Seacoast Banking Corporation of Florida Q1 2025 Earnings Report

Seacoast Banking Corporation of Florida EPS Results

• Actual EPS: $0.38
• Consensus EPS: $0.40
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: N/A

Seacoast Banking Corporation of Florida Revenue Results

• Actual Revenue: $140.70 million
• Expected Revenue: $138.41 million
• Beat/Miss: Beat by +$2.29 million
• YoY Revenue Growth: +12.00%

Seacoast Banking Corporation of Florida Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: After Market Closes
• Conference Call Date: Friday, April 25, 2025
• Conference Call Time: 10:00AM ET

Seacoast Banking Corporation of Florida (NASDAQ:SBCF) operates as a bank holding company through its principal subsidiary, Seacoast National Bank. Headquartered in Stuart, Florida, Seacoast National Bank provides a full range of commercial and retail banking services across the coastal region of Florida. Its network of branches serves customers from Martin County through Miami-Dade County, offering deposit accounts, lending solutions, cash management and payment services to individuals, small businesses and middle-market companies.

In addition to traditional banking, Seacoast offers specialized mortgage lending and wealth management services. Through Seacoast Mortgage, the company originates residential and commercial real estate loans, while its wealth division provides private banking, trust administration and financial planning. The bank’s treasury management platform supports business clients with online banking tools, merchant card processing, payroll services and liquidity solutions. Insurance products, including property/casualty and personal risk coverage, are also marketed to retail and commercial customers.

Founded in 1926 as the Bank of Stuart, Seacoast has grown organically and through strategic acquisitions to become a community-oriented institution with deep ties to its service area. The company emphasizes personalized service and local decision-making, while investing in digital platforms to enhance customer experience. Glenn R. Lubert, Jr. serves as president and chief executive officer, guiding Seacoast’s mission to support economic growth and financial well-being within the Florida communities it serves.

Seacoast Banking Corporation of Florida Q1 2025 Earnings Call Transcript

Key Takeaways

• The company delivered a strong Q1 with net income of $31.5 million, 6% annualized loan growth, 11% deposit growth, a 9 bp expansion in net interest margin and a 22% increase in adjusted pre‐tax pre‐provision earnings.
• Seacoast maintains a fortress balance sheet with a 14.7% Tier 1 capital ratio, 9.6% tangible common equity to tangible assets and a granular deposit franchise, providing optionality amid market turbulence.
• Asset quality remained robust as the NPL ratio fell by 68 bps, charge-offs were driven by acquired credits and the allowance coverage was held flat at 1.34% of total loans to reflect market uncertainty.
• Management expects continued momentum with mid-to-high single digit loan growth, ongoing net interest income expansion and the planned closing of the Heartland Bancshares acquisition in Q3 to further scale its Florida footprint.
• Despite optimism, executives cited emerging macroeconomic risks, tariff uncertainty and increased volatility, taking a conservative provisioning approach until clarity improves.

Presentation

[Operator]

Welcome to Seacoast Banking Corporation's First Quarter 2025 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 speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

[Operator]

If you would like to withdraw your question, again, press the star one. 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.

[Operator]

Seacoast will be discussing issues that constitute forward-looking statements within the meaning of the Securities and Exchange Act, and its comments today are intended to be covered within the meaning of that act. Please note that this conference is being recorded. I will now turn the call over to Chuck Shaffer, Chairman and CEO of Seacoast Bank. Mr. Shaffer, you may begin.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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 Tracey Dexter, our Chief Financial Officer; Michael Young, our Treasurer and Director of Investor Relations; and James Stallings, our Chief Credit Officer. Before we delve into earnings, I'd like to address the recent market uncertainty over the past three weeks.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Clearly, there 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've 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.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Additionally, we primarily operate in Florida, one of the strongest economies in the nation. 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 at the end of 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.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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. This quarter marked a promising start to 2025, and our investments and talent across our footprint have fully taken effect, driving substantial onboarding and new relationships.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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 to 68 basis points. Charge-offs for the quarter were entirely driven by acquired credits.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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. Lastly, everything is progressing well with Heartland Bancshares. We expect to close and convert this transaction in the third quarter. I'll now pass the call to Tracey, who will review our financial results.

[Tracey Dexter, Former CFO at Seacoast Bank]

Thank you, Chuck. Good morning, everyone. Directing your attention to first quarter results, beginning with slide four. Seacoast reported net income of $31.5 million, or $0.37 per share in the first quarter, and pre-tax pre-provision income increased $2.7 million-$50.6 million. 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.

