Seacoast Banking Corporation of Florida

Welcome to Seacoast Banking Corporation's 3rd Quarter 2025 Earnings Conference Call. My name is Desiree and I will be your operator. Before we begin, I have been asked to direct your attention to the statements at the end of the company's press release regarding forward-looking statements. Seacoast 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 Seacoast Bank. Mr. Schaefer, you may begin.

All right. Thank you. Good morning, everyone. As we proceed with our presentation, we'll refer to the third quarter earnings slide deck, which is available at seacoastbanking.com. Joining me today is Tracy Dexter, our Chief Financial Officer, Michael Young, our Chief Strategy Officer, and James Stallings, our Chief Credit Officer. The SECO team delivered another exceptional quarter, which clearly demonstrated the progress we are making towards enhancing our return profile while delivering strong growth on both sides of the balance sheet. Our competitive transformation has fully taken hold, with loan and deposit growth near 8%, the result of a focused effort to recruit the most qualified and capable bankers across our footprint. I was particularly pleased with the growth in non-interest-bearing DDA accounts and a balanced approach to loan growth, with our commercial production spread across CNI and CRE with multiple asset classes and industries. The team also delivered strong performance across multiple revenue streams, including a record-breaking quarter in wealth management and solid performance in treasury management fees, SBA, interchange, and insurance agency income. And impressively, the team accomplished all this while successfully closing and converting the Heartland transaction, as well as closing the Villages transaction on October 1st. Asset quality remains sound, non-performing loans declined, and net charge-offs were lower than our prior guidance, reflecting our continued focus on discipline underwriting and proactive risk management. We have very limited exposure to shared national credits or NDFI, and just to remind you, our portfolio is almost entirely franchise quality relationships made to borrowers in our footprint, including consumers, businesses, nonprofits, and municipalities that we have deep relationships with. And lastly, capital and liquidity are industry leading, and our liquidity profile will be further enhanced with the Villages transaction. We remain committed to our Fortress Balance Sheet principles and continue to operate one of the strongest banks in the industry. 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 executions continue to drive our success. We operate with one of the best banking teams in the Southeast, across some of the best markets in the United States, with an exceptionally strong balance sheet. I remain confident in our growth outlook and our ability to deliver continued improvements and returns into 2026. With that, I'll turn the call over to Tracy Dexter to walk through our financial results. Tracy?

