Seacoast Banking Corporation of Florida Q2 2025 Earnings Report

Seacoast Banking Corporation of Florida EPS Results

• Actual EPS: $0.52
• Consensus EPS: $0.42
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: $0.36

Seacoast Banking Corporation of Florida Revenue Results

• Actual Revenue: $151.40 million
• Expected Revenue: $146.08 million
• Beat/Miss: Beat by +$5.33 million
• YoY Revenue Growth: N/A

Seacoast Banking Corporation of Florida Announcement Details

• Quarter: Q2 2025
• Date: 7/24/2025
• Time: After Market Closes
• Conference Call Date: Friday, July 25, 2025
• Conference Call Time: 10:00AM ET

Seacoast Banking Corp. of Florida is a financial holding company, which engages in the provision of integrated financial services. It provides banking and investment services to businesses and consumers, including personal and business deposit products, Internet and mobile banking, personal, commercial and mortgage loans, wealth management services, and treasury management solutions. The company was founded in 1983 and is headquartered in Stuart, FL.

Seacoast Banking Corporation of Florida Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Net income rose 36% sequentially to $42.7 million, driving a 1.08% return on assets and a 12.8% return on tangible common equity.
• Positive Sentiment: Annualized loan growth reached 6.4% with a $921 million pipeline, and management expects mid- to high-single digit growth to continue.
• Positive Sentiment: Closed the Heartland acquisition and remain on track to complete the Villages deal in Q4, both adding high-quality deposits and enhancing profitability.
• Positive Sentiment: Deposit costs declined to 1.8%, contributing to a 3.58% net interest margin and an anticipated core NIM of ~3.35% by year-end (plus ~10 bps from acquisitions).
• Positive Sentiment: Asset quality remains strong with nonperforming loans at 0.61% and net charge-offs of $2.5 million, while allowance coverage held at 1.34% of outstanding loans.

Presentation

[Operator]

Welcome to Seacoast Banking Corporation's Second Quarter twenty twenty five Earnings Conference Call. My name is Angela, and I will be your operator. 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. Please note that this conference is being recorded.

[Operator]

I will now turn the call over to Chuck Schafer, Chairman and CEO of Seacoast Bank. Mr. Schafer, you may begin.

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

Okay. Thank you, Angela, and good morning, everyone. As we proceed with our presentation, we'll refer to the second quarter earnings slide deck available at seacoastbanking.com. Joining me today are Tracy Dexter, our Chief Financial Officer Michael Young, our Treasurer, Head of Corporate Development and Investor Relations and James Stallings, our Chief Credit Officer. The CECOST team delivered exceptional results in the second quarter of twenty twenty five, reflecting the strength of our growing franchise, the discipline and focus of our team, and the momentum we continue to build across all of our markets.

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

This quarter was highlighted by a substantial increase in net income, up 36% from the prior quarter, largely driven by a 10 basis point expansion in the net interest margin, and this was the result of robust loan growth and disciplined deposit cost management. We also delivered solid performance in non interest income and continued to demonstrate effective expense control. Profitability improved across the board. We made meaningful progress in our strategic priorities. Annualized loan growth reached 6.4, supported by a strong commercial pipeline, an outcome of a multi year strategy to attract top talent from larger institutions.

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

This talent continues to drive high quality loan production and deepen customer relationships. We also successfully closed the Heartland Bancshares transaction a few weeks ago and remain on track to close the Villages Bancorporation acquisition in the fourth quarter. Both franchises bring high quality deposit bases and complementary balance sheets. Once fully integrated, we expect these transactions to significantly enhance Seacoast's profitability profile. Turning to credit, asset quality remained sound, non performing loans declined to 0.61 of total loans, and net charge offs were just $2,500,000 reflecting our continued focus on disciplined underwriting and proactive risk management.

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

Criticized and classified loans remain stable. And in closing, I want to express my sincere appreciation to our dedicated associates for their commitment to advancing our growth and profitability goals. Their focus and execution continue to drive our success. We remain very confident in our strategic direction and we are enthusiastic about the opportunities that lie ahead. With that, I will turn it over to Tracy to walk through our financial results. Tracy?

