Earnings call transcript Q2 2023

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Operator

Greetings. Welcome to Seacoast Banking Corporation's Second Quarter 2023 Earnings Conference Call. My name is Malika, and I will be your operator.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. Instructions] [Operator

will I at to company's of the the regarding to statements. within begin, to your press covered meaning been that be comments forward-looking statement issues act. today and that the end Seacoast and of have the we statements meaning Exchange direct asked attention release, constitute Securities Before forward-looking discussing Act, within its be the of intended the are

conference Please being is note, this that recorded.

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

Chuck Shaffer

this Thank you all for joining us morning.

provide we'll can XXXX find we the you earnings seacoastbanking.com. second As quarter our comments, at which slide deck, reference

James Chief Officer; and Tracey joined Officer; Treasurer Credit Stallings, David by Houdeshell, I'm Director Relations; Analytics. Michael Chief Financial today of Credit and Dexter, Young, Risk Investor Director of

The with produced return XX.X%. performance of strong an solid tangible adjusted common Seacoast financial adjusted another in of equity on resulting team quarter earnings

and capital our Our were remains excellent. on quality asset liquidity ratios robust

As of now press expanding market release, Bank. nation. up Florida we assets positioning Professional of conversion Florida's billion entire strongest June, noted Seacoast the in in resident technology acquisition the every $XX economy unique Seacoast as with the banking Bank. wraps in serves locally in period the presence The our concentrated definitively beyond a company in a our that completed of state, peninsula boosted This threshold, the major activity the brand across in

aggressively of on growth remainder organic we Professional XXXX. With focus Bank through completed, reoriented the to have company conversion the

deposit additional marketing recent in we and with the investments low combination leverage customer will We talent in acquired exceptional to growth. drive cost years

focusing to in customer plan every with employee heavily fee bankers speed. generation our operations to large-scale that a income execute enterprise-wide the launched streamlining have and on We allow growth, involves company

in beyond. company, We customer for expect XXXX much balance of and a plan resulting to significant the refocus the this for stronger be pivot acquisition

by programs, origination additional headcount lower we The quarter, in of quarter lower X% deposit will in And low-cost we'll loan lower third drive of expense part reduce compensation in marketing resulting quarter. that the deferral to expect originations leading reinvested cost. As third the program, this also growth. third partially be

the with the realized rate will into decline from be the in full force run and Tracey We in and the remarks. reduction in benefit expense in expect will of provide her prepared a to third guidance fourth quarter QX reduce XXXX. expenses

we be M&A, And to believe of XXXX consolidation. period rapid turning late a industry to will mid

this be choice strong by Our And capital materialize goal to as position we they the in be with will of take Florida. acquirer liquidity. of these for opportunity is entering company opportunities XXXX to and and to the will position fully Seacoast prepared advantage

professional expect thank of most strong in and conversion, like hard positions Seacoast compared work and nation's to the you up coming And us significant incredibly Seacoast conversion to from a arise robust associates I'd and to Professional continue statewide sets we the conclude, strength and position for well backdrop the did we fortress to to in local our the job economy. economic This opportunities all to take of on periods. operate balance advantage amazing all sheet peers, smooth. an Bank their was the

call the turn now to results. I'll our over Tracey walk through to financial

Tracey Dexter

everyone. Thank morning, Good Chuck. you,

highlights on the Slide to X. results attention beginning your second Directing quarter the with

the and Bank acquisitions, the three of converted we've including early conversion in bank closed quarters, Over three past Professional June.

growth tangible Florida. an the acquisition. and through major exclusive for soon, focused has only on may Florida of growing we're focus share state M&A contributed markets publicly-traded customer in M&A book to headquartered all the but compounding statewide bank now arise Our now on value largest Florida among the Seacoast and organic our institutions positioning opportunities presence, again strategy and with

net income net on common On XXX% the adjusted XX% increased $XX.X second equity million. tangible million basis, adjusted Sequentially, an increased to $XX.X income in to return was and quarter XX.XX%.

fortress Our common capital and tangible balance increased The still equity position sheet. strong continues were to held-to-maturity to our we're securities the to at during fair to Also ratio be maintaining presented tangible ratio if be very of to assets X.XX%. strong the TCE committed quarter a all would value, X.XX%. notable, TA

in to competitive despite stability increasingly of an have level environment. pleased maintained deposits, overall We're the

loan ended our credit at and the on unchanged Our lending, disciplined standards ratio quarter relationship XX%. remain focused to and deposit

