UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to __________________.

Commission File No. 0-13660

Seacoast Banking Corporation of Florida

(Exact Name of Registrant as Specified in its Charter)

Florida

59-2260678

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

815 COLORADO AVENUE,

STUART

34994

(Address of Principal Executive Offices)

(Zip Code)


	(772)	287-4000
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SBCF	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No☒

Common Stock, $0.10 Par Value – ~~58,349,137~~61,410,300 shares as of ~~September~~June 30, ~~2021~~2022

INDEX

SEACOAST BANKING CORPORATION OF FLORIDA


		PAGE #
Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed consolidated statements of income – Three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	3

	Condensed consolidated statements of comprehensive income – Three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	45

	Condensed consolidated balance sheets - ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021	56

	Consolidated statements of cash flows – ~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	67

	Consolidated statements of shareholders' equity - Three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	89

	Notes to condensed consolidated financial statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6764

Item 4.	Controls and Procedures	6865

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	6866

Item 1A.	Risk Factors	6966

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6966

Item 3.	Defaults upon Senior Securities	6966

Item 4.	Mine Safety Disclosures	6967

Item 5.	Other Information	7067

Item 6.	Exhibits	7168

SIGNATURES		7370

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except per share data) 2021 2020 2021 2020
Interest and fees on loans $ 64,424 $ 60,487 $ 187,070 $ 188,771
Interest and dividends on securities 7,918 7,097 21,070 23,609
Interest on interest bearing deposits and other investments 867 556 2,162 1,974
Total Interest Income 73,209 68,140 210,302 214,354
Interest on deposits 849 1,299 2,894 5,692
Interest on time certificates 583 2,673 2,294 11,261
Interest on borrowed money 453 665 1,378 3,449
Total Interest Expense 1,885 4,637 6,566 20,402
Net Interest Income 71,324 63,503 203,736 193,952
Provision for credit losses 5,091 (845) (5,479) 36,279
Net Interest Income after Provision for Credit Losses 66,233 64,348 209,215 157,673
Noninterest income
Other income 19,058 16,942 52,220 45,387
Securities (losses) gains, net (30) 4 (199) 1,253
Total Noninterest Income (Note I – Noninterest Income and Expense) 19,028 16,946 52,021 46,640
Total Noninterest Expenses (Note I – Noninterest Income and Expense) 55,268 51,674 147,172 141,871
Income Before Income Taxes 29,993 29,620 114,064 62,442
Provision for income taxes 7,049 6,992 25,991 14,025
Net Income $ 22,944 $ 22,628 $ 88,073 $ 48,417
Share Data
Net income per share of common stock
Diluted $ 0.40 $ 0.42 $ 1.56 $ 0.91
Basic 0.40 0.42 1.57 0.91
Average common shares outstanding
Diluted 57,645 54,301 56,441 53,325
Basic 57,148 53,978 55,954 52,926


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2022		2021		2022		2021
Interest and fees on loans	$	69,307	$	60,348	$	136,425	$	122,646

Interest and dividends on securities	12,525		6,706		22,706		13,152

Interest on interest bearing deposits and other investments	1,917		709		2,850		1,295

Total Interest Income	83,749		67,763		161,981		137,093


Interest on deposits	994		980		1,761		2,045

Interest on time certificates	436		524		904		1,711

Interest on borrowed money	672		457		1,147		925

Total Interest Expense	2,102		1,961		3,812		4,681


Net Interest Income	81,647		65,802		158,169		132,412


Provision for credit losses	822		(4,855)		7,378		(10,570)


Net Interest Income after Provision for Credit Losses	80,825		70,657		150,791		142,982


Noninterest income:
Service charges on deposit accounts	3,408		2,338		6,209		4,676
Interchange income	4,255		4,145		8,383		7,965
Wealth management income	2,774		2,387		5,433		4,710
Mortgage banking fees	932		2,977		2,618		7,202
Marine finance fees	312		177		503		366
SBA gains	473		232		629		519
BOLI income	1,349		872		2,683		1,731
Other	3,761		2,249		6,631		5,993

	17,264		15,377		33,089		33,162
Securities losses, net	(300)		(55)		(752)		(169)

Total Noninterest Income	16,964		15,322		32,337		32,993


Noninterest Expense:

Salaries and wages	28,056		22,966		56,275		44,359
Employee benefits	4,151		3,953		9,652		8,933
Outsourced data processing costs	6,043		4,676		12,199		9,144
Telephone / data lines	908		838		1,641		1,623
Occupancy	4,050		3,310		8,036		7,099
Furniture and equipment	1,588		1,166		3,014		2,420
Marketing	1,882		1,002		3,053		2,170
Legal and professional fees	2,946		2,182		7,735		4,764
FDIC assessments	699		515		1,488		1,041
Amortization of intangibles	1,446		1,212		2,892		2,423

Table of Contents


Foreclosed property expense and net loss (gain) on sale	(968)		(90)		(1,132)		(155)
Provision for credit losses on unfunded commitments	—		—		142		—
Other	5,347		4,054		10,070		8,083
Total Noninterest Expense	56,148		45,784		115,065		91,904

Income Before Income Taxes	41,641		40,195		68,063		84,071

Provision for income taxes	8,886		8,785		14,720		18,942

Net Income	$	32,755	$	31,410	$	53,343	$	65,129


Share Data
Net income per share of common stock
Diluted	$	0.53	$	0.56	$	0.86	$	1.17

Basic	0.53		0.57		0.87		1.18

Average common shares outstanding
Diluted	61,923		55,901		61,818		55,827

Basic	61,409		55,421		61,269		55,347

See notes to unaudited condensed consolidated financial statements.

~~Table of Contents~~

~~SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)~~

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2021 2020 2021 2020
Net Income $ 22,944 $ 22,628 $ 88,073 $ 48,417
Other comprehensive income (loss):
Available-for-sale securities:
Unrealized gains (losses) on available-for-sale securities, net of tax benefit of $1.3 million and tax benefit of $4.3 million for the three and nine months ended September 30, 2021, respectively, and tax expense of $0.4 million and tax expense of $4.0 million for the three and nine months ended September 30, 2020, respectively $ (4,459) $ 1,890 $ (15,014) $ 16,024
Amortization of unrealized gains and losses on securities transferred to held-to-maturity, net of tax expense of $5 thousand and $16 thousand for the three and nine months ended September 30, 2021, respectively, and tax expense of $12 thousand and $36 thousand for the three and nine months ended September 30, 2020, respectively 21 43 65 137
Reclassification adjustment for losses (gains) included in net income, net of tax benefit of $0 and $19 thousand for the three and nine months ended September 30, 2021, respectively, and tax expense of $0 and $0.3 million for the three and nine months ended September 30, 2020, respectively — (4) 91 (1,403)
Available-for-sale securities, net of tax $ (4,438) $ 1,929 $ (14,858) $ 14,758
Unrealized losses on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax benefit of $32 thousand and $83 thousand for the three and nine months ended September 30, 2021, respectively (94) — (243) —
Total other comprehensive income (loss) $ (4,532) $ 1,929 $ (15,101) $ 14,758
Comprehensive Income $ 18,412 $ 24,557 $ 72,972 $ 63,175

~~See notes to unaudited condensed consolidated financial statements.~~

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Net Income	$	32,755	$	31,410	$	53,343	$	65,129

Other comprehensive (loss) income:

Available-for-sale securities:
Unrealized (losses) gains on available-for-sale securities, net of tax benefit of $16.0 million and $36.6 million for the three and six months ended June 30, 2022 and net of tax expense of $0.2 million and tax benefit of $3.0 million for the three and six months ended June 30, 2021, respectively	$	(50,473)	$	296	$	(116,485)	$	(10,555)

Amortization of unrealized gains and losses on securities transferred to held-to-maturity, net of tax benefit of $7 thousand and nominal tax expense for the three and six months ended June 30, 2022, respectively, and tax expense of $5 thousand and $11 thousand for the three and six months ended June 30, 2021, respectively	(34)		20		2		44
Reclassification adjustment for losses included in net income, net of tax benefit of $19 thousand for each of the three and six months ended June 30, 2021	—		91		—		91
Available-for-sale securities, net of tax	$	(50,507)	$	407	$	(116,483)	$	(10,420)

Unrealized losses on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax expense of $3 thousand and tax benefit of $19 thousand for the three and six months ended June 30, 2022, respectively, and tax benefit of $4 thousand and $51 thousand for the three and six months ended June 30, 2021, respectively	9		(11)		(55)		(149)

Total other comprehensive (loss) income	$	(50,498)	$	396	$	(116,538)	$	(10,569)

Comprehensive (Loss) Income	$	(17,743)	$	31,806	$	(63,195)	$	54,560

See notes to unaudited condensed consolidated financial statements.

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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


		September 30,		December 31,			June 30,		December 31,
(In thousands, except share data)	(In thousands, except share data)	2021		2020		(In thousands, except share data)	2022		2021
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	199,460	$	86,630	Cash and due from banks	$	363,343	$	238,750
Interest bearing deposits with other banks	Interest bearing deposits with other banks	1,028,235		317,458		Interest bearing deposits with other banks	538,025		498,979
Total cash and cash equivalents	Total cash and cash equivalents	1,227,695		404,088		Total cash and cash equivalents	901,368		737,729

Time deposits with other banks	Time deposits with other banks	750		750		Time deposits with other banks	4,730		—

Debt securities:	Debt securities:					Debt securities:
Securities available-for-sale (at fair value)	Securities available-for-sale (at fair value)	1,546,155		1,398,157		Securities available-for-sale (at fair value)	1,800,791		1,644,319
Securities held-to-maturity (fair value $518.5 million at September 30, 2021 and $192.2 million at December 31, 2020)		526,502		184,484
Securities held-to-maturity (fair value $706.2 million at June 30, 2022 and $627.4 million at December 31, 2021)						Securities held-to-maturity (fair value $706.2 million at June 30, 2022 and $627.4 million at December 31, 2021)	794,785		638,640
Total debt securities	Total debt securities	2,072,657		1,582,641		Total debt securities	2,595,576		2,282,959

Loans held for sale (at fair value)	Loans held for sale (at fair value)	49,597		68,890		Loans held for sale (at fair value)	14,205		31,791

Loans	Loans	5,905,884		5,735,349		Loans	6,541,548		5,925,029
Less: Allowance for credit losses	Less: Allowance for credit losses	(87,823)		(92,733)		Less: Allowance for credit losses	(90,769)		(83,315)
Loans, net of allowance for credit losses	Loans, net of allowance for credit losses	5,818,061		5,642,616		Loans, net of allowance for credit losses	6,450,779		5,841,714

Bank premises and equipment, net	Bank premises and equipment, net	71,250		75,117		Bank premises and equipment, net	74,784		72,404
Other real estate owned	Other real estate owned	13,628		12,750		Other real estate owned	2,419		13,618
Goodwill	Goodwill	252,154		221,176		Goodwill	286,606		252,154
Other intangible assets, net	Other intangible assets, net	16,153		16,745		Other intangible assets, net	20,062		14,845
Bank owned life insurance	Bank owned life insurance	193,747		131,776		Bank owned life insurance	207,724		205,041
Net deferred tax assets	Net deferred tax assets	24,187		23,629		Net deferred tax assets	60,080		27,321
Other assets	Other assets	153,619		162,214		Other assets	193,371		201,857
Total Assets	Total Assets	$	9,893,498	$	8,342,392	Total Assets	$	10,811,704	$	9,681,433

Liabilities	Liabilities					Liabilities
Deposits	Deposits	$	8,334,172	$	6,932,561	Deposits	$	9,188,953	$	8,067,589
Securities sold under agreements to repurchase, maturing within 30 days	Securities sold under agreements to repurchase, maturing within 30 days	105,548		119,609		Securities sold under agreements to repurchase, maturing within 30 days	110,578		121,565

Subordinated debt	Subordinated debt	71,576		71,365		Subordinated debt	71,786		71,646
Other liabilities	Other liabilities	91,682		88,455		Other liabilities	110,812		109,897
Total Liabilities	Total Liabilities	8,602,978		7,211,990		Total Liabilities	9,482,129		8,370,697

Shareholders' Equity	Shareholders' Equity					Shareholders' Equity
Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 58,742,223 and outstanding 58,349,137 at September 30, 2021, and authorized 120,000,000, issued 55,584,979 and outstanding 55,243,226 shares at December 31, 2020		5,835		5,524
Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 61,846,470 and outstanding 61,410,300 at June 30, 2022, and authorized 120,000,000, issued 58,909,369 and outstanding 58,504,250 shares at December 31, 2021						Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 61,846,470 and outstanding 61,410,300 at June 30, 2022, and authorized 120,000,000, issued 58,909,369 and outstanding 58,504,250 shares at December 31, 2021	6,141		5,850
Other shareholders' equity	Other shareholders' equity	1,284,685		1,124,878		Other shareholders' equity	1,323,434		1,304,886
Total Shareholders' Equity	Total Shareholders' Equity	1,290,520		1,130,402		Total Shareholders' Equity	1,329,575		1,310,736
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	9,893,498	$	8,342,392	Total Liabilities and Shareholders' Equity	$	10,811,704	$	9,681,433

See notes to unaudited condensed consolidated financial statements.

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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net income	Net income	$	88,073	$	48,417	Net income	$	53,343	$	65,129
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	Depreciation	4,139		4,531		Depreciation	2,832		2,792
Amortization of premiums and discounts on securities, net	Amortization of premiums and discounts on securities, net	5,353		2,890		Amortization of premiums and discounts on securities, net	623		4,012
Amortization of operating lease right-of-use assets	Amortization of operating lease right-of-use assets	3,263		3,274		Amortization of operating lease right-of-use assets	2,961		2,127
Other amortization and accretion, net	Other amortization and accretion, net	(11,715)		(4,402)		Other amortization and accretion, net	(635)		(7,307)
Stock based compensation	Stock based compensation	7,492		5,471		Stock based compensation	4,116		4,262
Origination of loans designated for sale	Origination of loans designated for sale	(406,392)		(378,069)		Origination of loans designated for sale	(121,402)		(283,001)
Sale of loans designated for sale	Sale of loans designated for sale	438,422		335,882		Sale of loans designated for sale	143,326		318,479
Provision for credit losses	Provision for credit losses	(5,479)		36,279		Provision for credit losses	7,378		(10,570)
Deferred income taxes	Deferred income taxes	3,325		(6,257)		Deferred income taxes	4,026		4,833
Losses (gains) on sale of securities		73		(1,102)
Losses on sale of securities						Losses on sale of securities	—		73
Gains on sale of loans	Gains on sale of loans	(12,450)		(10,585)		Gains on sale of loans	(3,992)		(9,411)
Gains on sale and write-downs of other real estate owned	Gains on sale and write-downs of other real estate owned	(380)		(278)		Gains on sale and write-downs of other real estate owned	(1,302)		(380)
Losses on disposition of fixed assets and write-downs upon transfer of bank premises to other real estate owned	Losses on disposition of fixed assets and write-downs upon transfer of bank premises to other real estate owned	684		790		Losses on disposition of fixed assets and write-downs upon transfer of bank premises to other real estate owned	172		316

Changes in operating assets and liabilities, net of effects from acquired companies:	Changes in operating assets and liabilities, net of effects from acquired companies:					Changes in operating assets and liabilities, net of effects from acquired companies:
Net decrease (increase) in other assets		4,899		(27,735)
Net (decrease) increase in other liabilities		(14,543)		9,174
Net decrease in other assets						Net decrease in other assets	11,213		1,086
Net decrease in other liabilities						Net decrease in other liabilities	(4,318)		(10,726)
Net cash provided by operating activities	Net cash provided by operating activities	$	104,764	$	18,280	Net cash provided by operating activities	$	98,341	$	81,714

Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Maturities and repayments of debt securities available-for-sale	Maturities and repayments of debt securities available-for-sale	417,189		211,798		Maturities and repayments of debt securities available-for-sale	164,223		288,171
Maturities and repayments of debt securities held-to-maturity	Maturities and repayments of debt securities held-to-maturity	103,254		53,409		Maturities and repayments of debt securities held-to-maturity	49,652		73,697
Proceeds from sale of debt securities available-for-sale	Proceeds from sale of debt securities available-for-sale	57,209		96,733		Proceeds from sale of debt securities available-for-sale	26,011		56,217
Purchases of debt securities available-for-sale	Purchases of debt securities available-for-sale	(848,122)		(626,731)		Purchases of debt securities available-for-sale	(474,124)		(468,430)
Purchases of debt securities held-to-maturity	Purchases of debt securities held-to-maturity	(235,077)		—		Purchases of debt securities held-to-maturity	(206,065)		(172,004)
Maturities of time deposits with other banks	Maturities of time deposits with other banks	—		1,495		Maturities of time deposits with other banks	1,743		—
Net new loans and principal repayments	Net new loans and principal repayments	559,920		(204,282)		Net new loans and principal repayments	(133,458)		346,173
Purchases of loans held for investment	Purchases of loans held for investment	(236,699)		—		Purchases of loans held for investment	(111,292)		(38,822)
Proceeds from sale of other real estate owned	Proceeds from sale of other real estate owned	4,954		6,174		Proceeds from sale of other real estate owned	14,208		4,954
Additions to other real estate owned	Additions to other real estate owned	(2,134)		(2,004)		Additions to other real estate owned	(590)		(1,310)
Proceeds from sale of FHLB and Federal Reserve Bank Stock	Proceeds from sale of FHLB and Federal Reserve Bank Stock	3,945		37,697		Proceeds from sale of FHLB and Federal Reserve Bank Stock	—		2,704
Purchase of FHLB and Federal Reserve Bank Stock	Purchase of FHLB and Federal Reserve Bank Stock	(59)		(26,976)		Purchase of FHLB and Federal Reserve Bank Stock	(3,347)		(59)

Net cash from bank acquisition		98,100		71,965
Net cash from bank acquisitions						Net cash from bank acquisitions	208,933		—
Purchase of bank owned life insurance	Purchase of bank owned life insurance	(50,000)		—		Purchase of bank owned life insurance	—		(25,000)
Additions to bank premises and equipment	Additions to bank premises and equipment	(1,697)		(1,373)		Additions to bank premises and equipment	(2,545)		(701)
Net cash used in investing activities		$	(129,217)	$	(382,095)
Net cash (used in)/provided by investing activities						Net cash (used in)/provided by investing activities	$	(466,651)	$	65,590

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Cash Flows from Financing Activities	Cash Flows from Financing Activities					Cash Flows from Financing Activities
Net increase in deposits	Net increase in deposits	$	906,690	$	826,686	Net increase in deposits	$	559,085	$	903,875
Net (decrease) increase in repurchase agreements	Net (decrease) increase in repurchase agreements	(14,061)		3,387		Net (decrease) increase in repurchase agreements	(10,987)		364
Net decrease in FHLB borrowings with original maturities of three months or less		—		(235,000)
Repayments of FHLB borrowings with original maturities of more than three months		(33,000)		(80,000)
Proceeds from FHLB borrowings with original maturities of more than three months		—		35,000

Stock based employee benefit plans	Stock based employee benefit plans	3,287		(1,221)		Stock based employee benefit plans	2,361		369
Dividends paid	Dividends paid	(14,856)		—		Dividends paid	(18,510)		(7,155)
Net cash provided by financing activities	Net cash provided by financing activities	$	848,060	$	548,852	Net cash provided by financing activities	$	531,949	$	897,453
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	823,607		185,037		Net increase in cash and cash equivalents	163,639		1,044,757
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	404,088		124,531		Cash and cash equivalents at beginning of period	737,729		404,088
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,227,695	$	309,568	Cash and cash equivalents at end of period	$	901,368	$	1,448,845

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid during the period for interest	Cash paid during the period for interest	$	8,334	$	19,834	Cash paid during the period for interest	$	3,779	$	6,462
Cash paid during the period for taxes	Cash paid during the period for taxes	28,200		21,712		Cash paid during the period for taxes	9,591		17,700
Recognition of operating lease right-of-use assets, other than through bank acquisition		35		1,887
Recognition of operating lease liabilities, other than through bank acquisition		35		1,887
Recognition of operating lease right-of-use assets, other than through bank acquisitions						Recognition of operating lease right-of-use assets, other than through bank acquisitions	3,370		35

Recognition of operating lease liabilities, other than through bank acquisitions						Recognition of operating lease liabilities, other than through bank acquisitions	3,370		35

Supplemental disclosure of non-cash investing activities:	Supplemental disclosure of non-cash investing activities:					Supplemental disclosure of non-cash investing activities:
Transfer of debt securities from available-for-sale to held-to-maturity	Transfer of debt securities from available-for-sale to held-to-maturity	$	210,805	$	—	Transfer of debt securities from available-for-sale to held-to-maturity	$	—	$	210,805
Unsettled purchases of debt securities available-for-sale	Unsettled purchases of debt securities available-for-sale	8,064		—		Unsettled purchases of debt securities available-for-sale	—		28,750
Transfers from loans to other real estate owned		—		5,552

Transfers from bank premises to other real estate owned	Transfers from bank premises to other real estate owned	3,318		1,289		Transfers from bank premises to other real estate owned	1,008		3,318

See notes to unaudited condensed consolidated financial statements.

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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

Accumulated
Other
Comprehensive
Income (Loss)
Common Stock Paid-in
Capital Retained
Earnings Treasury
Stock
(In thousands) Shares Amount Total
Balance at June 30, 2021 55,436 $ 5,544 $ 862,598 $ 314,584 $ (10,180) $ 9,801 $ 1,182,347
Comprehensive income — — — 22,944 — (4,532) 18,412
Stock based compensation expense 23 — 2,358 — — — 2,358
Common stock transactions related to stock based employee benefit plans 25 5 (22) — 34 — 17
Common stock issued for stock options 178 17 2,885 — — — 2,902
Issuance of common stock, pursuant to acquisition 2,687 269 86,218 — — — 86,487
Conversion of options, pursuant to acquisition — — 5,607 — — — 5,607
Dividends on common stock ($0.13 per share) — — — (7,610) — — (7,610)
Three months ended September 30, 2021 2,913 291 97,046 15,334 34 (4,532) 108,173
Balance at September 30, 2021 58,349 $ 5,835 $ 959,644 $ 329,918 $ (10,146) $ 5,269 $ 1,290,520


													Accumulated Other Comprehensive Income (Loss)
	Common Stock			Paid-in Capital			Retained Earnings			Treasury Stock
(In thousands)	Shares	Amount													Total
Balance at March 31, 2022	61,239	$	6,124		$	1,062,462		$	371,192		$	(10,459)	$	(73,034)	$	1,356,285
Comprehensive income (loss)	—	—			—			32,755			—		(50,498)		(17,743)
Stock based compensation expense	—	—			2,697			—			—		—		2,697
Common stock transactions related to stock based employee benefit plans	169	17			(31)			—			(1,173)		—		(1,187)
Common stock issued for stock options	2	—			39			—			—		—		39


Dividends on common stock ($0.17 per share)	—	—			—			(10,516)			—		—		(10,516)
Three months ended June 30, 2022	171	17			2,705			22,239			(1,173)		(50,498)		(26,710)
Balance at June 30, 2022	61,410	$	6,141		$	1,065,167		$	393,431		$	(11,632)	$	(123,532)	$	1,329,575


														Accumulated Other Comprehensive Income (Loss)																																	Accumulated Other Comprehensive Income (Loss)
		Common Stock			Paid-in Capital			Retained Earnings			Treasury Stock													Common Stock								Paid-in Capital			Retained Earnings				Treasury Stock						Accumulated Other Comprehensive Income (Loss)
(In thousands)	(In thousands)	Shares	Amount													Total		Accumulated Other Comprehensive Income (Loss)	(In thousands)					Shares				Amount			Paid-in Capital			Retained Earnings				Treasury Stock											Total	Accumulated Other Comprehensive Income (Loss)
Balance at June 30, 2020		52,991	$	5,299		$	811,321		$	204,726		$	(8,037)			$	17,294
Balance at March 31, 2021																			Balance at March 31, 2021					55,294				$	5,529						$	858,688				$	290,420						$	(8,693)					$	9,405
Comprehensive income	Comprehensive income	—	—			—			22,628			—		1,929								24,557	Comprehensive income				—					—			—				31,410					—					396				31,806
Stock based compensation expense	Stock based compensation expense	39	—			1,948			—			—		—					1,948			Stock based compensation expense				—					—			2,503				—					—				—					2,503
Common stock transactions related to stock based employee benefit plans	Common stock transactions related to stock based employee benefit plans	18	6			(6)			—			96		—					96			Common stock transactions related to stock based employee benefit plans				94					10			(18)				—					(1,487)				—					(1,495)
Common stock issued for stock options	Common stock issued for stock options	1	—			16			—			—		—					16			Common stock issued for stock options				48					5			1,425				—					—				—					1,430

Issuance of common stock, pursuant to acquisition		2,120	212			40,909			—			—		—					41,121
Three months ended September 30, 2020		2,178	218			42,867			22,628			96		1,929					67,738
Balance at September 30, 2020		55,169	$	5,517		$	854,188		$	227,354		$	(7,941)	$	19,223				$	1,098,341
Dividends on common stock ($0.13 per share)																					Dividends on common stock ($0.13 per share)				—					—			—				(7,246)					—				—					(7,246)
Three months ended June 30, 2021																					Three months ended June 30, 2021				142					15			3,910				24,164					(1,487)				396					26,998
Balance at June 30, 2021																					Balance at June 30, 2021				55,436					$	5,544		$	862,598			$	314,584				$	(10,180)			$	9,801				$	1,182,347

Accumulated
Other
Comprehensive
Income (Loss)
Common Stock Paid-in
Capital Retained
Earnings Treasury
Stock
(In thousands) Shares Amount Total
Balance at December 31, 2020 55,243 $ 5,524 $ 856,092 $ 256,701 $ (8,285) $ 20,370 $ 1,130,402
Comprehensive income — — — 88,073 — (15,101) 72,972
Stock based compensation expense 23 — 6,620 — — — 6,620
Common stock transactions related to stock based employee benefit plans 139 17 (40) — (1,861) — (1,884)
Common stock issued for stock options 257 25 5,147 — — — 5,172
Issuance of common stock, pursuant to acquisition 2,687 269 86,218 — — — 86,487
Conversion of options, pursuant to acquisition — — 5,607 — — — 5,607
Dividends on common stock ($0.13 per share) — — — (14,856) — — (14,856)
Nine months ended September 30, 2021 3,106 311 103,552 73,217 (1,861) (15,101) 160,118
Balance at September 30, 2021 58,349 $ 5,835 $ 959,644 $ 329,918 $ (10,146) $ 5,269 $ 1,290,520



													Accumulated Other Comprehensive Income (Loss)
	Common Stock			Paid-in Capital			Retained Earnings			Treasury Stock
(In thousands)	Shares	Amount													Total
Balance at December 31, 2021	58,504	$	5,850		$	963,851		$	358,598		$	(10,569)	$	(6,994)	$	1,310,736
Comprehensive income (loss)	—	—			—			53,343			—		(116,538)		(63,195)
Stock based compensation expense	—	—			4,116			—			—		—		4,116
Common stock transactions related to stock based employee benefit plans	176	18			(36)			—			(1,063)		—		(1,081)
Common stock issued for stock options	180	18			3,424			—			—		—		3,442
Issuance of common stock, pursuant to acquisition	2,550	255			89,979			—			—		—		90,234
Conversion of options, pursuant to acquisitions	—	—			3,833			—			—		—		3,833
Dividends on common stock ($0.30 per share)	—	—			—			(18,510)			—		—		(18,510)
Six months ended June 30, 2022	2,906	291			101,316			34,833			(1,063)		(116,538)		18,839
Balance at June 30, 2022	61,410	$	6,141		$	1,065,167		$	393,431		$	(11,632)	$	(123,532)	$	1,329,575

~~Table of Contents~~

Accumulated
Other
Comprehensive
Income (Loss)
Common Stock Paid-in
Capital Retained
Earnings Treasury
Stock
(In thousands) Shares Amount Total
Balance at December 31, 2019 51,514 $ 5,151 $ 786,242 $ 195,813 $ (6,032) $ 4,465 $ 985,639
Comprehensive income — — — 48,417 — 14,758 63,175
Stock based compensation expense 39 — 5,471 — — — 5,471
Common stock transactions related to stock based employee benefit plans 395 44 (53) — (1,909) — (1,918)
Common stock issued for stock options 58 6 692 — — — 698
Cumulative change in accounting principle upon adoption of new accounting pronouncement — — — (16,876) — — (16,876)
Issuance of common stock, pursuant to acquisition 3,163 316 61,836 — — — 62,152
Nine months ended September 30, 2020 3,655 366 67,946 31,541 (1,909) 14,758 112,702
Balance at September 30, 2020 55,169 $ 5,517 $ 854,188 $ 227,354 $ (7,941) $ 19,223 $ 1,098,341



													Accumulated Other Comprehensive Income (Loss)
	Common Stock			Paid-in Capital			Retained Earnings			Treasury Stock
(In thousands)	Shares	Amount													Total
Balance at December 31, 2020	55,243	$	5,524		$	856,092		$	256,701		$	(8,285)	$	20,370	$	1,130,402
Comprehensive income (loss)	—	—			—			65,129			—		(10,569)		54,560
Stock based compensation expense	—	—			4,262			—			—		—		4,262
Common stock transactions related to stock based employee benefit plans	114	12			(18)			—			(1,895)		—		(1,901)
Common stock issued for stock options	79	8			2,262			—			—		—		2,270

Dividends on common stock ($0.13 per share)	—	—			—			(7,246)			—		—		(7,246)
Six months ended June 30, 2021	193	20			6,506			57,883			(1,895)		(10,569)		51,945
Balance at June 30, 2021	55,436	$	5,544		$	862,598		$	314,584		$	(10,180)	$	9,801	$	1,182,347

See notes to unaudited condensed consolidated financial statements.

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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A1 – Basis of Presentation

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements of Seacoast Banking Corporation of Florida and its subsidiaries (the ~~"Company"~~“Company”) have been prepared in accordance with U.S. generally accepted accounting principles ("(“U.S. ~~GAAP"~~GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current period presentation.

Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021~~2022, or any other period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Use of Estimates: The preparation of these condensed consolidated financial statements requires management to make judgments in the application of certain accounting policies that involve significant estimates and assumptions. The Company has established policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements. Specific areas, among others, requiring the application of ~~management’s~~management��s estimates include determination of the allowance for credit losses, acquisition accounting and purchased loans, intangible assets and impairment testing, other fair value measurements and contingent liabilities.

~~Note B –~~ Recently Issued Accounting Standards, Not Yet Adopted

~~None applicable this period.~~

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02,

Financial Instruments Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures

. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (“TDRs”) in ASC 310-40,

Receivables - Troubled Debt Restructurings by Creditors

, and introduces new disclosures related to modifications with borrowers that are experiencing financial difficulties. ASU 2022-02 also requires the disclosure of current-period gross writeoffs by year of origination for financing receivables held at amortized cost. The amendments in ASU 2022-02 are effective for fiscal years beginning after December 15, 2022, and early adoption is permitted. The impact to the Company’s consolidated financial statements of the adoption of ASU 2022-02 is not expected to be material.

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Note C2 – Earnings per Share

Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period.

For the three and ~~nine~~six months ended ~~September~~June 30, 2022, 1,505 options to purchase shares of the Company’s common stock were anti-dilutive. For the three and six months ended June 30, 2021, no options to purchase shares of the Company's common stock were ~~anti-dilutive, compared to 508,000 shares that were excluded in the computation of diluted earnings per share for both the three and nine months ended September 30, 2020.~~anti-dilutive.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2021		2020		2021		2020		(Dollars in thousands, except per share data)	2022		2021		2022		2021
Basic earnings per share	Basic earnings per share									Basic earnings per share
Net income	Net income	$	22,944	$	22,628	$	88,073	$	48,417	Net income	$	32,755	$	31,410	$	53,343	$	65,129
Average common shares outstanding	Average common shares outstanding	57,148		53,978		55,954		52,926		Average common shares outstanding	61,409		55,421		61,269		55,347
Net income per share	Net income per share	$	0.40	$	0.42	$	1.57	$	0.91	Net income per share	$	0.53	$	0.57	$	0.87	$	1.18

Diluted earnings per share	Diluted earnings per share									Diluted earnings per share
Net income	Net income	$	22,944	$	22,628	$	88,073	$	48,417	Net income	$	32,755	$	31,410	$	53,343	$	65,129
Average common shares outstanding	Average common shares outstanding	57,148		53,978		55,954		52,926		Average common shares outstanding	61,409		55,421		61,269		55,347
Add: Dilutive effect of employee restricted stock and stock options	Add: Dilutive effect of employee restricted stock and stock options	497		323		487		399		Add: Dilutive effect of employee restricted stock and stock options	514		480		549		480
Average diluted shares outstanding	Average diluted shares outstanding	57,645		54,301		56,441		53,325		Average diluted shares outstanding	61,923		55,901		61,818		55,827
Net income per share	Net income per share	$	0.40	$	0.42	$	1.56	$	0.91	Net income per share	$	0.53	$	0.56	$	0.86	$	1.17
Net income has not been allocated to unvested restricted stock awards that are participating securities because the amounts that would be allocated are not material to net income per share of common stock. Unvested restricted stock awards that are participating securities represent less than one percent of all of the outstanding shares of common stock for each of the periods presented.

Note D3 – Securities

The amortized cost, gross unrealized gains and losses and fair value of securities available-for-sale and held-to-maturity at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are summarized as follows:


		September 30, 2021									June 30, 2022
(In thousands)	(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities available-for-sale	Debt securities available-for-sale									Debt securities available-for-sale
U.S. Treasury securities and obligations of U.S. government agencies	U.S. Treasury securities and obligations of U.S. government agencies	$	6,785	$	371	$	(2)	$	7,154	U.S. Treasury securities and obligations of U.S. government agencies	$	5,754	$	7	$	(110)	$	5,651

Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	1,147,743		12,378		(9,450)		1,150,671		Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	1,444,668		437		(143,293)		1,301,812

Private mortgage-backed securities and collateralized mortgage obligations	Private mortgage-backed securities and collateralized mortgage obligations	75,754		1,710		(236)		77,228		Private mortgage-backed securities and collateralized mortgage obligations	166,176		47		(7,374)		158,849

Collateralized loan obligations	Collateralized loan obligations	277,262		149		(105)		277,306		Collateralized loan obligations	315,165		—		(10,974)		304,191

Obligations of state and political subdivisions	Obligations of state and political subdivisions	32,016		1,837		(57)		33,796		Obligations of state and political subdivisions	31,441		258		(1,411)		30,288

Totals	Totals	$	1,539,560	$	16,445	$	(9,850)	$	1,546,155	Totals	$	1,963,204	$	749	$	(163,162)	$	1,800,791

Debt securities held-to-maturity	Debt securities held-to-maturity									Debt securities held-to-maturity
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	$	526,502	$	4,702	$	(12,740)	$	518,464	Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	$	794,785	$	113	$	(88,728)	$	706,170

Totals	Totals	$	526,502	$	4,702	$	(12,740)	$	518,464	Totals	$	794,785	$	113	$	(88,728)	$	706,170

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		December 31, 2020									December 31, 2021
(In thousands)	(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities available-for-sale	Debt securities available-for-sale									Debt securities available-for-sale
U.S. Treasury securities and obligations of U.S. government agencies	U.S. Treasury securities and obligations of U.S. government agencies	$	8,250	$	528	$	(1)	$	8,777	U.S. Treasury securities and obligations of U.S. government agencies	$	6,466	$	316	$	(3)	$	6,779
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	1,038,437		23,457		(1,240)		1,060,654		Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	1,234,721		8,308		(20,309)		1,222,720
Private mortgage-backed securities and collateralized mortgage obligations	Private mortgage-backed securities and collateralized mortgage obligations	89,284		2,131		(210)		91,205		Private mortgage-backed securities and collateralized mortgage obligations	88,096		1,091		(420)		88,767
Collateralized loan obligations	Collateralized loan obligations	202,563		279		(647)		202,195		Collateralized loan obligations	292,751		63		(124)		292,690
Obligations of state and political subdivisions	Obligations of state and political subdivisions	33,005		2,321		—		35,326		Obligations of state and political subdivisions	31,624		1,740		(1)		33,363
Totals	Totals	$	1,371,539	$	28,716	$	(2,098)	$	1,398,157	Totals	$	1,653,658	$	11,518	$	(20,857)	$	1,644,319

Debt securities held-to-maturity	Debt securities held-to-maturity									Debt securities held-to-maturity
Mortgage-backed securities of U.S. government-sponsored entities	Mortgage-backed securities of U.S. government-sponsored entities	$	184,484	$	7,818	$	(123)	$	192,179	Mortgage-backed securities of U.S. government-sponsored entities	$	638,640	$	3,828	$	(15,070)	$	627,398

Totals	Totals	$	184,484	$	7,818	$	(123)	$	192,179	Totals	$	638,640	$	3,828	$	(15,070)	$	627,398

~~Proceeds from sales of securities were $1.0 million for~~During the three months ended ~~September 30, 2021,~~March 31, 2022, securities with noa fair value of $26.0 million obtained in the acquisition of Business Bank of Florida Corp. were immediately sold. No gain or loss ~~recognized. For~~was recognized on the ~~nine months ended September 30, 2021, proceeds from~~sale. There were no other sales of securities during the three and six months ended June 30, 2022. Proceeds from the sales of securities for the three and six months ended June 30, 2021 were ~~$57.2~~$56.2 million, resulting in gross gains of $0.2 million and gross losses of $0.3 million. For the three months ended September 30, 2020, proceeds from sales of securities were $4.4 million, which resulted in gross gains of $4 thousand and no gross losses. For the nine months ended September 30, 2020, proceeds from sales of securities were $96.7 million, which resulted in gross gains of $2.4 million and gross losses of $1.3 million.