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Thank you, Chuck. Good morning, everyone. Directing your attention to second quarter results, beginning with Slide four. The Seacoast team delivered a strong quarter with net income of $42,700,000 or $0.50 per share, increasing 36% from the prior quarter and adjusted net income, which excludes merger related charges, increasing 39% sequentially to $44,500,000 or $0.52 per share. Profitability metrics are all improved and include a return on assets of 1.08%, return on tangible common equity of 12.8% and an improvement in the efficiency ratio, which, excluding merger related charges, was 55%.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Loan production was solid, with growth in balances over 6% on an annualized basis. Net interest income was $126,900,000 an increase of 7% from the prior quarter, and net interest margin expanded 10 basis points to 3.58%. Excluding accretion on acquired loans, net interest margin expanded five basis points to 3.29%. Contributing to the NIM improvement is a decline in deposit costs from 1.93% in the prior quarter to 1.8% in the second quarter, reflecting our continued focus on relationship based funding pricing. Tangible book value per share of $17.19 represents a 12% year over year increase.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Our capital position continues to be very strong. Seacoast Tier one capital ratio is 14.6%, and the ratio of tangible common equity to tangible assets is 9.75%. We completed our acquisition of Heartland Bancshares on July 11, adding four branches and approximately $777,000,000 in assets. We announced our proposed acquisition of Villages Bank Corporation, which will add a significant additional presence in Central Florida and approximately $4,100,000,000 in assets. That acquisition is expected to close in late October twenty twenty five.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Turning to slide five. Net interest income increased by $8,400,000 during the quarter, driven by loan growth and by lower deposit costs. The net interest margin expanded 10 basis points to 3.58% and excluding accretion on acquired loans, expanded five basis points to 3.29%. In the securities portfolio, yields decreased one basis point to 3.87%. Loan yields expanded eight basis points to 5.98%.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Excluding accretion, loan yields were flat compared to the prior quarter. Through proactive deposit cost management, we've brought the cost of deposits down by 13 basis points during the quarter to 1.8%. With strong momentum in loan growth, deposit costs now lower and stabilizing, additional liquidity and accretive acquisitions, we expect net interest income to continue to grow through the remainder of the year. Additionally, we continue to expect to exit the year with the core net interest margin of approximately 3.35%, inclusive of one expected rate cut in September and one in December. And with the two acquisitions, that could add approximately 10 basis points to that figure.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Moving to slide six. Noninterest income, excluding securities activity, was $24,500,000 increasing 10% from the second quarter of twenty twenty four. Fee revenue continues to benefit from our expansion of treasury management services to commercial customers. Our wealth and insurance businesses provide consistent strong results. Salable mortgages originated during the quarter generated gains of $700,000 BOLI income increased to $3,400,000 in the second quarter and included a $900,000 benefit.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Other income totaled $7,500,000 and included a $3,000,000 payroll tax credit received during the quarter claimed by a bank that we previously acquired. Looking ahead to the third quarter, 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 $215,000,000 in new assets under management so far this year, with total AUM increasing 16% compared to this time last year. Moving to slide eight. Noninterest expense in the second quarter was $91,700,000 an increase of $1,100,000 The current quarter includes $2,400,000 in merger related expenses.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Higher salaries and wages reflect annual merit increases and performance driven incentives. Other categories of expenses are in line with our expectations and reflect our continued focus on profitability and performance. Our adjusted efficiency ratio improved to 55.4%, down from 59.5 in the first quarter, demonstrating continued operating leverage. We continue with that focus. And with the addition of the Heartland franchise, we expect adjusted expenses for the third quarter, which excludes direct merger related costs, to be in a range of 92,000,000 to 94,000,000 Turning to slide nine.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Loan outstandings increased at an annualized 6.4%, with production of $854,000,000 in the second quarter. Pipelines remained strong at $921,000,000 and we continue to see strong demand across our markets. Loan yields expanded eight basis points, with higher accretion on acquired loans resulting from elevated payoffs. Looking forward, the pipeline is very strong, and we expect continued mid- high to single digit organic loan growth in the coming quarter and for the full year 2025, though the impact of tariffs may add some uncertainty. Turning to Slide 10.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