Thank you, Chuck. Good morning, everyone. Directing your attention to third quarter results, beginning with slide four. The Seacoast team delivered a strong quarter with adjusted net income, which excludes merger-related charges. increasing 48% year-over-year to $45.2 million, or $0.52 per share. Organic deposits, excluding brokered and Heartland-acquired deposits, grew $212 million, or 7% annualized, and that organic growth included $80 million in non-interest-bearing deposits. Loan production continued to be strong, with organic growth imbalances of 8% on an annualized basis. The pipeline has reached a record high, reflecting the success of recent hiring and the increase in the balance sheet following the completion of the Villages acquisition in October. Net interest income was $133.5 million, an increase of 5% from the prior quarter, and net interest margin, excluding accretion on acquired loans, expanded three basis points to 3.32%. Tangible book value per share increased 9% year-over-year to $17.61, remarkable given that the Heartland acquisition included 50% cash consideration. Our capital position continues to be very strong. Seacoast Tier 1 capital ratio is 14.5%, and the ratio of tangible common equity to tangible assets is 9.8%. We completed our acquisition of Heartland Bank shares on July 11th. adding four branches and approximately $824 million in assets. The technology conversion was fully completed in the third quarter. And on October 1st, we finalized our acquisition of Villages Bank Corporation, adding 19 branches and over $4 billion in assets. We expect the full technology conversion to happen early in the third quarter of 2026. Turning to slide five. Net interest income increased by 6.6 million, or 5%, compared to the prior quarter, and by 26.9 million, or 25%, compared to the prior year quarter. The net interest margin declined one basis point to 3.57%, and excluding accretion on acquired loans, expanded three basis points from the prior quarter to 3.32%. In the securities portfolio, yields increased five basis points to 3.92%. Loan yields declined two basis points to 5.96%. Excluding accretion, loan yields increased three basis points to 5.61%. The cost of deposits remain near flat, with only a one basis point increase during the quarter to 1.81%, and overall cost of funds is down three basis points from the prior quarter. 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. Consistent with our previous guidance, we expect to exit the year with the core net interest margin reaching approximately 3.45% inclusive of recent acquisitions. Moving to slide six. Non-interest income excluding securities activity was 24.7 million, increasing 5% from the prior year quarter. Fee revenue continues to benefit from our investments in talent and expansion of treasury management services to commercial customers, with service charges on deposits increasing 12% from the prior quarter. Our wealth management team delivered a record quarter in new AUM, continuing its strong performance and reinforcing its position as a key growth driver for the organization. 258 million in new AUM was added in the third quarter, the highest quarterly result in the division's history, and $473 million in new AUM in 2025 year to date. BOLI income increased to $3.9 million in the third quarter and included $1.3 million in benefits. Other income totaled $6 million and included higher gains on SBA loan sales and higher loan swap fees. Looking ahead to the fourth quarter, we expect non-interest income in a range from $22 million to $24 million. Moving to slide seven, again, the wealth division continues to grow entirely organic and with significant referrals from our commercial teams, with total AUM increasing 24% year over year and a 25% annual CAGR in the past five years. On slide eight, non-interest expense in the third quarter was $102 million, an increase of $10.3 million, and the third quarter included $10.8 million in merger-related expenses. Higher salaries and wages reflect continued expansion and the addition of Heartland, as well as higher performance-driven incentives. Outsource data processing costs totaled $9.3 million, an increase of $0.8 million, reflecting higher transaction volume and growth in customers, including from the acquisition of Heartland. Other categories of expenses were in line with expectations. Our adjusted efficiency ratio improved to 53.8%, down from 55.4% in the second quarter, demonstrating continued operating leverage. We continue to remain focused on profitability and performance, and expect continued disciplined management of overhead and the efficiency ratio. With the addition of the villages beginning in October, we expect adjusted expenses for the fourth quarter, excluding direct merger-related costs, to be in the range of $110 to $112 million. Turning to slide nine, loan outstandings, excluding the impact of the Heartland acquisition, increased at an annualized 8%. Pipelines increased 30% to $1.2 billion, and we continue to see strong, broad-based demand across our markets. Loan yields declined two basis points with lower accretion on acquired loans, with the prior quarter impacted by elevated payoffs. Excluding the effect of accretion, yields increased three basis points from the prior quarter to 5.61%. Looking forward, the pipeline remains strong and we expect continued high single-digit organic loan growth in the coming quarter. With the addition of the villages in the fourth quarter, we expect loan-to-deposit ratio at year-end 2025 to be below 75%, allowing significant continued growth opportunities. 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 32% and 223% of consolidated risk-based capital, respectively. We've managed our loan portfolio with diverse distribution across categories and retained granularity to manage risk. Moving to credit topics on slide 11, the allowance for credit losses totaled $147.5 million with coverage to total loans remaining flat at 1.34%. The allowance for credit losses combined with the $102.2 million remaining unrecognized discount on acquired loans totals $249.7 million, or 2.27% of total loans that's available to cover potential losses. Moving to slide 12, looking at quarterly trends in credit metrics, which remain strong. We recorded net charge-offs of $3.2 million during the quarter, or 12 basis points annualized. Non-performing loans declined by $3.6 million during the quarter and represent only 0.55% of total loans. Accruing past due loans moved slightly higher to 0.19% of total loans. The level of criticized and classified loans stands at 2.5% of total loans, generally in line with prior periods. As Chuck mentioned in his opening remarks, Seacoast continues to have very limited exposure to shared national credits or non-depository financial institutions. We have no exposure to private equity debt funds. Moving to slide 13 and the investment securities portfolio. Net unrealized losses in the AFS portfolio improved by 36 million during the third quarter, driven by changes in long-term rates. The portfolio yield increased five basis points to 3.92%, reflecting 385 million in purchases of primarily agency mortgage-backed securities with an average yield of 5.03%. Turning to slide 14 in the deposit portfolio, Seacoast continues to benefit from a diverse deposit base. Customer transaction accounts represent 48% 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. On slide 15, Organic deposit growth, excluding changes in broker deposits and the acquired Heartland deposits, was 212.3 million, or 7% annualized, of which 80.4 million was non-interest-bearing deposit growth. Cost of deposits increased slightly by one basis point to 1.81%. The Heartland acquisition added over 700 million in a strong core deposit franchise and the number one market share in Highlands County. We continue to build share across our markets with a focus on core relationship deposits. For the fourth quarter 2025, we expect low to mid single-digit organic deposit growth. And finally, on slide 16, our capital position continues to be very strong. Tangible book value per share has grown to $17.61, and the ratio of tangible common equity to tangible assets held strong at 9.8%. As expected, return on tangible common equity decreased, reflecting the impact of the Heartland acquisition. And in the fourth quarter, we'll see the initial impact of the Villages acquisition on these metrics. Into the first quarter of 2026 and moving forward, we expect to see meaningful improvements in return on equity measures. Our risk-based and Tier 1 capital ratios remain among the highest in the industry. Results this quarter reflect 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 over to Chuck.