Q1 2026 Seacoast Banking Corporation of Florida Earnings Call

April 29, 2026

Operator 2: Welcome to Seacoast Banking Corporation's Q1 2026 Earnings Conference Call. My name is Kate, I will be your operator. Before we begin, I have been asked to direct your attention to the statement at the end of the company's press release regarding forward-looking statements. Seacoast will be discussing issues that constitute forward-looking statements within the meaning of the Securities Exchange Act, 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 M. Shaffer, Chairman and CEO of Seacoast Bank. Mr. Shaffer, you may begin.

Operator: Welcome to Seacoast Banking Corporation's Q1 2026 Earnings Conference Call. My name is Kate, I will be your operator. Before we begin, I have been asked to direct your attention to the statement at the end of the company's press release regarding forward-looking statements. Seacoast will be discussing issues that constitute forward-looking statements within the meaning of the Securities Exchange Act, 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 M. Shaffer, Chairman and CEO of Seacoast Bank. Mr. Shaffer, you may begin.

Speaker #2: Seacoast will be discussing issues that constitute forward-looking statements within the meaning of the Securities and Exchange Act. And it's comments today are intended to be covered within the meaning of that act.

Speaker #2: 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.

Speaker #2: Okay. Thank you, Kate. And good morning, everyone. And thank you for joining us. As we move through today's presentation, we'll reference our first quarter 2026 earnings slide deck, which is available on our website, seacoastbanking.com.

Charles M. Shaffer: Okay. Thank you, Kate, and good morning, everyone, and thank you for joining us. As we move through today's presentation, we'll reference our Q1 2026 earnings slide deck, which is available on our website, seacoastbanking.com. Joining me today is Tracy Dexter, our Chief Financial Officer, Michael Young, our Chief Strategy Officer, and James Stallings, our Chief Credit Officer. The Seacoast team delivered another great quarter, highlighted by robust deposit growth, particularly in non-interest-bearing deposits, meaningful expansion in the net interest margin, and solid progress towards the financial guidance we introduced last quarter. Commercial loan production momentum remains strong, up 35% year over year. As expected, the Q1 loan growth was seasonally softer and further impacted by elevated payoffs.

Speaker #2: Joining me today is Tracy Dexter, our Chief Financial Officer. Michael Young, our Chief Strategy Officer. And James Stallings, our Chief Credit Officer. The Seacoast team delivered another great quarter, highlighted by robust deposit growth, particularly in non-expiring deposits, meaningful expansion in the net interest margin, and solid progress towards the financial guidance we introduced last quarter.

Speaker #2: Commercial loan production momentum remains strong, up 35% year over year, and as expected, the first quarter loan growth was seasonally softer and further impacted by elevated payoffs.

Charles M. Shaffer: Importantly, our loan pipeline remains strong, and we expect payoffs to moderate in the coming quarters, supporting a return to stronger loan growth as the year progresses. Asset quality remains exceptional with limited charge-offs, no change in criticized and classified assets from the prior quarter, and a modest uptick in non-accrual loans. Non-interest income continued to perform well, driven by strength across wealth management, insurance, treasury, and our mortgage businesses. Our expansion in the Villages is already delivering results, which with solid mortgage production and growing demand for wealth management services. Expense discipline remained excellent this quarter. Overhead was well controlled. The adjusted efficiency ratio was 55% and the ratio of adjusted non-interest expense to tangible assets remained at near 2.1% even as we continue to invest deliberately in growth.

Speaker #2: Importantly, our loan pipeline remains strong, and we expect payoffs to moderate in the coming quarters, supporting a return to stronger loan growth as the year progresses.

Speaker #2: Asset quality remains exceptional, with limited charge-offs, no change in criticized and classified assets from the prior quarter, and a modest uptick in non-accrual loans.

Speaker #2: Non-interest income continued to perform well, driven by stringth across wealth management, insurance, treasury, and our mortgage businesses, and our expansion in the villages has already delivering results.

Speaker #2: With solid mortgage production, and growing demand for wealth management services. Expense discipline remained excellent this quarter. Overhead was well controlled. The adjusted efficiency ratio was 55%, and the ratio of adjusted non-interest expense to tangible assets remained at near 2.1%, even as we continued to invest deliberately in growth.

Speaker #2: Our strategy to drive improved shareholder returns remains firmly on track, excluding merger-related costs associated with The Villages' Bank Corporation. Our return profile continues to strengthen.

Charles M. Shaffer: Our strategy to drive improved shareholder returns remains firmly on track. Excluding merger-related costs associated with Villages Bancorporation, Inc., our return profile continues to strengthen. For the quarter, adjusted return on assets was 1.31%, and the adjusted return on tangible equity was 16.3%. These results underscore the strong earnings power of the combined franchise. Looking ahead, we remain confident in our 2026 outlook. As outlined in the slide deck, we continue to expect full year earnings per share in a range of $2.48 to 2.52 despite two less rate cuts. Finally, capital and liquidity remain exceptionally strong. We continue to operate with fortress balance sheet and remain one of the strongest banks in the industry. With that, I'll turn it over to Tracey Dexter to walk through our financial results.

Speaker #2: For the quarter, adjusted return on assets was 1.31%, and the adjusted return on tangible equity was 16.3%. These results underscore the strong earnings power of the combined franchise.

Speaker #2: And looking ahead, we remain confident in our 2026 outlook, as outlined in the slide deck. We continue to expect full-year earnings per share in a range of $248 to $252, despite two less rate cuts.

Speaker #2: And finally, capital and liquidity remain exceptionally strong. We continue to operate with a fortress balance sheet and remain one of the strongest banks in the industry.

Speaker #2: With that, I'll turn it over to Tracy to walk through our financial results.

Speaker #3: Thank you, Chuck. Good morning, everyone. Beginning with slide four and first quarter performance highlights. Seacoast reported net income of $31.9 million, or $0.29 per share, in the first quarter.

