Q4 2023 Seacoast Banking Corporation of Florida Earnings Call

Presentation

Operator

Welcome to the Seacoast Banking Corporation's Fourth Quarter and Full Year 2023 earnings conference call. My name is Audra, and I will be your operator. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one.
Before we begin, I have been asked to direct your attention to the statement at the end of the Company's press release regarding forward-looking statements. First, we'll 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 that act. Please note that this conference is being recorded.
I will now turn the call over to Charles Shaffer, Chairman and CEO of Seacoast Bank. Mr. Shaffer, you may begin.

Thank you, Roger, and thank you all for joining us this morning. As we provide our comments will reference the fourth quarter and full year 2023 earnings slide deck, which you can find at Seacoast Banking.com. I'm joined today by Tracey Dexter, Chief Financial Officer, Michael Young Treasurer and Director of Investor Relations, and James Stallings, Chief Credit Officer.
Seacoast delivered another solid quarter of financial performance, generally in line with last quarter's guidance. The decline in net interest income was offset by expense reductions resulting in a pretax, pre-provision return on tangible assets of 1.48% and an adjusted return on tangible common equity of nearly 12% and an efficiency ratio of 60% since the end of the year or at the Seacoast ended the year with an industry leading Tier 1 capital ratio of 14.6%, making one of the strongest banks in the nation. On previous calls, we've highlighted this capital strength would likely provide opportunities for the bank this quarter evidenced to clear benefits. First, we were able to opportunistically repurchase 546,000 shares of our common stock at a weighted average price of $19.80, representing an attractive earn-back on the deployed capital.
Secondly, our tangible book value increased nearly 6% from the prior quarter as we've been able to maintain a large percentage of our securities in AFS compared to peers. Our substantial capital and fortress balance sheet will continue to offer strategic advantages and further optionality in the future. And during the quarter, the effects of quantitative tightening and rising interest rates on the industry have become increasingly evident. Our core net interest margin declined 11 basis points, slightly, exceeding exceeding our guide by one basis point. This was mainly driven by the ongoing transition of non-interest-bearing accounts to interest bearing products, which was consistent with previous quarters' trends. Important to note that we're not seeing attrition of engage customers and in fact, gross customer acquisition of checking accounts was up 13% from the same period one year ago. Notably, we believe the first half of 2024 represents the low point for our net interest margin and net interest income. Tracy will offer additional guidance on the shortly. We have implemented measures to optimize our efficiency across the organization and in the third quarter we reduced our workforce by 6%, which led to an 8% decrease in expenses in Q4 2023. Furthermore, the completion of a second phase of cost reductions in early Q1 2024 is projected to further decrease our annual operating expenses by an additional $15 million.
And turning to our lending strategy, we incurred We were encouraged by the growth in our lending pipelines while maintaining a prudent approach in the current economic climate.
Our loan portfolio grew by 2% annualized from the previous quarter, and we expect continued growth into 2024. Our loan add-on rate rose to near 8% during this period. And additionally, it's important to emphasize that we acquired a comprehensive banking relationship with Seacoast for all of our lending activities, ensuring a mutually beneficial partnership with our clients. Our asset quality remains robust, showcasing sustained strength. We continue to see a return to a more normalized credit environment, and we've included a chart in the accompanying slides to offer greater clarity and insight into this trend. This chart presents a view of the classified and criticized loan trends over the last five years, the ratio is consistent and aligned with the 5-year average on scoring the stability of our asset quality. Our A. triple L. stands at $149 million, equating to 1.48% of loans total loans. This figure places us in a strong position with an allowance ratio among the highest in our peer group. Additionally, we have another $174 million in purchase discount. And looking ahead, our financial standing reserves position us exceptionally well compared to our peers, which will allow us to navigate and adapt to any developments the cycle may present.
And in conclusion, as we enter 2024, our commitment to upholding our conservative balance sheet principles is unwavering. We are dedicated to astutely managing our expenses while strategically investing to stimulate growth in low-cost deposits. This disciplined approach is key to fostering a robust capital growth will help us maintain a diverse and stable funding base, further strengthening our company's fortress balance sheet. Ultimately, these efforts are aimed at enhancing the long-term value of our franchise, ensuring resilience and prosperity in the years to come.
Turn the call over to Tracey to walk through our financial results.

