the current low interest rate environment. Net interest income for the first six months of 2010 (on a tax equivalent basis) was $33.6 million, a decline of $3.7 million from a year ago as a result of lower deposit costs and lower rates paid on all interest bearing liabilities, decreased yield on investments, a decline in loan volumes, lower loan yields and over $221.9 million of average cash liquidity compared to $91.4 million during the first six months of 2009. The net interest margin for the second quarter totaled 3.27 percent, down 21 basis points compared to the first quarter 2010, and was 38 basis points lower than in second quarter 2009. Noninterest income, excluding securities gains and losses, totaled $4.6 million, up $40,000 linked quarter, due to an increase of $80,000 in service charges on deposits, $94,000 in debit card and other EFT fees as a result of increased households and customer accounts, as well as improved revenue related to mortgage banking fees, offset by seasonal declines in fees from merchant services, marine finance and wealth management. Wealth management and marine finance fees continue to be impacted by the challenging economic conditions. Mortgage production was up compared to the first quarter of 2010 with revenues at $464,000, and totaled $885,000 for the first half of 2010, $102,000 lower than the first six months last year. Noninterest expenses for the second quarter totaled $19.2 million, $2.0 million lower than in the second quarter 2009, excluding the effect of the goodwill impairment in 2009. Salaries, wages and benefits (excluding one-time severance payments) for the second quarter 2010 declined $349,000 or 4.2 percent from a year ago, and were $542,000 lower for the first six months compared to the same period in 2009, as a result of consolidation of branches and centralization of management by combining markets. Cost reductions were also achieved in backroom support areas, with expenditures for communications, occupancy, and furniture and equipment all declining compared to the prior year. Increasing this year were costs related to foreclosed and repossessed asset management activities, which increased by $2.5 million compared to the first six months of 2009, as well as higher legal and professional fees related to outside consulting assistance to the board of directors related to strategic planning and risk management. The Company’s residential lending group has produced solid, quality mortgage loan growth in 2010. A total of 266 applications were accepted in the second quarter 2010 for total loans of $51 million, and 538 applications were taken in the first six months for $107 million. Closed mortgage loans totaled $33 million for the quarter, similar to the first quarter 2010. A total of $24 million in residential mortgage loans were sold in the second quarter of 2010. Over the first six months of 2010, a total of $46 million in residential mortgage loans were sold, and $20 million were added to the portfolio. The Company’s retail core deposit focus has produced strong growth in core deposit customer relationships and has resulted in increased balances, which offset planned run-off of certificates of deposit as these matured in the second quarter 2010. The improved deposit mix and lower rates paid on interest bearing deposits during the second quarter reduced the overall cost of total deposits to 0.94 percent, 9 basis points lower than in the first quarter 2010. Total deposits at quarter end June 30, 2010 were lower compared to March 31, 2010, due to a planned deposit runoff of customers with single-service certificates of deposit and brokered certificates as they matured. In addition, noninterest bearing demand, NOW, MMDA and savings balances combined increased $89.3 million or 8.4 percent from a year ago. The mix of deposits improved with average time deposits declining $60.9 million, other lower cost average interest bearing NOW and savings deposits increasing $34.9 million or 16.4 percent annualized, and average demand deposits increasing $7.8 million or 11.5 percent annualized compared to the first quarter 2010. The average cost of interest bearing core deposits (NOW, savings and MMDA) during the second quarter was 0.56 percent, down 15 basis points from the second quarter of 2009. The interest rates paid on certificate of deposit rates were also lower compared to the second quarter last year and totaled 1.99 percent during the second quarter 2010, a decline of 81 basis points. The average cost of total interest bearing liabilities was 1.17 percent, down 8 basis points compared to the first quarter 2010. Average deposits totaled $1.739 billion for the second quarter 2010, $18 million less than in the first quarter 2010 and $34 million less compared to last year’s second quarter averages, due primarily to lower average brokered certificate of deposit balances and planned reduction of single-service time deposit customers. Total average sweep repurchase agreements declined during the quarter, as a result of normal seasonal funding trends for the Company’s public deposit customers. Total deposits at June 30, 2010 declined $41 million