[Tracey Dexter, Former CFO at Seacoast Bank]

Total deposits were up 11% annualized, and non-interest-bearing balances grew 17% annualized. Loan production was strong, with growth in balances near 6% on an annualized basis. Net interest income of $118.5 million is up 2% from the prior quarter, with the cost of deposits declining 15 basis points to 1.93%. Net interest margin expanded 9 basis points to 3.48%, and excluding accretion on acquired loans, net interest margin expanded 19 basis points to 3.24%.

[Tracey Dexter, Former CFO at Seacoast Bank]

Tangible book value per share of $16.71 represents a 10% year-over-year increase. Our capital position continues to be very strong. Seacoast's Tier 1 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.

[Tracey Dexter, Former CFO at Seacoast Bank]

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 2025. Turning to slide five, net interest income expanded by $2.7 million during the quarter, driven primarily by lower deposit costs. The net interest margin expanded 9 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.

[Tracey Dexter, Former CFO at Seacoast Bank]

Loan yields were down 3 basis points to 5.9%. 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.

[Tracey Dexter, Former CFO at Seacoast Bank]

Moving to slide six, non-interest income excluding securities activity was $22 million, increasing 8% from the first quarter of 2024, and a 20% increase in wealth management revenue and a 25% increase in insurance agency income year-over-year. 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.

[Tracey Dexter, Former CFO at Seacoast Bank]

Other income was lower by $4.1 million 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 non-interest income, and we expect non-interest income in a range from $20 million-$22 million. Moving to slide seven, our wealth division continued its strong growth, adding $117 million in new assets under management in the first quarter, with total AUM increasing 14% year-over-year.

[Tracey Dexter, Former CFO at Seacoast Bank]

On slide eight, non-interest expense in the first quarter was $90.6 million on a GAAP basis and included $1.1 million in merger-related expenses. Consistent with expectations, the first quarter was seasonally higher, with higher payroll tax and 401(k) contributions. Increases in other line items reflect the expansion of our commercial team by 10 bankers and the addition of two new branch locations.

[Tracey Dexter, Former CFO at Seacoast Bank]

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 million-$89 million. Turning to slide nine, loan outstandings increased at an annualized rate of 5.6%, with production of $555 million in the first quarter and the pipeline expanding by over 40% from the prior quarter.

[Tracey Dexter, Former CFO at Seacoast Bank]

Loan yields were down 3 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.

[Tracey Dexter, Former CFO at Seacoast Bank]

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. Non-owner-occupied commercial real estate loans represent 34% of all loans and are distributed across industries and collateral types.

[Tracey Dexter, Former CFO at Seacoast Bank]

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 34% and 220% 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, the allowance for credit losses totaled $140.3 million, or 1.34% of total loans, flat to the prior quarter.

[Tracey Dexter, Former CFO at Seacoast Bank]

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 $119.5 million remaining unrecognized discount on acquired loans, totals $259.8 million, or 2.49% of total loans that's available to cover potential losses, providing substantial loss absorption capacity.

[Tracey Dexter, Former CFO at Seacoast Bank]

Moving to slide 12, looking at quarterly trends in credit metrics. Non-performing loans represented 0.68% of total loans, a decrease of approximately $21 million from the prior quarter. Accruing past-due loans remain low at 0.16% of total loans. Moving to slide 13 in 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%.

[Tracey Dexter, Former CFO at Seacoast Bank]

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 million in primarily agency mortgage-backed securities, with an average book yield of 5.51%.

[Tracey Dexter, Former CFO at Seacoast Bank]

Turning to slide 14 in the deposit portfolio, total deposits increased to $12.6 billion, growing at an 11% annualized rate from the prior quarter, and non-interest-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%.

[Tracey Dexter, Former CFO at Seacoast Bank]

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. On slide 15, Seacoast continues to benefit from a diverse deposit base. Customer transaction accounts represent 50% of total deposits, which continues to highlight our long-standing relationship-focused approach.

[Tracey Dexter, Former CFO at Seacoast Bank]

Our customers are highly engaged and have a long history with us, and low average balances reflect the granular relationship nature of our franchise. 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, Former CFO at Seacoast Bank]

Our risk-based and Tier 1 capital ratios are among the highest in the industry. In summary, we remain steadfastly committed to driving shareholder value, and our consistent disciplined growth strategy positions us well as we continue to build Florida's leading regional bank. I'll now turn the call back to you, Chuck.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Thank you, Tracey. Operator, I think we're ready for Q&A.