Thank you, Jack. Good morning, everyone. Directing your attention to Q4 results, beginning with Slide 4. Seacoast reported net income of $0.35 per share in the fourth quarter. And on an adjusted basis, which excludes amortization of intangibles and securities related losses, net income was $0.43 per share. On an adjusted basis, PPNR to total assets was 1.48%. Adjusted ROTCE. was 11.8% and the efficiency ratio improved from the prior quarter to 60%, highlighting our continued focus on expense discipline after reducing headcount by 6% during the third quarter, we saw the full benefit to expense of that reduction in the fourth quarter. Additional opportunities for efficiency have been identified and will generate expense savings in 2024, which I will talk about shortly. We're pleased to report that 2023 was another record year for our wealth management team with assets under management increasing 23% to $1.7 billion and full year revenues increasing 16%. Tangible book value per share increased $0.82 to $15.8, benefiting from a 26% decline in unrealized losses on securities in AOCI, our capital position continues to be very strong, and we're committed to maintaining our fortress balance sheet. Seacoast's Tier 1 capital ratio increased to 14.6% and the ratio of tangible common equity to tangible assets increased during the quarter to 9.31%. Also notable, if all held to maturity securities were presented at fair value. The TCE to TA ratio would still be a strong 8.68%. Our fourth quarter results include $2.9 million in losses on the sale of approximately $83 million in securities, reinvesting the proceeds into higher yielding securities. The opportunistic repositioning has an expected earnback of approximately 1.3 years. We also repurchased 546,000 shares at $19.80 when prices dipped in late October.
Turning to Slide 5. Net interest income declined by $8.5 million or 7% during the quarter with lower purchased loan accretion, higher deposit costs and deposit product mix shift, all partially offset by higher yields. Core net interest margin contracted 11 basis points to 3.02% one basis point higher than the range of guidance we provided in the securities portfolio. Yields increased 10 basis points to 3.42%. Loan yields, excluding accretion, increased 6 basis points to 5.4%. Accretion of purchase discounts on acquired loans was lower this quarter by $3.5 million compared to the third quarter. The cost of deposits increased to 2%, while the pace of that increase continues to slow and our funding base remained strong with 54% transaction accounts.
Looking ahead to the first quarter we expect core net interest margin to be in a range from flat to lower by five basis points.
Moving to Slide 6. Noninterest income, excluding securities activity increased $1.6 million in the fourth quarter to $19.8 million. Service charges increased with continued expansion of our commercial treasury management offerings and new customer acquisition. Interchange income during the fourth quarter included an annual volume-based incentive from the payment network that added $0.7 million to the quarter. Beyond that, interchange revenue was up slightly from the third quarter to $1.7 million. Increased saleable SBA production in the fourth quarter resulted in gains of $0.9 million. Other income was higher by $0.4 million largely related to loan swap activity in the securities portfolio, the Company recognized an opportunity to sell lower-yielding bonds with modest losses, which I will discuss in more detail on a later slide. Looking ahead, we continue to focus on growing noninterest income, and we expect first quarter noninterest income in a range from $18.5 million to $20 million.
Moving to slide 7 assets under management increased 23% from a year ago to a record 1.7 billion and have increased at a compound annual growth rate of 27%. In the last five years. 2023 was one of the group's best years yet with significant new client acquisition and nearly $350 million in new assets under management wealth management revenues in 2023 were $12.8 million, an increase of 16% year over year. Our Family Office style offering continues to resonate with customers generating strong returns for the franchise.