Tracey L. Dexter: Thank you, Chuck. Good morning, everyone. Beginning with slide 4 and Q1 performance highlights. Seacoast's reported net income of $31.9 million or $0.29 per share in Q1. Reported results include a $39.5 million pre-tax loss related to the strategic repositioning of a portion of our available-for-sale securities portfolio, which we executed in January. On an adjusted basis, net income was $67.8 million or $0.62 per share, increasing 42% from the prior quarter and 111% year over year. These results reflect meaningful improvement in our core earnings power, driven by expanding net interest income, disciplined balance sheet management, and continued execution on organic growth initiatives. During the quarter, we delivered 7% annualized organic deposit growth, including 29% annualized growth in non-interest-bearing demand deposits.

Speaker #3: Reported results include a $39.5 million pre-tax loss related to the strategic repositioning of a portion of our available-for-sale securities portfolio, which we executed in January.

Speaker #3: On an adjusted basis, net income was $67.8 million or 62 cents per share, increasing 42% from the prior quarter and 111% year over year.

Speaker #3: These results reflect meaningful improvement in our core earnings power, driven by expanding net interest income, discipline balance sheet management, and continued execution on organic growth initiatives.

Speaker #3: During the quarter, we delivered 7% annualized organic deposit growth, including 29% annualized growth in non-interest-bearing demand deposits. We also delivered a 13 basis point decline in the cost of deposits to 1.54% and a 9 basis point decline in overall cost of funds to 1.71%.

Tracey L. Dexter: We also delivered a 13 basis point decline in the cost of deposits to 1.54% and a 9 basis point decline in overall cost of funds to 1.71%. Expansion in the net interest margin was a highlight this quarter, driven largely by lower deposit costs and the bond portfolio restructure. On an adjusted basis, return on average assets was 1.31% and return on average tangible equity was 16.26%. Our capital position remains very strong. We also were more active in share repurchases, buying back over 317,000 shares. Turning to net interest income and margin on slide 5. Net interest income totaled $178.2 million, up $1.9 million from the prior quarter.

Speaker #3: Expansion in the net interest margin was a highlight this quarter, driven largely by lower deposit costs and the bond portfolio restructure. On an adjusted basis, return on average assets was 1.31%, and return on average tangible equity was 16.26%.

Speaker #3: Our capital position remains very strong. We also were more active in share repurchases, buying back over 317,000 shares. Turning to net interest income and margin on slide five, net interest income totaled $178.2 million, up $1.9 million from the prior quarter.

Speaker #3: The net interest margin expanded 17 basis points to 3.83% and excluding the impact of accretion on acquired loans, margin expanded 13 basis points to 3.57%.

Tracey L. Dexter: The net interest margin expanded 17 basis points to 3.83% and excluding the impact of accretion on acquired loans, margin expanded 13 basis points to 3.57%. This improvement was driven by lower deposit costs combined with higher securities yields. Moving to non-interest income on slide 6. Reported non-interest income was a net loss of $12.6 million. Adjusted non-interest income, which excludes the securities repositioning, totaled $26.9 million, down 6% from the prior quarter and up 22% year over year, reflecting continued growth in fee-based businesses with the growth of the franchise. Wealth management remains a key contributor, with revenue up 36% year over year and assets under management increasing 33% year over year, including $125 million of new organic assets under management added during the quarter.

Speaker #3: This improvement was driven by lower deposit costs combined with higher securities yields. Moving to non-interest income on slide six, reported non-interest income was a net loss of $12.6 million adjusted non-interest income, which excludes the securities repositioning, totaled $26.9 million, down 6% from the prior quarter and up 22% year over year, reflecting continued growth in fee-based businesses with the growth of the franchise.

Speaker #3: Wealth management remains a key contributor, with revenue up 36% year over year and assets under management increasing 33% year over year, including $125 million of new organic assets under management added during the quarter.

Speaker #3: Mortgage banking income declined from the fourth quarter, primarily due to volatility in mortgage servicing rates, acquired in the villages' transaction. Underlying loan volumes and pipelines remain strong in the business.

Tracey L. Dexter: Mortgage banking income declined from the Q4, primarily due to volatility in mortgage servicing rights acquired in the Villages transaction. Underlying loan volumes and pipelines remain strong in the business. Insurance agency income benefited from a seasonal contingent commission payment, increasing $0.2 million year-over-year. Moving to slide 7. Our wealth management team delivered another quarter of strong results, with income growing 36% year-over-year and AUM balances growing 33% year-over-year, with a 21% annual CAGR in the past five years. We expect to continue to see strong volumes throughout 2026. Moving to slide 8. Non-interest expense totaled $122.2 million in the Q1, which includes $8.5 million of merger and integration costs.

Speaker #3: Insurance agency income benefited from a seasonal contingent commission payment increasing 0.2 year. Moving to slide seven, our wealth management team delivered another quarter of strong results, with income growing 36% year over year and AUM balances growing 33% year over year, with a 21% annual CAGR in the past five years.

Speaker #3: We expect to continue to see strong volumes throughout 2026. Moving to slide eight, non-interest expense totaled $122.2 million in the first quarter, which includes $8.5 million of merger and integration costs.

Speaker #3: On an adjusted basis, non-interest expense was $113.6 million just slightly higher than the prior quarter. Importantly, we saw continued improvement in operating leverage, with the efficiency ratio improving to 59.5% and the adjusted efficiency ratio at 55.3%, reflecting disciplined expense control alongside core revenue growth.

Tracey L. Dexter: On an adjusted basis, non-interest expense was $113.6 million, just slightly higher than Q1. Importantly, we saw continued improvement in operating leverage, with the efficiency ratio improving to 59.5% and the adjusted efficiency ratio at 55.3%, reflecting disciplined expense control alongside core revenue growth. Moving to loan growth and portfolio composition on slides 9 and 10. Loans ended the period at $12.6 billion, up modestly from year-end. Production remains strong, with growth largely offset by elevated payoffs during Q1. The commercial pipeline increased to over $1 billion at Q1 end, supporting continued organic growth as we move through the year.

