Q1 2024 Seacoast Banking Corp of Florida Earnings Call

Okay.

Marvin: Welcome to Seacoast banking Corporation's first quarter 'twenty 'twenty four earnings conference call. My name is Marvin you when that will be your operator either.

Operator: Welcome to Seacoast Banking Corporation's 1st Quarter 2024 Earnings Conference Call. My name is Marvilou, and I will be your operator. Later, we will conduct a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. 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. ECOs 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.

Later, we will conduct a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Marvin: 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 equals.

Marvin: Because you'll be discussing issues that constitute forward looking statements within the meaning of the Securities and Exchange Act ended your comments today are intended to be cord, but then that means you have to act.

Operator: Please note that this conference is being recorded. I will now turn the call over to Chuck Shaffer, Chairman and CEO of Seacoast Bank. Mr. Shaffer, you may begin.

Marvin: Note that this conference is being recorded.

Marvin: I'll now turn the call over to Chuck Shaffer, Chairman and CEO Seacoast Bank. Mr. Schafer you may begin.

Okay. Thank you and thank you all for joining US. This morning, as we provide our comments will reference the first quarter earnings slide deck.

Charles M. Shaffer: Okay, thank you. And thank you all for joining us this morning. As we provide our comments, we'll reference the first quarter earnings slide deck, which you can find at seacoastbanking.com. I'm joined today by Tracey Dexter, Chief Financial Officer; Michael Young, Treasurer and Director of Investor Relations; and James Stallings, Chief Credit Officer. We started 2024 on solid footing, one of the strongest quarters on record for customer acquisition. This results from our focused investment over the last 24 months in acquiring the most talented revenue-producing bankers in Florida, strong execution by our retail team, and further investments in marketing and branding across all of our markets. We saw many significant new opportunities throughout the state.

Marvin: You can find at seacoast banking dotcom.

Charles M. Shaffer: I'm joined today by Tracey Dexter Chief Financial Officer, Michael Young Treasurer, and director of Investor Relations, and James Stallings, Chief Credit Officer.

Charles M. Shaffer: We started 2024 on solid footing, one of the strongest quarters on record for customer acquisition.

Charles M. Shaffer: This results from our focused investment over the last 24 months and acquiring the most talented revenue producing bankers in Florida strong execution by our retail team and further investments in marketing and branding across all of our markets.

Charles M. Shaffer: We saw significant new opportunities throughout the state, which growth drove growth in DDA and supported an annualized deposit growth rate of 8%.

Charles M. Shaffer: This group drove growth in DDA and supported an annualized deposit growth rate of 8%. Additionally, we had an outstanding quarter in wealth management, with fee-based assets under management increasing by $160 million, and we exited the quarter with a significant wealth pipeline. Both our SBA team and our insurance agency had solid quarterly results, and our treasury team continues to win middle market commercial deposits. Our loan pipeline reached its highest point in over a year, with a large proportion of that in C&I, and we expect a meaningful second quarter for Cologne at the closing.

Additionally, we had an outstanding quarter in wealth management with fee based assets under management, increasing by $160 million.

Charles M. Shaffer: And exited the quarter with a significant wealth pipeline.

Charles M. Shaffer: Both our SBA team and our insurance agency had solid quarterly results and our Treasury team continues to win middle market commercial depository accounts.

Charles M. Shaffer: Our loan pipeline reached its highest point over a year with a large proportion of that C&I and we expect a meaningful second quarter for quota closings.

Charles M. Shaffer: I was incredibly proud of the team's focus on customer acquisition and we saw deposit growth in nearly every market we operate in.

Charles M. Shaffer: I was incredibly proud of the team's focus on customer acquisition, and we saw deposit growth in nearly every market we operated in. Given all the significant business development activity occurring across the franchise, I'm very excited about our prospects for new client acquisition over the remainder of 2024. In turning to expense management, as we discussed on last quarter's call, we fully executed our cost savings initiative earlier this quarter. This initiative was designed to reduce overhead to offset revenue compression associated with the current interest rate environment. At this point, we are done with this exercise and expect adjusted non-interest expense in 2024 to be down significantly from 2023.

Charles M. Shaffer: Given all the sniff significant business development activity occurring across the franchise I'm very excited about our prospects for new client acquisition over the remainder of 2024.

Charles M. Shaffer: And turning to expense management as we discussed on last quarter's call. We fully executed our cost savings initiative earlier. This quarter. This initiative was designed to reduce overhead to offset revenue compression associated with the current interest rate environment.

Charles M. Shaffer: At this point, we're done with this exercise and expect adjusted noninterest expense in 2020 for it to be down significantly from 2023 do not expect further one time expenses Tracy will provide further guidance shortly.

Charles M. Shaffer: Do not expect further one-time expenses. Tracey will provide further guidance shortly, taking a deeper dive into lending and asset quality. We are encouraged by the growth in our pipelines while maintaining a prudent approach in the current economic environment. Loan outstandings were down about $80 million from the prior quarter, primarily due to a handful of closings that pushed into the second quarter, elevated paydowns in our construction portfolio, and $30 million in credits we purposely exited. Our loan pipeline grew substantially by nearly 50% to $573 million, and new loan add-on rates were approximately 8% Looking forward, we continue to expect low single-digit growth for the remainder of the year.

Charles M. Shaffer: Taking a deeper dive into lending and asset quality. We are encouraged by the growth in our pipelines, while maintaining a prudent approach in the current economic climate.

Charles M. Shaffer: Outstandings were down about $80 million from the prior quarter, primarily due to a handful of closings that pushed into the second quarter elevated pay downs in our construction portfolio and $30 million in credits we purposely exited.

Our loan pipeline grew substantially by nearly 50% to 573 man and new loaded loan add on rates were approximately 8% during the quarter.

Charles M. Shaffer: Looking forward, we continue to expect low single digit growth through the remainder of the year and Additionally, it is important to emphasize that we continue to require complicated comprehensive banking relationship with seacoast for all of our lending activities, ensuring a mutually beneficial partnership with our clients.

Charles M. Shaffer: Additionally, it's important to emphasize that we continue to require a comprehensive banking relationship with Seacoast for all of our lending activities, ensuring a mutually beneficial partnership with our clients. Our asset quality continues to show sustained strength, and we charge us for the quarter with just 15 bases, annualized and classified, and criticized assets are nearly flat from the prior quarter. Our ACL stands at $147 million, equating to 1.47% of total loans. This figure places us in a strong position, with an allowance ratio among the highest in our peer group.

Charles M. Shaffer: Our asset quality continues to show sustained strength.

Charles M. Shaffer: And charge offs for the quarter were just 15 basis points annualized and classified and criticized assets remained nearly flat from the prior quarter.

Charles M. Shaffer: Our ACL stands at $147 million equating to 1.47% of total loans. This figure places us in a strong position with an allowance ratio among the highest in our peer group.

Charles M. Shaffer: Additionally, we have another $163 million in purchase balance. The purchase, Our strong balance sheet positions us exceptionally well compared to our peers, allowing us to navigate and adapt to any developments this cycle may present. And as we progress through 2024, our steadfast commitment to upholding conservative balance sheet principles remains unwavering. We are resolute in our efforts to prudently manage our expenses while strategically investing to stimulate growth and low-cost deposits, as evidenced by our performance.

Charles M. Shaffer: We have another 163 million in purchase balance the purchase discount.

Charles M. Shaffer: Our reported balance sheet positions us exceptionally well compared to our peers, allowing us to navigate and adapt to any developments. This cycle may present.

And as we progress through 2024, our steadfast commitment to uphold and conservative balance sheet principles remains unwavering. We are resolute in our efforts to prudently manage our expenses, while strategically investing to stimulate growth in low cost deposits as evidenced by our performance this quarter.

Charles M. Shaffer: This focus will not only help us maintain a diverse and stable funding base but also fortify our company's already robust balance. Ultimately, these endeavors are geared towards building the long-term value of our franchise, ensuring resilience and prosperity in the years to come, and establishing an exceptional financial institution in one of the nation's most economically attractive states. I'll now turn the call over to Tracey to walk through our financial... Thank you.

Charles M. Shaffer: This focus will not only help us maintain a diverse and stable funding base, but also fortify our companies already robust balance sheet.

Charles M. Shaffer: Ultimately these endeavors are geared towards building the long term value of our franchise, ensuring resilience and prosperity in the years to come and establishing exceptional financial institution and one of the nation's most economically attractive states.

