Q3 2025 Seacoast Banking Corp of Florida Earnings Call
Speaker #2: Welcome to Seacoast .
Operator: Welcome to Seacoast Banking Corporation of Florida's third quarter 2025 earnings conference call. My name is Desiree, and I will be your operator. Before we begin, I have been asked to direct your attention to the statements at the end of the company's press release regarding forward-looking statements. Seacoast will be discussing issues that constitute forward-looking statements within the meaning of the Securities and Exchange Act, and its comments today are intended to be covered within the meaning of that act. Please note that this conference is being recorded. I will now turn the call over to Charles Shaffer, Chairman and CEO of Seacoast Banking Corporation of Florida. Mr. Shaffer, you may begin.
Speaker #3: Banking Corporation's third Quarter 2020 earnings conference . Call . My name is Desiree , and I will be your operator . Before we begin , I have been asked to direct your attention to the statements at the end of the company's press release regarding forward looking statements .
Speaker #3: 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 .
Speaker #3: Please note that this conference is being recorded . I will now turn the call over to Chuck Schaffer , chairman and CEO of seacoast Bank .
Speaker #3: Mr. Schaffer , you may begin .
Speaker #4: All right . Thank you . Good morning everyone . As we proceed with our presentation , we'll refer to the third quarter earnings slide deck , which is available at Seacoast Banking .
Charles Shaffer: All right. Thank you. Good morning, everyone. As we proceed with our presentation, we'll refer to the third quarter earnings slide deck, which is available at seacoastbanking.com. Joining me today is Tracey Dexter, our Chief Financial Officer, Michael Young, our Chief Strategy Officer, and James Stallings, our Chief Credit Officer. The Seacoast team delivered another exceptional quarter, which clearly demonstrated the progress we are making towards enhancing our return profile while delivering strong growth on both sides of the balance sheet. Our competitive transformation has fully taken hold, with loan and deposit growth near 8%, the result of a focused effort to recruit the most qualified and capable bankers across our footprint. I was particularly pleased with the growth in non-interest bearing DDA accounts and a balanced approach to loan growth, with our commercial production spread across CNI and CRE with multiple asset classes and industries.
Speaker #4: Joining me today is Tracey Dexter , our chief financial officer Michael Young . Our chief strategy officer . And James Stallings , our chief credit officer .
Speaker #4: The seacoast team delivered another exceptional quarter , which clearly demonstrated the progress we are making towards enhancing our return profile . While delivering strong growth on both sides of the balance sheet .
Speaker #4: Our competitive transformation has fully taken hold with loan and deposit growth near 8% . The result of a focused effort to recruit the most qualified and capable bankers across our footprint .
Speaker #4: I was particularly pleased with the growth in noninterest-bearing DDA accounts and a balanced approach to loan growth, with our commercial production spread across CNI and CRE, covering multiple asset classes and industries.
Speaker #4: The team also delivered strong performance across multiple revenue streams, including a record-breaking quarter in wealth management and solid performance in treasury management fees.
Charles Shaffer: The team also delivered strong performance across multiple revenue streams, including a record-breaking quarter in wealth management and solid performance in treasury management fees, SBA, interchange, and insurance agency income. Impressively, the team accomplished all this while successfully closing and converting the Heartland transaction, as well as closing the Villages transaction on October 1, 2025. Asset quality remains sound, non-performing loans declined, and net charge-offs were lower than our prior guidance, reflecting our continued focus on disciplined underwriting and proactive risk management. We have very limited exposure to shared national credits or NDFI, and just to remind you, our portfolio is almost entirely franchise quality relationships made to borrowers in our footprint, including consumers, businesses, nonprofits, and municipalities that we have deep relationships with. Lastly, capital and liquidity are industry-leading, and our liquidity profile will be further enhanced with the Villages transaction.
Speaker #4: SBA interchange and Insurance Agency income and impressively , the team accomplished all this while successfully closing , converted the Heartland transaction as well as closing the villages transaction .
Speaker #4: On October 1st , asset quality remains sound . Non-performing loans declined and net charge offs were lower than our prior guidance , reflecting our continued focus on disciplined underwriting and proactive risk management .
Speaker #4: We have very limited exposure to shared national credits or NFI . And just to remind you , our portfolio is almost entirely franchise quality .
Speaker #4: Relationships made to borrowers in our footprint , including consumers , businesses , nonprofits and municipalities that we have deep relationships with . And lastly , capital and liquidity are industry leading , and our liquidity profile will be further enhanced with the villages transaction .
Speaker #4: We remain committed to our fortress balance sheet principles and continue to operate one of the strongest banks in the industry. In closing, I want to express my sincere appreciation to our dedicated associates for their commitment to advancing our growth and profitability goals.
Charles Shaffer: We remain committed to our fortress balance sheet principles and continue to operate one of the strongest banks in the industry. In closing, I want to express my sincere appreciation to our dedicated associates for their commitment to advancing our growth and profitability goals. Their focus and execution continue to drive our success. We operate with one of the best banking teams in the Southeast, across some of the best markets in the United States, with an exceptionally strong balance sheet. I remain confident in our growth outlook and our ability to continue to deliver continued improvements and returns into 2026. With that, I'll turn the call over to Tracey Dexter to walk through our financial results. Tracey?
Speaker #4: Their focus and execution continue to drive our success . We operate with one of the best banking teams in the southeast , across some of the best markets in the United States , with an exceptionally strong balance sheet .
Speaker #4: I remain confident in our growth outlook and our ability to continue to deliver improvements in returns into 2026. With that, I'll turn the call over to Tracey Dexter to walk through our financial results.
Speaker #4: Tracy .
Speaker #5: Thank you . Chuck . Good morning everyone . Directing your attention to third quarter results beginning with slide four . The seacoast team delivered a strong quarter with adjusted net income , which excludes merger related charges , increasing 48% year over year to 45.2 million , or $0.52 per share .
Operator: Thank you, Chuck. Good morning, everyone. Directing your attention to third quarter results, beginning with slide four. The Seacoast team delivered a strong quarter with adjusted net income, which excludes merger-related charges, increasing 48% year over year to $45.2 million or $0.52 per share. Organic deposits, excluding brokered and Heartland-acquired deposits, grew $212 million or 7% annualized, and that organic growth included $80 million in non-interest-bearing deposits. Loan production continued to be strong, with organic growth in balances of 8% on an annualized basis. The pipeline has reached a record high, reflecting the success of recent hiring and the increase in the balance sheet following the completion of the Villages acquisition in October. Net interest income was $133.5 million, an increase of 5% from the prior quarter, and net interest margin, excluding accretion on acquired loans, expanded 3 basis points to 3.32%.
Speaker #5: Organic deposits , excluding brokered and heartland , acquired deposits , grew $212 million , or 7% annualized , and that organic growth included 80 million in noninterest bearing deposits , loan production continued to be strong , with organic growth in balances of 8% on an annualized basis .
Speaker #5: The pipeline has reached a record high , reflecting the success of recent hiring and the increase in the balance sheet following the completion of the village's acquisition in October .
Speaker #5: Net interest income was 133.5 million , an increase of 5% from the prior quarter , and net interest margin , excluding accretion on acquired loans , expanded three basis points to 3.32% .
Speaker #5: Tangible book value per share increased 9% year over year to $17.61 . Remarkable given that the heartland acquisition included 50% cash consideration . Our capital position continues to be very strong .
Operator: Tangible book value per share increased 9% year over year to $17.61, remarkable given that the Heartland acquisition included 50% cash consideration. Our capital position continues to be very strong. Seacoast's tier-one capital ratio is 14.5%, and the ratio of tangible common equity to tangible assets is 9.8%. We completed our acquisition of Heartland Bancshares, Inc. on July 11, adding four branches and approximately $824 million in assets. The technology conversion was fully completed in the third quarter. On October 1, we finalized our acquisition of The Villages Bank Corporation, adding 19 branches and over $4 billion in assets. We expect the full technology conversion to happen early in the third quarter of 2026. Turning to slide five, net interest income increased by $6.6 million or 5% compared to the prior quarter and by $26.9 million or 25% compared to the prior year quarter.
Speaker #5: Seacoast tier one capital ratio is 14.5% , and the ratio of tangible common equity to tangible assets is 9.8% . We completed our acquisition of heartland Bank shares on July 11th , adding four branches and approximately $824 million in assets .
Speaker #5: The technology conversion was fully completed in the third quarter, and on October 1st, we finalized our acquisition of Villages Bank Corporation, adding 19 branches and over $4 billion in assets.
Speaker #5: We expect the full technology conversion to happen early in the third quarter of 2026 . Turning to slide five . Net interest income increased by $6.6 million , or 5% , compared to the prior quarter , and by $26.9 million , or 25% , compared to the prior year quarter .