Credit of strong risk non-accrual criticized with low levels remained metrics assets. charge-offs, loans and

XXX% liquidity maintain of is our uninsured and borrowing deposits. continue capacity uncollateralized We and robust total to

while declined Turning partially XX% interest yields with increased lower points accretion, margin offset rate interest increased to higher Loan X% X.XX%. Net on our securities cost In yields. by remains the base quarter, the add averaged deposit to with the Net yields during contracted in Slide and The or increased accounting portfolio, accretion basis higher and X.XX% purchase income X. X.XX%, transaction XX of by deposits million $X.X to strong X.XX%. funding to excluding X.X%. accounts. to June costs

interest quarter, approximately net into in XX stabilizing modeling margin points to XXXX. we're decline ahead, basis Looking the third

increased from offerings with the X. treasury and customers. income was management increase prior-year Service of Interchange in customer continued from million, previous consumer higher increased business with million of quarter both quarter. revenue Adjusted non-interest line expansion $XX.X at acquisition. Slide X% with increase and transaction $X.X our X% the commercial new an we of charges provided to $X.X counts and million the Moving guidance from an

reminder, agency a efforts division wealth the to periods of second to from The added through non-interest from income second of revenue diversify on those was in mitigated insurance income Amendment quarter net recent and income this X% constraints rules. lower Investments prior Seacoast be through years. our in Durbin an business of $X.X effective The have streams the our with of acquisition by quarter quarter. X impact addition income. million our future resulted interchange is of the in became the quarter growth. quarter the wealth so will by As significant beginning for XXXX in XXXX, in July higher And the in an management year, management XX% prior-year fourth

we Looking focus base expanded impact $XX non-interest the sources, to we approximately to other of of million, with having with third revenue income broad franchise, benefit of $XX the continue offset sources Durbin million quarter on our expect growing revenue. ahead, of the largely and

X. to Wealth to compared X% first Slide of the quarter XX% Moving revenues second compared to increased the XXXX. quarter and

last a to from XX% increased annual years. have at management and rate the under a growth ago $X.X billion in increased year of three XX% compound Assets

for to customers, the office style family with resonate offering Our continues franchise. strong generating returns

X. for platforms for the in the at prior reflect provided These was along parallel synergies non-interest million. Seacoast expense realized will quarter branding, half guidance the be line second most of quarter $XX with the cost Slide platforms fully and the processes Moving customer in Adjusted quarter. to second of and now Professional are we and from with and Seacoast into systems in fully XXXX. XXXX Increases to running the converted

benefits with in on of second reflecting Data quarter bank's branch the locations. taxes are second higher end absence $XXX,XXX, five typically and and base line volume of the an and customer transaction second we retail for quarter in much in by based quarter. payroll Near footprint volume. quarter, seasonal higher basis decreased consolidated costs larger adjusted of XXX(k) effect contributions. of larger Salaries first processing the costs the with the the the in the aligns the Similarly, are occupancy-related increase the

In in expense synergies acquisitions a initiatives We've XXXX. X%. to $XX This cost number positively $X $X ahead, expenses our $XX amortization the on the disciplined third million executed by headcount of the GAAP impact basis from Looking the and intangibles and of of half reduction we expect of in maintain million. severance efficiency, focus million year on a our order of million a quarter, recent will approximately approximately to back meaningfully costs. including benefit to includes

of quarter. also Adjusted includes additional second origination costs. the lower expenses are near quarter and be quarter The marketing flat deferral third to the for expected to expenses third loan

expect and the run to XXXX. maintain effect, synergies to quarter cost into drop that further initiatives by rate and as fourth take efficiency million Looking million $X to $X we expenses

Moving to costs increased. declining on income primarily as interest result basis efficiency increase net quarter-over-quarter an XX%. was ratio Slide adjusted deposit The X. The the was of

leading become As pace in continue discipline. we the our company our bank to investments Florida the markets, we with scale and

XX. we continue increased were as discipline to near loan see acquired Turning points to yields Loan basis basis quarter accretion XX on strict our X.XX% outstandings flat impact and higher and to Slide credit as rates X when increased of points we demand. the maintain Average loans. during the excluding by market on

to XXXX. the loan in yields to looking outstandings back will continue And we loan of We periods. forward, the coming increase decline modestly over believe half expect

has culture. to type in Turning terms our retaining maintaining distribution well collateral broadly estate granularity disciplined to manage and across with concentrations mix, element types strategy. lending asset remain categories We've been real in the critical loan diverse below and and industry be loan guidelines diversification company's of Portfolio Exposure and distributed to of across managed a levels. below and Slide we vigilant continue industries is our peer and regulatory risks. credit conservative commercial portfolio Construction XX.

