Seacoast Banking Co. of Florida Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
April 25, 2025
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Operator

Welcome to Seacoast Banking Corporation's First Quarter twenty twenty five Earnings Conference Call. My name is Desiree, and I will be your operator. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Before we begin, I have been asked to direct your attention to the statement at the end of the company's press release regarding forward looking statements. Seacoast will be discussing issues that constitute forward looking statements within the meaning of the Securities and Exchange Act, and its comments today are intended to be covered within the meaning of that act.

Operator

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

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Okay. Thank you, Desiree, and good morning, everyone. As we proceed with our presentation, we'll refer to the first quarter earnings slide deck available at seacoastbanking.com. Joining me today are Tracy Dexter, our Chief Financial Officer Michael Young, our Treasurer and Director of Investor Relations James Stallings, our Chief Credit Officer. Before we delve into earnings, I would like to address the recent market uncertainty over the past three weeks.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Clearly, is emerging risk in the macroeconomic environment and volatility has increased. I want to remind you that Seacoast is well positioned to navigate turbulent times. We have built one of the strongest balance sheets in the country, featuring an industry leading capital position, robust credit diversity, and a granular, highly valuable deposit franchise. This fortress balance sheet provides us with optionality and durability, serving as a significant source of strength. Additionally, we primarily operate in Florida, one of the strongest economies in the nation.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Turning to the quarterly results, the Seacoast team delivered a strong quarter for both loans and deposits, outperforming peers and the industry at large. The net interest margin increased by nine basis points, while the cost of deposits declined by 15 basis points. We achieved 6% annualized loan growth and ended the quarter with a healthy late stage pipeline. Deposit growth was also strong at nearly 11% annualized, with non interest bearing demand deposits growing 17% annualized. This all resulted in 22% growth in adjusted pre tax pre provision earnings when compared to the same quarter one year ago, and tangible book value per share grew 10% over that same period.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

This quarter marked a promising start to 2025 and our investments in talent across our footprint have fully taken effect, driving substantial onboarding of new relationships. These investments in revenue producing talent will continue to drive solid, disciplined growth. Additionally, we onboarded another 10 revenue producing bankers during the quarter. Asset quality remained strong during the quarter, with the NPL ratio dropping 68 basis points. Charge offs for the quarter were entirely driven by acquired credits.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

