Seacoast Banking of Florida(SBCF) - 2024 Q1 - Quarterly Report

Part I FINANCIAL INFORMATION Item 1. Financial Statements Seacoast Banking Corporation of Florida reported $26.0 million net income for Q1 2024, with total assets growing to $14.83 billion and deposits to $12.02 billion Consolidated Statements of Income Net income more than doubled to $26.0 million in Q1 2024, driven by lower provision for credit losses and reduced noninterest expense, despite decreased net interest income | Financial Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total Interest Income | $175,706 thousand | $157,991 thousand | | Total Interest Expense | $70,628 thousand | $26,839 thousand | | Net Interest Income | $105,078 thousand | $131,152 thousand | | Provision for credit losses | $1,368 thousand | $31,598 thousand | | Total Noninterest Income | $20,497 thousand | $22,445 thousand | | Total Noninterest Expense | $90,371 thousand | $107,475 thousand | | Net Income | $26,006 thousand | $11,827 thousand | | Diluted EPS | $0.31 | $0.15 | Consolidated Balance Sheets Total assets increased to $14.83 billion as of March 31, 2024, driven by cash and securities, while net loans slightly decreased and deposits rose to $12.02 billion | Balance Sheet Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Assets | $14,830,015 | $14,580,249 | | Total cash and cash equivalents | $682,724 | $447,182 | | Total debt securities | $2,619,359 | $2,516,333 | | Loans, net of allowance | $9,831,383 | $9,914,009 | | Goodwill | $732,417 | $732,417 | | Total Liabilities | $12,712,265 | $12,472,163 | | Deposits | $12,015,840 | $11,776,935 | | Total Shareholders' Equity | $2,117,750 | $2,108,086 | Consolidated Statements of Cash Flows Q1 2024 saw $24.7 million net cash from operations, $25.7 million used in investing, and $236.6 million provided by financing, leading to a $235.5 million net increase in cash | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,672 | $13,045 | | Net cash (used in) provided by investing activities | ($25,714) | $192,718 | | Net cash provided by financing activities | $236,584 | $383,540 | | Net increase in cash and cash equivalents | $235,542 | $589,303 | Notes to Consolidated Financial Statements Detailed notes cover securities with unrealized losses, a loan portfolio with increased nonaccrual loans, the allowance for credit losses, derivatives, regulatory capital, and the 2023 acquisition - As of March 31, 2024, the Available-for-Sale (AFS) securities portfolio had a fair value of $1.95 billion with gross unrealized losses of $223.6 million[27][33] - The Held-to-Maturity (HTM) portfolio had an amortized cost of $669.9 million with a fair value of $540.2 million[38] - Management believes unrealized losses are due to interest rate movements, not credit quality, and has not recorded an allowance for credit losses on these securities[38] - Total loans were $9.98 billion at March 31, 2024[42] - Nonaccrual loans increased to $77.2 million from $65.1 million at year-end 2023[46] - The allowance for credit losses (ACL) stood at $146.7 million, or 1.47% of total loans[57] - The company uses interest rate swaps to hedge changes in the fair value of its AFS securities and a pool of residential mortgages[67][68] - As of March 31, 2024, the notional amount of these hedges totaled $600 million[69] - The acquisition of Professional Holding Corp. on January 31, 2023, added approximately $2.0 billion in loans and $2.1 billion in deposits[81] - The total purchase price for the acquisition was $421.0 million, resulting in $251.7 million of goodwill[82] Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2024 net income rose 120% to $26.0 million due to lower credit loss provisions, despite a 20% drop in net interest income and margin compression to 3.24% Results of Operations Q1 2024 net income increased 120% to $26.0 million, or $0.31 diluted EPS, primarily due to a significantly lower provision for credit losses | Performance Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Income | $26.0M | $29.5M | $11.8M | | Diluted EPS | $0.31 | $0.35 | $0.15 | | Adjusted Net Income (Non-GAAP) | $31.1M | $31.4M | $23.7M | | Adjusted Diluted EPS (Non-GAAP) | $0.37 | $0.37 | $0.29 | | Return on average tangible assets (Non-GAAP) | 0.89% | 0.99% | 0.52% | | Efficiency ratio | 66.78% | 60.32% | 64.62% | Net Interest Income and Margin Net interest income decreased 20% to $105.1 million in Q1 2024, with net interest margin compressing to 3.24% due to rising deposit costs | Metric (Tax Equivalent Basis) | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income | $105.3M | $111.0M | $131.4M | | Net Interest Margin | 3.24% | 3.36% | 4.31% | | Yield on Earning Assets | 5.41% | 5.36% | 5.19% | | Rate on Interest Bearing Liabilities | 3.20% | 2.98% | 1.43% | | Cost of Deposits | 2.19% | 2.00% | 0.77% | - Accretion on acquired loans contributed 33 basis points to the net interest margin in Q1 2024, down from 53 basis points in Q1 2023[104] Noninterest