Seacoast Banking Corporation of Florida (SBCF) 2009 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Seacoast first-quarter earnings conference 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 will now turn the call over to Mr. Dennis S. Hudson. Mr. Hudson, you may begin.

Thank you very much and, again, welcome to our first-quarter earnings conference call. Before we begin, we will direct your attention to the statement at the end of our press release concerning forward statements. During the call we will discuss certain issues that constitute forward-looking statements within the meaning of the Securities and Exchange Act; and our comments are therefore intended to be covered within the meaning of Section 27A of the Act.

With me today is Bill Hahl, our Chief Financial Officer; as well as Jean Strickland, our President and Chief Credit Officer; and Russ Holland, our Chief Banking Officer.

Today we're going to start with Bill, who is going to update us on some fairly significant improvements in our core earnings performance this quarter, and then I'll jump in with an update regarding credit challenges in the current environment.

Before I turn the call over to Bill, I thought I would make a few general comments. While our earnings this quarter clearly remained under pressure, with continued high levels of credit cost, we were pleased to report some fairly significant, very real improvements in our core earnings. That is, our pre-credit core earnings.

Earnings for the quarter were overall improved over the fourth quarter of 2008, due to both these improvements in core earnings and reduced credit costs for the quarter. Regulatory capital ratios were unchanged over the prior quarter, as risk-based assets continued to decline. These ratios remain strong, with a risk-based capital ratio at an estimated 14% at quarter-end. This is well in excess of the 10% target for banks judged to be well-capitalized, and 8% for banks that are classified as adequately capitalized.

In the near term, we expect risk-based assets to continue to decline, which will be helpful to maintaining superior levels of capital during this difficult economic period.

Perhaps our most significant strength today is our unique and deep deposit penetration in our market, something that has taken us more than 80 years to develop. Our deep local roots in our local communities remain the steadying force that has served us very well in the current period.

This has allowed us to strengthen our liquidity position on a growing base of core deposits. And we have recently noticed an acceleration of deposit growth as a result of our retail initiative announced last year.

Now I would like to turn the call over to Bill for a few more comments. Bill?

Thanks, Denny. We posted some slides for the presentation, and my comments will cover those particular slides that we posted. I'll begin my comments on slide 1 of the earnings presentation, which summarizes the highlights for the first quarter's results.

The first item listed is regarding the improvement in pre-provision earnings per share. On this basis, earnings per share improved by $0.08 per share over the fourth quarter's results, and indicates that growth in the core deposit franchise is gaining momentum. That will likely result in improved margin and net interest income growth over the remainder of 2009. I'll have more to say about the margin in a later slide.

Next I want to discuss our funding profile and our liquidity position on slide 2. Our funding strategy remains primarily centered on stable retail and commercial relationship deposits, which fund more than 100% of loans.

As a result of our anticipated increase in FDIC insurance premiums, in November 2008 we contacted our largest public fund customers that maintain deposit accounts and switched to them to sweep repo accounts, thereby eliminating future FDIC insurance costs. This moved approximately $100 million of deposits in the fourth quarter to sweep repos.

The Bank's loans have always been funded primarily by retail and commercial deposits. Wholesale funding has been mostly used for seasonal fluctuation in deposits, or to pre-fund known deposit increases, and for ALCO strategies.

At quarter-end, deposits and sweep repos from consumer and commercial clients comprised 92% of total fundings, while only 2% were brokered. For regulatory purposes, deposits from existing customers that are placed in CDARS' program are required to be categorized as brokered. We treat these deposits as non-brokered in the slides.

The average daily overnight borrowing position is at zero at quarter-end, and the Bank can issue up to $40 million of FDIC-guaranteed notes should the need arise. Our combined available contingent liquidity from all funding sources, pledge-free securities, cash on hand at year-end exceeded $800 million.

During the quarter, we have maintained approximately $110 million of additional liquidity in the form of cash as insurance should economic conditions become from further stressed.

Moving to slide 3, I want to talk about the prior quarter and the estimated quarter's capital ratios for a minute. Like many, we applied for the Treasury's CPP program and closed on $50 million in December 2008. All regulatory and other capital ratios were positively impacted by this capital.

Both the Company and the Bank have strong ratios and are classified by their respective regulators as well-capitalized.

Tangible common equity declined from 5.18% at year-end to 5.09% at quarter-end. Tangible common equity to risk weighted assets was unchanged in the first quarter compared to the year-end and is likely to increase as the risk-weighted assets are adjusted lower.