Also included in “Securities ~~gains (losses),~~losses, net” ~~is a decrease~~are decreases of ~~$30~~$0.3 million and $0.8 million for the three and six months ended June 30, 2022, respectively, and an increase of $18 thousand and a decrease of $0.1 million for the three and ~~nine~~six months ended ~~September~~June 30, 2021, ~~respectively, and increases of $0.1 million and $0.2 million for the three and nine months ended September 30, 2020,~~ respectively, in the value of an investment in shares of a mutual fund that invests in CRA-qualified ~~mutual fund.~~debt securities.

During the ~~first quarter of~~three months ended March 31, 2021, the Company reclassified debt securities with an amortized cost of $210.8 million from available-for-sale to held-to-maturity, as it has the ability and intent to hold these securities to maturity. These securities had net unrealized gains of $0.8 million at the date of transfer, which will continue to be reported in accumulated other comprehensive income, and will be amortized over the remaining life of the securities as an adjustment of yield. The effect on interest income of the amortization of net unrealized gains is offset by the amortization of the premium on the securities transferred.

At ~~September~~June 30, ~~2021,~~2022, debt securities with a fair value of ~~$385.5~~$414.4 million were pledged primarily as collateral for public deposits and secured borrowings.

The amortized cost and fair value of ~~debt~~ securities ~~held-to-maturity and available-for-sale~~ at ~~September~~June 30, ~~2021,~~2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because prepayments of the underlying collateral for these securities may occur, due to the right to call or repay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

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		September 30, 2021									June 30, 2022
		Held-to-Maturity				Available-for-Sale					Held-to-Maturity				Available-for-Sale
(In thousands)	(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in less than one year	Due in less than one year	$	—	$	—	$	1,418	$	1,442	Due in less than one year	$	—	$	—	$	2,768	$	2,770

Due after one year through five years	Due after one year through five years	—		—		13,892		14,828		Due after one year through five years	—		—		14,400		14,600

Due after five years through ten years	Due after five years through ten years	—		—		8,376		8,764		Due after five years through ten years	—		—		5,679		5,598

Due after ten years	Due after ten years	—		—		15,115		15,916		Due after ten years	—		—		14,348		12,971

		—		—		38,801		40,950			—		—		37,195		35,939

Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	526,502		518,464		1,147,743		1,150,671		Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	794,785		706,170		1,444,668		1,301,812

Private mortgage-backed securities and collateralized mortgage obligations	Private mortgage-backed securities and collateralized mortgage obligations	—		—		75,754		77,228		Private mortgage-backed securities and collateralized mortgage obligations	—		—		166,176		158,849

Collateralized loan obligations	Collateralized loan obligations	—		—		277,262		277,306		Collateralized loan obligations	—		—		315,165		304,191

Totals	Totals	$	526,502	$	518,464	$	1,539,560	$	1,546,155	Totals	$	794,785	$	706,170	$	1,963,204	$	1,800,791

The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, or using observable market data. The tables below indicate the fair value of available-for-sale debt securities with unrealized losses for which no allowance for credit losses has been recorded.


		September 30, 2021													June 30, 2022
		Less Than 12 Months				12 Months or Longer				Total					Less Than 12 Months				12 Months or Longer				Total
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. government agencies	U.S. Treasury securities and obligations of U.S. government agencies	$	—	$	—	$	248	$	(2)	$	248	$	(2)	U.S. Treasury securities and obligations of U.S. government agencies	$	4,510	$	(109)	$	206	$	(1)	$	4,716	$	(110)

Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	660,028		(8,696)		15,350		(754)		675,378		(9,450)		Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	1,077,271		(109,953)		191,277		(33,340)		1,268,548		(143,293)

Private mortgage-backed securities and collateralized mortgage obligations	Private mortgage-backed securities and collateralized mortgage obligations	13,018		(206)		2,710		(30)		15,728		(236)		Private mortgage-backed securities and collateralized mortgage obligations	145,025		(7,194)		3,828		(180)		148,853		(7,374)

Collateralized loan obligations	Collateralized loan obligations	64,232		(58)		9,459		(47)		73,691		(105)		Collateralized loan obligations	251,412		(9,307)		52,780		(1,667)		304,192		(10,974)
Obligations of state and political subdivisions	Obligations of state and political subdivisions	5,443		(57)		—		—		5,443		(57)		Obligations of state and political subdivisions	17,982		(1,411)		—		—		17,982		(1,411)

Totals	Totals	$	742,721	$	(9,017)	$	27,767	$	(833)	$	770,488	$	(9,850)	Totals	$	1,496,200	$	(127,974)	$	248,091	$	(35,188)	$	1,744,291	$	(163,162)


		December 31, 2020													December 31, 2021
		Less Than 12 Months				12 Months or Longer				Total					Less Than 12 Months				12 Months or Longer				Total
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. government agencies	U.S. Treasury securities and obligations of U.S. government agencies	$	—	$	—	$	256	$	(1)	$	256	$	(1)	U.S. Treasury securities and obligations of U.S. government agencies	$	97	$	(1)	$	245	$	(2)	$	342	$	(3)
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	203,405		(1,218)		569		(22)		203,974		(1,240)		Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	955,881		(19,575)		11,953		(734)		967,834		(20,309)
Private mortgage-backed securities and collateralized mortgage obligations	Private mortgage-backed securities and collateralized mortgage obligations	23,997		(210)		—		—		23,997		(210)		Private mortgage-backed securities and collateralized mortgage obligations	33,640		(173)		9,628		(247)		43,268		(420)
Collateralized loan obligations	Collateralized loan obligations	104,697		(102)		72,513		(545)		177,210		(647)		Collateralized loan obligations	123,202		(81)		9,461		(43)		132,663		(124)

Obligations of state and political subdivisions														Obligations of state and political subdivisions	499		(1)		—		—		499		(1)
Totals	Totals	$	332,099	$	(1,530)	$	73,338	$	(568)	$	405,437	$	(2,098)	Totals	$	1,113,319	$	(19,831)	$	31,287	$	(1,026)	$	1,144,606	$	(20,857)

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At ~~September~~June 30, ~~2021,~~2022, the Company had ~~$9.4 million of~~ unrealized losses of $143.3 million on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of ~~$675.4 million.~~$1.3 billion. These securities are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. The implied government

~~Table of Contents~~

guarantee of principal and interest payments and the high credit rating of the portfolio provide a sufficient basis for the current expectation that there is no risk of loss if default were to occur. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at ~~September~~June 30, ~~2021,~~2022, no allowance for credit losses has been recorded.

At ~~September~~June 30, ~~2021,~~2022, the Company had ~~$0.2~~$11.0 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of $15.7 million. The collateral underlying these mortgage investments is primarily residential real estate. The securities have average credit support of 35%. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at September 30, 2021, no allowance for credit losses has been recorded.

~~At September 30, 2021, the Company had $0.1 million in~~ unrealized losses in uncapped 3-month LIBOR floating rate collateralized loan obligations ~~("CLOs"~~(“CLOs”) having a fair value of ~~$73.7~~$304.2 million. CLOs are special purpose vehicles and those in which the Company has invested acquire nearly all first-lien, broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors. As of ~~September~~June 30, ~~2021, these~~2022, all positions held by the Company are in AAA and AA tranches, with average credit support of 37% and ~~24%~~25%, respectively. The Company evaluates the securities for potential credit losses by modeling expected loan-level defaults, recoveries, and prepayments for each CLO security. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at ~~September~~June 30, ~~2021,~~2022, no allowance for credit losses has been recorded.

At June 30, 2022, the Company had $7.4 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of $148.9 million. The collateral underlying these mortgage investments is primarily residential real estate. The securities have average credit support of 22%. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at June 30, 2022, no allowance for credit losses has been recorded.

All HTM debt securities are issued by government-sponsored entities, which are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. While the potential for default on these securities may be something greater than zero, the long history with no credit losses, the implied government guarantee of principal and interest payments and the high credit rating of the HTM portfolio provide sufficient basis for the current expectation that there is no risk of loss if default were to occur. As a result, as of ~~September~~June 30, ~~2021,~~2022, no allowance for credit losses has been recorded.

Included in ~~other assets~~Other Assets at ~~September~~June 30, ~~2021~~2022 is ~~$31.5~~$38.1 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value. The Company has not identified events or changes in circumstances, ~~that~~which may have a significant adverse effect on the fair value of these cost method investment securities. Accrued interest receivable on AFS and HTM debt securities of $4.4 million and $1.3 million, respectively, at June 30, 2022, and $3.4 million and $1.0 million, respectively, at December 31, 2021, is included in Other Assets. Also included in ~~other assets~~Other Assets is ~~a $9.4~~an $8.6 million investment in a CRA-qualified mutual fund carried at fair value. Accrued interest receivable on AFS and HTM debt securities of $3.7 million and $0.8 million at September 30, 2021, respectively, and $3.2 million and $0.4 million at December 31, 2020, respectively, is also included in other assets.

The Company holds 11,330 shares of Visa Class B stock, which, following resolution of Visa litigation, will be converted to Visa Class A shares. Under the current conversion ratio that became effective ~~September 27, 2019,~~June 29, 2022, the Company would receive ~~1.6228~~1.6059 shares of Class A stock for each share of Class B stock for a total of ~~18,386~~18,194 shares of Visa Class A stock. The ownership of Visa stock is related to prior ownership in Visa's network while Visa operated as a cooperative, and is recorded on the Company's financial records at a zero basis.

Note E4 – Loans

Loans held for investment are categorized into the following segments:

•Construction and land development: Loans are extended to both commercial and consumer customers which are collateralized by and for the purpose of funding land development and construction projects, including 1-4 family residential construction, multi-family property and non-farm residential property where the primary source of repayment is from proceeds of the sale, refinancing or permanent financing of the property.

•Commercial real estate - owner-occupied: Loans are extended to commercial customers for the purpose of acquiring real estate to be occupied by the borrower's business. These loans are collateralized by the subject property and the repayment of these loans is largely dependent on the performance of the company occupying the property.

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•Commercial real estate - non owner-occupied: Loans are extended to commercial customers for the purpose of acquiring commercial property where occupancy by the borrower is not their primary intent. These loans are viewed

~~Table of Contents~~

primarily as cash flow loans, collateralized by the subject property, and the repayment of these loans is largely dependent on rental income from the successful operation of the property.

•Residential real estate: Loans are extended to consumer customers and collateralized primarily by 1-4 family residential properties and include fixed and variable rate mortgages, home equity mortgages, and home equity lines of credit. Loans are primarily written based on conventional loan agency guidelines, including loans that exceed agency value limitations. Sources of repayment may be from the occupant of the residential property or from cash flows on rental income from the successful operation of the property.

•Commercial and financial: Loans are extended to commercial customers. The purpose of the loans can be working capital, physical asset expansion, asset acquisition or other business purposes. Loans may be collateralized by assets owned by the borrower or the borrower's business. Commercial loans are based primarily on the historical and projected cash flow of the borrower's business and secondarily on the capacity of credit enhancements, guarantees and underlying collateral provided by the borrower.

•Consumer: Loans are extended to consumer customers. The segment includes both installment loans and lines of credit which may be collateralized or non-collateralized.

•Paycheck Protection Program ~~("PPP"~~(“PPP”): Loans originated under a temporary program established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and extended by the Economic Aid Act. Under the terms of the program, balances may be forgiven if the borrower uses the funds in a manner consistent with the program guidelines, and repayment is guaranteed by the U.S. government.

The following tables present net loan balances by segment as of:


		September 30, 2021									June 30, 2022
(In thousands)	(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total		(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total
Construction and land development	Construction and land development	$	190,344	$	37,067	$	48	$	227,459	Construction and land development	$	320,596	$	29,391	$	38	$	350,025
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	951,119		218,128		32,089		1,201,336		Commercial real estate - owner-occupied	979,173		255,850		19,320		1,254,343
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	1,166,220		428,095		79,272		1,673,587		Commercial real estate - non owner-occupied	1,457,626		438,184		76,730		1,972,540
Residential real estate	Residential real estate	1,278,138		181,344		7,847		1,467,329		Residential real estate	1,442,435		198,901		6,129		1,647,465
Commercial and financial	Commercial and financial	865,064		97,642		19,846		982,552		Commercial and financial	1,018,258		92,610		13,903		1,124,771
Consumer	Consumer	157,916		5,092		11		163,019		Consumer	171,315		3,886		—		175,201
Paycheck Protection Program	Paycheck Protection Program	153,842		36,760		—		190,602		Paycheck Protection Program	10,518		6,685		—		17,203
Totals	Totals	$	4,762,643	$	1,004,128	$	139,113	$	5,905,884	Totals	$	5,399,921	$	1,025,507	$	116,120	$	6,541,548


		December 31, 2020									December 31, 2021
(In thousands)	(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total		(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total
Construction and land development	Construction and land development	$	216,420	$	26,250	$	2,438	$	245,108	Construction and land development	$	199,341	$	31,438	$	45	$	230,824
Commercial real estate - owner occupied	Commercial real estate - owner occupied	854,769		247,090		39,451		1,141,310		Commercial real estate - owner occupied	983,517		186,812		27,445		1,197,774
Commercial real estate - non-owner occupied	Commercial real estate - non-owner occupied	1,043,459		323,273		29,122		1,395,854		Commercial real estate - non-owner occupied	1,278,180		382,554		75,705		1,736,439
Residential real estate	Residential real estate	1,155,914		176,105		10,609		1,342,628		Residential real estate	1,261,306		156,957		7,091		1,425,354
Commercial and financial	Commercial and financial	743,846		94,627		16,280		854,753		Commercial and financial	968,318		84,395		16,643		1,069,356
Consumer	Consumer	181,797		6,660		278		188,735		Consumer	169,507		4,658		10		174,175
Paycheck Protection Program	Paycheck Protection Program	515,532		51,429		—		566,961		Paycheck Protection Program	69,503		21,604		—		91,107
Totals	Totals	$	4,711,737	$	925,434	$	98,178	$	5,735,349	Totals	$	4,929,672	$	868,418	$	126,939	$	5,925,029

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$23.1 million, or ~~2.9%,~~2.3% of the acquired loan balances at December 31, ~~2020. These amounts are~~2021. The discount is accreted into interest income over the remaining lives of the related loans on a level yield basis.

~~Table of Contents~~

Accrued interest receivable is included within Other Assets and was ~~$15.2~~$15.7 million and ~~$25.8~~$14.7 million at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

The following tables present the status of net loan balances as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020. Loans on short-term payment deferral at the reporting date are reported as current.~~2021.


		September 30, 2021													June 30, 2022
(In thousands)	(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total		(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total
Portfolio Loans	Portfolio Loans													Portfolio Loans
Construction and land development	Construction and land development	$	190,310	$	—	$	—	$	—	$	34	$	190,344	Construction and land development	$	320,588	$	—	$	—	$	—	$	8	$	320,596
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	949,282		671		—		—		1,166		951,119		Commercial real estate - owner-occupied	977,270		360		544		—		999		979,173
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	1,164,458		—		—		—		1,762		1,166,220		Commercial real estate - non owner-occupied	1,455,266		—		—		—		2,360		1,457,626
Residential real estate	Residential real estate	1,267,081		340		35		—		10,682		1,278,138		Residential real estate	1,431,258		3,147		13		—		8,017		1,442,435
Commercial and financial	Commercial and financial	856,579		1,179		99		1,814		5,393		865,064		Commercial and financial	1,013,540		1,074		13		—		3,631		1,018,258
Consumer	Consumer	157,468		269		34		—		145		157,916		Consumer	170,262		851		39		—		163		171,315
Paycheck Protection Program1	Paycheck Protection Program1	153,484		358		—		—		—		153,842		Paycheck Protection Program1	10,442		—		—		76		—		10,518
Total Portfolio Loans	Total Portfolio Loans	$	4,738,662	$	2,817	$	168	$	1,814	$	19,182	$	4,762,643	Total Portfolio Loans	$	5,378,626	$	5,432	$	609	$	76	$	15,178	$	5,399,921

Acquired Non-PCD Loans	Acquired Non-PCD Loans													Acquired Non-PCD Loans
Construction and land development	Construction and land development	$	37,067	$	—	$	—	$	—	$	—	$	37,067	Construction and land development	$	29,391	$	—	$	—	$	—	$	—	$	29,391
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	217,436		—		692		—		—		218,128		Commercial real estate - owner-occupied	255,103		—		747		—		—		255,850
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	427,170		—		—		—		925		428,095		Commercial real estate - non owner-occupied	437,140		—		—		—		1,044		438,184
Residential real estate	Residential real estate	178,504		300		—		—		2,540		181,344		Residential real estate	197,974		403		—		—		524		198,901
Commercial and financial	Commercial and financial	96,799		334		—		—		509		97,642		Commercial and financial	91,918		310		—		—		382		92,610
Consumer	Consumer	4,639		15		—		—		438		5,092		Consumer	3,655		—		—		—		231		3,886
Paycheck Protection Program1	Paycheck Protection Program1	36,760		—		—		—		—		36,760		Paycheck Protection Program1	6,658		—		—		27		—		6,685
Total Acquired Non-PCD Loans	Total Acquired Non-PCD Loans	$	998,375	$	649	$	692	$	—	$	4,412	$	1,004,128	Total Acquired Non-PCD Loans	$	1,021,839	$	713	$	747	$	27	$	2,181	$	1,025,507

PCD Loans	PCD Loans													PCD Loans
Construction and land development	Construction and land development	$	42	$	—	$	—	$	—	$	6	$	48	Construction and land development	$	35	$	—	$	—	$	—	$	3	$	38
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	28,739		—		—		—		3,350		32,089		Commercial real estate - owner-occupied	18,748		—		—		—		572		19,320
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	76,768		—		—		—		2,504		79,272		Commercial real estate - non owner-occupied	73,544		—		—		—		3,186		76,730
Residential real estate	Residential real estate	6,007		24		—		—		1,816		7,847		Residential real estate	5,426		—		—		—		703		6,129
Commercial and financial	Commercial and financial	17,678		743		83		—		1,342		19,846		Commercial and financial	9,284		—		—		—		4,619		13,903
Consumer	Consumer	11		—		0		—		0		11		Consumer	—		—		—		—		—		—
Total PCD Loans	Total PCD Loans	$	129,245	$	767	$	83	$	—	$	9,018	$	139,113	Total PCD Loans	$	107,037	$	—	$	—	$	—	$	9,083	$	116,120

Total Loans	Total Loans	$	5,866,282	$	4,233	$	943	$	1,814	$	32,612	$	5,905,884	Total Loans	$	6,507,502	$	6,145	$	1,356	$	103	$	26,442	$	6,541,548

1Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government.	1Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government.													1Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government.

Table of Contents


		December 31, 2020													December 31, 2021
(In thousands)	(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total		(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total
Portfolio Loans	Portfolio Loans													Portfolio Loans
Construction and land development	Construction and land development	$	216,262	$	—	$	—	$	—	$	158	$	216,420	Construction and land development	$	199,087	$	—	$	—	$	—	$	254	$	199,341
Commercial real estate - owner occupied	Commercial real estate - owner occupied	851,222		1,076		—		—		2,471		854,769		Commercial real estate - owner occupied	982,804		—		—		—		713		983,517
Commercial real estate - non-owner occupied	Commercial real estate - non-owner occupied	1,041,306		—		—		—		2,153		1,043,459		Commercial real estate - non-owner occupied	1,276,582		—		—		—		1,598		1,278,180
Residential real estate	Residential real estate	1,142,893		3,002		1,427		61		8,531		1,155,914		Residential real estate	1,248,160		3,457		143		—		9,546		1,261,306
Commercial and financial	Commercial and financial	737,362		135		1,967		—		4,382		743,846		Commercial and financial	963,828		851		41		—		3,598		968,318
Consumer	Consumer	180,879		203		138		2		575		181,797		Consumer	168,791		565		23		15		113		169,507
Paycheck Protection Program		515,532		—		—		—		—		515,532
Paycheck Protection Program1														Paycheck Protection Program1	69,434		—		—		69		—		69,503
Total Portfolio Loans	Total Portfolio Loans	$	4,685,456	$	4,416	$	3,532	$	63	$	18,270	$	4,711,737	Total Portfolio Loans	$	4,908,686	$	4,873	$	207	$	84	$	15,822	$	4,929,672

Acquired Non-PCD Loans	Acquired Non-PCD Loans													Acquired Non-PCD Loans
Construction and land development	Construction and land development	$	26,250	$	—	$	—	$	—	$	—	$	26,250	Construction and land development	$	31,438	$	—	$	—	$	—	$	—	$	31,438
Commercial real estate - owner occupied	Commercial real estate - owner occupied	244,486		—		—		—		2,604		247,090		Commercial real estate - owner occupied	186,652		—		160		—		—		186,812
Commercial real estate - non-owner occupied	Commercial real estate - non-owner occupied	322,264		—		—		—		1,009		323,273		Commercial real estate - non-owner occupied	381,510		—		—		—		1,044		382,554
Residential real estate	Residential real estate	171,507		1,605		104		—		2,889		176,105		Residential real estate	154,981		182		—		—		1,794		156,957
Commercial and financial	Commercial and financial	93,223		216		—		—		1,188		94,627		Commercial and financial	84,180		—		40		—		175		84,395
Consumer	Consumer	6,640		20		—		—		—		6,660		Consumer	4,082		135		—		—		441		4,658
Paycheck Protection Program		51,429		—		—		—		—		51,429
Paycheck Protection Program1														Paycheck Protection Program1	21,567		—		—		37		—		21,604
Total Acquired Non-PCD Loans	Total Acquired Non-PCD Loans	$	915,799	$	1,841	$	104	$	—	$	7,690	$	925,434	Total Acquired Non-PCD Loans	$	864,410	$	317	$	200	$	37	$	3,454	$	868,418

PCD Loans	PCD Loans													PCD Loans
Construction and land development	Construction and land development	$	2,429	$	—	$	—	$	—	$	9	$	2,438	Construction and land development	$	40	$	—	$	—	$	—	$	5	$	45
Commercial real estate - owner occupied	Commercial real estate - owner occupied	36,345		—		—		—		3,106		39,451		Commercial real estate - owner occupied	24,192		—		—		—		3,253		27,445
Commercial real estate - non-owner occupied	Commercial real estate - non-owner occupied	24,200		—		—		—		4,922		29,122		Commercial real estate - non-owner occupied	72,442		—		—		—		3,263		75,705
Residential real estate	Residential real estate	9,537		—		—		—		1,072		10,609		Residential real estate	5,386		—		—		—		1,705		7,091
Commercial and financial	Commercial and financial	15,121		125		—		—		1,034		16,280		Commercial and financial	13,547		—		—		—		3,096		16,643
Consumer	Consumer	271		—		—		—		7		278		Consumer	10		—		—		—		—		10
Total PCD Loans	Total PCD Loans	$	87,903	$	125	$	—	$	—	$	10,150	$	98,178	Total PCD Loans	$	115,617	$	—	$	—	$	—	$	11,322	$	126,939

Total Loans	Total Loans	$	5,689,158	$	6,382	$	3,636	$	63	$	36,110	$	5,735,349	Total Loans	$	5,888,713	$	5,190	$	407	$	121	$	30,598	$	5,925,029

1Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government.														1Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest subsequently received on such loans is accounted for under the cost-recovery method, whereby interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and future payments are reasonably assured. The Company recognized ~~$0.3~~$0.4 million in interest income on nonaccrual loans during each of the three months ended June 30, 2022 and 2021. The Company recognized $1.2 million and ~~$0.1~~$0.6 million in interest income on nonaccrual loans during the ~~three~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, respectively. The Company recognized $0.9 million and $0.5 million in interest income on nonaccrual loans during the nine months ended September 30,~~ 2021, ~~and 2020,~~ respectively.

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The following tables present net balances of loans on nonaccrual status and the related allowance for credit losses, if any, as of:


		September 30, 2021									June 30, 2022
(In thousands)	(In thousands)	Nonaccrual Loans With No Related Allowance		Nonaccrual Loans With an Allowance		Total Nonaccrual Loans		Allowance for Credit Losses		(In thousands)	Nonaccrual Loans With No Related Allowance		Nonaccrual Loans With an Allowance		Total Nonaccrual Loans		Allowance for Credit Losses
Construction and land development	Construction and land development	$	40	$	—	$	40	$	—	Construction and land development	$	11	$	—	$	11	$	—
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	3,490		1,026		4,516		417		Commercial real estate - owner-occupied	999		572		1,571		48
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	3,739		1,452		5,191		95		Commercial real estate - non owner-occupied	6,590		—		6,590		—
Residential real estate	Residential real estate	14,345		693		15,038		362		Residential real estate	9,149		95		9,244		34
Commercial and financial	Commercial and financial	3,443		3,801		7,244		2,658		Commercial and financial	5,599		3,033		8,632		1,881
Consumer	Consumer	33		550		583		550		Consumer	49		345		394		345

Totals	Totals	$	25,090	$	7,522	$	32,612	$	4,082	Totals	$	22,397	$	4,045	$	26,442	$	2,308


		December 31, 2020									December 31, 2021
(In thousands)	(In thousands)	Nonaccrual Loans With No Related Allowance		Nonaccrual Loans With an Allowance		Total Nonaccrual Loans		Allowance for Credit Losses		(In thousands)	Nonaccrual Loans With No Related Allowance		Nonaccrual Loans With an Allowance		Total Nonaccrual Loans		Allowance for Credit Losses
Construction and land development	Construction and land development	$	148	$	19	$	167	$	8	Construction and land development	$	37	$	222	$	259	$	92
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	7,893		288		8,181		287		Commercial real estate - owner-occupied	2,976		990		3,966		419
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	5,666		2,418		8,084		1,640		Commercial real estate - non owner-occupied	4,490		1,415		5,905		27
Residential real estate	Residential real estate	9,520		2,972		12,492		1,587		Residential real estate	12,358		687		13,045		357
Commercial and financial	Commercial and financial	3,175		3,429		6,604		2,235		Commercial and financial	2,676		4,193		6,869		2,384
Consumer	Consumer	222		360		582		75		Consumer	29		525		554		525
Totals	Totals	$	26,624	$	9,486	$	36,110	$	5,832	Totals	$	22,566	$	8,032	$	30,598	$	3,804

Collateral-Dependent Loans

Loans are considered collateral-dependent when the repayment, based on the Company's assessment as of the reporting date, is expected to be provided substantially through the operation or sale of the underlying collateral and there are no other available and reliable sources of repayment. The following table presents collateral-dependent loans as of:


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	June 30, 2022		December 31, 2021
Construction and land development	Construction and land development	$	31	$	189	Construction and land development	$	16	$	271
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	5,152		11,992		Commercial real estate - owner-occupied	2,069		4,706
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	5,190		7,285		Commercial real estate - non owner-occupied	6,349		4,923
Residential real estate	Residential real estate	15,039		16,652		Residential real estate	12,971		16,334
Commercial and financial	Commercial and financial	9,302		11,198		Commercial and financial	6,137		8,741
Consumer	Consumer	583		586		Consumer	548		741
Totals	Totals	$	35,297	$	47,902	Totals	$	28,090	$	35,716

Loans by Risk Rating

The Company utilizes an internal asset classification system as a means of identifying problem and potential problem loans. The following classifications are used to categorize loans under the internal classification system:

•Pass: Loans that are not problem loans or potential problem loans are considered to be pass-rated.

•Special Mention: Loans that do not currently expose the Company to sufficient risk to warrant classification in the Substandard or Doubtful categories, but possess weaknesses that deserve management's close attention are deemed to be Special Mention.

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•Substandard: Loans with the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

•Substandard Impaired: Loans typically placed on nonaccrual and considered to be collateral-dependent or accruing TDRs.

•Doubtful: Loans that have all the weaknesses inherent in those classified Substandard with the added characteristic that the weakness present makes collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are likely to be charged off.

The following tables present the risk rating of loans by year of origination as of:


		September 30, 2021																	June 30, 2022
(In thousands)	(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving		Total		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving		Total
Construction and Land Development	Construction and Land Development																	Construction and Land Development
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	62,879	$	38,326	$	38,517	$	26,344	$	4,771	$	20,952	$	35,590	$	227,379	Pass	$	112,623	$	124,511	$	19,219	$	29,937	$	7,222	$	13,488	$	43,009	$	350,009
Special Mention	Special Mention	—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—
Substandard Impaired	Substandard Impaired	—		—		—		—		—		80		—		80		Substandard Impaired	—		—		—		—		—		16		—		16
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	62,879	$	38,326	$	38,517	$	26,344	$	4,771	$	21,032	$	35,590	$	227,459	Total	$	112,623	$	124,511	$	19,219	$	29,937	$	7,222	$	13,504	$	43,009	$	350,025
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied																	Commercial real estate - owner-occupied
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	155,499	$	159,752	$	186,442	$	142,027	$	132,413	$	385,244	$	8,951	$	1,170,328	Pass	$	108,673	$	198,439	$	152,729	$	180,828	$	121,286	$	458,968	$	13,388	$	1,234,311
Special Mention	Special Mention	—		6,588		5,416		655		220		5,690		—		18,569		Special Mention	—		—		5,280		5,275		636		314		—		11,505
Substandard	Substandard	—		—		—		77		3,903		2,770		—		6,750		Substandard	—		—		447		2,665		—		2,701		—		5,813
Substandard Impaired	Substandard Impaired	—		—		2,811		256		1,104		1,518		—		5,689		Substandard Impaired	—		—		—		317		309		2,088		—		2,714
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	155,499	$	166,340	$	194,669	$	143,015	$	137,640	$	395,222	$	8,951	$	1,201,336	Total	$	108,673	$	198,439	$	158,456	$	189,085	$	122,231	$	464,071	$	13,388	$	1,254,343
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied																	Commercial real estate - non owner-occupied
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	248,842	$	201,940	$	303,903	$	202,400	$	123,851	$	513,792	$	7,203	$	1,601,931	Pass	$	288,039	$	407,054	$	207,900	$	286,427	$	192,275	$	538,503	$	7,498	$	1,927,696
Special Mention	Special Mention	—		—		2,363		—		1,620		8,397		—		12,380		Special Mention	—		—		—		830		—		3,797		—		4,627
Substandard	Substandard	—		4,798		3,856		24,078		1,907		19,446		—		54,085		Substandard	—		—		4,731		—		14,282		13,873		—		32,886
Substandard Impaired	Substandard Impaired	—		—		1,052		—		—		4,139		—		5,191		Substandard Impaired	—		—		1,044		4,175		34		2,078		—		7,331
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	248,842	$	206,738	$	311,174	$	226,478	$	127,378	$	545,774	$	7,203	$	1,673,587	Total	$	288,039	$	407,054	$	213,675	$	291,432	$	206,591	$	558,251	$	7,498	$	1,972,540
Residential real estate	Residential real estate																	Residential real estate
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	364,563	$	119,039	$	110,560	$	136,044	$	132,151	$	243,005	$	342,581	$	1,447,943	Pass	$	91,195	$	542,597	$	116,702	$	83,670	$	103,890	$	291,042	$	403,630	$	1,632,726
Special Mention	Special Mention	—		—		—		47		—		205		285		537		Special Mention	—		—		—		66		—		868		546		1,480
Substandard	Substandard	—		—		—		—		—		160		35		195		Substandard	—		—		—		—		13		275		—		288
Substandard Impaired	Substandard Impaired	—		488		728		40		5,358		9,335		2,705		18,654		Substandard Impaired	—		—		140		133		90		10,397		2,211		12,971
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	364,563	$	119,527	$	111,288	$	136,131	$	137,509	$	252,705	$	345,606	$	1,467,329	Total	$	91,195	$	542,597	$	116,842	$	83,869	$	103,993	$	302,582	$	406,387	$	1,647,465

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		September 30, 2021																	June 30, 2022
(In thousands)	(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving		Total		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving		Total
Commercial and financial	Commercial and financial																	Commercial and financial
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	229,168	$	187,063	$	107,743	$	83,267	$	45,562	$	60,048	$	222,822	$	935,673	Pass	$	138,675	$	306,952	$	159,376	$	79,518	$	57,045	$	69,304	$	279,113	$	1,089,983
Special Mention	Special Mention	563		16,137		219		247		275		149		406		17,996		Special Mention	1,263		480		5,202		479		309		371		444		8,548
Substandard	Substandard	—		388		4,502		3,666		1,491		3,333		25		13,405		Substandard	—		478		5,891		5,888		2,253		2,484		277		17,271
Substandard Impaired	Substandard Impaired	—		—		5,394		4,335		1,698		3,389		662		15,478		Substandard Impaired	—		—		216		547		5,227		2,926		53		8,969
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	229,731	$	203,588	$	117,858	$	91,515	$	49,026	$	66,919	$	223,915	$	982,552	Total	$	139,938	$	307,910	$	170,685	$	86,432	$	64,834	$	75,085	$	279,887	$	1,124,771
Consumer	Consumer																	Consumer
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	32,239	$	34,927	$	30,164	$	19,961	$	12,050	$	18,097	$	12,838	$	160,276	Pass	$	25,561	$	43,537	$	26,957	$	20,625	$	13,667	$	20,177	$	21,157	$	171,681
Special Mention	Special Mention	—		38		90		57		42		50		1,477		1,754		Special Mention	—		—		24		296		228		272		1,954		2,774
Substandard	Substandard	—		—		—		11		35		—		198		244		Substandard	—		—		—		12		19		8		159		198
Substandard Impaired	Substandard Impaired	—		15		59		25		79		129		438		745		Substandard Impaired	—		8		26		101		54		144		215		548
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	32,239	$	34,980	$	30,313	$	20,054	$	12,206	$	18,276	$	14,951	$	163,019	Total	$	25,561	$	43,545	$	27,007	$	21,034	$	13,968	$	20,601	$	23,485	$	175,201
Paycheck Protection Program	Paycheck Protection Program																	Paycheck Protection Program
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	182,082	$	8,520	$	—	$	—	$	—	$	—	$	—	$	190,602	Pass	$	—	$	14,764	$	2,439	$	—	$	—	$	—	$	—	$	17,203

Total	Total	$	182,082	$	8,520	$	—	$	—	$	—	$	—	$	—	$	190,602	Total	$	—	$	14,764	$	2,439	$	—	$	—	$	—	$	—	$	17,203
Consolidated	Consolidated																	Consolidated
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	1,275,272	$	749,567	$	777,329	$	610,043	$	450,798	$	1,241,138	$	629,985	$	5,734,132	Pass	$	764,766	$	1,637,854	$	685,322	$	681,005	$	495,385	$	1,391,482	$	767,795	$	6,423,609
Special Mention	Special Mention	563		22,763		8,088		1,006		2,157		14,491		2,168		51,236		Special Mention	1,263		480		10,506		6,946		1,173		5,622		2,944		28,934
Substandard	Substandard	—		5,186		8,358		27,832		7,336		25,709		258		74,679		Substandard	—		478		11,069		8,565		16,567		19,341		436		56,456
Substandard Impaired	Substandard Impaired	—		503		10,044		4,656		8,239		18,590		3,805		45,837		Substandard Impaired	—		8		1,426		5,273		5,714		17,649		2,479		32,549
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	1,275,835	$	778,019	$	803,819	$	643,537	$	468,530	$	1,299,928	$	636,216	$	5,905,884	Total	$	766,029	$	1,638,820	$	708,323	$	701,789	$	518,839	$	1,434,094	$	773,654	$	6,541,548


		December 31, 2020																	December 31, 2021
(In thousands)	(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving		Total		(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving		Total
Construction and Land Development	Construction and Land Development																	Construction and Land Development
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	62,107	$	52,384	$	46,067	$	15,873	$	7,335	$	17,873	$	35,324	$	236,963	Pass	$	94,318	$	23,860	$	38,058	$	25,507	$	3,995	$	15,466	$	29,349	$	230,553
Special Mention	Special Mention	206		245		5,918		—		—		1,449		—		7,818		Special Mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		51		—		51		Substandard	—		—		—		—		—		—		—		—
Substandard Impaired	Substandard Impaired	—		—		—		37		—		239		—		276		Substandard Impaired	—		—		—		222		—		49		—		271
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	62,313	$	52,629	$	51,985	$	15,910	$	7,335	$	19,612	$	35,324	$	245,108	Total	$	94,318	$	23,860	$	38,058	$	25,729	$	3,995	$	15,515	$	29,349	$	230,824
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied																	Commercial real estate - owner-occupied
Risk Ratings:	Risk Ratings:																	Risk Ratings:
Pass	Pass	$	155,953	$	198,559	$	156,276	$	138,341	$	148,389	$	287,772	$	14,255	$	1,099,545	Pass	$	205,404	$	154,432	$	179,786	$	132,353	$	125,763	$	363,986	$	10,005	$	1,171,729
Special Mention	Special Mention	5,773		1,858		3,305		—		4,471		4,050		2		19,459		Special Mention	—		6,527		5,370		649		218		3,250		—		16,014
Substandard	Substandard	—		—		—		4,709		1,955		5,508		—		12,172		Substandard	—		—		—		—		3,290		1,610		—		4,900
Substandard Impaired	Substandard Impaired	—		3,151		747		1,362		—		4,874		—		10,134		Substandard Impaired	—		—		2,742		310		596		1,483		—		5,131
Doubtful	Doubtful	—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—
Total	Total	$	161,726	$	203,568	$	160,328	$	144,412	$	154,815	$	302,204	$	14,257	$	1,141,310	Total	$	205,404	$	160,959	$	187,898	$	133,312	$	129,867	$	370,329	$	10,005	$	1,197,774

Table of Contents

December 31, 2020
(In thousands) 2020 2019 2018 2017 2016 Prior Revolving Total
Commercial real estate - non owner-occupied
Risk Ratings:
Pass $ 159,299 $ 313,287 $ 201,112 $ 123,357 $ 175,623 $ 356,943 $ 8,596 $ 1,338,217
Special Mention — 431 9,487 7,580 10,240 114 — 27,852
Substandard — — 9,709 — 8,311 3,682 — 21,702
Substandard Impaired — 2,418 — — 125 5,540 — 8,083
Doubtful — — — — — — — —
Total $ 159,299 $ 316,136 $ 220,308 $ 130,937 $ 194,299 $ 366,279 $ 8,596 $ 1,395,854
Residential real estate
Risk Ratings:
Pass $ 96,819 $ 144,329 $ 204,077 $ 205,046 $ 160,612 $ 159,742 $ 350,502 $ 1,321,127
Special Mention — — 33 720 — 966 479 2,198
Substandard 350 — — 896 — 1,452 100 2,798
Substandard Impaired 109 726 1,520 1,762 715 9,671 2,002 16,505
Doubtful — — — — — — — —
Total $ 97,278 $ 145,055 $ 205,630 $ 208,424 $ 161,327 $ 171,831 $ 353,083 $ 1,342,628
Commercial and financial
Risk Ratings:
Pass $ 214,774 $ 146,511 $ 103,769 $ 60,782 $ 39,692 $ 53,758 $ 204,304 $ 823,590
Special Mention 71 946 965 5,612 67 635 209 8,505
Substandard 154 41 3,016 1,609 553 3,239 764 9,376
Substandard Impaired 317 4,595 3,199 2,292 2,074 704 81 13,262
Doubtful1
— — — — — — 20 20
Total $ 215,316 $ 152,093 $ 110,949 $ 70,295 $ 42,386 $ 58,336 $ 205,378 $ 854,753
Consumer
Risk Ratings:
Pass $ 46,476 $ 43,143 $ 30,433 $ 18,937 $ 21,880 $ 9,488 $ 15,089 $ 185,446
Special Mention 58 27 14 41 42 21 1,854 2,057
Substandard — — — 42 4 151 228 425
Substandard Impaired 7 50 193 24 329 183 21 807
Doubtful — — — — — — — —
Total $ 46,541 $ 43,220 $ 30,640 $ 19,044 $ 22,255 $ 9,843 $ 17,192 $ 188,735
Paycheck Protection Program
Risk Ratings:
Pass $ 566,961 $ — $ — $ — $ — $ — $ — $ 566,961
Total $ 566,961 $ — $ — $ — $ — $ — $ — $ 566,961
Consolidated
Risk Ratings:
Pass $ 1,302,389 $ 898,213 $ 741,734 $ 562,336 $ 553,531 $ 885,576 $ 628,070 $ 5,571,849
Special Mention 6,108 3,507 19,722 13,953 14,820 7,235 2,544 67,889
Substandard 504 41 12,725 7,256 10,823 14,083 1,092 46,524
Substandard Impaired 433 10,940 5,659 5,477 3,243 21,211 2,104 49,067
Doubtful1
— — — — — — 20 20
Total $ 1,309,434 $ 912,701 $ 779,840 $ 589,022 $ 582,417 $ 928,105 $ 633,830 $ 5,735,349
1Loans classified as doubtful are fully reserved at December 31, 2020.