And the provision for loan losses increased from the prior quarter in part due to strong loan growth that occurred late in the quarter and we chose to hold the allowance coverage ratio flat to the prior quarter given market uncertainty. We will take a conservative approach until clarity emerges. And lastly, everything is progressing well with Heartland Bancshares. We expect to close and convert this transaction in the third quarter. I will now pass the call to Tracy, who will review our financial results.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Thank you, Chuck. Good morning, everyone. Directing your attention to first quarter results, beginning with Slide four. Seacoast reported net income of $31,500,000 or $0.37 per share in the first quarter, and pretax pre provision income increased $2,700,000 to $50,600,000 Growth in loans and deposits was largely the result of talent added over the last several quarters, which is now resulting in onboarding significant new relationships. Total deposits were up 11% annualized, and noninterest bearing balances grew 17% annualized.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Loan production was strong, with growth in balances near 6% on an annualized basis. Net interest income of $118,500,000 is up two percent from the prior quarter, with the cost of deposits declining 15 basis points to 1.93%. Net interest margin expanded nine basis points to 3.48%. And excluding accretion on acquired loans, net interest margin expanded 19 basis points to 3.24. Tangible book value per share of $16.71 represents a 10% year over year increase.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Our capital position continues to be very strong. Seacoast Tier one capital ratio is 14.7%, and the ratio of tangible common equity to tangible assets is 9.6%. We grew our branch footprint during the quarter with two new locations in Fort Lauderdale and Tampa, Two of the fastest growing markets in the state. And in February, we announced the proposed acquisition of Heartland Bancshares and Heartland National Bank. We're on track to close in the third quarter of twenty twenty five.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Turning to slide five. Net interest income expanded by $2,700,000 during the quarter, driven primarily by lower deposit costs. The net interest margin expanded nine basis points to 3.48% and excluding accretion on acquired loans, expanded 19 basis points to 3.24%. In the securities portfolio, yields increased 11 basis points to 3.88%, benefiting from new purchases. Loan yields were down three basis points to 5.9%.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Excluding accretion, loan yields increased by 10 basis points to 5.58%. The cost of deposits decreased 15 basis points to 1.93% due to proactive deposit repricing and growth in DDA balances, demonstrating the success of the talent we've added in recent periods and the strength of our relationship focused banking model. Given the strong growth momentum coming out of the first quarter, we expect net interest income to continue to grow through the remainder of the year. Moving to Slide six. Noninterest income, excluding securities activity, was $22,000,000 increasing 8% from the first quarter of twenty twenty four and a 20% increase in wealth management revenue and 25% increase in insurance agency income year over year.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Beyond that, our investments in talent and significant market expansion across the state have resulted in continued growth in treasury management services to commercial customers. Other income was lower by $4,100,000 compared to the prior quarter, with lower gains on SBIC investments and fewer loan sales compared to the fourth quarter. Looking ahead to the second quarter, we continue to focus on growing noninterest income, and we expect noninterest income in a range from $20,000,000 to 22,000,000 Moving to slide seven. Our wealth division continued its strong growth, adding $117,000,000 in new assets under management in the first quarter, with total AUM increasing 14% year over year. And on slide eight.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Noninterest expense in the first quarter was $90,600,000 on a GAAP basis and included $1,100,000 in merger related expenses. Consistent with expectations, the first quarter was seasonally higher, with higher payroll tax and four zero one contributions. Increases in other line items reflect the expansion of our commercial team by 10 bankers and the addition of two new branch locations. We continue to remain focused on profitability and performance and expect adjusted expenses for the second quarter, which excludes merger related costs, to be in a range of $87,000,000 to $89,000,000 Turning to slide nine. Loan outstandings increased at an annualized rate of 5.6%, with production of $555,000,000 in the first quarter and the pipeline expanding by over 40% from the prior quarter.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Loan yields were down three basis points and excluding accretion were higher by 10 basis points to 5.58%. Accretion continues to be variable and declined this quarter, with the prior quarter impacted by significant payoffs. Looking forward, the pipeline is very strong, and we expect mid to high single digit loan growth in the coming quarter and for the full year 2025, though the impact of tariffs may add some uncertainty. On 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.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Nonowner occupied commercial real estate loans represent 34% of all loans and are distributed across industries and collateral types. As we have for many years, we consistently manage our portfolio to keep construction and land development loans and commercial real estate loans well below regulatory guidance. These measures are significantly below the peer group at 34220% of consolidated risk based capital, respectively. We've managed our loan portfolio with diverse distribution across categories and retaining granularity to manage risk. Moving on to credit topics on Slide 11.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

The allowance for credit losses totaled $140,300,000 or 1.34% of total loans, flat to the prior quarter. Our allowance estimation process includes consideration of recent volatility in the markets and macroeconomic environment, and we continue to closely monitor the potential impact of economic and fiscal policy decisions on our borrowers. The allowance for credit losses, combined with the $119,500,000 remaining unrecognized discount on acquired loans, totals $259,800,000 or 2.49% of total loans that's available to cover potential losses, providing substantial loss absorption capacity. Moving to slide 12, looking at quarterly trends and credit metrics. Nonperforming loans represented 0.68% of total loans, a decrease of approximately $21,000,000 from the prior quarter.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

And accruing past due loans remain low at 0.16% of total loans. Moving to slide 13 and the investment securities portfolio. The average yield on securities has benefited from recent purchases at higher yields, and the portfolio yield increased during the first quarter to 3.88%. We leveraged FHLB advances to purchase securities in advance of the Heartland acquisition. Heartland's short term bond portfolio and high liquidity levels provided an opportunity to lock in higher rates mid quarter with purchases of $412,000,000 in primarily agency mortgage backed securities, with an average book yield of 5.51%.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Turning to Slide 14 and the deposit portfolio. Total deposits increased to $12,600,000,000 growing at an 11% annualized rate from the prior quarter, and noninterest bearing accounts grew at 17% annualized. We believe this growth was in part the result of customers aggregating balances to make tax payments, and we expect some outflow in the second quarter. The cost of deposits declined 15 basis points to 1.93%. We remain very encouraged about the continued ability of recent talent additions to onboard relationships and build core deposits, and we expect low to mid single digit deposit growth for the full year 2025, with a typical seasonally lower trend in the second quarter.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

On slide 15, CCOS continues to benefit from a diverse deposit base. Customer transaction accounts represent 50% of total deposits, which continues to highlight our longstanding relationship focused approach. Our customers are highly engaged and have a long history with us, and low average balances reflect the granular relationship nature of our franchise. And finally, on Slide 16, our capital position continues to be very strong, and we're committed to maintaining our fortress balance sheet. Tangible book value per share has increased 10% year over year, and the ratio of tangible common equity to tangible assets remains exceptionally strong at 9.6%.