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

the of of CRE, XX% or through and the total occupied the C&I leasing not flows business, loans repaid Importantly, the represent from the is portfolio. cash owner of related which sale property,

relationships. detail and on loans of to office, of On date in the including XX has key low estate result XX, real and markets and credit these types on retail loan Slide the customer additional tenant non-owner been on categories, dispersion of the in we average provide valuable commercial monitoring across strong and state performance commercial and our and critical metrics. the strategy and segments occupied are sizes noting focus granularity long-time creating across collateral a of industries Diversification our the

in increased potential losses, to to on of with allowance loans, or million X.X% overall on to losses. credit quarter during remaining $XXX on acquired discount $XXX.X The XX. The to million total credit allowance an combined credit million the with totaled for unrecognized available that's increase losses Moving topics X.XX%. coverage for $XXX loans, an the Slide cover

XX, Slide credit to looking trends in metrics. Moving at

higher the and loans. represent assess in points total X allowance, metrics of environment the moved Charge-offs points credit the carefully very to pressures Non-performing X.XX% of watchful to were economic loans losses environment affect we classified for might quarter, X economy. quarter the X basis that impact broader factors we X.XX% loan the basis of the points remain inflation strong. And quarters. four Our credit of basis are on total loans In rates allowance the and Nevertheless, remain in X.X%. this averaged and and assets the to the have last assets higher the during considering percentage ongoing of and continue total was performance.

portfolio. The increased during to yield basis securities X.XX%, investment Slide quarter. points undertook we the to average on part Moving by XX activity XX due and in during the quarter securities swap to the

benefit a overall Additional the rate values, detrimental from during as of the will prior increasing in position loss curve the quarter. Changes result. yield to portfolio hikes the end the quarter the portfolio securities were unrealized

Deposits $XX.X and cost quarter of deposits the increased near XX% and the our longstanding XX of in the deposits, the relationship-focused highlight accounts to with Slide Transaction flat to increased deposit continues this Turning industry X.XX%, represent billion. portfolio. outstanding which The changes to landscape. at competitive dynamic materially were overall approach.

quarter time the pandemic, summer. Florida the impact for first state seeing full Bank of to a had leave for we we're and, Professional return residents the the North seasonal since Additionally,

by May The Florida. basis deposit cost requiring specified amended points. as accounts This change to impacted Florida to Bar on index. unique an that's the during pay these in interest trust approximately institutions known the IOTA, spread account Association a at to item financial X quarter program second One

predict Overall, with the and our is deposits difficult base on the to serves third said, deposit outperform expectation is higher for deposits with cost in to peers rates, That the the our the our continue continue impact extent to low we strength cost of of to cost certainty. increase as relationships. the of though environment focus that quarter will of highlight

of rate overall benefit higher from that mix and Slide categories continues with the to top granular bar of deposits. a representing depositors during shows chart X% the XX the Seacoast On affected addition in diverse XX, deposit quarter. base only the total the balances

customers of franchise balances an of an only consumer balance average account XX% overall account contributes XX% per with represent $XX,XXX. average per of total Our of Business deposit $XXX,XXX. deposits, balance only with

reflects our us. This bearing with are customers non-interest Our in long have deposits, peer-leading level have and the strength XX% a maintaining engaged of highly history and franchise. a nature And relationship provides the costs of time significant granular representing deposit deposit of over we base.

protection. On if above completely and excluding right cash bar FDIC the borrowing insured to approximately funds by collateral at backed Slide uncollateralized fund XX, demonstrating that be our the significant would balances the have potential totaled needed, public accounts the limits, capacity and $X.X which, outflows, Seacoast identifies Federal deposits on funded billion, capacity almost Reserve. Uninsured

nearly $X.X the has billion $X in sources billion. liquidity Beyond that, an additional Seacoast above of

have and don't use new We bank Federal plan program. not the funding term used to Reserve's