~~Loans Modified in Connection with COVID-19 Pandemic~~

The CARES Act, which was signed into law on March 27, 2020, and amended by the Consolidated Appropriations Act on December 27, 2020, encourages financial institutions to practice prudent efforts to work with borrowers financially impacted by the COVID-19 pandemic by providing an option to exclude from TDR consideration certain loan modifications that might otherwise be categorized as TDRs under ASC 310-40. This option is available for modifications that are deemed to be COVID-related, where the borrower was not more than 30 days past due on December 31, 2019, and the modification is executed between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency.

~~Table of Contents~~


	December 31, 2021
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving		Total
Commercial real estate - non owner-occupied
Risk Ratings:
Pass	$	395,308	$	207,824	$	298,021	$	186,339	$	110,990	$	460,435	$	6,477	$	1,665,394
Special Mention	—		—		844		—		289		13,850		—		14,983
Substandard	—		4,776		3,009		23,206		1,900		17,266		—		50,157
Substandard Impaired	—		1,044		1,849		—		326		2,686		—		5,905
Doubtful	—		—		—		—		—		—		—		—
Total	$	395,308	$	213,644	$	303,723	$	209,545	$	113,505	$	494,237	$	6,477	$	1,736,439
Residential real estate
Risk Ratings:
Pass	$	394,547	$	114,364	$	90,566	$	119,836	$	118,556	$	213,950	$	354,439	$	1,406,258
Special Mention	—		—		—		70		—		1,243		532		1,845
Substandard	—		340		—		—		58		422		86		906
Substandard Impaired	—		149		724		39		4,415		8,507		2,511		16,345
Doubtful	—		—		—		—		—		—		—		—
Total	$	394,547	$	114,853	$	91,290	$	119,945	$	123,029	$	224,122	$	357,568	$	1,425,354
Commercial and financial
Risk Ratings:
Pass	$	340,826	$	180,677	$	97,072	$	68,232	$	39,331	$	56,053	$	246,568	$	1,028,759
Special Mention	530		15,587		—		237		251		84		876		17,565
Substandard	—		371		2,605		3,594		1,436		3,217		339		11,562
Substandard Impaired	—		196		4,561		3,694		1,371		1,520		128		11,470
Doubtful	—		—		—		—		—		—		—		—
Total	$	341,356	$	196,831	$	104,238	$	75,757	$	42,389	$	60,874	$	247,911	$	1,069,356
Consumer
Risk Ratings:
Pass	$	45,063	$	31,342	$	26,194	$	17,300	$	9,979	$	16,019	$	25,418	$	171,315
Special Mention	—		24		431		37		167		3		1,199		1,861
Substandard	—		—		18		—		17		—		223		258
Substandard Impaired	—		—		92		23		74		118		434		741
Doubtful	—		—		—		—		—		—		—		—
Total	$	45,063	$	31,366	$	26,735	$	17,360	$	10,237	$	16,140	$	27,274	$	174,175
Paycheck Protection Program
Risk Ratings:
Pass	$	87,036	$	4,071	$	—	$	—	$	—	$	—	$	—	$	91,107


Total	$	87,036	$	4,071	$	—	$	—	$	—	$	—	$	—	$	91,107
Consolidated
Risk Ratings:
Pass	$	1,562,502	$	716,570	$	729,697	$	549,567	$	408,614	$	1,125,909	$	672,256	$	5,765,115
Special Mention	530		22,138		6,645		993		925		18,430		2,607		52,268
Substandard	—		5,487		5,632		26,800		6,701		22,515		648		67,783
Substandard Impaired	—		1,389		9,968		4,288		6,782		14,363		3,073		39,863
Doubtful	—		—		—		—		—		—		—		—
Total	$	1,563,032	$	745,584	$	751,942	$	581,648	$	423,022	$	1,181,217	$	678,584	$	5,925,029

Federal banking regulators issued similar guidance that also allows lenders to conclude that short-term modifications for borrowers affected by the pandemic should not be considered TDRs if the borrower was current at the time of modification. Seacoast has provided financially impacted borrowers with loan accommodations, primarily consisting of payment deferrals of up to six months. At its peak on June 30, 2020, loans on deferral represented $1.1 billion, or 21%, of total non-PPP loans. In the second half of 2020, the large majority of these borrowers successfully resumed making contractual payments, and the level of loans with accommodations has decreased to $2.2 million, or 0.04%, of total non-PPP loans as of September 30, 2021. Types of accommodations have included a combination of one or more of the following: full payment deferral, partial payment deferral, reduction of interest rate, extension of the original maturity date, or re-amortization of the facility.

~~The following table presents the balance of loans with active payment accommodations at the specified dates, excluding PPP loans:~~

(In thousands) September 30, 2021 December 31, 2020
Construction and land development $ — $ 1,032
Commercial real estate - owner-occupied 582 14,248
Commercial real estate - non owner-occupied — 32,549
Residential real estate 610 12,839
Commercial and financial 624 11,915
Consumer 338 1,479
Totals $ 2,154 $ 74,062

Troubled Debt Restructured Loans

The Company’s TDR concessions granted to certain borrowers generally do not include forgiveness of principal balances, but may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a limited period of time. Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements.

Table of Contents

The following table presents loans that were modified in a troubled debt restructuring during the three and ~~nine~~six months ~~ended:~~ended June 30, 2022 and June 30, 2021:


		Three Months Ended September 30,											Three Months Ended June 30,
		2021					2020						2022					2021
(In thousands)	(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Construction and land development	Construction and land development	—	$	—	$	—	—	$	—	$	—	Construction and land development	—	$	—	$	—	—	$	—	$	—
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	—	—		—		—	—		—		Commercial real estate - owner-occupied	—	—		—		—	—		—
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	—	—		—		—	—		—		Commercial real estate - non owner-occupied	—	—		—		—	—		—
Residential real estate	Residential real estate	1	152		152		—	—		—		Residential real estate	—	—		—		2	52		52
Commercial and financial	Commercial and financial	—	—		—		—	—		—		Commercial and financial	1	21		21		1	142		142
Consumer	Consumer	—	—		—		1	41		41		Consumer	—	—		—		—	—		—
Totals	Totals	1	$	152	$	152	1	$	41	$	41	Totals	1	$	21	$	21	3	$	194	$	194

~~Table of Contents~~


		Nine Months Ended September 30,											Six Months Ended June 30,
		2021					2020						2022					2021
(In thousands)	(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Construction and land development	Construction and land development	—	$	—	$	—	—	$	—	$	—	Construction and land development	—	$	—	$	—	—	$	—	$	—
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	—	—		—		—	—		—		Commercial real estate - owner-occupied	—	—		—		—	—		—
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	—	—		—		—	—		—		Commercial real estate - non owner-occupied	—	—		—		—	—		—
Residential real estate	Residential real estate	4	231		231		1	45		45		Residential real estate	3	785		785		3	79		79
Commercial and financial	Commercial and financial	1	142		142		4	437		437		Commercial and financial	2	54		54		1	142		142
Consumer	Consumer	—	—		—		3	88		88		Consumer	4	23		23		—	—		—
Totals	Totals	5	$	373	$	373	8	$	570	$	570	Totals	9	$	862	$	862	4	$	221	$	221

The TDRs described above resulted in a specific allowance for credit losses of $0.1 million and $0.2 million as of ~~September~~June 30, 2022 and June 30, 2021, ~~and September 30, 2020.~~respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, there ~~were 2 defaults~~was 1 default totaling ~~$0.1 million of loans~~$2 thousand on a loan that had been modified ~~in TDRs~~to a TDR within the preceding twelve months. During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, there were 42 defaults on loans totaling ~~$1.4~~$0.1 million ~~of loans~~ that had been modified to a TDR within the preceding twelve months. The Company considers a loan to have defaulted when it becomes 90 days or more delinquent under the modified terms, has been transferred to nonaccrual status, is charged off or has been transferred to other real estate owned. For loans measured based on the present value of expected future cash flows, ~~$9,000~~$15 thousand and ~~$19,000~~$6 thousand for the three months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020,~~2021, respectively, and ~~$20,000~~$20 thousand and ~~$65,000~~$11 thousand for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020,~~2021, respectively, was included in interest income and represents the change in present value attributable to the passage of time.

2322

Table of Contents

Note F5 – Allowance for Credit Losses

Activity in the allowance for credit losses is summarized as follows:

Three Months Ended September 30, 2021
(In thousands) Beginning
Balance Initial Allowance on PCD Loans Acquired During the Period Provision
for Credit
Losses Charge-
Offs Recoveries TDR
Allowance
Adjustments Ending
Balance
Construction and land development $ 4,053 $ — $ (1,459) $ — $ 10 $ (1) $ 2,603
Commercial real estate - owner-occupied 8,676 — (24) — — — 8,652
Commercial real estate - non owner-occupied 34,807 1,327 5,278 (1,327) — — 40,085
Residential real estate 12,543 — 1,456 (27) 158 (3) 14,127
Commercial and financial 18,016 1,719 (2) (535) 326 — 19,524
Consumer 3,032 — (158) (163) 126 (5) 2,832
Paycheck Protection Program — — — — — — —
Totals $ 81,127 $ 3,046 $ 5,091 $ (2,052) $ 620 $ (9) $ 87,823

Three Months Ended September 30, 2020
(In thousands) Beginning
Balance Initial Allowance on PCD Loans Acquired During the Period Provision
for Credit
Losses Charge-
Offs Recoveries TDR
Allowance
Adjustments Ending
Balance
Construction and land development $ 7,161 $ 39 $ 475 $ — $ 26 $ — $ 7,701
Commercial real estate - owner occupied 5,562 954 689 — 26 (12) 7,219
Commercial real estate - non-owner occupied 38,992 2,096 (7,050) (25) 5 — 34,018
Residential real estate 20,453 27 (3,196) (19) 65 (5) 17,325
Commercial and financial 15,514 2,632 8,081 (1,776) 203 — 24,654
Consumer 3,568 15 (244) (355) 114 (2) 3,096
Paycheck Protection Program — — — — — — —
Totals $ 91,250 $ 5,763 $ (1,245) $ (2,175) $ 439 $ (19) $ 94,013


		Nine Months Ended September 30, 2021										Three Months Ended June 30, 2022
(In thousands)	(In thousands)	Beginning Balance		Initial Allowance on PCD Loans Acquired During the Period		Provision for Credit Losses		Charge- Offs		Recoveries			TDR Allowance Adjustments		Ending Balance		(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	Construction and land development	$	4,920	$	—	$	(2,438)	$	—	$	124		$	(3)	$	2,603	Construction and land development	$	2,268	$	230	$	—	$	54	$	—	$	2,552
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	9,868		—		(1,216)		—		—			—		8,652		Commercial real estate - owner-occupied	9,294		(1,918)		—		—		—		7,376
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	38,266		1,327		1,817		(1,327)		2			—		40,085		Commercial real estate - non owner-occupied	43,922		2,528		—		9		—		46,459
Residential real estate	Residential real estate	17,500		—		(4,323)		(48)		1,008			(10)		14,127		Residential real estate	14,075		648		—		112		(14)		14,821
Commercial and financial	Commercial and financial	18,690		1,719		1,172		(2,855)		798			—		19,524		Commercial and financial	17,727		(500)		(253)		171		(1)		17,144
Consumer	Consumer	3,489		—		(491)		(547)		388			(7)		2,832		Consumer	2,552		(166)		(199)		230		—		2,417
Paycheck Protection Program	Paycheck Protection Program	—				—		—		—			—		—		Paycheck Protection Program	—		—		—		—		—		—
Totals	Totals	$	92,733	$	3,046	$	(5,479)	$	(4,777)	$	2,320		$	(20)	$	87,823	Totals	$	89,838	$	822	$	(452)	$	576	$	(15)	$	90,769


	Three Months Ended June 30, 2021
(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	$	4,428	$	(469)	$	—	$	96	$	(2)	$	4,053
Commercial real estate - owner occupied	9,792		(1,116)		—		—		—		8,676
Commercial real estate - non-owner occupied	36,229		(1,423)		—		1		—		34,807
Residential real estate	14,353		(2,407)		(21)		621		(3)		12,543
Commercial and financial	18,916		399		(1,564)		265		—		18,016
Consumer	2,925		161		(199)		146		(1)		3,032

Paycheck Protection Program	—		—		—		—		—		—
Totals	$	86,643	$	(4,855)	$	(1,784)	$	1,129	$	(6)	$	81,127



	Six Months Ended June 30, 2022
(In thousands)	Beginning Balance		Initial Allowance on PCD Loans Acquired During the Period		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	$	2,751	$	—	$	(263)	$	—	$	64	$	—	$	2,552
Commercial real estate - owner-occupied	8,579		—		(1,203)		—		—		—		7,376
Commercial real estate - non owner-occupied	36,617		31		9,802		—		9		—		46,459
Residential real estate	12,811		17		1,708		(1)		303		(17)		14,821
Commercial and financial	19,744		3		(2,128)		(822)		348		(1)		17,144
Consumer	2,813		—		(538)		(294)		438		(2)		2,417
Paycheck Protection Program	—				—		—		—		—		—
Totals	$	83,315	$	51	$	7,378	$	(1,117)	$	1,162	$	(20)	$	90,769

Table of Contents


		Nine Months Ended September 30, 2020																	Six Months Ended June 30, 2021
(In thousands)	(In thousands)	Beginning Balance		Impact of Adoption of ASC 326		Initial Allowance on PCD Loans Acquired During the Period		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance		(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	Construction and land development	$	1,842	$	1,479	$	87	$	4,202	$	—	$	92	$	(1)	$	7,701	Construction and land development	$	4,920	$	(979)	$	—	$	114	$	(2)	$	4,053
Commercial real estate - owner occupied	Commercial real estate - owner occupied	5,361		80		1,161		655		(45)		44		(37)		7,219		Commercial real estate - owner occupied	9,868		(1,192)		—		—		—		8,676
Commercial real estate - non-owner occupied	Commercial real estate - non-owner occupied	7,863		9,341		2,236		14,578		(37)		37		—		34,018		Commercial real estate - non-owner occupied	38,266		(3,461)		—		2		—		34,807
Residential real estate	Residential real estate	7,667		5,787		124		3,638		(150)		283		(24)		17,325		Residential real estate	17,500		(5,779)		(21)		850		(7)		12,543
Commercial and financial	Commercial and financial	9,716		3,677		2,643		12,144		(4,642)		1,116		—		24,654		Commercial and financial	18,690		1,174		(2,320)		472		—		18,016
Consumer	Consumer	2,705		862		28		662		(1,442)		284		(3)		3,096		Consumer	3,489		(333)		(384)		262		(2)		3,032
Paycheck Protection Program	Paycheck Protection Program	—		—		—		—		—		—		—		—		Paycheck Protection Program	—		—		—		—		—		—
Totals	Totals	$	35,154	$	21,226	$	6,279	$	35,879	$	(6,316)	$	1,856	$	(65)	$	94,013	Totals	$	92,733	$	(10,570)	$	(2,725)	$	1,700	$	(11)	$	81,127

Management establishes the allowance using relevant available information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts to project losses over a three-year forecast period. Forecast data is sourced primarily from Moody’s Analytics (“Moody’s”), a firm widely recognized for its research, analysis, and economic forecasts. For portfolio segments with a weighted average life longer than three years, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans within each segment.

Historical credit losses provide the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in current and forecasted environmental conditions, such as changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.

As of ~~September~~June 30, ~~2021,~~2022, the Company utilized Moody’s most recent “U.S. Macroeconomic Outlook Baseline” scenario and considered the uncertainty associated with the assumptions in the Baseline scenario, including actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential ~~for increasing COVID-19 infections, including from variants,~~impact of those actions, the ongoing Russia-Ukraine conflict and the magnitude of the resulting ~~potential erosion in consumer confidence,~~market disruption, and the ~~risk that government stimulus programs are less effective than expected.~~potential impact of persistent high inflation on economic growth. Outcomes in any or all of these factors could differ from the Baseline scenario, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions, and for additional dimensions of risk not captured in the quantitative model.

The following section discusses changes in the level of reserves for the three months ended June 30, 2022.

In the Construction and Land Development segment, the ~~decrease~~increase in reserves ~~during the quarter~~ reflects ~~lower~~higher loan balances, ~~and improved economic variables relating to residential real estate.~~partially offset by continuing low historical loss rates for this segment. In this segment, the primary source of repayment is typically from proceeds of the sale, refinancing, or permanent financing of the underlying property; therefore, industry and collateral type and estimated collateral values are among the relevant factors in assessing expected losses.

In the Commercial Real Estate - Owner-Occupied segment, ~~increases~~the decrease in the allowance ~~resulting from~~reflects lower loan ~~growth were offset by~~balances, changes in the ~~impact~~proportion of ~~improved economic variables relating to unemployment.~~loan types in this category, and lower specific reserves. Risk characteristics include but are not limited to, collateral type, loan seasoning, and ~~lien position.~~note structure.

In the Commercial Real Estate - Non Owner-Occupied segment, the increase in reserves reflects higher loan balances ~~partially offset by improved~~and the impact of considerations of the increasing risk of economic ~~forecast variables including lower unemployment.~~recession on loans in this category. Repayment is often dependent upon rental income from the successful operation of the underlying property. Loan performance may be adversely affected by general economic conditions or conditions specific to the real estate market, including property types. Collateral type, loan seasoning, and ~~lien position~~note structure are among the risk characteristics analyzed for this segment.

The Residential Real Estate segment includes first mortgages secured by residential property, and home equity lines of credit. The increase in reserves reflects the impact of higher loan ~~balances resulting from organic growth and loans acquired, partially offset by improved economic forecast variables including lower unemployment.~~balances. Risk characteristics considered for this segment include, but are not limited to, collateral type, ~~lien position,~~note structure, loan to value ratios, and loan seasoning.

In the Commercial and Financial segment, borrowers are primarily small to medium sized professional firms and other businesses, and loans are generally supported by projected cash flows of the business, collateralized by business assets, and/or guaranteed by the business owners. The decrease in reserves is attributed to lower loan balances and lower specific reserves.

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~~guaranteed by the business owners. The increase in reserves is attributed to higher loan balances.~~ Industry, collateral type, estimated collateral values and loan seasoning are among the relevant factors in assessing expected losses.

Consumer loans include installment and revolving lines, loans for automobiles, boats, and other personal or family purposes. Risk characteristics considered for this segment include, but are not limited to, collateral type, loan to value ratios, loan seasoning and FICO score. The decline in the reserve ~~during the quarter~~ reflects ~~lower loan balances~~continuing low historical loss rates and ~~improved economic forecast variables.~~an increasing proportion of seasoned loans in this segment.

Balances outstanding under the Paycheck Protection Program are guaranteed by the U.S. government and have not been assigned a reserve.

The allowance for credit losses is composed of specific allowances for loans individually evaluated and general allowances for loans grouped into loan pools based on similar characteristics, which are collectively evaluated. The Company’s loan portfolio and related allowance at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 is shown in the following tables:


		September 30, 2021													June 30, 2022
		Individually Evaluated				Collectively Evaluated				Total					Individually Evaluated				Collectively Evaluated				Total
(In thousands)	(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction and land development	Construction and land development	$	80	$	3	$	227,379	$	2,600	$	227,459	$	2,603	Construction and land development	$	16	$	—	$	350,009	$	2,552	$	350,025	$	2,552
Commercial real estate - owner occupied	Commercial real estate - owner occupied	5,689		420		1,195,647		8,232		1,201,336		8,652		Commercial real estate - owner occupied	2,714		48		1,251,629		7,328		1,254,343		7,376
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	5,190		95		1,668,397		39,990		1,673,587		40,085		Commercial real estate - non owner-occupied	7,331		741		1,965,209		45,718		1,972,540		46,459
Residential real estate	Residential real estate	18,654		513		1,448,675		13,614		1,467,329		14,127		Residential real estate	12,971		297		1,634,494		14,524		1,647,465		14,821
Commercial and financial	Commercial and financial	15,478		3,350		967,074		16,174		982,552		19,524		Commercial and financial	8,969		2,185		1,115,802		14,959		1,124,771		17,144
Consumer	Consumer	746		565		162,273		2,267		163,019		2,832		Consumer	548		474		174,653		1,943		175,201		2,417
Paycheck Protection Program	Paycheck Protection Program	—		—		190,602		—		190,602		—		Paycheck Protection Program	—		—		17,203		—		17,203		—
Totals	Totals	$	45,837	$	4,946	$	5,860,047	$	82,877	$	5,905,884	$	87,823	Totals	$	32,549	$	3,745	$	6,508,999	$	87,024	$	6,541,548	$	90,769


		December 31, 2020													December 31, 2021
		Individually Evaluated				Collectively Evaluated				Total					Individually Evaluated				Collectively Evaluated				Total
(In thousands)	(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction and land development	Construction and land development	$	276	$	13	$	244,832	$	4,907	$	245,108	$	4,920	Construction and land development	$	271	$	92	$	230,553	$	2,659	$	230,824	$	2,751
Commercial real estate - owner occupied	Commercial real estate - owner occupied	10,243		402		1,131,067		9,466		1,141,310		9,868		Commercial real estate - owner occupied	5,131		419		1,192,643		8,160		1,197,774		8,579
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	8,083		1,640		1,387,771		36,626		1,395,854		38,266		Commercial real estate - non owner-occupied	5,905		27		1,730,534		36,590		1,736,439		36,617
Residential real estate	Residential real estate	16,506		2,064		1,326,122		15,436		1,342,628		17,500		Residential real estate	16,345		646		1,409,009		12,165		1,425,354		12,811
Commercial and financial	Commercial and financial	13,281		3,498		841,472		15,192		854,753		18,690		Commercial and financial	11,470		2,885		1,057,886		16,859		1,069,356		19,744
Consumer	Consumer	807		91		187,928		3,398		188,735		3,489		Consumer	741		685		173,434		2,128		174,175		2,813
Paycheck Protection Program	Paycheck Protection Program	—		—		566,961		—		566,961		—		Paycheck Protection Program	—		—		91,107		—		91,107		—
Totals	Totals	$	49,196	$	7,708	$	5,686,153	$	85,025	$	5,735,349	$	92,733	Totals	$	39,863	$	4,754	$	5,885,166	$	78,561	$	5,925,029	$	83,315

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Note G6 – Derivatives

Back-to-Back Swaps

The Company offers interest rate swaps when requested by customers to allow them to hedge the risk of rising interest rates on their variable rate loans. Upon entering into these swaps, the Company enters into offsetting positions with counterparties in order to minimize the interest rate risk. These back-to-back swaps qualify as freestanding financial derivatives with the fair values reported in other assets and other liabilities. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under the arrangements for financial statement presentation purposes. Gains and losses on these back-to-back swaps, which offset, are recorded through noninterest income. No net gains or losses have been recognized to date on these instruments. As of ~~September~~June 30, ~~2021,~~2022, the interest rate swaps had an aggregate notional value of ~~$180.6~~$253.5 million, with a fair value of ~~$9.1~~$9.3 million recorded in other assets and other liabilities. As of December 31, ~~2020,~~2021, the interest rate swaps had an aggregate notional value of ~~$182.4~~$175.4 million, with a fair value of ~~$13.3~~$8.0 million recorded in other assets and other liabilities. The weighted average maturity was ~~6.9~~6.7 years at ~~September~~June 30, ~~2021~~2022 and ~~7.5~~6.7 years at December 31, ~~2020.~~2021.

Interest Rate Floors Designated as Cash Flow Hedges

The Company has entered into interest rate floor contracts to mitigate exposure to the variability of future cash flows due to changes in interest rates on certain segments of its variable-rate loans. During 2020, the Company entered into 2 interest rate floor contracts, each with a notional amount of $150.0 million, maturing in October 2023 and November 2023. The Company considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest rates and has designated them as cash flow hedges. Therefore, changes in the fair value of these derivative instruments are recognized in other comprehensive income. Amortization of the premium paid on cash flow hedges is recognized in earnings over the term of the hedge in the same caption as the hedged item. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company recognized a loss through other comprehensive income of ~~$0.2~~$0.1 million and ~~$0.5~~$0.2 million, respectively, and reclassified $0.1 million and $0.2 million, respectively, out of accumulated other comprehensive income and into interest income. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the interest rate floors had a fair value of ~~$0.5 million~~$41 thousand and ~~$1.0 million,~~$290 thousand, respectively, recorded in other assets in the consolidated balance sheet. Over the next twelve months, the Company expects to reclassify ~~$0.4~~$0.5 million from accumulated other comprehensive income into interest income related to these agreements.


(In thousands)	(In thousands)	Notional Amount		Fair Value		Balance Sheet Category	(In thousands)	Notional Amount		Fair Value		Balance Sheet Category
At September 30, 2021
At June 30, 2022							At June 30, 2022
Back-to-back swaps	Back-to-back swaps	$	180,610	$	9,110	Other Assets and Other Liabilities	Back-to-back swaps	$	253,524	$	9,320	Other Assets and Other Liabilities
Interest rate floors	Interest rate floors	300,000		514		Other Assets	Interest rate floors	300,000		41		Other Assets

At December 31, 2020
At December 31, 2021							At December 31, 2021
Back-to-back swaps	Back-to-back swaps	$	182,379	$	13,339	Other Assets and Other Liabilities	Back-to-back swaps	$	175,392	$	8,022	Other Assets and Other Liabilities
Interest rate floors	Interest rate floors	300,000		1,004		Other Assets	Interest rate floors	300,000		290		Other Assets

Note H7 – Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are accounted for as secured borrowings. For securities sold under agreements to repurchase, the Company is required to pledge collateral with value sufficient to fully ~~collateralized~~collateralize borrowings. Company securities pledged were as follows by collateral type and maturity as of:

(In thousands)

September 30, 2021

December 31, 2020

(In thousands)

June 30, 2022

December 31, 2021

Fair value of pledged securities - overnight and continuous:

Mortgage-backed securities and collateralized mortgage obligations of U.S. government sponsored entities

134,801

137,268

Mortgage-backed securities and collateralized mortgage obligations of U.S. government sponsored entities

139,805

134,577

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Note ~~I – Noninterest Income and Expense~~

~~Details of noninterest income and expenses for the three and nine months ended September 30, 2021 and 2020 are as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2021 2020 2021 2020
Noninterest income
Service charges on deposit accounts $ 2,495 $ 2,242 $ 7,171 $ 7,006
Interchange income 4,131 3,682 12,096 10,115
Wealth management income 2,562 1,972 7,272 5,558
Mortgage banking fees 2,550 5,283 9,752 11,050
Marine finance fees 152 242 518 545
SBA gains 812 252 1,331 572
BOLI income 1,128 899 2,859 2,672
Other income 5,228 2,370 11,221 7,869
19,058 16,942 52,220 45,387
Securities (losses) gains, net (30) 4 (199) 1,253
Total $ 19,028 $ 16,946 $ 52,021 $ 46,640
Noninterest expense
Salaries and wages $ 27,919 $ 23,125 $ 72,278 $ 67,049
Employee benefits 4,177 3,995 13,110 11,629
Outsourced data processing costs 5,610 6,128 14,754 14,820
Telephone/data lines 810 705 2,433 2,210
Occupancy 3,541 3,858 10,640 10,596
Furniture and equipment 1,567 1,576 3,987 4,557
Marketing 1,353 1,513 3,523 3,788
Legal and professional fees 4,151 3,018 8,915 8,658
FDIC assessments 651 474 1,692 740
Amortization of intangibles 1,306 1,497 3,729 4,436
Foreclosed property expense and net (gain) loss on sale 66 512 (89) 442
Provision for credit losses on unfunded commitments 133 756 133 980
Other 3,984 4,517 12,067 11,966
Total $ 55,268 $ 51,674 $ 147,172 $ 141,871

~~Note J~~8 – Equity Capital

The Company is well capitalized and at ~~September~~June 30, ~~2021,~~2022, the Company and the Company’s principal banking subsidiary, Seacoast Bank, exceeded the common equity Tier 1 (CET1) capital ratio regulatory threshold of 6.5% for well-capitalized institutions under the Basel III standardized transition approach, as well as risk-based and leverage ratio requirements for well capitalized banks under the regulatory framework for prompt corrective action.

Note K9 – Contingent Liabilities

The Company and its subsidiaries, because of the nature of their business, are at all times subject to numerous legal actions, threatened or filed. Management presently believes that none of the legal proceedings to which it is a party are likely to have a materially adverse effect on the Company’s consolidated financial condition, operating results or cash flows.

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Note L10 – Fair Value

Under ASC Topic 820, fair value measurements for items measured at fair value on a recurring and nonrecurring basis at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 included:


(In thousands)	(In thousands)	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(In thousands)	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At September 30, 2021
At June 30, 2022										At June 30, 2022
Financial Assets	Financial Assets									Financial Assets
Available-for-sale debt securities1	Available-for-sale debt securities1	$	1,546,155	$	199	$	1,545,956	$	—	Available-for-sale debt securities1	$	1,800,791	$	189	$	1,800,602	$	—
Derivative financial instruments2	Derivative financial instruments2	9,624		—		9,624		—		Derivative financial instruments2	9,361		—		9,361		—
Loans held for sale2	Loans held for sale2	49,597		—		49,597		—		Loans held for sale2	14,205		—		14,205		—
Loans3	Loans3	9,945		—		942		9,003		Loans3	5,300		—		1,343		3,957
Other real estate owned4	Other real estate owned4	13,628		—		390		13,238		Other real estate owned4	2,419		—		2,419		—
Equity securities5	Equity securities5	9,404		9,404		—		—		Equity securities5	8,564		8,564		—		—
Financial Liabilities	Financial Liabilities									Financial Liabilities
Derivative financial instruments2	Derivative financial instruments2	$	9,110	$	—	$	9,110	$	—	Derivative financial instruments2	$	9,320	$	—	$	9,320	$	—

At December 31, 2020
At December 31, 2021										At December 31, 2021
Financial Assets	Financial Assets									Financial Assets
Available-for-sale debt securities1	Available-for-sale debt securities1	$	1,398,157	$	101	$	1,398,056	$	—	Available-for-sale debt securities1	$	1,644,319	$	197	$	1,644,122	$	—
Derivative financial instruments2	Derivative financial instruments2	14,343		—		14,343		—		Derivative financial instruments2	8,312		—		8,312		—
Loans held for sale2	Loans held for sale2	68,890		—		68,890		—		Loans held for sale2	31,791		—		31,791		—
Loans3	Loans3	8,806		—		1,900		6,906		Loans3	8,443		—		1,558		6,885
Other real estate owned4	Other real estate owned4	12,750		—		72		12,678		Other real estate owned4	13,618		—		—		13,618
Equity securities5	Equity securities5	6,530		6,530		—		—		Equity securities5	9,316		9,316		—		—
Financial Liabilities	Financial Liabilities									Financial Liabilities
Derivative financial instruments2	Derivative financial instruments2	$	13,339	$	—	$	13,339	$	—	Derivative financial instruments2	$	8,022	$	—	$	8,022	$	—
1See “Note D – Securities” for further detail of fair value of individual investment categories.
1See “Note 3 – Securities” for further detail of fair value of individual investment categories.										1See “Note 3 – Securities” for further detail of fair value of individual investment categories.
2Recurring fair value basis determined using observable market data.	2Recurring fair value basis determined using observable market data.									2Recurring fair value basis determined using observable market data.
3See “Note E – Loans.” Nonrecurring fair value adjustments to collateral-dependent loans reflect full or partial write-downs that are based on current appraised values of the collateral in accordance with ASC Topic 310.
3See “Note 4 – Loans.” Nonrecurring fair value adjustments to collateral-dependent loans reflect full or partial write-downs that are based on current appraised values of the collateral in accordance with ASC Topic 310.										3See “Note 4 – Loans.” Nonrecurring fair value adjustments to collateral-dependent loans reflect full or partial write-downs that are based on current appraised values of the collateral in accordance with ASC Topic 310.
4Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360.	4Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360.									4Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360.
5An investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities, reported at fair value in Other Assets. Recurring fair value basis is determined using market quotations.	5An investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities, reported at fair value in Other Assets. Recurring fair value basis is determined using market quotations.									5An investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities, reported at fair value in Other Assets. Recurring fair value basis is determined using market quotations.

Available-for-sale debt securities: Level 1 securities consist of U.S. Treasury securities. Other securities are reported at fair value utilizing Level 2 inputs. The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available.

The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. The fair value of collateralized loan obligations is determined from broker quotes. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using internal models.

