SEACOAST REPORTS SECOND QUARTER 2023 RESULTS

Well-Positioned Balance Sheet with Strong Capital and Liquidity

Distinctive Deposit Franchise with Granular, Longstanding Customer Base

STUART, Fla., July 27, 2023 (GLOBE NEWSWIRE) -- Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) ( SBCF) today reported net income in the second quarter of 2023 of $31.2 million, or $0.37 per diluted share, compared to $11.8 million, or $0.15 per diluted share in the first quarter of 2023 and $32.8 million, or $0.53 per diluted share in the second quarter of 2022. For the six months ended June 30, 2023, net income was $43.1 million, or $0.52 per diluted share, a decrease of 19% compared to the six months ended June 30, 2022.

Adjusted net income¹ for the second quarter of 2023 was $49.2 million, or $0.58 per diluted share, compared to $29.2 million, or $0.36 per diluted share in the first quarter of 2023 and $36.3 million, or $0.59 per diluted share in the second quarter of 2022. Adjusted net income¹ for the six months ended June 30, 2023 was $78.4 million, or $0.94 per diluted share, an increase of 24% compared to the six months ended June 30, 2022.

For the second quarter of 2023, return on average tangible assets was 1.06% and return on average tangible shareholders’ equity was 12.08%, compared to 0.52% and 5.96%, respectively, in the prior quarter, and 1.29% and 13.01%, respectively, in the prior year quarter. Adjusted return on average tangible assets¹ in the second quarter of 2023 was 1.41% and adjusted return on average tangible shareholders’ equity¹ was 16.08%, compared to 0.90% and 10.34%, respectively, in the prior quarter, and 1.38% and 13.97%, respectively, in the prior year quarter. For the six months ended June 30, 2023, return on average tangible assets was 0.80% and return on average tangible shareholders’ equity was 9.14%, compared to 1.07% and 10.46%, respectively, for the six months ended June 30, 2022. For the six months ended June 30, 2023, adjusted return on average tangible assets¹ was 1.16% and adjusted return on average tangible shareholders’ equity¹ was 13.32%, compared to 1.23% and 11.95%, respectively, for the six months ended June 30, 2022.

Charles M. Shaffer, Seacoast’s Chairman and CEO said, “Seacoast delivered another quarter of robust financial performance, with strong adjusted earnings leading to an adjusted return on tangible common equity of 16.1%. Our capital and liquidity ratios were strong and our asset quality remains excellent. During the quarter, we successfully completed the Professional Bank conversion, wrapping up a significant period of M&A activity that has boosted Seacoast beyond the $10 billion asset threshold and definitively positioned the Company as Florida’s Bank.”

Shaffer added, “Seacoast is committed to our fortress balance sheet, with an allowance for loan losses of $159.7 million and an additional $201.8 million discount on acquired loans, providing significant loss absorption capacity. Our second quarter ratio of tangible common equity to tangible assets increased to 8.53% as we moved past the initially dilutive effect of recent acquisitions, reflecting commitment to driving shareholder value creation.”

Shaffer concluded, “Our strategic focus for the balance of the year will be on relationship-driven customer acquisition and carefully managing our expense base while investing in tactics to drive low-cost deposit growth. We believe that this rigorous approach will support solid capital growth, produce a broadly diversified and stable funding base, and generate increased franchise value over the long run.”

Acquisition Update

In June 2023, we successfully completed the integration of Professional Holding Corp. (“Professional”), including the consolidation of five branches in the South Florida market. Merger-related expense synergies are expected to be fully realized in the second half of 2023. Direct merger-related costs recorded during the second quarter of 2023 totaled $15.6 million. We expect merger-related costs to be insignificant in the third quarter of 2023.