Speaker #5: The net interest margin declined one basis point to 3.57% , and excluding accretion on acquired loans , expanded three basis points from the prior 2:45 .32 percent .
Operator: The net interest margin declined one basis point to 3.57%, and excluding accretion on acquired loans, expanded 3 basis points from the prior quarter to 3.32%. In the securities portfolio, yields increased 5 basis points to 3.92%. Loan yields declined 2 basis points to 5.96%. Excluding accretion, loan yields increased 3 basis points to 5.61%. The cost of deposits remained near flat, with only a one basis point increase during the quarter to 1.81%, and overall cost of funds is down 3 basis points from the prior quarter. With strong momentum in loan growth, deposit costs now lower and stabilizing, additional liquidity, and accretive acquisitions, we expect net interest income to continue to grow. Consistent with our previous guidance, we expect to exit the year with the core net interest margin reaching approximately 3.45%, inclusive of recent acquisitions.
Speaker #5: In the securities portfolio , yields increased five basis points to 3.92% . Loan yields declined two basis points to 5.96% . Excluding accretion , loan yields increased three basis points to 5.61% .
Speaker #5: The cost of deposits remained near flat , with only a one basis point increase during the 12:45 .81 percent , and overall cost of funds is down three basis points from the prior quarter , with strong momentum in loan growth , deposit costs now lower in stabilizing additional liquidity and accretive acquisitions .
Speaker #5: We expect net interest income to continue to grow consistent with our previous guidance . We expect to exit the year with the core .
Speaker #5: Net interest margin reaching approximately 3.45% , inclusive of recent acquisitions . Moving to slide six , non-interest income , excluding securities activity , was 24.7 million , increasing 5% from the prior year quarter .
Operator: Moving to slide six, non-interest income, excluding securities activity, was $24.7 million, increasing 5% from the prior year quarter. Fee revenue continues to benefit from our investments in talent and expansion of treasury management services to commercial customers, with service charges on deposits increasing 12% from the prior quarter. Our wealth management team delivered a record quarter in new AUM, continuing its strong performance and reinforcing its position as a key growth driver for the organization. $258 million in new AUM was added in the third quarter, the highest quarterly result in the division's history, and $473 million in new AUM in 2025 year to date. BOLE income increased to $3.9 million in the third quarter and included $1.3 million in benefits. Other income totaled $6 million and included higher gains on SBA loan sales and higher loan swap fees.
Speaker #5: Fee revenue continues to benefit from our investments in talent and expansion of treasury management services to commercial customers . With service charges on deposits increasing 12% from the prior quarter .
Speaker #5: Our wealth management team delivered a record quarter in new AUM, continuing its strong performance and reinforcing its position as a key growth driver for the organization.
Speaker #5: 258 million in new AUM was added in the third quarter . The highest quarterly result in the division's history , and $473 million in .
Speaker #5: AUM in 2025 . Year to date Boli income increased to 3.9 million in the third quarter and included 1.3 million in benefits . Other income totaled 6 million and included higher gains on SBA loan sales and higher loan swap fees .
Speaker #5: Looking ahead to the fourth quarter , we expect noninterest income in a range from 22 million to 24 million , moving to slide seven again , the wealth division continues to grow entirely organic .
Operator: Looking ahead to the fourth quarter, we expect non-interest income in a range from $22 million to $24 million. Moving to slide seven, again, the wealth division continues to grow, entirely organic and with significant referrals from our commercial teams, with total AUM increasing 24% year over year and a 25% annual CAGR in the past five years. On slide eight, non-interest expense in the third quarter was $102 million, an increase of $10.3 million, and the third quarter included $10.8 million in merger-related expenses. Higher salaries and wages reflect continued expansion and the addition of Heartland, as well as higher performance-driven incentives. Outsourced data processing costs totaled $9.3 million, an increase of $0.8 million, reflecting higher transaction volume and growth in customers, including from the acquisition of Heartland. Other categories of expenses were in line with expectations.
Speaker #5: And with significant referrals from our commercial teams, total assets under management (AUM) increased 24% year over year, and we achieved a 25% annual CAGR over the past five years.
Speaker #5: On slide eight , noninterest expense in the third quarter was 102 million , an increase of 10.3 million , and the third quarter included 10.8 million .
Speaker #5: In merger related expenses , higher salaries and wages reflect continued expansion and the addition of heartland , as well as higher performance driven incentives .
Speaker #5: Outsourced data processing costs totaled 9.3 million , an increase of 0.8 million , reflecting higher transaction volume and growth in customers , including from the acquisition of heartland .
Speaker #5: Other categories of expenses were in line with expectations . Our adjusted efficiency ratio improved to 53.8% , down from 55.4% in the second quarter , demonstrating continued operating leverage .
Operator: Our adjusted efficiency ratio improved to 53.8%, down from 55.4% in the second quarter, demonstrating continued operating leverage. We continue to remain focused on profitability and performance and expect continued disciplined management of overhead and the efficiency ratio. With the addition of The Villages beginning in October, we expect adjusted expenses for the fourth quarter, excluding direct merger-related costs, to be in the range of $110 to $112 million. Turning to slide nine, loan outstandings, excluding the impact of the Heartland acquisition, increased at an annualized 8%. Pipelines increased 30% to $1.2 billion, and we continue to see strong broad-based demand across our markets. Loan yields declined 2 basis points, with lower accretion on acquired loans, with the prior quarter impacted by elevated payoffs. Excluding the effect of accretion, yields increased 3 basis points from the prior quarter to 5.61%.
Speaker #5: We continue to remain focused on profitability and performance and expect continued disciplined management of overhead and the efficiency ratio with the addition of the villages beginning in October , we expect adjusted expenses for the fourth quarter , excluding direct merger related costs to be in the range of 110 to 112 million .
Speaker #5: Turning to slide nine . Loan outstandings excluding the impact of the heartland acquisition increased at an annualized 8% . Pipelines increased 30% to 1.2 billion , and we continue to see strong , broad based demand across our markets .
Speaker #5: Loan yields declined two basis points with lower accretion on acquired loans . With the prior quarter impacted by elevated payoffs . Excluding the effect of accretion , yields increased three basis points from the prior 4:45 .61 percent .
Speaker #5: Looking forward , the pipeline remains strong and we expect continued high single digit organic loan growth in the coming quarter with the addition of the villages in the fourth quarter , we expect our loan to deposit ratio at year end 2025 to be below 75% , allowing significant continued growth opportunities .
Operator: Looking forward, the pipeline remains strong, and we expect continued high single-digit organic loan growth in the coming quarter. With the addition of The Villages in the fourth quarter, we expect our loan-to-deposit ratio at year-end 2025 to be below 75%, allowing significant continued growth opportunities. Turning to slide 10, portfolio diversification in terms of asset mix, industry, and loan type has been a critical element of the company's lending strategy. Exposure is broadly distributed, and we continue to be vigilant in maintaining our disciplined, conservative credit culture. Non-owner occupied commercial real estate loans represent 34% of all loans and are distributed across industries and collateral types. As we have for many years, we consistently manage our portfolio to keep construction and land development loans and commercial real estate loans well below regulatory guidance.
Speaker #5: Turning to slide ten . Portfolio diversification in terms of asset mix , industry and loan type has been a critical element of the company's lending strategy .
Speaker #5: 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 .
Speaker #5: 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.
Speaker #5: These measures are significantly below the peer group at 32% , and 223% of consolidated risk based capital , respectively . We've managed our loan portfolio with diverse distribution across categories and retained granularity to manage risk , moving to credit topics on slide 11 , the allowance for credit losses totaled 147.5 million , with coverage to total loans remaining flat at 1.34% .
Operator: These measures are significantly below the peer group at 32% and 223% of consolidated risk-based capital, respectively. We've managed our loan portfolio with diverse distribution across categories and retained granularity to manage risk. Moving to credit topics on slide 11, the allowance for credit losses totaled $147.5 million, with coverage to total loans remaining flat at 1.34%. The allowance for credit losses, combined with the $102.2 million remaining unrecognized discount on acquired loans, totals $249.7 million, or 2.27% of total loans that's available to cover potential losses. Moving to slide 12, looking at quarterly trends in credit metrics, which remain strong. We recorded net charge-offs of $3.2 million during the quarter, or 12 basis points annualized. Non-performing loans declined by $3.6 million during the quarter and represent only 0.55% of total loans. Accruing past due loans moved slightly higher to 0.19% of total loans.
Speaker #5: The allowance for credit losses , combined with the 102.2 million remaining unrecognized discount on acquired loans , totals 249.7 million , or 2.27% of total loans .
Speaker #5: That's available to cover potential losses . Moving to slide 12 , looking at quarterly trends in credit metrics , which remain strong , we recorded net charge offs of 3.2 million during the quarter , or 12 basis points annualized .
Speaker #5: Nonperforming loans declined by 3.6 million during the quarter . And represent only 0.55% of total loans accruing past due loans moved slightly higher to 0.19% of total loans .