Derivative financial instruments: The Company offers interest rate swaps to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank.

~~Table of Contents~~

These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while

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providing a contract for fixed interest payments for the customer. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2. Other derivatives consist of interest rate floors designated as cash flow hedges. The fair values of these instruments are based upon the estimated amount the Company would receive or pay to terminate the instruments, taking into account current interest rates and, when appropriate, the current creditworthiness of the counterparties. Interest rate floors designated as cash flow hedges are classified within Level 2.

Loans held for sale: Fair values are based upon estimated values to be received from independent third party purchasers. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Fair market value changes occur due to changes in interest rates, the borrower’s credit, the secondary loan market and the market for a borrower’s debt. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of the loans were 90 days or more past due or on nonaccrual as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

The aggregate fair value and contractual balance of loans held for sale as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 is as follows:


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	June 30, 2022		December 31, 2021
Aggregate fair value	Aggregate fair value	$	49,597	$	68,890	Aggregate fair value	$	14,205	$	31,791
Contractual balance	Contractual balance	48,172		66,415		Contractual balance	13,746		30,963
Excess	Excess	1,425		2,475		Excess	459		828

Loans: Loans ~~carried~~measured at fair value consist of collateral-dependent real estate loans. Fair value is based on recent real estate appraisals less estimated costs of sale. These evaluations may use either a single valuation approach or a combination of approaches, such as comparative sales, cost and/or income approach. A significant unobservable input in the income approach is the estimated capitalization rate for a given piece of collateral. At ~~September~~June 30, ~~2021~~2022 capitalization rates utilized to determine fair value of the underlying collateral averaged approximately ~~7.0%~~6.9%. Adjustments to comparable sales may be made by an appraiser to reflect local market conditions or other economic factors and may result in changes in the fair value of an asset over time. As such, the fair value of these loans is considered level 3 in the fair value hierarchy. Collateral-dependent loans measured at fair value totaled ~~$14.2~~$9.0 million with a specific reserve of ~~$4.3~~$3.7 million at ~~September~~June 30, ~~2021,~~2022, compared to ~~$16.5~~$13.1 million with a specific reserve of ~~$7.7~~$4.7 million at December 31, ~~2020.~~2021.

For loans classified as Level 3, changes included loan additions of $5.4 million offset by $2.6 million in paydowns and charge-offs and $0.7 million in loans that returned to accruing status for the nine months ended September 30, 2021.

Other real estate owned: When appraisals are used to determine fair value and the appraisals are based on a market approach, the fair value of other real estate owned (“OREO”) is classified as a Level 2 input. When the fair value of OREO is based on appraisals which require significant adjustments to market-based valuation inputs or apply an income approach based on unobservable cash flows, the fair value of OREO is classified as Level 3.

~~For OREO classified as Level 3 at September 30, 2021, changes during the nine months ended included additions of $2.1 million offset by sales and write--downs of $1.6 million.~~

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and/or quarterly valuation process. During the six months ended June 30, 2022, an updated appraisal was obtained on a former branch property, and the value was transferred from Level 3 to Level 2. There were no ~~such~~ transfers during the ~~nine~~six months ended ~~September~~June 30, ~~2021 and 2020.~~2021.

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The carrying amount and fair value of the Company’s other financial instruments that were not disclosed previously in the balance sheet and for which carrying amount is not fair value as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 is as follows:


(In thousands)	(In thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(In thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2021
June 30, 2022										June 30, 2022
Financial Assets	Financial Assets									Financial Assets
Debt securities held-to-maturity1	Debt securities held-to-maturity1	$	526,502	$	—	$	518,464	$	—	Debt securities held-to-maturity1	$	794,785	$	—	$	706,170	$	—
Time deposits with other banks	Time deposits with other banks	750		—		757		—		Time deposits with other banks	4,730		—		4,598		—
Loans, net	Loans, net	5,808,116		—		—		5,810,038		Loans, net	6,445,479		—		—		6,511,612
Financial Liabilities	Financial Liabilities									Financial Liabilities
Deposit liabilities	Deposit liabilities	8,334,172		—		—		8,336,134		Deposit liabilities	9,188,953		—		—		9,182,221

Subordinated debt	Subordinated debt	71,576		—		58,399		—		Subordinated debt	71,786		—		69,484		—

December 31, 2020
December 31, 2021										December 31, 2021
Financial Assets	Financial Assets									Financial Assets
Debt securities held-to-maturity1	Debt securities held-to-maturity1	$	184,484	$	—	$	192,179	$	—	Debt securities held-to-maturity1	$	638,640	$	—	$	627,398	$	—
Time deposits with other banks		750		—		762		—

Loans, net	Loans, net	5,633,810		—		—		5,686,019		Loans, net	5,833,271		—		—		5,907,447
Financial Liabilities	Financial Liabilities									Financial Liabilities
Deposit liabilities	Deposit liabilities	6,932,561		—		—		6,936,097		Deposit liabilities	8,067,589		—		—		8,067,995

Subordinated debt	Subordinated debt	71,365		—		58,227		—		Subordinated debt	71,646		—		69,348		—
1See “Note D – Securities” for further detail of individual investment categories.
1See “Note 3 – Securities” for further detail of individual investment categories.										1See “Note 3 – Securities” for further detail of individual investment categories.

The short maturity of Seacoast’s assets and liabilities results in having a significant number of financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following balance sheet captions: cash and due from banks, interest bearing deposits with other banks, FHLB borrowings and securities sold under agreements to repurchase, maturing within 30 days.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

Held-to-maturity debt securities: These debt securities are reported at fair value utilizing level 2 inputs. The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available.

The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using internal models.

Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial or mortgage. Each loan category is further segmented into fixed and adjustable-rate interest terms as well as performing and nonperforming categories. The fair value of loans is calculated by discounting scheduled cash flows through the estimated life including prepayment considerations, using estimated market discount rates that reflect the risks inherent in the loan. The fair value approach considers market-driven variables including credit related factors and reflects an “exit price” as defined in ASC Topic 820.

Deposit liabilities: The fair value of demand deposits, savings accounts and money market deposits is the amount payable at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for funding of similar remaining maturities.

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Note 11 – Business Combinations

Acquisition of Business Bank of Florida, Corp.

On January 3, 2022, the Company completed its acquisition of Business Bank of Florida, Corp., (“BBFC”). Simultaneously, upon completion of the merger of BBFC and the Company, BBFC’s wholly owned subsidiary bank, Florida Business Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Florida Business Bank operated 1 branch in Melbourne, Florida.

As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.

The Company acquired 100% of the outstanding common stock of BBFC. Under the terms of the definitive agreement, each share of BBFC common stock was converted into the right to receive 0.7997 of a share of Seacoast common stock.


(In thousands, except per share data)	January 3, 2022
Number of BBFC common shares outstanding	1,112

Per share exchange ratio	0.7997
Number of shares of common stock issued	889
Multiplied by common stock price per share on January 3, 2022	$	35.39
Value of common stock issued	31,480

Fair value of options converted	497
Total purchase price	$	31,977

The acquisition of BBFC was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill of $8.0 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes known.

As part of the BBFC acquisition, 52,432 options were granted to replace outstanding BBFC options. These options had a weighted average exercise price of $26.63 and were fully vested upon acquisition. In accordance with ASC Topic 805, Business Combinations, the value of the replacement awards associated with pre-combination service, $0.5 million, was considered purchase consideration.


(In thousands)	Initially Measured January 3, 2022
Assets:
Cash	$	38,332
Investment securities	26,011
Loans	121,774
Bank premises and equipment	2,102
Core deposit intangibles	2,621
Goodwill	7,962
Total assets	$	198,802
Liabilities:
Deposits	166,326
Other liabilities	499
Total liabilities	$	166,825

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The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.


	January 3, 2022
(In thousands)	Book Balance		Fair Value
Loans:
Construction and land development	$	8,677	$	8,414
Commercial real estate - owner-occupied	45,403		44,564
Commercial real estate - non owner-occupied	53,065		52,034
Residential real estate	5,377		5,421
Commercial and financial	9,376		9,321
Consumer	59		61
PPP loans	1,959		1,959
Total acquired loans	$	123,916	$	121,774

~~Note M – Business Combinations~~The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:

~~Proposed~~


(In thousands)	January 3, 2022
Book balance of loans at acquisition	$	714
Allowance for credit losses at acquisition	(15)
Non-credit related discount	(48)
Total PCD loans acquired	$	651

The acquisition of BBFC resulted in the addition of $1.8 million in allowance for credit losses, including the $15 thousand identified in the table above for PCD loans, and $1.8 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition.

The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.

Acquisition of Sabal Palm Bancorp, Inc.

On ~~August 23, 2021,~~January 3, 2022, the Company ~~announced that it had entered into an agreement and plan~~completed its acquisition of ~~merger with~~ Sabal Palm Bancorp, Inc. (“Sabal Palm”) ~~and its wholly-owned subsidiary,~~. Simultaneously, upon completion of the merger of Sabal Palm ~~Bank.~~and the Company, Sabal Palm’s wholly owned subsidiary bank, Sabal Palm ~~operates~~Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Sabal Palm Bank operated 3 branches ~~across~~in the Sarasota ~~FL market~~area.

As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.

The Company acquired 100% of the outstanding common stock of Sabal Palm. Under the terms of the definitive agreement, each share of Sabal Palm common stock was converted into the right to receive 0.2203 of a share of Seacoast common stock.


(In thousands, except per share data)	January 3, 2022
Number of Sabal Palm common shares outstanding	7,536

Per share exchange ratio	0.2203
Number of shares of common stock issued	1,660
Multiplied by common stock price per share on January 3, 2022	$	35.39
Value of common stock issued	58,762

Fair value of options converted	3,336
Total purchase price	$	62,098

The acquisition of Sabal Palm was accounted for under the acquisition method in accordance with ~~$255~~ASC Topic 805, Business Combinations. The Company recognized goodwill of $26.5 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a

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complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes known.

As part of the Sabal Palm acquisition, 188,253 options were granted to replace outstanding Sabal Palm options. These options had a weighted average exercise price of $17.84 and were fully vested upon acquisition. In accordance with ASC Topic 805, Business Combinations, the value of the replacement awards associated with pre-combination service, $3.3 million, was considered purchase consideration.


(In thousands)	Initially Measured January 3, 2022
Assets:
Cash	$	170,609
Time deposits with other banks	6,473
Loans	246,152
Bank premises and equipment	1,745
Core deposit intangibles	5,587
Goodwill	26,489
Other assets	5,189
Total assets	$	462,244
Liabilities:
Deposits	395,952
Other liabilities	4,194
Total liabilities	$	400,146

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The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.


	January 3, 2022
(In thousands)	Book Balance		Fair Value
Loans:
Construction and land development	$	9,256	$	9,009
Commercial real estate - owner-occupied	57,690		56,591
Commercial real estate - non owner-occupied	89,153		87,280
Residential real estate	71,469		72,227
Commercial and financial	17,797		17,501
Consumer	233		232
PPP loans	3,312		3,312
Total acquired loans	$	248,910	$	246,152

The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:


(In thousands)	January 3, 2022
Book balance of loans at acquisition	$	3,703
Allowance for credit losses at acquisition	(37)
Non-credit related discount	(663)
Total PCD loans acquired	$	3,003

The acquisition of Sabal Palm resulted in the addition of $3.4 million in allowance for credit losses, including the $37 thousand identified in the table above for PCD loans, and ~~$389~~$3.4 million infor non-PCD loans recorded through the provision for credit losses at the date of acquisition.

The Company believes the deposits ~~as of September 30, 2021. The acquisition is expected to close~~assumed in the ~~first quarter~~acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of ~~2022, pending receipt~~deposit, deposit retention, interest rates and age of ~~regulatory and shareholder approvals.~~deposit relationships.

~~Proposed Acquisition of Business Bank of Florida, Inc.~~

On August 23, 2021, the Company announced that it had entered into an agreement and plan of merger with Business Bank of Florida, Corp (“BBFC”) and its wholly-owned subsidiary, Florida Business Bank. BBFC operates 1 branch in Melbourne, FL with $139 million in loans and $169 million in deposits as of September 30, 2021. The acquisition is expected to close in the first quarter of 2022 pending receipt of regulatory and shareholder approvals.

Acquisition of Legacy Bank of Florida

On August 6, 2021, the Company completed its acquisition of Legacy Bank of Florida (“Legacy Bank”). Prior to the acquisition, Legacy Bank operated 5 branches in Broward and Palm Beach counties.

As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.

The Company acquired 100% of the outstanding common stock of Legacy Bank. Under the terms of the definitive agreement, each share of Legacy Bank common stock was converted into the right to receive 0.1703 of a share of Seacoast common stock.


(In thousands, except per share data)	August 6, 2021
Number of Legacy Bank common shares outstanding	15,778

Per share exchange ratio	0.1703
Number of shares of common stock issued	2,687
Multiplied by common stock price per share on August 6, 2021	$	32.19
Value of common stock issued	86,487
Cash paid for fractional shares	7
Fair value of options converted	4,736
Total purchase price	$	91,230

The acquisition of Legacy Bank was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill of $31.0 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a

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~~Table~~As part of ~~Contents~~the Legacy Bank acquisition, 356,497 options were granted to replace outstanding Legacy Bank options. These options had a weighted average exercise price of $16.70 and were fully vested upon acquisition. In accordance with ASC Topic 805,

Business Combinations

, the value of the replacement awards associated with pre-combination service, $4.7 million, was considered purchase consideration, and the value of the replacement awards associated with post-combination service, $0.9 million, was recognized as compensation expense in 2021.


(In thousands)	Initially Measured August 6, 2021
Assets:
Cash	$	98,107
Investment securities	992
Loans	477,215
Bank premises and equipment	2,577
Core deposit intangibles	3,454
Goodwill	30,978
Other assets	15,532
Total assets	$	628,855
Liabilities:
Deposits	494,921
Other liabilities	42,705
Total liabilities	$	537,626

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The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.


	August 6, 2021
(In thousands)	Book Balance		Fair Value
Loans:
Construction and land development	$	37,558	$	36,651
Commercial real estate - owner-occupied	35,765		35,363
Commercial real estate - non owner-occupied	241,322		237,091
Residential real estate	71,118		70,541
Commercial and financial	61,274		58,324
Consumer	647		647
PPP loans	38,598		38,598
Total acquired loans	$	486,282	$	477,215

The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:


(In thousands)	August 6, 2021
Book balance of loans at acquisition	$	66,371
Allowance for credit losses at acquisition	(3,046)
Non-credit related discount	(736)
Total PCD loans acquired	$	62,589

The acquisition of Legacy Bank resulted in the addition of $11.2 million in allowance for credit losses, including the $3.0 million identified in the table above for PCD loans, and $8.2 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition.

~~Acquisition of Fourth Street Banking Company~~

On August 21, 2020, the Company completed its acquisition of Fourth Street Banking Company (“Fourth Street”). Simultaneously, upon completion of the merger of Fourth Street and the Company, Fourth Street's wholly owned subsidiary

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~~bank, Freedom Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Freedom Bank operated 2 branches in St. Petersburg, Florida.~~

As a result of this acquisition, the Company expects to enhance its presence in St. Petersburg, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.

The Company acquired 100% of the outstanding common stock of Fourth Street. Under the terms of the definitive agreement, each share of Fourth Street common stock was converted into the right to receive 0.1275 share of Seacoast common stock.


~~(In thousands, except per share data)~~	~~August 21, 2020~~
~~Number of Fourth Street common shares outstanding~~	~~11,220~~
~~Shares issued upon conversion of convertible debt~~	~~5,405~~
~~Per share exchange ratio~~	~~0.1275~~
~~Number of shares of common stock issued~~	~~2,120~~
~~Multiplied by common stock price per share on August 21, 2020~~	$	~~19.40~~
~~Value of common stock issued~~	~~41,121~~
~~Cash paid for Fourth Street vested stock options~~	~~596~~
~~Total purchase price~~	$	~~41,717~~

~~The acquisition of Fourth Street was accounted for under the acquisition method in accordance with ASC Topic 805,~~ ~~Business Combinations~~. The Company recognized goodwill of $9.0 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.

~~(In thousands)~~

~~August 21, 2020~~

~~Assets:~~

~~Cash~~

~~38,082~~

~~Investment securities~~

~~3,498~~

~~Loans~~

~~303,434~~

~~Bank premises and equipment~~

~~9,480~~

~~Core deposit intangibles~~

~~1,310~~

~~Goodwill~~

~~9,030~~

~~Other assets~~

~~7,088~~

~~Total assets~~

~~371,922~~

~~Liabilities:~~

~~Deposits~~

~~329,662~~

~~Other liabilities~~

~~543~~

~~Total liabilities~~

~~330,205~~

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~~The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.~~

August 21, 2020
(In thousands) Book Balance Fair Value
Loans:
Construction and land development $ 9,197 $ 8,851
Commercial real estate - owner-occupied 77,936 75,215
Commercial real estate - non owner-occupied 76,014 71,171
Residential real estate 23,548 23,227
Commercial and financial 72,745 68,096
Consumer 2,748 2,694
PPP loans 55,005 54,180
Total acquired loans $ 317,193 $ 303,434

~~The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:~~


~~(In thousands)~~	~~August 21, 2020~~
~~Book balance of loans at acquisition~~	$	~~59,455~~
~~Allowance for credit losses at acquisition~~	~~(5,763)~~
~~Non-credit related discount~~	~~(4,319)~~
~~Total PCD loans acquired~~	$	~~49,373~~

The acquisition of Fourth Street resulted in the addition of $10.4 million in allowance for credit losses, including the $5.8 million identified in the table above for PCD loans, and $4.6 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition.

~~Acquisition of First Bank of the Palm Beaches~~

On March 13, 2020, the Company completed its acquisition of First Bank of the Palm Beaches (“FBPB”). FBPB was merged with and into Seacoast Bank. FBPB operated 2 branches in the Palm Beach market.

As a result of this acquisition, the Company expects to enhance its presence in the Palm Beach market, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.

The Company acquired 100% of the outstanding common stock of FBPB. Under the terms of the definitive agreement, each share of FBPB common stock was converted into the right to receive 0.2000 share of Seacoast common stock.


~~(In thousands, except per share data)~~	~~March 13, 2020~~
~~Number of FBPB common shares outstanding~~	~~5,213~~
~~Per share exchange ratio~~	~~0.2000~~
~~Number of shares of common stock issued~~	~~1,043~~
~~Multiplied by common stock price per share on March 13, 2020~~	$	~~20.17~~
~~Value of common stock issued~~	~~21,031~~
~~Cash paid for FBPB vested stock options~~	~~866~~
~~Total purchase price~~	$	~~21,897~~

~~The acquisition of FBPB was accounted for under the acquisition method in accordance with ASC Topic 805,~~ ~~Business Combinations~~. The Company recognized goodwill of $6.9 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a

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complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The adjustments reflected in the table below are the result of information obtained subsequent to the initial measurement.

(In thousands) Initially Measured
March 13, 2020 Measurement Period Adjustments As Adjusted March 13, 2020
Assets:
Cash $ 34,749 $ — $ 34,749
Investment securities 447 — 447
Loans 146,839 (62) 146,777
Bank premises and equipment 6,086 — 6,086
Core deposit intangibles 819 — 819
Goodwill 6,799 62 6,861
Other assets 1,285 20 1,305
Total assets $ 197,024 $ 20 $ 197,044
Liabilities:
Deposits $ 173,741 $ — $ 173,741
Other liabilities 1,386 20 1,406
Total liabilities $ 175,127 $ 20 $ 175,147

~~The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.~~

March 13, 2020
(In thousands) Book Balance Fair Value
Loans:
Construction and land development $ 9,493 $ 9,012
Commercial real estate - owner-occupied 46,221 45,171
Commercial real estate - non owner-occupied 36,268 35,079
Residential real estate 47,569 47,043
Commercial and financial 9,659 9,388
Consumer 1,132 1,084
Total acquired loans $ 150,342 $ 146,777

~~The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:~~


~~(In thousands)~~	~~March 13, 2020~~
~~Book balance of loans at acquisition~~	$	~~43,682~~
~~Allowance for credit losses at acquisition~~	~~(516)~~
~~Non-credit related discount~~	~~(128)~~
~~Total PCD loans acquired~~	$	~~43,038~~

The acquisition of FBPB resulted in the addition of $2.3 million in allowance for credit losses, including the $0.5 million identified in the table above for PCD loans, and $1.8 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition.

Pro-Forma Information

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Pro-forma data ~~for the three and nine months ended September 30, 2021~~ presents information as if the acquisition of Legacy Bank occurred at the beginning of 2020, and the acquisitions of BBFC and Sabal Palm occurred at the beginning of 2021, as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share amounts)	(In thousands, except per share amounts)	2021		2020		2021		2020		(In thousands, except per share amounts)	2022		2021		2022		2021
Net interest income	Net interest income	$	73,309	$	68,164	$	216,682	$	207,388	Net interest income	$	81,647	$	78,315	$	158,169	$	157,149
Net income	Net income	43,401		24,098		104,521		39,930		Net income	32,755		41,913		58,025		73,205
EPS - basic	EPS - basic	$	0.75	$	0.42	$	1.81	$	0.72	EPS - basic	$	0.53	$	0.69	$	0.95	$	1.21
EPS - diluted	EPS - diluted	0.74		0.44		1.79		0.71		EPS - diluted	0.53		0.69		0.94		1.24

Proposed Acquisition of Apollo Bancshares, Inc.

On March 29, 2022, the Company announced its proposed acquisition of Apollo Bancshares, Inc. (“Apollo”). The transaction, which is expected to close early in the fourth quarter of 2022, will expand the Company’s presence in Miami-Dade County, part of the Miami-Fort Lauderdale-Pompano Beach MSA, Florida’s largest MSA and the 8th largest in the nation. Apollo operates 5 branches across Miami-Dade County with deposits of approximately $930.3 million and loans of $736.0 million as of June 30, 2022. Regulatory approvals for the transaction have been received. Completion of the merger remains subject to certain conditions, including the approval of Apollo and Apollo Bank shareholders and the satisfaction of other customary closing conditions.

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Proposed Acquisition of Drummond Banking Company.

On May 4, 2022, the Company announced its proposed acquisition of Drummond Banking Company (“Drummond”). The transaction, which is expected to close early in the fourth quarter of 2022, will expand the Company’s presence in new Florida markets including Ocala and Gainesville. Drummond operates 18 branches across North Florida with deposits of approximately $919.0 million and loans of $570.9 million as of June 30, 2022. Completion of the Drummond merger is subject to certain conditions, including the receipt of regulatory approvals, the approval of Drummond shareholders and the satisfaction of other customary closing conditions.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this discussion and analysis is to aid in understanding significant changes in the financial condition of Seacoast Banking Corporation of Florida and its subsidiaries ~~("Seacoast"~~(“Seacoast” or the “Company”) and their results of operations. Nearly all of the Company’s operations are contained in its banking subsidiary, Seacoast National Bank (“Seacoast Bank” or the “Bank”). Such discussion and analysis should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related notes included in this report.

The emphasis of this discussion will be on the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of ~~September~~June 30, ~~2021~~2022 compared to December 31, ~~2020.~~2021.

This discussion and analysis contains statements that may be considered “forward-looking statements” as defined in, and subject to the protections of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. See the following section for additional information regarding forward-looking statements.

For purposes of the following discussion, the words ~~“Seacoast"~~“Seacoast” or the ~~"Company”~~“Company” refer to the combined entities of Seacoast Banking Corporation of Florida and its direct and indirect wholly owned subsidiaries.

Special Cautionary Notice Regarding Forward-Looking Statements

Certain statements made or incorporated by reference herein which are not statements of historical fact, including those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are “forward-looking statements” within the meaning, and protections, of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, and intentions about future performance, and involve known and unknown risks, uncertainties and other factors, ~~any of which may be impacted by the COVID-19 pandemic and related effects on the U.S. economy,~~ which may be beyond the Company's control, and which may cause the actual results, performance or achievements of Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) or its wholly-owned banking subsidiary, Seacoast National Bank (“Seacoast ~~Bank)~~Bank”), to be materially different from those set forth in the forward-looking statements.

All statements other than statements of historical fact could be forward-looking statements. You can identify these forward-looking statements through the use of words such as ~~"may," "will," "anticipate," "assume," "should," "support," "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "further," "plan," "point~~“may,” “will,” “anticipate,” “assume,” “should,” “support,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “further,” “plan,” “point to,~~" "project," "could," "intend," "target"~~” “project,” “could,” “intend,” “target” or other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:

•the effects of future economic and market conditions, including seasonality;

•the ongoing adverse ~~impact~~effects of COVID-19 and any variants thereof (economic and otherwise) on the Company and its customers, counterparties, employees, and third-party service providers, and the adverse impacts to our business, financial position, results of operations, and ~~prospects, including the ongoing potential to adversely affect Seacoast’s revenues and values of its assets and liabilities, lead to a tightening of credit, and increase stock price volatility;~~prospects;

•government or regulatory responses to the COVID-19 pandemic, including the risk of inflation and interest rate increases resulting from monetary and fiscal stimulus response, which may have unanticipated adverse effects on our customers, and our financial condition and results of operations;

•governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve ("(“Federal ~~Reserve"~~Reserve”), as well as legislative, tax and regulatory ~~changes;~~changes, including those that impact the money supply and inflation;

•changes in accounting policies, rules and practices, including the impact of the adoption of the current expected credit losses (“CECL”) methodology;

•~~our participation in the Paycheck Protection Program (“PPP”);~~

•the risks of changes in interest rates on the level and composition of deposits, loan demand, liquidity and the values of loan collateral, securities, and interest rate sensitive assets and liabilities;

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•interest rate risks, sensitivities and the shape of the yield curve; uncertainty related to the impact of LIBOR calculations on securities, loans and debt;

•governmental actions to stimulate the economy and provide support for small businesses have resulted in material increases to the Company’s liquidity position, adversely affecting the net interest margin. The durationTable of ~~this liquidity remaining on the balance sheet is uncertain;~~Contents

•changes in ~~borrowing,~~ borrower credit risks and payment behaviors, customer income, creditworthiness and confidence, spending ~~or saving by businesses or households including as a result of the financial impact of COVID-19;~~and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity;

•changes in retail distribution strategies, customer preferences and ~~behavior;~~behavior (including as a result of economic factors);

•changes in the availability and cost of credit and capital in the financial markets;

•changes in the prices, values and sales volumes of residential and commercial real estate;

•the Company's ability to comply with any regulatory ~~requirements, including such requirements that may become applicable as the Company increases its total assets;~~requirements;

•the effects of problems encountered by other financial institutions that adversely affect Seacoast or the banking industry;

•Seacoast's concentration in commercial real estate loans and in real estate collateral in the state of Florida;

•inaccuracies or other failures from the use of models, including the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit conditions;

•the impact on the valuation of Seacoast's investments due to market volatility or counterparty payment risk;

•statutory and regulatory dividend restrictions;

•increases in regulatory capital requirements for banking organizations generally;

•the risks of mergers, acquisitions and divestitures, including Seacoast's ability to continue to identify acquisition targets and successfully acquire and integrate desirable financial ~~institutions;~~institutions and realize expected revenues and revenue synergies;

•changes in technology or products that may be more difficult, costly, or less effective than anticipated;

•the Company's ability to identify and address increased cybersecurity risks, including as a result of employees working remotely;

•inability of Seacoast's risk management framework to manage risks associated with the business;

•dependence on key suppliers or vendors to obtain equipment or services for the business on acceptable ~~terms;~~terms, including the impact of supply chain disruptions;

•reduction in or the termination of Seacoast's ability to use the online- or mobile-based ~~platform~~platforms that isare critical to the Company's business growth ~~strategy, as well as risks related to transitioning to new or different platforms and service providers;~~strategy;

•the effects of war or other conflicts including the impacts related to or resulting from Russia’s military action in Ukraine, acts of terrorism, natural disasters, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions;

•unexpected outcomes of, and the costs associated with, existing or new litigation involving the ~~Company, including as a result of the Company’s participation in the PPP;~~Company;

•Seacoast's ability to maintain adequate internal controls over financial reporting;

•potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement ~~actions;~~actions, including as a result of the Company’s participation in the PPP;

•the risks that deferred tax assets could be reduced if estimates of future taxable income from operations and tax planning strategies are less than currently estimated and sales of capital stock could trigger a reduction in the amount of net operating loss carryforwards that the Company may be able to utilize for income tax purposes;

•the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, non-bank financial technology providers, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in the Company's market areas and elsewhere,

~~Table of Contents~~

including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet;

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•the failure of assumptions underlying the establishment of reserves for possible credit losses;

•the risks relating to the recently completed merger including, without limitation: unexpected transaction costs, including the costs of integrating operations; the risks that the business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues being lower than expected;

•the risks relating to the proposed mergers including, without limitation: the timing to consummate the proposed mergers; the risk that a condition to closing of the proposed mergers may not be satisfied; the risk that the mergers may not be completed at all; the diversion of management time on issues related to the proposed mergers; unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following the mergers being lower than expected; the risk of deposit and customer attrition; any changes in deposit mix; unexpected operating and other costs, which may differ or change from expectation; the risk of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees; increased competitive pressures on solicitations of customers by competitors; as well as difficulties and risks inherent with entering new markets; and

•other factors and risks described under “Risk Factors” herein and in any of the Company's subsequent reports filed with the SEC and available on its website at www.sec.gov.

All written or oral forward-looking statements that are made or are attributable to Seacoast are expressly qualified in their entirety by this cautionary notice. The Company assumes no obligation to update, revise or correct any forward-looking statements that are made from time to time, either as a result of future developments, new information or otherwise, except as may be required by law.

Business Developments

~~Impact~~Proposed Acquisition of ~~COVID-19 Pandemic~~Apollo Bancshares, Inc.

On March 29, 2022, the Company announced its proposed acquisition of Apollo Bancshares, Inc. (“Apollo”). The COVID-19 pandemic and related restrictive measures taken by governments, businesses and individuals have caused unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve. As the restrictive measures eased during 2020 and over the course of 2021, the U.S. economy has begun to recover and with the availability and distribution of multiple COVID-19 vaccines, we anticipate continued improvements in commercial and consumer activity and the U.S. economy. While the overall outlook has improved based on the availability of the vaccine to all adults and older children, there continues to be the risk of increases in infection rates in the country, as well as within the State of Florida, attributed to variants, including the Delta variant. Therefore, the risk of further resurgence and possible reimplementation of business restrictions remains.

~~While indications of recovery exist, we recognize that our business and consumer customers are experiencing varying degrees of financial distress,~~transaction, which is expected to ~~continue through~~close early in the ~~remainder~~fourth quarter of ~~2021, especially if new COVID-19 variant infections increase (or are not adequately contained) and new economic restrictions are mandated. Changing consumer behavior~~2022, will expand the Company’s presence in Miami-Dade County, part of the Miami-Fort Lauderdale-Pompano Beach MSA, Florida’s largest MSA and the ~~impact~~8th largest in the nation. Apollo operates five branches across Miami-Dade County with deposits of ~~government support programs~~approximately $930.3 million and loans of $736.0 million as of June 30, 2022. Regulatory approvals for the transaction have been received. Completion of the merger remains subject to certain conditions, including the ~~PPP have contributed to higher customer deposit balances, which may adversely affect our net interest income~~approval of Apollo and ~~net interest margin. Commercial activity has improved, but has not returned in all industries to~~Apollo Bank shareholders and the ~~levels existing prior to the outbreak~~satisfaction of the pandemic, which may result in our customers’ inability to meet their loan obligations to us. In addition, the economic pressures and uncertainties related to the COVID-19 pandemic have resulted in changes in consumer spending behaviors, which may negatively impact the demand for loans and other services we offer. Our borrowers include customers in industries such as hotel/lodging, restaurants and retail and commercial real estate, all of which have been significantly impacted by the COVID-19 pandemic, or remain at heightened risk of future negative economic impact, which may be caused or exacerbated by increased COVID-19 variant infections, vaccine hesitancy, or new economic restrictions in our footprint. We recognize that these industries may take longer to recover as consumers may be hesitant to return to full social interaction or may change their spending habits on a more permanent basis as a result of the pandemic. We continue to monitor these customers closely.

~~Table of Contents~~customary closing conditions.

Proposed Acquisition of Drummond Banking Company

~~We have taken deliberate actions~~

On May 4, 2022, the Company announced its proposed acquisition of Drummond Banking Company (“Drummond”). The transaction, which is expected to ~~maintain our balance sheet strength to serve our clients~~close early in the fourth quarter of 2022, will expand the Company’s presence in new Florida markets including Ocala and ~~communities, including maintaining higher levels~~Gainesville. Drummond operates 18 branches across North Florida with deposits of ~~liquidity~~approximately $919.0 million and ~~managing our assets and liabilities in order to maintain a strong capital position and support business growth and acquisition opportunities; however, future economic conditions are~~loans of $570.9 million as of June 30, 2022. Completion of the Drummond merger is subject to ~~significant uncertainty. Uncertainties associated with~~certain conditions, including the ~~pandemic include~~receipt of regulatory approvals, the ~~duration~~approval of ~~the COVID-19 outbreak and any related variant infections, and effectiveness of COVID-19 vaccines, the impact to our customers, employees and vendors~~Drummond shareholders and the ~~impact~~satisfaction of other customary closing conditions.

2022 Acquisitions to the economy as a whole. We continuously seek to monitor and anticipate developments, but cannot predict all of the various adverse effects COVID-19 will have on our business, financial condition, liquidity or results of operations.Date

~~Acquisition of Legacy Bank of Florida~~

~~In August 2021,~~On January 3, 2022, the Company completed the ~~acquisition~~acquisitions of Legacy Bank of Florida (“Legacy Bank”), which added $477 million in loans and $495 million in deposits. The acquisition strengthens the Company’s position in South Florida, one of the strongest and fastest growing markets in the country, and complements prior acquisitions in the market. Consolidation activities and related expenses are substantially complete.

~~Announcement of Sabal Palm Bancorp, Inc. Acquisition~~

~~On August 23, 2021, the Company announced that it had entered into an agreement and plan of merger with~~ Sabal Palm Bancorp, Inc. (“Sabal Palm”) ~~and its wholly-owned subsidiary, Sabal Palm Bank. Sabal Palm operates three branches across the~~in Sarasota, ~~FL market with $255 million in loans~~ and $389 million in deposits as of September 30, 2021. The acquisition is expected to close in the first quarter of 2022, pending receipt of regulatory and shareholder approvals. The acquisition will provide entry into Sarasota county, which is located in the North Port-Sarasota-Bradenton MSA.

~~Announcement of Business Bank of Florida, Corp. Acquisition~~

~~On August 23, 2021, the Company announced that it had entered into an agreement and plan of merger with~~ Business Bank of Florida, Corp. (“BBFC”) and its wholly-owned subsidiary, Florida Business Bank. BBFC operates one branch in Melbourne, FL with $139 million in loans and $169 million in deposits as of September 30, 2021. The acquisition is expected to close in the first quarter of 2022 pending receipt of regulatory and shareholder approvals. The acquisition will deepen the Company’s presence in Brevard County, which ~~is located~~added a combined $367.9 million in loans, $562.3 million in deposits, and for which the Company recorded a $5.1 million provision for credit losses at acquisition.

Organic Growth and Expansion

Seacoast’s balanced growth strategy includes organic growth initiatives across the state. During the first half of 2022, Seacoast expanded its footprint into Naples/Southwest Florida and Jacksonville/Northeast Florida with key additions to its commercial banking leadership and teams. Over the past several quarters, Seacoast has added experienced bankers in the ~~Palm Bay-Melbourne-Titusville MSA.~~state’s most dynamic and fastest growing markets and expects to continue to invest in well-established seasoned bankers over the remainder of 2022.