So on to Slide 8, non-interest expense for the quarter was $86.4 million, which is at the lower end of the range of guidance we provided salaries and wages were lower by $8 million, which is comprised of the following changes. The third quarter included $3.2 million in severance associated with the third quarter reduction in force and there were no such charges in the fourth quarter. The resulting lower headcount from that effort reduced expenses in the fourth quarter by approximately $1.7 million.
Finally, beyond direct salary expense reductions, this category also benefited from higher loan production during the fourth quarter, resulting in higher deferrals of origination costs that benefited the quarter by approximately $2.8 million in marketing. As we've mentioned in prior calls, we're focused on driving organic growth throughout our markets and continue to make additional investments in marketing and brand recognition campaigns, legal and professional fees were somewhat higher, aligned with the timing of projects and legal matters, which are now complete. Higher FDIC assessments were the result of adjustments arising from the Company's growth in asset size early in 2023 upon the acquisition of professional banks, changes in real estate owned expense related to valuation adjustments on three of our former branch properties. We expect the final disposition of several properties in the first quarter of 2024 and other noninterest expense was lower across many areas and the efficiency ratio improved from 62.6% in the third quarter to 60.3% in the fourth quarter. Recent expense reduction initiatives continue to positively impact results, and we've taken additional meaningful action in the first quarter of 2020 form. We expect one-time expenses of approximately $5 million in the first quarter to effect these actions, which will reduce the full year 2024 expense by approximately $15 million.
Also, I'd like to highlight an important upcoming change to our presentation beginning in the first quarter of 2020 form our presentation format will no longer exclude amortization of intangibles from adjusted expenses. With that change in mind, we expect first quarter noninterest expense inclusive of amortization of intangibles to be in a range of $82 millionto $84 million.
Turning to Slide 9. Loan outstandings increased 2% on an annualized basis during the quarter, and we remain committed to our disciplined credit culture. Average loan yields, excluding accretion on acquired loans, increased 6 basis points to 5.4%. We expect loan yields to continue to increase in the coming periods as our fixed rate loans mature and reprice. In the fourth quarter, we continued to see new loan yields in the 8% range. And looking forward, we expect loan growth in the low single digits.
Turning to slide 10, portfolio diversification in terms of asset mix, industry and loan type has been a critical element of the Company's lending strategy, exposure across industries and collateral types is broadly distributed, and we continue to be vigilant in maintaining our disciplined, conservative credit culture and non-owner occupied.
Commercial real estate loans represent 33% of all loans and are distributed across industries and collateral types. Construction and commercial real estate concentrations remain well below regulatory guidelines and below peer levels. We've managed our loan portfolio with diverse distribution across categories and retaining granularity to manage risk.
Turning to Slide 11 to credit topics. The allowance for credit losses totaled $148.9 million or 1.48% of total loans compared to 1.49% in the prior quarter. The allowance for credit losses combined with the $174 million remaining unrecognized discount on acquired loans totaled $323 million or 3.2% of total loans that is available to cover potential losses.
