Seacoast Commerce Banc Holdings Announces Third Quarter 2020 Results

Third Quarter 2020 Highlights

Net income of $3.7 million, up $34 thousand, or 1.0%*
Diluted Earnings per share of $0.38, up $0.01, or 2.7%*
Return on Average Tangible Common Equity of 14.38%, YTD of 15.10%*
Return on Average Assets of 1.08%, YTD of 1.20%*
Net Interest Margin of 4.64%, YTD of 5.04%, current month cost of deposits of 0.08%
Asset growth of $245.2 million, or 22.7% annualized**
Gross loan growth of $240.6 million, or 26.1% annualized**
Retained SBA guaranteed loan growth of $180.7 million, or 41.5% annualized**
SBA Loan production of $95.4 million, up $24.8 million, or 35.1% annualized
Deposit growth of $153.2 million, or 18.0% annualized
Non-interest-bearing deposit growth of $192.9 million, or 43.5% annualized
Non-interest-bearing deposits represent 63.4% of total deposits
Property Management specialty deposit growth of $192.2 million, or 43.2% annualized
Quarterly cash dividend of $0.14 per share, up 27.3%
Became the nation's 8th largest SBA lender with $315.7 million in FY 2020 approvals
Announced our merger with Enterprise Financial Services Corp on August 20th, 2020

* Excludes $787 thousand in nonrecurring merger expenses
** Includes $92.1 million in outstanding SBA PPP loans

SAN DIEGO, CA / ACCESSWIRE / October 22, 2020 / Seacoast Commerce Banc Holdings (OTC PINK:SCBH) ("Company"), the holding company of Seacoast Commerce Bank ("Bank"), today reported unaudited consolidated net income for the third quarter ended September 30, 2020, of $2.9 million versus 2019 third quarter unaudited consolidated net income of $3.7 million, a 20.4% decrease. When excluding $787 thousand of one-time nonrecurring expenses related to the pending merger with Enterprise Financial Services Corp, net income was $3.7 million, a 1.0% increase over 2019. On a merger expense adjusted basis, diluted earnings per share increased 2.7% to $0.38 per share versus $0.37 per share in 2019. Additionally, the Company reported third quarter return on average tangible common equity (ROATCE) of 14.38% and return on average assets (ROAA) of 1.08%, with year-to-date ROATCE of 15.10% and ROAA of 1.20%.

On August 20th, 2020, Enterprise Financial Services Corp ("EFSC") and Seacoast Commerce Banc Holdings ("SCBH") jointly announced that EFSC and SCBH had entered into a definitive merger agreement whereby SCBH would merge with and into EFSC with the transaction expected to close in the 4th quarter of 2020. Under the terms of the definitive agreement, upon consummation of the transaction, each holder of SCBH common stock will receive 0.5061 shares of EFSC common stock for each SCBH common share held and cash in lieu of fractional shares. The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and SCBH shareholders are not expected to recognize gain or loss to the extent of the stock consideration received.

Richard M. Sanborn, President & Chief Executive Officer, commented, "The third quarter of 2020 was a very good quarter, considering the environment in which we are operating. While the COVID-19 pandemic has significantly disrupted life and business operations as we know it, the Seacoast team has continued to outperform. Our 3rd quarter growth across all business lines was exceptional with SBA production up 35%, SBA guaranteed loans available for sale up 42%, and property management focused deposits up 43%, in each case compared to the 3rd quarter of 2019, all setting all-time records. On top of our exceptional growth and production numbers, our credit portfolio is also in excellent shape with net non-performing loans of only $1.1 million, a six-year low, with reserves for potential loan losses at an all-time high of $7.3 million. Our operating results were aided by our industry leading current net interest margin of 4.64%, with our current cost of deposits at an all-time low of just 0.08%. We are excited to be handing a solid banking franchise to Enterprise and look forward to the strength of our combined institutions."

Allan W. Arendsee, Chairman of the Board, stated, "The Board of Directors is gratified by the tremendous strides the whole management team has made to ensure the institution's strong performance throughout the pandemic, and on the efforts made to turn over a strong performing bank to the Enterprise team. We are very excited about joining the Enterprise franchise and look forward to our future together."