Financial Results

Income Statement

• Net income was $31.2 million, or $0.37 per diluted share, for the second quarter of 2023 compared to net income of $11.8 million, or $0.15 per diluted share, for the prior quarter, and $32.8 million, or $0.53 per diluted share, for the prior year quarter. For the six months ended June 30, 2023, net income was $43.1 million, or $0.52 per diluted share, compared to $53.3 million, or $0.86 per diluted share, for the six months ended June 30, 2022. The results for the six months ended June 30, 2023 included the $26.6 million day-1 provision for credit losses on loans acquired in the Professional acquisition. Adjusted net income¹ for the second quarter of 2023 was $49.2 million, or $0.58 per diluted share, compared to $29.2 million, or $0.36 per diluted share, for the prior quarter, and $36.3 million, or $0.59 per diluted share, for the prior year quarter. For the six months ended June 30, 2023, adjusted net income¹ was $78.4 million, or $0.94 per diluted share, compared to $63.4 million, or $1.03 per diluted share, for the six months ended June 30, 2022.
• Net revenues were $148.5 million in the second quarter of 2023, a decrease of $5.1 million, or 3%, compared to the prior quarter, and an increase of $49.9 million, or 51%, compared to the prior year quarter. For the six months ended June 30, 2023, net revenues were $302.1 million, an increase of $111.6 million, or 59%, compared to the six months ended June 30, 2022. Adjusted revenues¹ were $148.7 million in the second quarter of 2023, a decrease of $2.7 million, or 2%, compared to the prior quarter, and an increase of $49.8 million, or 50%, compared to the prior year quarter. For the six months ended June 30, 2023, adjusted revenues¹ were $300.1 million, an increase of $108.8 million, or 57%, compared to the six months ended June 30, 2022.
• Pre-tax pre-provision earnings¹ were $40.9 million in the second quarter of 2023, a decrease of 12% compared to the first quarter of 2023 and a decrease of 4% compared to the second quarter of 2022. Adjusted pre-tax pre-provision earnings¹ were $64.9 million in the second quarter of 2023, a decrease of 9% compared to the first quarter of 2023 and an increase of 40% compared to the second quarter of 2022. Adjusted pre-tax pre-provision earnings¹ for the six months ended June 30, 2023 were $135.9 million, an increase of $47.8 million, or 54%, when compared to the six months ended June 30, 2022.
• Net interest income totaled $127.0 million in the second quarter of 2023, a decrease of $4.2 million, or 3%, from the first quarter of 2023 and an increase of $45.3 million, or 56%, compared to the second quarter of 2022. When excluding accretion on acquired loans, net interest income declined $2.4 million. Accretion on acquired loans totaled $14.2 million in the second quarter of 2023, $15.9 million in the first quarter of 2023, and $2.7 million in the second quarter of 2022. For the six months ended June 30, 2023, net interest income was $258.1 million, an increase of $99.9 million, or 63%, compared to the six months ended June 30, 2022. Accretion on acquired loans totaled $30.1 million for the six months ended June 30, 2023, compared to $6.4 million for the six months ended June 30, 2022.
• Net interest margin decreased 45 basis points to 3.86% in the second quarter of 2023 compared to 4.31% in the first quarter of 2023. The decline in the net interest margin from the prior quarter was driven by the impact of rising rates on the competitive environment for deposits, the continued effect of an inverted yield curve, and lower accretion of purchase discounts on acquired loans. Loan yields increased three basis points to 5.89%. The effect on loan yields of accretion of purchase discounts on acquired loans in the second quarter of 2023 was an increase of 56 basis points, compared to an increase of 69 basis points in the first quarter of 2023. Securities yields increased 28 basis points to 3.13%, including approximately 12 basis points of benefit from interest rate swaps initiated in the second quarter. The cost of deposits increased 61 basis points, from 77 basis points in the prior quarter, to 1.38% for the second quarter of 2023.
• Noninterest income totaled $21.6 million in the second quarter of 2023, a decrease of $0.9 million, or 4%, compared to the prior quarter, and an increase of $4.6 million, or 27%, compared to the prior year quarter. For the six months ended June 30, 2023, noninterest income was $44.0 million, an increase of $11.7 million, or 36%, compared to the six months ended June 30, 2022. Results for the second quarter of 2023 included the following:
  • Service charges on deposits increased $0.3 million, or 7%, compared to the prior quarter and $1.2 million, or 34%, year over year, including the continued benefit of the expansion of treasury management services to commercial customers.
  • Interchange income totaled $5.1 million in the second quarter, an increase of $0.4 million, or 8%, when compared to the prior quarter and $0.8 million, or 19%, compared to the prior year quarter. As a reminder, beginning in the third quarter of 2023, the Company’s interchange income will be reduced by the requirements of the Durbin amendment, which became effective for the Company on July 1, 2023.
  • The wealth management division continues to demonstrate notable success in building relationships, and during the second quarter of 2023, income increased $0.3 million, or 8%, compared to the prior quarter and $0.5 million, or 20%, compared to the prior year quarter. Assets under management increased by $60 million in the second quarter of 2023, bringing total assets under management to $1.6 billion, up 36% from the prior year.