On to slide 12, looking at quarterly trends in credit metrics, our credit metrics are strong and we remain watchful of the ongoing impact of higher rates on the economy. The charge-off rate during the quarter was 0.19% annualized. Nonperforming loans represent 0.65% of total loans and accruing past-due loans or 0.3% of total loans. The percentage of criticized and classified loans to total assets increased over the prior quarter to 1.6%.
On Slide 13, providing a longer term view of our stable asset quality trends recall that in the third quarter of 2023, we recorded an expected charge-off of $11.3 million. This was an acquired loan that was fully reserved through purchase accounting and the charge-off did not impact earnings or capital. That loan drove the somewhat higher charge-off level in 2023, noting the stable trends in nonperforming past-dues and criticized and classified loans over the past five years. Also, recall that much has changed at Seacoast over this five-year period, including eight separate bank acquisitions and a near doubling of asset size and the stability of our credit experience during that period reflects the consistently applied discipline of our credit culture.
Moving to slide 14 and the investment securities portfolio, we recognized an opportunity to sell low yielding bonds with modest losses on a small percentage of the investment portfolio. The proceeds of approximately $83 million were reinvested into higher-yielding bonds with strong prepayment protection and good convexity by selling short duration, lower-yielding securities from the portfolio and reinvesting into longer duration prepayment protected Agency CMBS, we were able to add considerable yield and interest income while prioritizing predictability expecting an earn-back period of only 1.3 years. The average yield on securities increased during the quarter by 10 basis points to 3.42% changes in the rate environment impacted portfolio values positively. And as a result, the overall unrealized loss position improved by $105.6 million. This contributed $0.61 of the total $0.82 increase in tangible book value per share during the quarter.
Turning to slide 15 and then deposit portfolio. Excluding the paydown of brokered deposits, organic deposits decreased by $145 million. We saw lower balances near year end, particularly in distributions from escrow and other attorney and trust accounts, which comprise approximately $100 billion of the decline. Non-interest demand deposits represent 30% of total deposits and transaction accounts represent 54% of total deposits, which continues to highlight our long-standing relationship-focused approach. The cost of deposits increased this quarter to 2%, the slower pace of increase than in the past several quarters. Overall, our expectation for the first quarter is that the cost of deposits will continue to increase, albeit at a lower pace. That said, we remain keenly focused on organic growth.
On slide 16, the bar chart shows non-brokered customer balances, including the sweep repurchase products because continued to benefit from a diverse and granular deposit base and customer funding declined modestly consistent with typical year end patterns. We continue to be very effective in new customer acquisition with the number of fourth quarter new transaction accounts increasing by 13% year over year. Our customers are highly engaged and have a long history with us and low average balances reflect the granular relationship nature of our franchise.
And finally, on Slide 17, our capital position continues to be very strong, and we're committed to maintaining our fortress balance sheet tangible book value per share increased to $15.8. The ratio of tangible common equity to tangible assets continues to increase, reaching an exceptionally strong 9.3% in the fourth quarter, our risk-based and Tier 1 capital ratios are among the highest in the industry.
In summary, we remain steadfastly committed to driving shareholder value and our consistent disciplined expense management positions us well as we continue to build Florida's leading community bank. Chuck, I'll turn the call back to you.

