Seacoast Banking Corporation of Florida (NASDAQ:SBCF) Q4 2025 Earnings Call Transcript

Seacoast Banking Corporation of Florida (NASDAQ:SBCF) Q4 2025 Earnings Call Transcript January 30, 2026

Operator: Welcome to Seacoast Banking Corporation’s Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Mark, and I will be your operator. Before we begin, I have been asked to direct your attention to the statements 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 the act. Please note that this conference is being recorded. I will now turn the call over to Chuck Shaffer, Chairman and CEO of Seacoast Bank. Mr. Shaffer, you may begin.

Charles Shaffer: All right. Thank you, Mark, and good morning, everyone. As we move through today’s presentation, we’ll reference the fourth quarter and full year earnings slide deck available at seacoastbanking.com. Joining me today are Tracey Dexter, our Chief Financial Officer; Michael Young, our Chief Strategy Officer; and James Stallings, our Chief Credit Officer. The Seacoast team delivered another exceptional quarter, highlighted by the closing of the Villages acquisition and strong growth in loans. Loan outstandings grew at an annualized rate of 15% driven by the continued success of our commercial banking team and the additional mortgage volume contributed by the Villages acquisition. The addition of the Villages mortgage team expands our optionality for future portfolio decisions.

The residential loans we added this quarter were very high-quality credits with high FICOs, strong yields and generally shorter expected lives than traditional mortgage products, given the unique characteristics of this borrower base. We also continue to see meaningful improvements in noninterest income with stronger performance across almost every major category. Wealth Management had an excellent year, adding $550 million in new AUM and treasury managed fee — treasury management fees and other service charges also continue to grow as new clients were onboarded. On the expense side, overhead was well managed, and our expense ratio improved from the prior quarter and the ratio of adjusted noninterest expense to tangible assets declined to near 2%.

Our plan to drive improved shareholder returns remains firmly on track. Excluding the day 1 provision and merger-related expenses associated with the Villages acquisition, our ROA for the fourth quarter was 1.22% and the return on tangible equity was 15.72%. These results demonstrate the strong return profile of the combined institution which will be fully realized following the Villages technology conversion in July 2026. The Villages acquisition also closed with materially higher tangible equity than initially projected, shortening the earn-back period. We are deploying a portion of this excess capital into the securities portfolio reposition that was executed this week and Michael will walk through these details here shortly. Overall, I’m very pleased with the progress we’re making, and I remain highly confident in our outlook for 2026.

As noted in the slide deck, we expect to achieve earnings per share for the full year in a range of $2.48 to $2.52 and anticipate exiting the year in the fourth quarter of 2026, after the Villages technology conversion with an ROA above 1.30% and a return on tangible equity of approximately 16%. And asset quality remains solid. Charge-offs were a modest 3 basis points for the fourth quarter and the full year average for 2025 was only 12 basis points. Our CRE and construction and land development ratios remain low following the addition of the villages. And as a reminder, our portfolio is composed almost entirely of franchise quality relationships. Long-standing borrowers across our footprint, which include consumers, businesses, nonprofits and municipalities.

And lastly, capital and liquidity remain exceptionally strong. We continue to operate with a fortress balance sheet. We remain one of the strongest banks in the industry. And with that, I’ll turn it over to Tracey Dexter to walk through our financial results. Tracey?

Tracey Dexter: Thank you, Chuck. Good morning, everyone. Beginning with Slide 4 and fourth quarter performance highlights. The Seacoast team delivered a strong quarter with adjusted net income, which excludes merger-related charges increasing 18% year-over-year to $47.7 million. Consistent with the accounting requirements, this includes the initial provisions for loans and unfunded commitments on the Villages Bank Corporation acquisition, which totaled $23.4 million. Pretax pre-provision earnings on an adjusted basis rose to $93.2 million in the fourth quarter, an increase of 39% from the third quarter and an increase of 65% from the prior year quarter. The efficiency ratio improved and on an adjusted basis, is below 55%. I’ll note that our presentation of the efficiency ratio now includes the amortization of intangible assets which added $10.4 million to expense in the fourth quarter.