Charles M. Shaffer: I'll now turn the call over to Tracy to walk through our financial results.

Tracey L. Dexter: Thank you, Chuck. Good morning, everyone.

Tracy: Thank you Jack good morning, everyone.

Tracey L. Dexter: I'm directing your attention to first quarter results, beginning with slide four. Seacoast reported net income of $0.31 per share in the first quarter, and on an adjusted basis, net income was $0.37 per share. On an adjusted basis, return on tangible assets was 1.04%, ROTCE was 11.15%, and the efficiency ratio was 61.1%. Deposit growth was strong at 8% annualized, with solid results in growing new customers across the entire franchise. Our Wealth Management team continues to deliver strong results, with assets under management increasing 9% during the quarter.

Tracy: And your attention to first quarter results beginning with slide four.

Tracy: <unk> reported net income of 31 cents per share in the first quarter and on an adjusted basis net income was <unk> 37 per share.

Tracy: On an adjusted basis return on tangible assets was 1.0% to 4%.

Tracy: <unk> was 11, 5% and the efficiency ratio was 61, 1%.

Tracy: Deposit growth was strong at 8% annualized with solid results in growing new customers across the entire franchise.

Tracy: Our wealth management team continues to deliver strong results with assets under management, increasing 9% during the quarter.

Tracey L. Dexter: Highlighting our continued focus on expense discipline, we're seeing the benefit of recent actions we've taken to streamline expenses with adjusted non-interest expense down $3.1 million from the prior quarter. Our loan pipelines have grown meaningfully, and we continue to see stable credit trends. Tangible book value per share increased to $15.26, overcoming the negative impact of the rate environment on unrealized losses on securities in AOCI. Our capital position continues to be very strong, and we're committed to maintaining our fortress balance.

Tracy: Highlighting our continued focus on expense discipline, we're seeing the benefit of recent actions we've taken to streamline expenses with adjusted noninterest expense down $3 1 million from the prior quarter.

Tracy: Our loan pipelines have grown meaningfully and we continue to see stable credit trends.

Tracy: Tangible book value per share increased to $15, 26% overcoming the negative impact of the rate environment on unrealized losses on securities in OCI.

Tracy: Our capital position continues to be very strong and we are committed to maintaining our fortress balance sheet.

Tracey L. Dexter: Seacoast's Tier 1 Capital Ratio is 14.6%, and the ratio of Tangible Common Equity to Tangible Assets is 9.3%. Also, if all held-to-maturity securities were presented at fair value, the TCE to TA ratio would still be a strong 8.6%. Our first quarter results include a $4.1 million gain on the liquidation of our Visa B-share holdings. The gain offsets a $3.8 million loss on the sale of approximately $87 million in securities. The opportunistic repositioning has an expected earn-back of approximately 1.9 years.

Tracy: Tier one capital ratio was 14, 6% and the ratio of tangible common equity to tangible assets is nine 3%.

Tracy: Also notable is all held to maturity securities were presented at fair value. The TCE to Ta ratio would still be a strong eight 6%.

Our first quarter results include a $4 $1 million gain on the liquidation of our visa B shareholdings.

The gain offset $3 8 million loss on the sale of approximately $87 million in security.

Tracy: The opportunistic repositioning has an expected earn back of approximately one nine years.

Tracey L. Dexter: Before we continue, I'd like to draw your attention to a change in our presentation. Beginning in the first quarter of 2024, our presentation format no longer excludes amortization of intangibles from adjusted expenses, and we've updated the presentation of prior periods for comparability. Now, on to slide five.

Before we continue I'd like to draw your attention to a change in our presentation beginning in the first quarter of 2024, our presentation format no longer excludes amortization of intangibles from adjusted expenses and we've updated the presentation of prior periods for comparability.

Tracy: On to slide five.

Tracy: Net interest income declined by $5 7 million or 5% during the quarter with higher deposit costs and growth in deposit balances, partially offset by higher yields on loans and securities.

Tracey L. Dexter: Net interest income declined by $5.7 million, or 5%, during the quarter, with higher deposit costs and growth in deposit balances partially offset by higher yields on loans and securities. Core Net Interest Margin contracted 11 basis points to 2.91%. Outside the range of guidance we provided, due largely to better than forecast growth and deposit balances and in part due to the investment in securities creating leverage on the balance sheet. In the securities portfolio, yields increased 5 basis points to 3.47%. Loan Yields Excluding Accretion increased 8 basis points to 5.48%, while accretion of purchase discounts on acquired loans was lower by $0.7 million compared to the prior quarter.

Tracy: Core net interest margin contracted 11 basis points to 291% outside the range of guidance, we provided due largely to better than forecast growth in deposit balances and in part due to the investment in securities, creating leverage on the balance sheet.

Tracy: In the securities portfolio yields increased five basis points to 347%.

Tracy: Loan yields excluding accretion increased eight basis points to 548%.

Tracy: Accretion of purchase discounts on acquired loans was lower by <unk> 7 million compared to the prior quarter.

Tracey L. Dexter: The cost of deposits increased to 2.19%, and we added an overall $239 million in deposit balances, including growth in non-interest-bearing DDA. Looking ahead, we expect net interest income to stabilize in the second quarter and to grow from that point forward. Our assumptions include one 25 basis point rate cut in November and one in December. Moving to slide six.

Tracy: The cost of deposits increased to $2, one, 9% and we added an overall $239 million in deposit balances, including growth in noninterest bearing DDA.

Tracy: Looking ahead, we expect net interest income to stabilize in the second quarter and to grow from that point forward our.

Tracy: Our assumptions include 125 basis point rate cut in November and one in December.

Tracy: Moving to slide six.

Tracey L. Dexter: Non-interest income excluding securities activity increased $0.5 million in the first quarter to $20.3 million. Service charges increased with continued expansion of our commercial treasury management offerings and new customer acquisitions. However, interchange income during the fourth quarter of 2023 included an annual volume-based incentive from the payment network resulting in a comparative decline in the first quarter. Other income was higher by $0.5 million, with higher saleable production in our marine lending business and higher income from SBIC investments. Looking ahead, we continue to focus on growing non-interest income, and we expect second quarter non-interest income in a range of $20 million to $22 million. Moving to slide seven.

Tracy: Noninterest income excluding securities activity increased <unk> 5 million in the first quarter to $20 3 million.

Service charges increased with continued expansion of our commercial treasury management offerings and new customer acquisition.

Tracy: Interchange income during the fourth quarter of 2023 included an annual volume based incentives from the payment network, resulting in a comparative decline in the first quarter.

Tracy: Other income was higher by 0.5 million with higher saleable production and our marine lending business and higher income from SB IC investments.

Looking ahead.

Tracy: We continue to focus on growing noninterest income and we expect second quarter noninterest income in a range from 20 million to $22 million.

Tracy: Moving to slide seven.

Tracey L. Dexter: Assets under management increased 9% this quarter to a record $1.9 billion and have increased at a compound annual growth rate of 28% in the last five years. Wealth management revenues during the quarter increased to $3.5 million, up 9% from the prior quarter and 16% from the prior year. With a significant pipeline at quarter end, we expect continued strong client acquisition and wealth management over the remainder of 2024.

Tracy: Assets under management increased 9% this quarter to a record $1 9 billion and have increased at a compound annual growth rate of 28% in the last five years.

Tracy: Wealth management revenues during the quarter increased to $3 5 million up 9% from the prior quarter and 16% from the prior year quarter.

Tracy: With a significant pipeline at quarter end, we expect continued strong client acquisition in wealth management over the remainder of 2024.

Tracy: On to slide eight.

Tracey L. Dexter: Non-interest expense for the quarter was $90.4 million, and on an adjusted basis, it was $83.3 million, in line with the guidance we provided last quarter. We saw a typical seasonal increase in employee benefits and payroll taxes, leading to an increase of $1.2 million. In outsourced data processing costs, we incurred $4.1 million in one-time charges associated with consolidation activities and began to see the benefits this quarter with a decline of $0.6 million on an adjusted basis. Legal and professional fees were lower, with the fourth quarter reflecting expenses associated with legal matters which are now complete.

Tracy: Noninterest expense for the quarter was $94 million and on an adjusted basis was $83 3 million in line with the guidance, we provided last quarter.

Tracy: We saw a typical seasonal increase in employee benefits and payroll taxes, leading to an increase of $1 2 million.