Speaker #5: The level of criticized and classified loans stands at 2.5% of total loans . Generally in line with prior periods . As Chuck mentioned in his opening remarks .
Operator: The level of criticized and classified loans stands at 2.5% of total loans, generally in line with prior periods. As Chuck mentioned in his opening remarks, Seacoast Banking Corporation of Florida continues to have very limited exposure to shared national credits or non-depository financial institutions. We have no exposure to private equity debt funds. Moving to slide 13 and the investment securities portfolio, net unrealized losses in the AFS portfolio improved by $36 million during the third quarter, driven by changes in long-term rates. The portfolio yield increased 5 basis points to 3.92%, reflecting $385 million in purchases of primarily agency mortgage-backed securities, with an average yield of 5.03%. Turning to slide 14 and the deposit portfolio, Seacoast Banking Corporation of Florida continues to benefit from a diverse deposit base. Customer transaction accounts represent 48% of total deposits, which continues to highlight our longstanding relationship-focused approach.
Speaker #5: Seacoast continues to have very limited exposure to shared national credits or non-depository financial institutions . We have no exposure to private equity , debt funds .
Speaker #5: Moving to slide 13 and the investment securities portfolio, net unrealized losses in the AFS portfolio improved by $36 million during the third quarter, driven by changes in long-term rates.
Speaker #5: The portfolio yield increased five basis points to 3.92% , reflecting $385 million in purchases of primarily agency mortgage backed securities , with an average yield of 5.03% , turning to slide 14 , and the deposit portfolio , seacoast continues to benefit from a diverse deposit base .
Speaker #5: Customer transaction accounts represent 48% 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 .
Operator: Our customers are highly engaged and have a long history with us, and low average balances reflect the granular relationship nature of our franchise. On slide 15, organic deposit growth, excluding changes in brokered deposits and the acquired Heartland deposits, was $212.3 million, or 7% annualized, of which $80.4 million was non-interest-bearing deposit growth. Cost of deposits increased slightly by one basis point to 1.81%. The Heartland acquisition added over $700 million in a strong core deposit franchise and the number one market share in Highlands County. We continue to build share across our markets with a focus on core relationship deposits. For the fourth quarter 2025, we expect low to mid-single-digit organic deposit growth. Finally, on slide 16, our capital position continues to be very strong. Tangible book value per share has grown to $17.61, and the ratio of tangible common equity to tangible assets held strong at 9.8%.
Speaker #5: On slide 15 , organic deposit growth , excluding changes in brokered deposits and the acquired heartland deposits , was 212.3 million , or 7% annualized , of which 80.4 million was non-interest bearing deposit growth .
Speaker #5: Cost of deposits increased slightly by one basis point to 1.81% . The Heartland acquisition added over $700 million in a strong core deposit franchise , and the number one market share in Highlands County .
Speaker #5: We continue to build share across our markets with a focus on core relationship deposits. For the fourth quarter of 2025, we expect low to mid single-digit organic deposit growth.
Speaker #5: And finally , on slide 16 , our capital position continues to be very strong , tangible book value per share has grown to $17.61 .
Speaker #5: And the ratio of tangible common equity to tangible assets held strong at 9.8%. As expected, return on tangible common equity decreased, reflecting the impact of the Heartland acquisition.
Operator: As expected, return on tangible common equity decreased, reflecting the impact of the Heartland acquisition, and in the fourth quarter, we will see the initial impact of the Villages acquisition on these metrics. Into the first quarter of 2026 and moving forward, we expect to see meaningful improvements in return on equity measures. Our risk-based and tier-one capital ratios remain among the highest in the industry. Results this quarter reflect our ability to deliver strong, sustainable performance. Our balance sheet is well positioned, and our capital position is strong. We'll continue to execute on our organic growth and profitability goals as we integrate recent acquisitions and grow the franchise. I'll now turn the call back over to Charles.
Speaker #5: And in the fourth quarter , we'll see the initial impact of the villages acquisition on these metrics into the first quarter of 2026 and moving forward , we expect to see meaningful improvements in return on equity measures .
Speaker #5: Our risk-based and Tier One capital ratios remain among the highest in the industry. Results this quarter reflect our ability to deliver strong, sustainable performance.
Speaker #5: Our balance sheet is well positioned and our capital position is strong . We'll continue to execute on our organic growth and profitability goals as we integrate recent acquisitions and grow the franchise .
Speaker #5: I'll now turn the call back over to Chuck.
Speaker #4: All right . Thanks , Tracey . And operator , I think we're ready for Q&A .
Charles Shaffer: All right. Thanks, Tracey. Operator, I think we're ready for Q&A.
Speaker #3: 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 one on your telephone keypad to raise your hand and join the queue .
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 one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Our first question comes from the line of Will Jones with KBW. Your line is open.
Speaker #3: If you would like to withdraw your question , simply press star one again . If you are called upon to ask your question in our listening via speakerphone on your device , please pick up your handset to ensure that your phone is not on mute .
Speaker #3: When asking your question again, press star one to join the queue. And our first question comes from the line of Wil Jones with KB.
Speaker #3: Your line is open .
Speaker #6: Yeah . Hey . Thanks , guys . Good morning .
[Analyst 1]: Yeah, thanks, guys. Good morning.
Speaker #4: Good morning will
Charles Shaffer: Morning, Will.
Speaker #6: just wanted to start on the growth outlook . You know it's impressive . You know in a quarter where you're closing and converting a deal and closing another one that you still able to just so consistently produce is this mid to high single digit growth .
[Analyst 1]: I just wanted to start on the growth outlook. It's impressive in a quarter where you're closing and converting a deal and closing another one that you're still able to just so consistently produce this mid to high single-digit growth. As I look back on the first half of the year, it's so consistent with what you produced this quarter. At the same time, it feels like pipeline momentum, being at all-time highs and just kind of the added flexibility you're going to have with The Villages Bank Corporation balance sheet, that there may be opportunity to kind of accelerate growth as you look into 2026. Could you just maybe talk about your willingness to scale up the growth opportunity to the extent that it does present itself next year?
Speaker #6: You know . And as I look back on the first half of the year , it's so consistent with what you produce this quarter .
Speaker #6: You know . But at the same time it feels like pipeline momentum . You know , being at all time highs . And you know , just kind of the added flexibility you're going to have with the village's balance sheet there may be opportunity to , you know , kind of kind of accelerate growth as you look into 2026 .
Speaker #6: Could you just maybe talk about your willingness to scale up, you know, the growth opportunity to the extent that that does present itself next year?
Speaker #4: Thanks for the question , Will . And that was one of the things I thought was most impressive about the quarter is not only did the team grow strongly , both sides of the balance sheet , we also converted heartland transaction , which went exceptionally well , and we continue to , you know , move with tremendous momentum .
Charles Shaffer: Thanks for the question, Will. That was one of the things I thought was most impressive about the quarter. Not only did the team grow strongly on both sides of the balance sheet, we also converted a Heartland transaction, which went exceptionally well. We continue to move with tremendous momentum. When you look at building the pipeline and building growth, we have a slide in there that shows the net loan growth quarter to quarter, and you're seeing consistent improvement. When you kind of combine the liquidity we're picking up with the Villages transaction, which, just to remind you, is a very granular, diverse, lower-cost deposit portfolio and connects that with what I think now is one of the strongest commercial banking teams across Florida and maybe in the whole Southeast, it is a really strong combination to put together to drive earnings as we move forward.
Speaker #4: When you look at the building , the pipeline , the building growth , we have a slide in there that shows the net loan growth quarter to quarter .
Speaker #4: And you're seeing consistent improvement . You know , when you kind of combine the liquidity we're picking up with the villages transaction , which just to remind you is a very granular diverse lower cost deposit portfolio .
Speaker #4: And connect that with what I think now is one of the strongest commercial banking teams across Florida . And maybe in the whole southeast is a really strong combination to put together to drive earnings as we move forward , the team we've built over the last three years is matured now , and if you recall , we've been pretty hard at work recruiting consistently now for a good 36 months .
Charles Shaffer: The team we've built over the last three years has matured now. If you recall, we've been pretty hard at work recruiting consistently now for a good 36 months. We've moved past solicitation constraints and other things that the bankers would have had in terms of contractual arrangements, and they're now fully available to go out and call and build business. We've also moved to the point where, from a lending perspective, some of the very low-yielding loans that were kind of locked into some of those balance sheets that would be moving business from have reached maturity and/or have amortized down to the point where they're willing to refinance those arrangements. When you put all that together, I just feel very confident about our ability to deliver our guide, which was high single digit as we move forward. I think I'd stick with that guide for now.
Speaker #4: We've moved past solicitation constraints and other things that these the bankers would have had in terms of contractual arrangements . And they're now fully available to go out and call and build business .