Loan production was very strong with organic growth in balances of 15% on an annualized basis. Higher commercial production, which increased 22% from the prior quarter reflects the success of a multiyear hiring strategy. Deposit costs were well managed and also benefited from the addition of VBI overall declining 14 basis points from the prior quarter to 1.67%. Net interest income was $174.6 million, an increase of 31% from the prior quarter. Net interest margin, excluding accretion on acquired loans expanded 12 basis points to 3.44% consistent with the guidance we provided. Our capital position continues to be very strong. Seacoast Tier 1 capital ratio is 14.4% and the ratio of tangible equity to tangible assets is 9.3%. We grew the branch footprint through 2 de novo openings in the fourth quarter, 1 in the greater Atlanta area and 1 on the Gulf Coast in Bradenton, Florida.

For the full year 2025, we opened 5 de novo branches. We completed our acquisition of VBI on October 1, 2025, with the technology conversion planned for July of 2026. On to Slide 5. Tax equivalent net interest income increased by $42.3 million or 32% compared to the prior quarter and by $60.1 million or 52% compared to the prior year quarter. The net interest margin expanded 9 basis points to 3.66% and excluding accretion on acquired loans expanded 12 basis points from the prior quarter to 3.44%. Loan yields increased 6 basis points to 6.02%. Excluding accretion, loan yields increased 7 basis points to 5.68%. Overall cost of funds is down 16 basis points from the prior quarter. With strong momentum in loan growth, funding costs now lower, additional liquidity and accretive acquisitions, we expect continued expansion in the net interest margin.

Turning to Slide 6. Noninterest income was $28.6 million, increasing 20% from the prior quarter. Fee revenue continues to benefit from our growth in commercial customers and with the addition of the Villages in the fourth quarter, service charges on deposits increased 4% from the prior quarter. Mortgage banking activities have expanded with the acquisition of VBI. This includes increases in saleable and portfolio production in the fourth quarter along with servicing income introduced by the Villages activities. Moving to Slide 7. Our wealth management team delivered another quarter of remarkable results with income growing 21% from the prior quarter, largely attributed to organic growth, bringing new assets under management in 2025. Total AUM increased 37% year-over-year with a 23% annual CAGR in the past 5 years.

We’re incredibly proud of our wealth team and their amazing success in 2025. Moving to Slide 8. Noninterest expense in the fourth quarter was $130.5 million, an increase of $28.5 million from the prior quarter. The fourth quarter included $18.1 million in merger and integration costs and $23.4 million in day 1 credit provisions for the Villages acquisition. Higher salaries and benefits and higher outsourced data processing costs reflect continued expansion and the addition of recent bank acquisitions as well as higher performance-driven incentives. Other categories of expenses were in line with expectations. Our adjusted efficiency ratio improved to 54.5%, demonstrating continued operating leverage. We continue to remain focused on profitability and performance and expect continued disciplined management of overhead and the efficiency ratio.

As a reminder, looking ahead, the first quarter typically has seasonally higher expenses from FICA and 401(k) resets. Turning to Slides 9 and 10 on the loan portfolio. Loan outstandings, excluding the impact of the VBI acquisition, increased at an annualized 15%. We continue to see strong broad-based demand across our markets and commercial production increased by 22% during the fourth quarter. Loan growth was further strengthened by strong mortgage production at VBI, much of which we chose to retain in the portfolio. Loan yields increased 6 basis points and excluding the effect of accretion, yields increased 7 basis points from the prior quarter to 5.68%. The overall mix of loan types has remained generally consistent quarter-over-quarter.

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. As we have for many years, we consistently managed 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 32% and 216% of consolidated risk-based capital, respectively. We’ve managed our loan portfolio with diverse distribution across categories and retain granularity to manage risk. Moving on to credit topics on Slide 11. The allowance for credit losses totaled $178.8 million with coverage to total loans increasing to 1.42%.

Loans acquired from VBI have coverage of approximately 2% as we take a conservative approach while transitioning to Seacoast portfolio management and monitoring practices. The allowance for credit losses, combined with the $150 million remaining unrecognized discount on acquired loans totaled $329 million or 2.61% of total loans that’s available to cover potential losses. The acquisition of VBI added approximately $59 million in accretable purchase mark. That’s included in the figures presented on the slide that if not needed to cover losses will be recognized through yield over time. Moving to Slide 12. Looking at quarterly trends and credit metrics, which remain strong. We recorded net charge-offs of $936,000 during the quarter or 3 basis points annualized bringing the net charge-offs for the full year 2025 to 12 basis points of average loans.