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

Question and Answer Session

Operator

Thank you at this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll go first to Eric. You're at Raymond James.

Hey, good morning, everybody. This is Eric down in for David Feaster. Thank you for taking the Quest.
Yes, Ron, just wanted to touch on the funding side to start off on appreciate the loan growth guidance of low single digits. It's great to see you reduced wholesale and brokered funding this quarter and new account openings. Just curious how you think about funding the loan growth and how you think about core deposit growth in 2020 for what initiatives you have in place to grow deposits? And do you expect to grow deposits at the same pace as loans? Just any color on that would be helpful.

And then thanks for the question, Eric. So I think as we look into 2024 level be determined by kind of the pace of the Fed movement within the year. Obviously, with more costs could be favorable to deposit flows in general. But on a broad trend, we would expect to have our deposit growth, maybe slightly below loan growth and continue to remix positively from a loan-to-deposit ratio perspective in 2024. That's probably a high-level thought there.

Got it. That's helpful. And then just outside of the margin, just as we think about the impact interest declining rates on the balance sheet and income statement, when you start to see additional loan growth from from that if we see cuts in and at what level and what segments would you expect to see it from first and then just curious how you think about repricing deposits if we begin to see rate cuts on drive additional core deposit flows if rates begin coming down?

And that's a great question, Eric. It kind of depends on how you think things play out over the rest of the year. What I'm very encouraged by is we're seeing the opportunity to step in where the market's somewhat pulling away from lending and really get well-structured, high quality credits, a lot of equity and projects and we're getting rate. So, you know where we as we've talked about in past calls, we kind of pulled back given some of the more I would describe it kind of getting on the edge of where we are comfortable in terms of underwriting structure we're now seeing the opportunity to underwrite very conservatively, get the right pricing on deals and then moved full relationships over our pipelines grew. We saw better production last quarter and then looking forward, even into the first few weeks of 2024 here, we're seeing the pipeline continue to grow. So very encouraged by that. And so as that plays out, we'll see how growth growth kind of comes along with it with that. And then that will kind of determine exactly where we are and how we step into the deposit market as Michael said, I think the biggest driver where the deposit market goes is whether or not the Fed does cut rates and whether or not the Fed starts buying bonds and put some liquidity back into the market. So and I think that will be very interesting to see how the back half of 2024 plays out. But I like where we're positioned.
I like the fact that we went ahead and double down our effort to get our expense base right-sized. And so when you kind of step back and think about where we are I think we've been proactive in getting the expense base sort of reset while going into the coming year where we're seeing loan growth pull through. And as that plays out into the coming year. If we do see some rate cuts on the back half are really starts to set up a really nice 25, 26. So we're taking a more medium to longer-term view of the situation, structuring the balance sheet and the expense base to prepare for that and looking forward to what things could look like in the coming years.

Yes, that's really helpful. And then just wanted to lastly, just touch on credit and if you could just touch on what drove the increase in NPAs and criticized and classified more broadly. If you could just provide some color on just how credit's trending. I think you kind of spoke to expectations of some normalization. Where are you most concerned about credit going forward? And just talk about how your economic outlook has changed and here, assuming any rate cuts in that outlook and any color there would be helpful.

Yes, I think where we saw it really did increase in NPLs was only a couple of credits on both for C&I driven credits, one of which is basically a restructure that potentially will move back to accrual once it sort of achieve stabilization, which we are fairly confident it will on the other. We've got reserved in a specific generally. So when we think about that that's really what drove some of that. And I don't know, James, if you have any color on that or anything you want to add to that. But I think as far as we think about where we continue to watch, I think the biggest sort of home area that we continue to be thoughtful about is '21 and '22 were such strong years for the US economy, that a lot of inflation driven revenue push through small businesses and operating companies, and then along with that came higher expenses. So now we're kind of moving through that period and revenues are potentially going to come down a little bit. And it's going to be important to monitor our operating companies to make sure they properly manage margins and manage expenses into the coming years. That's really be a summer ala.
James, anything you'd add to that?

I think you said it well, Chuck, I think we know what we're seeing is a normalization. As we talk about normalization of our credit metrics. It's really a normalization of the operating environment for our C&I companies where they went through sort of a shock from COVID and then all of the PPP and stimulus money driving inflationary pressure on the demand side. And so a number of companies, you know, just need to sort of readjust to a more normal operating environment. We're seeing declining deposit balances, which is something that we are keeping an eye on. But it's nothing that I would say is isolated to a particular industry or sector. It's just sort of a general normalization of the the ability to generate cash flow by our customers now.

So we continue to keep an eye on that, let's say 1,000 anywhere that we were going to be focused on. But what is again, just encouraged by the fact that our capital is strong as it is our allowances as strong as it is. That's going to allow us to be proactive and get out ahead of anything in manage these things to the best economic outcome.
If the cycle does sort of emerge here, but we feel we feel very good where we're at. I think what you're seeing is a normalization. We're coming off a period where there was almost nothing for a good period of time that was heavily backed up by government stimulus. And so I think it's important for all banks to keep keep and keep that in mind as we move through time here.

Jeff, thanks for the very detailed answer. And then just lastly for me, what are you assuming in terms of rate cuts in your in your outlook and then I'll step back after that. Thanks again for taking the questions.