Speaker #4: We've also moved to the point where , from a lending perspective , some of the very low yielding loans that were kind of locked in to some of those balance sheets that would be moving business from , have reached maturity and or have amortized down to the point where they're willing to refinance those those arrangements .
Speaker #4: And so when you put all that together , you know , I just feel very confident about our ability to deliver our guide , which was high single digit as we move forward .
Speaker #4: I know I think I'd stick with that guide for now . I think that's an appropriate guide as we move through time . But I feel , you know , really confident in our ability to deliver that in the coming quarters .
Charles Shaffer: I think that's an appropriate guide as we move through time. I feel really confident in our ability to deliver that in the coming quarters.
Speaker #4: And Will , this is Michael .
Michael Young: This is Michael. I just wanted to add, you know, I think when you compare that to what you're seeing in the industry right now, we did a lot of work over the last two years, and we de-risked kind of our portfolio and made sure that everything that we have is what we want to have going forward. I think a lot of others are going through that right now. Just our production is leading to more net growth as we add new relationships and grow the book.
Speaker #7: I just wanted to add , you know , I think when you compare that to what you're seeing in the industry right now , you know , we did a lot of work over the last two years , and we're , you know , you know , de-risk kind of our portfolio , made sure that everything that we have is what we want to have going forward .
Speaker #7: I think a lot of others are going through that right now. And so, just our production is leading to more net growth as we add new relationships and grow.
Speaker #7: The book .
Speaker #6: Yeah , that's that's fair enough . Certainly an enviable position to be in . And as I guess maybe more holistically , as you think about 2026 and the flexibility that that villages will provide to you .
[Analyst 1]: Yeah, that's fair enough. It's certainly an envious position to be in. As I guess maybe more holistically, as you think about 2026 and the flexibility that The Villages Bank Corporation will provide to you, as we kind of think about the size of the balance sheet next year, would you characterize 2026 more as a year of optimization? Maybe you don't need, as you know, intensive deposit growth to kind of just leverage the balance sheet on the loan side, or do you still expect to see some modest balance sheet growth in 2026?
Speaker #6: As we as we kind of think about the size of the balance sheet next year , do you would you would you characterize 2026 more as a year of optimization and maybe you don't need as intensive of deposit growth to kind of just leverage the balance sheet on the loan side ?
Speaker #6: Or do you still expect to see , you know , some modest balance sheet growth in 2026 ?
Speaker #7: Well , yeah . Let me I'll take that one . This is Michael . I'll call out one trend in the fourth quarter quickly .
Charles Shaffer: Hey, Will. Yeah. Let me take that one. This is Michael. I'll call it one trend in the fourth quarter quickly, and then I'll move to 2026 for a little bit of color there. In the fourth quarter, we did add a little bit of leverage in the third quarter to pre-buy some securities for The Villages, restructuring about $350 million that was purchased that Tracey mentioned earlier. We have about $167 million of brokered deposits at about 4.2% that'll run off in November and another $175 million of FHLB advances at about 4.2% that'll run off in November as well. We will de-lever just a little bit here in the fourth quarter at higher yields and expanding margin. As we move to 2026, we really think that across the franchise, there's a lot of deposit growth opportunity.
Speaker #7: And then I'll move to 2026 for a little bit of color there . So in the fourth quarter we did add a little bit of leverage in the third quarter to to pre-buy some securities for the villages restructuring .
Speaker #7: About 350 million . That was purchased that Tracy mentioned earlier . So we have about 167 million of brokered deposits at about 4.2% .
Speaker #7: That will run off in November , and another 175 million of Fhlb advances at about 4.2% . That will run off in November as well .
Speaker #7: So we will deliver just a little bit here in the fourth quarter at higher yields and expanding margin . But then as we move to 2026 , we really think that across the franchise , there's a lot of deposit growth opportunity .
Speaker #7: We've opened about 5 to 6 new locations by year end across the the the footprint here . And then also with the villages continued expansion and growth with them opening new town centers and having , you know , a lot of net new in-migration there as well .
Charles Shaffer: We've opened about five to six new locations by year-end across the footprint here. Also with The Villages, continued expansion and growth with them opening new town centers and having a lot of net new in-migration there as well. There's just a lot of tailwinds to deposit growth. We will remix a little bit, but deposits are still likely to grow at a pretty decent clip in 2026. The balance sheet will be expanding kind of in line with that deposit growth that we forecast for 2026.
Speaker #7: You know , there's just a lot of tailwinds to deposit growth . So we will , you know , remix a little bit .
Speaker #7: But deposits are still likely to grow at a pretty decent clip in 2026. So the balance sheet will be expanding kind of in line with that deposit growth that we forecast for 2026.
Speaker #6: Yeah, okay. I appreciate that detail, Michael. And then just lastly for me, you guys have been expanding into Atlanta more recently.
[Analyst 1]: Okay. I appreciate that detail, Michael. Just lastly for me, you guys have been expanding into Atlanta more recently. Correct me if I'm wrong, maybe your first meaningful expansion outside the state of Florida, just in terms of where you have boots on the ground. That's also a market that's seen quite a bit of M&A turnover in the past couple of months here. Maybe, Chuck, if you could just frame what you would like to see in terms of the build-out of Atlanta and where there may be opportunity to add talent here.
Speaker #6: You know , and correct me if I'm wrong . It may be your first , you know , meaningful expansion outside the state of Florida .
Speaker #6: Just in terms of where you have boots on the ground, that's also a market that has seen quite a bit of M&A turnover in the past couple of months.
Speaker #6: Here . Maybe talk if you could just frame what you what you would like to see in terms of the build out of Atlanta and where there may be opportunities to add talent here ?
Speaker #4: Sure . Thanks , Will . And you're right . You know what we see in that market and what we see as we entered it a few years ago , is the opportunity to take advantage of what we think will be significant consolidation in in the northern arc of Atlanta , we about three years ago began to enter that market carefully with the commercial real estate team .
Charles Shaffer: Sure. Thanks, Will. You're right. What we see in that market and what we see as we entered it a few years ago is the opportunity to take advantage of what we think will be significant consolidation in the northern arc of Atlanta. About three years ago, we began to enter that market carefully with a commercial real estate team. We saw a lot of success uniquely, or maybe not uniquely, but interestingly, we found a lot of connectivity between Atlanta and Florida with a lot of, particularly on the commercial real estate side, some of the institutional quality commercial real estate investors and developers doing a lot of work in Florida. It was a natural segue. As that continued to build, we've bolted on a CNI team that continues to grow in that market.
Speaker #4: We saw a lot of success uniquely or maybe not uniquely , but interestingly , we we found a lot of connectivity between Atlanta and Florida with a lot of particularly in the commercial real estate side , some of the institutional quality commercial real estate investors and developers doing a lot of work in Florida .
Speaker #4: So it was a natural segue is that continued to build . We've bolted on a CNI team that continues to grow in that market .
Speaker #4: I would expect this to ultimately open a handful of branches and probably 3 to 5 year period as we move through the coming years and expand into the market .
Charles Shaffer: I would expect us to ultimately open a handful of branches in probably a three to five-year period as we move through the coming years and expand into the market. We've had a lot of success at this point. We're onboarding a lot of high-quality customers. I would expect us to build out that northern arc. Beyond that, I don't think we have any plans outside of that at this point. That's kind of our focus in Atlanta. We still have markets to fill in around Florida that we're focused on as well. We're still getting a lot of inbound demand by bankers and banking teams wanting to join the franchise. We're carefully taking advantage of that as we move through time. Potentially, as there is more market disruption and consolidation, we'll have very good opportunities to bring on really high-quality talent.
Speaker #4: We've had a lot of success at this point. We're onboarding a lot of high-quality customers, and so I would expect this to build out that northern arc.
Speaker #4: Beyond that, I don't think we have any plans outside of that at this point. That's kind of our focus in Atlanta.
Speaker #4: And then we still have markets to fill in around Florida that we're focused on as well . We're still getting a lot of inbound demand by bankers and banking teams wanting to join the franchise .
Speaker #4: We're carefully taking advantage of that as we move through time and potentially as there is more up market disruption , consolidation , we'll have , you know , very good opportunities to bring on really high quality talent .
Speaker #6: Okay . I appreciate that color , guys . Nice quarter . Thank you .
[Analyst 1]: Okay. I appreciate that color, guys. Nice quarter. Thank you.
Speaker #4: Thanks , Bill .
Charles Shaffer: Thanks, Will.
Speaker #3: Our next question comes from the line of David Feaster with Raymond James . Your line is open .
Operator: Our next question comes from the line of David Pfister with Raymond James. Your line is open.
Speaker #8: Hi . Good morning everybody .
[Analyst 2]: Hi. Good morning, everybody.
Speaker #4: Hey David .
Charles Shaffer: Hey, David.
Speaker #7: Good morning David .