  • Mortgage banking fees totaled $0.6 million in the second quarter, an increase of $0.2 million, or 35%, due to higher saleable production.
  • Other income decreased by $1.8 million compared to the prior quarter, primarily the result of the recognition in the prior quarter of $2.1 million in bank owned life insurance (“BOLI”) death benefits.
• The provision for credit losses was a net benefit of $0.8 million in the second quarter of 2023, compared to a provision of $31.6 million in the first quarter of 2023 and a provision of $0.8 million in the second quarter of 2022. The provision for credit losses in the first quarter of 2023 included $26.6 million in day-1 provision recorded at the acquisition of Professional.
• Noninterest expense was $107.9 million in the second quarter of 2023, an increase of $0.4 million compared to the prior quarter, and an increase of $51.7 million, or 92%, compared to the prior year quarter. The second quarter of 2023 included $15.6 million of merger-related expenses, compared to $17.5 million in the prior quarter and $3.0 million in the prior year quarter. Noninterest expense was $215.3 million for the six months ended June 30, 2023, including $33.2 million in merger-related charges, compared to $115.1 million in the six months ended June 30, 2022, which included $9.7 million in merger-related charges. Changes compared to the first quarter of 2023 included:
  • Salaries and wages decreased $2.5 million to $45.2 million in the second quarter of 2023. The second quarter of 2023 included $1.6 million in merger-related expenses, compared to $4.2 million in the first quarter of 2023.
  • In the third quarter of 2023, we are continuing our focus on efficiency and streamlining operations, and in late July we executed a reduction in the Company’s workforce by approximately 5%. The Company will incur severance charges in a range of approximately $2.0 to $3.0 million. The resulting lower compensation expense in the third quarter of 2023 will largely be offset by investments in marketing expenses to drive low-cost deposit growth, and lower expense deferral associated with slowing loan originations. As a reminder, under the relevant accounting guidance, the Company defers the expenses associated with the origination of new loans, and recognizes this expense as a reduction to loan yield over the life of the loan. We expect the full benefit of the reduction in workforce to materialize in the fourth quarter of 2023.
  • Employee benefits decreased $1.1 million to $7.5 million in the second quarter of 2023 as a result of higher seasonal payroll taxes impacting the first quarter of 2023.
  • Outsourced data processing costs increased $5.7 million to $20.2 million in the second quarter of 2023. The second quarter of 2023 included $10.9 million in merger-related expenses, compared to $6.6 million in the first quarter of 2023. Termination penalties related to the Professional technology contracts were recorded in the second quarter in conjunction with the system conversion.
  • Telephone and data lines increased $0.4 million to $1.5 million in the second quarter of 2023 reflecting the expansion of the branch footprint.
  • Legal and professional fees decreased by $3.4 million to $4.1 million in the second quarter of 2023, and included $1.7 million in merger-related expenses during the second quarter of 2023 compared to $4.8 million of merger-related expenses in the first quarter of 2023.
  • Amortization of intangibles increased by $0.9 million to $7.7 million resulting from the first full quarter of amortization of the core deposit intangible assets acquired from Professional. These assets are amortized using an accelerated amortization method.
  • Other noninterest expenses increased $1.1 million to $8.3 million in the second quarter of 2023, primarily attributed to maintaining parallel activities and processes prior to the conversion of Professional in June 2023.
• Seacoast recorded $10.2 million of income tax expense in the second quarter of 2023, compared to $2.7 million in the first quarter of 2023, and $8.9 million in the second quarter of 2022, with an effective tax rate of 24.6%, 18.6%, and 21.3%, respectively. Impacts related to stock-based compensation were tax expense of $0.3 million in the second quarter of 2023, tax benefits of $0.2 million in the first quarter of 2023, and tax benefits of $0.4 million in the second quarter of 2022. The first quarter of 2023 included a discrete benefit of $0.6 million related to the BOLI distribution which, combined with lower overall pre-tax income, resulted in a lower effective tax rate in that period.
• The efficiency ratio was 67.34% in the second quarter of 2023, compared to 65.43% in the first quarter of 2023 and 56.22% in the prior year quarter. The adjusted efficiency ratio¹ was 56.44% in the second quarter of 2023, compared to 53.10% in the first quarter of 2023 and 53.15% in the prior year quarter. The Company continues to remain keenly focused on disciplined expense control. The increase in the adjusted efficiency ratio primarily reflects the impact of higher deposit rates on net interest income in the period. The adjusted efficiency ratio¹ for the six months ended June 30, 2023 was 54.76% compared to 53.97% for the six months ended June 30, 2022.