Speaker #3: Moving to loan growth and portfolio composition on slides nine and ten, loans ended the period at 12.6 billion, up modestly from year-end. Production remains strong, with growth largely offset by elevated payoffs during the first quarter.

Speaker #3: The commercial pipeline increased to over $1 billion at quarter-end, supporting continued organic growth as we move through the year. Our loan portfolio remains well-diversified by asset class, industry, and loan type, with average loan sizes that reflect the granular nature of our franchise and exposure levels that remain well within regulatory guidance and that provide significant flexibility for forward growth.

Tracey L. Dexter: Our loan portfolio remains well-diversified by asset class, industry, and loan type, with average loan sizes that reflect the granular nature of our franchise and exposure levels that remain well within regulatory guidance and that provide significant flexibility for forward growth. On credit quality, shown on slides 11 and 12, asset quality metrics remain solid. The allowance for credit losses totaled $176 million or 1.39% of loans, 3 basis points lower than the prior quarter. Combined with the remaining $138 million of unrecognized purchase discount on acquired loans, we continue to maintain meaningful loss absorption capacity. We saw a modest increase in non-performing loans compared to the prior quarter to 0.75% of total loans, though still well within the range of low historical levels.

Speaker #3: On credit quality, shown on slides 11 and 12, asset quality metrics remain solid. The allowance for credit losses totaled $176 million or 1.39% of loans, 3 basis points lower than the prior quarter.

Speaker #3: Combined with the remaining $138 million of unrecognized purchase discount on acquired loans, we continue to maintain meaningful loss absorption capacity. We saw a modest increase in non-performing loans compared to the prior quarter to 0.75% of total loans, though still well within the range of low historical levels.

Tracey L. Dexter: The increase in non-accrual loans during Q1 reflects the movement of 2 commercial credits to non-accrual status, each having collateral values well in excess of balances outstanding and therefore no credit loss is expected. Accruing past due loans declined. Net charge-offs remain low at 11 basis points annualized, and criticized and classified loans were stable sequentially. Turning to deposits on slides 13 and 14, total deposits increased $382 million during the quarter or 9.5% annualized. Excluding brokered balances, growth remains solid and relationship-driven with organic growth of 7% annualized. Deposit costs are lower by 13 basis points. Transaction accounts represented 50% of total deposits, and the deposit base continues to be highly granular, with the top 10 depositors representing only 3% of total balances. Moving to slide 15 in the investment securities portfolio.

Speaker #3: The increase in non-accrual loans during the first quarter reflects the movement of two commercial credits to non-accrual status, each having collateral values well in excess of balances outstanding and therefore no credit loss is expected.

Speaker #3: Accruing past-due loans declined, net charge-offs remain low at 11 basis points annualized, and criticized and classified loans were stable on slides 13 and 14, total deposits increased $382 million during the quarter or 9.5% annualized.

Speaker #3: Excluding brokered balances, growth remains solid and relationship-driven, with organic growth of 7% annualized. Deposit costs are lower by 13 basis points. Transaction accounts represented 50% of total deposits and the deposit base continues to be highly granular, with the top 10 depositors representing only 3% of total balances.

Speaker #3: Moving to slide 15 in the investment securities portfolio, as I mentioned, we took advantage of constructive market conditions and repositioned a portion of the available-for-sale portfolio in late January, which will enhance forward earnings while maintaining balance sheet flexibility.

Tracey L. Dexter: As I mentioned, we took advantage of constructive market conditions and repositioned a portion of the available-for-sale portfolio in late January, which will enhance forward earnings while maintaining balance sheet flexibility. We sold securities with proceeds of approximately $277 million, resulting in a pre-tax loss of $39.5 million impacting Q1 results. The proceeds were reinvested in primarily agency mortgage-backed securities with a tax equivalent book yield of approximately 4.8%. Turning to capital and liquidity on slide 16, Seacoast continues to operate with a fortress balance sheet. Tangible equity to tangible assets was 9.2%, and capital ratios remain very strong, providing significant flexibility to support organic growth, disciplined capital deployment, and opportunistic actions such as the approximately $317,000 in share repurchases completed during the quarter.

Speaker #3: We sold securities with proceeds of approximately $277 million, resulting in a pre-tax loss of 39.5 million impacting first-quarter results. The proceeds were reinvested in primarily agency mortgage-backed securities, with a tax equivalent book yield of approximately 4.8%.

Speaker #3: Turning to capital and liquidity on slide 16, Seacoast continues to operate with a fortress balance sheet. Tangible equity to tangible assets was 9.2%, and capital ratios remain very strong providing significant flexibility to support organic growth, disciplined capital deployment, and opportunistic actions such as the approximately $317,000 in share repurchases completed during the quarter.

Tracey L. Dexter: On slide 17, we reiterate the guidance we provided last quarter. The adjusted earnings per share outlook remains unchanged at $2.48 to 2.52, with the potential for slightly lower revenue resulting from the change in previously expected rate cuts, but with no change to bottom-line results. In summary, our results demonstrate meaningful improvement in core profitability, strong funding trends, and continued execution against our strategic priorities. We remain focused on disciplined growth and long-term shareholder value creation. With that, Chuck, I'll turn the call back to you.

Speaker #3: On slide 17, we reiterate the guidance we provided last quarter. The adjusted earnings per share outlook remains unchanged at $2.48 to $2.52, with the potential for slightly lower revenue resulting from the change in previously expected rate cuts but with no change to bottom-line results.

Speaker #3: In summary, our results demonstrate meaningful improvement in core profitability, strong funding trends, and continued execution against our strategic priorities. We remain focused on disciplined growth and long-term shareholder value creation.