compared to the prior year due to planned declines in brokered and single-service certificates of deposit. Brokered certificates of deposit totaled $19.8 million at June 30, 2010, down $44.5 million compared to second quarter 2009. Core interest bearing deposits totaled $877.5 million, up $97.2 million compared to the second quarter last year as a result of the successful retail core deposit strategy implemented last year. As previously reported, the Company has experienced strong growth in core deposit customer relationships since implementing the new strategy. A total of 7,410 new households, up 4.8%, have added 9,372 new personal checking accounts, an increase of 1.5% over the last twelve months. These new relationships have improved market share and increased our average services per household. In addition, the new relationships have increased their balances at account opening during the first six months by 19 percent to an average of $26,501. Seacoast will host a conference call on Friday, July 23, 2010 at 9:30 a.m. (Eastern Time) to discuss the earnings results and business trends. Investors may call in (toll-free) by dialing (888) 517-2464 (passcode: 5785075; host: Dennis S. Hudson). Charts will be used during the conference call and may be accessed at Seacoast’s website at www.seacoastbanking.net by selecting “Presentations” under the heading “Investor Services”. A replay of the call will be available for one month, beginning the afternoon of July 23, by dialing (877) 213-9653 (domestic), using the passcode 5785075#. Alternatively, individuals may listen to the live webcast of the presentation by visiting Seacoast’s website at www.seacoastbanking.net. The link is located in the subsection “Presentations” under the heading “Investor Services”. Beginning the afternoon of July 23, 2010, an archived version of the webcast can be accessed from this same subsection of the website. The archived webcast will be available for one year. Seacoast, with approximately $2.1 billion in assets, is one of the largest independent commercial banking organizations in Florida. Seacoast has 39 offices in South and Central Florida and is headquartered on Florida’s Treasure Coast, which is one of the wealthiest areas in the nation. Cautionary Notice Regarding Forward-Looking Statements This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements about future financial and operating results, ability to realized deferred tax assets, cost savings, enhanced revenues, economic and seasonal conditions in our markets, and improvements to reported earnings that may be realized from cost controls and for integration of banks that we have acquired, as well as statements with respect to Seacoast’s objectives, expectations and intentions and other statements that are not historical facts. Actual results may differ from those set forth in the forward-looking statements. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance or achievements of Seacoast to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. You should not expect us to update any forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “support”, “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “further”, “point to,” “project,” “could,” “intend” or other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation: the effects of future economic and market conditions, including seasonality; governmental monetary and fiscal policies, as well as legislative, tax and regulatory changes; changes in accounting policies, rules and practices; the risks of changes in interest rates on the level and composition of deposits, loan demand, liquidity and the values of loan collateral, securities, and interest sensitive assets and liabilities; interest rate risks, sensitivities and the shape of the yield curve; the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market areas and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet; and the failure of assumptions underlying the establishment of reserves for possible loan losses. The risks of mergers and acquisitions, include, without limitation: unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following the merger being lower than expected; the risk of deposit and customer attrition; any changes in deposit mix; unexpected operating and other costs, which may differ or change from expectations; the risks of customer and employee loss and business disruption, including, without limitation, as the result of difficulties in maintaining relationships with employees; increased competitive pressures and solicitations of customers by competitors; as well as the difficulties and risks inherent with entering new markets. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our annual report on Form 10-K for the year ended December 31, 2009 under “Special Cautionary Notice Regarding Forward-Looking Statements” and “Risk Factors”, and otherwise in our SEC reports and filings. Such reports are available upon request from the Company, or from the Securities and Exchange Commission, including through the SEC’s Internet website at http://www.sec.gov. |
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