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. 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 33221% of consolidated risk based capital, respectively.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

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 $142,200,000 or 1.34% of total loans, with no change in allowance coverage compared 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 $108,500,000 remaining unrecognized discount on acquired loans, totals $250,600,000 or 2.36% of total loans that's available to cover potential losses, providing substantial loss absorption capacity.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Moving to Slide 12, looking at quarterly trends and credit metrics. Credit quality remains strong. We recorded net charge offs of $2,500,000 during the quarter or nine basis points annualized. Nonperforming loans declined by $6,800,000 during the quarter and represent only 0.61% of total loans. And accruing past due loans moved lower to 0.13% of total loans.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

The level of criticized and classified loans declined slightly to 2.39% of total loans. Moving to slide 13 and the investment securities portfolio. We leveraged wholesale funding to purchase securities in the first half of the year in advance of the Heartland acquisition, adding primarily agency securities to the portfolio with an average book yield near 5%. Interest rate swaps that had been beneficial to prior quarters matured in April, with the impact to the overall portfolio yield offset by the new purchases. Net unrealized losses in the AFS portfolio improved by $16,000,000 during the quarter, driven by changes in long term rates.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Turning to Slide 14 and the deposit portfolio. Total deposits dipped $77,000,000 reflecting, as expected, typical seasonal slowness and a strategic focus on exiting very high rate deposit relationships. We took proactive steps to manage down the cost of deposits, which declined 13 basis points to 1.8%. This funding will be replaced with lower cost core franchise deposits from Heartland, improving our margin outlook. We continue to onboard new relationships and build market share with a focus on core deposits.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

We expect low single digit organic deposit growth for the full year 2025. On slide 15, Seacoast continues to benefit from a diverse deposit base. Customer transaction accounts represent 47% 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.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Tangible book value per share has grown to $17.19 and the ratio of tangible common equity to tangible assets is exceptionally strong at 9.8%. We saw meaningful improvements in return on equity measures, and our risk based and Tier one capital ratios remain among the highest in the industry. As a reminder, we'll be putting some of this capital to work in the Heartland and Villages transactions, which will materially improve our return on capital. In summary, results this quarter reflect the strength of our core franchise and disciplined execution across the organization. We remain confident in our ability to deliver strong, sustainable performance.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Our balance sheet is well positioned, and our capital position is strong. We'll continue to execute on our organic growth and profitability goals as we integrate recent acquisitions and grow the franchise. I'll now turn the call back to you, Chuck.

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

All right. Thank you, Tracy. And operator, we'll take some questions.

[Operator]

Thank you. We will now begin the question and answer And your first question comes from the line of David Feaster with Raymond James. Your line is now open.

[David Feaster, Director - Banking at Raymond James Financial]

Hi, good morning everybody.

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

Good morning, David.

[Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida]

Good morning, Dave.

[David Feaster, Director - Banking at Raymond James Financial]

I wanna start on on the growth side. You know, really encouraged by the growth trends that you've been seeing over the past few quarters and the strength the continued strength of the pipeline. Just wanted to get a sense first off on the competitive landscape from your standpoint in Florida and then some of the drivers behind this growth. I mean, is the growth, like, is it increased demand and activity from your clients as maybe things have settled down or less maybe the worst case scenario with trade wars is kind of off the table? Or is this the hires that you've made really just gaining share and that's the biggest driver? Just kind of curious some of those dynamics.

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

Thanks, David. And I'll start with the drivers of growth and then come back around to the competitive landscape. Obviously, we've had a very focused approach to take advantage of the ability to recruit bankers across all of our markets. We've had significant success with that over the last two or three years and have built, as I've described in the past, what I think is an exceptionally strong commercial and treasury management across our organization. That is driving growth as we continue to onboard clients from that recruiting effort.

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

That's one driver. The second driver is economic conditions remain really strong across the footprint. Demand for credit remains strong. The impact of tariffs at this point has been fairly limited. And really, we've not seen any sort of confidence weaken or anything along those lines.