Slide committed fortress and very balance we're our XX, to maintaining be strong finally, on And our position capital sheet. to continues

You can move effect see past to increase reflecting to equity quarter our second as in in common of value acquisitions, creation. assets the recent driving tangible we dilutive commitment the shareholder tangible initially the

and optionality providing we challenging the levels, one bank. prudent our in continue of strong considering Florida's have becomes community culture summary, capital customer environment In strongest quality balance to more sheets leading industry, credit franchise, the building the if high and

turn I'll call you. the to back Chuck,

Chuck Shaffer

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

Operator

Thank Gailey. ahead. line first phone Our the of go question from Please [Operator Instructions] is Perfect. you. Brady

Your open. line is now

Brady Gailey

Thank guys. morning, you. Good

Chuck Shaffer

Good morning, Brady.

Tracey Dexter

morning. Good

Brady Gailey

we've it's million a about Durbin? fee the a that'd know know, the think Durbin. from your Is I that I size $X past, way roughly right in talked I that think I still income million quarter. the in to $XX just about impact was be of wondering, year, the embedded but guidance,

Tracey Dexter

It is, Brady.

can use number. that You

Brady Gailey

fell And right. then, here. noninterest-bearing All Okay.

You're not total, mid-XX% the is across But alone, where noninterest-bearing deposits the seeing that do think that for you board. your lands? Seacoast industry to

Michael Young

a this return idiosyncratic would early We little some a as true in a the just us in Yeah, quarter. it some couple quarter, this had payments nationally. prepared other Florida, the is was Brady, the really a for in Michael. then, we mentioned tax had things. versus banks remarks, elevated And of which of I is call season to

bit the from little of some do the the that might is kind conservatism that down But range, modeling modeling in hope here into generally, may return trend quarter idiosyncratic benefit back just year. we point this quarters see conservative but the that's and a into but from future. some there the kind of into we of return view, a to So, that from of a positively we're low of XX% think drivers perspective coming half

Brady Gailey

more All Okay. I heard comments the Chuck, environment active. And M&A right. your a from a year maybe now, about then, be little will

Florida have been active bank very the guys You M&A. in

targets ever. mean for Seacoast's turned once bank that all, is spigot you a lot back your I held states, M&A? in that the a smaller do at about what kind Professional wondering Just left gets targets on, when there's privately you not M&A strategy? and larger you return biggest is think of looking But I of know deal big maybe

Chuck Shaffer

Brady. Yeah. Thanks the question, for

look deals you of competency deals XX, here did a of a integrating, was If how on, socially to the in as It both last position sort incredible those did bringing terms deals the in organization, in M&A. do now recently ourselves statewide here period technology We market. lot bring major back a to we and of inside lot months. XX of a Team We're into brand. an concentrated of Seacoast. here did every metro job that of

on can at pretty growth. bank couple half of possibly to about next the what all here I as at of least, this done the there. lot focused our get the and think heavily we've growth, of resources year. banks. the my of a on prepared into the in on quarters I'm at growing in resources, be those the mentioned excited we is organic energy lot point on I effort back a term, release And kind focus near in comments, consolidating of will going sort near We're our term, focus of had here organic least

a into then, the smaller XXXX, And like, say. think depending of it's return you probably on moving the depending to I and deals look a M&A, as bank environment what more

within is banks for our of If franchise we you $X in and to highest XX a that think sense. that value look smaller XX landscape, share institutions could Seacoast consolidating fit make across to the Florida. XX XX best probably think still there's the We banks, market profile, billion-and-under lot primarily about

of the love we If to in you around number to terms XX. where we're share, company drive look market I'd were into the at right are top XX.

would I over create shareholders for long incredible value that run. think the

exactly if opportunities been of so, to we've Brady. And kind those back what emerge it's doing,

Brady Gailey

estate bust down All then, if right. And real to state comes time, to picture, you estate prices. kind Florida blooming That's helpful. Real for finally a a me. it while for boom look prices Bigger of have there. been over tends be when

think real uncertain time in know times, Or dynamic want just real as prices? around you different there real is the insulate we economic head could some estate in I a estate Florida? could to So, that do like prices be there softness in this

