Seacoast Banking Corporation of Florida

Welcome to SECOS Banking Corporation's 4th Quarter and Full Year 2025 Earnings Conference Call. My name is Mark, 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. 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 the 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, Mark, and good morning, everyone. As we move through today's presentations, we'll reference the fourth quarter and full year earnings slide deck available at seacoastbanking.com. Joining me today are Tracy Dexter, our chief financial officer, Michael Young, our chief strategy officer, and James Stallings, our chief credit officer. The Seacoast team delivered another exceptional quarter highlighted by the closing of the Villages acquisition, and strong growth in loans. Loan outstandings grew at an annualized rate of 15%, driven by the continued success of our commercial banking team and the additional mortgage volume contributed by the Villages acquisition. The addition of the Villages mortgage team expands our optionality for future portfolio decisions. The residential loans we added this quarter were very high-quality credits with high FICOs, strong yields, and generally shorter expected lives than traditional mortgage products, given the unique characteristics of this borrower base. We also continue to see meaningful improvements in non-interest income, with stronger performance across almost every major category. Wealth management had an excellent year, adding $550 million in new AUM, and treasury management fees and other service charges also continued to grow as new clients were onboarded. On the expense side, overhead was well managed, and our expense ratio improved from the prior quarter, and the ratio of adjusted non-interest expense to tangible assets declined to near 2%. Our plan to drive improved shareholder returns remains firmly on track. Excluding the day one provision and merger-related expenses associated with the village's acquisition, ROA for the fourth quarter was 1.22%, and the return on tangible equity was 15.72%. These results demonstrate the strong return profile of the combined institution, which will be fully realized following the village's technology conversions, in July this year, 2026. The village's acquisition also closed with materially higher tangible equity than initially projected, shortening the earn-back period. We are deploying a portion of this excess capital into the securities portfolio reposition that was executed this week, and Michael will walk through these details here shortly. Overall, I'm very pleased with the progress we're making, and I remain highly confident in our outlook for 2026. As noted in the slide deck, we expect to achieve earnings per share for the full year in a range of $2.48 to $2.52 and anticipate exiting the year in the fourth quarter of 2026 after the village's technology conversion with an ROA above 1.30% and a return on tangible equity of approximately 16%. And asset quality remains solid. Charge-offs were a modest three basis points for the fourth quarter and the full year average for 2025 was only 12 basis points. Our CRE and construction and land development ratios remain low following the addition of the villages. And as a reminder, our portfolio is composed almost entirely of franchise quality relationships. Longstanding borrowers across our footprint, which include consumers, businesses, nonprofits, and municipalities. And lastly, capital and liquidity remain exceptionally strong. We continue to operate with a fortress balance sheet. We remain one of the strongest banks in the industry. With that, I'll turn it over to Tracy Dexter to walk through our financial reports. Tracy?

Thank you, Chuck. Good morning, everyone. Beginning with slide four and fourth quarter performance highlights. The Seacoast team delivered a strong quarter with adjusted net income, which excludes merger-related charges, increasing 18% year-over-year to $47.7 million. Consistent with the accounting requirements, this includes the initial provisions for loans and unfunded commitments on the Villages Bank Corporation acquisition, which totaled $23.4 million. Pre-tax pre-provision earnings on an adjusted basis rose to $93.2 million in the fourth quarter, an increase of 39% from the third quarter, and an increase of 65% from the prior year quarter. The efficiency ratio improved and on an adjusted basis is below 55%. I'll note that our presentation of the efficiency ratio now includes the amortization of intangible assets, which added $10.4 million to expense in the fourth quarter. Loan production was very strong, with organic growth in balances of 15% on an annualized basis. Higher commercial production, which increased 22% from the prior quarter, reflects the success of a multi-year hiring strategy. Deposit costs were well managed and also benefited from the addition of VBI, overall declining 14 basis points from the prior quarter to 1.67%. Net interest income was 174.6 million, an increase of 31% from the prior quarter. Net interest margin, excluding accretion on acquired loans, expanded 12 basis points to 3.44%, consistent with the guidance we provided. Our capital position continues to be very strong. Seacoast Tier 1 capital ratio is 14.4%, and the ratio of tangible equity to tangible assets is 9.3%. We grew the branch footprint through two de novo openings in the fourth quarter, one in the greater Atlanta area, and one on the Gulf Coast in Bradenton, Florida. For the full year 2025, we opened five de novo branches. We completed our acquisition of VBI on October 1st, 2025 with the technology conversion plan for July of 2026. On to slide five. Tax equivalent net