Seacoast Banking Corporation of Florida

Welcome to Seacoast Banking Corporation's third quarter 2026 earnings conference call. My name is Colby and I'll be your conference operator today. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, we will conduct a question and answer session. If you'd like to ask a question at that time, please press star then the number one on your telephone keypad to raise your hand and enter the queue. If you'd like to withdraw your question at any time, please press star Before we begin, I've 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 note that this conference is being recorded. I will now turn the conference over to Chuck Schaefer, Chairman and CEO of Seacoast Bank. Mr. Schaefer, you may begin.

Okay, thank you, Colby, and good morning, everyone, and thank you for joining us. As we move through today's presentation, we'll reference the third quarter 2026 earnings slide deck available at seacoastbanking.com. Joining me today are Tracey Dexter, our Chief Financial Officer, Michael Young, our Chief Strategy Officer, and James Stallings, our Chief Credit Officer. Seagos delivered another strong quarter with continued progress in growth, profitability, and operating leverage, all trucking well against the guidance we laid out earlier this year. The quarter also marked an important transition for our company. We successfully completed the technology conversion of Citizens First Bank in the Villages bringing our integration work largely to a close. The third quarter also represents the end of M&A-related charges flowing through our income statement, providing a cleaner earnings profile and greater visibility into the underlying earnings power of SECOS. And on October 2nd, SECOS celebrated its 100th anniversary, an extraordinary milestone made possible by generations of associates, customers, shareholders, and the communities we serve. And turning to the third quarter, net income was $59.9 million, or $0.55 per share, with adjusted earnings of $70.1.8 million, or $0.66 per share. And I was particularly pleased with the continued improvement in profitability, which has been a major strategic focus over the past year. Adjusted ROA improved to 1.34%, and adjusted ROTE increased to 16.9%, and adjusted pre-tax pre-provision earnings grew 58% year over year. Organic growth remains strong, and loans grew at a 13% annualized rate in the quarter, and we ended September with a commercial pipeline of approximately $1.3 billion. And importantly, we're generating this growth while maintaining disciplined underwriting and strong credit quality, with non-performing loans declining 15%, and net charge-offs remaining low. And on the funding side, total deposits were essentially flat year-to-date, but the underlying franchise trends remain encouraging, particularly as we continue to focus on growing operating accounts. Year-to-date non-expiring deposits have grown at a 10% annualized rate, and year-to-date growth in business accounts offset declines in public fund balances. And we are now moving beyond our seasonal low point for deposits, and I expect core deposit growth from here. And as we look ahead, Seagos is operating from a position of considerable strength. We have a fortress balance sheet, substantial liquidity, robust capital, improving profitability, and significant organic growth opportunities across our markets. That combination gives us both resilience and considerable flexibility as we move into 2027. And with the integration largely behind us, our focus is squarely on execution, attracting great bankers, growing organically, deepening customer relationships, and investing in technology and AI to operate more efficiently and deliver an even better experience for our customers. I want to thank our associates for their tremendous commitment to Seacoast and our one team culture. We have accomplished a great deal thus far in 2026. and with the integration behind us, profitability improving and strong momentum across the franchise, I believe SECOS is very well positioned for another year of strong performance in 2027. With that, I'll turn it over to Tracey.