Nonperforming and criticized and classified loans grew slightly with isolated additions from VBI but remain low as a percentage of total loans. Turning to Slide 13 and 14 on the deposit portfolio. Deposits increased to $16.3 billion, largely attributed to the acquired VBI deposits. Average balances in the fourth quarter were up 29% from the prior quarter, benefiting from the acquisition and the seasonal effect of higher public funds deposits. The cost of deposits declined to 1.67%, exiting the year at 1.64%. Seacoast continues to benefit from a diverse deposit base. Customer transaction accounts represent 48% of total deposits which continues to highlight our long-standing relationship-focused approach. On Slide 15, our capital position continues to be very strong.

Tangible book value per share shows the initially dilutive impact of the VBI acquisition, which we expect to be earned back ahead of our original projection. The ratio of tangible equity to tangible assets remained strong at 9.3%. As expected, return on tangible equity decreased, reflecting the impact of the acquisition. Our risk-based and Tier 1 capital ratios remain among the highest in the industry. I’ll now turn the call over to Michael to discuss recent strategic capital actions in the securities portfolio. Michael?

Michael Young: Thank you, Tracey. I’ll be referencing Slide 16 for the comments on the securities portfolio. With the closing of the VBI merger, our securities portfolio grew substantially to $5.75 billion in the fourth quarter, combining 2 low-cost granular deposit franchises, with a large, primarily agency-backed securities portfolio that has only further strengthened our balance sheet’s liquidity position as we converted excess capital into low-risk earnings. Immediately following the merger close, we sold approximately $1.5 billion of the $2.5 billion securities portfolio at VBI with an emphasis on reducing risk throughout the liquidation of over $600 million in corporate debt that was sold. We patiently redeployed that liquidity throughout the quarter, avoiding periods of low rates, which resulted in higher cash balances for much of the quarter, creating a slight drag on the NIM.

The net unrealized losses in the AFS portfolio improved by $18.5 million during the fourth quarter, leading to additional tangible book value accretion. This has been a hallmark of our 2025 performance with the unrealized losses on the securities portfolio improving by $137 million, adding nearly $1 to tangible book value and materially reducing the dilution from the acquisitions of Heartland and VBI. The portfolio yield increased 21 basis points to 4.13% in the fourth quarter with additional yield expansion expected in the first quarter of ’26 with a full quarter benefit of the fourth quarter actions. Now turning to Slide 17. We have materially outperformed our conservative assumptions related to the VBI acquisition. The primary contribution came from lower marks on the securities portfolio at close with additional benefits from lower credit marks on the loan portfolio.

These positive developments delivered significantly lower dilution and materially higher pro forma capital, as you can see. We have about 90 basis points of additional total risk-based capital or approximately $92 million compared to the 14.7% that we originally articulated at deal announcement. Given the significant capital outperformance, we are once again trending towards elevated capital levels. As a result, we elected to convert 1/3 of that excess regulatory capital generation into higher future earnings profile, delivering what we believe is a win-win for shareholders with no tangible book value dilution, but higher pro forma earnings and allowing us to exceed the $2.46 that we originally articulated at deal announcement. We sold $317 million in book value of available-for-sale securities with a projected book yield of below 2%, and we received proceeds of $277 million that were invested at a taxable equivalent yield of 4.8% for a pickup of almost 290 basis points as part of the securities restructure action we took this week.

And finally, on Slide 18, we felt it important to provide some additional guidance around our expectations for 2026. Our guidance numbers reflect adjusted performance metrics largely calibrating for merger-related charges that may take place in 2026. We expected adjusted revenue growth of 29% to 31% for the full year 2026 compared to the full year 2025. We believe our adjusted efficiency ratio will be in the 53% to 55% range for 2026, with the primary driver being the pace of banker hiring during the year. We plan to increase our banker count by approximately 15% in 2026, and the benefit will be fully realized in 2027 and 2028. Most importantly, however, we plan to manage these outcomes within tight bottom line performance of $2.48 in earnings to $2.52 in earnings, an increase from our articulation of the $2.46 target last year.

We expect to exit the year with a 1.3% adjusted ROA and a 16% ROTE in the fourth quarter post conversion activities as we balance the investments for future growth with strong current profitability. We plan to deliver all these financial outcomes while continuing the organic growth momentum that we’ve seen in 2025 and we expect to deliver high single-digit loan growth and low to mid-single-digit deposit growth as we move forward throughout the year. I’ll now turn the call back to Chuck for final comments.