Michael Young: Morning, David.
Speaker #8: I wanted to touch on the villages deal . And just kind of hoping to get maybe some of an update . I mean , this is a transformational deal and extremely exciting time for you all .
[Analyst 2]: I wanted to touch on The Villages Bank Corporation deal and just kind of hoping to get maybe some of an update. I mean, this is a transformational deal, an extremely exciting time for y'all. How has the deal gone early on, right? I mean, we're only a couple of weeks into it, I know. Where are you seeing the most opportunity to add value near term? You know, the timeline to cross-sell some additional products across the existing footprint. How are you prepping for that conversion to minimize disruption and ensure a seamless integration?
Speaker #8: How has the deal gone early on , right ? I mean , we're only a couple weeks into it , I know , but where are you seeing the most opportunity to add value near term ?
Speaker #8: You know , the timeline to cross-sell some additional products across the existing footprint and then just maybe , how are you prepping for that conversion to minimize disruption and ensure a seamless integration ?
Speaker #4: Great question, David. It's the most exciting thing that's ever happened to Seacoast. I really am not overstating that. We are really excited to be in the Villages MSA.
Charles Shaffer: Great question, David. It's the most exciting thing that's ever happened to Seacoast. I really am not overstating that. We are really excited to be in the Villages MSA. We've had a very good reception in that market. The team there fits incredibly well within Seacoast. The cultures are very much aligned, very customer-focused. We've been really excited to have the team join us. It's gone incredibly smooth. Having done a lot of these through my career, this one's a good one, and it's going exceptionally well. As we look at that market, as you mentioned, the most important thing we can do is have a very clean, smooth, easy conversion for the Villages customers, citizens-first customers. That's what we're focused on. That'll happen about July next year. We gave ourselves plenty of time to do lots of data integrity work, lots of mock conversions, lots of work.
Speaker #4: We've had a very great good reception in that market . The team there is fits incredibly well within seacoast . The cultures are very much aligned , very customer focused .
Speaker #4: We've been really excited to have the team join us . It's it's gone incredibly smooth . You know , having done a lot of these through my career .
Speaker #4: This one's a good one . And it's going exceptionally well . You know as we look at that market , you know , as you mentioned , the the most important thing we can do is have a very clean , smooth , easy conversion for the village Villages customers , citizens first customers and that's what we're focused on .
Speaker #4: That'll happen about July next year . We gave ourselves plenty of time to do lots of data integrity work , lots of mock conversions , lots of work .
Speaker #4: There's a whole team here that is , you know , heads down on that . It is the most important thing we can do is we come into that year and that the quality of that customer franchise we're acquiring is tremendous .
Charles Shaffer: There's a whole team here that is heads down on that. It is the most important thing we can do as we come into that year. The quality of that customer franchise we're acquiring is tremendous. We want to make it incredibly smooth for them, incredibly smooth for the Villages community in general, and highly focused on that. We're also going to be doing lots of coffee meetings and training for the customer. I mean, we have all kinds of things, plans, events, cocktail parties, everything you can imagine. We're going to be deeply involved in the Villages and the growth of the Villages. We want to get this one right because we have Villages 2 coming that we're going to build alongside with. A lot of upside to getting that right, a lot of benefit in the coming years.
Speaker #4: And so we want to make it incredibly smooth for them , incredibly smooth for the the villages community in general . And highly focused on that .
Speaker #4: We're also doing going to be doing lots of coffee meetings and , you know , training for the customer . I mean , we have all kinds of things plans , events , cocktail parties , everything you can imagine .
Speaker #4: So we're going to be deeply involved in the villages and the growth of the villages . And then , you know , we want to get this one right , because we have villages to come and that we're going to build alongside with .
Speaker #4: So a lot of upside to getting that right , a lot of benefit in the coming years . We think we can build , you know , a bank is twice the size of the bank there over time as it gets built in that market .
Charles Shaffer: We think we can build a bank that's twice the size of the bank there over time as it gets built in that market. We're super excited on it. That's step one. Step two will be building around that franchise in terms of wealth management. We've got a wealth team built at this point. We've acquired a full team up in that market that is now calling in that market, and we're starting to already win business, particularly on the trust side. We're off to the races up there. Things are going incredibly well. I think the balance sheet came in a little bigger than we expected. Deposits are growing, and we're probably outperforming a bit of our model at this point.
Speaker #4: And so we're super excited on it . That's step one . Step two will be building around that franchise in terms of wealth management .
Speaker #4: We've got a wealth team built at this point . We've acquired a full team up in that market that is now calling in that market , and we're starting to already win business , particularly on the trust side .
Speaker #4: So we're off to the races up there . Things are going incredibly well . I think the balance sheet came in a little bigger than we expected .
Speaker #4: The deposits are growing and we're probably outperforming a bit of our model at this point .
Speaker #8: That's terrific . And then , you know , on the other side too , I mean , we touched on it a bit , but you know , the pipelines continuing to grow .
[Analyst 2]: That's terrific. On the other side, we touched on it a bit, but the pipelines continue to grow. It's at record levels. How much of that is just, A, obviously, Florida is a really strong market. How much of that is just the market backdrop versus maybe more confidence from your clients to start investing in maybe down rates? Some projects met my pencil today that didn't before versus just, like you talked about, market share gains from your new hires. How's the complexion of the pipeline today, both by segment and geography? Kind of curious where you're seeing the most opportunity.
Speaker #8: It's at record levels . How much of that is just a I mean , obviously Florida is a really strong market . You know , how much of that is , you know , just the market backdrop versus maybe more confidence from your clients to start investing and maybe down rates .
Speaker #8: Some projects might pencil today that didn't before versus just , you know , like you talked about market share gains from you , new hires and then just how's the complexion of the pipeline today ?
Speaker #8: You know, just both by segment and geography. Just kind of curious where you're seeing the most opportunity.
Speaker #4: Yeah, the market is strong, and demand is strong. We're seeing broad-based demand. CNI and CRE pipelines are a mix of about 50% CRE and 50% CNI.
Charles Shaffer: Yeah. Market's strong. Demand is strong. We're seeing sort of broad-based demand, CNI and CRE. The pipeline's a mix of about 50/50 CRE and CNI. It's pretty wide. It's pretty broad. The industries are pretty wide, too. Kind of across the board, market demand remains really good. It really hasn't slowed down as a result of tariffs or anything. We're still seeing quite a bit of demand. We've seen no real impact in terms of demand as a result of that. We're feeling very good about market demand. Probably more importantly, what we're seeing a significant amount on is offloading customers out of larger bank balance sheets onto our balance sheet as we continue to have the banking team mature into the investments we made a number of years ago. I'll just reiterate what I said to Will's question.
Speaker #4: So it's it's pretty wide . It's pretty broad . The industries are pretty wide too . So kind of across the board market demand remains really good .
Speaker #4: It really hasn't slowed down as a result of tariffs or anything. We're still seeing quite a bit of demand. We've seen no real impact in terms of demand as a result of that.
Speaker #4: So we're feeling very good about market demand . And then probably more importantly , what we're seeing a significant amount on is , you offloading customers out of larger bank balance sheets onto our balance sheet as we continue to , you know , have the banking team mature into the investments we made a number of years ago .
Speaker #4: And I'll just reiterate what I said to Will's question . You know , a lot of those loans were locked in at very low rates .
Charles Shaffer: A lot of those loans were locked in at very low rates. The customers are coming up on their terms. They've got to refinance. Rather than going back to the bank they're at, they're following their banker to Seacoast. That is very exciting as we move forward. Combining that with the liquidity we're bolting on through the M&A is incredibly accretive in the years to come.
Speaker #4: Customers are coming up on their terms . They've got a refinance . And rather than going back to the bank , they're at , they're following their banker to seacoast and that is very exciting .
Speaker #4: As we move forward , combining that with the liquidity , we're voting on through the M&A is incredibly accretive in the years to come .
Speaker #8: Okay . And then maybe just stepping back kind of a higher level question . I mean , you've had pretty massive growth over the past several years .
[Analyst 2]: Okay. Maybe just stepping back, kind of a higher-level question. You've had pretty massive growth over the past several years. We went from, I was looking back, at the start of 2020, you were a $7 billion asset bank. Today, you're north of $21 billion in just five years, organically and through the inclusion of several community banks. Given that massive growth, as you step back and look where you stand today and you think about how you are going to compete maybe against more of some of your larger brethren, is there anything that you're missing or that you need to invest in, especially as you continue to move upstream, whether that be technology, infrastructure, product offerings? Just kind of curious what you're working on today and being a much larger institution, if there's anything that you need to add or where you're looking to invest.
Speaker #8: We went from I was looking back , you know , at the start of 2020 , you were 7 billion asset bank . Today you're north of 21 billion in just five years .