Likewise, risk-based capital was unchanged at 14% at quarter-end, exceeding the ratio as of June 30, 2007, of 12.5% when the real estate market bubble began to deflate.

We have made good progress in adjusting our balance sheet through producing reducing loan balances and adding lower-risk investments and therefore reducing risk. Now more capital is being produced by improvement in earnings through building out our core deposit relationships through our retail deposit growth strategy.

Evidence is clear this quarter that this is a winning strategy, confirmed by the strong improvement in retail core deposit growth and the decline in deposit costs as a result of improved deposit mix and lower costs paid for these deposits.

Growing the balance sheet and leveraging tangible capital is appropriate when one does it while maintaining or reducing risk, and keeping liquidity strong and stable. We believe our risks are quantified and declining. Our overhead is well managed, and our prospects for better earnings are good.

Now I'll move on to slide 4 and a summary of our non-interest expense results and items occurring in the quarter presented that were nonrecurring or credit-related costs world that will be lower as we move out of this extraordinary period.

This slide shows that overhead has been reduced more than is visible from the normal income statement perspective. As we have indicated in prior calls, we have made good progress in reducing overhead. Core underlying operating earnings have been improved or are being onset by one-time charges and much higher credit collection costs than will be ongoing with a lower risk profile in the future.

Adjusting for these items, the first-quarter overhead has declined by 2.8% compared to the fourth-quarter 2008. Increased credit-related cost and FDIC insurance compared to the prior year's first quarter has been offset by the comprehensive reductions in operating expenses implemented late last year and during the first-quarter 2009.

We expect additional expense savings measures will improve earnings over the remainder of the year and will range in the area of $1.3 million to $1.5 million.

Now I'll take a moment to cover the margin on slide 5. The margin increased this quarter and has remained fairly stable the last three quarters, given the pressure from factors such as competition for CDs, increased NPAs, slower loan growth over the last 12 months -- all of these negative impacts. Clearly the margin opportunities I discussed in last quarter's call became realities during the quarter, such as better deposit mix as a result of our successful growth in retail deposit relationships over the past year, where smaller balance lower-cost deposit account relationships were acquired and replaced the higher-cost commercial money market deposits. And also this quarter we allowed brokered CDs to run off.

Deposit cost competition has been more rational, which has allowed us to be more aggressive in lowering deposit rates. We believe that as the impacts of negative loan growth on the competition grab hold and their liquidity grows, deposit costs will creep even lower.

While overall loan growth was negative, targeted areas such as plain-vanilla residential mortgages performed well above expectations. Residential mortgage pipelines grew as well, as mortgage rates fell to their lowest levels. This added growth was positive to both the net interest income and the margin.

To summarize, we believe the margin will be stable and may increase due to lower deposit and repo costs as a result of improved mix and our lowering rates on these products.

I also list the risk to the margin for 2009. Many of the same issues that have impacted the margin during the prior 12 months may again be a concern that will need to be considered. Denny?

Thank you very much, Bill. Nonperforming assets continued to increase this quarter as the economy remained weak and we pulled back on our loan sales activity. Non-accrual loans totaled 6.7% at quarter-end.

During the quarter, we entered into loan modifications with several larger commercial borrowers designed around specific liquidation plans. We believe these modifications will result in better liquidation value over time than we would achieve through other more traditional collection activities.

During the quarter, we also rolled out our consumer mortgage modification program to provide assistance to individuals in danger of foreclosure. These modifications resulted in an increase in troubled debt restructures, which were classified as non-accrual at quarter-end.

As we stated in our earnings release, 30% of our nonaccruals are troubled debt restructures, and 73% of them are fully current at year-end.

So all of this -- a continued tough environment, together with our own internal greater focus on loss mitigation activities, which are designed to produce partial borrower performance and in the case of our commercial borrowers faster loan liquidation -- contributed to the growth in nonaccruals for this quarter.

We also saw an increase in OREO, other real estate owned, this quarter, as certain other loans begin to move closer to final liquidation.

As you know, most of our losses to date have come from our residential acquisition and development book. As detailed out in the last few slides or schedules of our press release -- I'm sorry, last few tables in our press release, where we list a very extensive writedown of loan balances, we have been working very diligently over the past two years to bring this exposure down. Today it stands at around 3% of total loans. That is, our construction/A&D book stands at about 3% of total loans compared with a little over 20% at the height.