Speaker #3: With that, Chuck, I'll turn the call back to you.

Charles M. Shaffer: All right. Thank you, Tracy. Kate, I think we're ready for Q&A.

Speaker #2: All right. Thank you, Tracy. And Kate, I think we're ready for Q&A.

Operator 2: At this time, I would like to remind everyone in order to ask a question, please press star then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Woody Lay with KBW. Your line is open.

Operator: At this time, I would like to remind everyone in order to ask a question, please press star then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Woody Lay with KBW. Your line is open.

Speaker #3: At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad.

Speaker #3: We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of who delay with KBW, your line is open.

Woody Lay: Hey, good morning, guys.

Speaker #4: Hey, good morning, guys.

Charles M. Shaffer: Morning, Woody.

Tracey L. Dexter: Morning.

Speaker #2: Morning, Woody.

Speaker #5: Morning.

Woody Lay: I just wanted to start on loan growth and, you know, higher payoffs impacted the growth in the quarter, but I just wanted to get a sense of how the pipeline was shaping up in Q2 2026, especially given some of the macro uncertainty that's out there.

Speaker #4: I just wanted to start on loan growth and how higher payoffs impacted the growth in the quarter. But I just wanted to get a sense of how the pipeline was shaping up in Q2 '26, especially given some of the macro uncertainty that's out there.

Charles M. Shaffer: Thanks, Woody. Just to kind of go back to the quarter itself, payoffs were very elevated. We notated in the release, and in the slides, you can see what it was year over year. In particular, in Q1, we did have three larger credits pay off, in aggregate, $150 million amongst the three. It was multiple loans to a couple of borrowers in there. It was, the good news is they paid off. They're great borrowers, and the bad news is we got paid off. That's kind of the way the business operates. When we look forward into the remainder of the year, the pipeline remains strong.

Speaker #2: Thanks, Woody. And just to kind of go back to the quarter itself, payoffs were very elevated. We notated in the release and in the slides—you can see what it was year over year.

Speaker #2: And in particular, in the first quarter, we did have three larger credits pay off. In aggregate, $150 million amongst the three. So it was multiple loans.

Speaker #2: So a couple of borrowers in there. But so it was good news is they paid off. They're great borrowers. The bad news is we got paid off.

Speaker #2: But that's kind of the way the business operates. And so when we look forward into the remainder of the year, the pipeline remains strong.

Charles M. Shaffer: We expect to return to high single digits here in the coming quarters and remain very confident throughout the remainder of the year. You know, the impacts of the geopolitical concerns are unknown, I would describe at this point. It's still probably too early to tell, we'll have to see how that all plays out here over the back half of the year. For now, we remain confident in the guidance and expect to return to high single digits.

Speaker #2: We expect to return to high single digits here in the coming quarters. And remain very confident throughout the remainder of the year. The impacts of the geopolitical concerns are unknown, I would describe at this point.

Speaker #2: It's still probably too early to tell. And so we'll have to see how that all plays out here over the back half of the year.

Speaker #2: But for now, we remain confident in the guidance and expect a return to high single digits.

Michael Young: Hey, Woody, this is Michael. Just adding on one thing at the end. You know, we had 15% annualized growth in Q4. Our average loan growth in Q1 was still high single digits, kind of 9%+. We just had a lot of pull through the pipeline late in the quarter. You know, we still feel like we remain on track and consistent. It's just our normal kind of seasonal trends here with, you know, strong Q4 production and growth. Q1, you know, generally as expected, being a bit softer, clearly impacted by the payoffs. You know, just maybe one call headed into Q2. We have a stronger kind of Q1 seasonal deposit growth.

Speaker #4: Hey, and Woody, this is Michael. Just adding on one thing at the end. We had 15% annualized growth in the fourth quarter. Our average loan growth in the first quarter was still high single digits, kind of 9% plus.

Speaker #4: We've had a lot of pull through the pipeline late in the quarter. And so we still feel like we remain on track and consistent.

Speaker #4: It's just our normal kind of seasonal trends here, with strong fourth-quarter production and growth. And then, first quarter generally—as expected—being a bit softer.

Speaker #4: So impacted by the payoffs. And then just maybe one call out headed into the second quarter, we have a stronger kind of first-quarter seasonal deposit growth.

Tracey L. Dexter: Q2, we do see that kind of come back a bit before we have seasonal trends return to tailwinds in H2.

Michael Young: Q2, we do see that kind of come back a bit before we have seasonal trends return to tailwinds in H2.

Speaker #4: And then, second quarter, we do see that kind of come back a bit before we have seasonal trends return to tailwinds in the back half of the year.

Woody Lay: Got it. That's helpful. Then maybe on deposits, you know, I believe the Q1 is typically a seasonally stronger quarter, but I mean, the non-interest-bearing deposit growth you saw in the quarter was really strong. Just trying to get a sense of how much you think that's seasonal versus, you know, actual core deposit growth.

Speaker #2: Got it. That's helpful. And then maybe on deposits, I believe the first quarter is typically a seasonally stronger quarter. But I mean, the non-interest-bearing deposit growth you saw in the quarter was really strong.

Speaker #2: Just trying to get a sense of how much you think that's seasonal versus actual core deposit growth.

Michael Young: Yeah, it's a good question. You know, we typically see outflows related to tax payments at the, you know, kinda end of Q1, early Q2. We did see that normal kinda seasonal trend, but it's not that all that came from DDA or non-interest-bearing deposits. Certainly some did, but, you know, I think we'll expect to hold higher levels of non-interest-bearing deposits as we move forward, given just kinda growth in aggregate across, you know, the franchise and growth in customer count. You know, we certainly see some tax-related outflows here in April, but not, you know, enough to backslide us on non-interest-bearing deposits.

Speaker #4: Yeah, it's a good question. We typically see outflows related to tax payments at the kind of end of first quarter, early second quarter. So we did see that normal kind of seasonal trend.