Speaker #8: You know organically and through the inclusion of several community banks that , you know , just given that massive growth , right , as you step back and look where you stand today and , you know , you think about how are you going to compete , maybe against more some against more , some of your larger brethren , you know , curious .
Speaker #8: Is there anything that you're missing or that you need to invest in , especially as you continue to move upstream , whether that be , you know , technology , infrastructure , product offerings ?
Speaker #8: Just kind of curious what you're working on today and being a much larger institution . If there's anything that you need to add or where you're looking to invest .
Speaker #4: You know , I'd say the the , the good thing or the smart thing we did over the last few years is we invested heavily in building out our line two , line three risk function .
Charles Shaffer: I would say the good thing or the smart thing we did over the last few years is we invested heavily in building out our line two, line three risk function. We have a very strong function that supports being a larger midsize bank. We continued to make investments over that period of time. I feel very confident in where we stand in regard to our overall enterprise risk management, our governance, the structure of the organization. We've also made a lot of investments on the technology side, particularly customer-facing technology. There's probably some things we need to continue to build on, particularly around our commercial treasury stack that we remain focused on here as we move forward. We're working on getting Zelle for Business inside the company. That's an important technology product that's important to our small business customers in particular.
Speaker #4: So we have a very strong ARM function that supports being a larger mid-size bank . We continue to make investments over that period of time .
Speaker #4: I feel very confident in where we stand in regard to our overall enterprise risk management, our governance, and the structure of the organization.
Speaker #4: We've also made a lot of investments in the technology side , particularly customer facing technology . There's probably some things we need to continue to build on , particularly around our commercial treasury stack , that we remain focused on here as we move forward .
Speaker #4: You know , we're working on getting Zelle for business inside the company . That's an important technology product that's important to our small business customers and particular .
Speaker #4: So there are things we're bolting on , David , that will be doing in the coming years . But I think at this point , the good news around our size is that 21 billion , we have the ability to compete up market in a meaningful way .
Charles Shaffer: There are things we're bolting on, David, that we'll be doing in the coming years. I think at this point, the good news around our size is at $21 billion, we have the ability to compete on market in a meaningful way. We've brought in large regional bank quality talent into the organization, combine that with a really high-quality treasury management team. You see that pulling through in our TM fees. We're letting them go to work and have the ability, the capacity now to go out and compete on market and win business. I largely feel like we're there. There's investments we need to make. We'll continue to make. There's investments we need to make to continue to harden and build our IT infrastructure and other things as we get larger. I think we've got that all in the plan.
Speaker #4: So we've brought in , you know , large regional bank quality talent into the organization . Combine that with , you know , a really high quality treasury management team .
Speaker #4: And you see that pulling through. Our team fees, and then we're letting them go to work and have the ability to capacity now to go out and compete in the market.
Speaker #4: And win business . And so I largely feel like we're there . There's investments we need to make . We'll continue to make there's investments we need to make to continue to harden and build our IT infrastructure and other things .
Speaker #4: Is as we get larger . But I think we've got that all in the plan . I think we've managed that and paste that appropriately and feel very good about our investments in the coming year and our earnings profile .
Charles Shaffer: I think we've managed that and paced that appropriately and feel very good about our investments in the coming year and our earnings profile.
Speaker #8: Terrific. Thanks, everybody. Exciting times for you all.
[Analyst 2]: Terrific. Thanks, everybody. Exciting times for you all.
Speaker #4: Thank you Dave .
Charles Shaffer: Thank you, David.
Speaker #3: Next question comes from the line of Russell Gunther with Stephens Inc. . Your line is open .
Operator: Next question comes from the line of Russell Elliott Gunther with Stephens Inc. Your line is open.
Speaker #9: Hi. Good morning, guys.
[Analyst 3]: Hi. Good morning, guys.
Speaker #4: Hey , Russell .
Charles Shaffer: Hey, Russell.
Speaker #7: Morning .
[Analyst 3]: Morning. Wanted to start on the margin discussion. I think the quarter end for this quarter came in a little bit lighter than this guide. Could you walk us through the glide path that gets us from Q3 to that 3.45%? Maybe touch on where the September NIM shook out if you could. What does this consider for continued excess liquidity deployment going forward?
Speaker #9: Wanted to start on the margin discussion . So I think the core for this quarter came in a little lighter than this guide .
Speaker #9: Could you walk us through the glide path that gets us from $3 million to that $345 million? Maybe touch on where the September NIM shook out.
Speaker #9: If you could . And then what does this consider for continued excess liquidity deployment going forward ?
Speaker #7: Hey Russell , this is Michael . I'll take that one . Yeah . So we we've been talking about a 3.45 Nim in the fourth quarter for a while .
Charles Shaffer: Hey, Russell. This is Michael. I'll take that one. Yeah. We've been talking about a 3.45% NIM in the fourth quarter for a while. We were kind of unsure of the date of the close of the legal transaction with The Villages Bank Corporation. That came in a little earlier, so that's certainly beneficial. I mentioned the wholesale funding that we'll pay off here in early November. That'll benefit the margin as well into the fourth quarter. I think from there, just the completion of the securities restructure in the fourth quarter will be the other main driver. We're down in cost of funds. Our September cost of funds was about 1.92% versus 1.96% reported for the quarter, so we're already benefiting from the rate cut that happened in September.
Speaker #7: We were, you know, kind of unsure of the date of the close of the legal transaction with villages that came in a little earlier.
Speaker #7: So that's certainly beneficial . I mentioned the wholesale funding that we'll pay off here in November , early November . That will benefit the margin as well into the fourth quarter .
Speaker #7: And then I think from there , just the completion of the securities restructure in the fourth quarter will be the other main driver .
Speaker #7: We're down in cost of funds. Our September cost of funds was about 192 versus 196 reported for the quarter. So we're already benefiting from the rate cut that happened in September.
Speaker #7: And then we'll add on the low cost deposits from villages as well . That we talked about , you know , would add roughly about ten basis points in total to the fourth quarter cost of funds improvement .
Charles Shaffer: We'll add on the low-cost deposits from The Villages Bank Corporation as well that we had talked about, which would add roughly about 10 basis points in total to the fourth quarter cost of funds improvement and therefore NIM. I think we're right on schedule. Obviously, if we get a couple rate cuts here, if we get October and December, that's beneficial to our slightly liability-sensitive balance sheet. Those give you some of the moving pieces as you move through the fourth quarter. We still expect expanding margin into 2026 with the securities reposition behind us and the low-cost deposit franchises that we've acquired. Maybe one other piece there as you look out, while we're not giving 2026 guidance yet. We do expect the deposit beta to come down a little bit.
Speaker #7: And therefore Nim . So I think we're we're right on schedule . Obviously , if we get a couple rate cuts here , if we get October and December , that's beneficial to our slightly liability sensitive balance sheet .
Speaker #7: So those give you some of the moving pieces. I think as you move through the fourth quarter, and you know, we still expect expanding margin.
Speaker #7: Obviously into 2026 with the securities reposition behind us and the low cost deposit franchises that we've acquired , maybe one other piece there .
Speaker #7: As you look out while we're not giving 2026 guidance yet , we do expect the deposit beta to to come down a little bit .
Speaker #7: We've we've really outperformed there at about a 48% deposit beta through these first 100 basis points of cuts through late last year . But we , you know , would expect with a lower cost deposit , franchise , maybe we're closer to 30% beta going forward .
Charles Shaffer: We've really outperformed there at about a 48% deposit beta through these first 100 basis points of cuts through late last year. We would expect with the lower-cost deposit franchises maybe we're closer to 30% beta going forward. Obviously, we hoped to outperform that, but that's probably where we would model going forward.
Speaker #7: Obviously we hoped outperform that . But that's probably where we would model going forward .
Speaker #9: Okay . That's super helpful Michael . Thank you . And then maybe just a reminder in terms of what's left to do on the securities restructure , where that sort of pro forma securities to average earning asset contribution would likely shake out in four .
[Analyst 3]: Okay. No, that's super helpful, Michael. Thank you. Maybe just a reminder in terms of what's left to do on the securities restructure, where that sort of pro forma securities to average earning asset contribution would likely shake out in Q4, and then the type of progress you would expect to make toward ratcheting that down over 2026.
Speaker #9: Q and then the type of progress you would expect to make toward ratcheting that down over 26 ?
Speaker #7: Sure , Russell . So , you know , high level you know , we closed the deal October 1st . And we we began restructuring the securities book at that time .
Charles Shaffer: Sure, Russell. High level, we closed the deal October 1, and we began restructuring the securities book at that time. We've made a lot of great progress there, and we'll continue to do so throughout the fourth quarter with a focus on best execution versus speed to completion. We're in good shape there and no real changes versus our initial expectations. The one positive is that original modeling of the deal, we recall that in April of this year, the tariff tantrum was going on and credit spreads were much wider and rates were higher at that point in time as well. As those have compressed to deal close, we would expect a lower AOCI than what we originally anticipated. We should have a little higher book value in capital, which we hope will make the deal less dilutive.