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Our risk based and Tier one capital ratios are among the highest in the industry. In summary, we remain steadfastly committed to driving shareholder value, and our consistent, disciplined growth strategy positions us well as we continue to build Florida's leading regional banks. I'll now turn the call back to you, Chuck.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Thank you, Tracy. And operator, I think we're ready for Q and A.

Operator

Thank you. We will now begin the question and answer 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, And our first question comes from the line of Stephen Scouten with Piper Sandler. Your line is open.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Hey, good morning, everyone. Thanks for the time.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Hey, Stephen. Good morning.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

I wanted to get clarity on the securities trade related to the pending Heartland deal. Is that just basically you guys taking advantage of the market and saying, okay, these are the securities we want and at closing, we're going to liquidate that Heartland book. You're just kind of front running that trade a little bit?

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

Yeah. Hey, Steven. This is Michael. I'll take that one. Yeah, that really is what it was.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

And it was a unique opportunity given the structure of their securities portfolio and high balances of cash along with their long tenure of their deposit relationships. The combination of those three things made it a low risk effort to be able to do this. So basically we just pre purchased the securities that we would want to retain following the transaction. Their securities portfolio is about a one year duration. And so there's not a lot of rate volatility impact to the AOCI marker or the capital piece even with all with rates moving up and down here.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

But it could move in our favor if rates are lower at the time of transaction close because we would have pre locked in our securities portfolio at higher yields.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Yeah, seems smart. I like it. Okay, that's great. Thanks for the color there. How should we think about kind of the increase in the core loan yields in the quarter given the impact that there were some impact from the rate cuts at the end of the year in the quarter.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

I guess how did that come about? How did that manifest?

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

And then how should

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

we think about the NIM from here? Move in the core NIM was pretty impressive, I thought.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

Hey, Steven. This is Michael again. I think there's two sides obviously to NIM equation here, but I'll tackle the loans first. We have about 50% fixed loans, about 29% adjustable loans and then only 2021% that are true more floating or immediately adjustable loans. So we felt the impact obviously of the 100 basis points of Fed rate cuts throughout the fourth quarter, but it's just small on a total basis for our balance sheet.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

We also had some received float hedges that are rolling off here in April as well on our securities portfolio and our loan portfolio. So we're becoming more fixed rate as assets yields head lower generally and as rates potentially head lower here. And so we're just pretty well positioned for a rates down scenario. And I think that's kind of the overall piece here combined with the deposit costs moving lower. You saw that in the fourth quarter, but continuing kind of into the first quarter here.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

And we'll just continue to manage our deposit pricing proactively to continue to drive NIM expansion both on the deposit cost side, but then our back book on fixed rate loans and fixed rate securities continues to roll in more and more each day. And so we're getting a basis point or two basis points kind of a month in terms of yield step up on that. And you can see that trend on Slide 21.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Okay, super. And then just last thing for me, I guess, the trends around loan growth sound really encouraging. The new hires are great to see yet again. And you guys still have it armed with ton of excess capital. So let's say the environment stabilizes, which I

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

think we all hope it does.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Could there be additional upside to this mid, what was the guide, mid high single digit loan growth or additional path for the excess capital from here?

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Yes, I'll take that. It's Chuck, Steven. If you remember back in the first quarter, our guide for the back half of the year was high single digits. I think with some clarity in a more normalized environment, I think we have a clear path to high single digits. When you look at the investments we've made over the last couple of years, this quarter is a very good quarter in terms of evidencing the pull through of that investment, strong deposit growth, strong loan growth.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

I'd feel very confident in the back half of the year, that high single digit type number barring the impact of tariffs and the economic volatility. Still too early to tell how our customers react to that or what the full impact of that would be. But I think the quality of the team we've built is now materially pulling through and that gives me a lot of confidence on what we'll see over the back half of the year. And I think at this point, we've built that team. So when you kind of step back and look at the big picture for us, fairly solid quarter in terms of growth, lot of investments made over the last twelve to eighteen months.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

I think we're kind of getting to the end of those investments in terms of what we need to be doing. We've got the team built to grow. And at this point, over remainder of the year, our focus will be on leveraging that investment to drive profitability enhancements throughout the remainder of the year.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Fantastic. Thanks so much for the time this morning. Great quarter.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Thanks, Tom. Thank you.