Results of Operations

For the ~~third~~second quarter of ~~2021,~~2022, the Company reported net income of ~~$22.9~~$32.8 million, or ~~$0.40~~$0.53 per average diluted share, compared to $20.6 million, or $0.33 per average diluted share, for the first quarter of 2022 and $31.4 million, or $0.56 per average diluted share, for the second quarter of ~~2021 and $22.6 million, or $0.42, for the third quarter of 2020.~~2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, net income totaled ~~$88.1~~$53.3 million, or ~~$1.56~~$0.86 per average diluted share, ~~an increase~~a decrease of ~~$39.7~~$11.8 million, or ~~82%~~18%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Adjusted net income1 for the ~~third~~second quarter of ~~2021~~2022 totaled ~~$29.4~~$36.3 million, or ~~$0.51~~$0.59 per average diluted share, compared to $27.1 million, or $0.44 per average diluted share, for the first quarter of 2022 and $33.3 million, or $0.59 per average diluted share, for the second quarter of ~~2021 and $27.3 million, or $0.50, for the third quarter of 2020.~~2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, adjusted net income1totaled ~~$98.1~~$63.4 million, or ~~$1.74~~$1.03 per average diluted share, compared to ~~$58.3~~$68.7 million, or ~~$1.09~~$1.23 per average diluted share for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

Third Second Third Nine Months Ended
Quarter Quarter Quarter September 30,
2021 2021 2020 2021 2020
Return on average tangible assets 1.00 % 1.48 % 1.20 % 1.37 % 0.93 %
Return on average tangible shareholders' equity 9.56 13.88 11.35 12.89 8.71
Efficiency ratio 59.55 54.93 61.65 55.99 57.15
Adjusted return on average tangible assets1
1.23 % 1.52 % 1.38 % 1.48 % 1.04 %
Adjusted return on average tangible shareholders' equity1
11.72 14.27 13.06 13.91 9.80
Adjusted efficiency ratio1
51.50 53.49 54.82 52.29 52.64
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

~~Net Interest Income and Margin~~

1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

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	Second		First		Second		Six Months Ended
	Quarter		Quarter		Quarter		June 30,
	2022		2022		2021		2022		2021
Return on average tangible assets	1.29	%	0.85	%	1.48	%	1.07	%	1.58	%
Return on average tangible shareholders' equity	13.01		8.02		13.88		10.46		14.73
Efficiency ratio	56.22		62.33		54.93		59.17		54.05

Adjusted return on average tangible assets1	1.38	%	1.06	%	1.52	%	1.23	%	1.63	%
Adjusted return on average tangible shareholders' equity1	13.97		10.01		14.27		11.95		15.12
Adjusted efficiency ratio1	53.15		54.86		53.49		53.97		52.72
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

Net Interest Income and Margin

Net interest income for the ~~third~~second quarter of ~~2021~~2022 totaled ~~$71.3~~$81.6 million, increasing ~~$5.5~~$5.1 million, or 8%7%, compared to the first quarter of 2022, and increasing $15.8 million, or 24%, compared to the second quarter of ~~2021, and increasing $7.8~~2021. For the six months ended June 30, 2022, net interest income totaled $158.2 million, an increase of $25.8 million, or ~~12%~~19%, compared to the ~~third quarter of 2020. For the nine~~six months ended ~~September~~June 30, ~~2021, net interest income totaled $203.7 million, an increase of $9.8 million, or 5%, compared to the nine months ended September 30, 2020.~~2021. The ~~increase quarter over quarter and compared to the prior year quarter reflects~~increases reflect higher ~~loan and securities~~ balances and higher ~~recognition of~~yields on securities and loans, partially offset by declines in interest and fees on Paycheck Protection Program (“PPP”) loans attributed to higher loan forgiveness. Furthermore, lower interest expense reflects the continued low rate environment and the Company’s efforts to proactively manage rates paid on interest bearing deposits.loans. Net interest margin (on a fully tax equivalent basis)1 was ~~3.22%~~3.38% in the ~~third~~second quarter of ~~2021,~~2022, compared to 3.25% in the first quarter of 2022, and 3.23% in the second quarter of ~~2021 and 3.40% in~~2021. The increase during the ~~third~~second quarter of ~~2020. The decrease during the third quarter of 2021~~2022 reflects ~~decreases~~increases in yields on both securities and non-PPP ~~loans, partially offset~~loans. Compared to the first quarter of 2022, securities yields increased by ~~the impact of higher fees due~~30 basis points to ~~higher~~1.98% and non-PPP loan ~~forgiveness on PPP loans and lower rates on interest bearing deposits. Compared~~yields increased by three basis points to 4.27% during the second quarter of ~~2021, securities yields declined by four~~2022. The effect on net interest margin of accretion of purchase discounts on acquired loans were increases of 12 basis points ~~to 1.59% and non-PPP loan yields declined by seven~~in the second quarter of 2022, 15 basis points ~~to 4.29% during~~in the ~~third~~first quarter of 2022, and 14 basis points in the second quarter of 2021. ~~Offsetting~~The effect of interest and ~~favorable was the increase in yields~~fees on PPP loans ~~from 4.07% to 8.33%, which includes the impact~~was an increase of ~~higher fee accretion~~two basis points in the ~~current~~second quarter ~~and a decrease~~of 2022, an increase of five basis points in the first quarter of 2022, and an increase of six basis points in the second quarter of 2021. The cost of deposits ~~from~~was six basis points in each of the first and second quarters of 2022, and eight basis points in the second quarter of 2021. The Company’s asset sensitive position, with significant core deposit funding and ample liquidity, will provide benefits in a higher rate environment. Higher interest rates through the remainder of 2022 are expected to contribute to increased net interest margin and to benefit net interest income as the Company’s assets are expected to reprice faster and to a greater degree than its liabilities.

For the six months ended June 30, 2022, net interest margin (on a fully tax equivalent basis)1 was 3.32%, compared to 3.37% for the six months ended June 30, 2021. The yield on securities increased from 1.64% for the six months ended June 30, 2021 to ~~seven~~1.83% for the six months ended June 30, 2022, reflecting the impact of rising interest rates as the Company makes new purchases in higher yielding securities. The yield on non-PPP loans declined from 4.36% for the six months ended June 30, 2021 to 4.25% for the six months ended June 30, 2022, reflecting the impact of elevated levels of prepayments of higher rate loans since mid-2020, and growth in the portfolio during recent periods of low rates. Offsetting and favorable was the decline in the cost of deposits from 10 basis points infor the ~~third quarter of 2021.~~six months ended June 30, 2021 to six basis points for the six months ended June 30, 2022. The effect on net interest margin of purchase discounts on acquired loans was an increase of 1514 basis points infor the ~~third quarter of 2021~~six months ended June 30, 2022 compared to an increase of 1415 basis points infor the ~~second quarter of 2021 and an increase of 17 basis points in the third quarter of 2020.~~six months ended June 30, 2021. The effect of interest and fees on PPP loans was an increase of ~~18 basis points in the third quarter of 2021, an increase of six basis points in the second quarter of 2021 and an increase of seven basis points in the third quarter of 2020.~~

~~For the nine months ended September 30, 2021, net interest margin (on a fully tax equivalent basis)~~1 was 3.32%, compared to 3.67% for the nine months ended September 30, 2020. The yield on securities declined from 2.58% for the nine months ended September 30, 2020 to 1.62% for the nine months ended September 30, 2021, reflecting the impact of a lower interest rate environment including the payoff of higher yielding securities being replaced with lower yields on new purchases. The yield on non-PPP loans declined from 4.63% for the nine months ended September 30, 2020 to 4.34% for the nine months ended September 30, 2021, reflecting the impact of the lower interest rate environment. Offsetting and favorable was the increase in yield on PPP loans, which increased from 2.60% for the nine months ended September 30, 2020 to 5.16% for the nine months ended September 30, 2021 as well as the decline in the cost of deposits from 36three basis points for the ~~nine~~six months ended ~~September~~June 30, 2020 to 9 basis points for the nine months ended September 30, 2021. The effect on net interest margin of purchase discounts on acquired loans was an increase of 15 basis points for the nine months ended September 30, 20212022, compared to an increase of 20eight basis points for the ~~nine~~six months ended ~~September~~June 30, 2020. The effect of interest and fees on PPP loans was an increase of 12 basis points for the nine months ended September 30, 2021, compared to an increase of four basis points for the nine months ended September 30, 2020.2021.

The cost of deposits declined to seven basis points in the third quarter of 2021, compared to eight basis points in the second quarter of 2021 and 24 basis points in the third quarter of 2020. For the nine months ended September 30, 2021, the cost of deposits was nine basis points, a decrease of 27 basis points compared to the nine months ended September 30, 2020. Lower cost of deposits reflects lower market rates, and a favorable shift in product mix to include a higher proportion of noninterest bearing demand deposits to total deposits.

The following table details the trend for net interest income and margin results (on a tax equivalent basis)1, the yield on earning assets and the rate paid on interest bearing liabilities for the periods specified:

(In thousands, except ratios)
Net Interest
Income1
Net Interest
Margin1
Yield on
Earning Assets1
Rate on Interest
Bearing Liabilities
Third quarter 2021 $ 71,455 3.22 % 3.31 % 0.14 %
Second quarter 2021 65,933 3.23 % 3.33 % 0.16 %
Third quarter 2020 63,621 3.40 % 3.65 % 0.40 %
Nine months ended September 30, 2021 204,129 3.32 % 3.42 % 0.17 %
Nine months ended September 30, 2020 194,300 3.67 % 4.05 % 0.59 %
1On tax equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.

Total average loans increased $105.8 million, or 2%, for the third quarter of 2021 compared to the second quarter of 2021, and decreased $156.8 million, or 3%, from the third quarter of 2020. The increase compared to the prior quarter reflects loan growth including loans acquired from Legacy Bank, partially offset by a decrease in PPP loans attributed to loan forgiveness. The decrease compared to the prior year quarter reflects the impact of PPP loan forgiveness.

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(In thousands, except ratios)	Net Interest Income1		Net Interest Margin1		Yield on Earning Assets1		Rate on Interest Bearing Liabilities
Second quarter 2022	$	81,764	3.38	%	3.46	%	0.14	%
First quarter 2022	76,639		3.25	%	3.33	%	0.12	%
Second quarter 2021	65,933		3.23	%	3.33	%	0.16	%

Six months ended June 30, 2022	158,403		3.32	%	3.40	%	0.13	%
Six months ended June 30, 2021	132,674		3.37	%	3.49	%	0.19	%
1On tax equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.

Total average loans increased $141.9 million, or 2%, for the second quarter of 2022 compared to the first quarter of 2022, and increased $882.5 million, or 16%, from the second quarter of 2021. The increase compared to the prior quarter reflects organic loan growth while the increase compared to the prior year quarter includes loans acquired from BBFC, Sabal Palm and Legacy Bank.

Average loans as a percentage of average earning assets totaled ~~65%~~67% for the ~~third~~second quarter of ~~2021,~~2022, 66% for the first quarter of 2022 and 68% for the second quarter of ~~2021 and 79% for the third quarter of 2020.~~2021.

Loan production and late-stage pipelines (loans in underwriting and approval or approved and not yet closed) are detailed in the following table for the periods specified:


		Third		Second		Third		Nine Months Ended					Second		First		Second		Six Months Ended
		Quarter		Quarter		Quarter		September 30,					Quarter		Quarter		Quarter		June 30,
(In thousands)	(In thousands)	2021		2021		2020		2021		2020		(In thousands)	2022		2022		2021		2022		2021
Commercial pipeline at period end	Commercial pipeline at period end	$	368,907	$	322,014	$	256,191	$	368,907	$	256,191	Commercial pipeline at period end	$	476,693	$	619,547	$	322,014	$	476,693	$	322,014
Commercial loan originations	Commercial loan originations	331,618		193,028		88,245		728,899		378,432		Commercial loan originations	461,855		372,986		193,028		834,841		397,281

Residential pipeline - saleable at period end	Residential pipeline - saleable at period end	42,847		60,585		149,896		42,847		149,896		Residential pipeline - saleable at period end	14,700		25,745		60,585		14,700		60,585
Residential loans - sold	Residential loans - sold	95,136		120,099		162,468		353,572		347,792		Residential loans - sold	42,666		51,222		120,099		93,888		258,436

Residential pipeline - portfolio at period end	Residential pipeline - portfolio at period end	35,387		54,132		33,374		35,387		33,374		Residential pipeline - portfolio at period end	53,092		87,950		54,132		53,092		54,132
Residential loans - retained	Residential loans - retained	250,820		118,126		25,404		415,566		74,719		Residential loans - retained	102,996		175,457		118,126		278,453		164,746

Consumer pipeline at period end	Consumer pipeline at period end	30,980		31,748		17,094		30,980		17,094		Consumer pipeline at period end	75,532		61,613		31,748		75,532		31,748
Consumer originations	Consumer originations	66,400		63,702		62,293		176,847		171,765		Consumer originations	126,479		79,010		63,702		205,489		110,447

PPP originations	PPP originations	—		23,529		8,276		256,007		598,994		PPP originations	—		—		23,529		—		256,007

Commercial originations during the ~~third~~second quarter of ~~2021~~2022 were ~~$331.6~~$461.9 million, an increase of ~~$138.6~~$88.9 million, or ~~72%~~24%, compared to the first quarter of 2022, and an increase of $268.8 million, or 139%, compared to the second quarter of 2021. For the six months ended June 30, 2022, commercial originations were $834.8 million compared to $397.3 million for the six months ended June 30, 2021, ~~and~~ an increase of ~~$243.4~~$437.6 million, or ~~276%, compared to the third quarter of 2020. Recent investments in commercial banking talent contributed to the increase in production quarter-over-quarter.~~110%. Commercial originations ~~for~~remained strong and reflect the ~~third quarter~~addition of ~~2021 also includes a $17.1 million purchased loan pool.~~well-established commercial bankers and expansion into new markets across the state. The addition of experienced commercial bankers in recent periods is generating disciplined growth in full relationships, including credit facilities, deposit relationships, and wealth opportunities.

The commercial pipeline ~~increased $46.9~~decreased $142.9 million, or ~~15%~~23%, to ~~$368.9~~$476.7 million at ~~September~~June 30, ~~2021,~~2022, compared to a record $619.5 million at March 31, 2022, and increased $154.7 million, or 48%, compared to June 30, ~~2021,~~2021. As rates have increased, the Company has maintained its disciplined lending criteria, requiring lower leverage on commercial real estate projects. Despite this, the pipeline remains strong and ~~increased $112.7 million, or 44%, compared~~continues to ~~September 30, 2020, also reflecting the benefit of investments in commercial banking talent.~~build.

The Company originates residential mortgage loans identified for sale to investors in the secondary market. The Company uses rate locks with investors at the time of application, thereby eliminating interest rate risk. Residential loans originated for sale in the secondary market totaled ~~$95.1~~$42.7 million in the ~~third~~second quarter of ~~2021,~~2022, compared to $51.2 million in the first quarter of 2022 and $120.1 million in the second quarter of ~~2021 and $162.5 million~~2021. For the six months ended June 30, 2022, residential loans originated for sale in the ~~third quarter of 2020,~~secondary market totaled $93.9 million compared to $258.4 million for the six months ended June 30, 2021, a decrease of ~~21% and a decrease of 41%, respectively. Refinance activity has slowed from the peaks seen in 2020, and Florida’s~~$164.5 million, or 64%. Limited housing inventory ~~remains limited.~~and slowing refinance activity

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contributed to lower production. Residential saleable pipelines were ~~$42.8~~$14.7 million as of ~~September~~June 30, ~~2021,~~2022, compared to $25.7 million as of March 31, 2022 and $60.6 million as of June 30, ~~2021 and $149.9 million as of September 30, 2020.~~2021.

Residential loan production retained in the portfolio for the ~~third~~second quarter of ~~2021~~2022 was ~~$250.8~~$103.0 million compared to $175.5 million in the first quarter of 2022 and $118.1 million in the second quarter of ~~2021 and $25.4 million in~~2021. For the ~~third quarter of 2020. Residential loans~~six months ended June 30, 2022, residential loan production retained in the ~~third~~portfolio totaled $278.5 million compared to $164.7 million for the six months ended June 30, 2021, an increase of $113.7 million, or 69%. The first quarter of ~~2021 includes $180.8~~2022 included the purchase of a $111.3 million ~~in purchased~~wholesale residential home mortgage loan ~~pools compared to $38.4 million purchased during~~pool, and the second quarter of ~~2021.~~2021 included the purchase of a $38.4 million wholesale residential home mortgage loan pool. The Company fully underwrites acquired loans prior to executing transactions. The pipeline of residential loans intended to be retained in the portfolio was ~~$35.4~~$53.1 million as of ~~September~~June 30, ~~2021,~~2022, compared to $88.0 million as of March 31, 2022, and $54.1 million as of June 30, ~~2021, and $33.4 million as of September 30, 2020.~~2021.

Consumer originations totaled ~~$66.4~~$126.5 million during the ~~third~~second quarter of 2022, compared to $79.0 million in the first quarter of 2022 and $63.7 million in the second quarter of 2021. For the six months ended June 30, 2022, consumer originations totaled $205.5 million compared to $110.4 million for the six months ended June 30, 2021, an increase of ~~$2.7~~$95.0 million, or ~~4%, from the second quarter of 2021 and an increase of $4.1 million, or 7%, from the third quarter of 2020.~~86%. The consumer pipeline was ~~$31.0 million as of September 30, 2021, compared to $31.7~~$75.5 million as of June 30, ~~2021~~2022, compared to $61.6 million as of March 31, 2022 and ~~$17.1~~$31.7 million at ~~September~~June 30, ~~2020.~~

~~In March 2020,~~2021. The increases are primarily the ~~Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. The CARES Act includes provisions for~~result of consumer lending teams that joined the Paycheck Protection Program (“PPP”) offered through the U.S. Small Business Administration (“SBA”). Loans originated under this program have a contractual rate of interest of 1% with principal and interest that may be forgiven, provided that the borrower uses the fundsCompany in a manner consistent with PPP guidelines. Seacoast has assisted more than 8,000 borrowers through the PPP since inception, $675.7 million in PPP loan balances have been forgiven, and remaining outstanding balances total $190.6 million at September 30,late 2021.

~~Table of Contents~~

Average debt securities increased ~~$341.8~~$109.9 million, or ~~21%~~5%, during the ~~third~~second quarter of ~~2021~~2022 compared to the first quarter of 2022, and were $885.3 million, or 53%, higher compared to the second quarter of ~~2021, and were $651.1 million, or 48%, higher compared to the third quarter of 2020.~~2021. Increases reflect the investment of excess liquidity, partially offset by paydowns and maturities. Average debt securities were $2.5 billion for the six months ended June 30, 2022, an increase of $869.8 million, or 54%, compared to the six months ended June 30, 2021.

The cost of average interest-bearing liabilities ~~contracted~~increased two basis points in the ~~third~~second quarter of ~~2021~~2022 to 14 basis points from 12 basis points in the first quarter of 2022, and decreased from 16 basis points in the second quarter of ~~2021, and from 40~~2021. For the six months ended June 30, 2022, the cost of average interest-bearing liabilities was 0.13%, a decrease of six basis points incompared to the ~~third quarter of 2020.~~six months ended June 30, 2021. The cost of average total deposits (including noninterest bearing demand deposits) was six basis points in both the ~~third~~second quarter of ~~2021 was 7 basis points compared to~~2022 and the first quarter of 2022 and 8 basis points in the second quarter of 2021, ~~and 24 basis points in the third quarter of 2020,~~ reflecting continued repricing downward of interest-bearing deposits and time deposits. For the six months ended June 30, 2022, the cost of average total deposits (including noninterest bearing demand deposits) was 6 basis points compared to 10 basis points for the six months ended June 30, 2021.

During the ~~third~~second quarter of ~~2021,~~2022, average transaction deposits (noninterest and interest bearing demand) increased ~~$384.9~~$349.6 million, or 9%6%, compared to the first quarter of 2022 and increased $1.3 billion, or 29%, compared to the second quarter of 2021, ~~and increased $1.2 billion, or 34%, compared to the third quarter of 2020,~~ reflecting ~~the acquisition of Legacy Bank,~~ the inflow of new customers, including from bank acquisitions, and higher deposit balances for existing customers.

For the six months ended June 30, 2022, average transaction deposits (noninterest and interest bearing demand) increased $1.3 billion, or 32%, compared to the six months ended June 30, 2021. The Company’s deposit mix remains favorable, with ~~93%~~95% of average deposit balances comprised of savings, money market, and demand deposits for the ~~nine~~six months ended ~~September~~June 30, ~~2021. Seacoast's average cost~~2022.

Average balances of deposits, including noninterest bearing demand deposits, decreased to 9 basis points for the nine months ended September 30, 2021 compared to 36 basis points for the nine months ended September 30, 2020, reflecting the lower interest rate environment and shifts in deposit mix with a higher proportion of low cost deposits. Brokered CDs totaled $20.0 million at September 30, 2021, with a weighted average rate of 0.32%. The Company participates in programs with third party deposit networks as part of its liquidity management strategy, particularly as it approaches $10 billion in assets. Through these programs, the Company can offer its customers access to FDIC insurance on large balances, and the Company can retain or sell, on an overnight basis, the underlying deposits. The Company expects to remain below $10 billion in assets at year end 2021, and at September 30, 2021, the Company had sold, on an overnight basis, $233.1 million in deposits, compared to $112.7 million at December 31, 2020. These deposits are not included in the Consolidated Balance Sheet.

~~Sweep~~sweep repurchase agreements with customers increased ~~$37.5~~$2.3 million, or ~~48%~~2%, quarter-over quarter and $5.1 million, or 4%, year-over-year. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the average balance was ~~$116.3~~$119.3 million compared to an average balance of ~~$78.8~~$114.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The average rate on customer sweep repurchase accounts was 0.22% for the six months ended June 30, 2022, compared to 0.13% for the ~~nine~~six months ended ~~September~~June 30, ~~2021, compared to 0.41% for the nine months ended September 30, 2020. No federal funds purchased were utilized at September 30, 2021 nor September 30, 2020.~~2021.

~~In connection with the Legacy Bank transaction, the Company acquired $33.0~~Subordinated debt balances averaged $71.7 million in ~~FHLB borrowings during~~each of the ~~third~~first and second quarters of 2022, and $71.5 million in the second quarter of 2021, which were immediately repaid for a nominal fee. The Company had no other FHLB borrowings during the nine months ended September 30, 2021 compared to $180.9 million with an average rate of 1.08% for the nine months ended September 30, 2020. The decrease reflects the impact of higher average deposit balances that were sufficient to fund the Company’s liquidity needs during 2021.

~~For the nine months ended September 30, 2021, subordinated debt averaged $71.5 million, compared to $71.2 million for the nine months ended September 30, 2020.~~ The average rate on subordinated debt for the ~~nine~~second quarter of 2022 was 3.24%, an increase of 77 basis points compared to the first quarter of 2022 and an increase of 87 basis points compared to the second quarter of 2021. For the six months ended ~~September~~June 30, ~~2021~~2022, subordinated debt averaged $71.7 million, compared to $71.4 million for the six months ended June 30, 2021. The average rate on subordinated debt for the six months ended June 30, 2022 was ~~2.37%~~2.85%, compared to ~~3.28%~~2.40% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The subordinated debt relates to trust preferred securities issued by subsidiary trusts of the Company.

4443

Table of Contents

The following tables detail average balances, net interest income and margin results (on a tax equivalent basis, a non-GAAP measure) for the periods presented:


Average Balances, Interest Income and Expenses, Yields and Rates1	Average Balances, Interest Income and Expenses, Yields and Rates1																			Average Balances, Interest Income and Expenses, Yields and Rates1

		2021												2020							2022												2021
		Third Quarter						Second Quarter						Third Quarter							Second Quarter						First Quarter						Second Quarter
		Average				Yield/		Average				Yield/		Average				Yield/			Average				Yield/		Average				Yield/		Average				Yield/
(In thousands, except ratios)	(In thousands, except ratios)	Balance		Interest		Rate		Balance		Interest		Rate		Balance		Interest		Rate		(In thousands, except ratios)	Balance		Interest		Rate		Balance		Interest		Rate		Balance		Interest		Rate
Assets	Assets																			Assets
Earning assets:	Earning assets:																			Earning assets:
Securities:	Securities:																			Securities:
Taxable	Taxable	$	1,971,520	$	7,775	1.58	%	$	1,629,410	$	6,559	1.61	%	$	1,322,160	$	6,972	2.11	%	Taxable	$	2,517,879	$	12,387	1.97	%	$	2,406,399	$	10,041	1.67	%	$	1,629,410	$	6,559	1.61	%
Nontaxable	Nontaxable	25,311		181		2.86		25,581		186		2.90		23,570		157		2.67		Nontaxable	22,443		175		3.12		24,042		177		2.94		25,581		186		2.90
Total Securities	Total Securities	1,996,831		7,956		1.59		1,654,991		6,745		1.63		1,345,730		7,129		2.12		Total Securities	2,540,322		12,562		1.98		2,430,441		10,218		1.68		1,654,991		6,745		1.63

Federal funds sold and other investments		1,091,997		867		0.31		925,323		709		0.31		239,511		556		0.92
Federal funds sold																				Federal funds sold	644,144		1,281		0.80		738,588		350		0.19		816,455		226		0.11
Other investments																				Other investments	46,257		636		5.51		44,999		583		5.25		108,868		483		1.78

Loans excluding PPP loans	Loans excluding PPP loans	5,422,350		58,600		4.29		5,092,897		55,313		4.36		5,242,776		58,854		4.47		Loans excluding PPP loans	6,454,444		68,647		4.27		6,276,964		65,675		4.24		5,092,897		55,313		4.36
PPP Loans	PPP Loans	281,724		5,917		8.33		505,339		5,127		4.07		618,088		1,719		1.11		PPP Loans	26,322		741		11.29		61,923		1,523		9.98		505,339		5,127		4.07
Total Loans	Total Loans	5,704,074		64,517		4.49		5,598,236		60,440		4.33		5,860,864		60,573		4.11		Total Loans	6,480,766		69,388		4.29		6,338,887		67,198		4.30		5,598,236		60,440		4.33

Total Earning Assets	Total Earning Assets	8,792,902		73,340		3.31		8,178,550		67,894		3.33		7,446,105		68,258		3.65		Total Earning Assets	9,711,489		83,867		3.46		9,552,915		78,349		3.33		8,178,550		67,894		3.33

Allowance for loan losses	Allowance for loan losses	(88,412)						(86,042)						(92,151)						Allowance for loan losses	(90,242)						(87,467)						(86,042)
Cash and due from banks	Cash and due from banks	386,781						327,171						138,749						Cash and due from banks	389,695						365,835						327,171
Premises and equipment	Premises and equipment	70,667						70,033						72,572						Premises and equipment	74,614						75,876						70,033
Intangible assets	Intangible assets	254,980						235,964						228,801						Intangible assets	307,411						304,321						235,964
Bank owned life insurance	Bank owned life insurance	164,879						133,484						129,156						Bank owned life insurance	206,839						205,500						133,484
Other assets	Other assets	171,937						166,686						163,658						Other assets	240,712						211,536						166,686
Total Assets	Total Assets	$	9,753,734					$	9,025,846					$	8,086,890					Total Assets	$	10,840,518					$	10,628,516					$	9,025,846

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity																			Liabilities and Shareholders' Equity
Interest-bearing liabilities:	Interest-bearing liabilities:																			Interest-bearing liabilities:
Interest-bearing demand	Interest-bearing demand	$	1,891,092	$	219	0.05	%	$	1,692,178	$	235	0.06	%	$	1,364,947	$	330	0.10	%	Interest-bearing demand	$	2,262,408	$	293	0.05	%	$	2,097,383	$	190	0.04	%	$	1,692,178	$	235	0.06	%
Savings	Savings	842,018		65		0.03		790,734		118		0.06		648,319		170		0.10		Savings	962,264		64		0.03		925,348		65		0.03		790,734		118		0.06
Money market	Money market	1,860,386		565		0.12		1,736,481		627		0.14		1,328,931		799		0.24		Money market	1,938,421		637		0.13		1,976,660		512		0.11		1,736,481		627		0.14
Time deposits	Time deposits	572,661		583		0.40		533,350		524		0.39		1,051,316		2,673		1.01		Time deposits	496,186		436		0.35		560,681		468		0.34		533,350		524		0.39
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	120,507		35		0.12		115,512		35		0.12		90,357		40		0.18		Securities sold under agreements to repurchase	120,437		94		0.31		118,146		39		0.13		115,512		35		0.12
Federal Home Loan Bank borrowings		—		—		—		—		—		—		93,913		181		0.77

Other borrowings	Other borrowings	71,530		418		2.32		71,460		422		2.37		71,258		444		2.48		Other borrowings	71,740		579		3.24		71,670		436		2.47		71,460		422		2.37
Total Interest-Bearing Liabilities	Total Interest-Bearing Liabilities	5,358,194		1,885		0.14		4,939,715		1,961		0.16		4,649,041		4,637		0.40		Total Interest-Bearing Liabilities	5,851,456		2,103		0.14		5,749,888		1,710		0.12		4,939,715		1,961		0.16
Noninterest demand	Noninterest demand	2,985,582						2,799,643						2,279,584						Noninterest demand	3,520,700						3,336,121						2,799,643
Other liabilities	Other liabilities	161,411						116,093						96,458						Other liabilities	117,794						141,972						116,093
Total Liabilities	Total Liabilities	8,505,187						7,855,451						7,025,083						Total Liabilities	9,489,950						9,227,981						7,855,451

Shareholders' equity	Shareholders' equity	1,248,547						1,170,395						1,061,807						Shareholders' equity	1,350,568						1,400,535						1,170,395

Total Liabilities & Equity	Total Liabilities & Equity	$	9,753,734					$	9,025,846					$	8,086,890					Total Liabilities & Equity	$	10,840,518					$	10,628,516					$	9,025,846

Cost of deposits	Cost of deposits					0.07	%					0.08	%					0.24	%	Cost of deposits					0.06	%					0.06	%					0.08	%
Interest expense as a % of earning assets	Interest expense as a % of earning assets					0.09	%					0.10	%					0.25	%	Interest expense as a % of earning assets					0.09	%					0.07	%					0.10	%
Net interest income as a % of earning assets	Net interest income as a % of earning assets			$	71,455	3.22	%			$	65,933	3.23	%			$	63,621	3.40	%	Net interest income as a % of earning assets			$	81,764	3.38	%			$	76,639	3.25	%			$	65,933	3.23	%

1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.	1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.																			1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.

Table of Contents



Average Balances, Interest Income and Expenses, Yields and Rates1

	2022						2021
	Year to Date						Year to Date
	Average				Yield/		Average				Yield/
(In thousands, except ratios)	Balance		Interest		Rate		Balance		Interest		Rate
Assets
Earning assets:
Securities:
Taxable	$	2,462,447	$	22,428	1.82	%	$	1,590,152	$	12,857	1.62	%
Nontaxable	23,238		352		3.03		25,756		373		2.90
Total Securities	2,485,685		22,780		1.83		1,615,908		13,230		1.64

Federal funds sold	691,105		1,631		0.48		556,425		299		0.11
Other investments	45,631		1,219		5.39		96,422		996		2.08

Loans excluding PPP loans	6,366,194		134,322		4.25		5,121,114		110,817		4.36
PPP Loans	44,024		2,264		10.37		557,247		12,013		4.35
Total Loans	6,410,218		136,586		4.30		5,678,361		122,830		4.36

Total Earning Assets	9,632,639		162,216		3.40		7,947,116		137,355		3.49

Allowance for loan losses	(88,862)						(88,873)
Cash and due from banks	377,831						291,626
Premises and equipment	75,241						72,141
Intangible assets	305,875						236,640
Bank owned life insurance	206,173						132,785
Other assets	226,205						165,658
Total Assets	$	10,735,102					$	8,757,093

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand	$	2,180,351	$	483	0.04	%	$	1,646,587	$	493	0.06	%
Savings	943,908		129		0.03		756,693		255		0.07
Money market	1,957,435		1,149		0.12		1,673,559		1,297		0.16
Time deposits	528,255		904		0.35		621,844		1,711		0.55
Securities sold under agreements to repurchase	119,298		133		0.22		114,181		76		0.13

Other borrowings	71,706		1,015		2.85		71,425		849		2.40
Total Interest-Bearing Liabilities	5,800,953		3,813		0.13		4,884,289		4,681		0.19
Noninterest demand	3,428,921						2,616,856
Other liabilities	129,815						102,450
Total Liabilities	9,359,689						7,603,595

Shareholders' equity	1,375,413						1,153,498

Total Liabilities & Equity	$	10,735,102					$	8,757,093

Cost of deposits					0.06	%					0.10	%
Interest expense as a % of earning assets					0.08	%					0.12	%
Net interest income as a % of earning assets			$	158,403	3.32	%			$	132,674	3.37	%

1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.

Table of Contents

Average Balances, Interest Income and Expenses, Yields and Rates1
2021 2020
Year to Date Year to Date
Average Yield/ Average Yield/
(In thousands, except ratios) Balance Interest Rate Balance Interest Rate
Assets
Earning assets:
Securities:
Taxable $ 1,718,671 $ 20,632 1.60 % $ 1,203,877 $ 23,241 2.57 %
Nontaxable 25,606 554 2.88 20,895 461 2.94
Total Securities 1,744,277 21,186 1.62 1,224,772 23,702 2.58
Federal funds sold and other investments 800,839 2,162 0.36 253,635 1,974 1.04
Loans excluding PPP loans 5,222,629 169,417 4.34 5,254,089 182,239 4.63
PPP Loans 464,397 17,930 5.16 348,407 6,787 2.60
Total Loans 5,687,026 187,347 4.40 5,602,496 189,026 4.51
Total Earning Assets 8,232,142 210,695 3.42 7,080,903 214,702 4.05
Allowance for loan losses (88,717) (78,067)
Cash and due from banks 323,693 111,019
Premises and equipment 71,644 70,451
Intangible assets 242,820 228,795
Bank owned life insurance 143,601 127,683
Other assets 167,775 145,827
Total Assets $ 9,092,958 $ 7,686,611
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand $ 1,728,985 $ 712 0.06 % $ 1,279,485 $ 1,461 0.15 %
Savings 785,447 320 0.05 588,913 683 0.15
Money market 1,736,519 1,862 0.14 1,217,627 3,548 0.39
Time deposits 605,269 2,294 0.51 1,165,194 11,261 1.29
Securities sold under agreements to repurchase 116,304 112 0.13 78,755 241 0.41
Federal Home Loan Bank borrowings — — — 180,893 1,460 1.08
Other borrowings 71,460 1,266 2.37 71,186 1,748 3.28
Total Interest-Bearing Liabilities 5,043,984 6,566 0.17 4,582,053 20,402 0.59
Noninterest demand 2,741,115 2,001,630
Other liabilities 122,329 79,821
Total Liabilities 7,907,428 6,663,504
Shareholders' equity 1,185,530 1,023,107
Total Liabilities & Equity $ 9,092,958 $ 7,686,611
Cost of deposits 0.09 % 0.36 %
Interest expense as a % of earning assets 0.11 % 0.38 %
Net interest income as a % of earning assets $ 204,129 3.32 % $ 194,300 3.67 %
1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.

~~Table of Contents~~

Noninterest Income

Noninterest income totaled ~~$19.0~~$17.0 million for the ~~third~~second quarter of ~~2021,~~2022, an increase of ~~$3.7~~$1.6 million, or ~~24%~~10%, compared to the ~~second~~first quarter of ~~2021~~2022 and an increase of ~~$2.1~~$1.6 million, or ~~12%~~11%, from the ~~third~~second quarter of ~~2020.~~2021. Noninterest income totaled ~~$52.0~~$32.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~$5.4~~$0.7 million, or ~~12%~~2%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

Noninterest income is detailed as follows:


		Third		Second		Third		Nine Months Ended					Second		First		Second		Six Months Ended
		Quarter		Quarter		Quarter		September 30,					Quarter		Quarter		Quarter		June 30,
(In thousands)	(In thousands)	2021		2021		2020		2021		2020		(In thousands)	2022		2022		2021		2022		2021
Service charges on deposit accounts	Service charges on deposit accounts	$	2,495	$	2,338	$	2,242	$	7,171	$	7,006	Service charges on deposit accounts	$	3,408	$	2,801	$	2,338	$	6,209	$	4,676
Interchange income	Interchange income	4,131		4,145		3,682		12,096		10,115		Interchange income	4,255		4,128		4,145		8,383		7,965
Wealth management income	Wealth management income	2,562		2,387		1,972		7,272		5,558		Wealth management income	2,774		2,659		2,387		5,433		4,710
Mortgage banking fees	Mortgage banking fees	2,550		2,977		5,283		9,752		11,050		Mortgage banking fees	932		1,686		2,977		2,618		7,202
Marine finance fees	Marine finance fees	152		177		242		518		545		Marine finance fees	312		191		177		503		366
SBA gains	SBA gains	812		232		252		1,331		572		SBA gains	473		156		232		629		519
BOLI income	BOLI income	1,128		872		899		2,859		2,672		BOLI income	1,349		1,334		872		2,683		1,731
Other income	Other income	5,228		2,249		2,370		11,221		7,869		Other income	3,761		2,870		2,249		6,631		5,993
		19,058		15,377		16,942		52,220		45,387			17,264		15,825		15,377		33,089		33,162
Securities (losses) gains, net		(30)		(55)		4		(199)		1,253
Securities losses, net												Securities losses, net	(300)		(452)		(55)		(752)		(169)
Total	Total	$	19,028	$	15,322	$	16,946	$	52,021	$	46,640	Total	$	16,964	$	15,373	$	15,322	$	32,337	$	32,993

Service charges on deposits were ~~$2.5~~$3.4 million in the ~~third~~second quarter of ~~2021,~~2022, $2.8 million in the first quarter of 2022 and $2.3 million in the second quarter of ~~2021 and $2.2 million in the third quarter of 2020.~~2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, service charges on deposits totaled ~~$7.2~~$6.2 million, an increase of ~~$0.2~~$1.5 million, or 2%33%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020. The increase~~2021. Increases in ~~service charges~~fees reflect growth in commercial deposit relationships and changes in monthly maintenance and ATM fees. Overdraft-related fees for ~~the nine-month period reflects an increase in customer deposit accounts. Overdraft fees~~both consumer and commercial accounts represent ~~40%~~38% of total service charges on deposits for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, and ~~44%~~39% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

Interchange income ~~remained flat at~~increased to $4.3 million for the second quarter of 2022, compared to $4.1 million for the ~~three months ended September 30, 2021, compared to~~first quarter of 2022, and $4.1 million for the ~~three~~second quarter of 2021. For the six months ended June 30, ~~2021, and increased~~2022, interchange income totaled $8.4 million, an increase of $0.4 million, or ~~12%~~5%, compared to the ~~three~~six months ended ~~September~~June 30, 2020. Third quarter activity reflects stable transaction volume despite the impact of the COVID-19 delta variant on spending early in the third quarter. For the nine months ended September 30, 2021, interchange income totaled $12.1 million, an increase of $2.0 million, or 20%, compared to the nine months ended September 30, 2020. The 2021 periods reflect the return of transactional volume and higher per-card spending in the current year when compared to the prior year, which was negatively affected by COVID-19-related shutdowns and reduced consumer consumption.2021.

