Welcome to the Seacoast third quarter earnings conference call. My name is Ethan, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I’ll now turn the call over to Dennis S. Hudson, CEO. Mr. Hudson, you may begin.

Thank you very much. And before we begin, I’ll direct your attention as we always do to the statement contained at the end of our press release regarding forward-looking statements that we may be making during our call. We’ll be discussing issues that constitute forward-looking statements within the meaning of the Securities and Exchange Act, and as a result our comments are intended to be covered within the meaning of the Act. The earnings release and the slides that go along with this call are also posted on our website at seacoastbanking and they can be found at Investor Services under Presentations. So thank you for joining us today on our third quarter earnings conference call. With me today is Steve Fowle, our Chief Financial Officer, who will be discussing our financial and operating results. Also joining us in the room are Chuck Cross, who leads Commercial Banking; Chuck Shaffer, who heads Community Banking and Jeff Lee, our Chief Marketing Officer. We’ll answer questions following the conclusion of a few remarks. Turning to our third quarter, Seacoast posted strong results, as we continue to execute our balanced growth strategy. This strategy combines investments in organic growth from consumer and commercial banking with selective strategic transactions that strengthen our geographic presence and provides what we think are compelling financial returns. Total revenue rose to 37.1 million, a 59% gain from last year’s third quarter and an increase of 7.5% sequentially. We pulled this growth to the bottom line with adjusted net income rising 96% to 6.4 million from the year ago period and our core efficiency ratio improved from a little under 80% to 68% during the current quarter. Our operating metrics show that Seacoast challenger approach to a traditional community banking is working. We posted strong gains in household growth,…

Thank you, Denny. And thanks to all of you who are calling in for taking the time to join us this afternoon. Our third quarter reflects another successful period of year-over-year growth for Seacoast. We saw continued strong progress across our lines of business combined with strategic acquisitions that drove ongoing revenue gains. As Denny noted earlier, revenues increased a solid $2.6 million this quarter to $37.1 million. That’s a 7.5% not annualized linked quarter growth rate and an increase of 59% of $13.7 million compared to the same quarter last year. During the quarter, we completed the acquisition and integration of Palm Beach County based Grand Bank. Now, it is in the form of one-time charges and increased operating costs related to our acquisition make the quarter difficult to compare especially since a fraction of cost savings have not been achieved. Reported earnings of $4.4 million or $0.13 per diluted share compared to $3 million or $0.12 a share a year ago and are down from prior quarter’s $0.18 per share. However, adjusted net income excluding primarily merger charges was up 96% to $6.4 million from $3.3 million last year and up 4% sequentially. Adjusted earnings per diluted share were $0.19, up from $0.13 last year and flat with last quarter. As I mentioned we had not fully implemented cost savings from the Grand Bank merger and believe an additional $200,000 or so can be saved additionally going forward. While our results were augmented by recent acquisitions, our investment in our franchise including effective use of digital marketing and analytics continued to drive significant organic growth. Last quarter, we discussed to strengthen our household growth rate. And we saw continued acceleration with annualized household growth reaching 6%. And help improve our acquisition thesis; our Orlando market reached 7.5% household…

Thanks, Steve, our result this year, I think, are proving that we are capable clearly of creating sustainable growth rates. We're among frankly the best in the industry and growth rates that are even exceeding some of the growth rates we're seeing across the State of Florida. Excluding the impact of acquisitions, we are growing in the mid-teens organic growth, loan growth as you heard was up 16% over the past year, organic customer funding was up 17% over the past year and organic deposit growth was up 13% over the last year. And it’s the right kind of growth. Our demand deposits mix grew from 29% a year ago and stand at 32% of deposits as of now and we see that number going up. And the total cost of deposits remain very low, I think this quarter around 13 basis points. And the loans we are making, our spread against – and across all loan categories, both commercial and consumer and they are very granular with commercial loans averaging well under $300,000 so far this year. In fact, our individual loan halt limit is currently less than 20% of our legal lending limit. So we are not just producing strong organic growth, it’s the right kind of growth. We are pleased with the progress and we know we have more work to do achieve better results in terms of ROA and ROE. As our growth continues, we are planning for faster improvements in these metrics with more significant progress throughout 2016 as we demand greater improvement in our operating leverage. So with that, I’d like to open the call to questions, and I’ll turn the call back to our operator. Ethan?

[Operator Instructions] And our first question comes from Stephen Scouten from Sandler O'Neill. Stephen, please go ahead.

Yeah, thanks. Good morning, guys, Danny, Steve, everyone. Afternoon as I guess it’s now become, I am a little behind. Sorry about that. So looking at the quarter, I was curious, I know Steve you gave a little color about the NIM, the level of accretion and just the fact that obviously the BMO deposits will take that down somewhat. But can you give us a sense for what you feel like the overall trajectory of the NIM will be and just kind of how you’re thinking about compression just in this continued low rate environment?

Thank you. Well, again, the rate environment definitely is a wild card. We are positioned by asset sensitive and pretty significantly so, so that in an up 200 environment, the way most companies model the world, up 200 rate environment would help us by about 10% in our net interest margin. So again, we are positioned well for the upgrade environment. Forward curve would be a positive for us. That said, we see our NIM in the low-to-mid 3.60s going forward. Again with an expected level of purchase accretion, we see a low-to-mid 3.60s with some upward opportunity related to our strong loan growth and the opportunity to realign our balance sheet.