The significant and rapid liquidation of this portfolio, while very painful, has substantially reduced our most volatile asset category. And in doing so, we have substantially reduced our forward risk should conditions continue to deteriorate. In fact, since this downcycle began, our aggregate loss rate totals now a little over 6% of total loans.

The point is, we have taken action early in the cycle to achieve real reductions in our risk profile. While we're beginning to see some early signs that the cycle may be bottoming, we are planning for continued difficulty through 2009.

I would now like to focus on the charts that are actually I think on pages 8 through 10 posted on our website. We have seen some evidence that home prices in the harder-hit markets in Florida are really beginning to stabilize. In fact, for the Treasure Coast in Palm Beach County we have seen improvements in median home prices, along with continued strong year-over-year growth in sales activity.

Foreclosures still represent a large portion of sales, and they have helped drive prices down. But they are selling, and overall inventory is declining.

Most importantly, affordability has returned to the market. Today here in Florida, you can buy a home at pre-boom value and finance it with mortgage rates last seen in the 1940s. If you are a first-time home buyer, you get a $15,000 tax credit to boot.

The combination yields an improvement in affordability levels that are down to those levels that were last seen prior to the year 2000, prior to the bubble. So it's clear to me that residential assets are beginning to achieve stability, which is good.

We still, however, face the broader effects of this very severe recession, including unemployment. This will pose a challenge for us and everyone as we push deeper into 2009.

We said in our last call that our focus for the year would be growing our core deposit franchise and growing our residential mortgage lending production in response to what has become a very favorable rate environment. We have seen tremendous progress this quarter in both of these areas.

This, combined with expense reduction, should continue to help us build our core earnings out, which will be important as we continue to work through our remaining credit issues in 2009.

Seacoast remains a remarkable value today. Our risks are well understood and communicated, and we have made significant progress in reducing our risks over the past year or more.

We continue to trade at a negative premium to our growing deposit franchise, something remarkable to consider given our 80-year history and our strong market penetration in what is likely to be viewed as increasingly attractive markets as the housing markets begin to stabilize.

Now we'll pause and we would be happy to take a few questions.

(Operator Instructions) Jefferson Harralson, KBW.

Thanks, Denny. I would like to ask you about the income-producing commercial real estate book.

Okay.

Can you talk about the trends in nonaccruals or losses in that book? Do you -- I think a big fear out there is that CRE might be the next shoe to drop. Can you comment on the health of the markets for CRE in your marketplace?

Yes. Well, it probably is the next shoe to drop. The question is, how big is this you going to be? It's not going to be as big as the land acquisition and development shoe. You know, these are very different assets.

In our portfolio, there is a much broader diversity of exposure, but it's something we're concerned about. I would say as of right now, we've seen some weakening and some deterioration, but very little actual movement, dramatic movement, to nonaccrual as of yet. But it's something that we think we will likely see out over the next year, and we are preparing for it.

The real question to be answered is, how effective will we liquidate other parts of the nonperforming portfolio? And at what time frame will that occur? And how will that kind of fit up into the potential for deterioration in the CRE amortizing portfolio?

I would say -- well again, I guess that's all I will say about that. Jean, any comments?

Well, to piggyback and emphasize more what he said, there is a lot more to work with when you have cash flow. The residential land and development for sale type real estate was a lot more problematic to work with.

So while we expect that there will be some more stress in the income-producing, there is a lot more that we can do with that, those kinds of assets.

Right. You know, we would intend to work with our borrowers and work around diminished cash flows, if necessary, where appropriate. Where we get something in return from the borrower, we will work with them to kind of work through this period, if it comes to that. I think that's going to be why I think it's a much smaller shoe in this downturn.

The other thing I would point out is the theory debacle that the industry went through in the early '90s was largely a result of overdevelopment and tremendously high levels of new products entering the market. I've got to tell you, down here it was nothing like what we saw in the early '90s.

Again, I have said it before, I think maybe beginning a year ago, we were all too busy building houses in Florida and we didn't have time to get around to an oversupply in these other areas.

But we will have problems. It's a concern. Not trying to sugarcoat it at all, but I don't think it's going to be 1991 all over again.

All right. Just to follow up on, can you put any numbers around the average loss of value for a typical commercial real estate piece of property and loan-to-values or loss rates or NPAs? I guess, can you fill in numbers around what you're saying?