Quarterly Financial highlights (in millions)*:

 
09/30/2020
 
 
06/30/2020
 
 
09/30/2019
 
 
09/30 Change
 
 
% Change
 

Consolidated Net Income

 
$
2.931
 
 
$
3.692
 
 
$
3.684
 
 
$
(0.753
)
 
 
(20.4
%)

ROATCE

 
 
11.51
%
 
 
15.09
%
 
 
16.17
%
 
 
(4.66
%)
 
 
(28.9
%)

ROAA

 
 
0.86
%
 
 
1.21
%
 
 
1.33
%
 
 
(0.47
%)
 
 
(35.3
%)

Earnings Per Share (Diluted)

 
$
0.30
 
 
$
0.38
 
 
$
0.37
 
 
$
(0.07
)
 
 
(20.4
%)

Dividend Paid

 
$
0.14
 
 
$
0.12
 
 
$
0.11
 
 
$
0.03
 
 
 
27.3
%

Bank Net Interest Margin

 
 
4.64
%
 
 
5.33
%
 
 
6.18
%
 
 
(1.54
%)
 
 
(24.9
%)

* Includes $787 thousand in one-time nonrecurring merger related expenses

Specialty Division quarter-to-date results (in millions):

 
09/30/2020
 
 
06/30/2020
 
 
09/30/2019
 
 
Change
 
 
% Change
 

SBA Loan Production

 
$
95.431
 
 
$
61.770
*
 
$
70.657
 
 
$
24.774
 
 
 
35.1
%

SBA 7(a) Guaranteed Loan Sales

 
$
13.938
 
 
$
14.251
 
 
$
8.320
 
 
$
5.618
 
 
 
67.5
%

Percent of Guaranteed Loan Sales

 
 
19.5
%
 
 
30.4
%
 
 
15.7
%
 
 
3.8
%
 
 
24.2
%

SBA Guaranteed Loan Inventory

 
$
615.964
 
 
$
476.135
 
 
$
435.250
 
 
$
180.714
 
 
 
41.5
%

Commercial Loan Production

 
$
23.687
 
 
$
38.975
 
 
$
10.050
 
 
$
13.637
 
 
 
135.7
%

1031 Exchange Deposits

 
$
67.310
 
 
$
153.447
 
 
$
119.919
 
 
$
(52.609
)
 
 
(43.9
%)

Commercial Management Deposits

 
$
316.172
 
 
$
289.094
 
 
$
230.705
 
 
$
85.467
 
 
 
37.1
%

Association Management Deposits

 
$
321.092
 
 
$
315.043
 
 
$
214.354
 
 
$
106.738
 
 
 
49.8
%

Excludes $92.5 million in SBA PPP loans.

Selected highlights for third-quarter 2020 versus third-quarter 2019:

Balance Sheet Metrics

Asset growth of 22.7%, or $245.2 million, to $1.3 billion;
Loan growth of 26.1%, or $240.6 million, to $1.2 billion;
Saleable SBA guaranteed loans up 41.5%, or $180.7 million, to $616.0 million;
Deposit growth of 18.0%, or $153.2 million, to $1.0 billion;
Property Management deposit growth of 43.2%, up $192.2 million, to $637.3 million;
Non-Interest-Bearing deposits represent 63.4% of total deposits;
Shareholders' Equity growth of 8.2%, or $10.6 million, to $139.9 million.

Income Statement Metrics

Interest Income down (13.0%), or ($2.2) million, to $14.8 million;
Interest Expense down (73.9%), or ($904) thousand, to $320 thousand;
Net-Interest Income down (8.3%), or ($1.3) million to $14.5 million;
Non-Interest Income (excluding gains) up 84.1%, or $743 thousand, to $1.6 million;
Gain on sale income up 99.9%, or $710 thousand, to $1.4 million;
Non-Interest Expenses up 7.2%, or $866 thousand, to $12.8 million;
Net Income down (20.4%) or ($753) thousand, to $2.9 million.