Tracy: In outsource data processing costs, we incurred $4 1 million in one time charges associated with consolidation activities and began to see the benefits this quarter with a decline of <unk> 6 million on an adjusted basis.

Tracy: Legal and professional fees were lower with the fourth quarter, reflecting expenses associated with legal matters, which are now complete.

Tracey L. Dexter: The efficiency ratio moved somewhat higher, affected by higher deposit costs associated with growth and seasonal payroll tax expenses. The successful execution of our recent expense reduction initiatives has begun to positively impact results and lower ongoing costs, and we'll maintain this discipline around expenses. We expect second quarter non-interest expense to be in a similar range to the first quarter, between $83.5 and $84.5 million. Turning to slide nine.

Tracy: The efficiency ratio moved somewhat higher affected by higher deposit costs associated with growth and seasonal payroll tax expenses.

Tracy: The successful execution of our recent expense reduction initiatives have begun to positively impact results and lower ongoing costs and we will maintain this discipline around expenses.

Tracy: Expect second quarter noninterest expense to be in a similar range to the first quarter between $83 $584 5 million.

Speaker Change: Turning to slide nine.

Speaker Change: Loan Outstandings declined by $84 $9 million during the quarter, partially attributed to elevated payoffs and paydowns across our construction portfolio.

Tracey L. Dexter: Loan outstandings declined by $84.9 million during the quarter, partially attributed to elevated payoffs and paydowns across our construction portfolio. Average loan yields, excluding accretion on acquired loans, increased eight basis points to 5.48%, and in the first quarter, we continued to see new loan yields in the 8% range. The pipeline is very strong, with a large portion in C&I, and looking forward, we expect loan growth in the low single digits.

Speaker Change: Average loan yields excluding accretion on acquired loans increased eight basis points to 548% and in the first quarter. We continued to see new loan yields in the 8% range.

Speaker Change: The pipeline is very strong with a large portion in C&I and looking forward, we expect loan growth in the low single digits.

Speaker Change: Turning to slide 10.

Tracey L. Dexter: 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 36% and 222% of consolidated risk-based capital, respectively.

Portfolio diversification in terms of asset mix industry and loan type has been a critical element of the company's lending strategy.

Speaker Change: Exposure is broadly distributed and we continue to be vigilant in maintaining our disciplined conservative credit culture.

Speaker Change: Non owner occupied commercial real estate loans represent 34% of all loans and our distributed across industries and collateral types.

Speaker Change: 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.

Speaker Change: These measures are significantly below the peer group at 36% and 222% of consolidated risk based capital respectively.

Tracey L. Dexter: 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 $146.7 million, or 1.47% of total loans, compared to 1.48% in the prior quarter.

Speaker Change: We've managed our loan portfolio with diverse distribution across categories and retaining granularity to manage risk.

Speaker Change: Moving onto credit topics on slide 11.

Speaker Change: The allowance for credit losses totaled $146 7 million or 147% of total loans compared to 148% in the prior quarter.

Tracey L. Dexter: The allowance for credit losses, combined with the $163 million remaining unrecognized discount on acquired loans, totals $310 million, or 3.1% of total loans that are available to cover potential losses, providing substantial loss absorption capacity. Moving to slide 12, looking at quarterly trends in credit metrics. Our credit metrics are strong, and we remain watchful of the ongoing impacts of higher rates on the economy. The annualized charge-off rate during the quarter was 15 basis points.

Speaker Change: The allowance for credit losses, combined with the $163 million remaining unrecognized discount on acquired loans totaled $310 million or three 1% of total loans, that's available to cover potential losses, providing substantial loss absorption capacity.

Speaker Change: Moving to slide 12, looking at quarterly trends and credit metrics.

Speaker Change: Our credit metrics are strong and we remain watchful of the ongoing impacts of higher rates on the economy.

Speaker Change: The annualized charge off rate during the quarter was 15 basis points.

Tracey L. Dexter: Non-performing loans represent 0.77% of total loans, and accruing past-due loans remain at 0.3% of total loans; criticized and classified loans were near flat at 2.4% of total loans, on slide 13, providing a longer-term view of our stable asset quality trends. Also recall that the period presented includes eight separate bank acquisitions and a near doubling of asset size. The stability of our credit experience during that period reflects the consistently applied discipline of our credit culture. Moving to slide 14 in the investment securities portfolio, During the first quarter, we sold all of our holdings of Visa Class B shares and recognized a net gain of $4.1 million.

Speaker Change: Nonperforming loans represent 0.7%, 7% of total loans and accruing past due loans remained at 0.3% of total loans.

Speaker Change: Criticized and classified loans were near flat at two 4% of total loans.

Speaker Change: On slide 13, providing a longer term view of our stable asset quality trends.

Speaker Change: So recall that the period presented includes eight separate bank acquisitions, and a near doubling of asset size <unk>.

Speaker Change: The stability of our credit experience during that period reflects the consistently applied discipline of our credit culture.

Moving to slide 14 in the investment Securities portfolio.

Speaker Change: During the first quarter, we sold all of our holdings of visa class B shares and recognized a net gain of $4 1 million.

Speaker Change: We also recognize the opportunity to sell low yielding bonds with modest losses on a small percentage of the investment portfolio.

Tracey L. Dexter: We also recognize the opportunity to sell low-yielding bonds with modest losses on a small percentage of the investment portfolio. The proceeds, approximately $87 million, were reinvested into bonds with an average yield of 5.5%. With an expected earn-back of less than two years, this was an opportunity to increase interest income and improve our securities yield. In the overall portfolio, the average yield on securities increased during the quarter by 5 basis points to 3.47%. However, changes in the rate environment negatively impacted portfolio values, and as a result, the overall unrealized loss position increased by $14.5 million.

Speaker Change: Proceeds approximately $87 million were reinvested into bonds with an average yield of five 5%.

Speaker Change: With an expected earn back of less than two years. This was an opportunity to increase interest income and improve our securities yields.

Speaker Change: And the overall portfolio the average yield on securities increased during the quarter by five basis points to 347%.

Speaker Change: Changes in the rate environment negatively impacted portfolio values and as a result, the overall unrealized loss position increased by $14 5 million.

Tracey L. Dexter: Turning to slide 15, in the deposit portfolio, Seacoast has been keenly focused on deposit growth, and the 8% annualized growth this quarter demonstrates our success in acquiring relationships. Non-interest demand deposits grew $10.4 million, and while growth in money market and other interest-bearing accounts has resulted in higher deposit costs, this relationship-based funding supports our continued progress in deepening market share as we become Florida's leading regional bank. The cost of deposits increased this quarter to 2.19%, and we expect in the second quarter a continued increase, albeit at a slower pace.

Speaker Change: Turning to slide 15 in the deposit portfolio.

Speaker Change: CECO has been keenly focused on deposit growth and the 8% annualized growth this quarter demonstrates our success in acquiring relationships.

Speaker Change: Noninterest demand deposits grew $10 4 million and while growth in money market and other interest bearing accounts has resulted in higher deposit costs. This relationship based funding supports our continued progress in deepening market share as we become Florida's leading regional bank.

Speaker Change: The cost of deposits increased this quarter to $2, one 9% and we expect in the second quarter, our continued increase albeit at a slower pace.

Speaker Change: Looking forward, we expect continued growth in deposits and are very encouraged about the activity and focus across the franchise on deposit gathering.

Tracey L. Dexter: Looking forward, we expect continued growth in deposits and are very encouraged about the activity and focus across the franchise on deposit gathering. On slide 16, Seacoast continues to benefit from a diverse deposit base. Non-interest-bearing deposits represent 30% of total deposits, which was flat from the prior quarter, and transaction accounts represent 52% 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.

Speaker Change: On slide 16.

Speaker Change: <unk> continues to benefit from a diverse deposit base noninterest bearing deposits represent 30% of total deposits, which was flat from the prior quarter and transaction accounts represent 52% of total deposits, which continues to highlight our long standing 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.

Speaker Change: And finally on slide 17.

Tracey L. Dexter: And finally, on slide 17, our capital position continues to be very strong, and we're committed to maintaining our fortress balance. Tangible book value per share increased to $15.26, and the ratio of tangible common equity to tangible assets remains exceptionally strong at 9.3%. Our risk-based and Tier 1 capital ratios are among the highest in the industry. In summary, we remain steadfastly committed to driving shareholder value, and our consistent, disciplined expense management positions us well as we continue to build Florida's leading regional bank. Chuck, I'll turn the call back to you.