[Operator]

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join a queue. If you would like to withdraw your question, simply press star one again.

[Operator]

If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Our first question comes from the line of Stephen Scouten with Piper Sandler. Your line is open.

[Stephen Scouten, Managing Director and Senior Research Analyst at Piper Sandler]

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

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Hey, Steve. Good morning.

[Stephen Scouten, Managing Director and Senior Research Analyst at Piper Sandler]

Wonderful 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? So you're just kind of front-running that trade a little bit?

[Michael Young, CFO at Seacoast Bank]

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

[Michael Young, CFO at Seacoast Bank]

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 there is not a lot of rate volatility impact to the AOCI mark or the capital piece, even with rates moving up and down here. 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, Managing Director and Senior Research Analyst at Piper Sandler]

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? I mean, there was some impact from the rate cuts at the end of the year in the quarter. I guess, how did that come about? How did that manifest? How should we think about the NIM from here? The move in the core NIM was pretty impressive, I thought.

[Michael Young, CFO at Seacoast Bank]

Yeah, hey, Steven. Kind of this is Michael again. I think there's two sides, obviously, to the NIM equation here, but I'll tackle the loans first. We have about 50% fixed loans, about 29% adjustable loans, and then only 20-21% that are true more floating or immediately adjustable loans.

[Michael Young, CFO at Seacoast Bank]

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. We also had some receive-float hedges that are rolling off here in April as well on our securities portfolio and our loan portfolio. We're becoming more fixed rate as assets yields had lower generally and as rates potentially had lower here. We're just pretty well-positioned for a rates down scenario.

[Michael Young, CFO at Seacoast Bank]

I think that is 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. We will just continue to manage our deposit pricing proactively to continue to drive NIM expansion, both on the deposit cost side, but then our backbook on fixed rate loans and fixed rate securities continues to roll in more and more each day. We are getting a basis point or two basis points kind of a month in terms of yield step up on that. You can see that trend on slide 21.

[Stephen Scouten, Managing Director and Senior Research Analyst at Piper Sandler]

Okay, super. 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. You guys still have it armed with a ton of excess capital. Let's say the environment stabilizes, which I think we all hope it does. 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?

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Yeah, 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.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

I'd feel very confident in the back half of the year, that high single-digit type number, barring the impact of tariffs and economic volatility. Still too early to tell how our customers react to that or what the full impact of that would be. 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.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

I think at this point, we've built that team. When you kind of step back and look at the big picture for us, fairly solid quarter in terms of growth, a lot of investments made over the last 12 to 18 months. 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. At this point, over the remainder of the year, our focus will be on leveraging that investment to drive profitability enhancements throughout the remainder of the year.

[Stephen Scouten, Managing Director and Senior Research Analyst at Piper Sandler]

Fantastic. Thanks so much for the time this morning.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Great course. Thanks.

[Stephen Scouten, Managing Director and Senior Research Analyst at Piper Sandler]

Thank you.

[Operator]

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

[Woody Lay, CFA and VP at KBW]

Hey, good morning.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Good morning, Woody.

[Woody Lay, CFA and VP at KBW]

Just wanted to follow up on the NIM. Core NIM beat expectations in the quarter by about 10 basis points. How should we be thinking about that 335 core NIM target by the end of the year?

[Michael Young, CFO at Seacoast Bank]

Hey, Woody, this is Michael. Yeah, there will be a little bit of impact on the timing around when the Heartland acquisition closes. That's just a caveat to put out there depending on when that closes. Outside of that, the core trends remain positive, I think, in our ability to manage deposit costs lower.

[Michael Young, CFO at Seacoast Bank]

Like I said, just the backbook repricing that's going to continue for some time here over the next few years. 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. We are managing deposit costs carefully to continue to drive NIM expansion and profitability improvement, as Chuck mentioned. I think that's really the focus. As it pertains to the 335 NIM in the fourth quarter, I don't think we've updated guidance explicitly there.

[Michael Young, CFO at Seacoast Bank]

If there are more rate cuts, we said we would be higher than that, certainly. I think the timing of the Heartland acquisition close could impact that a little bit as well. We feel good about the trajectory, particularly of NII dollars, but also NIM going forward.