Chuck Shaffer

in a I Florida, years. over changed XX lot's the think last

had Florida, You've with in the and has the growth. history a boom-bust sort construction. particular, stronger sort the not built lot South comes incredibly strong, anchors from there sort of I was of terms issue in think population of of Orlando, urban past, inbound Typically, the drivers. where the economic chasing Jacksonville, also demand is construction diverse of has and much and Southeastern been of in Florida in become in incredibly oversupply out Florida Florida, Tampa,

didn't years. you look really last or But the at until construction three if come crisis, the last since -- there's on really four

growth. reasonable. housing very see see the population very supply We remains still see market being reasonable. so, We remarkably We stable. absorption And strong being

estate feel seeing, to increases. see stabilization so, of are seeing in think pace the values value terms don't confident going real of increase we're we we're very I in I And in Florida.

healthy very very feels me strong. And so, and to residential

been been of absorption new supply there. coming growth all in That mindful there. commercial strong, remain there's And being we're thing on population large and the The so just the a part very has said, of markets in have market the the not why that. again, lot mindful strength we side, is always asset of diverse we tried in to of granularity capital and that and that the build of both terms very a geography we portfolio that's size, build We're very asset base. type concentrated Florida, the fact a the same

are, history, know, where about I feel know Brady. good we the we we Florida, So but

Brady Gailey

Great. Thanks, Chuck.

Chuck Shaffer

you. Thank

Operator

you. Thank

is line go Feaster. Our ahead. question Please from next of David the

open. now is line Your

David Feaster

Hi, good morning, everybody.

Chuck Shaffer

morning, Good David.

Michael Young

Good morning.

David Feaster

customer how you just you the you know last I that core curious Where of are side, quarter. one are levels growth? deposit growth core forward? you're growth the Maybe highest are And are growth? where said I'm you money deposit to just you And driving organic I drive the back then, you to new this seeing. core shifting point? count rates in going interest success? quarter, I'm bearing Where in the how think growth kind on of core having deposit later on at about of deposit had do mean new add able seeing curious success

Chuck Shaffer

and with strong And as seeing couple What's state I'll to I've bring second great and are the willing relationships. we've had over Maybe built on follow commercial on small start the sort of with of on the relationships know, been enterprises that you consolidating and new the really customers, banks us. converting money years. with that a team David, over. can We're those on teams last part, full those still is of lot now really to of I quarter Week-in calling the Michael, focus we've very we're around week-out, first behind to up out opportunities relationship exciting size banking medium an opportunities. calling on think first across in me, moving then you incredible rates. And

added about an team. new here think with I'm is out team. marketing additional conjunction we've go unleash opportunity periods branding a of I there the additional coming combining some in to the to so, And incredible bankers lot And excited some and expenses, in that

also, as have retail really strong know, We a you footprint.

as culture going We footprint. unleash retail and well. have a And service those really strong sales to in guys that we're

State Florida the the new, as with of and biased a back to really the lot drive I here, of team of banking the data expenses we're after with best half via in combination in additional commercial in hard. about this the year, strong past, of sorry think we've marketing think talked to about what and combination in are to unique is, ability but what going our we're we kind going very -- digital cross-sell So, analytics the platform combine go

year. about So, the this, half I'm a in of company a excited lot the back and think there's about of lot of the energy David. I There's opportunity,

Michael Young

rate bank of move that think new market. is the the the still down of paying commercial pretty on expansion conversation, bearing focus. alongside into accounts follow-up piece a a operating the and a the over with is a in that obviously investments basis Chuck, go treasury of really get lot competitive made platform those rate But combination we've higher as of as to management portion that cost the along add-ons David, a are accounts then probably, bringing lot attractive to new relationships average those into our mentioned a that interest of to And X%-s and core the on blended and all new little on. average volume on DDA to I blended We're we blend that be then, trying of

those DDA an distinction accounts the that into is, following moved important to April, Brady's earlier, into of call ICS think so reclassification and bit with it's of And now. we from a a I events out product, quick lot and question one come does and the follow-up March a operating in

an So, well. look that's at maybe call to out important as

David Feaster

-- good of That's you you quantify big was? Could an a that impact how that? point. Could

