Earnings Call Transcript - SBCF Q4 2025

Operator, 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, CEO

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 high-quality credits with 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 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 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, CFO

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 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's 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 two de novo openings in the fourth quarter, one in the greater Atlanta area and one on the Gulf Coast in Bradenton, Florida. For the full year 2025, we opened five 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, the 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 five 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.

Michael Young, CFO

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 two 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 net interest margin. 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 2026 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 one-third of that excess regulatory capital generation into a 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. 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 expect 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 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.

Charles Shaffer, CEO

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, two 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.

Operator, Operator

And our first question comes from David Feaster with Raymond James.

David Feaster, Analyst

Our growth outlook and our ability to deliver on our strong return profile in 2026 is looking very promising. It’s particularly rewarding to approach our 100th anniversary in 2026 with such a solid foundation. As we commemorate a century of serving our communities, we do so with confidence, momentum, and great optimism for the future. Now, operator, we can open the line for questions. Our first question comes from David Feaster with Raymond James.

Charles Shaffer, CEO

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, Analyst

Is that better?

Charles Shaffer, CEO

Yes. Better, David. Good, perfect.

David Feaster, Analyst

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, CFO

Yes, David, I can address the first part. This is Tracey. Our adjusted efficiency ratio includes the expense for amortization of intangible assets. In the past, we excluded that. We understand that has been a difference in how you track it. So it's included now.

Michael Young, CFO

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 count as 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, Analyst

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, CEO

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 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 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. 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 2026, 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 continue to reoriginate to. 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 as 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, Analyst

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, CEO

We'll see how the year develops and what opportunities arise. This quarter, we took the chance to execute a securities loss trade, which I believe was a smart use of our capital given the significant capital appreciation from the Villages transaction and the quicker earn-back compared to our initial deal modeling. We will keep monitoring the situation. Clearly, we have a lot of capital, which gives us opportunities to consider dividends and buybacks in the future. As you've noted, there are fewer M&A opportunities at this time, and right now, our primary focus is on completing the Villages deal. That's our main priority. We want to ensure an exceptional transition for our customers and provide a solid experience in the Villages. Once we get through the middle of the year, we'll assess what opportunities are available. I understand that we are accumulating a lot of capital, and that's an ongoing conversation with our Board. We'll continue looking at other possibilities as the year progresses, including buybacks and dividends among other options.

Russell Gunther, Analyst

Maybe I'd like to start, if I could, on margin and NII. I really appreciate the revenue guide for the year. Given the securities actions taken within the fourth quarter and then again here in the first quarter, 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, CFO

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, CFO

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, which 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 2025 as the run rate for '26, but do expect volatility in that accretion number.

Michael Young, CFO

Yes. Just one other point I wanted to make. We've been 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 expenses, 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 Gunther, Analyst

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, CFO

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 Gunther, Analyst

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, CFO

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 Gunther, Analyst

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 a more bigger picture, but how should we think about a normalized expense growth rate for Seacoast going forward?

Michael Young, CFO

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-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 Gunther, Analyst

As I consider 2027 and beyond, particularly in light of your comments about the advantages of hiring in 2027 and 2028 and as we anticipate a clearer run rate following the cost savings from the Villages, what would be an appropriate normalized growth rate that reflects the franchise investment you are making?

Michael Young, CFO

I appreciate you reminding me of the last part of the question. I think as we zoom out, and this is a 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. 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 in the company and into future growth prospects. We're not running this for one year or two years. We're running it for continued growth and sustainable growth over a long period. So we'll balance those two as we've done in the past and maintain a reasonable profitability level and efficiency level as we move forward, balancing those two key critical pieces.

Charles Shaffer, CEO

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

Stephen Scouten, Analyst

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, CFO

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, Analyst

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, CEO

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 three 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, three years or so to roughly have about a five 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'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, Analyst

Okay. Can you provide some context for that 15%? Or remind me what that would roughly translate to in terms of full-time employee count?

Charles Shaffer, CEO

It's roughly about 15 bankers.

Stephen Scouten, Analyst

Okay, perfect. Great. Lastly, Chuck, you provided valuable insights about the factors influencing growth. Regarding the payoffs you mentioned, which you anticipate to be higher next year, how do you view the potential variations in payoffs, particularly in relation to interest rates? If rates decrease, will that increase payoffs? Or do you believe that a rise in production activity could create a more favorable environment if rates decline?

Michael Young, CFO

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, CEO

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 2025. Probably more of our challenge around that will emerge in 2027, 2028, 2029, 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 strong at the moment. But 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, Analyst

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, CEO

We have limited exposure to builder lines, especially since the post-GFC period when we steered clear of that type of lending. With that said, Florida's market is quite specific. The condo market, in particular, has been struggling mainly due to the need for retrofitting to meet new standards, which has increased costs for associations that must be transferred to condo owners. This situation has slowed down new buyers until the retrofitting is completed. Once done, those condos tend to sell quickly. Currently, we are experiencing a cycle of disparity in the market—those who have completed the retrofitting can sell, while those who haven't face a weaker market. As for the residential sector, there are both weak and strong areas. Southeast Florida, particularly from Palm Beach County to Miami-Dade, remains exceptionally strong with stable prices and high demand. However, moving to the West Coast around Fort Myers and Cape Coral, we saw rapid post-COVID development leading to oversupply, resulting in declining prices. Overall, while there are challenges, Florida's market is not as weak as some might think, though there are certain areas experiencing oversupply.

Stephen Scouten, Analyst

And really great quarter. Congrats on a great year.

Operator, 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, CEO

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 onto an awesome 2026. So that will wrap up our call.

Operator, Operator

This concludes today's conference call. You may now disconnect.