[Woody Lay, CFA and VP at KBW]

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

[James Stallings, Chief Credit Officer at Seacoast Bank]

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've sort of looked over that. We do not really see any 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 of their units offline.

[James Stallings, Chief Credit Officer at Seacoast Bank]

We had another situation that was an existing C&I business that the underlying business is performing fine, but the owner was excessively distributing. We stepped in and we adjusted the risk grade and took action on that. By and large, it is just a handful of one-off situations that drove that.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

We continue to take a break approach to that, Woody, and just carefully grade over time. That is kind of normal cycle movements here. Things move in, classifieds, they move out through non-accrual. In the case James just described, most of those we expect to remain on accrual and actually do not really expect much loss content. They are all just sort of unique situations.

[Woody Lay, CFA and VP at KBW]

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

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Yeah, 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. Beyond that, we'll be ready to do deals.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Obviously, continue to remain very disciplined in terms of earnings and pricing and the like. Obviously, anything we'd look at would have to contemplate all this volatility that's going on. We're open and ready, but obviously, volatility makes deals more challenging in terms of kind of the way we think about things. 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.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Depending on what things look like as we come through the Heartland deal, buybacks could make sense and M&A could make sense. It just depends on what the environment looks like. Deploying capital, obviously, is very accretive to our franchise given the capital levels.

[Woody Lay, CFA and VP at KBW]

All right. Thanks for taking my questions.

[Michael Young, CFO at Seacoast Bank]

Thanks, Woody.

[Operator]

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

[David Feaster, Managing Director of Banking at Raymond James]

Hi, good morning, everybody.

[Michael Young, CFO at Seacoast Bank]

Good morning, David.

[David Feaster, Managing Director of Banking at Raymond James]

I just wanted to circle back to the loan side. I mean, 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 real tailwind, first of all, from the economic backdrop here in Florida, right? Then the new hires.

[David Feaster, Managing Director of Banking at Raymond James]

I'm just curious, first off, where are you seeing opportunity for growth, and just what's the pulse of your clients as you talk to your bankers? Just given the uncertainty, are you seeing any change in the pull-through of the pipeline, or would you expect to see any just given the trade wars? Just kind of curious what you're seeing on that front.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Sort of broad-based comment. The pipeline remains. We've not seen any fallout at this point, which is encouraging. Our customers continue to remain committed to their projects. 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. Kind of what I think you're hearing from everybody, it's just too early to tell.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

We expect to continue to pull that pipeline through in the coming quarter. In at least over the next 90-120 days, I feel very good about the growth outlook for us. I feel solid in our sort of mid to high single-digit growth for the coming quarter on loans. Beyond that, we'll be dependent on sort of the more broader macroeconomic issues and whether or not that impacts our customers.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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

[David Feaster, Managing Director of Banking at Raymond James]

Yeah. Yeah. Look, I mean, you guys are always really conservative. You've 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? Has there been any changes to your credit box or underwriting or even approach to risk ratings? I mean, has there been any just shifts just given the volatility?

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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. It is just requiring a deeper level of discipline.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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

[David Feaster, Managing Director of Banking at Raymond James]

Okay.

[Michael Young, CFO at Seacoast Bank]

David, this is Michael. I just want to add one thing there. I think with all the new bankers that we've brought on, they have long-tenured relationships with their customers. A lot of growth will be supported just by moving over those relationships that they are already really connected with versus being completely dependent on kind of the macro environment and picking up net new green shoots.

[David Feaster, Managing Director of Banking at Raymond James]

Yeah. That's an important distinction. Thanks. 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. 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, CFO at Seacoast Bank]

Sure, David. This is Michael. Yeah, 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.

[Michael Young, CFO at Seacoast Bank]

We're obviously growing deposits, so that's a tailwind to the specific deposit-related fees in TM and other areas. Same with some of the seasonal things in marine, mortgage, etc. We have had a little bit of contribution here from SBA market getting a little better. Just kind of some general reset seasonally in the first quarter and some growth from there in various businesses, including wealth, TM, and SBA.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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

[David Feaster, Managing Director of Banking at Raymond James]

Okay. Terrific. Thanks, everybody. Great quarter.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Thanks, David.

[Operator]

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

[Russell Gunther, Managing Director at Stephens]

Hey, good morning, guys.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Morning, Russell.