Operator

Our next question comes from the line of Woody Lay with KBW.

Woody Lay
Vice President at Keefe, Bruyette & Woods (KBW)

Just wanted to follow-up on the NIM. Core NIM beat expectations in the quarter by about 10 basis points. So how should we be thinking about that three thirty five core NIM target by the end of the year?

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

Hey, Woody, this is Michael. Yes, there will be a little bit of impact on the timing around when the Heartland acquisition closes. So that's just a caveat to put out there depending on when that closes. But outside of that, the core trends remain positive, I think, in our ability to manage deposit costs lower. And like I said, just the back book repricing that's going to continue for some time here over the next few years.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

And so that's just sort of a core underlying tailwind on the asset side. We continue to reprice up into the higher rate environment every day. And then we're managing deposit costs carefully to continue to drive expansion and profitability improvement as Chuck mentioned. So I think that's really the focus. So as it pertains to the $3.35 NIM in the fourth quarter, I don't think we've updated guidance explicitly there.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

But if there's more rate cuts, we said we'd be higher than that certainly. And I think then just the timing of the Heartland acquisition close could impact that a little bit as well. But we feel good about the trajectory, particularly of NII dollars, but also going forward.

Woody Lay
Vice President at Keefe, Bruyette & Woods (KBW)

Got it. And maybe shifting over to credit, just any color on on what drove the criticized and classified increase in the quarter?

James Stallings
Chief Credit Officer at Seacoast Banking of Florida

Hey, good morning, Woody. This is James Stallings. I'll sort of speak to that. We had a handful of loans that moved to criticized or classified this quarter. We have sort of looked over that.

James Stallings
Chief Credit Officer at Seacoast Banking of Florida

We don't really see sort of thematic drivers of that. These were somewhat idiosyncratic. We had one situation that was isolated to a CRE facility that experienced flooding last year that took some other units offline. We had another situation that was an existing C and I business that the underlying business is performing fine but the owner was excessively distributing and so we stepped in and we adjusted the risk rate and took action on that, but by and large it is just a handful of one off situations that drove that.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

We continue to take a break out approach to that, Woody, and just carefully grade over time. That's just normal cycle movements here. Things move in classified, they move out through non accrual. But in the case James just described, most of those we expect remain on accrual and actually don't really expect much loss content. They're all just sort of unique situations.

Woody Lay
Vice President at Keefe, Bruyette & Woods (KBW)

And then maybe just last for me. I think back on the Heartland call, we had talked about you remained interested in smaller bank M and A. Has the uncertainty in the current macro environment, has that shifted your sort of capital deployment strategy?

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Yes, it's a great question. Obviously, a lot of volatility over the last three weeks. I'd describe it this way. We remain open and ready to do another deal. The Heartland deal is small enough and will be easily integrated here in the coming couple of quarters.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

So beyond that, we'll be ready to do deals, obviously, continue to remain very disciplined in terms of earn backs and pricing and the like. And obviously, anything we'd look at would have to contemplate all this volatility that's going on. So, we're open and ready, but obviously, volatility makes deals more challenging. In terms of kind of the way we think about things, we unfortunately, we're kind of blacked out of buying back shares right now given the Heartland deal, but that looks pretty attractive at these levels. So depending on what things look like as we come through the Heartland deal, buybacks could make sense and M and A could make sense.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

So it just depends on what the environment looks like. But deploying capital, obviously, very accretive to our franchise given the capital levels.

Woody Lay
Vice President at Keefe, Bruyette & Woods (KBW)

All right. Thanks for taking my questions.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Thanks, Wood.

Operator

Next question comes from the line of David Pfister with Raymond James. Your line is open.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Hi. Good morning, everybody.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Good morning, David.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

I just wanted to circle back to the loan side. I mean, the the increase in the pipeline is terrific. I mean and it's extremely encouraging to hear the commentary about the late stage pipeline growing. Obviously, you've got a a real tailwind, you know, first of all, from the economic backdrop here in Florida. Right?