Other Metrics

SBA loans funded up 35.1% or $24.8 million, to $95.4 million, and $321.0 million YTD;
SBA 7(a) loan sales percentage down to 19.5% of guaranteed production;
Allowance for loan losses of $7.3 million, or 1.63% of held for investment, net of guarantees;
Allowance for loan losses stands at 675.6% of non-performing loans, net of SBA guarantees;
Non-performing assets to Tier 1 Capital plus ALLL (Texas Ratio) of 1.86%;
Loan modifications down from $218.m million, or 20.2% of total loans at June 30, 2020, to $17.2 million, or 1.5% of total loans, with only 1 relationship receiving a second deferral;
Since inception of the Bank's SBA program 11 years ago, the Bank has funded 3,132 loans for $2.3 billion in small business financing;
The Bank services a total of 2,137 SBA loans for $1.3 billion, of which $318 million has been sold in the secondary market and is not reflected on the Bank's balance sheet.

The Bank has always maintained capital levels well above the regulatory highest designation, "well capitalized", and had capital ratios at September 30, 2020, as follows:

Capital Ratios of of September 30, 2020

 
Company
 
 
Bank
 
 
"Well Capitalized"
Level
 

Tier 1 Leverage Ratio:

 
 
8.38
%
 
 
8.35
%
 
 
5.00
%

Common Equity Tier 1 Ratio:

 
 
13.71
%
 
 
13.68
%
 
 
7.00
%

Tier 1 Risk-Based Capital Ratio:

 
 
13.71
%
 
 
13.68
%
 
 
8.50
%

Total Risk-Based Capital Ratio:

 
 
14.69
%
 
 
14.66
%
 
 
10.50
%

As reported by the U.S. Small Business Administration ("SBA") for their fiscal year ending September 30, 2020, Seacoast Commerce Bank was the 8th largest SBA lender in the nation, out of over 3,000 financial institutions that are approved as an SBA lender. SBA rankings are based on total dollars approved with Seacoast having $315.7 million approved, up from the 10th largest lender in 2019.

About Seacoast Commerce Banc Holdings: Seacoast Commerce Banc Holdings is a bank holding company with one wholly owned banking subsidiary, Seacoast Commerce Bank. Both the holding company and the bank are headquartered in San Diego, California, with the Bank having five full-service banking branches in California and Nevada, and loan and deposit production offices throughout Arizona, California, Colorado, Illinois, Indiana, Massachusetts, Michigan, Nevada, Ohio, Oregon, Texas, Utah, and Washington. For more information on Seacoast Commerce Banc Holdings or Seacoast Commerce Bank, please visit www.scbholdings.com or www.sccombank.com, or contact Richard M. Sanborn, President and Chief Executive Officer at 858-432-7001, or rsanborn@scbholdings.com.

This press release contains some non-GAAP financial analysis provided to supplement information regarding the Bank's performance, and to enhance investors' overall understanding of such financial performance. Certain statements in this press release, including statements regarding the proposed merger with Enterprise Financial Services Corp ("EFSC"), the operations of EFSC after the merger and anticipated development and expansion of the Bank's business, and the intent, belief or current expectations of the Bank, its directors or its officers, are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such "forward-looking" statements. These risks and uncertainties include, but are not limited to, risks related to the local and national economy, the Bank's performance and regulatory matters; the possibility that the proposed merger with EFSC may not be completed in a timely manner, or at all; and the possibility that EFSC may not realize the anticipated benefits of the proposed merger when expected or at all.

Seacoast Commerce Banc Holdings
Selected Financial Data
Consolidated and Unaudited) (000)

 
For the Quarters Ended
 
 
% Change
 

 
9/30/2020
 
 
6/30/2020
 
 
9/30/2019
 
 
09/30 – 09/30
 

Balance Sheet Items

Total Gross Loans

 
 
1,161,597
 
 
 
1,090,276
 
 
 
921,047
 
 
 
26.1
%

SBA Loans Available for Sale (Memo Only)

 
 
615,964
 
 
 
568,635
 
 
 
435,250
 
 
 
41.5
%

Total Assets

 
 
1,327,419
 
 
 