Not really. There is no question, though, that cap rates are increasing.

Rental rates are on the decline.

Rental rates are on the decline in response to higher vacancies. That's something we've looked at very carefully, and we have our own thoughts and projections on that as we have tried to stress the portfolio and try to identify assets that we want to be concerned about over the next year. But it's kind of all over the board.

Yes, and we don't see the same type of drop in the CRE that we saw in the residential land and development book.

No.

We also have conservatively underwritten the CRE portfolio, just like we did with the land and development. But the drop was so significant in that portfolio we just don't think we'll see the same level of drop in the CRE. We think there will be less pain here.

Right. Jefferson, a large portion of our CRE portfolio are seasoned owner-occupied smaller balance loans that we've had on the books for many years. So we have a fairly stable portfolio there.

Thanks a lot, guys.

Mac Hodgson, SunTrust Robinson Humphrey.

Good morning. I have a question on the troubled debt restructuring. Was it a decision to do more of those based on characteristics of the loan in particular, or the loan sale market becoming more challenging? Any more color you can give on the decision to do more TDRS going forward?

Yes, that and more. I'll turn it over to Jean.

Yes, there were a couple of reasons. One, certainly the loan sale market has gotten more difficult in the difference between the bid and the ask margins of late.

But also where we have people who can pay, it makes more sense to keep them in their homes, to get some payback around the principal, versus discounting it to the sell-side marketplace and taking a huge loss at that point to move it off. So where we can get things performing even on a less than normal basis, it just made more sense to preserve the capital and preserve the payback.

As an example, we have a couple of residential borrowers who are actively working to liquidate their land, improve lots, and that sort of thing. In certain cases -- not many of them, but in some cases -- we feel we have come to an agreement with the borrower such that he has some incentive to work with us to achieve faster liquidation than we think we could without his help. That's where we've moved with some of that stuff.

We think the yield we're going to get in terms of return is going to be incrementally better than we could get through other means. I will tell you we've had some success over the last 90 days with faster liquidation actually occurring.

Yes. They are in a better position to help liquidate assets than we are. Also we reduce our legal costs.

Right, so we're looking at that; and I think it is just a reality that everybody faces today.

Given that the market seems to be improving somewhat, why do you think the loan sale market has gotten a bit worse? Is it because maybe the stuff you sold last year was of higher quality relative to what's left?

No.

No, not at all. In fact, it's a better quality and I think a better value for those buyers today. I think it's -- I will make a comment and then Russ can jump in. But I think one thing that happened this quarter was the political risk continues to wreak havoc in markets.

One of those was the announcement of the PPIP, which caused buyers to kind of wonder how that was going to work out and had a dramatic impact on their willingness to move forward.

Having said that, I just want to be clear. We took a break from loan sales this quarter because we saw things deteriorating in that market. And I'm glad we did, because it turned out to be a pretty poor quarter for that, given the political risk of that announcement for PPIP. Any other comments?

The only other comment is, as Denny points out, there's fewer buyers actively engaged in the market, driving prices down. And then the sellers that are in the market appear to be willing to take prices that are just unrealistic.

Meaning low.

Yes, very distressed.

Very distressed pricing. We were worried about that, and that's why we got on this last year. We were worried that by the time the FDIC caught up with -- began to dominate this market place, that was going to not be happy for sellers. And that is proving to be true and I think will only get worse.

The good news is we might see some stabilization occurring here generally, and you can see that possibly affect that market at some point.

The final comment is that the stuff that we sold -- we detailed in the press release sort of the cycle to date work we've done in terms of loan sales. We've continued to say that the focus of those loan sales were on some of the nastiest stuff that we had/

The stuff going forward is stuff that has greater potential for us kind of working ourselves, in some cases with borrowers, in other cases just liquidating.

Okay, great. Maybe just one last question on the mortgage business. You gave some statistics in your press release about maybe the dollar amount from total applications you took in the quarter versus closed mortgages. It looks like $38 million closed versus $19 million in applications.

Right.

Is there anything to read into that? Is it timing issue? Are there fewer approvals, or --?

No, just timing. It was a -- we've had a growing application pipeline and we think it's probably almost at a record level right now.

There are no particular issues. We've really tried to -- with respect to refis work upfront with the borrower and get right at the loan-to-value issues if they are there, and help them determine whether they want to apply. So we think it's a pretty clean application pipeline.