Yes, no problem, Eric. So we are baking in three rate cuts and our expectations for 2024. But we do know that if we had six cuts, that would be even more beneficial, just to getting us back to a we'll call it a more normal operating environment with the yield curve that might be more flat to up eventually. So the faster we can get to that the better. But we've got three cuts built in for '24 based on what we expect kind of starting midyear.

Operator

We'll go next to Brady Gailey of KBW.

Thanks. Good morning, guys, and a great fit. Maybe just a follow-up on what Michael just said. So the impact to net interest margin of down rates, would you consider Seacoast to be liability sensitive like the more rate cuts we get the better the margin will be?

Yes, it's a good question, Brady. I think the reality will depend on the deposit lag that we may or may not see as an industry. So that's more of an industry comment if in a quantitative tightening environment as rates go down, will banks be able to lower deposit rates, you know, commensurate like many may model?
I think for us, we assume a little bit of a deposit pricing lag that might occur, but we'll see in that environment kind of how pricing adjusts. So the reality is that if rates move down faster. We are mostly a fixed rate asset book. So we will benefit certainly over the long term and really even over the medium term. But over the very short term it could, you know, for a quarter be kind of more a question of timing.
Do you look out in the long term 2025, 2026 is materially beneficial.

Okay. Fine. And then, Tracy, when you were talking about the expense guide of 82 to $84 million for the first quarter, does that include all of the impact of the cost saves the geologists realize or is that could it be more of a full boat thing in 2Q?

The impact of the cost saves, the $5 million we expect as kind of a one-time that's set aside outside the 82 to 84 of 82 to 84 is kind of fully baked in what we expect in Q1 and probably a little bit of modest improvement into Q2 and then cause that's kind of the run rate going into the next year.

Okay. And then finally for me, is I know Seacoast has historically been a pretty acquisitive company like a lot of bank CEOs are pointing to the back half of this year as when M&A will start to become a little more active.

What are your updated thoughts on M&A and the conversations are picking back up there with the described the market?
You know, that being said, I think we'll continue to be very thoughtful in the market and where we'd be looking would be something similar to what we've done in the past. Typically smaller end market community banks under $1 billion in general. And but that being said, prices have to make sense and earn back has to make sense. And so we as long as the market allows for appropriate pricing and deals we could be there. But you know, we don't have a lot of appetite for a lot of earn-back right now. So the deals will have to be priced appropriately. And if they make sense and we can sort of have a conservative view on that, we'd look at it. But otherwise, we probably wouldn't do something if it was outsized and price price is going to matter a lot. And particularly, we want to be careful with capital and dilution.

And so we'll be we'll be thoughtful the way I describe it, Doug and Chuck, I mean Seacoast is at $15 billion. I know the focus is still within the state lines of Florida. I mean, are there still some targets out there that would be not too small, but more meaningful that you guys could seriously consider. Is there still a target list that makes sense for you guys?

Yes, there's about 10 to 15 banks in the mall in the state that are very attractive to us that at the right sort of structure and the right situation, we would certainly be active in Okay, great.

Thanks.

Nice break.

In one one cleanup, Brady, or just a reminder that on the expense guide, the 80 to 84 that is inclusive of intangible asset amortization, we made that shift. As Tracy mentioned on our comments, I just want to make sure Brady, that we're talking all in expenses now we'll move next Stephen Scouten at Piper Sandler.

Thanks, guys. Good morning. Just to follow up on that expense point and clarify so the it sounds like the $15 million in savings, maybe half or $10 million, so that annualized might be in the one quarter run rate and then there's a little bit of incremental run rate that helps 2Q expenses. Is that the right way to think about it?

Yes. Stephen, I'd just say keep in mind, Q1 is usually a little higher with PICA taxes and kind of annual resets there. And so you've kind of got the expense saves With that as an offset and then in 2Q that that starts to burn back down. So you get to kind of more of a normalized run rate at 61 plants that makes sense.