Speaker #4: But it's not that all of that came from DDA or non-interest-bearing deposits. Certainly, some did. But I think we'll expect to hold higher levels of non-interest-bearing deposits as we move forward, given just kind of growth in aggregate across the franchise and growth in customer count.

Speaker #4: So we certainly see some tax-related outflows here in April. But not enough to backslide us on non-interest-bearing deposits.

Woody Lay: Got it. Maybe just last for me. You have the Villages conversion coming up here this summer. Can you just remind me how much cost saves are still set to come out of the run rate?

Speaker #2: Got it. And then maybe just last for me. So you have the villages, conversion, coming up here this summer. Can you just remind me how much cost saves are still set to come out of the run rate?

Michael Young: Yeah. We, you know, articulated as a 26%, 27% cost out, kinda at announcement. As we talked about, I think on the last call, we have an expense step-up here in Q2 with our normal annual pay cycle and increase. You know, we'll expect maybe a little tick-up in the efficiency ratio headed into conversion as well in Q2. We'll see the cost outs come in H2 as our efficiency ratio begins to step back down into Q4. That's kind of a way to think about it. We are, as we talked about, you know, hiring and growing, you know, as well.

Speaker #4: Yeah. So we articulated as a 26, 27 percent cost out kind of at announcement as we talked about, I think, on the last call.

Speaker #4: We have an earnings step or I'm sorry, an expense step up here in the second quarter with our normal annual pay cycle and increase.

Speaker #4: We'll expect maybe a little tick up in the efficiency ratio headed into conversion as well. In the second quarter. And then we'll see the cost outs come in the back half of the year, as our efficiency ratio begins to step back down into the fourth quarter.

Speaker #4: So that's kind of a way to think about it. We are, as we talked about, hiring and growing as well. And so that will offset some of the expense saves that are just discrete from the deal.

Michael Young: You know, that will offset some of the expense saves, you know, that are just discrete from the deal.

Charles M. Shaffer: I'd just remind you to push back to the guidance we laid out last quarter that's reiterated in the slide. We think a full-year efficiency ratio somewhere between 53% and 55%. As you're modeling, that's kind of the ballpark where we expect to be full year.

Speaker #2: And I'd just remind you to push back to the guidance we laid out last quarter that's reiterated in the slide. We think a full-year efficiency ratio somewhere between 53 and 55 percent.

Speaker #2: So as you're modeling, that's kind of the ballpark where we expect to be full year.

Woody Lay: Perfect. All right. Well, thanks for taking my questions. Congrats on the good quarter.

Speaker #4: Perfect. All right. Well, thanks for taking my questions. Congrats on the good quarter.

Charles M. Shaffer: Thanks, Woody.

Speaker #2: Thanks, Woody.

Operator 2: Your next question comes from the line of Russell Gunther with Stephens. Your line is open.

Operator: Your next question comes from the line of Russell Gunther with Stephens. Your line is open.

Speaker #3: Your next question comes from the line of Russell Gunther with Stevens. Your line is open.

Russell Gunther: Hey, good morning, guys.

Speaker #6: Hey, good morning, guys.

Charles M. Shaffer: Hey, Russell.

Speaker #2: Hey, Russell.

Russell Gunther: Hey, Charles M. Shaffer. Maybe to start on the core margin, would be helpful to get a sense for how you are expecting that to trend going forward. Maybe touching on incremental commercial loan yields versus deposit costs. On that last front, as it relates to the cost of deposits from here, do you think you have the ability to continue to lower, or is there, you know, perhaps with a fed on pause an upward bias to deposit costs embedded in the revenue guide?

Speaker #6: Hey, Chuck. Maybe to start on the core margin, it would be helpful to get a sense for how you are expecting that to trend going forward—maybe touching on incremental commercial loan yields versus deposit costs.

Speaker #6: And then on that last front, as it relates to the cost of deposits from here, do you think you have the ability to continue to lower or is there perhaps for the Fed on pause and upward bias to deposit costs embedded in the revenue guide?

Michael Young: Hey, Russell, this is Michael. I'll take that one. A couple questions in there, so I'll try to hit each one. First on the margin progression, we do expect continued margin expansion here in Q2 and Q3. You saw we exited the quarter with lower deposit costs than we kinda started the quarter as we continued to blend the rate volume mix down. We're still at a 75% loan-to-deposit ratio, so we're in a really strong balance sheet position there. I think as we've approached kind of this 1.30 ROA and 16% ROTE that we've been targeting, we do wanna be on the offensive and grow. I think we'll continue to try to do that throughout the year while maintaining the profitability levels and the guidance that we talked about.

Speaker #4: Hey, Russell. This is Michael. I'll take that one. A couple of questions in there. So I'll try to hit each one. First, on the margin progression, we do expect continued margin expansion here in the second and third quarter.

Speaker #4: You saw we exited the quarter with lower deposit costs than we kind of started the quarter as we continued to blend the rate volume mix down.

Speaker #4: We're still at a 75% loan-to-deposit ratio. So we're in a really strong balance sheet position there. But I think as we've approached kind of this 130 ROA and 16% ROTE that we've been targeting, we do want to be on the offensive and grow.

Speaker #4: And so I think we'll continue to try to do that throughout the year while maintaining the profitability levels and the guidance that we talked about.

Michael Young: We do expect continued, you know, pretty nice margin progression here in Q2, Q3. You know, on the deposit cost side without Fed cuts, as you saw, we revised the revenue guidance low end down by 1 percentage point. That's basically our rate sensitivity to 2 cuts is really all that is. You know, we could see some, you know, stabilizing to increasing deposit costs potentially later this year without Fed rate cuts as we grow the deposit balances from here. On the loan yields side, the other part of your question, we still saw kinda add-on yields in the low 6s this quarter.