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

Sort of the market remains still as focused as it has been. The pipeline going into the third quarter remains continues to be strong. And so I feel confident in our ability to deliver that mid to high single digit growth rate at least over the next few quarters and into 2026. Team is doing exceptionally well. And so I feel very confident, David, on our path forward there.

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

And it is largely driven by talent. It's also driven by demand in the marketplace. And kind of on the other side of the big beautiful bill, it seems like we've gotten past any lack of confidence in the forward direction. And I think that's all supportive of growth as we move forward in the coming quarters and into the coming year. The competitive landscape, I would say, continues to probably increasingly get more competitive.

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

We saw particularly in commercial real estate, a lot of large banks pull out of the space in 'twenty four in 'twenty three and 'twenty four in particular and now have come back in, in a material way. It's as competitive as it's ever been kind of across the board, across all of our markets. So, it's full on competitive at this point. And so, but we continue to do well there. We pick our spots carefully and I'm pleased with the growth this quarter and pleased with the outlook for growth.

[David Feaster, Director - Banking at Raymond James Financial]

That's great. That's helpful. And maybe just switching gears to the other side of the balance sheet, right? You've done a great job actively managing funding costs, continue to push deposit costs lower. Obviously, we've got the Heartland and and the Villages deal coming online.

[David Feaster, Director - Banking at Raymond James Financial]

But I guess, at a high level, how how do you think about funding costs? Is there much deposit cost leverage left? And where do you see the most opportunity to drive the core deposit growth that you were talking about?

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

I'll let Michael take the deposit cost side and maybe come back with few comments around driving growth. But Michael, you want to talk a little bit about the outlook for deposit cost?

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

Sure, David. Just what we had a great quarter, great work by the team, just kind of proactive management. We've been speaking to the fact that we were very customer friendly through the liquidity constrained environment 'twenty three and 'twenty four, and we've been bringing deposit costs down as the Fed cut rates and then just some proactive and tactical moves this quarter that really moved the needle for us and improved ROA that we've been focused on. So we've done a lot of that work. I think we want to be judicious here and we don't want to constrain growth.

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

So we're going to balance between growth in volume and rate management from here. But I think really the opportunity at this point is growing those core operating accounts and blending down our cost of funds through DDA growth over time. And with all the bankers we've added, that's been really beneficial to them bringing over relationships and full relationships that should be additive to that. On the volume side, just as a reminder, we're kind of at the seasonal low point for us with public funds at seasonal low points. And then we have the tax related outflows at the end of the first quarter headed into the second quarter.

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

So we should also see the seasonal trends turn to tailwinds from headwinds in the second half. Yes.

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

And the only thing I'd add to that, Michael, I think you answered that really well, is we don't have any deposit verticals or any sort of wholesale deposits in the franchise. We win deposits and loans customer by customer. And the entire balance sheet is relationship based. So as we move forward, as we onboard customers and prospects, particularly those coming off the balance sheets of the larger banks, we'll continue to add to our core deposit franchise. And we're not focused on driving high rate deposits and sort of more transactional based deposits.

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

It is about net new checking core accounts and driving business growth over time.

[David Feaster, Director - Banking at Raymond James Financial]

Okay. That's good. And then just kind of curious maybe some balance sheet optimization thoughts. I mean, you guys have been very active. We got these two deals.

[David Feaster, Director - Banking at Raymond James Financial]

It gives you a ton of financial flexibility and optionality. You've already done some prepurchasing for the Heartland deal. You know, you touched on some of the moves with swaps. I'm just curious, you know, I guess with these two deals and anticipation of Fed cuts and just kind of where we are today, how do you think about has your plans to manage and optimize the balance sheet changed and just some of your priorities here?

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

Sure, David. This is Michael. I think the long term plan is the same. These acquisitions are super valuable deposit franchises and we're super glad to have them as part of the overall Seacoast franchise. It looks a lot like who we are and who we've always been.