Michael Young

to It point don't too I that, want $XXX a million. fine probably on but get sizable. over was

David Feaster

we help us the And you on and the about the the add-on and yield the for new stabilize Okay. maybe rates equation, normalized funding types the start of core just stabilize, And those think commentary where and then, once are? X%-s, paying the to pay-downs on trying seeing XX to maybe new of we're maybe rates side, roll-off be kind can NIM loan the loan expectations where and side margin? rates the six months? in of borrowings are what'll on what costs pay-offs other deposit kind like in I'm could how of the things, what down with could combine next

Michael Young

bit. quarter a no, -- understand million rates quarter, a roll-off over rates Yeah, have David. higher We little increasing a The little this had definitely been little and $XXX down that, are pay a higher. little the

think seeing variable-rate with electing down is bit. pay what a I we're loans people to are those little

that's on maturing. So, kind to far higher a that rate little loans thus least roll-off leading of at are and paying off

on yields. Then add-on definitely side we're the though, good seeing add-on

just I improve are seeing over six returns move starting think we pricing much where That's to to in articulated, nine weren't the now generally Xs that for and we're a the high there. we're to risk higher. better underwriting, loan risk-adjusted it's like handles, we've X adjusted months attractive. much growth been headwind with mid getting But the into structure, returns better last that market us felt

production, that's X% the profitability the add-on at you're kind all that's of getting there blended X% defend on we're is the focus really and versus here now that looking of to in that the risk market. new and margin a that together, kind rates, margin bringing So, paid for the

David Feaster

Yeah.

been you a, very maybe your where returns? is slowdown much production? then, I'm being translated lenders. I'm makes the terms slowdown how front. part following you've But from concerned bit I maybe originations. as of of you on and all surprisingly, pushing do originations still curious, That pricing And curious good demand? in into you structure I'm slower mean, -- risk-adjusted all? and about I'm sense selective a seeing hear the retention And more returns. risk-adjusted slowing at then, strategic think are you of are market a glad your up they I I'm hearing poaching -- lender just in guess, just ton twofold your at And you're to on curious what that. Not that's question, guessing just some a on versus point then disciplined on and the Okay. maybe, Are back

Chuck Shaffer

Yeah.

we it's with producing starting what income primarily the companies if side, you do stabilized real we demand think Just on, estate. areas commercial and the market in operating about focus

evaporated. stabilized on income just estate, is so, the really lot of projects, not the of stabilized happening is real acquisitions now. lot estate And demand There's commercial producing been just pencil, market a of real not

are I that C&I, due rates same much higher. demand. slowing would describe largely So, some down market to extent, thing, to

think so, would a market way probably quarters I And it three quarter say demand, it of probably about the I of is is us.

stepping and the And as into the monetary and know is picture, the kind in both that occur continue there's coming thought terms sheet. tightening go of will at the we going know we've a year going shrink bigger balance way the next we to We Fed back is business quarters about through of looking to to quantitative be the rate and supply.

where these what portfolio relationships opportunities, wealth we companies to you is broader particularly lending. incredibly you deep, that as XXXX, treasury, out highly-profitable for bring loan the compete operating go with things here and could But enter to maintain is compete, And solid, lending, so, the really relationships. the want fill deposits, equipment in the important, broader as and turn protecting management are the to the into company particularly going of liquidity firepower transactional

continue And what burn and we out when want liquidity is long compete near loan compete term, in up don't get solving term, to do growth to shrink. problem funding for need a The we that Fed our what so. deposit that to pie, if going it about industry will has to think of deposits. overall is pie shrinking on We way, and knowing the you a us the be told know into

incredibly to on flexibility been maintaining returns maintaining and high-quality maintaining focused. is where optionality we've strong take very so, And liquidity, risk-adjusted

are deposits They the question engaged. terms Kind of the come our bringing banking them over. of other we over. and They've incentives, things. They're rotated -- last your relationships incredibly part in they with teams, of

make opportunity are make an and money. go to plenty have contribution and brought thinking opportunity about been to incredible of to how they They out an the have doing really So, huge job. a into compete, And they they've here.

about concerns team no are really I the So, being have poached.

franchise they're friends be think continue bring with part to our to their of them. I excited and

are pleased So, we too, with I'm David. there, pretty where

Michael Young

add And all those well joining company, we us David, that might served and through serve and know well just you when communicated and to I they're that lenders to Listen, the they know as that. as volatility. us will our know economic conservative culture they

So, in be able strength around market of we'll peers and base internally and communication deploy. and to that back liquidity just our the ability the lots than get earlier to capital of the that

generating about other communicative can very clients kind banks coming likely step away capital when so been we just we've So, in have of serve powder, the to dry quarters. and

David Feaster

Thank complete Makes sense. you.