Speaker Change: Our capital position continues to be very strong and we're committed to maintaining our fortress balance sheet.

Speaker Change: Tangible book value per share increased to $15 26.

Speaker Change: And the ratio of tangible common equity to tangible assets remains exceptionally strong at nine 3%.

Speaker Change: Our risk based and tier one capital ratios are among the highest in the industry.

Speaker Change: In summary, we remain steadfastly committed to driving shareholder value and our consistent disciplined expense management positions us well as we continue to build Florida's leading regional bank.

Speaker Change: Chuck I'll turn the call back to you. Thank you Tracy and two our seacoast bankers on the call. We had an exceptional quarter for customer growth proud of everything you guys did thanks for all the hard work.

Charles M. Shaffer: Thank you, Tracey, and to our Seacoast bankers on the call. We had an exceptional quarter for customer growth. We're proud of everything you guys did. Thanks for all the hard work. And at this point, our operator will take questions.

Speaker Change: And at this point.

Speaker Change: Operator, we'll take questions.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in I would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question Sanjay Brett Farve. When again, if you are called upon to ask your question and our Additionally via loud speaker in your device. Please pickup your handset.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. And your first question comes from the line of Brandon King with Truvis Security.

Speaker Change: And to ensure that you're going to slap on mute when asking your question.

Speaker Change: Again fresh start want to join the queue.

Speaker Change: And your first question comes from the line of Brandon King with <unk> Securities.

Brandon Thomas King: Please go ahead.

Brandon Thomas King: Hey, good morning.

Brandon Thomas King: Morning, Brian.

Brandon Thomas King: So just starting off on the margin could you give us a sense of how you're thinking about how the margin could.

Brandon Thomas King: So just starting off on the margin, could you kind of give a sense of how you're thinking about how the margin could be a trend this year and kind of your update on the Curve Assumption.

Brandon Thomas King: Train this year and kind of your updated.

Brandon Thomas King: Forward curve assumptions.

Yes sure Brendan this is Michael.

Michael Masters Young: Yeah, sure, Brandon. This is Michael.

Michael Masters Young: Just to start, you know, the updated assumptions, take the last part first. As Tracey mentioned in the prepared comments, one cut in November and then one in December. Obviously, that last one doesn't have a lot of impact.

Michael Masters Young: Just to start the updated assumptions take the last part first as Tracy mentioned.

Michael Masters Young: Prepared comments one cut in November and then one in December obviously that last one does have a lot of impact on.

Michael Masters Young: The shift versus our prior forecast was, you know, the delay in cuts being later in the year with some, you know, upward pressure on the cost of funds related to that. So, in general, though, we still expect the margin to bottom in the first half of the year this year and expand from there. But the pace of Fed cuts will be kind of the ultimate driver of the pace of expansion or magnitude of expansion in the back half of the year. So, with a delay in that, you know, we would expect less expansion of the margin in the back half.

Michael Masters Young: The shift versus our prior forecast was the delay in cuts being later in the year with some upward pressure in the cost of funds related to that.

Michael Masters Young: So in general, though we still expect the margin to bottom in the first half of the year this year and expand from there, but the pace of fed cuts will be kind of the ultimate driver at the pace of expansion or magnitude of expansion in the back half of the year.

Michael Masters Young: So with the delay and that we would expect less expansion of the margin in the back half.

Michael Masters Young: Okay, so it's fair to say that if their funds are stable, that the margins just kind of stay stable at this at the current range.

Michael Masters Young: Okay.

Michael Masters Young: It's fair to say that.

The funds are stable with that kind of on the margin just kind of stay stable at this current range.

Michael Masters Young: In the near term and the long run we expect margin to begin to expand and importantly, as Tracey said in her prepared comments, we think NII is starting to stabilize and then starts to grow fairly strongly on the back half of the year and into 'twenty five.

Michael Masters Young: In the near term, in the long run, we expect the margin to begin to expand. And importantly, as Tracey said in her comments, we think NII is starting to stabilize and then will start to grow fairly strongly on the back end.

Speaker Change: Okay. Okay got it and then I wanted to talk about the pipelines are.

Charles M. Shaffer: And then I want to talk about the pipelines that are among the higher quarter over quarter. So could you put that into context as far as what you're saying, where that's coming from, whether it's from existing customers or, you know, taking market share and talent.

Speaker Change: Higher quarter over quarter. So just could you put that into context as far as what youre seeing where that's coming from whether it's from existing customers or taking market share talent.

Charles M. Shaffer: Yeah, thanks Brandon. I'm super excited about the efforts by our banking team this quarter in business development. We saw deposit growth across nearly every market in the state. We saw growing pipelines across most every market in the state, and we also saw a larger percentage of our pipeline growing in CNI. And so, at a broad level, what we're seeing is the opportunity to continue to take clients from some of the national and large regional banks, and a lot of that's coming from heavy investment and talent over the last 24 months or so, which is now starting to If you kind of just think about a moderate-sized operating company, typically, they're going to have about five or six products.

Speaker Change: Yes, Thanks, Brian.

Speaker Change: Super excited about the efforts by our banking team this quarter on business development, we saw deposit growth across nearly every market in the state we saw growing pipelines across most every market in the state and we also saw a larger percentage of our pipeline growing in C&I and so what we're seeing.

Speaker Change: At a broad level is the opportunity to continue to take.

Speaker Change: Clients from some of the national and large regional banks and a lot of Thats coming from heavy investment in talent over the last 24 months, we're now starting to mature into that investment and we're starting to see material client aggregation. If you kind of just think about a moderate size operating company typically theyre going to have about five or six.

Speaker Change: <unk> products, they are going to have a letter of credit.

Charles M. Shaffer: They're going to have a letter of credit that's our line of credit that's tied to SOFR plus a spread. We're moving that over. They typically have an operating account. We're moving that over. They typically have a money market account or a sweep account.

Speaker Change: Line of credit.

So for a plus a spread we're moving that over that typically have an operating account or moving that over that typically have a money market account or a sweep account for moving that over we're collecting the TM the merchant and the treasury, what we're leaving behind is the 4% equipment loan and the 4% building loan, but the next equipment requests that comes up.

Charles M. Shaffer: We're moving that over. We're collecting the TM, the merchant, and the treasury. What we're leaving behind is the 4% equipment loan and the 4% building loan, but the next equipment request that comes up, we're going to do that equipment request for that client, and so you know this sort of thing when you look at the blended add-on rate on the depository side for that, what you're seeing is maybe a 370-type cost to that money coming into the franchise, which I'm really pumped up about.

Speaker Change: We're going to do that Couldnt request for that client and so.

Speaker Change: When you look at the blended add on rate on the depository side for that or are you seeing as maybe a 370 type cost to that money coming into the franchise, which I'm really pumped up about it I'm excited about.

Charles M. Shaffer: I'm excited about what I'm seeing in terms of all the wins that are sort of all the way across the franchise. There's a lot of incredible business development being done by our team. You know, that team is now maturing into probably a year's worth of seasonality here, so we're moving past non-solicits and other things that were restrictions we had to we had to work through, so we're now seeing, you know, a lot of clients onboarding with the bank. We also have worked really hard to focus our entire company on deposit gathering and client acquisition. A lot of effort is made inside the company.

Speaker Change: What I'm seeing in terms of all the wins that we're sort of all the way across the franchise. There's a lot of incredible business development being done by our team that team is now maturing into probably into a year's worth of seasonality here. So we're moving past non solicits and other things that were restrictions we had to we had to work.

Speaker Change: Through so we're now seeing a lot of clients Onboarding with the bank. We also have worked really hard to focus our entire company on deposit gathering and client acquisition what effort inside the company and we're seeing the impact of that show up we had a phenomenal quarter for new clients. So that's leading to strong wealth pipeline.

Charles M. Shaffer: We're seeing the impact of that show up. We had a phenomenal quarter for new clients, so that's leading to strong wealth pipeline, strong deposit growth in the quarter. We had DDA growth in the quarter and growing pipelines kind of across the board, so I'm pretty pumped up about what the quarter had and pumped up about what the rest of the year could look like.

Speaker Change: <unk> deposit growth in the quarter, we had DDA growth in the quarter and growing pipelines kind of across the board. So.