Things take longer now. It's not a week's worth of time before you can get an application and get a closing; it's a much longer process with going through the appraisal, that type of thing, than it has been in the past.

Okay, thanks. That's it for me. Appreciate it.

Ben Harvey, Stephens Inc.

Morning. My question goes back to the restructured loans, and specifically the ones you guys list as restructured and accruing. I'm assuming that those are the ones that have demonstrated performance for six months, so you've moved them out of the nonaccrual. Is that correct?

No.

No.

Okay.

Explain.

It says in your press release that the debt restructures classify as nonaccrual until they can be verified for performance. So what is the restructured loans that are accruing then?

It's about -- I think we listed about $3.3 million, I think.

Right, three-three.

Yes, $3.3 million. The other part of it is that it's those that have been restructured. They are, as Denny mentioned, performing; but they haven't reached the six months yet.

Just to add more color. I think there is one commercial loan in the accruing that is a troubled debt restructure that has an operating company behind it with cash flowing. But we reduced the rates temporarily. So we will see if we can get that back into a normal performing status at some point.

On the residential side, as Denny mentioned, we just started really the loss mitigation program. As those borrowers perform, we will actually be able to upgrade those to a normal performing status. They're in their six months' performance period.

Right.

Okay. That was my question. I appreciate it.

David Bishop, Stifel Nicolaus.

Hey, good morning, guys. In the preamble you alluded to the increase in troubled debt restructuring. It sounded like it was related to larger commercial credits there. I'm just curious in terms of -- I don't know if you can segment that in terms of maybe some color, where those issues were [arising] from. Was it office, was it retail?

And then was it more of a function of these loans coming to maturity and no permanent financing available? Or what sort of led you down the road to the TDR path?

The TDR, the larger TDR, commercial TDRs are frankly still in the residential construction book.

Okay.

It's land loans, lots, models, things like that. What we've done in a couple of cases -- and this is unusual. Most of these guys we cannot work with, I've got to tell you. But in some cases we just sit down and say, what are you going to -- what can we do to move this stuff off the books in the next six months?

And we put together a plan with the borrower to do that, and they go out and begin executing that plan. Perhaps we'll burn off some of their personal guarantee if they hit their target. That sort of thing.

So it was not CRE or anything like that. We are still struggling with the construction book.

The good news is what's left is largely on nonaccrual, so there isn't a whole lot further to go in that construction book. The other really good news is that it's come down very dramatically from two years ago.

So we have worked through a lot of that and that has driven our losses up dramatically, but it better positions us for '09 and beyond.

The other part of the TDRs frankly this quarter was plain-vanilla well-underwritten fully-documented prime mortgage loans to consumers just experiencing stress. I think with the government programs that were announced in December, I think we saw a significant amount of activity in our borrower base coming in and beginning to question what sort of help we could give.

And in many cases, there was a definite benefit to us working with them and giving them some relief. So some of that growth in TDRs was actually growth in residential mortgage TDRs.

In those cases, we are following our own program. We're not participating in the federal program. But our program looks sort of 70% similar to that federal program.

We're looking to have them fully disclose what their current financial situation is. In many instances, after that disclosure we all conclude -- the customer as well -- there really isn't anything that can be done.

But in some cases, we are able to reduce the interest rate temporarily to help them stay on their feet in hopes that a couple years down the line they will be in a better position to kind of re-step up and start looking at it.

We're also looking at refis for people where we can qualify them into current low rates and that sort of thing. I hope that helps.

Yes. So it sounds like thus far on the commercial real estate side (inaudible) you guys have had to -- not saying forced, but taken (multiple speakers).

We've had some of it and I think we talked six months ago that most of what we had in the commercial real estate area that was in default had some sort of a relationship to a residential exposure that brought a commercial developer down. That sort of thing.

We've seen again some weakness in that portfolio. But we'll just have to see how the rest of this year -- how it performs.

I don't know if you can quantify, but in terms of maybe a margin impact, in terms of the TDRs this quarter, is it possible to put that into a margin or per-share perspective?

Not really. I mean, I guess I could go back and you could make some calculations on that basis.

Yes, you could. I mean, what is it? $30 million of our nonperformers are TDRs, so that's -- and then we had $3 million that are TDR-TDRs, that have some partial performance. But 5% of $30 million is $1.5 million.