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

And so it'll just continue to add ballast to the balance sheet and keep us very steady through various rate cycles that may emerge. Obviously, there's a lot of different permutations and outcomes that may transpire in terms of interest rates over the medium term, and we're just very focused on managing that interest rate risk appropriately. But I think it really gives us a lot of raw material and opportunity to optimize earnings and profitability for the franchise as we move forward. And particularly as time progresses, we've talked a lot about just the fixed rate repricing trends on our balance sheet and even the acquired balance sheet. So, we're stepping into sort of margin expansion assets repricing higher and then this really core sticky deposit franchise that I think we've re evidenced through the second quarter that will be positive for us.

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

So we'll get an initial lift as we reposition the securities portfolios here in the back half of twenty twenty five. And then the upside comes from that low 70s loan to deposit ratio remixing up towards 80% and eventually 85% loan to deposit ratio as we deploy that with banker hires and loan growth over the coming years.

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

Yes. And I would point investors and shareholders back to the deck we put out on the Villages transaction that contemplated both bank deals in the forward direction of Seacoast. And what you can see in that deck is 130 plus ROA emerges fairly very strong return on tangible common equity and that's repositioning. So, believe we're right on track with what we presented in the villages deck there and we also put some earnings guidance in there as well. So, sort of you're looking for where we think we're headed, just go back to that deck. That's the outlook.

[David Feaster, Director - Banking at Raymond James Financial]

That's helpful. Thanks, everybody.

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

Thank you, Dave.

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

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

[Operator]

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

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

Hey, good morning, guys.

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

Hey, good morning, Woody.

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

Wanted to follow-up on deposit costs. I think so far through this easing cycle, interest bearing deposit beta is around 80%. Obviously, there's kind of been some onetime corrections in there stemming from 2023. But how do you think about the deposit beta going forward with incremental rate cuts?

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

Yeah. Hey, Woody, this is Michael. I'll take that one. I think what we had articulated is that we were kind of aggressive late in the cycle on betas on the way up to protect liquidity, and we expected to be aggressive on the way down and reestablishing because we do think we have a very strong deposit franchise, those lower deposit costs that Seacoast is known for. And I think we've evidenced that here through this quarter.

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

So I think you've seen kind of the more aggressive move down in betas and then from here, we'll return to more normalized betas as we have incremental Fed cuts potentially through next year. So we had a 45 cumulative beta this cycle versus prior cycles, in the low 30s, I would expect we kind of return to that low 30s kind of top of the house beta, again, on interest bearing, just total deposits as we see incremental Fed cuts move in from here.

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

Got it, and then I can't remember off the top of my head what the, or if you even specified what the sort of the beta assumptions were at the start of the year for the three thirty five core NIM for Seacoast, but it feels like you would have outperformed expectations a little bit. Have there been any offsets on the asset side that sort of maintaining that core NIM guidance at three thirty five? Or I guess could there be potential upside?

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

Yes, it's a good question, Woody. I think we've certainly moved more on the deposit side than where we maybe expected to be at this point, but also the Fed cuts are occurring later in the year and maybe we'll only have one instead of two. And so if you think about it that way, we're kind of ahead of the game, but where we'll land at the end of the year is maybe just slightly different because of the delay in the Fed cuts doesn't change the cumulative outcome. And then the one other thing I would just call out is on the asset yield side, we've had those benefits from the pay fixed swaps in 2024, kind of handed off to some higher just prepayment and interest recovery benefits as we work through some credit resolution in the first half of this year. And then we'll expect that continued back book fixed rate repricing to really take the lead in the second half of the year combined with, I think, balance sheet growth.

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

And so I think we're just leaning a little more towards growth versus margin optimization in the back half, which should land us in a similar spot. And then we basically spoke to the deals will add roughly, once we close the village, it's about 10 basis points to the margin at that point in time, And so just a little bit KG on when that will close, if that'll be early in the fourth quarter or late in the fourth quarter, we'll kind of dictate how much margin expansion we get there.

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

Got it. Super helpful. And then just last for me. Know over the past year investing in the you've kind of been toggling between investing in the franchise while recognizing the profitability improvement story. We got a pretty notable inflection in the second quarter.

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

I know there's a couple of onetime items that might have benefited, but profitability is still at a really nice level. Just given that and given some of the disruption we've seen in your backyard, how do you think about reinvesting into the franchise?

