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With First Green deal, Seacoast still bulking up in Orlando MSA

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With First Green deal, Seacoast still bulking up in Orlando MSA

Seacoast Banking Corp. of Florida's largest deal to date could mark the end of its acquisitive streak in the Orlando metropolitan statistical area, an executive suggested.

The Stuart, Fla.-based bank is buying state peer, Mount Dora-based First Green Bancorp Inc., in a stock deal valued at about $132.6 million. The deal is its fourth in the Orlando market — the state's third-largest MSA — and its seventh bank deal since 2014. The combined bank will have about $6.6 billion in total assets.

On a June 12 call to discuss the transaction, President and CEO Dennis Hudson III said that while he would not rule out additional Orlando M&A, "there's not a lot left in that market." He said the deal will help Seacoast add scale in an important market "propelled by an increasingly diversified economy," as well as generate shareholder value.

The acquisition of First Green will tack on seven branches in Orlando, Daytona and Fort Lauderdale, including five in the Orlando MSA. Hudson noted that six of the seven branches are within three miles of a Seacoast branch, providing immediate operating synergy opportunities. The bank anticipates cost savings of more than 50% of First Green's noninterest expense base. Seacoast currently has 51 branches, with the majority along Florida's east coast.

Hudson said the acquisitive bank, with $5.9 billion in assets, is building out its risk management organizational structures in anticipation of crossing the $10 billion asset threshold. The bank does not anticipate crossing the threshold over the next two years, he said. Organic growth remains Seacoast's top priority, Hudson said, but he noted that the bank will likely remain an active acquirer over the next two to three years. Hudson said the bank's last seven acquisitions have increased the number of customers it serves in Central Florida from about 6,300 in 2013 to 54,000 once the First Green deal closes.

In a research note, Sandler O'Neill & Partners analyst Stephen Scouten wrote that the deal was "fairly pricey," but presents "ample rewards" given its cost saving opportunities and in-market expertise. Scouten wrote that the deal leaves runway for solid organic growth, is easily digestible, and should not keep Seacoast on the sidelines in terms of additional 2018 M&A.

An analyst on the call noted that the deal materially increases Seacoast's commercial real estate, or CRE, exposure. CFO Charles Shaffer said the deal moves Seacoast's CRE ratio on a qualitative basis from roughly 190% to 225%. Hudson said Seacoast still has "some appetite for CRE."

"This doesn't change our strategy in any way," Shaffer said. He noted that the bank remains focused on granular and commercial-and-industrial lending, and that "[the deal] brings some CRE in an attractive market that we feel comfortable with."

Raymond James analyst Michael Rose wrote that while First Green is "relatively young" and comes with a nearly 100% loan-to-deposit ratio, it bolsters Seacoast's growth profile and expands its presence in attractive markets. He wrote that the deal expands Seacoast's balance sheet by about 12.4% and is expected to boost EPS by more than 10% on a core basis in 2019 and 2020.

First Green was founded in 2009, with a focus on environmental and social responsibility a topic that continues to gain traction.

Hudson said Seacoast shares First Green's concern for the environment, and he said the deal will provide customers with extensive online and mobile banking services.

"Our mission as an organization is to help our customers improve their lives and help them build stronger communities," Hudson said. "That's at the heart of who Seacoast is, and I think that's entirely aligned with the heart of what you find at First Green with their focus on being socially responsible and the like."