Chuck Shaffer

David. you, Thank

Operator

Thank you.

question Please line next King. ahead. go the Our of from Brandon is

Your open. line is

Brandon King

good questions. Hey, Thanks taking morning. for my

Chuck Shaffer

Brandon. morning, Good

Brandon King

Yes.

So, the I on And sheet. they're to the deposits up It seems on managing and also down balance a deposit core follow kind loans been stable growth here. loan of competition to then from wanted higher trend like growth bit. sure little to like it and seems

of the general kind So, I down you sheet? to XX%-s? now. been the deposit how how that thinking Or you know just about looking Are are kind ratio balance loan do in in to about XX%-s drive the you going of forward? it's think

Michael Young

Yeah, is Brandon, this Michael.

we the that the of sheet a would head some do to lot from securities the an towards just the have deposit cost has as cash depend little of a of would our will XX%, But flow loan trajectory de-lever towards. borrowings more -- little generate might think loan growth amount on, and if in, opportunity, some take cash the in on think of is a down think which deposit on have getting and to deposit we're little higher XX% driven side. higher pay We risk we paid balance back probably bit, be I here are generate and softer. yield So, side that growth be we're probably comes ratio able success But we that year. we by to probably that the I the the coming will we securities holistically, been for loan half able if

Brandon King

would or those particularly, down lending? that flows higher And with go you high-yielding coming generally the to about with the portfolio cash redeploy that you think now looking what online? in just do cost that, securities to Are paying down securities

Michael Young

generally this loan off think fund book using and lending cash I flow we're the securities just to at point Yes, the growth.

months in trend. of you assume principal that got just million roughly off the cash trend assume you securities the of just that about kind lower to think book XX with I should over flow next the related that securities we've to $XXX payments should book half So, continues

Brandon King

much how you are flow cash us? again, expecting, remind And you could

Michael Young

over it's XX $XXX the little months. million Yeah, next a over

Brandon King

putting all going interest noticed Could the rate that swaps how you the assets Okay. then, forward? the process securities yields. you And rate interest managing give the around benefited lastly sensitivity you and us thought swaps

Michael Young

Sure.

to So, good just related and deposits. Tracey had as portion, IOTA opportunity the market we to in flipped the deposits floating that of mentioned, a

And those so, proactive some mute it of impacts. is a of really kind opportunity

move fixed we million a swap. so, $XXX And pay to

We are paying variable. which about now SOFR, $XXX million, receiving and overnight us more moved to

now under XX% So, variable is fixed. XX% book the versus securities just

the yield next good of near here So, lot it's term potentially just up without rates of over proactive moving a a risk pick two years from opportunity lower. to downside incremental bit a

So, that took. that's kind we there overall the of opportunity

part question Brandon? the there, of And your remind me second

Brandon King

are to Just condition you just the you you're of do expecting in do more trades going funding? like forward, given or spot this think this,

Michael Young

and depending of be and the balance always market risk our make rate the sheet opportunistic we'll unfolding. moves as to see positioning, are in and expectations that of rates on manage ahead and environment things the to our we volatility what interest kind Yeah, appropriate

context. to no the So, no the improve bank, swings, returns movements incremental overall and big be incremental earnings for we'll there, yield positioning the risk big within just bets, and

So, right specific nothing about way out to I that's it, to today. of call think think kind the

Brandon King

I questions. That's taking my for Okay. all Thanks had.