Charles Shaffer: Thank you, Michael. And before we open the line for questions, I’d like to once again express my deep appreciation for our Seacoast associates, our customers and our shareholders. We closed out a truly transformational year, one marked by industry-leading loan growth, 2 exceptional acquisitions and meaningful investments across our company that position us for long-term strength. We operate one of the best banking teams in the Southeast and some of the strongest markets in the country. We have an exceptionally strong balance sheet. I remain very confident in our growth outlook and our ability to deliver upon our strong return profile in 2026. And it’s especially gratifying to enter our 100th anniversary in 2026 with such a strong foundation. As we celebrate a century of serving our communities, we do so with confidence, momentum and tremendous optimism for what lies ahead. And with that, operator, we’ll open the line for questions.

Q&A Session

Operator: [Operator Instructions] And our first question comes from the line of David Feaster with Raymond James.

David Feaster: [indiscernible]

Charles Shaffer: David, you’re a little garbled. I think maybe you got a bad connection. Do you want to drop and come back in? Sorry. Yes. I think, operator, we’ll go to the next one.

David Feaster: Is that better?

Charles Shaffer: Yes. Better, David. Good, perfect.

David Feaster: Okay. Sorry. I was just saying I appreciate the guidance this quarter. That is super helpful. I wanted to start on the efficiency side. I guess, first, I just wanted to clarify, when we talk about an adjusted efficiency ratio, does that exclude intangible amortization like we have in the past. And then just looking at the efficiency, it is a bit higher than where the Street is. It sounds like there’s some new hiring embedded in that. But just wanted to get your thoughts on how expenses are, specifically in investments kind of on the horizon.

Tracey Dexter: Yes. David, I can take the first part. This is Tracey. Our adjusted efficiency ratio includes — leaves in the expense for amortization of intangible assets. In the past, we had excluded that. We know that’s been kind of a difference in the way you keep track of it. So it’s in there.

Michael Young: And David, regarding the investments, I think if you look back to the original deal deck, we had an efficiency ratio of about 52.5%. That was run rate post all the expense takeout with the acquisitions. We obviously won’t have that impact until kind of the midway part of this year. So that naturally pushes the efficiency ratio up for 2026 guidance. But also, as articulated in the prior prepared remarks, we plan to be aggressive in hiring bankers. We’ve had a lot of inbound demand, as Chuck has referenced many times in the past, but we wanted to balance that growth in banker count with profitability. We’re in a much stronger profitability footing now. And given the merger disruption that we see in the industry, we want to be on the front foot in hiring.

We articulated a 15% increase in the banker account is the expectation. And some of the driver will just be how successful we are and how early in the year as to when we see the expenses ramp versus kind of the future production.

David Feaster: That’s helpful. And then maybe kind of staying on the hiring side. You’ve obviously had a lot of success. There’s more opportunity on the horizon. I guess, first off, the loan growth, I mean, 15% was great. I wanted to get a sense of how much of that would you attribute to the new hires versus improving demand or just increasing productivity from your existing team? And then is the hiring investment that you’re contemplating key to the achievability of that high single-digit growth guide or would that be additive just given the time it takes for these lenders to ramp up?

Charles Shaffer: Yes. Maybe I’ll take that one, David. So I think if you look back at the quarter, the way to break it down, and this is rough, so this isn’t super precise. But out of the 15%, I’d say, roughly 10% came out of what was legacy Seacoast, so our commercial banking team. The hiring we’ve done over the last couple of years, that drove about 10% of that annualized growth. There’s another 2% to 3% that came from the Villages acquisition, as we talked about in my prepared comments. When you kind of look at the opportunity there, it’s really high FICO credit, a more senior borrower and typically shorter life duration assets. So we really like that paper. And as a result, we took the opportunity in the portfolio, and then there’s probably another 1% to 2%.

It’s just a little bit slower paydowns. When you look into the coming year, we’ve contemplated arguably a little bit higher pay downs as we move into the coming year, but bake that into our model. And so we guided to that high single-digit growth rate. I would tell you that if you really think about the hiring profile, if we do exceptionally well here in the first half of the year and are able to add that 15%, while it will benefit late in 2016, really, we won’t see the benefit until ’27, ’28. And the other thing that you have to sort of contemplate is the balance sheet will grow as we move through the year with a high single digit, call it, 8% to 9% growth rate. If we achieve that you got fairly sizable growth in the loan portfolio that we need to kind of continue to reoriginate to.