[Russell Gunther, Managing Director at Stephens]

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. My question is on the cost of deposits going forward. Been kind of bouncing in that 192-193 over the course of 1Q. How are you thinking about that trend going forward in the absence of rate cuts?

[Michael Young, CFO at Seacoast Bank]

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, etc., we're making tactical adjustments every day.

[Michael Young, CFO at Seacoast Bank]

I think there's still some opportunities there to move deposit costs favorably into the rest of the year. 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.

[Michael Young, CFO at Seacoast Bank]

We had really strong growth as we brought on new bankers and new relationships, and we continue to move those in every day. I think that's the other key trend to watch as we continue to grow just our overall relationship-based deposit book, and the non-interest-bearing deposits will be a key driver there as well.

[Russell Gunther, Managing Director at Stephens]

Yeah. Great. Good point, Michael. Thank you. Maybe along the lines of the revenue producers that you hired in this quarter, what's the pipeline for continued liftouts? Is it expectations for that to continue over the course of the year? 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.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

Yeah. 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. I don't know that we've got to add a lot of additional overhead there, at least over the next couple of quarters.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

As we move out into the coming year, we'll see how things sort of play out. I think at this point, we'll be pretty selective. On the other side, on the other hand of that conversation, we have a lot of inbound demand wanting to build banks and markets and things for us, which is exciting. We will get to it with time.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

We're excited to hear all the interest in becoming part of our franchise. 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]

Thank you, Chuck. I appreciate that. Guys, last one for me. Understanding a good portion of the book is marked, asset quality trends this quarter are favorable. Understanding the dynamics with the ACL this quarter. 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 Bank]

Hey. Good morning, Russell. James Stallings here. I think in terms of what we're looking at, we're certainly watching our C&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. The general sense is that it's too soon to tell.

[James Stallings, Chief Credit Officer at Seacoast Bank]

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. Recall that many of these clients experienced supply chain disruptions and significant cost inflation post-COVID. 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 Bank]

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

[Michael Young, CFO at Seacoast Bank]

Tracey, you want to address the allowance front?

[Tracey Dexter, Former CFO at Seacoast Bank]

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. 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]

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

[Michael Young, CFO at Seacoast Bank]

Thanks, Russ.

[Operator]

Our last question comes from the line of David Bishop with Hovde Group. Your line is open.

[David Bishop, Director of Research Department at Hovde Group]

Yeah. 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 if you sort of view this level of net charge-offs. I think they've been running in the mid to high 20s lately. 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?

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

It's really hard to provide any solid guidance here, but I think 25 basis points in 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 of Research Department at Hovde Group]

Got it. The bump up in the reserve this quarter, just curious in terms of the economic forecast you use. Are you using sort of the Moody's baseline, severe? Just curious what are sort of the drivers to that ACL?

[Tracey Dexter, Former CFO at Seacoast Bank]

Yeah. We use a blend of three Moody's economic scenarios: the baseline, the S3, and the more positive S1 in different weightings. 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. We just tune into changes and kind of acknowledging the volatility in those factors. Our allowance contemplates the more recent volatility and does still have the various weightings on the three economic scenarios.

[David Bishop, Director of Research Department at Hovde Group]

Okay. Great. Final question, Chuck and Tracey. I've been seeing some headlines 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.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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 have peaked at this point. 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.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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. I think generally things are okay and things are healthy even regardless of higher cost of insurance, etc. Florida is still a very attractive place to move to. Taxation remains exceptionally low.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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. I think the state's doing a pretty good job of also supporting our insurance companies, bringing a lot of new supply into the market. It is stable, but prices have definitely seemed to hit a peak at this point.

[David Bishop, Director of Research Department at Hovde Group]

Got it. Appreciate the color, Chuck.

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

All right, David. Thank you.

[Operator]

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

[Chuck Shaffer, Chairman and CEO at Seacoast Bank]

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

[Operator]

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

Participants

Analysts

• Stephen Scouten, Managing Director and Senior Research Analyst at Piper Sandler
• David Feaster, Managing Director of Banking at Raymond James
• Woody Lay, CFA and VP at KBW
• David Bishop, Director of Research Department at Hovde Group
• James Stallings, Chief Credit Officer at Seacoast Bank
• Chuck Shaffer, Chairman and CEO at Seacoast Bank
• Tracey Dexter, Former CFO at Seacoast Bank
• Michael Young, CFO at Seacoast Bank
• Russell Gunther, Managing Director at Stephens