Speaker #7: We've made a lot of great progress there , and we'll continue to do so throughout the fourth quarter with a focus on best execution versus speed to completion .
Speaker #7: But we're in good shape there, and no real changes versus our initial expectations. You know, the one positive is that the original modeling of the deal, or recall that in April of this year, the tariff tantrum was going on.
Speaker #7: And credit spreads were much wider . And rates were higher . At that point in time as well . And so as those have compressed to deal close , we would expect a lower aoci than what we originally anticipated .
Speaker #7: So we should have a little higher book value in capital , which we hope will make the deal less dilutive . And then , you know , getting more detailed into kind of the the timing of the repositioning of the balance sheet .
Charles Shaffer: Getting more detailed into the timing of the repositioning of the balance sheet in total in the fourth quarter, we expect the loan-to-deposit ratio, as Tracey mentioned, to be below 75%. As we grow throughout 2026, we would expect some positive remix. If you did just a high single-digit loan growth number for next year, that would be about $300 million more than a low to mid-single-digit deposit growth number. That gives you an order of magnitude on what could happen next year. Obviously, with higher loan growth, we might remix faster.
Speaker #7: In total , in the fourth quarter . You know , we expect the loan to deposit ratio as Tracy mentioned , to be below 75% .
Speaker #7: But as we grow throughout 2026 , we would expect some positive remix . Again , if you did a just a high single digit loan growth number for next year , that would be about $300 million more than kind of a low to mid single digit deposit growth number .
Speaker #7: So that kind of gives you an order of magnitude on what could happen next year . Obviously with higher loan growth , we might remix faster .
Speaker #9: Yep . Okay . Absolutely . Very helpful Michael . Thank you . And then just last one for me . Appreciate the look at where for Q expenses could shake out as we think about the pro forma franchise .
[Analyst 3]: Yep. Okay. Absolutely. Very helpful, Michael. Thank you. Just last one for me. I appreciate the look at where 4Q expenses could shake out. As we think about the pro forma franchise, maybe bigger picture, how should we contextualize sort of a decent core growth rate for Seacoast going forward?
Speaker #9: Maybe a bigger picture: how should we contextualize a decent core growth rate for Seacoast going forward?
Speaker #7: Hey Russell , this is Michael again . You know , I think what we've said historically and continue to expect to be the case on just the organic side would be , you know , something in pace and in alignment with inflation , you know , kind of a three ish , 3 to 4% growth rate on the core underlying .
Charles Shaffer: Hey, Russell. This is Michael again. I think what we've said historically and continue to expect to be the case on just the organic side would be something in pace and in alignment with inflation, kind of a 3%, 3 to 4% growth rate on the core underlying. It depends on the success and sort of banker hires from there. As Chuck mentioned, we do expect some merger disruption across our footprint and the Southeast broadly. We may see a better appetite and a better opportunity to invest. As Chuck's mentioned before, we've had a lot of pipeline of opportunities to hire bankers, but we've wanted to balance that hiring with profitability delivery to shareholders. I think you'll see, obviously, into 2026, we're going to have strong profitability delivery to shareholders.
Speaker #7: And then , you know , it depends on the success and sort of banker hires from there . As Chuck mentioned , we do expect some merger disruption across our footprint .
Speaker #7: And the southeast broadly . So , you know , we may see a better appetite and a better opportunity to invest . As Chuck mentioned before , we've we've had a lot of pipeline of opportunities to hire bankers , but we've wanted to balance that hiring with profitability delivery to shareholders .
Speaker #7: I think you'll see obviously into 26 , we're going to have strong profitability delivery to shareholders . So it gives us more capacity and ability to continue to expand and hire bankers and expand our commercial banking franchise .
Charles Shaffer: It gives us more capacity and ability to continue to expand and hire bankers and expand our commercial banking franchise. I think those are kind of the things you want to think about. We're not giving 2026 guidance yet. We'll give more color on that in January.
Speaker #7: So I think , you know , those are kind of the things you want to think about . We're not giving 2026 guidance yet .
Speaker #7: We'll give more color on that in January .
Speaker #9: Understood . Okay . Very helpful . Thank you guys for taking all my questions .
[Analyst 3]: Understood. Okay. Very helpful. Thank you, guys, for taking all my questions.
Speaker #4: Thank you Russell .
Charles Shaffer: Thank you, Russell.
Speaker #3: Next question comes from the line of Stephen Scouten with Piper Sandler . Your line is open .
Operator: Next question comes from the line of Stephen Scoutin with Piper Sandler. Your line is open.
Speaker #10: Yeah . Good morning . Thanks . So appreciating you're not giving 2026 guide at all . But in the same vein , you did give like a 2026 kind of high level run rate number in the , you know , village slide deck .
[Analyst 2]: Good morning. Thanks. Appreciating you're not giving 2026 guide at all, but in the same vein, you did give like a 2026 kind of high-level run rate number in the Villages slide deck. Do you feel like that $250 million number you kind of disclosed there is probably on pace and maybe it even sounds like potentially ahead of schedule based on the deal closing sooner, better loan growth, and those sort of things? Is that kind of a fair way to think about expectations versus that disclosure?
Speaker #10: It . Do you feel like that 250 number you kind of disclosed there is probably on pace . And maybe it even sounds like potentially ahead of schedule based on the deal closing sooner , better loan growth and those sort of things .
Speaker #10: Is that is that kind of a fair way to think about expectations versus that disclosure ?
Speaker #7: Yeah , Stephen , this is Michael . I think we feel really comfortable with what we laid out originally . I think what what you may see is , again , given kind of the rate movement , we may see better book value or less dilution than we initially expected , but we're still finalizing those rate marks .
Charles Shaffer: Yeah, Stephen. This is Michael. I think we feel really comfortable with what we laid out originally. I think what you may see is, again, given kind of the rate movement, we may see better book value or less dilution than we initially expected. We're still finalizing those rate marks, obviously, and everything right now. As we currently model, that would be the biggest change on the earnings front. We still feel really comfortable with where we're headed and what we have initially laid out. Some variability with how many rate cuts we get and what you all are modeling, but we feel really comfortable with the 246 number.
Speaker #7: Obviously . And everything right now . But that you know , as we currently model , that would be the biggest change on the earnings front .
Speaker #7: We still feel really comfortable with where we're headed and what we initially laid out. There is obviously some variability with how many rate cuts we get and what you all are modeling.
Speaker #7: But we feel really comfortable with the 2.46 number .
Speaker #4: Yeah . If you go back to that deck . Stephen , that , you know , just to reiterate with some confidence , that's where we expect to land .
Michael Young: Yeah, if you go back to that deck, Stephen, just to reiterate with some confidence, that's where we expect to land.
Speaker #10: Fantastic . Perfect . And then just thinking about the balance sheet remix path over time , you guys have highlighted a couple times this , you know , 75% ish loan deposit ratio .
[Analyst 2]: Fantastic. Perfect. Just thinking about the balance sheet remix path over time, you guys have highlighted a couple of times this 75% loan-to-deposit ratio. There is a ton of potential to remix over time. Does that lead you to pursue any different paths? I think the answer is no based on knowing you guys over time. Do you think about any loan portfolio purchases? You have always had a really low CRE exposure, with this Atlanta push. Do you think about maybe adding more CRE than you have in the past? Any changes to strategy around loan growth, given all the dry powder you have to put to work?
Speaker #10: So a ton of potential to remix over time . Does that lead you to pursue any any different paths ? I mean , I think the answer is no based on knowing you guys over time , but do you think about any loan portfolio purchases or .
Speaker #10: I mean , you've always had a really low CRE exposure , you know , with this Atlanta push , do you think about maybe adding more CRE than you have in the past , just kind of any changes to strategy around loan growth , given all the dry powder you have to put to work ?
Speaker #4: I think a high single digit guide still appropriate . Stephen . You know , we'll be disciplined and focus on granularity . Focus on diversity and be thoughtful over time .
Charles Shaffer: I think a high single-digit guide is still appropriate. Stephen, you know, we'll be disciplined and focus on granularity, focus on diversity, and be thoughtful over time. Certainly, we'll have a lot of capacity to lend, but the way I describe it is we'll do it prudently and thoughtfully over the coming years.
Speaker #4: Certainly, we'll have a lot of capacity to lend. But the way I describe it is we'll do it prudently and thoughtfully over the coming years.
Speaker #10: Okay . Fair enough . And then just lastly , for me , on the fee side of things like spa . S.p.A . Had a particularly strong quarter .
[Analyst 2]: Okay. Fair enough. Lastly for me, on the fee side of things, it looks like SBA had a particularly strong quarter. Were any of the hires in the recent past within that division? Is that something that we could see like sustainable strength in, or was that more episodic in nature?