Wealth management income, including trust fees and brokerage commissions and fees, was ~~a record $2.6~~$2.8 million in ~~the third quarter of 2021, increasing $0.2 million, or 7%, from~~ the second quarter of ~~2021~~2022, increasing $0.1 million, or 4%, from the first quarter of 2022 and increasing ~~$0.6~~$0.4 million, or ~~30%~~16%, compared to the ~~third~~second quarter of ~~2020.~~2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, wealth management income totaled ~~$7.3~~$5.4 million, an increase of ~~$1.7~~$0.7 million, or ~~31%~~15%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020. The wealth management~~2021, as the team continues to ~~successfully win business with commercial relationships and high net worth families across the Company’s footprint, as reflected~~deliver strong returns through the ~~growth~~addition of ~~assets under management from $792.6 million at September 30, 2020 to $1.2 billion at September 30, 2021.~~new relationships.

Mortgage banking fees decreased by ~~$0.4~~$0.8 million, or ~~14%~~45%, to ~~$2.5~~$0.9 million in the ~~third~~second quarter of ~~2021~~2022 compared to the first quarter of 2022, and decreased $2.0 million, or 69%, compared to the second quarter of 2021, reflecting lower saleable production due to the impact of rising interest rates and ~~decreased $2.7~~limited housing inventory. For the six months ended June 30, 2022, mortgage banking fees totaled $2.6 million, a decrease of $4.6 million, or ~~52%~~64%, compared to the ~~third~~six months ended June 30, 2021.

SBA gains were $0.5 million in the second quarter of ~~2020, reflecting~~2022, compared to $0.2 million in the ~~impact~~first quarter of ~~lower refinance activity~~2022, and ~~low housing inventory levels.~~$0.2 million in the second quarter of 2021. The increase reflects improved saleable loan production for the second quarter of 2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2021, mortgage banking fees~~2022, SBA gains totaled ~~$9.8~~$0.6 million, ~~a decrease~~an increase of ~~$1.3~~$0.1 million, or ~~12%~~21%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

~~SBA gains were a record $0.8~~Bank owned life insurance (“BOLI”) income was $1.3 million for the second quarter of 2022, flat compared to the first quarter of 2022 and an increase of ~~$0.6 million,~~55% compared to the second quarter of ~~2021~~2021. The increase year-over-year is attributed to additions of $69.1 million in BOLI from acquisitions and ~~an increase of $0.6~~purchases during 2021. BOLI income totaled $2.7 million ~~compared to~~for the ~~third quarter of 2020. Higher saleable loan production reflects a renewed focus on saleable activity as the PPP program winds down. For the nine~~six months ended ~~September~~June 30, ~~2021, SBA gains totaled $1.3~~2022 and $1.7 million ~~an increase of $0.8 million, or 133%, compared to~~for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

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~~Bank owned life insurance (“BOLI”)~~Other income was ~~$1.1~~$3.8 million ~~for the third quarter of 2021, an increase of $0.3 million compared to both~~in the second quarter of 2021 and the third quarter of 2020. The increase is attributed to additions to BOLI, including $25.0 million purchased late in the second quarter, with a tax equivalent yield of 4.50%. In addition, the Company acquired $9.1 million in BOLI from Legacy Bank, and an additional $25.0 million was purchased late in the third quarter of 2021. BOLI income totaled $2.9 million for the nine months ended September 30, 2021 and $2.7 million for the nine months ended September 30, 2020.

~~Other income was $5.2 million in the third quarter of 2021,~~2022, an increase of ~~$3.0~~$0.9 million quarter-over-quarter and an increase of ~~$2.9~~$1.5 million year-over-year, reflecting ~~the impact of gains on SBIC investments during the quarter. Returns recognized on these investments will vary and are not expected to occur on a routine basis.~~higher loan-swap related income. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, other income totaled ~~$11.2~~$6.6 million, an increase of ~~$3.4~~$0.6 million, or ~~43%~~11%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

The Company recognized $0.3 million in securities losses in the second quarter of 2022 compared to $0.5 million in the first quarter of 2022 and $0.1 million in the second quarter of 2021.

Noninterest Expenses

~~The Company has demonstrated its commitment to efficiency through disciplined, proactive management of its cost structure.~~ For the ~~third~~second quarter of ~~2021,~~2022, the efficiency ratio, defined as noninterest expense less amortization of intangibles and gains, losses, and expenses on foreclosed properties divided by net operating revenue (net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses), was ~~59.55%~~56.22% compared to 62.33% for the first quarter of 2022 and 54.93% for the second quarter of ~~2021 and 61.65% for~~2021. The higher efficiency ratio in the ~~third~~first quarter of ~~2020. The increase in the efficiency ratio quarter over quarter~~2022 primarily reflects ~~higher net interest income and higher non-interest income, which was more than offset by~~ the impact of higher expenses, primarily resulting from the Legacy Bank acquisition during the third quarter of 2021. The decrease in the efficiency ratio when compared to the prior year quarter reflects higher net interest income and higher noninterest income. Both periods reflected the impact of higher expenses from acquisitions with the completion of the Freedom Bank acquisition in the third quarter of 2020.merger-related expenses. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the efficiency ratio was ~~55.99%~~59.17% compared to ~~57.15%~~54.05% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

The adjusted efficiency ratio12was ~~51.50%~~53.15% in the ~~third~~second quarter of ~~2021,~~2022, compared to 54.86% in the first quarter of 2022 and 53.49% in the second quarter of ~~2021 and 54.82% in~~2021. In the ~~third~~second quarter of ~~2020. The decrease in the adjusted efficiency ratio~~1 ~~compared to the prior quarter and the prior year quarter primarily reflects higher net interest income and higher noninterest income. At September 30, 2021,~~2022, adjusted noninterest expense1 as a percent of average tangible assets was ~~1.95%~~2.00% compared to 1.99% for the ~~third~~first quarter of ~~2021 compared to~~2022 and 1.98% for the second quarter of ~~2021 and 2.24% for the third quarter of 2020.~~2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 the adjusted efficiency ratio1 was ~~52.29%~~53.97% compared to ~~52.64%~~52.72% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The Company expects that the adjusted efficiency ratio1 will continue to be in the low 50s for the remainder of 2022.


	Second			First			Second			Six Months Ended
	Quarter			Quarter			Quarter			June 30,
(In thousands, except ratios)	2022			2022			2021			2022			2021
Noninterest expense, as reported	$	56,148		$	58,917		$	45,784		$	115,065		$	91,904

Merger-related charges	(3,039)			(6,692)			(509)			(9,731)			(1,090)
Amortization of intangibles	(1,446)			(1,446)			(1,212)			(2,892)			(2,423)

Branch reductions and other expense initiatives	—			(74)			(663)			(74)			(1,112)
Adjusted noninterest expense1	$	51,663		$	50,705		$	43,400		$	102,368		$	87,279

Foreclosed property expense and net gain on sale	968			164			90			1,132			155
Provision for credit losses on unfunded commitments	—			(142)			—			(142)			—

Net adjusted noninterest expense1	$	52,631		$	50,727		$	43,490		$	103,358		$	87,434

Efficiency ratio	56.22		%	62.33		%	54.93		%	59.17		%	54.05		%
Adjusted efficiency ratio1,2	53.15			54.86			53.49			53.97			52.72
Adjusted noninterest expense as a percent of average tangible assets1,2	2.00			1.99			1.98			2.00			2.07
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.
2Adjusted efficiency ratio is defined as noninterest expense, including adjustments to noninterest expense divided by aggregated tax equivalent net interest income and noninterest income, including adjustments to revenue.

12Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

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Third Second Third Nine Months Ended
Quarter Quarter Quarter September 30,
(In thousands, except ratios) 2021 2021 2020 2021 2020
Noninterest expense, as reported $ 55,268 $ 45,784 $ 51,674 $ 147,172 $ 141,871
Merger-related charges (6,281) (509) (4,281) (7,371) (9,074)
Amortization of intangibles (1,306) (1,212) (1,497) (3,729) (4,436)
Business continuity expenses — — — — (307)
Branch reductions and other expense initiatives (870) (663) (464) (1,982) (464)
Adjusted noninterest expense1
$ 46,811 $ 43,400 $ 45,432 $ 134,090 $ 127,590
Foreclosed property expense and net (loss)/gain on sale (66) 90 (512) 89 (442)
Provision for credit losses on unfunded commitments (133) — (756) (133) (980)
Net adjusted noninterest expense1
$ 46,612 $ 43,490 $ 44,164 $ 134,046 $ 126,168
Efficiency ratio 59.55 % 54.93 % 61.65 % 55.99 % 57.15 %
Adjusted efficiency ratio1,2
51.50 53.49 54.82 52.29 52.64
Adjusted noninterest expense as a percent of average tangible assets1,2
1.95 1.98 2.24 2.03 2.26
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.
2Adjusted efficiency ratio is defined as noninterest expense, including adjustments to noninterest expense divided by aggregated tax equivalent net interest income and noninterest income, including adjustments to revenue.

Noninterest expense for the ~~third~~second quarter of ~~2021~~2022 totaled ~~$55.3~~$56.1 million, a decrease of $2.8 million, or 5%, compared to the first quarter of 2022, and an increase of $10.4 million, or 23%, from the second quarter of 2021. For the six months ended June 30, 2022, noninterest expenses totaled $115.1 million, an increase of ~~$9.5~~$23.2 million, or ~~21%~~25%, compared to the ~~second quarter of 2021, and an increase of $3.6 million, or 7%, from the third quarter of 2020. For the nine~~six months ended

~~Table of Contents~~

~~September~~ June 30, ~~2021, noninterest expenses totaled $147.2 million, an increase of $5.3 million, or 4%, compared to the nine months ended September 30, 2020.~~2021. Noninterest expenses are detailed as follows:


		Third		Second		Third		Nine Months Ended					Second		First		Second		Six Months Ended
		Quarter		Quarter		Quarter		September 30,					Quarter		Quarter		Quarter		June 30,
(In thousands)	(In thousands)	2021		2021		2020		2021		2020		(In thousands)	2022		2022		2021		2022		2021

Salaries and wages	Salaries and wages	$	27,919	$	22,966	$	23,125	$	72,278	$	67,049	Salaries and wages	$	28,056	$	28,219	$	22,966	$	56,275	$	44,359
Employee benefits	Employee benefits	4,177		3,953		3,995		13,110		11,629		Employee benefits	4,151		5,501		3,953		9,652		8,933
Outsourced data processing costs	Outsourced data processing costs	5,610		4,676		6,128		14,754		14,820		Outsourced data processing costs	6,043		6,156		4,676		12,199		9,144
Telephone/data lines	Telephone/data lines	810		838		705		2,433		2,210		Telephone/data lines	908		733		838		1,641		1,623
Occupancy	Occupancy	3,541		3,310		3,858		10,640		10,596		Occupancy	4,050		3,986		3,310		8,036		7,099
Furniture and equipment	Furniture and equipment	1,567		1,166		1,576		3,987		4,557		Furniture and equipment	1,588		1,426		1,166		3,014		2,420
Marketing	Marketing	1,353		1,002		1,513		3,523		3,788		Marketing	1,882		1,171		1,002		3,053		2,170
Legal and professional fees	Legal and professional fees	4,151		2,182		3,018		8,915		8,658		Legal and professional fees	2,946		4,789		2,182		7,735		4,764
FDIC assessments	FDIC assessments	651		515		474		1,692		740		FDIC assessments	699		789		515		1,488		1,041
Amortization of intangibles	Amortization of intangibles	1,306		1,212		1,497		3,729		4,436		Amortization of intangibles	1,446		1,446		1,212		2,892		2,423
Foreclosed property expense and net loss (gain) on sale		66		(90)		512		(89)		442
Foreclosed property expense and net gain on sale												Foreclosed property expense and net gain on sale	(968)		(164)		(90)		(1,132)		(155)
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	133		—		756		133		980		Provision for credit losses on unfunded commitments	—		142		—		142		—
Other	Other	3,984		4,054		4,517		12,067		11,966		Other	5,347		4,723		4,054		10,070		8,083
Total	Total	$	55,268	$	45,784	$	51,674	$	147,172	$	141,871	Total	$	56,148	$	58,917	$	45,784	$	115,065	$	91,904

Salaries and wages totaled ~~$27.9~~$28.1 million for the ~~third~~second quarter of ~~2021,~~2022, $28.2 million for the first quarter of 2022, and $23.0 million for the second quarter of ~~2021, and $23.1 million for the third~~2021. The second quarter of ~~2020. The third quarter includes $2.6 million in merger-related expenses, as well as increases relating to the addition of the Legacy Bank branch franchise, and increases resulting from~~2022 reflects higher compensation costs, with ongoing investments in commercial banking ~~talent.~~talent and production support roles, which was more than offset by higher merger-related expenses in the first quarter of 2022 associated with the BBFC and Sabal Palm acquisitions. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, salaries and wages totaled ~~$72.3~~$56.3 million, an increase of ~~$5.2~~$11.9 million, or 8%27%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase compared to the prior year period reflects higher salaries from headcount added through acquisitions and investments made to support organic growth.

During the ~~third~~second quarter of ~~2021,~~2022, employee benefit costs, which include costs associated with the Company's self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $4.2 million, ~~an increase~~a decrease of ~~$0.2~~$1.4 million, or 6%25%, compared to the ~~second~~first quarter of ~~2021~~2022, and an increase of $0.2 million, or 5%, compared to the ~~third~~second quarter of ~~2020.~~2021. The ~~third~~first quarter of ~~2021~~2022 included higher ~~healthcare-related costs attributed to increased headcount.~~seasonal payroll taxes and 401(k) contributions. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, employee benefit costs totaled ~~$13.1~~$9.7 million, an increase of ~~$1.5~~$0.7 million, or ~~13%~~8%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020. The increase reflects~~2021 primarily related to growth in the ~~impact of higher health insurance related costs and payroll taxes resulting from headcount added through acquisitions and investments made to support organic growth.~~associate base.

The Company utilizes third parties for its core data processing systems. Ongoing data processing costs are directly related to the number of transactions processed and the negotiated rates associated with those transactions. Outsourced data processing costs totaled ~~$5.6~~$6.0 million, ~~$4.7~~$6.2 million, and ~~$6.1~~$4.7 million for the ~~third~~second quarter of ~~2021,~~2022, first quarter of 2022, and second quarter of 2021, ~~and third quarter of 2020,~~ respectively. ~~The third quarter of 2021 included $0.9 million in merger-related costs related to data conversion, while the third quarter of 2020 included $1.9 million in merger-related costs.~~ For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020,~~2021, outsourced data processing costs totaled ~~$14.8 million.~~$12.2 million and $9.1 million, respectively. The ~~Company continues to improve and enhance mobile and other digital products and services through key third parties. Outsourced data processing costs may~~ increase year-over-year reflects increased cost associated with growth in the ~~future~~company’s footprint as ~~customers adopt improved products and~~well as ~~business volumes grow.~~ongoing upgrades to the Company’s various technology platforms.

Telephone and data line expenditures, including electronic communications with customers and between branch and customer support locations and personnel, as well as with third-party data processors, were ~~$0.8~~$0.9 million, ~~$0.8~~$0.7 million, and ~~$0.7~~$0.8 million for the ~~third~~second quarter of ~~2021,~~2022, first quarter of 2022, and second quarter of 2021, ~~and third quarter of 2020,~~ respectively. ~~For the nine months ended September 30, 2021, telephone~~Telephone and data line expenditures totaled ~~$2.4~~$1.6 million ~~an increase~~in each of ~~$0.2 million, or 10%, compared to~~ the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2022 and 2021.

Total occupancy, furniture and equipment expenses were ~~$5.1~~$5.6 million in the ~~third~~second quarter of ~~2021,~~2022, $5.4 million in the first quarter of 2022, and $4.5 million in the second quarter of ~~2021, and $5.4 million in~~2021. Increases compared to the ~~third~~second quarter of ~~2020. Increases in the third quarter reflect merger-related equipment disposals, as well as increases relating~~2021 relate to ~~the addition~~expansion of the ~~Legacy Bank~~ branch ~~franchise.~~footprint through acquisitions and through organic growth into new markets including Naples, Sarasota and Jacksonville. For the ~~nine~~six months ended June 30, 2022, total occupancy, furniture and equipment expenses totaled $11.1 million, compared to $9.5 million for the six months ended June 30, 2021.

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~~September 30, 2021, total occupancy, furniture and equipment expenses totaled $14.6 million, a decrease of $0.5 million, or 3%, compared to the nine months ended September 30, 2020.~~

Marketing expenses totaled ~~$1.4~~$1.9 million in the ~~third~~second quarter of ~~2021,~~2022, $1.2 million in the first quarter of 2022, and $1.0 million in the second quarter of ~~2021 and $1.5 million in~~2021. Increases quarter-over-quarter are primarily the ~~third quarter~~result of ~~2020.~~marketing campaigns focused on our expansion markets. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, marketing expenses totaled ~~$3.5~~$3.1 million, ~~a decrease~~an increase of ~~$0.3~~$0.9 million, or 7%41%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020. Targeted marketing campaigns allow the Company to engage new and existing customers while maintaining a controlled expense base.~~2021.

Legal and professional fees for the ~~third~~second quarter of ~~2021~~2022 were ~~$4.2~~$2.9 million, a decrease of $1.8 million, or 38%, compared to the first quarter of 2022, and an increase of ~~$2.0~~$0.8 million, or ~~90%~~35%, compared to the second quarter of ~~2021, and an increase of $1.1 million, or 38%, compared to the third quarter of 2020.~~2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, legal and professional fees totaled ~~$8.9~~$7.7 million, an increase of ~~$0.3~~$3.0 million, or 3%62%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Acquisition-related expenses were ~~$2.0~~$1.4 million in the ~~third~~second quarter of ~~2021,~~2022, $2.9 million in the first quarter of 2022, and $0.5 million in the second quarter of ~~2021, and $1.3 million in the third quarter of 2020.~~2021.

FDIC assessments were $0.7 million for the ~~third~~second quarter of ~~2021~~2022, $0.8 million in the first quarter of 2022, and $0.5 million in ~~both~~ the second quarter of ~~2021 and the third quarter of 2020.~~2021. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, FDIC assessments totaled ~~$1.7~~$1.5 million compared to ~~$0.7~~$1.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020 with 2020 benefiting from the FDIC small bank assessment credits which offset expense.~~2021.

A provision of $0.1 million was recorded for potential credit losses on unfunded lending commitments in the first quarter of 2022 attributed to the acquisitions of BBFC and Sabal Palm.

Other expense totaled $5.3 million, $4.7 million and $4.1 million for the second quarter of 2022, the first quarter of 2022 and the second quarter of 2021, respectively. For the six months ended June 30, 2022, other expense totaled $10.1 million, an increase of $2.0 million, or 25%, compared to the six months ended June 30, 2021, reflecting higher recruiting and production-related costs.

The Company expects to maintain expense discipline while investing for growth. Expenses in the third quarter of ~~2021 attributed~~2022 are expected to increase, primarily as a result of continued investments in talent and scaling the ~~acquisition~~business.

Provision for Credit Losses

The provision for credit losses was $0.8 million for the second quarter of ~~Legacy Bank,~~2022 compared to ~~no adjustment~~a provision of $6.6 million for the first quarter of 2022 and a reversal of provision of $4.9 million for the second quarter of 2021. The first quarter of 2022 included $5.1 million in provisioning for loans acquired in the Sabal Palm and BBFC transactions. The reversal in the second quarter of 2021 ~~and a $0.8 million provision~~lowered the ratio of allowance for credit losses to total loans, reflecting improvement in the ~~third quarter of 2020 with the acquisition of Freedom Bank.~~economic forecast at that time.

Other expense totaled $4.0 million, $4.1 million and $4.5 million for the third quarter of 2021, the second quarter of 2021 and the third quarter of 2020, respectively. For the nine months ended September 30, 2021, other expense totaled $12.1 million, an increase of $0.1 million, or 1%, compared to the nine months ended September 30, 2020.

Income Taxes

For the ~~third~~second quarter of ~~2021,~~2022, the Company recorded tax expense of ~~$7.0~~$8.9 million compared to ~~tax expense~~$5.8 million in the first quarter of 2022 and $8.8 million in the second quarter of ~~2021 and $7.0 million in~~2021. During the ~~third~~second quarter of ~~2020. For~~2022, the ~~nine months ended September 30, 2021,~~Company received a $1.0 million refund of Florida corporate income tax ~~expense totaled $26.0 million, an increase of $12.0 million, or 85%, compared to the nine months ended September 30, 2020 due to higher pre-tax income. A tax benefit~~paid in prior periods. Tax benefits related to stock-based compensation totaled ~~$0.3~~$0.4 million in the ~~third~~second quarter of ~~2021, compared to a tax benefit~~2022, $0.5 million in the first quarter of 2022, and $0.6 million in the second quarter of 2021. For the six months ended June 30, 2022, tax expense totaled $14.7 million, a decrease of $4.2 million, or 22%, compared to the six months ended June 30, 2021 ~~and nominal impact in the third quarter of 2020.~~due primarily to lower pre-tax income.

Explanation of Certain Unaudited Non-GAAP Financial Measures

This report contains financial information determined by methods other than Generally Accepted Accounting Principles (“GAAP”). The financial highlights provide reconciliations between GAAP and adjusted financial measures including net income, fully taxable equivalent net interest income, noninterest income, noninterest expense, tax adjustments, net interest margin and other financial ratios. Management uses these non-GAAP financial measures in its analysis of the Company’s performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company’s performance. The Company believes the non-GAAP measures enhance investors’ understanding of the Company’s business and performance and if not provided would be requested by the investor community. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might define or calculate these measures differently. The Company provides reconciliations between GAAP and these non-GAAP measures. These disclosures should not be considered an alternative to GAAP.

Table of Contents

Reconciliation of Non-GAAP Measures


		Third		Second		Third		Nine Months Ended					Second			First			Second			Six Months Ended
		Quarter		Quarter		Quarter		September 30,					Quarter			Quarter			Quarter			June 30,
(In thousands, except per share data)	(In thousands, except per share data)	2021		2021		2020		2021		2020		(In thousands, except per share data)	2022			2022			2021			2022			2021
Net income, as reported:	Net income, as reported:											Net income, as reported:
Net income	Net income	$	22,944	$	31,410	$	22,628	$	88,073	$	48,417	Net income	$	32,755		$	20,588		$	31,410		$	53,343		$	65,129

Diluted earnings per share		$	0.40	$	0.56	$	0.42	$	1.56	$	0.91

Noninterest Income												Noninterest Income	$	16,964		$	15,373		$	15,322		$	32,337		$	32,993
Securities losses, net												Securities losses, net	300			452			55			752			169

Total adjustments to noninterest income												Total adjustments to noninterest income	300			452			55			752			169
Total Adjusted Noninterest Income												Total Adjusted Noninterest Income	$	17,264		$	15,825		$	15,377		$	33,089		$	33,162

Noninterest Expense												Noninterest Expense	56,148			$	58,917		$	45,784		$	115,065		$	91,904
Merger-related charges												Merger-related charges	(3,039)			(6,692)			(509)			(9,731)			(1,090)
Amortization of intangibles												Amortization of intangibles	(1,446)			(1,446)			(1,212)			(2,892)			(2,423)

Branch reductions and other expense initiatives1												Branch reductions and other expense initiatives1	—			(74)			(663)			(74)			(1,112)
Total adjustments to noninterest expense												Total adjustments to noninterest expense	(4,485)			(8,212)			(2,384)			(12,697)			(4,625)
Total Adjusted Noninterest Expense												Total Adjusted Noninterest Expense	$	51,663		$	50,705		$	43,400		$	102,368		$	87,279

Income Taxes												Income Taxes	$	8,886		$	5,834		$	8,785		$	14,720		$	18,942
Tax effect of adjustments												Tax effect of adjustments	1,213			2,196			598			3,409			1,175

Total adjustments to income taxes												Total adjustments to income taxes	1,213			2,196			598			3,409			1,175
Adjusted income taxes												Adjusted income taxes	10,099			8,030			9,383			18,129			20,117
Adjusted net income												Adjusted net income	$	36,327		$	27,056		$	33,251		$	63,383		$	68,748

Earnings per diluted share, as reported												Earnings per diluted share, as reported	$	0.53		$	0.33		$	0.56		$	0.86		$	1.17
Adjusted diluted earnings per share												Adjusted diluted earnings per share	0.59			0.44			0.59			1.03			1.23
Average diluted shares outstanding												Average diluted shares outstanding	61,923			61,704			55,901			61,818			55,827

Adjusted Noninterest Expense												Adjusted Noninterest Expense	$	51,663		$	50,705		$	43,400		$	102,368		$	87,279
Foreclosed property expense and net (loss) gain on sale												Foreclosed property expense and net (loss) gain on sale	968			164			90			1,132			155
Provision for credit losses on unfunded commitments												Provision for credit losses on unfunded commitments	—			(142)			—			(142)			—
Net Adjusted Noninterest Expense												Net Adjusted Noninterest Expense	$	52,631		$	50,727		$	43,490		$	103,358		$	87,434

Revenue												Revenue	$	98,611		$	91,895		$	81,124		$	190,506		$	165,405
Total adjustments to revenue												Total adjustments to revenue	300			452			55			752			169
Impact of FTE adjustment												Impact of FTE adjustment	117			117			131			234			262
Adjusted revenue on a fully tax equivalent basis												Adjusted revenue on a fully tax equivalent basis	$	99,028		$	92,464		$	81,310		$	191,492		$	165,836
Adjusted Efficiency Ratio												Adjusted Efficiency Ratio	53.15		%	54.86		%	53.49		%	53.97		%	52.72		%
Net Adjusted Noninterest Expense as a Percent of Average Tangible Assets2												Net Adjusted Noninterest Expense as a Percent of Average Tangible Assets2	2.00		%	1.99		%	1.98		%	2.00		%	2.07		%

Net Interest Income												Net Interest Income	$	81,647		$	76,522		$	65,802		$	158,169		$	132,412
Impact of FTE adjustment												Impact of FTE adjustment	117			117			131			234			262
Net interest income including FTE adjustment												Net interest income including FTE adjustment	81,764			76,639			65,933			158,403			132,674
Noninterest income												Noninterest income	16,964			15,373			15,322			32,337			32,993
Noninterest expense												Noninterest expense	56,148			58,917			45,784			115,065			91,904
Pre-Tax Pre-Provision Earnings												Pre-Tax Pre-Provision Earnings	42,580			33,095			35,471			75,675			73,763
Adjustments to noninterest income												Adjustments to noninterest income	300			452			55			752			169
Adjustments to noninterest expense												Adjustments to noninterest expense	(3,517)			(8,190)			(2,294)			(11,707)			(4,470)
Adjusted Pre-Tax Pre-Provision Earnings												Adjusted Pre-Tax Pre-Provision Earnings	$	46,397		$	41,737		$	37,820		$	88,134		$	78,402

Table of Contents


	Second			First			Second			Six Months Ended
	Quarter			Quarter			Quarter			June 30,
(In thousands, except per share data)	2022			2022			2021			2022			2021

Average Assets	$	10,840,518		$	10,628,516		$	9,025,846		$	10,735,102		$	8,757,093
Less average goodwill and intangible assets	(307,411)			(304,321)			(235,964)			(305,875)			(236,640)
Average Tangible Assets	$	10,533,107		$	10,324,195		$	8,789,882		$	10,429,227		$	8,520,453

Return on Average Assets (ROA)	1.21		%	0.79		%	1.40		%	1.00		%	1.50		%
Impact of removing average intangible assets and related amortization	0.08			0.06			0.08			0.07			0.08
Return on Average Tangible Assets (ROTA)	1.29			0.85			1.48			1.07			1.58
Impact of other adjustments for Adjusted Net Income	0.09			0.21			0.04			0.16			0.05
Adjusted Return on Average Tangible Assets	1.38		%	1.06		%	1.52		%	1.23		%	1.63		%

Average Shareholders' Equity	$	1,350,568		$	1,400,535		$	1,170,395		$	1,375,413		$	1,153,498
Less average goodwill and intangible assets	(307,411)			(304,321)			(235,964)			(305,875)			(236,640)
Average Tangible Equity	$	1,043,157		$	1,096,214		$	934,431		$	1,069,538		$	916,858

Return on Average Shareholders' Equity	9.73		%	5.96		%	10.76		%	7.82		%	11.39		%
Impact of removing average intangible assets and related amortization	3.28			2.06			3.12			2.64			3.34
Return on Average Tangible Common Equity (ROTCE)	13.01			8.02			13.88			10.46			14.73
Impact of other adjustments for Adjusted Net Income	0.96			1.99			0.39			1.49			0.39
Adjusted Return on Average Tangible Common Equity	13.97		%	10.01		%	14.27		%	11.95		%	15.12		%

Loan Interest Income2	$	69,388		$	67,198		$	60,440		$	136,586		$	122,830
Accretion on acquired loans	(2,720)			(3,717)			(2,886)			(6,437)			(5,754)
Interest and fees on PPP loans	(741)			(1,523)			(5,127)			(2,264)			(12,013)
Loan interest income excluding PPP and accretion on acquired loans2	$	65,927		$	61,958		$	52,427		$	127,885		$	105,063

Yield on Loans2	4.29		%	4.30		%	4.33		%	4.30		%	4.36		%

Impact of accretion on acquired loans	(0.16)			(0.24)			(0.21)			(0.21)			(0.20)
Impact of PPP loans	(0.03)			(0.06)			0.01			(0.04)			(0.02)
Yield on loans excluding PPP and accretion on acquired loans2	4.10		%	4.00		%	4.13		%	4.05		%	4.14		%

Net Interest Income2	$	81,764		$	76,639		$	65,933		$	158,403		$	132,674
Accretion on acquired loans	(2,720)			(3,717)			(2,886)			(6,437)			(5,754)
Interest and fees on PPP loans	(741)			(1,523)			(5,127)			(2,264)			(12,013)
Net interest income excluding PPP and accretion on acquired loans2	$	78,303		$	71,399		$	57,920		$	149,702		$	114,907

Net Interest Margin2	3.38		%	3.25		%	3.23		%	3.32		%	3.37		%
Impact of accretion on acquired loans	(0.12)			(0.15)			(0.14)			(0.14)			(0.15)
Impact of PPP loans	(0.02)			(0.05)			(0.06)			(0.03)			(0.08)
Net interest margin excluding PPP and accretion on acquired loans2	3.24		%	3.05		%	3.03		%	3.15		%	3.14		%

Loan Interest Income2	$	69,388		$	67,198		$	60,440		$	136,586		$	122,830
Tax equivalent adjustment to loans	(81)			(80)			(92)			(161)			(184)
Loan interest income excluding tax equivalent adjustment	$	69,307		$	67,118		$	60,348		$	136,425		$	122,646

Table of Contents

Third Second Third Nine Months Ended
Quarter Quarter Quarter September 30,
(In thousands, except per share data) 2021 2021 2020 2021 2020
Noninterest Income $ 19,028 $ 15,322 $ 16,946 $ 52,021 $ 46,640
Securities (gains) losses, net 30 55 (4) 199 (1,253)
Total adjustments to noninterest income 30 55 (4) 199 (1,253)
Total Adjusted Noninterest Income $ 19,058 $ 15,377 $ 16,942 $ 52,220 $ 45,387
Noninterest Expense 55,268 $ 45,784 $ 51,674 $ 147,172 $ 141,871
Merger-related charges (6,281) (509) (4,281) (7,371) (9,074)
Amortization of intangibles (1,306) (1,212) (1,497) (3,729) (4,436)
Business continuity expenses — — — — (307)
Branch reductions and other expense initiatives1
(870) (663) (464) (1,982) (464)
Total adjustments to noninterest expense (8,457) (2,384) (6,242) (13,082) (14,281)
Total Adjusted Noninterest Expense $ 46,811 $ 43,400 $ 45,432 $ 134,090 $ 127,590
Income Taxes $ 7,049 $ 8,785 $ 6,992 $ 25,991 $ 14,025
Tax effect of adjustments 2,081 598 1,530 3,256 3,195
Total adjustments to income taxes 2,081 598 1,530 3,256 3,195
Adjusted income taxes 9,130 9,383 8,522 29,247 17,220
Adjusted net income $ 29,350 $ 33,251 $ 27,336 $ 98,098 $ 58,250
Earnings per diluted share, as reported $ 0.40 $ 0.56 $ 0.42 $ 1.56 $ 0.91
Adjusted diluted earnings per share 0.51 0.59 0.50 1.74 1.09
Average diluted shares outstanding 57,645 55,901 54,301 56,441 53,325
Adjusted Noninterest Expense $ 46,811 $ 43,400 $ 45,432 $ 134,090 $ 127,590
Foreclosed property expense and net (loss) gain on sale (66) 90 (512) 89 (442)
Provision for unfunded commitments (133) — (756) (133) (980)
Net Adjusted Noninterest Expense $ 46,612 $ 43,490 $ 44,164 $ 134,046 $ 126,168
Revenue $ 90,352 $ 81,124 $ 80,449 $ 255,757 $ 240,592
Total adjustments to revenue 30 55 (4) 199 (1,253)
Impact of FTE adjustment 131 131 118 393 348
Adjusted revenue on a fully tax equivalent basis $ 90,513 $ 81,310 $ 80,563 $ 256,349 $ 239,687
Adjusted Efficiency Ratio 51.50 % 53.49 % 54.82 % 52.29 % 52.64 %
Net Adjusted Noninterest Expense as a Percent of Average Tangible Assets2
1.95 % 1.98 % 2.24 % 2.03 % 2.26 %
Net Interest Income $ 71,324 $ 65,802 $ 63,503 $ 203,736 $ 193,952
Impact of FTE adjustment 131 131 118 393 348
Net interest income including FTE adjustment 71,455 65,933 63,621 204,129 194,300
Noninterest income 19,028 15,322 16,946 52,021 46,640
Noninterest expense 55,268 45,784 51,674 147,172 141,871
Pre-Tax Pre-Provision Earnings 35,215 35,471 28,893 108,978 99,069
Adjustments to noninterest income 30 55 (4) 199 (1,253)
Adjustments to noninterest expense (8,656) (2,294) (7,510) (13,126) (15,703)
Adjusted Pre-Tax Pre-Provision Earnings $ 43,901 $ 37,820 $ 36,399 $ 122,303 $ 113,519

~~Table of Contents~~

Third Second Third Nine Months Ended
Quarter Quarter Quarter September 30,
(In thousands, except per share data) 2021 2021 2020 2021 2020
Average Assets $ 9,753,734 $ 9,025,846 $ 8,086,890 $ 9,092,958 $ 7,686,611
Less average goodwill and intangible assets (254,980) (235,964) (228,801) (242,820) (228,795)
Average Tangible Assets $ 9,498,754 $ 8,789,882 $ 7,858,089 $ 8,850,138 $ 7,457,816
Return on Average Assets (ROA) 0.93 % 1.40 % 1.11 % 1.29 % 0.84 %
Impact of removing average intangible assets and related amortization 0.07 0.08 0.09 0.08 0.09
Return on Average Tangible Assets (ROTA) 1.00 1.48 1.20 1.37 0.93
Impact of other adjustments for Adjusted Net Income 0.23 0.04 0.18 0.11 0.11
Adjusted Return on Average Tangible Assets 1.23 % 1.52 % 1.38 % 1.48 % 1.04 %
Average Shareholders' Equity $ 1,248,547 $ 1,170,395 $ 1,061,807 $ 1,185,530 $ 1,023,107
Less average goodwill and intangible assets (254,980) (235,964) (228,801) (242,820) (228,795)
Average Tangible Equity $ 993,567 $ 934,431 $ 833,006 $ 942,710 $ 794,312
Return on Average Shareholders' Equity 7.29 % 10.76 % 8.48 % 9.93 % 6.32 %
Impact of removing average intangible assets and related amortization 2.27 3.12 2.87 2.96 2.39
Return on Average Tangible Common Equity (ROTCE) 9.56 13.88 11.35 12.89 8.71
Impact of other adjustments for Adjusted Net Income 2.16 0.39 1.71 1.02 1.09
Adjusted Return on Average Tangible Common Equity 11.72 % 14.27 % 13.06 % 13.91 % 9.80 %
Loan Interest Income2
$ 64,517 $ 60,440 $ 60,573 $ 187,347 $ 189,026
Accretion on acquired loans (3,483) (2,886) (3,254) (9,237) (10,529)
Interest and fees on PPP loans (5,917) (5,127) (1,719) (17,930) (6,787)
Loan interest income excluding PPP and accretion on acquired loans2
$ 55,117 $ 52,427 $ 55,600 $ 160,180 $ 171,710
Yield on Loans2
4.49 % 4.33 % 4.11 % 4.40 % 4.51 %
Impact of accretion on acquired loans (0.24) (0.21) (0.22) (0.21) (0.25)
Impact of PPP loans (0.22) 0.01 0.33 (0.09) 0.11
Yield on loans excluding PPP and accretion on acquired loans2
4.03 % 4.13 % 4.22 % 4.10 % 4.37 %
Net Interest Income2
$ 71,455 $ 65,933 $ 63,621 $ 204,129 $ 194,300
Accretion on acquired loans (3,483) (2,886) (3,254) (9,237) (10,529)
Interest and fees on PPP loans (5,917) (5,127) (1,719) (17,930) (6,787)
Net interest income excluding PPP and accretion on acquired loans2
$ 62,055 $ 57,920 $ 58,648 $ 176,962 $ 176,984
Net Interest Margin2
3.22 % 3.23 % 3.40 % 3.32 % 3.67 %
Impact of accretion on acquired loans (0.15) (0.14) (0.17) (0.15) (0.20)
Impact of PPP loans (0.18) (0.06) 0.19 (0.12) 0.04
Net interest margin excluding PPP and accretion on acquired loans2
2.89 % 3.03 % 3.42 % 3.05 % 3.51 %
Loan Interest Income2
$ 64,517 $ 60,440 $ 60,573 $ 187,347 $ 189,026
Tax equivalent adjustment to loans (93) (92) (86) (277) (255)
Loan interest income excluding tax equivalent adjustment $ 64,424 $ 60,348 $ 60,487 $ 187,070 $ 188,771

~~Table of Contents~~


		Third		Second		Third		Nine Months Ended					Second		First		Second		Six Months Ended
		Quarter		Quarter		Quarter		September 30,					Quarter		Quarter		Quarter		June 30,
(In thousands, except per share data)	(In thousands, except per share data)	2021		2021		2020		2021		2020		(In thousands, except per share data)	2022		2022		2021		2022		2021

Securities Interest Income2	Securities Interest Income2	$	7,956	$	6,745	$	7,129	$	21,186	$	23,702	Securities Interest Income2	$	12,562	$	10,218	$	6,745	$	22,780	$	13,230
Tax equivalent adjustment to securities	Tax equivalent adjustment to securities	(38)		(39)		(32)		(116)		(93)		Tax equivalent adjustment to securities	(36)		(37)		(39)		(73)		(78)
Securities interest income excluding tax equivalent adjustment	Securities interest income excluding tax equivalent adjustment	$	7,918	$	6,706	$	7,097	$	21,070	$	23,609	Securities interest income excluding tax equivalent adjustment	$	12,526	$	10,181	$	6,706	$	22,707	$	13,152

Net Interest Income2	Net Interest Income2	$	71,455	$	65,933	$	63,621	$	204,129	$	194,300	Net Interest Income2	$	81,764	$	76,639	$	65,933	$	158,403	$	132,674
Tax equivalent adjustments to loans	Tax equivalent adjustments to loans	(93)		(92)		(86)		(277)		(255)		Tax equivalent adjustments to loans	(81)		(80)		(92)		(161)		(184)
Tax equivalent adjustments to securities	Tax equivalent adjustments to securities	(38)		(39)		(32)		(116)		(93)		Tax equivalent adjustments to securities	(36)		(37)		(39)		(73)		(78)
Net interest income excluding tax equivalent adjustments	Net interest income excluding tax equivalent adjustments	$	71,324	$	65,802	$	63,503	$	203,736	$	193,952	Net interest income excluding tax equivalent adjustments	$	81,647	$	76,522	$	65,802	$	158,169	$	132,412
1Includes severance, contract termination costs, disposition of branch premises and fixed assets, and other costs to effect the Company's branch consolidation and other expense reduction strategies.	1Includes severance, contract termination costs, disposition of branch premises and fixed assets, and other costs to effect the Company's branch consolidation and other expense reduction strategies.											1Includes severance, contract termination costs, disposition of branch premises and fixed assets, and other costs to effect the Company's branch consolidation and other expense reduction strategies.
2On a fully taxable equivalent basis. All yields and rates have been computed using amortized cost.	2On a fully taxable equivalent basis. All yields and rates have been computed using amortized cost.											2On a fully taxable equivalent basis. All yields and rates have been computed using amortized cost.