I think, I’d just make one another comment. The biggest driver to our margin expansion really over the last 18 months or so has been a loan growth and creating the right kind of growth and the balance sheet. Yes, it’s been aided by some of the acquisition work we have done here recently, but the real driver is fundamental growth that we are producing in the balance sheet around the right kinds of assets and funding.

Yeah, definitely. And in regards to that loan growth, I mean, I know the pipeline is still pretty strong heading into the next quarter. But little bit down from the previous quarter I guess. So would you think the 4Q might have a little downside relative to the organic growth we saw in 3Q? And is your outlook still kind of to achieve double-digit loan growth into 2016?

I’ll turn the call over to Chuck Cross, just for a few comments.

Yeah, we continue to see strong and healthy loan growth. We just had a couple of deal slip in Q3 because the borrowers couldn’t close and we see those loans closing in Q4. So we think we’ll stay right on stride with loan growth for the next few quarters.

Okay, great. And maybe one last question for me as it pertains to expenses, and I appreciate kind of the breakdown you’re going through – some of the movement quarter-over-quarter. One of the items that I still had a question and I guess is the – in particular, the increase in data processing, and if that was just related to grant or what drove that? And just kind of how – what we can expect to see in terms of the absolute level of expenses as you guys continue to make investments in technology and other things that should pay long-term dividends, but maybe in the near-term could lead the expense space higher or maybe give me some guidance there if you could.

So on the first question, the data processing cost, the reason for the significant up this quarter has to do with payments made for the Grand Bank’s data conversion. So that spike won’t be repeating next quarter and those -- that line item shouldn’t come back closer to where we were last quarter. Otherwise, long term, again, next quarter, we see expenses probably normalized, relatively or adjusted relatively flat with where we were this quarter and again as we move forward very focused on operating leverage, making sure our revenues are significantly outpacing the increase in expenses.

Okay. Well, thanks guys. I appreciate you taking my questions.

And our next question comes from Christopher Marinac from FIG Partners. Christopher, please go ahead.

Thanks. Good afternoon. Dennis or Steve, I was wondering if you look beyond just the short term, in closing the Orlando branch deal, where should we see the loan to deposit ratio shake out next year, should that be kind of in general higher than we see it today?

So, obviously, as we close the Orlando deal, we’re picking up significant amount more in deposits than we are in loans. So where we are at about 77%, 78% loan to deposit ratio, that should drop before we’re covering in the longer term. We see a lot of opportunities with what we’re doing digitally and with people that we’re picking up through the Grand acquisition, through the acquisition up in Orlando and through the work we’re doing internally, through our accelerating traditional offerings to be able to really make some upward momentum as we’ve been doing recently in our loan to deposit ratio.

Right. I’d also say we’ll look carefully as we approach closing of that transaction, we’ll look carefully at other funding sources that we may want to tamp down a little bit. So we’re mindful of that as well.

Okay. This is a seasonal time of the year, where you tend to historically have that more deposits, I was curious if that also plays into this management sign?

Yeah. And it certainly will, particularly we’re thinking we would close the BMO transaction, I think we’re thinking second quarter, didn’t we say, early second quarter. And if that occurs, as you know, that kind of coincides with a seasonal high, all things considered in funding. So a lot of liquidity coming in.

Got you. Very good. And then Den, the 17% statistic that you mentioned in your remarks about I guess on the consumer side, either coming from digital or from call centers, what’s the rough split between the call center piece and the digital piece?

Between call center and digital, I don’t think we’ve broadcast that, but go ahead.

Yeah. If you think about deposit accounts opened outside of the branch, about 40% to 50% of those are coming through direct, the rest are being closed by our call center and it’s really up to the customer to choose whatever is most convenient for them and that’s why we’re really focused around both channels.

Got it. Okay. So we can call it roughly half, but I understand what you’re saying on that. Okay. Very good. And then last comment I guess would just be question about sort of raising deposits virtually and are you doing some of that or are there opportunities for you to do that down the road?

Yeah. I think there are opportunities to continue to move forward. I think right now, we’re trying to source things directly online, but at the same time, we’re also doing quite a bit of lead gen work for the people in the field. We think it’s very important to continue to support the sales staff through digital means, the ability to geo-target around branches and so we really see it as using both opportunities to drive direct sales, but also to drive lead gen and support the staff that we have.

Okay. Very good. Thanks very much.

Chris, getting this right over the next couple of years has very significant implications on our cost structure as we look ahead a little further down the road and we’re very mindful of that. And ultimately, our highest level goal here is to continue to bring down the cost to serve and the cost to acquire while bringing up and improving the way we interact with customers both on the phone digitally and face to face and in our branches and it’s a pretty exciting thing for us as we begin to discover how to move faster.

Great. Sounds good, Dennis. Thanks very much for the color.

Thank you.

[Operator Instructions]

Great. And I think, Ethan – do you have any more questions?

It appears we have no further questions at this time. I would like to turn the call over back to Mr. Hudson for any final remarks.

Great. Well, thank you very much for joining us today. We look forward to speaking with you in early 2016 to discuss our full year results.

Thank you, ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.