interest income increased by 42.3 million or 32% compared to the prior quarter and by 60.1 million or 52% compared to the prior year quarter. The net interest margin expanded nine basis points to 3.66%, and excluding accretion on acquired loans, expanded 12 basis points from the prior quarter to 3.44%. Loan yields increased six basis points to 6.02%. Excluding accretion, loan yields increased seven basis points to 5.68%. Overall cost of funds is down 16 basis points from the prior quarter. With strong momentum in loan growth, funding costs now lower, additional liquidity, and accretive acquisitions, we expect continued expansion in the net interest margin. Turning to slide six. Non-interest income was $28.6 million, increasing 20% from the prior quarter. Fee revenue continues to benefit from our growth in commercial customers, and with the addition of the villages in the fourth quarter, service charges on deposits increased 4% from the prior quarter. Mortgage banking activities have expanded with the acquisition of VBI. This includes increases in saleable and portfolio production in the fourth quarter, along with servicing income introduced by the village's activities. Moving to slide seven. Our wealth management team delivered another quarter of remarkable results, with income growing 21% from the prior quarter, largely attributed to organic growth, bringing new assets under management in 2025. Total AUM increased 37% year over year, with a 23% annual CAGR in the past five years. We're incredibly proud of our wealth team and their amazing success in 2025. Moving to slide eight, non-interest expense in the fourth quarter was $130.5 million, an increase of $28.5 million from the prior quarter. The fourth quarter included $18.1 million in merger and integration costs and $23.4 million in day one credit provisions for the village's acquisition. Higher salaries and benefits and higher outsourced data processing costs reflect continued expansion and the addition of recent bank acquisitions, as well as higher performance-driven incentives. Other categories of expenses were in line with expectations. Our adjusted efficiency ratio improved to 54.5%, demonstrating continued operating leverage. We continue to remain focused on profitability and performance, and expect continued disciplined management of overhead and the efficiency ratio. As a reminder, looking ahead, the first quarter typically has seasonally higher expenses from FICA and 401K resets. Turning to slides nine and 10 on the loan portfolio, loan outstandings, excluding the impact of the VBI acquisition, increased at an annualized 15%. We continue to see strong broad-based demand across our market and commercial production increased by 22% during the fourth quarter. Loan growth was further strengthened by strong mortgage production at VBI, much of which we chose to retain in the portfolio. Loan yields increased six basis points, and excluding the effect of accretion, yields increased seven basis points from the prior quarter to 5.68%. The overall mix of loan types has remained generally consistent quarter over quarter, 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. 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 216% of consolidated risk-based capital, respectively. We've managed our loan portfolio with diverse distribution across categories and retained granularity to manage risk. Moving on to credit topics on slide 11, the allowance for credit losses totaled $178.8 million, with coverage to total loans increasing to 1.42%. Loans acquired from VBI have coverage of approximately 2%, as we take a conservative approach while transitioning to Seacoast's portfolio management and monitoring practices. The allowance for credit losses, combined with the $150 million remaining unrecognized discount on acquired loans, totals $329 million, or 2.61% of total loans that's available to cover potential losses. The acquisition of VBI added approximately $59 million in accretable purchase mark. That's included in the figures presented on the slide. that if not needed to cover losses, will be recognized through yield over time. Moving to slide 12, looking at quarterly trends and credit metrics, which remain strong. We recorded net charge-offs of $936,000 during the quarter, or three basis points annualized, bringing the net charge-offs for the full year 2025 to 12 basis points of average loans. Non-performing and criticized and classified loans grew slightly, with isolated additions from VBI, but remain low as a percentage of total loans. Turning to slides 13 and 14 on the deposit portfolio. Deposits increased to $16.3 billion, largely attributed to the acquired VBI deposits. Average balances in the fourth quarter were up 29% from the prior quarter, benefiting from the acquisition and the seasonal effect of higher public funds deposits. The cost of deposits declined to 1.67%, exiting the year at 1.64%. Seacoast continues to benefit from a diverse deposit base. Customer transaction accounts represent 48% of total deposits, which continues to highlight our long-standing, relationship-focused approach. On slide 15, our capital position continues to be very strong. Tangible book value per share shows the initially dilutive impact of the VBI acquisition, which we expect to be earned back ahead of our original projection. The ratio of tangible equity to tangible assets remains strong at 9.3%. As expected, return on tangible equity decreased, reflecting the impact of the acquisition. Our risk-based and Tier 1 capital ratios remain among the highest in the industry. I'll now turn the call over to Michael to discuss recent strategic capital actions in the securities portfolio. Michael?