Financial Condition

Total assets increased ~~$1.6~~$1.1 billion at ~~September~~June 30, ~~2021,~~2022, or ~~19%~~12%, from December 31, ~~2020,~~2021, reflecting organic growth, the ~~acquisition~~acquisitions of ~~Legacy Bank,~~BBFC and Sabal Palm, which combined added ~~$628.9~~$661.0 million in assets, as well as higher cash and securities balances due to higher customer deposit ~~balances, and additional investments in debt securities.~~balances.

Securities

Information related to yields, maturities, carrying values and fair value of the Company’s debt securities is set forth in “Note D3 – Securities” of the Company’s condensed consolidated financial statements.

At ~~September~~June 30, ~~2021,~~2022, the Company had ~~$1.5~~$1.8 billion in ~~debt~~ securities available-for-sale and ~~$526.5~~$794.8 million in ~~debt~~ securities held-to-maturity. The Company's total debt securities portfolio increased ~~$490.0~~$312.6 million, or ~~31%~~14%, from December 31, ~~2020.~~2021.

During the first quarter of 2021, the Company reclassified debt securities with an amortized cost of $210.8 million from available-for-sale to held-to-maturity. These securities had net unrealized gains of $0.8 million at the date of transfer, which will continue to be reported in accumulated other comprehensive income and will be amortized over the remaining life of the securities as an adjustment of yield. The effect on interest income of the amortization of net unrealized gains is offset by the amortization of the premium on the securities transferred. The Company has the intent and ability to retain these securities until maturity.

~~During the nine~~six months ended ~~September~~June 30, ~~2021,~~2022, there were ~~$1.1 billion~~$680.3 million of debt security purchases and ~~$520.4~~$213.9 million in ~~aggregated~~ paydowns and ~~maturities.~~maturities over the same period. The Company obtained securities in the first quarter of 2022 as part of the acquisition of BBFC which had a fair value of $26.0 million and were immediately sold with no gain or loss recognized. For the ~~nine~~six months ended ~~September~~June 30, 2021, there were $669.2 million of debt security purchases and $361.9 million in paydowns and maturities over the same period. For the six months ended June 30, 2021, the Company had ~~$57.2~~$56.2 million in proceeds from the sales of securities with a net ~~losses~~loss of $0.1 million. For the nine months ended September 30, 2020, there were $626.7 million debt security purchases and aggregated maturities and principal paydowns totaled $237.1 million. Proceeds from sales of securities during the nine months ended September 30, 2020 totaled $96.7 million, with net gains of $1.1 million.

Debt securities generally return principal and interest monthly. At September 30, 2021, available-for-sale debt securities had gross unrealized losses of $9.9 million and gross unrealized gains of $16.4 million, compared to gross unrealized losses of $2.1 million and gross unrealized gains of $28.7 million at December 31, 2020. The modified duration of the available-for-sale portfolio at ~~September~~June 30, ~~2021~~2022 was ~~3.2,~~3.3, compared to ~~3.8~~3.1 at December 31, ~~2020.~~2021.

At June 30, 2022, available-for-sale securities had gross unrealized losses of $163.2 million and gross unrealized gains of $0.7 million, compared to gross unrealized losses of $20.9 million and gross unrealized gains of $11.5 million at December 31, 2021. The decline in value was the result of rising interest rates and changes in interest rate spreads during the period. The Company assesses securities in an unrealized loss position on a quarterly basis. As of June 30, 2022, the Company expected to recover the entire amortized cost basis of these securities, and therefore, no allowance for credit losses was recorded.

The credit quality of the Company’s securities holdings is primarily investment grade. U.S. ~~Treasuries, obligations of~~Treasury and U.S. government agencies and obligations of U.S. government sponsored entities totaled ~~$1.7~~$2.1 billion, or 81%, of the total portfolio.

The portfolio includes ~~$75.8~~$166.2 million, with a fair value of ~~$77.2~~$158.8 million, in private label residential and commercial mortgage-backed securities and collateralized mortgage obligations. Included are ~~$50.7~~$146.5 million, with a fair value of ~~$51.2~~$139.6 million, in private label mortgage-backed residential securities with weighted average credit support of ~~34%~~22%. The collateral underlying these mortgage investments includes both fixed-rate and adjustable-rate mortgage loans. Non-guaranteed agency commercial securities ~~total $25.0~~totaled $19.7 million, with a fair value of ~~$26.0~~$19.3 million. These securities have weighted average credit support of ~~12%~~21%. The collateral underlying these mortgages ~~are~~is primarily pooled multifamily loans.

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The Company also has invested ~~$277.3 million, with a fair value of $277.3~~$315.2 million in uncapped 3-month LIBOR floating rate collateralized loan obligations. Collateralized loan obligations ~~(“CLOs”). CLOs~~ are special purpose vehicles ~~and the Company’s holdings~~that purchase ~~nearly all~~ first lien broadly syndicated corporate loans ~~across a diversified band of industries~~ while providing support to senior tranche investors. As of ~~September~~June 30, ~~2021, the Company held 32 total positions,~~2022, all of ~~which~~the Company’s collateralized loan obligations were in AAA/AA tranches with average credit support of ~~31%~~32%. The Company utilizes credit models with assumptions of loan level defaults, recoveries, and prepayments to evaluate each security for potential credit losses. The result of this analysis did not indicate expected credit losses.

Held-to-maturity securities consist solely of mortgage-backed securities and collateralized mortgage obligations guaranteed by government agencies.

At ~~September~~June 30, ~~2021,~~2022, the Company has determined that all debt securities in an unrealized loss position are the result of both broad investment type spreads and the current interest rate environment. Management believes that each investment will recover any price depreciation over its holding period as the debt securities move to maturity, and management has the intent and ability to hold these investments to maturity if necessary. Therefore, at ~~September~~June 30, ~~2021,~~2022, no allowance for credit losses has been recorded.

Loan Portfolio

Loans, net of unearned income and excluding the allowance for credit losses, were ~~$5.9~~$6.5 billion at ~~September~~June 30, ~~2021,~~2022, a ~~$170.5~~$616.5 million increase from December 31, ~~2020. Increases include organic growth, along with~~2021. Changes during the ~~acquisition~~first half of ~~Legacy Bank~~2022 included $367.9 million added through bank acquisitions, and the purchase of a $111.3 million residential loan ~~pools. During the nine months ended September 30, 2021, the Company participated~~pool in the ~~most recent round~~first quarter of 2022. Removing the impacts of loans added through acquisitions and the purchased pool, loans grew 7% on an annualized basis in each of the ~~PPP, resulting~~first and second quarters of 2022. The Company expects loan growth to continue, with an annualized growth rate, excluding bank acquisitions, in ~~loan originations~~the high single digits for the remainder of ~~$256.0 million. Increases were offset by $675.1 million in PPP loans forgiven by the SBA during the nine months ended September 30, 2021.~~2022.

For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company originated ~~$728.9~~$834.8 million in commercial and commercial real estate loans, compared to ~~$378.4~~$397.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, an increase of ~~$350.5~~$437.6 million, or ~~93%~~110%. The late-stage loan pipeline for commercial and commercial real estate loans totaled ~~$368.9~~$476.7 million at ~~September~~June 30, ~~2021. Prior year’s production~~2022. The addition of well-established commercial bankers and ~~pipeline reflect~~expansion into new markets across the impact of the onset of the COVID-19 pandemic when the Company purposefully slowed originations. The current year activity reflects the Company’s return to its pre-pandemic credit policy and continuation of strict underwriting guidelines.state has generated disciplined loan growth.

The Company originated ~~$415.6~~$278.5 million in residential loans retained in the portfolio during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~$74.7~~$164.7 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, an increase of ~~$340.8~~$113.7 million, or ~~456%~~69%. Residential loans retained in the portfolio includes ~~$180.8~~the $111.3 million in purchased ~~pools~~residential loan pool consisting of 30-year fixed rate jumbo residential loans purchased in the ~~third~~first quarter of ~~2021~~2022 and athe $38.4 million purchased residential loan pool consisting of 30-year fixed rate jumbo residential loans purchased in the second quarter of 2021. Saleable production ~~increased~~decreased for the ~~nine~~six months ended ~~September~~June 30, ~~2021, representing $353.6~~2022, to $93.9 million ~~versus $347.8~~compared to $258.4 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020, an increase~~2021, reflecting the impact of ~~2%.~~increasing interest rates and limited housing inventory.

Consumer originations totaled ~~$176.8~~$205.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$5.1~~$95.0 million, or 3%86%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase is primarily the result of consumer lending teams that joined in late 2021.

The Company remains committed to sound risk management procedures. Lending policies contain guardrails that pertain to lending by type of collateral and purpose, along with limits regarding loan concentrations and the principal amount of loans. The Company's exposure to commercial real estate lending remains well below regulatory limits (see “Loan Concentrations”).

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The following tables detail loan portfolio composition at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 for portfolio loans, purchased credit deteriorated (“PCD”) and loans purchased which are not considered purchased credit deteriorated (“Non-PCD”) as defined in Note ~~E-Loans.~~4-Loans.


		September 30, 2021									June 30, 2022
(In thousands)	(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total		(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total
Construction and land development	Construction and land development	$	190,344	$	37,067	$	48	$	227,459	Construction and land development	$	320,596	$	29,391	$	38	$	350,025
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	951,119		218,128		32,089		1,201,336		Commercial real estate - owner-occupied	979,173		255,850		19,320		1,254,343
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	1,166,220		428,095		79,272		1,673,587		Commercial real estate - non owner-occupied	1,457,626		438,184		76,730		1,972,540
Residential real estate	Residential real estate	1,278,138		181,344		7,847		1,467,329		Residential real estate	1,442,435		198,901		6,129		1,647,465
Commercial and financial	Commercial and financial	865,064		97,642		19,846		982,552		Commercial and financial	1,018,258		92,610		13,903		1,124,771
Consumer	Consumer	157,916		5,092		11		163,019		Consumer	171,315		3,886		—		175,201
Paycheck Protection Program	Paycheck Protection Program	153,842		36,760		—		190,602		Paycheck Protection Program	10,518		6,685		—		17,203
Totals	Totals	$	4,762,643	$	1,004,128	$	139,113	$	5,905,884	Totals	$	5,399,921	$	1,025,507	$	116,120	$	6,541,548


		December 31, 2020									December 31, 2021
(In thousands)	(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total		(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total
Construction and land development	Construction and land development	$	216,420	$	26,250	$	2,438	$	245,108	Construction and land development	$	199,341	$	31,438	$	45	$	230,824
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	854,769		247,090		39,451		1,141,310		Commercial real estate - owner-occupied	983,517		186,812		27,445		1,197,774
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	1,043,459		323,273		29,122		1,395,854		Commercial real estate - non owner-occupied	1,278,180		382,554		75,705		1,736,439
Residential real estate	Residential real estate	1,155,914		176,105		10,609		1,342,628		Residential real estate	1,261,306		156,957		7,091		1,425,354
Commercial and financial	Commercial and financial	743,846		94,627		16,280		854,753		Commercial and financial	968,318		84,395		16,643		1,069,356
Consumer	Consumer	181,797		6,660		278		188,735		Consumer	169,507		4,658		10		174,175
Paycheck Protection Program	Paycheck Protection Program	515,532		51,429		—		566,961		Paycheck Protection Program	69,503		21,604		—		91,107
Totals	Totals	$	4,711,737	$	925,434	$	98,178	$	5,735,349	Totals	$	4,929,672	$	868,418	$	126,939	$	5,925,029

The amortized cost basis of loans at ~~September~~June 30, ~~2021~~2022 included net deferred costs of ~~$32.1~~$30.8 million on non-PPP portfolio loans and net deferred fees of ~~$5.4~~$0.3 million on PPP loans. At December 31, ~~2020,~~2021, the amortized cost basis included net deferred costs of ~~$22.6~~$31.0 million on non-PPP portfolio loans and net deferred fees of ~~$9.5~~$2.4 million on PPP loans. At ~~September~~June 30, ~~2021,~~2022, the remaining fair value adjustments on acquired loans was ~~$26.6~~a net discount of $21.4 million, or ~~2.3%~~1.8%, of the outstanding acquired loan balances. At December 31, ~~2020,~~2021, the remaining fair value adjustments for acquired loans was ~~$30.2~~a net discount of $23.1 million, or ~~2.9%~~2.3%, of the acquired loan balances. ~~These amounts are~~The discount is accreted into interest income over the remaining lives of the related loans on a level yield basis.

Commercial real estate (“CRE”) loans, inclusive of owner-occupied ~~commercial real estate,~~CRE, increased by ~~$337.8~~$292.7 million, or ~~13%~~10%, in the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, totaling ~~$2.9~~$3.2 billion at ~~September~~June 30, ~~2021~~2022 compared to ~~$2.5~~$2.9 billion at December 31, ~~2020.~~2021. Owner-occupied ~~commercial real estate~~CRE loans represent ~~$1.2~~$1.3 billion, or ~~42%~~39%, of the commercial real estate portfolio.

Fixed-rate and adjustable-rate loans secured by commercial real estate, excluding construction loans, totaled approximately $2.5 billion and $412.6 million, respectively, at September 30, 2021, compared to $2.1 billion and $453.7 million, respectively, at December 31, 2020.

During the nine months ended September 30, 2021, the Company participated in the most recent round of the PPP and originated 2,782 loans totaling $256.0 million. Also during the nine months ended September 30, 2021, $675.1 million in PPP loans were forgiven by the SBA.

At September 30, 2021, Seacoast had $2.2 million of loans with payment accommodations to borrowers financially impacted by the COVID-19 pandemic, none of which have been classified as TDRs, compared to $74.1 million at December 31, 2020. Interest and fees have continued to accrue on these loans during any payment deferral period.

Residential real estate loans increased ~~$124.7~~$222.1 million, or 9%16%, to ~~$1.5~~$1.6 billion as of ~~September~~June 30, ~~2021,~~2022, compared to December 31, ~~2020.~~2021. Substantially all residential mortgage originations have been underwritten to conventional loan agency standards, including loans having balances that exceed agency value limitations. At ~~September~~June 30, ~~2021,~~2022, approximately ~~$315.3~~$314.4 million, or

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~~21%~~ 19%, of the Company’s residential mortgage balances were adjustable 1-4 family mortgage loans, which includes hybrid adjustable-rate mortgages, compared to ~~$436.3~~$278.9 million, or ~~32%~~20%, at December 31, ~~2020.~~2021. Fixed-rate mortgages totaled approximately ~~$0.8 billion,~~$952.0 million, or 56%, at ~~September~~June 30, ~~2021,~~2022, compared to ~~$499.0~~$773.7 million, or ~~37%~~54%, at December 31, ~~2020.~~2021. Home equity lines of credit ~~("HELOCs"~~(“HELOCs”), primarily floating rates, totaled ~~$325.3~~$381.1 million at ~~September~~June 30, ~~2021~~2022 and ~~$341.6~~$336.6 million at December 31, ~~2020.~~2021. Borrowers in the residential real estate portfolio have an average credit score of ~~749.~~750. Specifically for HELOCs, borrowers have an average credit score of 763. The average LTV of our HELOC portfolio is 67% with ~~43%~~37% of the portfolio being in first lien position at ~~September~~June 30, ~~2021,~~2022, compared to an average LTV of ~~68%~~69% with ~~45%~~42% of the portfolio being in the first lien position at December 31, ~~2020.~~2021.

The Company also provides consumer loans, which include installment loans, auto loans, marine loans, and other consumer loans, which decreased ~~$25.7~~$1.0 million, or ~~14%~~1%, to total ~~$163.0~~$175.2 million, compared to ~~$188.7~~$174.2 million at December 31, ~~2020.~~2021. Borrowers in the consumer portfolio have an average credit score of ~~734.~~736.

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At ~~September~~June 30, ~~2021,~~2022, the Company had unfunded loan commitments of ~~$1.8~~$2.2 billion, compared to ~~$1.5~~$2.0 billion at December 31, ~~2020.~~2021.

Loan Concentrations

The Company has developed prudent guardrails to manage loan types that are most impacted by stressed market conditions in order to minimize credit risk concentration to capital. Outstanding balances for commercial and CRE loan relationships greater than $10 million totaled ~~$1.1~~$1.5 billion and represented ~~18%~~22% of the total portfolio at ~~September~~June 30, ~~2021~~2022, compared to ~~$753.7 million,~~$1.2 billion, or ~~13%~~20%, at year-end ~~2020.~~2021.

The Company’s ten largest commercial and commercial real estate funded and unfunded loan relationships at ~~September~~June 30, ~~2021~~2022 aggregated to ~~$294.0~~$378.9 million, of which ~~$193.9~~$228.3 million was funded, compared to ~~$254.3~~$312.0 million at December 31, ~~2020,~~2021, of which ~~$188.0~~$157.8 million was funded. The Company had ~~180~~189 commercial and commercial real estate relationships in excess of $5 million totaling ~~$1.8~~$2.2 billion, of which ~~$1.5~~$1.6 billion was funded at ~~September~~June 30, ~~2021~~2022, compared to ~~135~~174 relationships totaling ~~$1.3~~$1.9 billion at December 31, ~~2020,~~2021, of which ~~$1.2~~$1.4 billion was funded.

Concentrations in total construction and land development loans and total CRE loans are maintained well below regulatory limits. Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital were ~~21%~~29% and ~~175%~~192%, respectively, at ~~September~~June 30, ~~2021,~~2022, compared to ~~23%~~21% and ~~168%~~177%, respectively, at December 31, ~~2020.~~2021. Regulatory guidance suggests limits of 100% and 300%, respectively. On a consolidated basis, construction and land development and commercial real estate loans represent ~~19%~~27% and ~~160%~~176%, respectively, of total consolidated risk based capital. To determine these ratios, the Company defines CRE in accordance with the guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) issued by the federal bank regulatory agencies in 2006 (and reinforced in 2015), which defines CRE loans as exposures secured by land development and construction, including 1-4 family residential construction, multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property (i.e., loans for which 50 percent or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Loans to real estate investment trusts (“REITs”) and unsecured loans to developers that closely correlate to the inherent risks in CRE markets would also be considered CRE loans under the Guidance. Loans on owner-occupied CRE are generally excluded.

At June 30, 2022, the Company had $1.6 billion in loans secured by residential real estate and $3.2 billion in loans secured by commercial real estate, representing 25% and 49% of total loans outstanding, respectively. In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.

Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality

Nonperforming assets (“NPAs”) at ~~September~~June 30, ~~2021~~2022 totaled ~~$46.2~~$28.9 million, and were comprised of ~~$32.6~~$26.4 million of nonaccrual loans, and ~~$13.6~~$2.4 million of other real estate owned (“OREO”). Compared to December 31, ~~2020,~~2021, nonaccrual loans decreased ~~$3.5~~$4.2 million, primarily the result of paydowns. The ~~increase~~decrease in OREO of ~~$0.9~~$11.2 million reflects ~~additions of $3.3 million, and $2.1 million of capital expenditures, offset by $4.1~~$12.8 million in sales and ~~$0.4~~$0.1 million of write-downs, offset by $1.0 million added upon closure of a branch property, $0.1 million in ~~write-downs.~~acquired OREO, and $0.6 million in capital expenditures. Overall, NPAs decreased ~~$2.6~~$15.4 million, or 5%35%, from ~~$48.9~~$44.2 million as of December 31, ~~2020.~~2021. At ~~September~~June 30, ~~2021,~~2022, approximately ~~76%~~66% of nonaccrual loans were secured with real estate. See the tables below for details about nonaccrual loans. At ~~September~~June 30, ~~2021,~~2022, nonaccrual loans ~~were written down by~~reflected cumulative write downs of approximately ~~$7.1~~$4.8 million, including reserves on individually evaluated loans.

Nonperforming loans to total loans outstanding at ~~September~~June 30, ~~2021~~2022 decreased to ~~0.55%~~0.40% from ~~0.63%~~0.52% at December 31, ~~2020.~~2021. Nonperforming assets to total assets at ~~September~~June 30, ~~2021~~2022 decreased to ~~0.47%~~0.27% from ~~0.59%~~0.46% at December 31, ~~2020.~~2021.

The Company’s asset mitigation staff handles all foreclosure actions together with outside legal counsel.

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The Company pursues loan restructurings in select cases where it expects to realize better values than may be expected through traditional collection activities. The Company has worked with retail mortgage customers, when possible, to achieve lower payment structures in an effort to avoid foreclosure. Troubled debt restructurings (“TDRs”) have been a part of the Company’s loss mitigation activities and can include rate reductions, payment extensions and principal deferrals. Company policy requires TDRs that are classified as nonaccrual loans after restructuring remain on nonaccrual until performance can be verified, which usually requires six months of performance under the restructured loan terms. Accruing TDRs totaled $4.0 million at ~~September~~June 30, ~~2021~~2022, compared to ~~$4.2~~$3.9 million at December 31, ~~2020.~~2021. Accruing TDRs are excluded from the nonperforming asset ratios.

~~Beginning in March 2020, in response to the economic downturn resulting from the COVID-19 pandemic, the Company has offered short-term payment deferrals to affected borrowers. As~~

Table of September 30, 2021, pandemic-related deferrals totaled $2.2 million and are not considered TDRs. If economic conditions deteriorate, these borrowers may be unable to resume scheduled payments, which may result in further modification of terms and the potential for classification as a TDR in future periods.Contents

The table below sets forth details related to nonaccrual and accruing restructured loans.


		September 30, 2021									June 30, 2022
		Nonaccrual Loans						Accruing Restructured Loans			Nonaccrual Loans						Accruing Restructured Loans
(In thousands)	(In thousands)	Non-Current		Current		Total				(In thousands)	Non-Current		Current		Total
Construction and land development	Construction and land development	$	—	$	40	$	40	$	39	Construction and land development	$	—	$	11	$	11	$	5
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	256		4,260		4,516		103		Commercial real estate - owner-occupied	131		1,440		1,571		97
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	1,473		3,718		5,191		—		Commercial real estate - non owner-occupied	5,253		1,337		6,590		—
Residential real estate	Residential real estate	6,816		8,222		15,038		3,616		Residential real estate	2,937		6,307		9,244		3,462
Commercial and financial	Commercial and financial	5,059		2,185		7,244		126		Commercial and financial	4,063		4,569		8,632		304
Consumer	Consumer	62		521		583		163		Consumer	78		316		394		154
Total	Total	$	13,665	$	18,947	$	32,612	$	4,047	Total	$	12,462	$	13,980	$	26,442	$	4,022


		December 31, 2020									December 31, 2021
		Nonaccrual Loans						Accruing Restructured Loans			Nonaccrual Loans						Accruing Restructured Loans
(In thousands)	(In thousands)	Non-Current		Current		Total				(In thousands)	Non-Current		Current		Total
Construction and land development	Construction and land development	$	37	$	129	$	166	$	109	Construction and land development	$	—	$	259	$	259	$	12
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	5,682		2,500		8,182		109		Commercial real estate - owner-occupied	261		3,705		3,966		101
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	2,030		6,053		8,083		—		Commercial real estate - non owner-occupied	3,218		2,687		5,905		—
Residential real estate	Residential real estate	4,074		8,418		12,492		3,740		Residential real estate	5,130		7,915		13,045		3,298
Commercial and financial	Commercial and financial	3,777		2,827		6,604		—		Commercial and financial	2,914		3,955		6,869		318
Consumer	Consumer	543		40		583		224		Consumer	46		508		554		188
Total	Total	$	16,143	$	19,967	$	36,110	$	4,182	Total	$	11,569	$	19,029	$	30,598	$	3,917

At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, total TDRs (performing and nonperforming) were comprised of the following loans by type of modification:


		September 30, 2021			December 31, 2020				June 30, 2022			December 31, 2021
(In thousands)	(In thousands)	Number	Amount		Number	Amount		(In thousands)	Number	Amount		Number	Amount
Maturity extended	Maturity extended	52	$	5,263	51	$	5,438	Maturity extended	51	$	4,940	56	$	5,385
Rate reduction	Rate reduction	27	3,119		37	4,275		Rate reduction	20	1,113		25	2,769
Chapter 7 bankruptcies	Chapter 7 bankruptcies	9	313		13	417		Chapter 7 bankruptcies	7	220		1	39
Not elsewhere classified	Not elsewhere classified	6	161		5	160		Not elsewhere classified	6	189		12	378
Total	Total	94	$	8,856	106	$	10,290	Total	84	$	6,461	94	$	8,571

During the ~~nine~~six months ended ~~September~~June 30, 2022, there was one default totaling $2 thousand on a loan that had been modified to a TDR within the preceding twelve months. During the six months ended June 30, 2021, there were two defaults totaling $0.1 ~~million of loans that had been modified in TDRs within the preceding twelve months. During the nine months ended September 30, 2020, there were four defaults totaling $1.4~~ million of loans that had been modified to a TDR within the preceding twelve months. Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring

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agreements. A restructured loan is considered in default when it becomes 90 days or more past due under the modified terms, has been transferred to nonaccrual status, has been charged off or has been transferred to OREO.

In accordance with regulatory reporting requirements, loans are placed on nonaccrual following the Retail Classification of Loan interagency guidance. The accrual of interest is generally discontinued on loans, except consumer loans, that become 90 days past due as to principal or interest unless collection of both principal and interest is assured by way of collateralization, guarantees or other security. Consumer loans that become 120 days past due are generally charged off. The loan carrying value is analyzed and any changes are appropriately made as described above quarterly.

Allowance for Credit Losses on Loans

Management estimates the allowance using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit losses provide the basis for

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estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.

During the ~~third~~second quarter of ~~2021,~~2022, the Company recorded a provision of ~~$5.1~~$0.8 million, reflecting the impact of higher loans ~~outstanding, including~~outstanding. The first quarter of 2022 included a provision of $5.1 million for loans acquired in the ~~Legacy Bank acquisition. Net charge-offs~~BBFC and Sabal Palm acquisitions as well as the impact of organic loan growth during the quarter. The Company reported net recoveries for the ~~third~~second quarter of ~~2021 were $1.4~~2022 of $0.1 million ~~or 0.10% of average loans~~ and, for the four most recent quarters, net charge-offs averaged ~~0.10%~~0.04% of outstanding loans.

The ratio of allowance for credit losses to total loans was 1.39% at June 30, 2022, 1.39% at March 31, 2022, and 1.49% at June 30, 2021. Excluding PPP loans, the ratio of allowance for credit losses to total loans ~~decreased~~at June 30, 2022 was 1.39%, compared to ~~1.54%~~1.40% at ~~September 30, 2021 from~~March 31, 2022 and 1.60% at June 30, 2021.

~~The following tables present the activity in the allowance for credit losses on loans by segment:~~

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Nine Months Ended September 30, 2021
(In thousands) Beginning Balance Initial Impact on Allowance of PCD Loans Acquired During the Period Provision for Credit Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance
Construction and land development $ 4,920 $ — $ (2,438) $ — $ 124 $ (3) $ 2,603
Commercial real estate - owner-occupied 9,868 — (1,216) — — — 8,652
Commercial real estate - non owner-occupied 38,266 1,327 1,817 (1,327) 2 — 40,085
Residential real estate 17,500 — (4,323) (48) 1,008 (10) 14,127
Commercial and financial 18,690 1,719 1,172 (2,855) 798 — 19,524
Consumer 3,489 — (491) (547) 388 (7) 2,832
Paycheck Protection Program — — — — — — —
Totals $ 92,733 $ 3,046 $ (5,479) $ (4,777) $ 2,320 $ (20) $ 87,823

At September 30, 2021, the Company had $1.5 billion in loans secured by residential real estate and $2.9 billion in loans secured by commercial real estate, representing 25% and 49% of total loans outstanding, respectively. In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.

LIBOR Transition

The Company’s LIBOR transition steering committee is responsible for overseeing the execution of the Company’s enterprise-wide LIBOR transition program, and for evaluating and mitigating risks associated with the transition from LIBOR. The LIBOR transition program includes a comprehensive review of the financial products, agreements, contracts, and business processes that may use LIBOR as a reference rate, and the development and execution of strategy to transition away from LIBOR, with appropriate consideration of the potential financial, customer, counterpart, regulatory and legal impacts. The Company continues to execute its LIBOR transition program, and to monitor regulatory and legislative activity to identify any necessary actions and facilitate the transition to alternative reference rates.

As of December 31, 2021, the Company ceased issuance of new LIBOR loans. As of June 30, 2022, the Company has approximately $218 million in existing loans for which the repricing index is tied to LIBOR. The Company's swap agreements and other derivatives are governed by the International Swap Dealers Association (“ISDA”). ISDA has developed fallback language for swap agreements and has established a protocol to allow counterparties to modify legacy trades to include the new fallback language. The Company also invests in securities and has issued subordinated debt tied to LIBOR. The Company continues to monitor regulatory and legislative activity with regard to these products to identify and execute necessary actions to facilitate the transition to alternative reference rates.

Cash and Cash Equivalents and Liquidity Risk Management

Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liability, as well as the risk of not being able to meet unexpected cash needs. Liquidity planning and management are necessary to ensure the ability to fund operations cost effectively and to meet current and future potential obligations such as loan commitments and unexpected deposit outflows.

Funding sources include primarily customer-based deposits, collateral-backed borrowings, brokered deposits, cash flows from operations, cash flows from the loan and investment portfolios and asset sales, primarily secondary marketing for residential real estate mortgages and marine loans. Cash flows from operations are a significant component of liquidity risk management and the Company considers both deposit maturities and the scheduled cash flows from loan and investment maturities and payments when managing risk.

Deposits are a primary source of liquidity. The stability of this funding source is affected by numerous factors, including returns available to customers on alternative investments, the quality of customer service levels, perception of safety and competitive forces. The Company routinely uses debt securities and loans as collateral for secured borrowings. In the event of severe market disruptions, the Company has access to secured borrowings through the FHLB and the Federal Reserve Bank of Atlanta under its borrower-in-custody program.

The Company does not rely on and is not dependent upon off-balance sheet financing or significant amounts of wholesale funding. Brokered ~~certificates of deposit (“CDs”)~~deposits at ~~September~~June 30, ~~2021~~2022 were ~~$20.0~~$106.8 million, ~~a decrease of $213.8~~an increase compared to $8.0 million ~~or 91%, from~~at December 31, ~~2020.~~2021, which reflected the Company’s year-end liquidity management activities.

Cash and cash equivalents, including interest bearing deposits, totaled ~~$1.2 billion~~$901.4 million on a consolidated basis at ~~September~~June 30, ~~2021,~~2022, compared to ~~$404.1~~$737.7 million at December 31, ~~2020.~~2021. Higher cash and cash equivalent balances at ~~September~~June 30, ~~2021~~2022 reflect the benefit of deposits acquired from ~~Legacy Bank~~BBFC and Sabal Palm in addition to favorable organic deposit growth.

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Contractual maturities for assets and liabilities are reviewed to meet current and expected future liquidity requirements. Sources of liquidity are maintained through a portfolio of high quality marketable assets, such as residential mortgage loans, debt securities available-for-sale and interest-bearing deposits. The Company is also able to provide short-term financing of its activities by selling, under an agreement to repurchase, United States Treasury and Government agency debt securities not pledged to secure public deposits or trust funds. At ~~September~~June 30, ~~2021,~~2022, the Company had available unsecured lines of credit of $165.0 million and secured lines of credit, which are subject to change, of ~~$1.3~~$2.2 billion. In addition, the Company had ~~$1.7~~$2.1 billion of debt securities and ~~$694.6~~$744.8 million in residential and commercial real estate loans available as collateral. In comparison, at December 31, ~~2020,~~2021, the Company had available unsecured lines of ~~$135.0~~$165.0 million and secured lines of credit of ~~$1.8~~$1.6 billion, and ~~$1.2~~$1.9 billion of debt securities and ~~$733.3~~$614.2 million in residential and commercial real estate loans available as collateral.