Thank you, Chuck. Good morning, everyone. Beginning with slide four and third quarter performance highlights. SECOS reported net income of $59.9 million or $0.55 per share, up 1% from the prior quarter and 64% from the prior year quarter. Adjusted net income increased 9% sequentially to $71.8 million, or $0.66 per share, up 59% from the prior year quarter. Adjusted pre-tax pre-provision earnings were $100.3 million, up 5% from the prior quarter and 49% from the prior year quarter. Net interest income increased 2% from the prior quarter. Net interest margin was stable at 3.83%, while margin excluding acquired loan accretion increased one basis point to 3.66%. Adjusted ROA improved to 1.34%. Loans increased $429 million or 13% annualized during the quarter supported by continued strong origination activity. We're seeing good results in relationship deposit growth year to date with non-interest bearing deposits up 10% on an annualized basis since the beginning of the year. Adjusted return on tangible equity grew to 16.9%, and we remain well positioned with strong capital. Moving to net interest income and margin on slide five. Net interest income on a fully tax-equivalent basis totaled $185.4 million, up $3.2 million from the prior quarter. Higher average loan balances and higher core loan yields supported growth, partially offset by higher deposit costs and lower average securities balances. Net interest margin remained stable at 3.83%. Excluding acquired loan accretion, core margin increased one basis point to 3.66%. Securities yields increased to 4.52%. Loan yields were 5.89%, up one basis point sequentially. And excluding accretion, loan yields increased three basis points from the prior quarter to 5.64%. The cost of deposits increased modestly, but remains low at 1.6%, and the overall cost of funds was 1.74%. Turning to non-interest income on slide 6, non-interest income totaled $31.6 million, up 14% from the prior quarter. Excluding securities activity, adjusted non-interest income was $32.1 million, up 15% from the prior quarter. Wealth management income continues to build, increasing 2% sequentially. Mortgage banking income increased $2 million from the prior quarter to $4.7 million, with the increase largely the result of the change in the value of mortgage servicing rights resulting from higher market interest rates. Insurance agency income continues to grow, increasing $0.5 million from the prior quarter. Other income increased $1.4 million from the prior quarter, reflecting higher swap and syndication fees, higher gains on SBA loan sales, and higher income from SBIC investments. Moving to slide seven, assets under management reached 3.2 billion, an increase of 29% year over year, and as you can see on the chart, a 22% compound annual growth rate over the last five years. The team has added 574 million of new organic assets under management year to date reflecting continued new business development and asset inflows from new and existing relationships. Moving to expenses on slide eight, non-interest expense totaled $133.3 million and included $15.5 million of merger and integration costs associated with the completion of the Citizens First Bank Villages Bank Corp conversion. Adjusted non-interest expense was $117.8 million compared with $114.8 million in the prior quarter. The adjusted efficiency ratio improved to 53.9% from 54.5% in the second quarter and 57.6% a year ago, demonstrating continued improvement in core operating leverage. Looking ahead to the fourth quarter, we expect approximately $2.4 million in discrete expenses, which will not recur in 2027. On to slide 9 and 10 on the loan portfolio. Loans ended the quarter at $13.6 billion, increasing $429 million or 13% annualized from June 30th. The commercial pipeline remained strong at approximately $1.3 billion at September 30th, supporting our outlook for continued organic growth. Looking at the allowance for credit losses, the details of which are shown on slide 11. The allowance for credit losses was $191 million, 1.41% of total loans, compared with 1.38% at June 30th. During the third quarter, we recorded an adjustment to the purchase accounting valuation for a loan acquired in the Villages acquisition. This increased the allowance by $8.4 million, with a corresponding adjustment to Goodwill. Our credit quality metrics, shown on slide 12, remain solid. Non-performing loans declined during the quarter to $73.3 million and represent 54 basis points of total loans. Net charge-offs were $5.4 million, or 16 basis points of average loans, and the four-quarter average is 10 basis points of total loans. The level of criticized and classified loans was stable at 2.9% of total loans. Turning to deposits on slides 13 and 14, Total deposits were $16.6 billion at September 30th, compared with $16.8 billion at June 30th. The third quarter is typically our seasonal low point during the year, but the decline also reflects a $159 million reduction in brokered time deposits. Non-interest bearing demand deposits remain near flat at $4.2 billion. Average non-interest bearing balances increased $40 million from the second quarter. Customer transaction accounts represented 48% of total deposits at quarter end, and the top 10 depositors represented only 2% of total customer deposits. Moving to slide 15 in the investment securities portfolio, net unrealized losses in the available for sale securities portfolio increased by $237 million during the third quarter, driven by higher rates and wider spreads. As a reminder, this is a high-quality portfolio of largely agency-backed securities, and with no anticipated need to sell these securities, the decline in value is considered temporary, will reverse over time as these bonds move toward maturity or as the rate environment changes. Turning to capital and liquidity on slide 16, strong capital levels are a hallmark of the Seacoast franchise. The sequential decline in tangible equity to tangible assets and tangible book value per share primarily reflected the impact of higher rates on the market value of the available for sale securities portfolio through accumulated other comprehensive income. And we also put some capital to work through share repurchases. Our robust capital levels continue to provide significant flexibility to support organic growth and discipline capital deployment. On slide 17, demonstrating the components of the change in TBV per share during the quarter, which again was primarily impacted by unrealized losses related to the securities portfolio. On slide 18, we reiterate our 2026 guidance. Our results for the quarter continue to evidence the improvements we've achieved 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, I'll turn the call back to Chuck.