Balance Sheet

• At June 30, 2023, the Company had total assets of $15.0 billion and total shareholders’ equity of $2.1 billion. Book value per share was $24.14 on June 30, 2023, compared to $24.24 on March 31, 2023, and $21.65 on June 30, 2022. Tangible book value per share totaled $14.24 on June 30, 2023 compared to $14.25 on March 31, 2023 and $16.66 on June 30, 2022. Removing the impact of the change in accumulated comprehensive income, tangible book value per share increased by $0.20.
• Debt securities totaled $2.6 billion on June 30, 2023, a decrease of $129.8 million, or 5%, compared to March 31, 2023. Debt securities include approximately $1.9 billion in securities held at fair value and classified as available for sale. The unrealized loss on these securities is fully reflected in the value presented on the balance sheet. The portfolio also includes $707.8 million in securities classified as held to maturity with a fair value of $577.6 million. Held-to-maturity securities consist solely of mortgage-backed securities and collateralized mortgage obligations guaranteed by U.S. government agencies, each of which is expected to recover any price depreciation over its holding period as the debt securities move to maturity. The Company has significant liquidity and available borrowing capacity and has the intent and ability to hold these investments to maturity.
• Loans decreased $16.5 million when compared to the prior quarter, totaling $10.1 billion as of June 30, 2023. The Company continues to exercise a disciplined approach to lending, carefully underwriting loans to strict underwriting guidelines and setting high expectations for risk adjusted returns given the current environment.
• Loan originations were $518.9 million in the second quarter of 2023, a decrease of 3% compared to $536.3 million in the first quarter of 2023.
  • Commercial originations were $317.4 million during the second quarter of 2023, compared to $321.7 million in the first quarter of 2023, and $461.9 million in the second quarter of 2022.
  • Consumer originations in the second quarter of 2023 were $97.2 million, compared to $110.6 million in the first quarter of 2023, and $130.8 million in the second quarter of 2022.
  • Residential loans originated for sale in the secondary market totaled $19.1 million in the second quarter of 2023, compared to $13.9 million in the first quarter of 2023, and $42.7 million in the second quarter of 2022.
  • Closed residential loans retained in the portfolio totaled $85.3 million in the second quarter of 2023, compared to $90.1 million in the first quarter of 2023, and $103.0 million in the second quarter of 2022.
• Pipelines (loans in underwriting and approval or approved and not yet closed) totaled $284.6 million on June 30, 2023, a decrease of 27% from March 31, 2023, and a decrease of 54% from June 30, 2022.
  • Commercial pipelines were $217.6 million as of June 30, 2023, a decrease of 27% from $297.4 million at March 31, 2023, and a decrease of 54% from $476.7 million at June 30, 2022. The decline in pipeline quarter over quarter was the result of the impact of higher rates and a continued selective approach on new credit facilities given a cautious economic outlook.
  • Consumer pipelines were $28.4 million as of June 30, 2023, a decrease of $10.3 million from $38.7 million at March 31, 2023, and a decrease of 62% from $75.5 million at June 30, 2022.
  • Residential saleable pipelines were $11.5 million as of June 30, 2023, compared to $6.6 million at March 31, 2023, and $14.7 million at June 30, 2022. Retained residential pipelines were $27.1 million as of June 30, 2023, compared to $48.4 million at March 31, 2023, and $53.1 million at June 30, 2022.
• Total deposits were $12.3 billion as of June 30, 2023, a decrease of $26.4 million when compared to March 31, 2023, and an increase of $3.1 billion, or 34%, compared to June 30, 2022. Seacoast’s granular, longstanding deposit base is a hallmark of our franchise, and in the current environment serves as a significant source of strength. The Company continues to maintain balance sheet flexibility and ended the quarter with a loan to deposit ratio of 82%.
  • At June 30, 2023, transaction account balances represented 57% of overall deposits.
  • Noninterest bearing demand deposits represent 34% of overall deposits.
  • Average deposits per banking center were $157 million at June 30, 2023 compared to $148 million at March 31, 2023.
  • Uninsured deposits represented only 34% of overall deposit accounts as of June 30, 2023. This includes public funds under the Florida Qualified Public Depository program, which provides loss protection to depositors beyond FDIC insurance limits. Excluding such balances, the uninsured and uncollateralized deposits were 28% of total deposits. The Company has liquidity sources including cash and lines of credit with the Federal Reserve and Federal Home Loan Bank that represent 155% of uninsured deposits, and 184% of uninsured and uncollateralized deposits.
  • Consumer deposits represent 43% of overall deposit funding with an average consumer customer balance of $23 thousand. Commercial deposits represent 57% of overall deposit funding with an average business customer balance of $109 thousand.
• Federal Home Loan Bank advances totaled $160.0 million at June 30, 2023 with a weighted average interest rate of 3.64%. In the aggregate, borrowed funds, including FHLB advances, subordinated debt, and brokered deposits represented only 6.6% of total liabilities as of June 30, 2023.