And as we’ve talked about before, we’re always going to be thoughtful about what our credit risk appetite is and what we’re willing to take into the portfolio. We’re going to do the loans we like in our credit profile and largely don’t want to sort of be held to such a high growth rate that we wouldn’t be able to continue to be thoughtful and selective on what credits we’re willing to put in the portfolio. So I think if you’re thinking about modeling sort of that high single-digit growth rate is the right way to think about it. We’ll have optionality with the Villages portfolio to kind of move that in and out depending on where rates are and where the yield curve is. And as Michael mentioned, we still have a lot of opportunity to hire. So on the growth side, particularly loan growth side, I feel really confident about what’s out ahead for us.

David Feaster: That’s exciting. Maybe just last one for me. Switching gears to capital. You talked about capital pro forma being higher than expected, deployed a portion of that into the repositioning here in the first quarter. But look, based on your pro forma profitability, you’re going to be accreting a lot of capital even with high single-digit loan growth. How do you think about capital return going forward, just as maybe M&A is less of a focus like you talked about, would you expect to see more capital return or would you rather accrete capital back closer to maybe where you were previously?

Charles Shaffer: Yes. We’ll see how the year plays out, what opportunities emerge. We took the opportunity here this quarter to do the securities loss trade. And I think that was a good use of capital given the significant capital appreciation that we saw on the Villages transaction and the shorter earn back than what we originally put in the deal modeling. And so we will continue to monitor, David. I mean, obviously, we’re going to have a lot of capital that’s going to give us opportunities to think about things like dividends and buybacks over time. As you mentioned, there’s a lot less opportunity for M&A. And at the moment, we’re heads down, highly focused on getting this Villages deal done. I mean that’s kind of the priority right now.

We want to get through the middle part of the year, have an amazing conversion for our customers, deliver really solid experience in the Villages come out of that and then we’ll see what opportunities present. But at the moment, we’re — I hear you, we’re growing a lot of capital. That’s a conversation we continue to have with our Board and something we’ll continue to monitor. But yes, I mean we’ll continue to look at other options as we go through the year here. And there’s buybacks and dividends and other things we can do through time.

Operator: And your next question comes from the line of Russell Gunther with Stephens.

Russell Elliott Gunther: Maybe I’d like to start, if I could, on kind of margin and NII. I really appreciate the revenue guide for the year. Given the securities actions taken within 4Q and then again here in 1Q, kind of how are you thinking about where that first quarter margin could shake out? And then an adjacent question within the NII expectation for the year. Kind of what is your overall level of purchase accounting embedded in that guide?

Michael Young: Russell, I’ll take the first part of that and turn the second part to Tracey. Two key things to think about. One is the margin side, but the other is the average earning asset balances. In the fourth quarter, we have public funds balances that tend to fund up and fund back down as well as you mentioned kind of the — taking our time on the repositioning. So we had some excess cash balances related to that as well. So both of those kind of weighed on the margin a little bit in the fourth quarter. We would expect the average earning asset base to be down in the first quarter by a couple of hundred million dollars, but the margin will expand pretty nicely probably in that 10 to 15 basis point range in the first quarter. So those are the dynamics you want to think about kind of the start of the year and then moving throughout the year to hit the guidance that we laid out. And I’ll turn it to Tracey on the purchase accounting accretion question.

Tracey Dexter: Yes. Russell, the expectations for accretion are always kind of difficult to predict, maybe more so with the addition of this portfolio. The base level of accretion is derived using the loan’s contractual life and the maturities here in the villages portfolio are relatively long. So the accretion will be accelerated upon payoff that will create a lot more volatility in the accretion, and we’ve got that baked into our forecast, too. But our model uses the fourth quarter of ’25 as the run rate for ’26, but do expect volatility in that accretion number.

Michael Young: Yes. Just one other point I wanted to make, we’ve been kind of calling this out a little bit more recently, but just the nature of our acquisitions being heavy core deposit franchises, there’s more core deposit intangible expense. And so if you look at the net effect of the purchase accounting marks in both revenue and expenses, they largely balance one another. So if you take kind of a low 40 number on purchase accounting accretion and you see our kind of $38 million roughly number on core deposit intangible expense, you’ve got a pretty marginal contribution on a net basis to earnings. So we just want to call that our earnings guidance for the year has really not been contributed to on a net basis from purchase accounting accretion in a significant way.