Speaker #4: But we do expect continued, pretty nice margin progression here in the second quarter, third quarter. That will, on the deposit cost side—without Fed cuts, as you saw, we revised the revenue guidance low end down by 1 percentage point.

Speaker #4: That's basically our rate sensitivity to two cuts is really all that is. And so we could see some stabilizing to increasing deposit costs potentially later this year without Fed rate cuts as we grow.

Speaker #4: The deposit balances from here on the loan yields side, the other part of your question, we still saw kind of add-on yields in the low sixes this quarter.

Michael Young: We are seeing a little more mix of residential, mortgage, retention as we've talked about before, which with the long end of the curve at higher levels is, you know, pretty attractive rates, and good risk-adjusted returns. We've seen that coming through as a benefit. On the commercial side, there's obviously been competitive forces at play, but we still, you know, are being disciplined there and really holding around kind of the 6% level.

Speaker #4: We are seeing a little more mix of residential mortgage retention as we've talked about before. Which with the long end of the curve, at higher levels, is pretty attractive rates.

Speaker #4: And good risk-adjusted returns. So we've seen that coming through as a benefit on the commercial side. There's obviously been competitive forces at play, but we still are being disciplined there.

Speaker #4: And really holding around kind of the 6% level.

Russell Gunther: Okay. Thank you, Michael. Thanks for tackling all of those. Maybe switching gears on the expense side, follow up to the discussion already appreciate the glide path. Maybe just some color or clarification in terms of your efficiency target and how tethered that is to revenue. If we're at the high end of revenue, should we be at the low end of efficiency, or is there some flex there? Kinda post-conversion, how do you think about a normalized growth rate for Seacoast given the franchise investment you kind of see ahead of you, at least on the lending hiring front?

Speaker #6: Okay, thank you, Michael. Thanks for tackling all of those. Maybe, switching gears on the expense side—a follow-up to the discussion already—appreciate the glide path.

Speaker #6: Maybe just some color or clarification in terms of your efficiency targets and how tethered that is to revenue. So if we're at the high end of revenue, should it be at the low end of efficiency?

Speaker #6: Or is there some flex there? And then kind of post-conversion, how do you think about a normalized growth rate for Seacoast, given the franchise investment you kind of see ahead of you?

Speaker #6: At least on the lending hiring front.

Charles M. Shaffer: Yeah. I would think about it this way. We put the guide out there, the 53 to 55, to give you a sense of where we think we'll land full year. You know, if revenue is higher, I think that does fall to the bottom line and pushes us to the lower end of that range. You know, given the fact that as Michael laid out, we won't potentially have 2 Fed cuts, that's gonna probably not drive as low Deposit costs as we thought we'd see on the H2 of the year. As such, that's gonna require us to probably tighten a little bit on the expense side to navigate through that. We're confident in our ability to deliver on the overall EPS range.

Speaker #4: Yeah. I would think about it this way. We put the guide out there, the 53 to 55, to give you a sense of where we think we'll land full year.

Speaker #4: If revenue is higher, I think that does fall to the bottom line and pushes us to the lower end of that range. We're given the fact that, as Michael laid out, we won't potentially have two Fed cuts that's going to probably not drive as low deposit costs as we thought we'd see on the back half of the year.

Speaker #4: And as such, that's going to require us to probably tighten a little bit on the expense side to navigate through that. But we're confident in our ability to deliver on the overall EPS range, will sort of feather that depending on what the back half of the year looks like.

Charles M. Shaffer: You know, we'll sort of feather that depending on what the H2 looks like. We've given ourselves enough room to be 100% confident in delivering the EPS range. You know, that'd be the way I'd think about it. Long term, you know, we'd like to run the company in that same range. Kinda that 53% to 55% range is probably where we land. The way we're thinking about the business is running with a return on tangible equity north of 16 ROA, north of 130 and high single-digit growth rates, kinda with a 53% to 55% efficiency ratio delivers really strong shareholder return compounding over time. That's kind of the where I think the optimal run rate is for the company and what we're working to deliver to shareholders.

Speaker #4: But we've given ourselves enough room to be 100% confident in delivering the EPS range. So that'd be the way I'd think about it. Long-term, we'd like to run the company in that same range, kind of that 53 to 55 percent range is probably where we land.

Speaker #4: The way we're thinking about the business is running with a return on tangible equity, y, north of 16 ROA, north of 130, and high single-digit growth rates, kind of with a 53 to 55 percent efficiency ratio delivers a really strong shareholder return, compounding over time.

Speaker #4: And so that's kind of the where I think the optimal run rate is for the company and what we're working to deliver to shareholders.

Russell Gunther: Very helpful. Thank you, Chad. Thanks, guys, for taking my questions.

Speaker #6: Very helpful. Thank you, Chuck. Thanks, guys, for taking my questions.

Charles M. Shaffer: Thanks, Russ.

Speaker #2: Thanks, Russell.

Operator 2: Your next question comes from the line of Liam Cuhel with Raymond James. Your line is open.

Operator: Your next question comes from the line of Liam Cuhel with Raymond James. Your line is open.

Speaker #3: Your next question comes from the line of Liam Cohill with Raymond James. Your line is open.

Liam Cuhel: Hey, good morning, guys. This is Liam on for David Feaster.

Liam Coohil: Hey, good morning, guys. This is Liam on for David Feaster.

Speaker #5: Hey, good morning, guys. This is Liam on for David Feister.

Charles M. Shaffer: Hey, Liam.

Speaker #4: Hey, Liam.

Michael Young: Good morning, Liam.

Liam Cuhel: I appreciate all the color on loan and deposit growth. I'm curious, where in your footprint have you been seeing the most success, and where do you expect the most opportunity to be moving forward? Is a lot of that deposit growth coming from The Villages, or is it more the core markets?

Liam Coohil: I appreciate all the color on loan and deposit growth. I'm curious, where in your footprint have you been seeing the most success, and where do you expect the most opportunity to be moving forward? Is a lot of that deposit growth coming from The Villages, or is it more the core markets?