David Feaster
David Feaster
Director - Banking at Raymond James Financial

And and then the new hires. I'm just curious. First off, where are you seeing opportunity for growth? And and just what's the pulse of your clients as you talk to your bankers? Just given the uncertainty, are are you seeing any change in the pull through of the pipeline or would you expect to see any just given the trade wars?

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Just kind of curious what you're seeing on that front.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Sort of broad based comment, pipeline remains. We've not seen any fallout at this point, which is encouraging. Our customers continue to remain committed to their projects. And so we haven't seen any true impact yet. We have surveyed a lot of our customers in terms of the impact of tariffs and how they're navigating it and kind of what I think you're hearing from anybody, everybody, it's just too early to tell.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

We hear lots of different, we'll pass the cost on, well, there'll be no impact. We have some customers, actually, it'll be an advantage for them. And so it just depends on the situation. But I do think it's just really too early to call what the impact of all this will be on forward growth. But generally, at the high level, I still feel very positive.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

If you look at the pipeline, it's solidly there. We expect to continue to pull that pipeline through in the coming quarter. And so in the at least over the next ninety, one hundred and twenty days, I feel very good about the growth outlook for us, feel solid in our sort of mid to high single digit growth for the coming quarter on loans. And then beyond that, we'll be dependent on sort of the more broader macroeconomic issues and whether or not that impacts our customers. But so far, so good.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

They seem to be holding in there with no real issues. Pipeline seems to be holding in. And obviously, our heads are in the sand. We're pulling our customers, talking to our customers, being thoughtful here.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Yeah. Yeah. And look, I mean, you guys are always really conservative. You got a strong track record of asset quality, a disciplined approach to credit. Maybe as you just staying on the topic of the uncertainty, as you step back and think about the potential impacts, I guess, is there anything that you're watching more closely?

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Has there been any changes to your credit box or underwriting or even approach to risk ratings? I mean, there been any just shifts just given the volatility?

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

No real shifts, other than as we're looking at new credits, obviously, we're having fairly deep conversations around what the impact of tariffs could be on that opportunity, obviously, writing up in the write ups, how that customer can mitigate that risk, what capacity do they have to carry their project given the uncertainty. And so it's just requiring a deeper level of discipline. But generally, I think that we're just continuing to do what we do. We're not pulled back yet at this point. We're taking it customer by customer and just thoughtfully looking at each of our credits one by one.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Risk rating and the like, we continue to just remain very conservative. Obviously, time moves on, we'll have to contemplate tariffs as things come through renewal and the like. But we'll just continue to take it day by day.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Okay.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

David,

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

this is Michael. I just want to

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

add one thing there. I think with all the new bankers that we've brought on, they have long tenured relationships with their customers. And so a lot of growth will be supported just by moving over relationships that they're already really connected with versus being completely dependent on kind of the macro environment and picking up net new green shoots.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Yeah, that's an important distinction. Thanks. And then last one, just wanted to touch on the fee side. Obviously, there's a lot of positives on the fee income side. The guide implies maybe a little bit of downside from the first quarter.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

The market pullback can obviously impact wealth management. Could you just touch on maybe some of the puts and takes on the various fee income lines?

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

Sure, David. This is Michael. Yes, I think versus the fourth quarter, as we called out, we had some one time benefits like the SBIC write up that we spent on sort of moving out the FinTech portfolio in the fourth quarter. Moving here into the first quarter, we have some seasonal declines obviously in some of the deposit service charges and fees that will continue to build throughout the year. We're obviously growing deposits, so that's a tailwind of the specific deposit related fees in TM and other areas.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

And same with some of the seasonal things in marine, mortgage, etcetera. And then we've had a little bit of contribution here from SBA market getting a little better. So just kind of some general reset seasonally in the first quarter and some growth from there in various businesses including wealth, TM and SBA.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Yeah, while wealth may see some pullback due to the fact that the equity markets pulled back, a fairly large portion of our wealth portfolio is actually fixed income, so it probably is not as impactful as it may be for other investment strategies. And often times, when we see fairly big uncertainty like this, it opens up opportunities for us to look at moving new clients into CECO. So, in some ways, it's it's a little bit challenging. In other ways, it's a material opportunity for us.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Okay. Terrific. Thanks, everybody. Great quarter.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Thanks, Dave.

Operator

Next question comes from the line of Russell Gunther with Stephens. Your line is open.