Russell Elliott Gunther: And then, I guess, next question for me would be, given the overall excess capital you guys discussed, how you’re thinking about that in the context of the actions already taken within the securities portfolio. Is there room or appetite left for additional restructurings in ’26 beyond what’s currently contemplated in the guide?

Michael Young: Russell, I think we don’t expect to execute any additional securities restructures and that’s certainly not reflected in the guide. So this is the only piece that’s reflected in the guidance. And maybe zooming out more broadly, most of the other securities that are at loss positions or more material loss positions are in the HTM portfolio. We don’t have any plans to pierce the HTM portfolio. So I think we’re pretty much done with this capital action.

Russell Elliott Gunther: Okay. Yes. Michael, helpful. And then you touched on another one I had earlier in terms of just average earning asset expectations. So as we think about the mix within securities and into this high single-digit loan growth expectations, beyond the step down you mentioned in the first quarter, how are you expecting average earning asset levels to trend over the course of the year?

Michael Young: Russell, yes, it’s pretty similar commentary to last quarter. The thing that’s changed, we started the year with a little higher loan-to-deposit ratio because of some of the proactive actions we mentioned but we’ll remix relatively slowly from here, and that’s just going to be the delta between our loan growth versus our deposit growth really is going to be the driver of that. So if we’re guiding to high single-digit loan growth and low to mid-single-digit deposit growth depending on where you shake out in that mix of ranges, that’s going to be really the driver of our remix throughout the year.

Russell Elliott Gunther: Okay. And if I could sneak one last one, guys. I appreciate it. The efficiency ratio guide is helpful. Maybe could you just give us a sense for the reminder of the cadence of the cost saves within the Villages acquisition. I think you mentioned the conversion in July. Just kind of where an exit expense rate might be for the year. And then perhaps more bigger picture, but how should we think about a normalized expense growth rate for Seacoast going forward?

Michael Young: Russell. Yes, so in the acquisition deck, the base run rate for them was about $64 million at inflation year-over-year to that. That’s kind of their base expense rate that would come out post the conversion in early third quarter. And so we would expect to see that kind of underlying drop. Now to offset, though, is we are investing into banker hires and ramping that during the year. And so one will kind of impact the other and could see a little more stability, if you will, in the expense base, but with much higher production and productivity going forward. And then I forgot the last part of your question was…

Russell Elliott Gunther: I think really just — yes, as I’m thinking about sort of ’27 and even beyond, given your commentary around the benefits from hiring in ’27, ’28, just as we exit with a cleaner run rate post all the Villages expense saves, what is a decent normalized growth rate to think about that captures the franchise investment you guys are making?

Michael Young: Appreciate you reminding me the last part of the question. I think as we zoom out, and this is hypothetical conversation, not guidance, obviously, but as a larger company today at $21 billion in assets, there’s a lot of opportunity for us to drive scalability across the company. And a lot of our processes with investment into technology that leads to material expense rationalization and really our ability to grow into our existing expense base in many different areas. So I think we’re really excited about that opportunity as we move forward into ’27 and ’28 and driving some of that scalability and operating leverage. But we obviously want to maintain our ability to invest into the company and into the future growth prospects.

We’re not running this for 1 year or 2 years. We’re running it for continued growth and sustainable growth over a long period of time. And so we’ll balance those 2 as we’ve done in the past and maintain a reasonable profitability level and efficiency level as we move forward, balancing those 2 key critical pieces.

Charles Shaffer: Just to add a little bit there, just in a long-term sort of view on efficiency ratio is one way to think about things, it’s probably low to mid-50s type efficiency ratio target is where we want to operate the company over the cycle.

Operator: And our next question comes from the line of Stephen Scouten with Piper Sandler.

Stephen Scouten: Just one point of clarification potentially. Do you guys have a good number for where the securities yield can kind of shake out the first quarter after all the actions completed.

Michael Young: Stephen, this is Michael. It will be a little bit dependent on the pace of prepayment speeds. We have a lot of discount mortgage backs in the portfolio. But generally, it’s going to be in that kind of 4.40% to 4.50% range.

Stephen Scouten: Okay. I appreciate the context there. And then anything in terms of updates on the Atlanta market, just kind of curious what that may have contributed to growth maybe this quarter and how it plays into this 15% uptick in lenders? How much of those might be contemplated in the Atlanta MSA.

