Seacoast Third Quarter 2026 Earnings Conference Call - SEACOAST BANKING CORP OF FLORIDA

Explicit Guidance:

• Q4 2026 Adjusted Non-Interest Expense: Expect approx. $118 million in adjusted expenses, potentially increasing $2–3 million step-up depending on specific items; includes approx. $2.4 million in discrete, non-recurring expenses.
• Q4 2026 Loan Growth: Modeled at approx. 10% annualized growth rate, accounting for potential pipeline fallout and higher rate environment effects.
• 2027 Financial Targets: Long-term profitability targets include ROA >1.30% (aiming for high end of current guidance), Return on Tangible Equity (ROTE) >16%, and Efficiency Ratio between 53% and 55%.
• 2027 Expense Outlook: Expect annualized adjusted expenses of approx. $119 million (current $118M) plus ~5% organic growth rate to support franchise investment.
• Loan Growth Guidance: Long-term modeling assumes high single-digit annualized loan growth rates rather than double digits.

Business-Segment Outlook:

• Commercial Pipeline: Maintained strong at approx. $1.3 billion as of September 30, supporting organic growth expectations into 2027.
• Asset Mix Shift: Anticipated transition of construction loans (currently high) into "mini-perm" and non-owner-occupied commercial real estate to free capacity for future construction lending within guardrails.
• Securities vs. Loans: Plan to redirect approx. $5–600 million in annual securities cash flows toward loan purchases over the next few years to remix the balance sheet.
• Deposit Growth: Expects core deposit growth to accelerate post-seasonal low point; targeting organic growth in operating and relationship-based accounts while brokered CDs and FHLB balances trend down.
• Wealth & Non-Interest Income: AUM reached $3.2B (29% YoY growth); wealth management and insurance agency income streams expected to build sequentially.
• Mortgage Banking: Production viewed as resilient and durable due to new construction volume in "The Villages" region; less sensitive to rate-driven refinance cycles than peers.

Market and Competitive Outlook:

• NIM Trajectory: Expects margin expansion into Q4 2026 driven by seasonal deposit mix shift (approx. $300M public funds at 100–200 bps lower cost than wholesale funding).
• Earning Asset Repricing: Three key tailwinds for 2026–2027: (1) $600M fixed-rate maturing loans repricing from ~4% to higher levels; (2) ~$300–400M ARM portfolio resetting annually with ~1.5% step-ups; (3) $600M annual securities cash flow remixed into higher-yielding loans.
• Deposit Competition: Anticipates ability to grow core funding with lower price sensitivity due to granular deposit base from acquisitions; 35% deposit beta expected to remain stable.
• Demand Dynamics: Acknowledges potential demand destruction in Commercial Real Estate (CRE) if rates remain high and property values adjust, expecting a "reconciliation" phase for transactions.

Macro / Industry Outlook:

• Interest Rate Environment: Expects long end of the yield curve to remain high and upward-sloping; believes current environment supports margin expansion if rates stay elevated.
• Rate Sensitivity: Neutral to Fed hikes due to matched 35% deposit beta vs. 35% floating-rate loan portfolio; incremental rate moves not expected to materially impact earnings outlook.
• Macroeconomic Risks: Cites volatility from midterm elections, potential geopolitical escalation (e.g., war), and rate fluctuations (5.5% to 5.0% range) as factors creating uncertainty in pipeline conversion.
• Regulatory/Legacy Integration: Views completion of Citizens First and The Villages integration as a structural inflection point, removing M&A charges and improving earnings visibility for 2027.

Strategic Initiatives:

• Talent Investment: Continuing aggressive hiring and banker recruitment to sustain high single-digit loan growth; investing in franchise capacity.
• Technology & AI: Commitment to investing in technology and AI to improve operational efficiency and customer experience post-integration.
• Balance Sheet Remix: Shifting funding sources away from brokered CDs and FHLB toward core customer deposits; no anticipated additional security sales to fund loans going forward (only using organic cash flows).
• Organic Growth Focus: Full strategic pivot to organic growth, relationship deepening, and execution now that integration is complete.

Risks and Headwinds to Outlook:

• Pipeline Fallout: Potential for lower loan conversion from the $1.3B pipeline due to higher rates and market volatility.
• Commercial Real Estate: Risk of demand destruction and transaction stagnation if CRE values fall and buyer/seller expectations fail to reconcile.
• Interest Rate Volatility: Uncertainty regarding midterms and geopolitical events could alter market dynamics.
• Competition: Potential for increased deposit competition to pressure pricing, though currently viewed as offsettable by backbook repricing dynamics.
• Expense Steps: Discrete Q4 costs (approx. $2.4M) and planned investment hires may temporarily pressure ROA before margin tailwinds take effect.

Management Tone on the Future:

• Confidence Level: Highly confident ("feeling good," "very well positioned") regarding 2027 performance, citing "considerable strength" and "resilience."
• Strategic Clarity: Expresses relief and optimism regarding the completion of major integration work, signaling a clear shift from "survival/integration" to "execution/growth."
• Guidance Stance: Maintaining steady long-term targets while acknowledging near-term headwinds (Q4 discrete expenses, rate environment); explicitly states expectations to hit the high end of current profitability guidance ranges.
• Differentiation: Emphasizes structural advantages over peers (lower deposit beta, resilient mortgage book, strong backbook repricing) as key drivers for outperformance.

Miscellaneous:

• 100th Anniversary: Company celebrated its centennial on October 2, 2026.
• Credit Quality: Non-performing loans declined 15% QoQ; net charge-offs low (16 bps); criticized loans stable at 2.9%.
• Capital Deployment: Share repurchases occurred in Q3; capital remains robust to support organic growth and disciplined deployment.