Russell Gunther
Managing Director at Stephens Inc

Hey, good morning, guys.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Good morning, Russell.

Russell Gunther
Managing Director at Stephens Inc

Good morning, Chuck. Wanted to follow-up on the margin discussion. Hear you guys on NII growth expected for the rest of the year. Appreciate all the color on slide 14. And so my question is on the cost of deposits going forward.

Russell Gunther
Managing Director at Stephens Inc

I've been kind of bouncing in that 385,000,000 over the course of 1Q. How are you thinking about that trend going forward in the absence of rate cut?

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

Hey, Russell, this is Michael. I think we still have opportunities to continue to make some tactical adjustments to our deposit costs coming out of what was a big increase and a sudden increase in rates and then a quick decline as well. We've kind of made a lot of top of the house movements. But I think given our relationship banking model, etcetera, we're making tactical adjustments every day. And so I think there's still some opportunities there to move deposit costs favorably into the rest of the year.

Michael Young
Executive VP, Treasurer & Director of Investor Relations at Seacoast Banking of Florida

So we'll continue to focus on that, but it's tactical at this point probably versus significant. The other key piece is really the demand deposits, right, non interest bearing deposits. We had really strong growth as we brought on new bankers and new relationships, and we continue to move those in every day. And so I think that's the other key trend to watch as we continue to grow just our overall relationship based deposit book in the non interest bearing deposits will be a key driver there as well.

Russell Gunther
Managing Director at Stephens Inc

Yeah, great. Good point, Michael. Thank you. And then maybe on the along the lines of the revenue producers that you hired in this quarter, what's the pipeline for continued lift outs? Is it expectations for that to continue over the course of the year?

Russell Gunther
Managing Director at Stephens Inc

Is there some kind of seasonality as to when you can bring people over based on bonuses? Just trying to get a sense for any potential additional ads this year and how that may or may not impact the expense run rate as well?

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Yes, great question. The way I describe it is I think we've built the team to grow in that mid to high single digit type profile moving forward fairly with some confidence. And so, I don't know that we've got

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

to add a lot

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

of additional overhead there over the lease over the next couple of quarters. As we move out into the coming year, we'll see how things sort of play out. But I think at this point, we'll be pretty selective. On the other side, another hand of that conversation, we have a lot of inbound demand wanting to build banks and markets and things for us, which is exciting and we will get to it with time and we're excited to hear all the interest in becoming part of our franchise. But I think at this point, at least over the next couple of quarters, I'm primarily focused on improving our profitability profile.

Russell Gunther
Managing Director at Stephens Inc

Thank you, Chuck. I appreciate that. And then guys, last one for me. Understanding a good portion amount of book is marked asset quality trends this quarter are favorable, understanding the dynamics with the ACL this quarter. But I guess just as you are digesting the potential impact of tariffs, could you just share any particular sectors of the loan portfolio you're keeping an incremental eye on if any?

James Stallings
Chief Credit Officer at Seacoast Banking of Florida

Hey, good morning, Russell. James Stellings here. I think in terms of what we're looking at, we're certainly watching our C and I businesses to try to understand what the impacts of tariffs are. As Chuck mentioned, we've talked to a number of our clients already and the general sense is that it's too soon to tell. What I would say that we've been pleasantly surprised by is that a number of our clients that we've spoken to already have indicated that they've been considering supply chain disruptions and tariffs since before the election, and recall that many of these clients experienced supply chain disruptions and significant cost inflation post COVID and so many of them have adjusted their business models with the ability to pass through to not get caught in fixed price contracts and to pre buy.

James Stallings
Chief Credit Officer at Seacoast Banking of Florida

A lot of them have increased inventory ahead of the expected tariff impact. So it's it's too early to tell. We are still cautious regarding C and I businesses in our portfolio that may have derivative exposure to higher cost inputs as a result of tariffs and potential supply chain disruptions. But at this point, we feel like they're pretty well anticipating it and have already begun to take action.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Tracy, you want address the allowance component?

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Yeah, I think the portfolio continues to perform well. Our judgments are balanced with our awareness of the volatility in market conditions and the potential for deterioration. So, as James said, we're monitoring the portfolio closely for potential impacts on our borrowers of changes in economic and fiscal policy, market conditions changing. We think right now the 1.34% allowance coverage is prudent, but of course, we'll continue to take into account all factors as we go forward.