Got you. Great. Thank you.

Michael Rose, Raymond James.

Good morning, guys. Sorry; I jumped on the call a little bit late. But just a theoretical question in terms of Florida and how you see the next two years playing out.

Do you imagine a lot of consolidation? Do you think there is going to be a significant amount of bank failures within your markets? How do you see the endgame, if you will?

Yes and yes. I mean I think that you have a whole group of smaller banks that were dominated by two or three commercial lenders that never really built the other side of the balance sheet up. And those are really going to be a problem.

We, frankly, think the opportunities for us, for organic growth, are starting to accelerate. It's the big area that we talk about continuously here with our management team.

We believe that it's even better than you described, inasmuch as all of the -- there are many larger banks, particularly in our markets, that have gone through two or three rounds of sale already. WaMu, National City, Wachovia are all huge players in our market, particularly Wachovia and National City. And that is just beginning to play out in our markets.

Then add to that the stress that we are seeing everywhere for the smaller community banks and the lack of options that they have to get through this.

It all comes back to us -- as we get through this period and come out the other side, we think at least for a period of years, 10 years or more, we are going to have far less competition. Far more rational competition.

And most importantly, who we are as a good-sized large community bank in Florida with some capacity and some branch infrastructure, that competes against PNC, competes against Wells Fargo, and competes against Bank of America, positions us as the only alternative going forward.

You are either going to be with these large monolithic solid banks that ultimately survive this. Or you can be with the sole remaining good-sized community bank out there.

That is what we're really focused on. That's why we have been so focused the last two years on retooling our retail deposit attractiveness, our retail branch infrastructure, and the like.

That's why we continued to focus on residential mortgage growth in the last quarter in response to very low interest rates. We have that structure in place. We have the customer base in place.

And that's critical to growing revenues inside the balance sheet that are going to help us offset the final resolution of these very significant credit issues that we deal with.

Okay. I guess a follow-up to that is, what is your nearer-term appetite to acquire the deposits from some of these banks that could possibly fail in your markets?

Well, it's something we look at and we continue to see when the FDIC puts that information out. Thus far in the state of Florida, as you well know, the banks that have failed have really not been worth anything. There's just nothing there.

It would be a challenge for us, for example, to go into a de novo market at this point in time, given our weak earnings. Even though it could be done in a safe way with respect to a deposit-only transaction, as an example, the challenge is it would in essence be a de novo entry. And most of them that we've seen just are not worth anything.

As you know, BankAtlantic announced recently that they have been put on a short leash and that --

BankUnited.

BankUnited, I'm sorry. Excuse me. BankUnited in Miami has been put on a short leash, and that is obviously a factor of 10 too big for anything for us to look at. And so I won't comment on that.

But there could be. We've got several good-sized community banks in markets that make sense to us that over the next let's say 12 months from now could start to head dramatically south. We will continue to focus on those, and we think there are some opportunities. But they are very select and they are very few in terms of acquiring any real franchise, and that is what we would be focused on.

As crazy as it sounds, by the time we get there, there are not going to be a lot of buyers. The buyers that are significantly larger than us, the PNCs of the world and the like, have big issues that they are dealing with. You might be surprised at what happens.

Great. Thanks for your insights.

[Valerie Taliaferro], FIG Partners.

Good morning. I just wanted to ask what the balance of your loans past due 30 to 89 days look like at quarter-end, and any trends you're seeing in migration into or out of that past-due bucket.

Bill, I believe the numbers are virtually unchanged from last quarter. Right?

No, I think the 30 to 89 -- I'm not --

It's basically unchanged. (multiple speakers) So very little change in the 30-day category. And what was the second part, migration into that bucket?

Yes, I guess, if there have been changes, if you were seeing any movement in specific loan types into or out of the bucket.

We saw over this past quarter -- I think we talked a little bit about it in the press release -- some deterioration in the residential, the prime residential portfolio that is concerning. Although the trends are not at all different than you are seeing nationally and elsewhere. So that's a bit of a change in trend.

Then of course, we saw continued growth in nonaccruals, driven in part by the TDR discussion that we just had.

All right. Thank you so much.

(Operator Instructions) I'm showing we have no further questions.

Well, thank you very much for your attendance today. We look forward to talking with you again next quarter.

Thank you. Ladies and gentlemen, this concludes the Seacoast first-quarter earnings conference. Thank you for participating. You may all disconnect.