Speaker #5: So I appreciate all the color on loan and deposit growth. And I'm curious, where on your footprint have you been seeing the most success?

Speaker #5: And where do you expect the most opportunity to be moving forward? Is a lot of that deposit growth coming from the villages, or is it more of the core markets?

Charles M. Shaffer: It's broad-based. I mean, I would say that we're seeing good, solid growth in The Villages. Some of the new offices that have opened in the Villages Two development are growing nicely. We've been very pleased with that. Some of the expansionary markets up into North Florida, up towards Gainesville, Ocala, have seen really, really solid growth as we continue to expand what was the legacy Drummond franchise, and then we layered on a really strong banking team up in that market. Atlanta is also off to a really nice start. It's fairly broad-based with most of the growth coming from probably The Villages and the expansionary markets, some of the new markets we've opened up.

Speaker #4: It's broad-based. I mean, I would say that we're seeing good solid growth in the villages. Some of the new offices that have opened in the villages, two development, are growing nicely.

Speaker #4: We've been very pleased with that. Some of the expansionary markets up into North Florida, up towards Gainesville, Ocala, have seen really, really solid growth.

Speaker #4: As we continue to expand, what was the legacy Drummond franchise? And then we layered on a really strong banking team up in that market.

Speaker #4: And then Atlanta is also off to a really nice start. And so it's fairly broad-based with most of the growth coming from probably the villages and the expansionary markets, some of the new markets we've opened up.

Liam Cuhel: Great. Thanks. On deposit costs, do you expect non-interest balance growth to be the larger driver of total deposit cost reductions into H2, especially if we're assuming kind of more of a stable rate environment?

Liam Coohil: Great. Thanks. On deposit costs, do you expect non-interest balance growth to be the larger driver of total deposit cost reductions into H2, especially if we're assuming kind of more of a stable rate environment?

Speaker #5: Great. Thanks. And then on deposit costs, do you expect non-interest balance growth to be the larger driver of total deposit cost reductions into the back half of the year, especially if we're assuming kind of more of a stable rate environment?

Michael Young: Yeah, it's a, it's a good question. I think, you know, we've been optimizing, particularly on the CD rate side, you know, letting some of the higher rate CDs roll down, which has been a driver along with some non-interest-bearing growth and just repricing of money markets as the Fed cut rates. You know, I think as we move forward, some of it will be mix-driven. Certainly that will improve cost of funds or maybe keep cost of funds from going up as much, you know, over the medium term. You know, over time, it's really about the pace of growth. If we need to grow, you know, at higher paces of growth, then, you know, we'll see a little more pricing pressure.

Speaker #4: Yeah. It's a good question. I think we've been optimizing, particularly on the CD rate side, letting some of the higher-rate CDs roll down. Which has been a driver along with some non-interest-bearing growth and just repricing of money markets as the Fed cut rates.

Speaker #4: I think as we move forward, some of it will be mixed-driven. Certainly, that will improve cost of funds or maybe keep cost of funds from going up as much over the medium term.

Speaker #4: But then over time, it's really about the pace of growth. So if we need to grow at higher paces of growth, then we'll see a little more pricing pressure.

Michael Young: I think it's more, you know, geared to overall balance sheet growth and how quickly we're growing the deposit portfolio.

Speaker #4: So I think it's more geared to overall balance sheet growth and how quickly we're growing the deposit portfolio.

Liam Cuhel: That makes sense. Last thing for me to touch on was, it was really impressive to see the wealth management balance growth in a quarter where the market was down almost 5%. You know, with new asset growth continuing and the market rebounding in April, would it be unreasonable to expect some nice balance growth into Q2?

Liam Coohil: That makes sense. Last thing for me to touch on was, it was really impressive to see the wealth management balance growth in a quarter where the market was down almost 5%. You know, with new asset growth continuing and the market rebounding in April, would it be unreasonable to expect some nice balance growth into Q2?

Speaker #5: So that makes sense. And last thing for me to touch on was, it was really impressive to see the wealth management balance growth in a quarter where the market was down almost 5%.

Speaker #5: And with new asset growth continuing and the market rebounding in April, would it be unreasonable to expect some nice balance growth into Q2?

Charles M. Shaffer: We do expect that to continue to grow. What we're really excited about in Q1 is we saw almost $17 million of new AUM coming out of The Villages, and $15+ million coming out of what was the legacy Heartland market. It's really great to see new opportunities coming out of those two new acquisitions from last year. The business is operating exceptionally well, and we expect it to continue to grow throughout the year. I'm continue to be remain very bullish on that business inside of Seacoast, and it continues to drive really solid returns on capital. Ideally, as we move through time, we'll continue to get opportunities in The Villages footprint and the remainder of the franchise. So far, everything's going right according to plan.

Speaker #4: We do expect that to continue to grow in some of the what we're really excited about in the first quarter as we saw almost 17 million of new AUM coming out of the villages.

Speaker #4: And $15-plus million coming out of what was the legacy Heartland market. So it's really great to see new opportunities coming out of those two new acquisitions from last year.

Speaker #4: And the business is operating exceptionally well, and we expect to continue to grow throughout the year. I'm going to continue to remain very bullish on that business inside of Seacoast.

Speaker #4: And it continues to drive really solid returns on capital. And so ideally, as we move through time, we'll continue to get opportunities in the villages' footprint and the remainder of the franchise.

Speaker #4: So far, everything's going right according to plan.

Liam Cuhel: Appreciate all the color. Thanks, guys.

Liam Coohil: Appreciate all the color. Thanks, guys.

Speaker #5: Appreciate all the color. Thanks, guys.

Charles M. Shaffer: Awesome. Thanks, Liam.

Speaker #4: Awesome. Thanks, Liam.

Operator 2: Your next question comes from the line of Kyle Gierman with Hovde Group. Your line is open.

