Seacoast Banking Corporation of Florida

Welcome to Seacoast Banking Corporation's first quarter 2026 earnings conference call. My name is Kate, and I will be your operator. 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. 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 know 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.

Okay, thank you, Kate, and good morning, everyone, and thank you for joining us. As we move through today's presentation, we'll reference our first quarter 2026 earnings slide deck, which is available on our website, 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 SECOS team delivered another great quarter, highlighted by robust deposit growth, particularly in non-interest-bearing deposits, meaningful expansion in the net interest margin, and solid progress towards the financial guidance we introduced last quarter. Commercial loan production momentum remained strong, up 35% year over year, and as expected, the first quarter loan growth was seasonally softer than and further impacted by elevated payoffs. Importantly, our loan pipeline remains strong, and we expect payoffs to moderate in the coming quarters, supporting a return to stronger loan growth as the year progresses. Asset quality remains exceptional, with limited charge-offs, no change in criticized and classified assets from the prior quarter, and a modest uptick in non-accrual loans. Non-interest income continued to perform well, driven by strength across wealth management, insurance, treasury, and our mortgage businesses. And our expansion in the villages is already delivering results, with solid mortgage production and growing demand for wealth management services. Expense discipline remained excellent this quarter. Overhead was well controlled. The adjusted deficiency ratio was 55%, and the ratio of adjusted non-interest expense to tangible assets remained at near 2.1%. even as we continue to invest deliberately in growth. Our strategy to drive improved shareholder returns remains firmly on track. Excluding merger-related costs associated with Villages Bank Corporation, our return profile continues to strengthen. For the quarter, adjusted return on assets was 1.31%, and the adjusted return on tangible equity was 16.3%. These results underscore the strong earnings power of the combined franchise. And looking ahead, we remain confident in our 2026 outlook. As outlined in the slide deck, we continue to expect full-year earnings per share in a range of 248 to 252, despite two less rate cuts. And finally, capital and liquidity remain exceptionally strong. We continue to operate with a fortress balance sheet and remain one of the strongest banks in the industry. With that, I'll turn it over to Tracy to walk through our financial results.