The Company has traditionally relied upon dividends from Seacoast Bank and securities offerings to provide funds to pay the Company’s expenses and to service the Company’s debt. During the ~~third~~second quarter of ~~2021,~~2022, Seacoast Bank distributed ~~$38.3~~$8.4 million to the Company and, at ~~September~~June 30, ~~2021,~~2022, is eligible to distribute dividends to the Company of approximately ~~$194.4~~$169.5 million without prior regulatory approval. At ~~September~~June 30, ~~2021,~~2022, the Company had cash and cash equivalents at the parent of approximately ~~$95.5~~$104.4 million compared to ~~$70.1~~$98.5 million at December 31, ~~2020.~~2021.

Deposits and Borrowings

Customer relationship funding is detailed in the following table for the periods specified:


		September 30,			December 31,				June 30,			December 31,
(In thousands, except ratios)	(In thousands, except ratios)	2021			2020			(In thousands, except ratios)	2022			2021
Noninterest demand	Noninterest demand	$	3,086,466		$	2,289,787		Noninterest demand	$	3,593,201		$	3,075,534
Interest-bearing demand	Interest-bearing demand	1,845,165			1,566,069			Interest-bearing demand	2,269,148			1,890,212
Money market	Money market	1,951,639			1,556,370			Money market	1,911,847			1,651,881
Savings	Savings	834,309			689,179			Savings	946,738			895,019
Time certificates of deposit	Time certificates of deposit	616,593			831,156			Time certificates of deposit	468,019			554,943
Total deposits	Total deposits	$	8,334,172		$	6,932,561		Total deposits	$	9,188,953		$	8,067,589

Customer sweep accounts	Customer sweep accounts	$	105,548		$	119,609		Customer sweep accounts	$	110,578		$	121,565

Noninterest demand deposits as % of total deposits	Noninterest demand deposits as % of total deposits	37		%	33		%	Noninterest demand deposits as % of total deposits	39		%	38		%

The Company’s balance sheet continues to be primarily funded by core deposits.

Total deposits increased ~~$1.4~~$1.1 billion, or ~~20%~~14%, to ~~$8.3~~$9.2 billion at ~~September~~June 30, ~~2021,~~2022, compared to ~~$6.9~~$8.1 billion at December 31, ~~2020.~~2021. The increase ~~is largely the result of significant~~reflects growth in ~~transaction account deposit~~existing customer balances, asthe addition of new ~~clients were onboarded~~customers and ~~existing clients continue to see expansion~~the impact of the BBFC and Sabal Palm acquisitions, which added $166.3 million and $396.0 million, respectively, in ~~cash balances.~~deposits during the first quarter of 2022.

Since December 31, ~~2020,~~2021, interest bearing deposits (interest bearing demand, savings and money market deposits) increased ~~$819.5~~$690.6 million, or ~~21%~~16%, to ~~$4.6~~$5.1 billion, and CDs ~~(excluding brokered CDs)~~ decreased ~~$0.7~~$86.9 million, or ~~0.1%~~16%, to ~~$596.6~~$468.0 million. Noninterest demand deposits were higher by ~~$796.7~~$517.7 million, or ~~35%~~17%, compared to year-end ~~2020,~~2021, totaling ~~$3.1~~$3.6 billion. Noninterest demand deposits represented ~~37%~~39% of total deposits at ~~September~~both June 30, ~~2021~~2022 and ~~33% at~~ December 31, ~~2020.~~2021.

~~During the nine months ended September~~As of June 30, ~~2021, $213.8 million of brokered CDs at an average rate of 1.14% matured. Brokered CDs at September 30, 2021 totaled $20.0 million, compared to $233.8 million at~~2022 and December 31, ~~2020, and mature in~~2021, the ~~fourth quarter of 2021.~~Company did not hold any brokered CDs.

Customer repurchase agreements totaled ~~$105.5~~$110.6 million at ~~September~~June 30, ~~2021,~~2022, decreasing ~~$14.1~~$11.0 million from December 31, ~~2020.~~2021. Repurchase agreements are offered by Seacoast to select customers who wish to sweep excess balances on a daily basis for investment purposes. Public funds comprise a significant amount of the outstanding balance.

The Company participates in programs with third party deposit networks as part of its liquidity management strategy, particularly as it approaches $10 billion in assets. Through these programs, the Company can offer its customers access to FDIC insurance on large balances, and the Company can retain or sell, on an overnight basis, the underlying deposits. The Company expects to remain below $10 billion in assets at year end 2021, and at SeptemberAt June 30, ~~2021, the Company had sold, on an~~

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~~overnight basis, $233.1 million in deposits, compared to $112.7 million at December 31, 2020. These deposits are not included in the Consolidated Balance Sheet.~~

~~No unsecured federal funds purchased were outstanding at September 30, 2021.~~

~~At September 30, 2021~~2022 and December 31, ~~2020,~~2021, borrowings were comprised of subordinated debt of ~~$71.6~~$71.8 million and ~~$71.4~~$71.6 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company, and there were no borrowings from ~~FHLB. For~~FHLB during any of the ~~nine months ended September 30, 2020, FHLB borrowings averaged $180.9 million with a weighted average rate of 1.08%.~~periods presented.

The weighted average interest rate of outstanding subordinated debt related to trust preferred securities was ~~2.37%~~2.85% and ~~3.28%~~2.40% for the ~~nine~~six months ended ~~September~~June 30, 2022 and June 30, 2021, ~~and September 30, 2020,~~ respectively.

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Off-Balance Sheet Transactions

In the normal course of business, the Company may engage in a variety of financial transactions that, under generally accepted accounting principles, either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk.

Lending commitments include unfunded loan commitments and standby and commercial letters of credit. For loan commitments, the contractual amount of a commitment represents the maximum potential credit risk that could result if the entire commitment had been funded, the borrower had not performed according to the terms of the contract, and no collateral had been provided. A large majority of loan commitments and standby letters of credit expire without being funded, and accordingly, total contractual amounts are not representative of actual future credit exposure or liquidity requirements. Loan commitments and letters of credit expose the Company to credit risk in the event that the customer draws on the commitment and subsequently fails to perform under the terms of the lending agreement.

For commercial customers, loan commitments generally take the form of revolving credit arrangements. For retail customers, loan commitments generally are lines of credit secured by residential property. These instruments are not recorded on the balance sheet until funds are advanced under the commitment. Loan commitments were ~~$1.8~~$2.2 billion at ~~September~~June 30, ~~2021~~2022 and ~~$1.5~~$2.0 billion at December 31, ~~2020.~~2021.

Capital Resources

The Company’s equity capital at ~~September~~June 30, ~~2021~~2022 increased ~~$160.1~~$18.8 million, or ~~14%~~1%, from December 31, ~~2020~~2021 to $1.3 billion. Changes in equity included increases from net income of ~~$88.1~~$53.3 million, and the issuance of $94.1 million in equity in connection with the BBFC and Sabal Palm acquisitions, partially offset by the issuance of a common stock dividend totaling ~~$14.9~~$18.5 million and the decrease in accumulated other comprehensive income of ~~$15.1~~$116.5 million ~~primarily~~ attributed to the ~~decrease in~~impact of rising interest rates on the market value of available-for-sale debt securities.

The ratio of shareholders’ equity to period end total assets was ~~13.04%~~12.30% and ~~13.55%~~13.54% at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The ratio of tangible shareholders’ equity to tangible assets was ~~10.62%~~9.74% and ~~11.01%~~11.09% at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The decrease was due to growth in the balance sheet, the result of bank acquisitions ~~PPP loans~~ and ~~associated liquidity.~~deposit growth, and the impact on equity of the decline in value of available-for-sale securities due to rising interest rates in the first half of 2022.

Activity in shareholders’ equity for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 follows:


(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Beginning balance at December 31, 2020 and 2019		$	1,130,402	$	985,639
Beginning balance at December 31, 2021 and 2020						Beginning balance at December 31, 2021 and 2020	$	1,310,736	$	1,130,402
Net income	Net income	88,073		48,417		Net income	53,343		65,129
Cumulative change in accounting principle upon adoption of new accounting pronouncement		—		(16,876)
Issuance of common stock and conversion of options pursuant to acquisition		92,094		62,152
Common stock issued for stock options						Common stock issued for stock options	3,442		2,270
Issuance of common stock and conversion of options pursuant to acquisitions						Issuance of common stock and conversion of options pursuant to acquisitions	94,067		—
Stock compensation, net of Treasury shares acquired	Stock compensation, net of Treasury shares acquired	9,908		4,251		Stock compensation, net of Treasury shares acquired	3,035		2,361
Issuance of common share dividend	Issuance of common share dividend	(14,856)		—		Issuance of common share dividend	(18,510)		(7,246)
Change in accumulated other comprehensive income	Change in accumulated other comprehensive income	(15,101)		14,758		Change in accumulated other comprehensive income	(116,538)		(10,569)
Ending balance at September 30, 2021 and 2020		$	1,290,520	$	1,098,341
Ending balance at June 30, 2022 and 2021						Ending balance at June 30, 2022 and 2021	$	1,329,575	$	1,182,347

Capital ratios are well above regulatory requirements for well-capitalized institutions. Seacoast management's use of risk-based capital ratios in its analysis of the Company’s capital adequacy are “non-GAAP” financial measures. Seacoast management

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uses these measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company. The capital measures are not necessarily comparable to similar capital measures that may be presented by other companies (see “Note J8 – Equity Capital”). See “Reconciliation of Non-GAAP Measures” for more information.

September 30, 2021 Seacoast
(Consolidated) Seacoast
Bank
Minimum to be Well- Capitalized1
Total Risk-Based Capital Ratio 18.56% 17.00% 10.00%
Tier 1 Capital Ratio 17.66 16.10 8.00
Common Equity Tier 1 Ratio (CET1) 16.53 16.10 6.50
Leverage Ratio 11.74 10.71 5.00
1For subsidiary bank only.

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June 30, 2022	Seacoast (Consolidated)	Seacoast Bank	Minimum to be Well- Capitalized1
Total Risk-Based Capital Ratio	17.70%	16.25%	10.00%
Tier 1 Capital Ratio	16.77	15.33	8.00
Common Equity Tier 1 Ratio (CET1)	15.80	15.33	6.50
Leverage Ratio	11.61	10.61	5.00
1For subsidiary bank only.

The Company’s total risk-based capital ratio was ~~18.56%~~17.70% at ~~September~~June 30, ~~2021, an increase~~2022, a decrease from ~~18.51%~~18.21% at December 31, ~~2020. During~~2021, primarily due to growth including the ~~first quarter~~acquisitions of ~~2020, the Company adopted interagency guidance which delays the impact of CECL adoption on capital for two years followed by a three-year phase-in period.~~Sabal Palm and BBFC. At ~~September~~June 30, ~~2021,~~2022, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was ~~10.71%~~10.61%, well above the minimum to be well capitalized under regulatory guidelines.

The Company and Seacoast Bank are subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The appropriate federal bank regulatory authority may prohibit the payment of dividends where it has determined that the payment of dividends would be an unsafe or unsound practice. The Company is a legal entity separate and distinct from Seacoast Bank and its other subsidiaries, and the Company’s primary source of cash and liquidity, other than securities offerings and borrowings, is dividends from its bank subsidiary. Without Office of the Comptroller of the Currency (“OCC”) approval, Seacoast Bank can pay ~~$194.4~~$169.5 million of dividends to the Company.

The OCC and the Federal Reserve have policies that encourage banks and bank holding companies to pay dividends from current earnings, and have the general authority to limit the dividends paid by national banks and bank holding companies, respectively, if such payment may be deemed to constitute an unsafe or unsound practice. If, in the particular circumstances, either of these federal regulators determined that the payment of dividends would constitute an unsafe or unsound banking practice, either the OCC or the Federal Reserve may, among other things, issue a cease and desist order prohibiting the payment of dividends by Seacoast Bank or us, respectively. The board of directors of a bank holding company must consider different factors to ensure that its dividend level, if any, is prudent relative to the organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may occur before the payment date that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company, such as Seacoast, should consult with the Federal Reserve and eliminate, defer, or significantly reduce the bank holding company’s dividends if: (i) its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or (iii) it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

The Company has paid quarterly dividends since the second quarter of 2021. Whether the Company continues to pay quarterly dividends and the amount of any such dividends will be at the discretion of the Company's Board of Directors and will depend on the Company's earnings, financial condition, results of operations, business prospects, capital requirements, regulatory restrictions, and other factors that the Board of Directors may deem relevant. In the second quarter of 2022, the Company's Board of Directors approved a quarterly increase from $0.13 to $0.17 per share.

The Company has seven wholly owned trust subsidiaries that have issued trust preferred stock. Trust preferred securities from acquisitions were recorded at fair value when acquired. All trust preferred securities are guaranteed by the Company on a junior subordinated basis. The Federal Reserve’s rules permit qualified trust preferred securities and other restricted capital elements to be included under Basel III capital guidelines, with limitations, and net of goodwill and intangibles. The Company believes that its trust preferred securities qualify under these revised regulatory capital rules and believes that it can treat all ~~$71.6~~$71.8 million of trust preferred securities as Tier 1 capital. For regulatory purposes, the trust preferred securities are added to the Company’s tangible common shareholders’ equity to calculate Tier 1 capital.

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Critical Accounting Policies and Estimates

The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, (“GAAP”), including prevailing practices within the financial services industry. The preparation of consolidated financial statements requires management to make judgments in the application of certain of its accounting policies that involve significant estimates and assumptions. The Company has established policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements. Management, after consultation with the Company’s Audit Committee, believes the most critical accounting estimates and assumptions that involve the most difficult, subjective and complex assessments are:

•the allowance and the provision for credit ~~losses on loans;~~losses;

•acquisition accounting and purchased loans;

•intangible assets and impairment testing;

•other fair value ~~adjustments;~~measurements;

•impairment of debt securities;~~, and;~~ and

•contingent liabilities.

The following is a discussion of the critical accounting policies intended to facilitate a reader’s understanding of the judgments, estimates and assumptions underlying these accounting policies and the possible or likely events or uncertainties known to the Company that could have a material effect on reported financial information. For more information regarding management’s judgments relating to significant accounting policies and recent accounting pronouncements, see “Note 1-Basis of Presentation” to the Company’s consolidated financial statements.

Allowance ~~and Provision~~ for Credit Losses ~~on Loans–~~– Critical Accounting Policies and Estimates

On January 1, 2020, the Company adopted ASC Topic 326 - Financial Instruments - Credit Losses, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology.

For loans, management estimates the allowance for credit losses using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit losses provide the basis for estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.

The allowance for credit losses is measured on a collective basis when similar risk characteristics exist. The Company has developed an allowance model based on an analysis of probability of default ~~("PD"~~(“PD”) and loss given default ~~("LGD"~~(“LGD”) to determine an expected loss by loan segment. PDs and LGDs are developed by analyzing the average historical loss migration of loans to default.

The allowance estimation process also applies an economic forecast scenario over a three year forecast period. The forecast may utilize one scenario or a composite of scenarios based on management's judgment and expectations around the current and future macroeconomic outlook. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. For portfolio segments with a weighted average life longer than three years, the Company reverts to longer term historical loss experience, adjusted for prepayments, to estimate losses over the remaining life of the loans within each segment.

Adjustments may be made to baseline reserves for some of the loan pools based on an assessment of internal and external influences on credit quality not fully reflected in the quantitative components of the allowance model. These influences may include elements such as changes in concentration, macroeconomic conditions, recent observable asset quality trends, staff turnover, regional market conditions, employment levels and loan growth. Based upon management's assessments of these factors, the Company may apply qualitative adjustments to the allowance.

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Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

The contractual term of a loan excludes expected extensions, renewals, and modification unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring (“TDR”) will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and not unconditionally cancellable by the Company.

The allowance for credit losses on ~~troubled debt restructurings (“TDRs”)~~TDRs is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash

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flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit losses is determining by discounting the expected future cash flows at the original interest rate of the loan.

It is the Company's practice to ensure that the charge-off policy meets or exceeds regulatory requirements. Losses on unsecured consumer loans are recognized at 90 days past due, compared to the regulatory loss criteria of 120 days. In compliance with Federal Financial Institution Examination Council guidelines, secured consumer loans, including residential real estate, are typically charged off or charged down between 120 and 180 days past due, depending on the collateral type. Commercial loans and real estate loans are typically placed on nonaccrual status when principal or interest is past due for 90 days or more, unless the loan is both secured by collateral having realizable value sufficient to discharge the debt in-full and the loan is in process of collection. Loans provided with short-term payment deferrals under the CARES Act or interagency guidance are not considered past due if in compliance with the terms of their deferral. Secured loans may be charged down to the estimated value of the collateral with previously accrued unpaid interest reversed against interest income. Subsequent charge-offs may be required as a result of changes in the market value of collateral or other repayment prospects. Initial charge-off amounts are based on valuation estimates derived from appraisals, broker price opinions, or other market information. Generally, new appraisals are not received until the foreclosure process is completed; however, collateral values are evaluated periodically based on market information and incremental charge-offs are recorded if it is determined that collateral values have declined from their initial estimates.

Note F5 to the financial statements (titled “Allowance for Credit Losses”) summarizes the Company’s allocation of the allowance for credit losses on loans by loan segment and provides detail regarding charge-offs and recoveries for each loan segment and the composition of the loan ~~portfolio at September 30, 2021 and December 31, 2020.~~portfolio.

Acquisition Accounting and Purchased Loans – Critical Accounting Policies and Estimates

The Company accounts for acquisitions under ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. All loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820, Fair Value Measurement. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of expected principal, interest and other cash flows. Loans are identified as purchased credit deteriorated (“PCD”) when they have experienced more-than-insignificant deterioration in credit quality since origination. An allowance for expected credit losses on PCD loans is recorded at the date of acquisition through an adjustment to the loans’ amortized cost basis. In contrast, expected credit losses on loans not considered PCD are recognized in net income at the date of acquisition.

Fair value estimates for acquired assets and assumed liabilities are based on the information available, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.

Intangible Assets and Impairment Testing – Critical Accounting Policies and Estimates

Intangible assets consist of goodwill, core deposit intangibles and ~~mortgage~~loan servicing rights. Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions. The core deposit intangible represents the excess intangible value of acquired deposit customer ~~relationships.~~relationships as determined by valuation specialists. Core deposit intangibles are amortized on a straight-line basis, and are evaluated for indications of potential impairment at least annually. Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis. ~~The Company~~We performed an annual

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impairment test of goodwill, as required by ASC Topic 350, Intangibles—Goodwill and Other, in the fourth quarter of ~~2020,~~2021, and concluded that no impairment existed.

Other Fair Value Measurements – Critical Accounting Policies and Estimates

The fair value of collateral-dependent loans, OREO and repossessed assets is typically based on current appraisals, which are reviewed quarterly to determine if fair value adjustments are necessary based on known changes in the market and/or the project assumptions. When necessary, the appraised value may be adjusted based on more recent appraisal assumptions received by the Company on other similar properties, the tax assessed market value, comparative sales and/or an internal

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valuation. Collateral-dependent loans are loans where repayment is solely dependent on the liquidation of the collateral or operation of the collateral for repayment.

The Company also holds 11,330 shares of Visa Class B stock, which, following resolution of ~~Visa~~Visa’s litigation, will be converted to Visa Class A shares. Under the current conversion ~~ratio~~rate that became effective ~~September 27, 2019,~~June 29, 2022, the Company ~~would~~expects to receive ~~1.6228~~1.6059 shares of Class A stock for each share of Class B stock for a total of ~~18,386~~18,194 shares of Visa Class A stock. The Company’s ownership ~~of Visa stock~~ is related to prior ownership in Visa's network while Visa operated as a ~~cooperative, and~~cooperative. This ownership is recorded on the Company's financial records at a zero basis.

Impairment of Debt Securities – Critical Accounting Policies and Estimates

~~Expected~~On January 1, 2020, the Company adopted ASC Topic 326 – Financial Instruments – Credit Losses, which requires expected credit losses on both held-to-maturity (“HTM”) and available-for-sale (“AFS”) securities ~~are~~to be recognized through a valuation ~~allowance.~~allowance instead of as a direct write-down to the amortized cost basis of the security. For HTM securities, the guidance requires management ~~estimates~~to estimate expected credit losses over the remaining expected life and ~~recognizes~~recognize this estimate as an allowance for credit losses. An AFS security is considered impaired if the fair value is less than amortized cost basis. For AFS securities, if any portion of the decline in fair value is related to credit, the amount of allowance is determined as the portion related to credit, limited to the difference between the amortized cost basis and the fair value of the security. If the fair value of the security increases in subsequent periods, or changes in factors used within the credit loss assessment result in a change in the estimated credit loss, the Company would reflect the change by decreasing the allowance. If the Company has the intent to sell or believes it is more likely than not that it will be required to sell an impaired AFS security before recovery of the amortized cost basis, the credit loss is recorded as a direct write-down of the amortized cost basis. Declines in the fair value of AFS securities that are not considered credit related are recognized in Accumulated Other Comprehensive Income on the Company’s Consolidated Balance Sheet.

Seacoast analyzes AFS debt securities quarterly for credit losses. The analysis is performed on an individual security basis for all securities where fair value has declined below amortized cost. Fair value is based upon pricing obtained from third party pricing services. Based on internal review procedures and the fair values provided by the pricing services, the Company believes that the fair values provided by the pricing services are consistent with the principles of ASC Topic 820, Fair Value Measurement. However, on occasion pricing provided by the pricing services may not be consistent with other observed prices in the market for similar securities. Using observable market factors, including interest rate and yield curves, volatilities, prepayment speeds, loss severities and default rates, the Company may at times validate the observed prices using a discounted cash flow model and using the observed prices for similar securities to determine the fair value of its securities.

The Company utilizes both quantitative and qualitative assessments to determine if a security has a credit loss. Quantitative assessments are based on a discounted cash flow method. Qualitative assessments consider a range of factors including: percent decline in fair value, rating downgrades, subordination, duration, amortized loan-to-value, and the ability of the issuers to pay all amounts due in accordance with the contractual terms.

Contingent Liabilities – Critical Accounting Policies and Estimates

Seacoast is subject to contingent liabilities, including judicial, regulatory and arbitration proceedings, and tax and other claims arising from the conduct of the Company's business activities. These proceedings include actions brought against the Company and/or its subsidiaries with respect to transactions in which the Company and/or its subsidiaries acted as a lender, a financial adviser, a broker or acted in a related activity. Accruals are established for legal and other claims when it becomes probable that the Company will incur an expense and the amount can be reasonably estimated. Company management, together with attorneys, consultants and other professionals, assesses the probability and estimated amounts involved in a contingency. Throughout the life of a contingency, the Company or its advisers may learn of additional information that can affect the

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assessments about probability or about the estimates of amounts involved. Changes in these assessments can lead to changes in recorded reserves. In addition, the actual costs of resolving these claims may be substantially higher or lower than the amounts reserved for the claims. At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had no significant accruals for contingent liabilities and had no known pending matters that could potentially be significant.

Interest Rate Sensitivity

Fluctuations in interest rates may result in changes in the fair value of the Company’s financial instruments, cash flows and net interest income. This risk is managed using simulation modeling to calculate the most likely interest rate risk utilizing estimated loan and deposit growth. The objective is to optimize the Company’s financial position, liquidity, and net interest income while limiting their volatility.

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Senior management regularly reviews the overall interest rate risk position and evaluates strategies to manage the risk. The Company's Asset and Liability Management Committee ~~("ALCO"~~(“ALCO”) uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a twelve-month period is subjected to instantaneous changes in market rates of 100 basis point increases up to 200 basis points of change on net interest income and is monitored on a quarterly basis.

The following table presents the ALCO simulation model's projected impact of a change in interest rates on the projected baseline net interest income for the 12 and 24 month periods beginning on ~~October~~July 1, ~~2021,~~2022, holding all ~~other changes in~~balances on the balance sheet static. This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve.


		% Change in Projected Baseline Net			% Change in Projected Baseline Net
Change in Interest Rates	Change in Interest Rates	Interest Income		Change in Interest Rates	Interest Income
		1-12 months	13-24 months		1-12 months	13-24 months
+2.00%	+2.00%	11.4%	15.1%	+2.00%	10.3%	14.6%
+1.00%	+1.00%	5.6%	7.7%	+1.00%	5.1%	7.2%
Current	Current	—%	—%	Current	—%	—%
-1.00%	-1.00%	(1.8%)	(7.5%)	-1.00%	(3.4%)	(7.7%)

The Company had a positive gap position based on contractual and prepayment assumptions for the next 12 months, with a positive cumulative interest rate sensitivity gap as a percentage of total earning assets of ~~30.8%~~27.1% at ~~September~~June 30, ~~2021.~~2022. This result includes assumptions for core deposit re-pricing ~~validated for the Company by an independent~~from a statistical study commissioned from a third party consulting group.

The computations of interest rate risk do not necessarily include certain actions management may undertake to manage this risk in response to changes in interest rates. Derivative financial instruments, such as interest rate swaps, options, caps, floors, futures and forward contracts may be utilized as components of the Company’s risk management profile.

Effects of Inflation and Changing Prices

The condensed consolidated financial statements and related financial data presented herein have been prepared in accordance with U.S. GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money, over time, due to inflation.

Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the general level of inflation. However, inflation affects financial institutions by increasing their cost of goods and services purchased, as well as the cost of salaries and benefits, occupancy expense, and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings, and shareholders’ equity. Mortgage originations and re-financings tend to slow as interest rates increase, and higher interest rates likely will reduce the Company’s earnings from such activities and the income from the sale of residential mortgage loans in the secondary market.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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See also Management’s discussion and analysis “Interest Rate Sensitivity.”

Market risk refers to potential losses arising from changes in interest rates, and other relevant market rates or prices.

Interest rate risk, defined as the exposure of net interest income and Economic Value of Equity, or “EVE,” to adverse movements in interest rates, is the Company’s primary market risk, and mainly arises from the structure of the balance sheet (non-trading activities). The Company is also exposed to market risk in its investing activities. The Company’s Asset/Liability Committee, or “ALCO,” meets regularly and is responsible for reviewing the interest rate sensitivity position of the Company and establishing policies to monitor and limit exposure to interest rate risk. The policies established by the ALCO are reviewed and approved by the Company’s Board of Directors. The primary goal of interest rate risk management is to control exposure to

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interest rate risk, within policy limits approved by the Board. These limits reflect the Company’s tolerance for interest rate risk over short-term and long-term horizons.

The Company also performs valuation analyses, which are used for evaluating levels of risk present in the balance sheet that might not be taken into account in the net interest income simulation analyses. Whereas net interest income simulation highlights exposures over a relatively short time horizon, valuation analysis incorporates all cash flows over the estimated remaining life of all balance sheet positions. The valuation of the balance sheet, at a point in time, is defined as the discounted present value of asset cash flows minus the discounted value of liability cash flows, the net result of which is the EVE. The sensitivity of EVE to changes in the level of interest rates is a measure of the longer-term re-pricing risks and options risks embedded in the balance sheet. In contrast to the net interest income simulation, which assumes interest rates will change over a period of time, EVE uses instantaneous changes in rates.

As with the net interest income simulation model, assumptions about the timing and variability of balance sheet cash flows are critical in the EVE analysis. Particularly important are the assumptions driving prepayments and the expected changes in balances and pricing of the indeterminate life deposit portfolios. Core deposits are a more significant funding source for the Company, making the lives attached to core deposits more important to the accuracy of EVE modeling. The Company periodically reassesses its assumptions regarding the indeterminate lives of core deposits utilizing an independent third party resource to assist. With lower interest rates over a prolonged period, the average lives of core deposits have trended higher and favorably impacted model estimates of EVE for higher rates.

The following table presents the projected impact of a change in interest rates on the balance sheet. This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve.

% Change in

Change in Interest Rates

Economic Value of

Change in Interest Rates

Economic Value of

Equity

+2.00%

20.7%

+2.00%

11.0%

+1.00%

11.2%

+1.00%

6.0%

Current

—%

Current

—%

-1.00%

(12.1%)

-1.00%

(6.6%)

While an instantaneous and severe shift in interest rates is used in this analysis to provide an estimate of exposure under an extremely adverse scenario, a gradual shift in interest rates would have a much more modest impact. Since EVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon, i.e., the next fiscal year. Further, EVE does not take into account factors such as future balance sheet growth, changes in product mix, change in yield curve relationships, and changing product spreads that could mitigate the adverse impact of changes in interest rates.

Item 4. CONTROLS AND PROCEDURES

The Company’s management, with the participation of its chief executive officer and chief financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of ~~September~~June 30, ~~2021~~2022 and concluded that those disclosure controls and procedures are effective.

During the quarter ended ~~September~~June 30, ~~2021,~~2022, there have been no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

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Part II OTHER INFORMATION

Item 1. Legal Proceedings

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Item 1A. Risk Factors

In addition to the other information set forth in this report, you should consider the factors discussed in “Part I, Item 1A. Risk Factors” in our report on Form 10-K for the year ended December 31, ~~2020,~~2021, which could materially affect our business, financial condition and prospective results. The risks described in this report, in our Form 10-K or our other SEC filings are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes with respect to the risk factors disclosed in our Annual Report on form 10-K for the year ended December 31, ~~2020.~~2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the ~~nine~~six month period ended ~~September~~June 30, ~~2021,~~2022, the Company repurchased shares of its common stock as indicated in the following table:

Period
Total
Number of
Shares
Purchased1
Average Price
Paid Per Share Total Number of
Shares Purchased
as part of Public
Announced Plan Maximum
Value of
Shares that May
Yet be Purchased
Under the Plan
(in thousands)
1/1/21 to 1/31/21 4,776 $ 29.45 — $ 100,000
2/1/21 to 2/28/21 — — — 100,000
3/1/21 to 3/31/21 10,127 36.90 — 100,000
Total - 1st Quarter 14,903 $ 34.51 — $ 100,000
4/1/21 to 4/30/21 44,152 36.52 — 100,000
5/1/21 to 5/31/21 45 37.07 — 100,000
6/1/21 to 6/30/21 — — — 100,000
Total - 2nd Quarter 44,197 $ 36.52 — $ 100,000
7/1/21 to 7/31/21 3,051 34.26 — 100,000
8/1/21 to 8/31/21 199 30.39 — 100,000
9/1/21 to 9/30/21 — — — 100,000
Total - 3rd Quarter 3,250 $ 34.30 — 100,000
Year to Date 2021 62,350 $ 35.91 — $ 100,000
1Shares purchased from January 1, 2021 through September 30, 2021 represent shares surrendered to the Company to satisfy tax withholding related to the exercise of stock options and the vesting of share-based awards.


Period	Total Number of Shares Purchased1	Average Price Paid Per Share		Total Number of Shares Purchased as part of Public Announced Plan	Maximum Value of Shares that May Yet be Purchased Under the Plan (in thousands)
1/1/22 to 1/31/22	940	$	35.39	—	$	100,000
2/1/22 to 2/28/22	—	—		—	100,000
3/1/22 to 3/31/22	—	—		—	100,000
Total - 1st Quarter	940	$	35.39	—	$	100,000
4/1/22 to 4/30/22	39,489	34.34		—	100,000
5/1/22 to 5/31/22	—	—		—	100,000
6/1/22 to 6/30/22	—	—		—	100,000
Total - 2nd Quarter	39,489	$	34.34	—	$	100,000





1Shares purchased from January 1, 2022 through June 30, 2022 represent shares surrendered to the Company to satisfy tax withholding related to the exercise of stock options and the vesting of share-based awards.

On December ~~17, 2020,~~15, 2021, the Company's Board of Directors authorized the renewal of the Company’s share repurchase program, under which the Company may, from time to ~~repurchase~~time, purchase up to $100 million of its shares of outstanding common stock. Under the share repurchase program, which will expire on December 31, ~~2021,~~2022, repurchases will be made, if at all, in accordance with applicable securities laws and may be made from time to time in the open market, by block purchase or by negotiated transactions. The amount and timing of repurchases, if any, will be based on a variety of factors, including share acquisition price, regulatory limitations, market conditions and other factors. The program does not obligate the Company to purchase any of its shares, and may be terminated or amended by the Board of Directors at any time prior to its expiration date. As of ~~September~~June 30, ~~2021,~~2022, no shares of the Company's common stock had been repurchased under the program.

Item 3. Defaults upon Senior Securities

None.

~~Item 4. Mine Safety Disclosures~~

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Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits



			Exhibit 2.1 Agreement and Plan of Merger dated ~~August 23, 2021~~March 29, 2022 by and among the Company, Seacoast Bank, ~~Business Bank of Florida, Corp.~~Apollo Bancshares, Inc. and ~~Florida Business~~Apollo Bank incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed ~~August 27, 2021.~~April 1, 2022.

			Exhibit ~~2.2~~2.2 Agreement and Plan of Merger dated ~~August 23, 2021~~May 4, 2022 by and among the Company, Seacoast Bank, ~~Sabal Palm Bancorp, Inc.~~Drummond Banking Company and ~~Sabal Palm~~Drummond Community Bank incorporated herein by reference from Exhibit ~~2.2~~2.1 to the Company’s Form 8-K, filed ~~August 27, 2021.~~May 10, 2022.

			Exhibit 3.1.1 Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q, filed May 10, 2006.

			Exhibit 3.1.2 Articles of Amendment to the Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed December 23, 2008.

			Exhibit 3.1.3 Articles of Amendment to the Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.4 to the Company's Form S-1, filed June 22, 2009.

			Exhibit 3.1.4 Articles of Amendment to the Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.1 to the Company's Form 8-K, filed July 20, 2009.

			Exhibit 3.1.5 Articles of Amendment to the Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed December 3, 2009.

			Exhibit 3.1.6 Articles of Amendment to the Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K/A, filed July 14, 2010.

			Exhibit 3.1.7 Articles of Amendment to the Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed June 25, 2010.

			Exhibit 3.1.8 Articles of Amendment to the Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed June 1, 2011.

			Exhibit 3.1.9 Articles of Amendment to the Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed December 13, 2013.

			Exhibit 3.1.10 Articles of Amendment to the Amended and Restated Articles of Incorporation Incorporated herein by reference from Exhibit 3.1 to the Company's Form 8K, filed May 30, 2018.

			Exhibit 3.2 Amended and Restated By-laws of the Company Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed October 26, 2020.



			Exhibit 31.1			Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
			Exhibit 31.2			Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
			Exhibit 32.1			Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
			Exhibit 32.2			Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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			Exhibit 101			The following materials from Seacoast Banking Corporation of Florida’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021~~2022 formatted in Inline XBRL: (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity and (vi) the Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
			Exhibit 104			The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021,~~2022, formatted in Inline XBRL.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			SEACOAST BANKING CORPORATION OF FLORIDA


~~November 3, 2021~~August 4, 2022			/s/ Charles M. Shaffer
			Charles M. Shaffer
			~~President~~Chairman and Chief Executive Officer


~~November 3, 2021~~August 4, 2022			/s/ Tracey L. Dexter
			Tracey L. Dexter
			Executive Vice President and Chief Financial Officer

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	Three Months Ended September 30, 2021
(In thousands)	Beginning Balance		Initial Allowance on PCD Loans Acquired During the Period		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	$	4,053	$	—	$	(1,459)	$	—	$	10	$	(1)	$	2,603
Commercial real estate - owner-occupied	8,676		—		(24)		—		—		—		8,652
Commercial real estate - non owner-occupied	34,807		1,327		5,278		(1,327)		—		—		40,085
Residential real estate	12,543		—		1,456		(27)		158		(3)		14,127
Commercial and financial	18,016		1,719		(2)		(535)		326		—		19,524
Consumer	3,032		—		(158)		(163)		126		(5)		2,832
Paycheck Protection Program	—		—		—		—		—		—		—
Totals	$	81,127	$	3,046	$	5,091	$	(2,052)	$	620	$	(9)	$	87,823


	August 21, 2020
(In thousands)	Book Balance		Fair Value
Loans:
Construction and land development	$	9,197	$	8,851
Commercial real estate - owner-occupied	77,936		75,215
Commercial real estate - non owner-occupied	76,014		71,171
Residential real estate	23,548		23,227
Commercial and financial	72,745		68,096
Consumer	2,748		2,694
PPP loans	55,005		54,180
Total acquired loans	$	317,193	$	303,434


(In thousands)	Initially Measured March 13, 2020		Measurement Period Adjustments		As Adjusted March 13, 2020
Assets:
Cash	$	34,749	$	—	$	34,749
Investment securities	447		—		447
Loans	146,839		(62)		146,777
Bank premises and equipment	6,086		—		6,086
Core deposit intangibles	819		—		819
Goodwill	6,799		62		6,861
Other assets	1,285		20		1,305
Total assets	$	197,024	$	20	$	197,044
Liabilities:
Deposits	$	173,741	$	—	$	173,741
Other liabilities	1,386		20		1,406
Total liabilities	$	175,127	$	20	$	175,147


	March 13, 2020
(In thousands)	Book Balance		Fair Value
Loans:
Construction and land development	$	9,493	$	9,012
Commercial real estate - owner-occupied	46,221		45,171
Commercial real estate - non owner-occupied	36,268		35,079
Residential real estate	47,569		47,043
Commercial and financial	9,659		9,388
Consumer	1,132		1,084
Total acquired loans	$	150,342	$	146,777