Chuck Shaffer

Brandon. you, Thank

Operator

you. Thank

Scouten. ahead. from go Stephen of line next is question Please Our the

line now Your open. is

Stephen Scouten

walk here, quarter? morning. other me guidance, wanted hearing there banks Good than If NIM around I you kind of pieces, XX those to dynamics Hey, from what's larger that what fueling professional make with points maybe lot into we're move quarter-over-quarter thanks. is any if of kind any quarter, the the follow could. third Yeah, the through different? a third the shift NIM that Just basis of decline, into

Michael Young

This is Stephen. again. Sure, Michael

of a that's XX cost funding key I cost the point there. is think or there. of basis IOTA would increase make deposits I couple about impact, the to of outs, call a One

peers, run kind a So, that's kind may one-time for normalized idiosyncratic driver and it's of from we different of should rate It's reset, from on be be us. a there. then

is is the quarter the The higher. just other rate piece exiting probably spot a little

run going of around seasonality. kind perspective from seasonality of that trough for just kind mentioned, that around we're to be if felt deposit us, little at we deposits rate kind a of So, pressure forward, there's a that And a we there. as

tailwinds discussing opposed next I driving pressure return and organic we're So, maybe quarter it's incremental little that with that with you along could some all think internally. some seasonality of growth as headwinds, benefit a to this margin see the efforts quarter,

that's head kind and So, that's the the think those see and maybe of there, pieces benefits we of we'll XXXX. to later start moving materialize kind year into hopefully, us as then getting I in

Stephen Scouten

Okay.

beta earlier, So, for really you deposit those feel to a what and the give from beta can things perspective us you're a just you loan assuming spoke perspective? moving forward

Michael Young

Sure.

growing loan not beta very quickly the we side, On at moment. are the

And fixed so, got We've XX% on of loan side. the we'll see beta. balance loan sheet kind probably rate about less

reprice So, not we incremental just mature, movement interim. we're we'll much as then, can and loan repricing refinancing some able lower loans but any there, rate the do obviously that to see in as

kind of side. on that's So, loan the

side the hikes see deposit generally on Fed and betas think I higher the just On here. from for betas, going you're to industry, incremental

differential versus is there there really. don't us I think a anyone So, else for

really thus beta stabilize and the from our But see lot to just and have will better have this likely hopefully. we'll though be perspective, catch pretty impacts But kind Fed we'll what far So, and think bit how managed the far quarter. outperforming peers of a a there. beta did of well little we cum moves up likely a we from here cumulative trend obviously we've

Stephen Scouten

how time and ratably we Perfect. book to about On I rollover over time? of fairly think is over kind you the that's fixed loans, five-year that do like that that? think period that can that of mean XX% a rate, how they reprice

Michael Young

about or things that's the of the of is maturing, loan Stephen. really are to Yeah, Most extending right, kind maturity. life

a life something point. seen probably payoffs not five X.X or X probably seeing that, year So, and those times early or years like have we're five-year life downs fair you this might of pay appropriate average higher at but is

Stephen Scouten

Makes sense.

that Okay. the in and conservative and little strong, for a y'all's -- loan is purchase with mean possible this last purchase modeling? you're see Florida reserve [indiscernible] And while? discounts discounts super could thing zero-ish your was then provision be from discounts me, I like X%, economy I book seem going granular, growing slower, we kind to like. sounds mean, it of Is a around

Tracey Dexter

scenarios rates, quarter The allowance our coverage is Stephen, X We continue related persistent each at scenarios economic risks we seeing about environment basis to use estimate prior what of economic and look Florida each Yes, and the just sustained higher contemplate we're trying context up just our make points our those that to the from inflation. portfolio, to we're in in quarter. quarter. best our

that we and the say advance. feel think purchase discount, So, remaining covered you it's well pretty at are include that think difficult level. certainly comfortable of to I in do when we impact the I

Chuck Shaffer

have, we is position. Yeah, confident we absorption the our that's the just when loss feel ACL a ratio, follow-up in coverage to you our look very in balance at incredibly the capital there, strong sheet that,

Stephen Scouten

Great, question. guys the thanks for and Appreciate it. no Yeah, time. the color

Chuck Shaffer

Thank Stephen. you,

Operator

Instructions] showing moment, questions [Operator further And no on the this you. Thank I'm at phone lines.

Chuck Shaffer

Thank calls. joining we're to have And us everybody And wants operator. you, if anybody follow-up Thank around, Okay. this you. appreciate morning.

Operator

conclude ask and Have and Ladies day. you. you a your good your We call. for that lines. gentlemen, disconnect you that participation, does today's Thank please thank

Seacoast Banking Corporation of Florida (SBCF) 28 Jul 232023 Q2 Earnings call transcript