Okay. And then how should we think about non-interest bearing deposits moving forward? And the decline this quarter was a little more pronounced at year end. I'm just kind of wondering what you're thinking, how you're thinking that trends moving forward?

Yes. It's a good question. I think we did see the outflow in Q4. It's been a continuing trend as we see clients use deposits to pay down their their variable rate loans in particular that have moved to pretty high rates on. We could see that continue some of that as I mentioned may be dependent upon what the Fed does, but we would expect to like you've seen with other banks in the industry as a whole that you would see some continued bleed of demand deposit balances. We're about 30% mix today with growth will probably be growing interest bearing categories a little faster than DDA as well. So the mix shift may continue to add lower historical range for us, you know, would be somewhere around 25% to 27% potentially. So that may be kind of a good good area to focus on.

Great. That's helpful, Michael. And then just last thing for me. I'm curious of what you guys think could drive maybe upside to this kind of low single digit loan growth. And it sounds like the pipelines are improving nicely. You feel like you're getting good structured credits. Sounds like a little bit more on the offensive.

So what do you think would have to play out for that to maybe be higher than those expectations, lower rates on the net, probably the driver seeing the biggest change from the beginning you gave CRE Yes, the biggest challenges, you know, just with higher rates, just the demand for stabilized product is just not there. So you know, really what would be the biggest driver is demand for stabilized products or operating companies wanting to make investments with debt. What we see today is operating companies making investments of cash. So we need lower rates. I think really would drive the bulk of it.

That makes sense. Thanks for the comments, guys. Appreciate it. Thank you.

Operator

As a reminder, if you would like to ask a question, please press star one on your telephone keypad.
We'll go next to Brandon King at Truist Securities who more than basic my question's more group.

so all move through through repricing. Could you quantify how much of your loan portfolio, I guess fixed rate loans you expect to reprice this year and kind of what the runoff yields are? Yes.

You said fixed rate loan repricing rebranded the company. And so this year, we'll have about $650 million, roughly of that's a combination of maturities and amortization or recover fully amortizing lender in most cases. So that's kind of a combination of that, and it's around a 5% rate effectively. That's kind of what you should think about for 2024.

Okay. And just looking out, does that amount increase in 2025 and 2026 potential?

It's pretty consistent on. We do have more, I would say, maturities if you go out another year or two from some of the origination vintages in 20 and 21. But again, given kind of the amortization that we see off our book, the cash flows, if you will, are pretty consistent around $500 million or so a year with various rate profiles, but actually somewhat declining rate profile. So we actually get more benefit into 25 and 26.

Okay. And I guess what's the expectation of those repricing for that a percent level potentially? Are you pretty comfortable with your borrowers being able to absorb that sort of increase?

James? Yes, we've we've done pretty extensive testing, particularly within our existing CRE portfolio relative to maturing fixed-rate loans in I'm sorry, we have done pretty extensive testing within the portfolio for maturing loans with fixed rates. And I would say less than 10 or 15% of any sort of significant impact in those that do we have proactively reached out and plan sponsors largely willing to to rightsize the loan to accommodate the higher debt service care. So we feel pretty good about where we are brand further in it.

And I would add, Brian and you know, given the fixed rates in the full amortization, you know these the loan-to-values are amortizing down with time and you have that are the projects giving them an abridged floating rate facilities and things like that, they have time to react and respond to that as well.

Yes, yes. Got it as a very important point.
And then lastly, of course, the credit quality. I know you kind of mentioned how your borrowers are deal with inflationary pressures, but could you speak to impact of higher insurance? I know particularly in your markets is more of an issue than other areas of the country, but could you talk about that and how your customers have been able to do that and manage through that and you're still concerned about that?

