Seacoast Banking Corporation of Florida

second quarter 2025 earnings conference call. My name is Angela and I will be your operator. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star 1 on your telephone keypad. And if you would like to withdraw your question, simply press star 1 again. Before we begin, I have been asked to direct your attention to the statement at the end of the company's press release regarding forward-looking statements. SECOS will be discussing issues that constitute forward-looking statements within the meaning of the Securities and Exchange Act, and its comments today are intended to be covered within the meaning of that act. Please note that this conference is being recorded. I will now turn the call over to Chuck Schaefer, Chairman and CEO of SECOS Bank. Mr. Schaefer, you may begin.

Okay, thank you, Angela, and good morning, everyone. As we proceed with our presentation, we'll refer to the second quarter earnings slide deck available at seacoastbanking.com. Joining me today are Tracy Dexter, our Chief Financial Officer, Michael Young, our Treasurer, Head of Corporate Development and Investor Relations, and James Stallings, our Chief Credit Officer. The Seacoast team delivered exceptional results in the second quarter of 2025, reflecting the strength of our growing franchise, the discipline and focus of our team, and the momentum we continue to build across all of our markets. This quarter was highlighted by a substantial increase in net income, up 36% from the prior quarter, largely driven by a 10 basis point expansion in the net interest margin, and this was the result of robust loan growth and disciplined deposit cost management. We also delivered solid performance in non-interest income and continued to demonstrate effective expense control. Profitability improved across the board. We made meaningful progress in our strategic priorities. Annualized loan growth reached 6.4%, supported by a strong commercial pipeline, an outcome of a multi-year strategy to attract top talent from larger institutions. This talent continues to drive high-quality loan production and deepen customer relationships. We also successfully closed the Heartland Bank Shears transaction a few weeks ago and remain on track to close the Villages Bank Corporation acquisition in the fourth quarter. Both franchises bring high-quality deposit balances and complementary balance sheets. And once fully integrated, we expect these transactions to significantly enhance Seacoast's profitability profile. And turning to credit, asset quality remains sound. Non-performing loans declined to 0.61% of total loans, and net charge-offs were just $2.5 million, reflecting our continued focus on discipline underwriting and proactive risk management. Criticized and classified loans remain stable. And in closing, I want to express my sincere appreciation to our dedicated associates for their commitment to advancing our growth and profitability goals. Their focus and execution continue to drive our success. We remain very confident in our strategic direction, and we're enthusiastic about the opportunity to lie ahead. With that, I'll turn it over to Tracy to walk through our financial results. Tracy?