Operator: Your next question comes from the line of Kyle Gierman with Hovde Group. Your line is open.

Speaker #3: Your next question comes from the line of Kyle Gierman with Jose Group. Your line is open.

Kyle Gierman: Hi, this is Kyle on for David Bishop.

Speaker #6: Hi. This is Kyle on for Dave Bishop.

Charles M. Shaffer: Hey, good morning.

Michael Young: Morning.

Speaker #7: Hey, good morning.

Charles M. Shaffer: Morning.

Kyle Gierman: Good morning. I was wondering, in your prior guidance, you referenced plans for a meaningful banker headcount growth into 2026. I believe it was around 15%. I was wondering if you could update us on the progress so far this year, your target for, like, net new producers for 2026, and how that hiring pace factors into your efficiency and revenue guidance. Thanks.

Speaker #4: Good morning.

Speaker #6: Good morning. I was wondering, in your prior guidance, you referenced plans for meaningful banker headcount growth into 2026. I believe it was around 15%.

Speaker #6: I was wondering if you could update us on the progress so far this year? Your target for net new producers for 2026. And how that hiring pace factors into your efficiency and revenue guidance?

Charles M. Shaffer: Yeah. I'll take that. We're about halfway there. That'd be a way to describe it. We, through Q1, got about half of what we wanted to get done. Through the remainder of the year, we'll see what opportunities emerge. You know, we're gonna be thoughtful about making sure we manage efficiency and manage the EPS guide we've given. We'll see what opportunities emerge for us. So far, so good. We continue to focus on that, and particularly, as I mentioned earlier, in some of the expansionary markets, we continue to add on bankers, and I remain excited about what's out there for us.

Speaker #4: Yeah. I'll take that. We're about halfway there. That'd be the way to describe it. Through the first quarter, got about half of what we wanted to get done.

Speaker #4: Through the remainder of the year, we'll see what opportunities emerge. We're going to be thoughtful about making sure we manage efficiency and manage the EPS guide.

Speaker #4: We've given, but we'll see what opportunities emerge for us. But so far, so good. We continue to focus on that and particularly as I mentioned earlier in some of the expansionary markets, we continue to add on bankers and remain excited about what's out there for us.

Kyle Gierman: Thank you. I was wondering how your M&A appetite kind of evolved heading into H2 2026, especially with the Villages conversion approaching. Was wondering if you are actively evaluating in market or adjacent opportunities in your Florida and Georgia markets or is near-term focus squarely on the integration and organic growth? Thanks.

Speaker #6: Thank you. And then maybe I was wondering how your M&A appetite kind of evolved heading into the back half of 2026, especially with the villages conversion approaching.

Speaker #6: I was wondering if you are actively evaluating in-market or adjacent opportunities in your Florida and Georgia markets. Is near-term focus squarely on growth? Thanks.

Charles M. Shaffer: Yeah, great question. At the moment, it's heads down focused on integration. You know, obviously the impacts of this transaction are substantial on the earnings profile of the company. We want to get this absolutely 100% right, and we're going to deliver a flawless conversion. The team is heads down, very focused on it, and I'm confident we'll get that done. As we come out of that, you know, we'd obviously be available to do M&A. We remain kind of focused only on Florida from an M&A perspective. There's only about a handful of banks left that are big enough and in the right markets to be impactful. If one of those were to emerge, we would certainly look at it. There is a limited opportunity set as we move through time under that structure.

Speaker #4: Yeah. Great question. At the moment, it's heads-down focused on integration. Obviously, the impacts of this transaction are substantial on the earnings profile of the company.

Speaker #4: We want to get this absolutely 100% right. And we're going to deliver a flawless conversion. The team is heads-down, very focused on it. And I'm confident we'll get that done.

Speaker #4: As we come out of that, we'd obviously be available to do M&A. We remain kind of focused only on Florida from an M&A perspective.

Speaker #4: There's only about a handful of banks left that are big enough and in the right markets to be impactful. And if one of those were to emerge, we would certainly look at it.

Speaker #4: But it is there is a limited opportunity set as we move through time under that structure. And so it could be there. It might not be there.

Charles M. Shaffer: It could be there, it might not be there, but right now it's focused on The Villages.

Speaker #4: But right now, it's focused on The Villages.

Kyle Gierman: Thank you for taking my questions.

Speaker #6: Thank you for taking my questions.

Charles M. Shaffer: Awesome. Thank you.

Speaker #4: Awesome. Thank you.

Operator 2: I'll now turn the call back over to Charles M. Shaffer for closing remarks.

Operator: I'll now turn the call back over to Charles M. Shaffer for closing remarks.

Speaker #3: I'll now turn the call back over to Chuck Schaefer for closing remarks.

Charles M. Shaffer: All right. Well, thank you all for joining us this morning and, just for the Seacoast team, really proud of the team this quarter. They continue to do an excellent job growing the franchise amongst, working exceptionally hard to deliver a upcoming conversion. A lot of hard work's going on that as well with building around other new tools, AI products, and we're going to come out of 2026 much stronger than we came into it. Couldn't be more excited about the year ahead, and thank you all for being on the call, and we're available for follow-up calls if anybody has them. That'll conclude our call. Thank you. Kate?

Speaker #4: All right. Well, thank you all for joining us this morning. And just for the Seacoast team, really proud of the team this quarter. They continue to do an excellent job growing the franchise, while working exceptionally hard to deliver an upcoming conversion.

Speaker #4: And a lot of hard work's going on on that as well with building around other new tools, AI products, and we're going to come out of '26 much stronger than we came into it.

Speaker #4: So couldn't be more excited about the year ahead. And thank you all for being on the call. And we're available for follow-up calls if anybody has them.

Speaker #4: So, that'll conclude our call. Thank you, Kate.

Operator 2: Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.

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

Q1 2026 Seacoast Banking Corporation of Florida Earnings Call

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