SEACOAST BANKING CORP OF FLORIDA Q3 FY2026 earnings call

• Integration Completion: Successfully completed the technology conversion of Citizens First Bank in The Villages, bringing integration work largely to a close and removing M&A-related charges from the income statement.
• Profitability Improvement: Adjusted ROA improved to 1.34% and adjusted ROTE increased to 16.9%, reflecting a major strategic focus on profitability over the past year.
• Loan Growth & Credit Quality: Loans grew at a 13% annualized rate with a strong commercial pipeline of approximately $1.3 billion. Non-performing loans declined 15%, and net charge-offs remained low at 16 basis points of average loans.
• Deposit Trends: While total deposits were flat due to seasonal lows and brokered deposit reductions, non-expiring deposits grew at a 10% annualized rate. The company expects core deposit growth as it moves beyond the seasonal low point.
• Strategic Focus: With integration complete, management is shifting focus to organic execution, attracting talent, deepening customer relationships, and investing in technology and AI for efficiency.
• Capital Position: The company maintains a fortress balance sheet with substantial liquidity and robust capital, providing flexibility for 2027 despite unrealized losses in the securities portfolio impacting tangible book value.

The company reported consolidated net income of $59.9 million ($0.55 per share), a 1% increase from the prior quarter and a 64% increase year-over-year. Adjusted net income was $71.8 million ($0.66 per share), up 9% sequentially and 59% year-over-year. Net interest income totaled $185.4 million, up 2% sequentially, with a stable net interest margin of 3.83%. Non-interest income reached $31.6 million, a 14% increase from the prior quarter, driven by mortgage banking, insurance agency, and wealth management segments. Total loans grew to $13.6 billion, an annualized rate of 13%, while total deposits remained essentially flat at $16.6 billion. The adjusted efficiency ratio improved to 53.9%.

• Full Year 2026 Guidance: Management reiterated its 2026 guidance, expressing confidence that they will hit the high end of the provided range and exit the year in a strong position.
• Efficiency Ratio: Targeting an efficiency ratio band between 53% and 55%.
• Return Metrics: Aiming for an ROA north of 1.30% and an ROTE north of 16%.
• Expense Outlook: Expects adjusted expenses of roughly $118 million annualized, with a ~5% growth rate expected for the coming year to support investment in bankers and technology.
• Loan Growth Expectations: Models approximately 10% annualized loan growth for Q4 2026, with long-term expectations in the high single digits.

• Interest Rate Sensitivity: Higher rates may lead to demand destruction, particularly in commercial real estate, potentially impacting loan growth volumes.
• Pipeline Volatility: The commercial pipeline faces uncertainty due to midterms, potential geopolitical conflicts, and volatile rate movements, requiring management to handicap conversion rates.
• Payoff Trends: In a higher rate environment, lower payoff trends mean less production is needed for net growth, but prepayment risk remains a factor in mortgage portfolios.
• Securities Portfolio Value: Unrealized losses in the available-for-sale securities portfolio have increased due to higher rates and wider spreads, though these are considered temporary given the high quality of the assets and no intent to sell.

Q: Woody Lay asked about the margin outlook, specifically how the Fed hike in September affects margins and if the company is reaching peak margins. / A: Michael Young explained that Q4 should see margin expansion due to the return of lower-cost public funds replacing wholesale funding. He noted the company is neutral to further rate hikes due to a balanced mix of 35% deposit beta and floating-rate loans. He highlighted tailwinds including fixed-rate maturities stepping up, ARM resets adding ~1.5% to yields, and remixing cash flows from lower-yielding securities into higher-yielding loans, suggesting room for continued margin expansion into 2027 if the curve stays high.

Q: Russell Gunther inquired about the sustainability of double-digit loan growth and whether demand destruction at higher rates poses a risk to organic targets. / A: Chuck Schaefer stated that while Q3 and Q4 were standout quarters driven by recruiting, he models ~10% annualized growth for Q4, with long-term growth settling in the high single digits. Michael Young added that lower payoff trends in a higher rate environment reduce the production volume needed for net growth, and their mortgage production is resilient due to new construction activity in The Villages rather than refinancing.

Q: Steven Scooten asked about the pace of balance sheet remix, specifically regarding security sales to fund loan growth and future mix shifts. / A: Michael Young clarified that recent security sales were prudent to fund unexpected strong loan growth during a seasonal deposit low, but they do not anticipate additional security sales to fund future growth. Going forward, ~$600 million in annual securities cash flows will be used to remix the balance sheet toward loans. Aggregate balance sheet growth will depend on core deposit growth, which is expected to be in the low-to-mid single digits as the team returns to organic focus post-integration.