Seacoast Banking of Florida(SBCF) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted net income for Q4 2025 increased 18% year-over-year to $47.7 million, with pre-tax, pre-provision earnings rising to $93.2 million, a 39% increase from Q3 and a 65% increase from the prior year quarter [6][7] - Return on assets (ROA) for Q4 was 1.22%, and return on tangible equity (ROTE) was 15.72%, with expectations to exceed 1.30% ROA and approximately 16% ROTE in Q4 2026 [4][5] - Net interest income reached $174.6 million, a 31% increase from the prior quarter, with net interest margin expanding 12 basis points to 3.44% [8][9] Business Line Data and Key Metrics Changes - Loan outstandings grew at an annualized rate of 15%, driven by strong commercial banking performance and the Villages acquisition [2][12] - Non-interest income increased to $28.6 million, a 20% rise from the prior quarter, with wealth management income growing 21% from the prior quarter [10][11] - Non-interest expense for Q4 was $130.5 million, including $18.1 million in merger costs and $23.4 million in provisions related to the Villages acquisition [11][12] Market Data and Key Metrics Changes - Deposits increased to $16.3 billion, up 29% from the prior quarter, largely due to the acquisition of VBI [15] - Customer transaction accounts represented 48% of total deposits, reflecting a strong relationship-focused approach [16] - The allowance for credit losses totaled $178.8 million, with coverage to total loans increasing to 1.42% [14] Company Strategy and Development Direction - The company plans to achieve adjusted revenue growth of 29%-31% for the full year 2026, with a focus on organic growth momentum and high single-digit loan growth [21][23] - A 15% increase in banker count is planned for 2026, with benefits expected to be fully realized in 2027 and 2028 [22][23] - The company aims to maintain a low- to mid-50s efficiency ratio over the cycle, balancing growth investments with profitability [68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth outlook and the ability to deliver strong returns in 2026, emphasizing a strong balance sheet and operational strength [24] - The company remains vigilant in maintaining a disciplined credit culture, with a focus on high-quality loans and conservative risk management [13] - Management noted that while there are pockets of weakness in the Florida housing market, overall demand remains strong in key areas [86] Other Important Information - The Villages acquisition closed with higher tangible equity than initially projected, shortening the earn-back period [4] - The securities portfolio grew to $5.75 billion, with a focus on reducing risk and improving liquidity [17][18] - The company expects to manage capital effectively, considering options for dividends and buybacks in the future [46] Q&A Session Summary Question: Clarification on adjusted efficiency ratio - Management confirmed that the adjusted efficiency ratio includes amortization of intangible assets, which was previously excluded [34] Question: Loan growth attribution - Approximately 10% of the 15% loan growth was attributed to legacy Seacoast, with 2%-3% from the Villages acquisition, and the remainder from slower paydowns [38][40] Question: Capital return strategy - Management indicated that they will monitor capital levels and consider options for dividends and buybacks, focusing on the Villages deal first [46] Question: Fee income expectations - Management noted that mortgage banking income is expected to be higher due to the acquisition of a sizable servicing portfolio, impacting overall fee income [105]