Asset Quality

• Credit metrics remain strong with charge-offs, non-accruals, and criticized assets at historically low levels. The Company remains diligent in its monitoring of these metrics, as well as changes in the broader economic environment.
• Nonperforming loans were $48.3 million at June 30, 2023. Nonperforming loans to total loans outstanding were 0.48% at June 30, 2023, 0.50% at March 31, 2023, and 0.40% at June 30, 2022.
• Nonperforming assets to total assets decreased to 0.37% at June 30, 2023, compared to 0.38% at March 31, 2023, and increased from 0.27% at June 30, 2022.
• The ratio of allowance for credit losses to total loans was 1.58% at June 30, 2023, 1.54% at March 31, 2023, and 1.39% at June 30, 2022.
• Net charge-offs of $0.7 million for the second quarter of 2023 compared to $3.2 million in the first quarter of 2023 and compared to a net recovery of $0.1 million in the second quarter of 2022. Net charge-offs for the four most recent quarters averaged 0.06%.
• Portfolio diversification, in terms of asset mix, industry, and loan type, has been a critical element of the Company’s lending strategy. Exposure across industries and collateral types is broadly distributed. Seacoast’s average loan size is $278 thousand, and the average commercial loan size is $685 thousand, reflecting an ability to maintain granularity within the overall loan portfolio.
• Construction and land development and commercial real estate loans remain well below regulatory guidance at 52% and 256% of total bank-level risk-based capital, respectively, compared to 48% and 258%, respectively, at March 31, 2023. On a consolidated basis, construction and land development and commercial real estate loans represent 47% and 236%, respectively, of total consolidated risk-based capital.

Capital and Liquidity

• The Company continues to operate with a fortress balance sheet with a tier 1 capital ratio at June 30, 2023 of 13.9% compared to 13.4% at March 31, 2023, and 16.8% at June 30, 2022. The total capital ratio was 15.0%, the common equity tier 1 capital ratio was 12.9%, and the tier 1 leverage ratio was 10.8% at June 30, 2023. The Company is considered “well capitalized” based on applicable U.S. regulatory capital ratio requirements.
• In April 2023, the Company announced an increase to its common share dividend by $0.01 to $0.18 per share.
• Cash and cash equivalents at June 30, 2023 totaled $727.9 million.
• Our Board of Directors has approved a share repurchase program of up to $100 million in shares of the Company’s common stock. During the second quarter of 2023, 2,515 shares were repurchased under the program at a weighted average price of $17.99 per share.
• The Company’s loan to deposit ratio was 82% at June 30, 2023, providing liquidity and flexibility moving forward.
• Tangible common equity to tangible assets was 8.53% at June 30, 2023, compared to 8.36% at March 31, 2023, and 9.74% at June 30, 2022. If all held-to-maturity securities were adjusted to fair value, the tangible common equity ratio would have been 7.87%.
• At June 30, 2023, in addition to $727.9 million in cash, the Company had $5.7 billion in available borrowing capacity, including $4.7 billion in available collateralized lines of credit, $0.7 billion of unpledged debt securities available as collateral for potential additional borrowings, and available unsecured lines of credit of $0.3 billion. These liquidity sources as of June 30, 2023 represented 184% of uninsured and uncollateralized deposits.