Thank you, Chuck. Good morning, everyone. Directing your attention to second quarter results, beginning with slide four. the Seacoast team delivered a strong quarter with net income of $42.7 million, or $0.50 per share, increasing 36% from the prior quarter, and adjusted net income, which excludes merger-related charges, increasing 39% sequentially to $44.5 million, or $0.52 per share. Profitability metrics are all improved and include a return on assets of 1.08%, return on tangible common equity of 12.8%, and an improvement in the efficiency ratio, which, excluding merger-related charges, was 55%. Loan production was solid, with growth in balances over 6% on an annualized basis. Net interest income was $126.9 million, an increase of 7% from the prior quarter, and net interest margin expanded 10 basis points to 3.58%. Excluding accretion on acquired loans, net interest margin expanded 5 basis points to 3.29%. Contributing to the NIM improvement is a decline in deposit costs from 1.93% in the prior quarter to 1.8% in the second quarter, reflecting our continued focus on relationship-based funding and disciplined pricing. Tangible book value per share of $17.19 represents a 12% year-over-year increase. Our capital position continues to be very strong. Seacoast Tier 1 capital ratio is 14.6%, and the ratio of tangible common equity to tangible assets is 9.75%. We completed our acquisition of Heartland Bank shares on July 11th, adding four branches and approximately $777 million in assets. We announced our proposed acquisition of Villages Bank Corporation, which will add a significant additional presence in Central Florida and approximately $4.1 billion in assets. That acquisition is expected to close in late October 2025. Turning to slide five, net interest income increased by 8.4 million during the quarter, driven by loan growth and by lower deposit costs. The net interest margin expanded 10 basis points to 3.58%, and excluding accretion on acquired loans, expanded five basis points to 3.29%. In the securities portfolio, yields decreased one basis point to 3.87%. Loan yields expanded eight basis points to 5.98%, Excluding accretion, loan yields were flat compared to the prior quarter. Through proactive deposit cost management, we've brought the cost of deposits down by 13 basis points during the quarter to 1.8%. With strong momentum in loan growth, deposit costs now lower and stabilizing, additional liquidity and accretive acquisitions, we expect net interest income to continue to grow through the remainder of the year. Additionally, We continue to expect to exit the year with the core net interest margin of approximately 3.35%, inclusive of one expected rate cut in September and one in December. And with the two acquisitions, that could add approximately 10 basis points to that figure. Moving to slide six. Non-interest income excluding securities activity was 24.5 million, increasing 10% from the second quarter of 2024. Fee revenue continues to benefit from our expansion of Treasury management services to commercial customers. Our wealth and insurance businesses provide consistent, strong results. Saleable mortgages originated during the quarter generated gains of $0.7 million. BOLI income increased to $3.4 million in the second quarter and included a $0.9 million benefit. Other income totaled $7.5 million and included a $3 million payroll tax credit received during the quarter claimed by a bank that we previously acquired. Looking ahead to the third quarter, we expect non-interest income in a range from $20 million to $22 million. Moving to slide seven, our wealth division continued its strong growth, adding $215 million in new assets under management so far this year. with total AUM increasing 16% compared to this time last year. Moving to slide eight, non-interest expense in the second quarter was 91.7 million, an increase of 1.1 million. The current quarter includes 2.4 million in merger-related expenses. Higher salaries and wages reflect annual merit increases and performance-driven incentives. Other categories of expenses are in line with our expectations and reflect our continued focus on profitability and performance. Our adjusted efficiency ratio improved to 55.4%, down from 59.5% in the first quarter, demonstrating continued operating leverage. We continue with that focus, and with the addition of the Heartland franchise, we expect adjusted expenses for the third quarter, which excludes direct merger-related costs, to be in a range of $92 to $94 million. Turning to slide 9. Loan outstandings increased at an annualized 6.4%, with production of $854 million in the second quarter. Pipelines remain strong at $921 million, and we continue to see strong demand across our markets. Loan yields expanded eight basis points, with higher accretion on acquired loans resulting from elevated payoffs. Looking forward, the pipeline is very strong, and we expect continued mid- to high-single-digit organic loan growth in the coming quarter, and for the full year 2025, though the impact of tariffs may add some uncertainty. Turning to slide 10, portfolio diversification in terms of asset mix, industry, and loan type has been a critical element of the company's lending strategy. Exposure is broadly distributed, and we continue to be vigilant in maintaining our disciplined, conservative credit culture. Non-owner-occupied commercial real estate loans represent 34% of all loans and are distributed across industries and collateral types. As we have for many years, we consistently manage our portfolio to keep construction and land development loans and commercial real estate loans well below regulatory guidance. These measures are significantly below the peer group at 33% and 221% of consolidated risk-based capital, respectively. We've managed our loan portfolio with diverse distribution across categories and retaining granularity to manage risk. Moving on to credit topics on slide 11. The allowance for credit losses totaled 142.2 million, or 1.34% of total loans, with no change in allowance coverage compared to the prior quarter. Our allowance estimation process includes consideration of recent volatility in the markets and macroeconomic environment, and we continue to closely monitor the potential impact of economic and fiscal policy decisions on our borrowers. The allowance for credit losses, combined with the 108.5 million remaining unrecognized discount on acquired loans, totals 250.6 million, or 2.36% of total loans that's available to cover potential losses, providing substantial loss absorption capacity. Moving to slide 12, looking at quarterly trends in credit metrics, credit quality remains strong. We recorded net charge-offs of 2.5 million during the quarter, or nine basis points annualized, Non-performing loans declined by $6.8 million during the quarter and represent only 0.61% of total loans. And accruing past due loans moved lower to 0.13% of total loans. The level of criticized and classified loans declined slightly to 2.39% of total loans. Moving to slide 13 and the investment securities portfolio. We leveraged wholesale funding to purchase securities in the first half of the year in advance of the Heartland acquisition. adding primarily agency securities to the portfolio, with an average book yield near 5%. Interest rate swaps that had been beneficial to prior quarters matured in April, with the impact of the overall portfolio yield offset by the new purchases. Net unrealized losses in the AFS portfolio improved by 16 million during the quarter, driven by changes in long-term rates. Turning to slide 14 on the deposit portfolio, Total deposits dipped 77 million, reflecting, as expected, typical seasonal slowness and a strategic focus on exiting very high rate deposit relationships. We took proactive steps to manage down the cost of deposits, which declined 13 basis points to 1.8%. This funding will be replaced with lower cost core franchise deposits from Heartland, improving our margin outlook. We continue to onboard new relationships and build market share with a focus on core deposits. We expect low single-digit deposit growth, organic deposit growth, for the full year 2025. On slide 15, Seacoast continues to benefit from a diverse deposit base. Customer transaction accounts represent 47% of total deposits, which continues to highlight our longstanding, relationship-focused approach. Our customers are highly engaged and have a long history with us, and low average balances reflect the granular relationship nature of our franchise. And finally, on slide 16, our capital position continues to be very strong, and we're committed to maintaining our fortress balance sheet. Tangible book value per share has grown to $17.19, and the ratio of tangible common equity to tangible assets is exceptionally strong at 9.8%. We saw meaningful improvements in return on equity measures and our risk-based and Tier 1 capital ratios remain among the highest in the industry. As a reminder, we'll be putting some of this capital to work in the Heartland and Villages transactions, which will materially improve our return on capital. In summary, results this quarter reflect the strength of our core franchise and disciplined execution across the organization. We remain confident in our ability to deliver strong, sustainable performance. Our balance sheet is well positioned and our capital position is strong. We'll continue to execute on our organic growth and profitability goals as we integrate recent acquisitions and grow the franchise. I'll now turn the call back to you, Chuck.