Russell Gunther
Managing Director at Stephens Inc

Got it. Hey, guys. Thank you very much for taking all of my questions.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

Thanks, Ross.

Operator

And our last question comes from the line of David Bischoff with Hovde Group. Your line is open.

David Bishop
Director at Hovde Group

Yes, good morning. Following on Russell's question about credit. Chuck, I think you heard the preamble you said most of the charge offs this quarter were previously acquired credit. I'm curious, you sort of view this level of net charge offs. I think they've been running in the mid to high 20s lately.

David Bishop
Director at Hovde Group

Is that sort of the normalized level or do you think we see some improvement as you sort of run through some of these acquired loan books and continue to charge those off?

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

It's really hard to provide any solid guidance here, but I think 25 basis points of net charge offs is a reasonable assumption. It's going to bump around here and there, but that's kind of what we run-in our model.

David Bishop
Director at Hovde Group

Got it. And then the bump up in the reserve this quarter, just curious in terms of the the economic forecast you used in sort of the Moody's baseline, severe, just curious what are sort of the drivers to that ACL?

Tracey Dexter
EVP & CFO at Seacoast Banking of Florida

Yes, we use a blend of three Moody's economic scenarios, baseline, the S3, and the more positive S1 in different weightings. And so, of course, when we run the model at the beginning of our quarter end process, that still got some lag time in the economic indicators. So, we just tune into changes and kind of acknowledging the volatility in those factors. So, our allowance contemplates the more recent volatility and does still have the various weightings on the three economic scenarios.

David Bishop
Director at Hovde Group

Okay, great. And then, you know, final question, Chuck and Tracy, and I've been seeing some headlines, you know, recently about some of the softness maybe on the residential side of the state in Florida with insurance rates spiking and such. Are you seeing that play into any weakness within the local housing markets across your footprint? Thanks.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

We've not seen any weakness show up. I mean, I think, the way I describe it is our view of the residential market in Florida's values definitely sort of peaked at this point and probably I don't we don't see any sort of sharp decline or anything in values, but we do expect values to probably hold here at this point. The market still feels relatively healthy even though the costs are higher. People are selling houses, people are buying houses. Inventory levels have gotten a little higher over the last three or four quarters.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

But I think generally things are okay and things are healthy even regardless of higher cost of insurance, etcetera. Florida is still a very attractive place to move to. Taxation remains exceptionally low. In fact, I just saw that we're looking at potentially lowering our state sales tax, which is, from my point of view, incredibly impressive given the state's balanced budget and even surplus. And I think the state is doing a pretty good job of also supporting our insurance companies, bringing a lot of new supply into the market.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

So it's stable, but prices have definitely seemed to hit a peak at this point.

David Bishop
Director at Hovde Group

Got it. Appreciate the color, Chuck.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

All right, Dave. Thank you.

Operator

That concludes the question and answer session. I would like to turn the call back over to Chuck Schafer for closing remarks.

Charles Shaffer
Charles Shaffer
Chairman, President & CEO at Seacoast Banking of Florida

All right. Thank you, operator. I think that will conclude our call. We're around if anybody has any further questions and appreciate the Seacoast team and amazing quarter for growth and we're on to having an amazing year. So thank you all.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you all for joining and you may now disconnect.

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Key Takeaways

  • Seacoast delivered 6% annualized loan growth, 11% deposit growth, a 9 bp expansion in net interest margin, and 22% growth in adjusted pre-tax pre-provision earnings, driving a 10% increase in tangible book value per share.
  • The bank’s fortress balance sheet features a Tier 1 capital ratio of 14.7% and a tangible common equity ratio of 9.6%, supported by robust credit diversification and a granular, relationship-driven deposit franchise in Florida.
  • Asset quality remained strong as nonperforming loans fell to 0.68% of total loans, charge-offs were confined to acquired credits, and the allowance for credit losses was maintained at 1.34% of loans (2.49% including unrecognized discounts) to absorb potential volatility.
  • Seacoast continues to invest in growth with 10 new revenue-producing bankers and two new branches in Fort Lauderdale and Tampa, fueling relationship-based lending and wealth management expansion.
  • The planned acquisition of Heartland Bancshares is on track for a Q3 close, with $412 million of agency mortgage-backed securities pre-purchased to lock in higher yields and streamline post-closing integration.
AI Generated. May Contain Errors.
Earnings Conference Call
Seacoast Banking Co. of Florida Q1 2025
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