Speaker Change: I am pretty pumped up about what the quarter had pumped up about what the rest of the year could look like.

Speaker Change: Got it.

Charles M. Shaffer: Got it. And thank you for that. And lastly, it was encouraging to see kind of a slight uptick in non-interest-bearing deposits. Do you think it could grow from this base here or, you know, anything seasonal to point out that we could maybe see?

Speaker Change: Thank you for that and lastly, it was encouraging to see slight uptick in noninterest bearing deposits do you think it could grow from here or do you think seasonality to point out that could maybe see some.

Charles M. Shaffer: [inaudible]

Speaker Change: Decline with Peter.

Charles M. Shaffer: Yeah, we're keenly focused on growing that. That's one of our core objectives for this year, and, you know, we will see some tax payments here in April. That's naturally going to occur.

Peter: Yes, yes, we're keenly focused on growing that that's one of our core objectives for this year and we will see some tax payments here in April that's naturally going to occur but is that kind of happens we expect to continue building DDA and so that is our focus and as I said, what we're trying to really.

Charles M. Shaffer: But, you know, as that kind of happens, we expect to continue building DDA. And so, you know, that is our focus. And as I said, what we're trying to really get done here is moving on full relationships that include DDA. So, you know, I was really pleased with what I saw in the quarter. It came from a lot of new prospect growth. And you know, we will continue to focus on growing DDA.

Peter: Good Dan here is moving on full relationships that includes DDA. So I was really pleased with what I saw in the quarter. It came from a lot of new prospect growth.

Peter: And we.

Peter: We will continue to focus on growing DDA I think we're running right now about 30% DDA to total deposits I think thats very solid very solid in the industry and we will continue to work keep it as close to that as we can.

Charles M. Shaffer: I think we're running right now about 30% DDA to total deposits. I think that's very solid, very solid in the industry. And we'll continue to work to keep it as close to that as we can. Got it. Thanks for taking my question.

Charles M. Shaffer: Got it. Thanks for taking my questions. Awesome. Thanks, Brandon.

Speaker Change: Got it thanks for taking my questions.

Speaker Change: Awesome. Thanks, Brian.

Speaker Change: Yes.

Operator: Operator, I think we're ready for another question.

Speaker Change: Operator, I think we're ready for another question.

Sorry.

Speaker Change: Your next question comes from the line of David <unk> with today and bond James Thank.

Operator: Your next question comes from the line of David Feaster with Raymond James.

Thank you David and good morning, everybody.

David Pipkin Feaster: Thank you. Hey David. Hey, good morning everybody. How are you? Oh, great.

David: How are you.

David: Oh great.

David:

David Pipkin Feaster: I am curious, maybe a high-level question. I'm curious how you're thinking about managing the balance sheet today. I mean, you're a bit liability sensitive at this point. The rate outlook continues to change pretty rapidly, so I'm just curious how you think about managing a balance sheet at this point, just given the uncertainty on rates and the increased likelihood of a higher-for-longer environment. I mean, you guys have obviously been active with securities optimization. I'm just curious if there are any other initiatives or what else you might be considering.

Speaker Change: I am curious maybe high level question.

Speaker Change: I'm curious, how you're thinking about managing the balance sheet today, I mean, you're a bit liability sensitive at this point.

Speaker Change: The rate outlook continues to change pretty rapidly. So I am just curious how you think about managing the balance sheet. At this point just given the uncertainty on rates increased likelihood of a higher for longer environment.

Speaker Change: I mean, you guys have obviously been active with securities.

Speaker Change: <unk> optimization I'm just curious if there is any other initiatives or what else you might be considering.

Michael Masters Young: Yeah, sure, David, this is Michael. You know, I think, at a high level, we have been focused on, you know, market share gain, and you saw the really strong deposit growth in the first quarter. You know, as we deploy that into loans throughout the rest of the year, I think you'll see the benefits of that pull through with better support for kind of overall margin at that point in time.

Speaker Change: Yes sure David This is Michael.

Michael Masters Young: I think at a high level, we have been focused on market share gain and you saw the really strong deposit growth in the first quarter.

Michael Masters Young: As we deploy that into loans throughout the rest of the year I think youll see the benefits of that flow through.

Michael Masters Young: With with better support for kind of overall margin at that point in time, and then I would also add we're not going to stand still here there was sort of a propensity to kind of wait until the fed cut to take action on the deposit book, but I think youre going to see us lean into that a little more that we haven't yet this cycle, so that could be another kind of a tailwind, but we are.

Michael Masters Young: And then I would also add, you know, we're not going to stand still here. There was sort of a propensity to kind of wait until the Fed cut to take action on the deposit book, but I think you're going to see us lean into that a little more than we haven't yet this cycle. So that could be another, you know, kind of tailwind, but we're going to continue to actively manage it and try to drive, you know, the best return profile we can for shareholders in the interim.

Michael Masters Young: Going to continue to actively manage it and try to drive.

Michael Masters Young: The best.

Michael Masters Young: Return profile, we can for shareholders in the interim and just high level. David If you think about the way we positioned the balance sheet. We've got very strong allowance. We got the purchase discount we've got a lot of capital the capital gives us optionality if the earn backs there for buybacks, we will take it if they earn backs there for us regarding share repurchase we will tell.

Charles M. Shaffer: And just at a high level, David, if you think about the way we position the balance sheet, we've got a very strong allowance, we've got the purchase discount, we've got a lot of capital. The capital gives us optionality, you know, if the earn back's there for buybacks, we'll take it. If the earn back's there for securities repurchase, we'll take it. The earn back is there for a deal; we'll look at that too.

Michael Masters Young: The earn backs there for a deal we will look at that too. So we have choices here and then sort of fourth as Michael mentioned, we're very keenly focused on essentially taking market share across the state of Florida, and so I think we have options as we move forward. We will continue to manage that and continue to watch for.

Charles M. Shaffer: So, you know, we have choices here. And then, sort of fourth, as Michael mentioned, we're very keenly focused on, you know, essentially taking market share across the state of Florida. And so I think we have options as we move forward. We'll continue to manage that, and continue to watch for opportunities as they develop.

<unk> as they develop.

Charles M. Shaffer: And maybe, maybe on that same topic, right? I mean, you guys have done a good job kind of, you know, it seems like we're kind of increasingly focused on organic growth, and you've had a lot of success recruiting high-quality talent for the Bank. You know, how do you think about hires at this point? I mean, we're starting to see that horsepower kind of come to fruition to see what they can do. Are you still interested in hiring? And are you still having success recruiting?

Speaker Change: And maybe maybe on that same topic right. I mean, you guys have done a good job kind of it seems like were kind of increasingly focused on organic growth that you've had a lot of success recruiting high quality talent to the bank.

Speaker Change: I'm curious.

Speaker Change: How do you think about hires at this point I mean, we're starting to see that horsepower kind of come to fruition and see what they can do or are you still interested in hires.

Speaker Change: And are you still having.

Speaker Change: Success recruiting.

Speaker Change: Yes, definitely there is more to come there we're going to obviously manage expenses carefully our goal is to.

Charles M. Shaffer: Yeah, definitely. There's more to come. We're going to obviously manage expenses carefully. You know, our goal is to, you know, keep our expenses and the United States. And so we'll have to find ways to offset those investments as we find them. But yes, where we find really high-quality bankers, either in wealth, commercial, or otherwise, and they can bring a book of business, we're going to take a look at them.

Speaker Change: Keep our expense.

Speaker Change: Load in line and so we'll have to find ways to offset those investments as we find them, but yes, we're we find really high quality bankers.

Speaker Change: Either in wealth commercial or otherwise and they can bring a book of business, we're going to we're going to take a look at it there is still a lot of opportunity in that regard. There is a lot of talent that still wants to join the franchise in China and the investments. We've made over last few years I still think we're in the early innings of that investment pulling through if you think about.

Charles M. Shaffer: There is still a lot of opportunity in that regard. There is a lot of talent that still wants to join the franchise. And kind of in the investments we've made over the last few years, I still think we're in the early innings of that investment pulling through. If you think about acquiring teams back before, rates kind of where they were, you'd move all those clients with credit as you initiated loans. It's difficult when those loan books are sitting at three, three and a half percent.

Speaker Change: Acquiring team back before rates kind of where they were you know you would move all those clients with credit as you initiated loans, it's difficult when those loan books are sitting at 335, 4%. So we're moving those clients with deposits, which just takes longer so it's taken a little while to see that pull through but now we're starting to really see a pull through and <unk>.