Speaker #10: Were any of the hires in the recent past within that division ? Is that something that we could see like sustainable strength in , or was that more episodic in nature .
Speaker #4: Within the wealth management division , you focus on . said SBA .
Charles Shaffer: Within the wealth management division, you focused on?
[Analyst 2]: You said SBA.
Speaker #10: SBA , I .
Charles Shaffer: Oh, SPA.
[Analyst 2]: Oh, SBA, I think, in particular.
Speaker #4: Sorry , no , we've not had anything there , just volumes have come back . Teams remain focused , but it's the same group we've been operating with for a couple of years .
Charles Shaffer: No, we've not added anything there. Just the volumes have come back. Teams remain focused, but it's the same group we've been operating with for a couple of years.
Speaker #7: Yeah , gain on sale spreads there Steven , have gotten a little bit better , which is probably one of the one of the drivers in that line item this quarter .
Michael Young: Yeah. Gain on sales spreads there, Stephen, have gotten a little bit better, which is probably one of the drivers in that line item this quarter.
Speaker #10: Okay , great . And I guess the last thing is the conversion . I think you said is set for maybe third quarter 26 on villages .
[Analyst 2]: Okay. Great. I actually thought the last thing is the conversion, I think you said, is set for maybe third quarter 2026 on Villages. Is that where we would expect to see more of the lion's share of the cost saves come out at that point in time?
Speaker #10: So is that where we would expect to see more of the lion's share of the cost savings come out at that point in time ?
Speaker #5: That's right . The conversion is currently planned for early in the third quarter of 26 . So looking still to achieve all those cost savings in the second half of 26 .
Operator: That's right. The conversion is currently planned for early in the third quarter of 2026. Looking still to achieve all those cost saves in the second half of 2026.
Speaker #10: Fantastic . Thanks so much for all the color . Great , great quarter .
[Analyst 2]: Fantastic. Thanks so much for all the color. Great, great quarter.
Speaker #4: Thanks , Steve .
Michael Young: Thanks, Steve.
Speaker #3: Next question comes from the line of David Bishop with Group . Your line is open .
Operator: Next question comes from the line of David Bishop with Hofdy Group. Your line is open.
Speaker #11: Hey good morning guys .
Charles Shaffer: Good morning, guys.
Speaker #4: Hey David .
Michael Young: Hey, David.
Speaker #11: Hey quick question Chuck . Maybe comment what you're seeing out there in the market in terms of loan pricing and spreads . I know it's still pretty competitive with credit holding in fairly nicely .
Charles Shaffer: Hey. Quick question. Chuck, maybe comment on what you're seeing out there in the market in terms of loan pricing and spreads. I know it's still pretty competitive with credit holding in fairly nicely. Just curious what you're seeing on credit spread fronts. Thanks.
Speaker #11: Just curious what you're seeing on credit spreads front . Thanks .
Speaker #4: It's really low . It's it's definitely gotten hyper competitive . You know , I would say we're cautious around that being thoughtful . But yeah credit spreads are incredibly tight .
Michael Young: It's really low. It's definitely gotten hyper-competitive. I would say we're cautious around that, being thoughtful. Yeah, credit spreads are incredibly tight, particularly for high-quality, stabilized commercial real estate and really high-quality, strong cash-flowing operating companies. It's remarkably tight. Everybody's back in the game in a big way. We saw after 2023, some of the banks pulled back. Now it feels like everybody's back in. Credit spreads are super tight. We're navigating that carefully, picking our spots carefully. Credit spreads are remarkably low across the board, particularly in low-risk areas, low risk where we're most involved.
Speaker #4: Particularly for high quality stabilized commercial real estate and really high quality strong cash flowing operating companies . It's remarkably tight and its everybody's back in the game in a big way .
Speaker #4: You know , we saw after 23 some of the banks pulled back . Now it feels like everybody's back in . And so credit spreads are super tight .
Speaker #4: We're navigating that carefully picking our spots carefully . But it is . Credit spreads are remarkably low across the across the board .
Speaker #7: Particularly in low risk areas . Low risk areas . We're most involved .
Speaker #11: Got it . Then you'd mentioned the the opportunity for the villages to build out . Just remind us the timeline and maybe I don't know if you ring fenced the deposit or loan opportunity there .
Charles Shaffer: Got it. You'd mentioned the opportunity for The Villages 2 build-out. Just remind us of the timeline and maybe, I don't know if you'd ring-fence the deposit or loan opportunity there. Just curious, just some more details around The Villages 2. Thanks.
Speaker #11: Just curious . Just some more details around the villages too . Thanks .
Speaker #4: Yeah, we think villages will probably build out over the next 10 to 15 years. It'll take some time. They've got Michael.
Michael Young: Yeah. We think Villages 2 probably builds out over the next 10 to 15 years. It'll take some time. They've got, Michael, correct me if I'm wrong, I think two town centers open at this point. We are opening our branch in that town center now. I would expect, I think they, largely, if you think about it this way, they grew a $4 billion bank in Villages 1 with some inflation just on money in general. You could probably grow a $4 to $6 billion bank in Villages 2 over the next 10 years.
Speaker #4: Correct me if I'm wrong . I think two town centers open at this point . We are opening our branch in that town center now .
Speaker #4: Currently . So , you know , I would expect you know , I think they , you know , largely if you think about it this way , they grew a $4 billion bank in villages , one with some inflation just on money in general .
Speaker #4: You know , you could probably grow 4 to $6 billion bank in villages , two over the next ten years .
Speaker #11: Got that final question , Chuck . It doesn't sound like at this point , but obviously there's a lot in the media and papers about the impact of rising insurance costs in Florida .
Charles Shaffer: Got it. Final question, Chuck. It doesn't sound like it to this point, but obviously, there's a lot in the media and papers about the impact of rising insurance costs in Florida. Are you seeing any sort of impact in that impacting shovels in the ground or our behavior? Thanks.
Speaker #11: Are you seeing any sort of impact that is affecting shovels in the ground or our behavior? Thanks.
Speaker #4: Not really . It's noise . It's complicated . We actually are seeing insurance premiums stabilize . If not coming back down at this point .
Michael Young: Not really. It's noise. It's complicated. We actually are seeing insurance premiums stabilize, if not coming back down at this point. We've had premiums get to the point where it brought a bunch of new entrants back into the market, as well as there was some tort reform that went on about 18 months ago that's pulling through at this point as well. We've seen a fair amount of startup capital come back into the market to provide insurance buy-down policies from the state of Florida citizens' windpool. I do feel like insurance is still expensive, I mean, on a relative basis for sure, but it's stable. In some cases, we're seeing it come down. It's still challenging for older properties. That's going to be your most expensive spot. If you're buying or building a brand new home, it's actually really inexpensive at this point.
Speaker #4: We've had premiums got to the point where , you know , brought a bunch of new entrants back into the market as well as there was some tort reform that went on about 18 months ago that that's pulling through at this point as well .
Speaker #4: So we've seen a fair amount of start up capital come back into the market to provide insurance . Buy down policies from the state of Florida citizens .
Speaker #4: Wind pool . And so I do feel like insurance is is still expensive . I mean , on a relative basis for sure , but it's stable .
Speaker #4: And in some cases we're seeing it come down . You know , still challenging for older properties to , you know , that's going to be your most expensive spot .
Speaker #4: But if you're buying or building a brand new home, it's actually really inexpensive at this point. So it's kind of bifurcated inside the marketplace.
Michael Young: It's kind of bifurcated inside the marketplace, but it isn't near as bad as it was, call it, 24 months ago.
Speaker #4: But it isn't near as bad as it was . Call it 24 months ago .
Speaker #11: Got it . Appreciate the color .
Charles Shaffer: Got it. Appreciate the color.
Speaker #7: All right .
Michael Young: All right.
Speaker #3: That concludes the question-and-answer session. I would like to turn the call back over to Mr. Charles Shaffer for closing remarks.
Operator: That concludes the question and answer session. I would like to turn the call back over to Mr. Charles Shaffer for closing remarks.
Speaker #4: Okay . Thank you all for joining us this morning . Just want to reiterate my thanks , appreciation to our seacoast team , proud of our company .
[Analyst 2]: Okay. Thank you all for joining us this morning. I just want to reiterate my thanks, appreciation to the Seacoast team. Proud of our company. We produced an amazing quarter. I think our outlook is really good and just super, super excited to be where we are. Thanks to our team for everything they've done. Thanks to our shareholders for supporting us. Thank you all for joining us on the call. That'll wrap us up, operator. Thank you.
Speaker #4: We produced an amazing quarter . I think our outlook is really good and just super , super excited to be where we are .
Speaker #4: So thanks . Thanks to our team for everything they've done . Thanks to our shareholders for supporting us . And thank you all for joining this call .
Speaker #4: That'll wrap us up. Operator, thank you.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.