Charles Shaffer: Yes. Thanks, Stephen. As we’ve talked in the past, we’ve got a team of roughly 10 or so bankers up in that market. It’s gone exceptionally well. I’ve been really pleased with the success we’ve had over the last couple of years there. We entered with an LPO about 3 years ago, built a CRE team and program, moved a little further into C&I, opened a branch here recently. As we’ve said in the past, I would expect over the next, call it, 3 years or so to roughly have about a 5 branch footprint in the Greater Northern Atlanta market as we build out up in there and roughly to 20 bankers calling in that market with treasury support and the like. And so it was — it’s been helpful. We’ve definitely seen a lot of success there, and we do expect to continue to build in the Atlanta market in the coming years.

Stephen Scouten: Okay. And just — and can you contextualize that 15%? Or just remind me like what would that be ballpark on just FTE count perspective?

Charles Shaffer: It’s roughly about 15 bankers.

Stephen Scouten: Okay. Perfect. Great. And then just kind of lastly for me in terms of — and then, Chuck, you gave a lot of great color about the moving parts around growth. But the payoffs in particular, which you noted, you’re kind of forecasting in higher payoffs next year. How do you think about the puts and takes of what you might see from a payoff perspective, especially within the context of rates. If we get lower rates, should that escalate payoffs? Or do you think kind of increases in production activity might kind of actually lead to a better environment if we get lower rates from here?

Michael Young: Stephen, this is Michael. I’ll take that one. Yes, I think it is somewhat pretty heavily rate dependent as we move into next year. We have a fair bit, as we’ve talked about, of low fixed rate maturities that are coming due as well. Some clients or customers may choose to pay off or refinance elsewhere. But generally, it’s just going to be a nature of kind of where the rate environment heads, particularly in the middle of that curve, as to whether or not people pay off or refi or if they continue to refinance with us.

Charles Shaffer: Stephen, I’ll remind you, we really pulled back on lending and particularly construction lending in 2023. And so we didn’t quite see the level of payoffs that others have dealt with probably here in 2025. And I think we’ll probably still not quite see the level of payoffs that others may feel in early ’25. Probably more of our challenge around that will emerge in ’27, ’28, ’29 but we did take that pause back then when rates were really low, given what we viewed as a higher risk environment and didn’t want to be delivering into potentially a weaker economy. Obviously, that didn’t fully play out. The economy is pretty dog on strong at the moment. But it’s nonetheless, that dynamic plays out for us. And so that issue hasn’t been quite as strong for us as others in the industry.

Stephen Scouten: Got it. Really helpful. And then maybe just one last for me actually. We’re seeing more headlines about potential weakness in residential housing in certain pockets within Florida. Can you maybe contextualize that in any of your markets? Is there anything that you see that’s concerning at all? I can’t say that I’m really seeing it being that widespread or of a concern, but just wondering your context being in those markets.

Charles Shaffer: Yes, really high level. And just to remind you, we don’t have a lot of exposure to builder lines, just to kind of point that out. That’s not something we’ve done a lot of, particularly post GFC. We’ve stayed out of the builder line sort of lending. It’s not a real — we do a little bit here and there, but it’s not a big part of our portfolio. And — but nonetheless, the way I’d characterize Florida is it is very market specific and then I’d start with saying the condo market has been weak, primarily driven by condo having to be retrofitted for new standards. And so that’s put additional cost on associations that have to be passed on to backfill condo owners and therefore, new buyers have slowed down and buying into that market until you have that retrofit done.

Once the retrofit is done, those condos move pretty quickly. But we’re going through this cycle where you just kind of the have and have nots. Those have gotten done, you can sell your condo, those that haven’t, it’s a weak market. So you kind of got to pull that out. And then when you get to the residential market, there are pockets of weakness, and there’s pockets of strength. I described Southeast Florida, Palm Beach County down to Miami-Dade being exceptionally strong. Prices have not come down much. Demand for housing remains really strong in those markets. But you move just directly over to the West Coast into that Fort Myers, Cape Coral area, and there was a lot of sort of post-COVID boom that happened with a lot of development, a lot of overdevelopment and now we’re seeing prices come down.

So it is very much sort of depending upon the market in Florida. But I’d say, generally, it’s not as weak as probably advertised, but there are pockets of weakness where there’s been some oversupply.

Stephen Scouten: And really great quarter. Congrats on a great year.

Operator: And our next question comes from the line of David Bishop with Hovde Group.