Charles M. Shaffer: So we're moving those clients with deposits, which just takes longer. So it's taken a little while to see that pull through, but now we're starting to really see it pull through. And importantly, it's been a while since we had the distraction of a deal. And so we're now. I think the last time we had a conversion was June of last year. So we're nine months out from our last conversion, 12 months out from our last acquisition, more than 12 months out from our last announced acquisition.

Speaker Change: Shortly it's been a while since we had the distraction of a deal and so we're now I think last time, we had a conversion was June of last year. So we're nine months out from our last conversion.

Speaker Change: 12 months out from our last act more than 12 months out from a 15 months out from our last Act announced acquisition. So a lot of those distractions had moved away to allow us to focus on organic growth and allows us to focus on taking market share across the state. So like I said earlier I'm very excited about what im seeing just numbers and numbers of wins happening kind of all over the place.

Charles M. Shaffer: So a lot of those distractions have moved away to allow us to focus on organic growth and allow us to focus on taking market share across the state. So, like I said earlier, I'm very excited about what I'm seeing, just numbers and numbers of wins happening kind of all over the place. Wealth, Commercial, Retail, we're just winning business left and right.

Speaker Change: Wealth commercial and retail we're just we're winning business left and right.

Speaker Change: That's terrific.

Charles M. Shaffer: That's terrific. And maybe we should switch gears to the fee line. It's great to see the increase in fees. I know it's been a big focus. It seems like insurance has been especially strong, but wealth has also had some nice AUM wins. You talked about being interested in potentially recruiting some wealth advisors. I'm curious if you could touch on those business lines, what you're seeing, and thoughts on expanding or investing in those and potential cross-sell opportunities.

And maybe switching gears to the fee line. It was great to see the increase in fees and I know, it's been a big focus it seems like insurance has been especially strong wealth has also had some nice wins.

Speaker Change: You talked about being interested in potentially recruiting some some wealth advisors.

Speaker Change: Curious if you could touch on those business lines, what youre seeing.

Speaker Change: Thoughts on expanding or investing in those and potential cross sell opportunities.

Speaker Change: Yes, maybe I'll start with the insurance agency.

Charles M. Shaffer: Yeah, maybe I'll start with the insurance agency. You know, that integration into Seacoast has gone exceptionally well. It's an amazing team inside that agency. We're super excited to have them on board and spend a lot of time with them. I think there's more to be done there. We haven't even really got started on building a cross-sell business around that agency. That's something that's in the works here in the back half of the year.

Speaker Change: Integration to seacoast has gone exceptionally well, it's an amazing team inside that agency.

Speaker Change: Super excited to have them onboard spend a lot of time with them I think there's more to be done there. We haven't even really got started on building a cross sell business around that agency Thats something thats in the works here on the back half of the year.

Charles M. Shaffer: There's a lot to be done there. This past quarter was a record quarter for that agency, the best quarter they've ever had in their history. So, you know, I'm really pleased with what's happening there. I like the business.

Speaker Change: There is a lot to be done there that this prior quarter was a record quarter for that agency and best quarter, they've ever had in our history. So.

Speaker Change: Really pleased with what's what's happening there I like the business to return on capital is really good and the Wolf story continues to be an exceptional story. They had a really good quarter AUM grew by 160 man.

Charles M. Shaffer: The return on capital is really good, and the wealth story continues to be an exceptional story. You know, they had a really good quarter. AUM grew by $160 million. The pipeline is super strong. We're setting up to have a really good wealth year. Returns there are really good.

Speaker Change: Pipeline is super strong we are setting up to have a really good wealth year returns, they're really good both those businesses take a long time to build but they generate really good returns and so we're focus there and then the other piece on all of that David is we've made a lot of investment in our TM teams, our treasury management capabilities, both in terms of technology.

Charles M. Shaffer: You know, both those businesses take a long time to build, but they generate really good returns. And so we're focused on those. And then the other piece of All Add David is we've made a lot of investment in our treasury management team. So our treasury management capabilities, both in terms of technology, service offerings, and people, have just gotten, you know, remarkably better from where we were 24 months ago. And so we are winning, as I mentioned earlier, we are winning operating companies, we are winning TM accounts, you know, that's a whole other line of business that's early in its innings to fully mature and provide benefits.

Speaker Change: <unk>.

Speaker Change: Service offerings people, it's just gotten.

Speaker Change: No.

Speaker Change: Remarkably better from where we were at 24 months ago and so we are winning I mentioned earlier, we are winning operating companies, we are winning TM accounts.

Speaker Change: That's a whole another line of business Thats early in its early and its earnings.

Speaker Change: Fully mature and provide benefit so there is opportunities here mortgage banking has kind of been.

Charles M. Shaffer: So there are opportunities here, you know, mortgage banking's kind of held back just given the market and the way the market is, there's just not, still not a lot of inventory, not a lot moving there. But we'll continue to be really focused on fees, continue to be really focused on growing that line item. And I couldn't be, again, just excited about what's going on in wealth and excited about what's going on in insurance. Those are two really solid businesses for us. That's great!

Speaker Change: It's kind of held back just given the market where the market is just now it's still not a lot of inventory in our move in there, but we will continue to be really focused on fees continue to be really focused on growing that line item and I couldnt be again, just I'm excited about what's going on in wealth excited about what's going on at <unk>. Those are two really solid businesses for us.

Speaker Change: That's great. Thanks, everybody.

Speaker Change: Thanks, David.

Woody Lay: Your next question comes from the line of Woody lay with <unk>.

David Pipkin Feaster: That's great. Thanks, everybody. Thanks, David.

Operator: Your next question comes from the line of Udi Ley with KBW.

Woody Lay: Hey, good morning, guys.

Wood Neblett Lay: It's great to hear you so upbeat on the customer acquisition front, and I mean, we saw really strong deposit growth in the first quarter. Do you think this is a trend that can sort of carry on throughout the year?

Woody Lay: Okay.

Woody Lay: It's great to hear you so upbeat on the customer acquisition front and I mean, we saw really strong deposit growth in the first quarter. Do you think this is a trend that can sort of.

Woody Lay: Carry on throughout the year.

Charles M. Shaffer: That's the goal. You know, we're in this moment here where we do see tax payments going out and probably will see a little bit of a decline in public funds. That normally happens here in the second quarter. But given the focus across the franchise, you know, I'd like to have another quarter before I tell you for certain, but it's a really solid quarter. Really, pipelines are good, deposit pipelines are good. So I'm feeling pretty confident about it, Woody.

Speaker Change: That's the goal.

Speaker Change: In this moment here, where we do see tax payments going out probably see a little bit of decline in public funds that seasonally happens here in the second quarter, but given the focus across the franchise I would like to have another quarter before I'd tell you for certain but it was a really solid quarter really pipelines are good deposit pipelines are good.

Speaker Change: So I'm feeling pretty confident about it.

Speaker Change: Yes, and what are you seeing on the on the loan competition side I mean, there's a lot of peers that don't have the balance sheet flexibility that youll have to are you seeing.

Wood Neblett Lay: Yeah, and what do you think on the loan competition side? I mean, there's a lot of peers that don't have the balance sheet flexibility that y'all have. Are you seeing competitors sort of pull out?

Speaker Change: Competitors sort of pull out.

Charles M. Shaffer: [inaudible]

Speaker Change: And the loans there yes.

Charles M. Shaffer: Yeah, we did sort of late last year and early this year, but over the last 60, 90 days, we've seen competitors really pull back in. I would say the one challenge that's emerged is some of the regional banks that we're largely pulling relationships out of have gotten really aggressive on cutting pricing to hold relationships. That wasn't happening.

Speaker Change: Yeah, we did.

Speaker Change: Sort of late last year, but in early in this year, but over the last 60 to 90 days, we've seen competitors really pull back and I would say the one challenges emerge as some of the regional banks that were largely pulling relationships out of them got really aggressive on cutting pricing to hold relationships.

Speaker Change: That wasn't happening.

Charles M. Shaffer: That's a little bit of an emergence, and then there seems to be a number of banks reentering the commercial real estate and construction space. And so it did feel like there was some pullback, but we are seeing competitiveness sort of return. That being said, I like where we're at. I like our optionality, and I like our ability to continue to win business. And that's what we're doing. But it has gotten a little more competitive here recently.