Yes, it's a great question. And it is one of the few. What I would say is sort of Florida centric negative headwinds that we're facing today, we are we are seeing it primarily on the increase in wind coverage relative to larger properties. We're sort of dealing with on a case-by-case basis. And in most cases, the sponsors have the ability to address the higher at higher premiums, but in some cases, they're coming to us and asking for the ability to adjust lower coverage and what we're effectively requiring is that they've got the liquidity to self insure. And so that's how we're making accommodations. But we've done a lot of work around this, and we're finding that all banks in Florida are sort of facing the same issue?

Yes.

So it is an issue, but it isn't it isn't super widespread, but there are unique situations where we're having to deal with it. And we're hoping we get some resolution of that in the coming years. But that is a challenge brand.

And there's no doubt with that, it is taking my questions. Thank you.

Operator

And we'll go next.
David Bishop, have the group.

Hey, good morning, guys.
A question for you. The slide regarding some of the deposit headwinds you faced this quarter.
On You called out the the title company balances. Is that an opportunity to rebuild those if we get a rally in the mortgage market? Just curious maybe how the how far those deposit balances are down maybe from the peak of the housing cycle?

Yes, they're down a lot from the peak of the housing cycle.
Yes. Definitely. If you saw unit as well as commercially. And as we've seen the slowdown in commercial real estate, that's certainly a pull through in the title companies and the attorneys. And we do normally see kind of the end of the year. We saw this last year where they're trying to get transactions closed and get everything done by the end of the year. And so typically they do sort of come down during that period of time, a little bit higher this year than in prior years. But if the market was Mark, I think the market will return here in Q1, we would expect them to start to fund back up. So a bit of a nuanced seasonal thing there. We do bank a lot of attorneys and a lot of title companies who are probably a little outsized there and are the impact we see on that. And I know one of the sticking points in a recently has been that the cost the Iota costs there. So you're not sort of managing that debt that vertical way, just given that increased cost base due Iota?
No, we're still and definitely still in the vertical. We like the business end up paying more interest expense for.

Got it. And then within the on the wealth management side, it has had some good growth there that could at RI. acquisition play into the M&A acquisition strategy?

Well, well, first, I'd say I'm super excited about our wealth management business in the coming year. We've got one of the strongest pipelines we've had in some time. So I'm expecting a very good Q1 and Q2 team to do an awesome job and they're very integrated with our commercial bankers is an amazing relationship there and they continue to refer back and forth. It's been a really good story for us, and I'm very excited where we're headed. I don't know that we're really focused on RA acquisitions if something came along, that was interesting, we might take a quick look at it, but it's not it's not an area of focus, right, got it.

And one final question.

Maybe, Tracy, in terms of the purchase accounting accretion and that declined from modestly this quarter, just curious if we should see that uptick to that $14 million, $15 million level get our system to serve a new run rate.

You the good question after several quarters of very high accretion in the fourth quarter was meaningfully lower. Generally, accretion runs higher when individual loans with high mark have payoffs or meaningful paydowns in the fourth quarter, we just saw notably fewer prepayments on loans with high marks. So I feel like that's going to continue to be difficult to predict. And the uncertainty just to highlight really only exists around the timing. We do expect to earn the full remaining purchase mark, but the pace at which that comes through is kind of out of our hands, no uplift in terms of expectations going forward. It's hard to see that it's likely to go back to the the higher levels from Q2 or Q3?
I'm on I'm updating our expectations to look a little more like 4Q, but but really variable from Iberia.

We don't really have much control over and that's kind of out of our hands could go up, could remain the same. Got to appreciate the color.

Operator

And at this time, we have no further questions.

I would like to turn the conference over to Chuck Shaffer for closing remarks, or I will thank you all for joining us this morning. And just thank you to the entire Seacoast team we had a great Q4 and looking forward to 2024, I think it could be an amazing year appreciated, but it's hard work for everybody that joined the call around for calls after the meeting if anybody wants to chat. Okay. Thanks, Roger.

Operator

You're welcome. And that does conclude today's conference call. Again, thank you for your participation. You may now disconnect.