Income Noninterest income decreased 9% to $20.5 million in Q1 2024, primarily due to lower interchange income, partially offset by a Visa stock sale gain | Noninterest Income Component | Q1 2024 (in thousands) | Q4 2023 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | :--- | | Service charges on deposit accounts | $4,960 | $4,828 | $4,242 | | Interchange income | $1,888 | $2,433 | $4,694 | | Wealth management income | $3,540 | $3,261 | $3,063 | | Securities gains (losses), net | $229 | ($2,437) | $107 | | Total Noninterest Income | $20,497 | $17,338 | $22,445 | - Interchange income decreased significantly year-over-year due to the Durbin amendment, effective for the Company on July 1, 2023[114] - A net securities gain of $0.2 million was recognized, resulting from a $4.1 million gain on the sale of Visa Class B stock, largely offset by $3.8 million in losses on the sale of other investment securities[118] Noninterest Expenses Noninterest expense decreased 16% to $90.4 million in Q1 2024, reflecting lower merger-related charges and current quarter system consolidation and lease termination costs | Noninterest Expense Component | Q1 2024 (in thousands) | Q4 2023 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | :--- | | Salaries and wages | $40,304 | $38,435 | $47,616 | | Outsourced data processing costs | $12,118 | $8,609 | $14,553 | | Legal and professional fees | $2,151 | $3,294 | $7,479 | | Total Noninterest Expense | $90,371 | $86,367 | $107,475 | - Q1 2024 expenses included $4.1 million in charges for contract terminations and modifications to consolidate systems and $0.8 million for early lease terminations[121][122] - Q1 2023 expenses included $17.5 million in merger-related charges from the Professional acquisition, primarily in data processing, legal fees, and salaries[90][119][124] Financial Condition Total assets grew to $14.8 billion, deposits to $12.0 billion, while net loans decreased; credit quality remained stable, and capital ratios exceeded 'well-capitalized' minimums - Total assets were $14.8 billion as of March 31, 2024, an increase of 2% from December 31, 2023[131] - The loan portfolio decreased by 1% to $10.0 billion, while the securities portfolio increased by $103.0 million to $2.6 billion[133][140] - Total deposits increased by 2% to $12.0 billion[167] - Uninsured and uncollateralized deposits represented 29% of total deposits[172] - The company remains well-capitalized with a CET1 ratio of 14.01% and a Total Risk-Based Capital Ratio of 16.14% at March 31, 2024[188] Item 3. Quantitative and Qualitative Disclosures about Market Risk Interest rate risk is managed via ALCO, with simulations showing a +200 bps rate shock could decrease NII by 8.1% and EVE by 14.1% Projected Impact of Interest Rate Changes on Net Interest Income (as of March 31, 2024) | Change in Interest Rates | % Change in NII (1-12 months) | % Change in NII (13-24 months) | | :--- | :--- | :--- | | +2.00% | (8.1)% | (7.6)% | | +1.00% | (3.5)% | (3.1)% | | -1.00% | 0.7% | —% | | -2.00% | 0.2% | (2.5)% | Projected Impact of Interest Rate Changes on Economic Value of Equity (EVE) | Change in Interest Rates | % Change in EVE | | :--- | :--- | | +2.00% | (14.1)% | | +1.00% | (6.0)% | | -1.00% | 4.7% | | -2.00% | 8.0% | Item 4. Controls and Procedures Management confirmed effective disclosure controls and procedures as of March 31, 2024, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of March 31, 2024[206] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[207] Part II OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal actions, none of which are expected to materially impact financial condition or results - Management does not expect any current legal proceedings to have a material adverse effect on the company[208] Item 1A. Risk Factors No material changes to previously disclosed risk factors were reported since the 2023 Annual Report on Form 10-K - No material changes to risk factors were reported since the 2023 Form 10-K filing[209] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities In Q1 2024, 9,796 shares were repurchased at $27.67 average price for tax purposes, separate from the $100 million authorized repurchase program - The Board of Directors authorized a renewal of the share repurchase program for up to $100 million, expiring on December 31, 2024[210] - No shares were repurchased under the authorized program during the three months ended March 31, 2024[211] Share Repurchases in Q1 2024 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | 1/1/24 to 1/31/24 | 8,200 | $28.46 | | 2/1/24 to 2/29/24 | 1,596 | $24.14 | | 3/1/24 to 3/31/24 | 0 | N/A | | Total - 1st Quarter | 9,796 | $27.67 | Item 5. Other Information A board member adopted a Rule 10b5-1 plan to sell up to 60,000 shares of common stock, with sales commencing after Q1 2024 results disclosure - A board member, Dennis S. Hudson, III, established a Rule 10b5-1 trading plan to sell up to 60,000 shares of common stock[214]