Speaker Change: It's a little bit of an emergence and then there is there seems to be a number of banks re entering the commercial real estate and construction space and so it did it did feel like there was some pull back but we are seeing the competitiveness sort of return that being said.

Speaker Change: I like where we're at I like our Optionality and our like our ability to continue to win business and that's what we're doing but it has gotten a little more competitive here recently.

Charles M. Shaffer: Yeah, and then I know internally they are very focused on your overall exposure and concentration to certain loan segments. As you look at the loan portfolio today, are there segments that you feel you're underweighted to that you could look to grow, and then vice versa? Are there segments that are more full and likely won't see much growth from here?

Speaker Change: And then I know internally are very focused on your overall exposure and concentration that certain loan segments.

Speaker Change: As you look at the loan portfolio today are there segments that you feel youre under weighted to that you could look to grow and then vice versa or are there segments that are more full than likely won't see much growth from here.

Charles M. Shaffer: Yeah, we're sort of fully open to business for C&I operating companies pretty much across the board. You know, there are a couple industries in there that obviously we wouldn't do, but generally, you know, manufacturing, distribution, business services, all the healthcare, all the things you could sort of name we're open and targeting. On the commercial real estate side, there's plenty of room to do commercial real estate.

Yes.

Speaker Change: So it's sort of fully open to business for C&I operating companies pretty much across the board. There's a couple of industries in there that obviously, we wouldn't do but generally manufacturing distribution.

Business services all of its healthcare all of the things you could name were open and targeting on the commercial real estate side, there's plenty of room to do commerce.

Charles M. Shaffer: Obviously, office is something we're, you know, not going to really look at right now. And our hotel exposure is generally at its max. You know, we've been working on reducing that. In fact, we worked out or let a couple of hotel loans get refinanced out of us here to work that down. So, you know, hotel hospitality is kind of on hold at this point. And office is, you know, definitely on hold.

Speaker Change: Real estate, obviously office is something we're not going to really look at it right now.

Speaker Change: Our hotel exposure is generally at its Max we've been we've been working on reducing that in fact, we.

Speaker Change: Worked out or let a couple of hotel loans being refinanced out from US a year to work that down So hotel hospitality is kind of on hold at this point offices.

Speaker Change: Only on hold but outside of that we're looking we're looking at other.

Charles M. Shaffer: But outside of that, we're looking at pretty much anything else that comes along. The retail, we'll look at opportunities, particularly grocery-anchored retail. Multifamily, if it's stabilized and, you know, it's working, we'll look at that as well. Industrial, we'll look at those projects as well. But really, the only thing that's one of our sort of max caps on is hospitality and office.

Speaker Change: Pretty much anything else. It comes to retail we will look at opportunities, particularly grocery anchored retail.

Speaker Change: Multifamily if it's stabilized and that's working well look at that as well industrial we'll look at look at those projects as well, but really the only thing thats.

Speaker Change: One of our sort of we're on a Max cap on is hospitality and office.

Speaker Change: Got it thanks for taking my questions.

Wood Neblett Lay: Got it. Thanks for taking my questions.

Speaker Change: Good.

Operator: Your next question comes from the line with Stephen Scouten and Piper Sandler.

Speaker Change: Your next question comes from the line of Steve Stephen Scouten with Piper Sandler.

Speaker Change: Hey, good morning, everyone.

Stephen Kendall Scouten: Hey, good morning, everyone. Chuck, you might have just answered one of my questions here. I think you noted something like $30 million in loans that you kind of allowed to leave the bank. Was that indeed in the hospitality portfolio?

Speaker Change: Doug you might have just answered one of my questions. Here I think you noted like $30 million in loans that you're kind of allowed to leave the bank was that indeed in the hospitality portfolio.

Charles M. Shaffer: Yeah, most of it was. Yeah. Yeah, there were weaker credits that came due through renewal, and there were other banks that were willing to sort of take us out of that. And we let that happen.

Doug: Yes, most of it was yes.

Doug: Yes, there are weaker credits.

Doug: <unk> through <unk>.

Doug: And there is other banks, who are willing to sort of take us out of that and we let that happen.

Stephen Kendall Scouten: Perfect. And then what would it take for you guys to get a bit more aggressive around growth? And maybe I'm hearing this in a way you're not intending it to, but my takeaway is kind of, you know, you're being conservative because you have a great bank and a great franchise, and you don't want to, you know, disrupt that. That being said, it sounds like you've got a great team in place, and the pipelines have grown significantly. So what would kind of, I don't know, give you more confidence to be a bit more aggressive in putting those stuff on the balance?

Doug: Perfect.

Doug: And then what would it take for you guys to get a bit more aggressive around growth and maybe im hearing.

Doug: Here in this way, you're not intending to do but.

Doug: Takeaway it is kind of.

Doug: You are being conservative because you have a great bank and a great franchise and you don't want to disrupt that that being said it sounds like you've got a great team in place and the pipelines have grown significantly. So so what we've kind of I don't know give you more confidence to be a bit more aggressive in putting that stuff on the balance sheet.

Charles M. Shaffer: Clarity of the economic environment I'd say the biggest thing. I mean, it's a struggle right now to get your head around where rates are headed, where growth is headed, you know GDP underperformed here recently. We talk a lot internally about stagflation and what the impacts of stagflation could be, so you know it's We're always, as you know us, pretty wealthy. We're always going to be cautious, prudent, you know, exercise discipline.

Doug: Clarity of the economic environment, I would say the biggest thing I mean.

Doug: It's a struggle right now to get your head around where rates are headed where growth is headed GDP underperformed here recently.

Doug: We talk a lot internally about stagflation and what the impacts of stagflation can be so.

Doug: <unk>.

Doug: As you know is pretty wealthy we're always going to be cautious prudent.

Doug: <unk> discipline.

Doug: But clarity around where we're headed on all of this would be super helpful.

Charles M. Shaffer: And but clarity around where we're headed on all this would be super helpful. You know, I think the team we built is amazing. I'd love if that clarity emerged, because I think we could run incredibly hard. But I think we just got to continue to pick our sponsors carefully and pick our winners. And that's what

Doug: The team we built is amazing.

Doug: If that clarity emerge because I think we could run incredibly hard but I think we just got to continue to pick pick our sponsors carefully and pick our winners and that's what we're doing.

Stephen Kendall Scouten: Yeah, makes sense. And it was really interesting anecdotally to hear you say that some of your competitors are kind of coming back into the market a bit. Do you think that affects kind of what is out there from a talent acquisition perspective? And has there been any sort of shift in who you might be talking to in terms of large regionals or like-sized competitors or anything like that in terms of the, you know, potentially available talent?

Doug: Yes, it makes sense and it was really interesting anecdotally to hear you say that some of your competitors are kind of coming.

Doug: Back into the market a bit.

Doug: Do you think that affects kind of what is out there from a talent acquisition perspective and has there been any sort of shifts and who you might be talking to in terms of large regionals or like sized competitors or anything like that in terms of the potentially available talent.

Doug: No we're still pulling the same thread and still working down the same angle, we like regional bank talent fits well with our credit appetite fits well with our risk posture and fits well with our cross sell model they come equipped to sell well and tdm and the full gamut, which is what we want to see.

Charles M. Shaffer: No, we're still pulling the same thread and still working down the same angle. You know, we like regional bank talent. It fits well with our credit appetite, fits well with our risk posture, and fits well with our cross-sell model. You know, they come equipped to sell wealth and TM and the full gamut, which is what we want to see, and so we continue to recruit from the same place.

Speaker Change: So we'll continue to recruit from the same places Steve.

Stephen Kendall Scouten: Got it. Very helpful. Thanks for the time.

Stephen Kendall Scouten: Got it very helpful. Thanks for the time.

Stephen Kendall Scouten: Awesome.

Stephen Kendall Scouten: Again, if you would like to ask a question Press Star then the number one on your telephone keypad and your next question comes from the line of David <unk> with <unk>.

Operator: Again, if you would like to ask a question, press star, then number one on your telephone keypad. And your next question comes from the line of David Bishop with Hobbs & Co.

David: Yes, good morning.

David Jason Bishop: Hey Chuck, you sound pretty optimistic, especially as we get into 2025 for the direction of spread income and the margin. Any sort of maybe top-level holistic guidance you can give us into 2025 if rates do stabilize, we start to get fed rate cuts, maybe that will impact spread income or the margin. Thanks.