1,288,454
 
 
 
1,082,173
 
 
 
22.7
%

Total Deposits

 
 
1,005,171
 
 
 
1,041,070
 
 
 
851,984
 
 
 
18.0
%

Non-Interest DDA (Memo Only)

 
 
636,830
 
 
 
650,341
 
 
 
443,897
 
 
 
43.5
%

Bank Borrowings

 
 
166,102
 
 
 
96,210
 
 
 
86,000
 
 
 
93.1
%

Shareholders' Equity

 
 
139,910
 
 
 
137,681
 
 
 
129,353
 
 
 
8.2
%

Bank Shareholders' Equity (Memo Only)

 
 
139,620
 
 
 
137,710
 
 
 
129,399
 
 
 
7.9
%

Income Statement Items

Total Interest Income

 
 
14,800
 
 
 
14,581
 
 
 
17,010
 
 
 
(13.0)
%

Total Interest Expense

 
 
320
 
 
 
470
 
 
 
1,224
 
 
 
(73.9)
%

Net Interest Income

 
 
14,480
 
 
 
14,111
 
 
 
15,786
 
 
 
(8.3)
%

Provision for Loan Losses

 
 
293
 
 
 
325
 
 
 
360
 
 
 
(18.6)
%

Non-Interest Income (excluding gains)

 
 
1,627
 
 
 
1,183
 
 
 
884
 
 
 
84.1
%

Gain on Sale Income

 
 
1,420
 
 
 
1,201
 
 
 
710
 
 
 
99.9
%

Non-Interest Expense

 
 
12,849
 
 
 
11,064
 
 
 
11,982
 
 
 
7.2
%

Pre-Tax Income

 
 
4,385
 
 
 
5,105
 
 
 
5,038
 
 
 
(13.0)
%

Our Fair Share of Income Taxes (33.2%)

 
 
1,454
 
 
 
1,414
 
 
 
1,354
 
 
 
7.4
%

Net Income

 
 
2,931
 
 
 
3,692
 
 
 
3,684
 
 
 
(20.4)
%

QTD Diluted Earnings per Share

 
$
0.30
 
 
$
0.37
 
 
$
0.37
 
 
 
(20.4)
%

YTD Diluted Earnings per Share

 
$
1.05
 
 
$
0.75
 
 
$
1.09
 
 
 
(3.6)
%

Book Value per Share

 
$
14.42
 
 
$
14.29
 
 
$
13.53
 
 
 
6.5
%

Tangible Book Value per Share

 
$
10.61
 
 
$
10.45
 
 
$
9.65
 
 
 
10.0
%

QTD ROAA

 
 
0.86
%
 
 
1.21
%
 
 
1.33
%
 
 
(35.3)
%

YTD ROAA*

 
 
1.20
%
 
 
1.27
%
 
 
1.34
%
 
 
(10.4)
%

QTD ROATCE

 
 
11.51
%
 
 
15.09
%
 
 
16.17
%
 
 
(28.9)
%

YTD ROATCE*

 
 
15.10
%
 
 
15.48
%
 
 
16.48
%
 
 
(8.4)
%

Ending Shares Outstanding

 
 
9,703
 
 
 
9,635
 
 
 
9,557
 
 
 
1.5
%

Stock Price

 
 
13.85
 
 
$
12.50
 
 
$
18.15
 
 
 
(23.7)
%

Market Capitalization

 
$
134,388
 
 
$
120,448
 
 
$
173,461
 
 
 
(22.5)
%

Qtr. Cash Dividends Paid to Shareholders

 
$
0.14
 
 
$
0.12
 
 
$
0.11
 
 
 
27.3
%

YTD Cash Dividends Paid to Shareholders

 
$
0.38
 
 
$
0.24
 
 
$
0.32
 
 
 
18.8
%

* Excluding $787 thousand in one-time nonrecurring merger expenses

Contact:

Richard M. Sanborn
President & Chief Executive Officer
Phone: 858-432-7001
Email: rsanborn@scbholdings.com

SOURCE: Seacoast Commerce Banc Holdings

ReleaseID: 611579