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

Yes. That's a great question, Woody. And we'll see what opportunities present their self. Obviously, last time there was significant disruption, we materially capitalized on that disruption and you're seeing the benefits of that now pull through our financials. As we move forward, we'll opportunistically look at opportunity and we'll weigh that against delivering what we've committed to shareholders in terms of returns.

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

I'd say my primary focus is delivering what we have in our villages deck and getting our profitability up to where I think it needs to be. But if unique opportunities present themselves, we'll obviously look at them.

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

All right. Thanks for taking my questions.

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

Thank you, Woody.

[Operator]

Your next question comes from the line of David Bashot with Hovde Group. Your line is now open.

[David Bishop, Director - Research at Hovde Group]

Yes. Good morning, guys.

[David Bishop, Director - Research at Hovde Group]

Hey, David. We hearing about, and I think maybe alluded to in the preamble or one of the questions about large banks coming back into the commercial real estate market and such. Just curious what you're seeing out there in terms of loan pricing and spreads, how they've trended over the past ninety days or so?

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

It's been tough. Don't know, James Stallings, you want to talk about what you're seeing? He's our Chief Credit Officer. He's looking at deals every day, commercial real estate pricing.

[James Stallings, EVP & Chief Credit Officer at Seacoast Banking of Florida]

Yeah, thanks Chuck. Thanks, David. It's a good question. We're seeing I think for the top tier sponsors and for really quality assets, we're continuing to see increased competition where we probably didn't see as many banks bidding as aggressively eighteen, twenty four months ago. That has changed in the last ninety days.

[James Stallings, EVP & Chief Credit Officer at Seacoast Banking of Florida]

And I would say we're starting to see some spread compression below a two handle. We're seeing 180, 190 basis point spreads on some really quality transactions. And then there's some pressure on structure. We're seeing sponsors really push for longer IOU periods even with stabilized properties to try to drive their cash on cash returns for investors. So there's some competition, but the good news is the credit quality is holding up and so it's still supportive of the structures that we're having to do to win business.

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

Yes. So we're carefully walking the line there of getting the right risk based returns, but I don't think I think our growth outlook remains very stable, but we'll pick our spots carefully. We're always thoughtful and disciplined is how we approach credit and we'll continue to be. And as pricing compresses, we'll pick our spots there too. Obviously, we'll support our high quality Tier one sponsors as we have in the past.

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

But we'll be thoughtful as we move through time. And it's definitely more competitive than it was a year ago.

[David Bishop, Director - Research at Hovde Group]

Got it. That's a good segue, Chuck. Maybe to our next question here or sticking with credit. Unusually low loss content this quarter, I think our charge offs were sub 10 basis points. Just curious, as you look across the horizon, just maybe any sort of thoughts where you think you've seen that charge off stabilizing here in the near term?

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

Yes, credit quality remains very stable and our outlook is for it to remain stable. We're not seeing any deterioration across the portfolio. If anything, we're seeing it sort of clean up as we've moved through past some of the M and A from sort of 2022 and 2023. What I can tell you is I feel pretty good about our outlook on asset quality. I think it does remain very stable moving forward.

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

And David, is Michael. Just as a reminder, in 2024, we had the consumer fintech portfolio that we've called out before that we largely liquidated in the fourth quarter. That had added about eight basis points to net charge offs. So that's kind of removed and gone. And so you're seeing kind of the benefits of that pull through.

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

But longer term, we expect mid cycle to be 20 to 25 basis points, so it's just kind of a mid cycle level for us.

[David Bishop, Director - Research at Hovde Group]

Got it. And then one sort of housekeeping question, Mike, I know into the Heartland deal, you added the securities in front of that, Should we expect that to unwind here in the third quarter and have some runoff on both the securities and borrowing side? Thanks.

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

Yes, not on the security side because those wouldn't have been a part of our financials. So the securities balances will remain fairly consistent, but we will delever a little bit or plan to on the wholesale funding side. So we had a little higher broker and FHLB borrowings in the second quarter and you'll see those likely come down depending on kind of the path forward for us into the villages. But that's really the plan as we stand here today.

[David Bishop, Director - Research at Hovde Group]

Great, thank you.