David: Hey, David.

David: Hey, Chuck sound pretty optimistic.

David: Especially as we get into 2025.

David: For the direction of spread income and the margin any sort of maybe top level holistic guidance. You can you can give us into 2000 2025, if rates do stabilize and we start to get.

David: That rate cuts, maybe that the impact there.

David: On spread income or the margin. Thanks.

Michael Masters Young: Hey, David. It's Michael.

Michael Masters Young: Hey, David It's Michael.

Michael Masters Young: I'll give you some of the pieces. We're obviously not going to give any guidance for 25 at this point in time, but a lot of the trends we've seen are still consistent. We've got about a billion dollars of lower fixed-rate assets. They'll turn over the next 12 months. And they'll reprice higher.

Michael Masters Young: I think just I'll give you some of the pieces, we're obviously not going to give any guidance for 25 at this point in time, but.

Michael Masters Young: A lot of the trends we've seen are still consistent we've got about $1 billion of kind of lower fixed rate assets.

Michael Masters Young: Assets that we'll turn it over this over the next 12 months that will reprice higher we expect that at some point here. The the rate of increase on deposits should decelerate as we mentioned some of the proactive stances, we're taking in that.

Michael Masters Young: We expect that at some point here, the rate of increase on deposits should decelerate, as we mentioned some of the proactive stances we're taking in that area as well, near term. So I think as you see those things materialize in the balance sheet return to growth, you're going to see a more positive revenue trajectory as we head into 2025. And that should be a more stable earnings base, right?

Michael Masters Young: Area as well near term so.

Michael Masters Young: As you see those things materialize in the balance sheet returned to growth.

Michael Masters Young: Going to see a more positive revenue trajectory as we head into 2025.

Michael Masters Young: And that should be a more stable earnings base rate, we don't have ongoing.

Michael Masters Young: We don't have ongoing things that we need to de-risk like you're seeing with other banks. We don't have a lot of reserves to build. We don't have capital that we need to build. So we really have kind of the wind at our backs and the ability to kind of move forward and grow the bank and grow the franchise value of the bank and grow earnings as well.

Things that we need to de risk like Youre seeing with other banks, we don't have a lot of reserve to build.

Michael Masters Young: We don't have.

Michael Masters Young: Capital that we need to build so we really have kind of the winds at our back and the ability to kind of move forward.

Michael Masters Young: And grow the bank and grow the franchise value of the bank and.

Michael Masters Young: And grow earnings as well.

David Jason Bishop: Got it. And then?

Got it then.

David Jason Bishop: Yes, accretion income has been under a little bit of pressure here. Is that $10 million, you know, sort of run rate, good under this interest rate environment? And if rates do start to fall, is that impacted by, you know, potentially, prepayments or payoffs? I'm just curious how we should think about the pace of purchase of county appraisals.

Michael Masters Young: Accretion income has been under a little bit of pressure here.

Michael Masters Young: Is that $10 million sort of run rate.

Michael Masters Young: Under this interest rate environment, and if rates do start to fall.

Michael Masters Young: That impacted thereby potentially prepayments or payoffs just I'm just curious how we should think about the pace of purchase accounting accretion.

Michael Masters Young: [inaudible]

David as he said as expected the accretion has tapered off since the periods immediately following the recent acquisition generally accretion runs higher when the individual loans with high marks have payoffs are meaningful pay downs.

Michael Masters Young: David, as you said, as expected, the accretion has tapered off since the periods immediately following the recent acquisitions. Generally, accretion runs higher when the individual loans with high marks have payoffs or meaningful paydowns. And so we've seen notably fewer prepayments on loans with high marks. That's going to continue to be difficult to predict, but maybe just a point of emphasis: it does come back eventually. And just the uncertainty that exists around timing, but I think probably what you're seeing in the first quarter, that 10 to 10 and a half, I guess, would be a reasonable guess.

Michael Masters Young: And so we've seen notably fewer prepayments on loans with high marks that's going to continue to be difficult to predict but maybe just a point of emphasis it does come back eventually.

Michael Masters Young: And just the uncertainty that exists around timing, but I think probably what youre seeing in the first quarter.

Michael Masters Young: That 10 to 10, and a half I guess would be.

Michael Masters Young: And in Bulgaria.

Speaker Change: Got it and then.

Speaker Change: Chuck I know Youre pretty bulled up about the commercial loan pipeline.

Speaker Change: Any chance you share the commercial deposit pipeline, how that looks any visibility there from us from a dollar perspective or a percentage basis of that pipeline.

David Jason Bishop: Got it, then Chuck. I know you're pretty bullish about the commercial loan pipeline. Any chance you'd share the commercial deposit pipeline, how that looks, any visibility there from a dollar perspective or percentage basis of that pipeline?

Speaker Change: I don't have it in front of me, David and I don't really have a number to give you I'll give it to you if I have it I just don't have it in front of me.

Speaker Change: Maybe.

Speaker Change: Maybe just a gearing ratio on that we do require compensating balances. So you can see what we're seeing in terms of the loan pipeline and assume some percentage of.

Speaker Change: Those loans are a percentage of the balances of those loans would be also coming in in terms of deposit funding.

Charles M. Shaffer: Maybe just a gearing issue

Charles M. Shaffer: And the trick for modeling there is just to remind you again, you know, we are going to see some tax payments here. I think we're going to see tax payments across the industry. It's not going to be a heavy tax year for all banks for a lot of reasons, but as public funds typically come down. So, you know, we'll have that kind of fighting through April here, but as we, you know, continue to grow, we'll grow through it.

Speaker Change: The trick for modeling there is just to remind you again, we are going to see some tax payments here made I think where you see tax payments across the industry.

Speaker Change: Is that going to be a heavy tax here for all banks for a lot of reasons.

Speaker Change: But as well as public funds typically come down so we'll have that kind of fighting that through April here, but as we continue to grow we'll grow through it.

David Jason Bishop: Got it. A final question, a little bit of take up in the substandard criticism. Just curious, when you look at that book, is there a material difference in the average size of those loans versus maybe the portfolio average? Is it chunkier than what we see on average? Nah. Nah.

Speaker Change: Got it and then final question.

Speaker Change: A little bit of pickup in the substandard criticized just curious when you look at that book is there.

Speaker Change: Material difference in the average size of those loans versus maybe the portfolio average is a tough year than.

Speaker Change: What we see on average now it's kind of the average portfolio.

Charles M. Shaffer: No, no, it's kind of the average portfolio, you know, the Classified Criticizer, generally flat quarter over quarter by just a hair. Generally, we're seeing just normal, I call it seasoning of the cycle here. And then when you look at the NPL book, you know, that book is kind of just spread amongst a number of smaller transactions as well. So, you know, we feel pretty, pretty, pretty good where we are on asset quality here, feel pretty strongly about where we're positioned, and we've got the allowance to generally cover anything that's going to come our way.

Speaker Change: Classified criticized were generally flat quarter over quarter up just a hair.

Speaker Change: Generally we're seeing just normal.

Speaker Change: I call it.

Speaker Change: Seasoning of the cycle here.

Speaker Change: And then when you look at the NPL book.

Speaker Change: That book is kind of just spread amongst a number of smaller transactions as well. So we feel pretty pretty good where we are on asset quality here.

Speaker Change: Feel pretty strongly about where we're positioned.

Speaker Change: And we've got the allowance generally cover anything thats going to come our way I think.

David Jason Bishop: Perfect. Thank you for the color.

Speaker Change: Perfect. Thank you for the color.

Operator: That concludes our Q&A session. I will now turn the conference back over to Mr. Shaffer for closing remarks.

Charles M. Shaffer: That concludes our Q&A session I will now turn the conference back over to Mr. Shaffer for closing remarks.

Charles M. Shaffer: Okay, thank you very much. Thank you all for joining us this morning. I do think we had an exceptional quarter. The Seacoast team did an amazing job, and I'm excited to see what we can do over the remainder of the year. And we'll round out if anybody has any questions. Feel free to reach out.

Shaffer: Okay. Thank you very much. Thank you all for joining us. This morning, I do think we had an exceptional quarter for <unk>.

CECO team did an amazing job.

Shaffer: Excited to see what we can do over the remainder of the year and will around if anybody has any questions feel free to reach out. Okay. Thank you operator that will conclude our call.

Operator: Okay, thank you, operator. That will conclude our call. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

[music].

Speaker Change: Okay.