Thank you, Chuck. Good morning, everyone. Beginning with slide four and first quarter performance highlights. SECOS reported net income of $31.9 million, or $0.29 per share, in the first quarter. Reported results include a $39.5 million pre-tax loss related to the strategic repositioning of a portion of our Available for Sale securities portfolio, which we executed in January. On an adjusted basis, net income was $67.8 million, or $0.62 per share, increasing 42% from the prior quarter and 111% year-over-year. These results reflect meaningful improvement in our core earnings power, driven by expanding net interest income, disciplined balance sheet management, and continued execution on organic growth initiatives. During the quarter, we delivered 7% annualized organic deposit growth, including 29% annualized growth in non-interest-bearing demand deposits. We also delivered a 13 basis point decline in the cost of deposits to 1.54%, and a nine basis point decline in overall cost of funds to 1.71%. Expansion in the net interest margin was a highlight this quarter, driven largely by lower deposit costs and the bond portfolio restructure. On an adjusted basis, return on average assets was 1.31% and return on average tangible equity was 16.26%. Our capital position remains very strong. We also were more active in share repurchases, buying back over 317,000 shares. Turning to net interest income and margin on slide five, net interest income totaled $178.2 million, up $1.9 million from the prior quarter. The net interest margin expanded 17 basis points to 3.83%, and excluding the impact of accretion on acquired loans, margin expanded 13 basis points to 3.57%. This improvement was driven by lower deposit costs combined with higher securities yields. Moving to non-interest income on slide six, reported non-interest income was a net loss of $12.6 million. Adjusted non-interest income, which excludes the securities repositioning, totaled $26.9 million, down 6% from the prior quarter and up 22% year-over-year, reflecting continued growth in fee-based businesses with the growth of the franchise. Wealth management remains a key contributor, with revenue up 36% year-over-year and assets under management increasing 33% year-over-year, including $125 million of new organic assets under management added during the quarter. Mortgage banking income declined from the fourth quarter, primarily due to volatility in mortgage servicing rights acquired in the village's transaction. Underlying loan volumes and pipelines remain strong in the business. Insurance agency income benefited from a seasonal contingent commission payment, increasing 0.2 million year-over-year. Moving to slide seven, our wealth management team delivered another quarter of strong results, with income growing 36% year-over-year and AUM balances growing 33% year-over-year, with a 21% annual CAGR in the past five years. We expect to continue to see strong volumes throughout 2026. Moving to slide 8, non-interest expense totaled $122.2 million in the first quarter, which includes $8.5 million of merger and integration costs. On an adjusted basis, non-interest expense was $113.6 million, just slightly higher than the prior quarter. Importantly, we saw continued improvement in operating leverage, with the efficiency ratio improving to 59.5%, and the adjusted efficiency ratio at 55.3%, reflecting disciplined expense control alongside core revenue growth. Moving to loan growth and portfolio composition on slides 9 and 10, loans ended the period at $12.6 billion, up modestly from year end. Production remained strong, with growth largely offset by elevated payoffs during the first quarter. The commercial pipeline increased to over $1 billion at quarter end, supporting continued organic growth as we move through the year. Our loan portfolio remains well diversified by asset class, industry, and loan type, with average loan sizes that reflect the granular nature of our franchise and exposure levels that remain well within regulatory guidance and that provide significant flexibility for forward growth. On credit quality, shown on slides 11 and 12, asset quality metrics remain solid. The allowance for credit losses totaled 176 million, or 1.39% of loans, three basis points lower than the prior quarter. Combined with the remaining 138 million of unrecognized purchase discount on acquired loans, we continue to maintain meaningful loss absorption capacity. We saw a modest increase in non-performing loans compared to the prior quarter, to 0.75% of total loans, though still well within the range of low historical levels. The increase in non-accrual loans during the first quarter reflects the movement of two commercial credits to non-accrual status, each having collateral values well in excess of balances outstanding, and therefore no credit loss is expected. Accruing past due loans declined, net charge-offs remained low at 11 basis points annualized, and criticized and classified loans were stable sequentially. Turning to deposits on slides 13 and 14, Total deposits increased $382 million during the quarter, or 9.5% annualized. Excluding brokered balances, growth remained solid and relationship-driven, with organic growth of 7% annualized. Deposit costs are lower by 13 basis points. Transaction accounts represented 50% of total deposits, and the deposit base continues to be highly granular, with the top 10 depositors representing only 3% of total balances. Moving to slide 15 in the investment securities portfolio. As I mentioned, we took advantage of constructive market conditions and repositioned a portion of the available for sale portfolio in late January, which will enhance forward earnings while maintaining balance sheet flexibility. We sold securities with proceeds of approximately $277 million, resulting in a pre-tax loss of $39.5 million, impacting first quarter results. The proceeds were reinvested in primarily agency mortgage-backed securities, with a tax equivalent book yield of approximately 4.8%. Turning to capital and liquidity on slide 16, Seacoast continues to operate with a fortress balance sheet. Tangible equity to tangible assets was 9.2%, and capital ratios remain very strong, providing significant flexibility to support organic growth, disciplined capital deployment, and opportunistic actions such as the approximately $317,000 in share repurchases completed during the quarter. On slide 17, we reiterate the guidance we provided last quarter. The adjusted earnings per share outlook remains unchanged at $2.48 to $2.52, with the potential for slightly lower revenue resulting from the change in previously expected rate cuts, but with no change to bottom line results. In summary, our results demonstrate meaningful improvement in core profitability, strong funding trends, and continued execution against our strategic priorities. We remain focused on disciplined growth and long-term shareholder value creation. With that, Chuck, I'll turn the call back to you.