[Operator]

Your next question comes from the line of Russell Gunther with Stephens Inc. Your line is now open.

[Russell Gunther, Managing Director at Stephens Inc]

Hey, good morning, guys.

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

Good morning, Russell.

[Russell Gunther, Managing Director at Stephens Inc]

I wanted to good morning, Chuck. Maybe just following up on the loan growth discussion a little bit, make sure I understand. I think more recently you committed to being able to kind of keep with this mid to high single digit pace as you look ahead to '26 even on the bigger balance sheet with these deals. I want to make sure that's the case. And then maybe just address the transaction specifically that transpired last night.

[Russell Gunther, Managing Director at Stephens Inc]

What type of opportunity do you think that might represent and how Seacoast would plan to try to capitalize on dislocation?

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

Yes, sure. Thanks, Russell. Just to reiterate, we still feel very confident in our mid to high single digit growth rate on the loan side going into the back half of this year and into '26. So I think that guidance remains sound and I'm confident in our ability to deliver that. And then the transaction last night, obviously, like I mentioned earlier, any disruption is always beneficial.

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

We'll see how that all plays out and see where opportunities may come to us. We operate with a very sound, strong capital position, sort of in a differentiated way, going to have a lot of liquidity to put to work over the coming years and have a really strong culture inside the organization of supporting front line bankers. And as you see from a lot of the awards we won around best places to work, etcetera, we've got a very strong, capable, sustainable business here, and I think it will be attractive to banking talent over time. And as that opportunities come up, we'll look at them. And any time there's upstream disruption that's beneficial, and even beyond the transaction announced last night, I suspect there will be more over time.

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

And so we'll look to take advantage of that across all our markets.

[Russell Gunther, Managing Director at Stephens Inc]

Yes. I appreciate that, Chuck, a good point certainly on excess liquidity, capital and culture. And then I had a follow-up on the margin expectation just to make sure I heard it right. So core $3.35 NIM for the back half of the year. And then as you fold in the two deals, is the guide for a reported margin of three forty five in the back half of the year?

[Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida]

The core margin would be three forty five. So we're guiding the core. Accretion income can come in high or low quarter to quarter, so we're just guiding off the core. So, 3.35% in the fourth quarter was the guide with acquisitions adding about 10 basis points to the margin from the lower cost of funding that those will bring in.

[Russell Gunther, Managing Director at Stephens Inc]

Okay. So the step up was Yeah. Core to

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

Just to make it really clear, 3.45 inclusive of transactions plus accretion gets you to the margin.

[Russell Gunther, Managing Director at Stephens Inc]

Okay. Very good. I appreciate the clarification, guys. Rest of my questions are asked and answered. Thank you.

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

Awesome Russell. Thank you.

[Operator]

There are no further questions. I would now like to turn the call back over to Mr. Schafer for closing remarks.

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

All right. Thank you, Angela. And I just want to say thank you to the Seacoast team. We have got a very focused effort here to grow in that high single digit range over time and deliver upper quartile returns and the team was heads down focused on that this quarter. I think this quarter evidences the outcome of that and I feel really good about where we're headed here into the coming year.

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

So appreciate everybody on the Seacoast team for all their hard work and welcome to the Heartland team joining the franchise here in the last few weeks and looking forward to the conversion and looking forward to the Villages transaction in the fourth quarter. We've had a lot of great interaction with that team. It's been a really solid cultural combination and we're super excited about what that looks like later this year. So thank you to everybody on our team. You guys did an awesome job and we'll be around if anybody has questions on the quarter. And that will conclude our call.

[Operator]

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

Participants

Executives

• Charles Shaffer, Chairman, President & CEO

Analysts

• Tracey Dexter, Executive VP & CFO at Seacoast Banking of Florida
• David Feaster, Director - Banking at Raymond James Financial
• Michael Young, EVP, Treasurer & Director - IR at Seacoast Banking of Florida
• Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)
• David Bishop, Director - Research at Hovde Group
• James Stallings, EVP & Chief Credit Officer at Seacoast Banking of Florida
• Russell Gunther, Managing Director at Stephens Inc