David Bishop: Chuck, I’m curious, you guys also maybe got lost in the shuffle, had pretty strong core deposit growth this quarter. Just curious if there’s any sort of breakdown you have commercial versus consumer inflows there? I’m just curious what the main drivers were.

Charles Shaffer: I don’t have that in front of me. We can pull that for you, David. We do have that table in the earnings release, but it’s hard to get to the number because of the acquisitions in there. We can kind of pull that apart for you. I would say generally, we saw a little bit of — just on the high level sort of we all saw some deposit outflow in Q4 primarily in CDs as we kind of backed off of the higher-priced CD options, just given all the liquidity we had, we didn’t feel like we needed to compete there. But the underlying core dynamics, DDAs, the typical operating accounts continues to be really strong with the growth and onboarding of new clients particularly the commercial client base that continues to — the C&I base continues to come on. So — but we’ll see if we can pull that apart a little bit for you and give you some detail after the call.

David Bishop: Perfect. And then one follow-up. Most of my questions have been asked and answered. But just curious, it sounds like some of your peers new loan origination yields are quickly, actually more quickly than I thought they would approaching what’s rolling off. Just curious what the spread is between new originations and what’s maturing.

Michael Young: David, this is Michael. Yes, our new originations in the quarter were kind of in the low 6s. Our roll off yields, it will depend. It’s a little episodic throughout the year, given we have some periods of lower fixed rate maturities, and we have a lot of ARMs that are coming in to reset windows from the pandemic vintage. So we’re still getting that positive back book dynamic on repricing, but those portfolios are a little lower in aggregate now pro forma. So — but we’re still probably picking up maybe 50 to 100 basis points kind of in terms of the new add-on rates versus the cumulative impact of the fixed rate, adjustable rate repricing and kind of fall off rates.

Operator: And our final question comes from the line of Wood Lay with KBW.

Wood Lay: I wanted to touch on fee income. Fees this past quarter came in pretty well above the guidance you provided, and I know there are some questions on especially villages mortgage unit and portfolioing that versus selling. So how do you think about the toggle between that going forward? And just any expectations on the fee income side near term?

Michael Young: Woody, it’s Michael. Yes, we did retain as we talked about, more of the mortgage production in the fourth quarter, which drove a little additional balance sheet growth as part of the restructure to move us a little faster there. I think we may still do that a little bit here in the first quarter, potentially but then we’ll start to ease off of that as we move throughout the year, but it just remains a really important lever for us as we move forward to kind of manage the overall balance sheet. And as Chuck mentioned, just the quality of that paper is so strong given the high-quality borrowers that are in the market. We just — it’s a very attractive asset to have on the balance sheet. So that’s kind of how we’re thinking about it from that side.

And that will obviously have flow-through impacts into fee income in 2026, depending on the level of sold volume versus retention of the volume on balance sheet, and that’s kind of why we just gave a total revenue guidance. It could flip between NII or fee income a little bit depending on our optionality and how we lean into that. But we’ll deliver the total revenue that we articulated.

Charles Shaffer: Yes. Just generally, we probably will see mortgage banking income a little higher than we have in the past. We picked up a servicing portfolio there that the Citizens First Bank of the Villages was servicing that was fairly sizable. And so it’s a nice revenue stream that will be continuing through the income statement.

Wood Lay: Got it. And then maybe last for me. Again, on Villages. We touched on at announcement, there could be several revenue synergy opportunities. And I know we’re still very early on in the process. But are you seeing any early signs of those synergies.

Charles Shaffer: Yes, early on, we’ve built the wealth management team. We’re starting to see opportunities there. That’s been great to see. As we talked about the mortgage business has gone very well, really exceptionally well. We like everything we’re seeing there at the mortgage business. Ultimately, with time, we’d like to get some insurance offerings in that market as we have an insurance agency just north of there, near Gainesville. So we’re continuing to look at opportunities to expand our carrier rights into that market, and hopefully, with time, we’ll find our way there. But the biggest driver that we’ve seen so far is just the wealth management side of the business is starting to get traction there.

Operator: That concludes our question-and-answer session. I will now turn the call over to Chuck Shaffer for any closing remarks. Mr. Shaffer?

Charles Shaffer: Okay. Thank you, operator. Thank you all for joining us today. We appreciate the support, and thank you to our team for another great quarter and on to an awesome 2026. So that will wrap up our call.

Operator: This concludes today’s conference call. You may now disconnect.