What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-05 · 206 added, 127 removed, 1011 unchanged (25% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands, except per share data) 2021 2020 2021 2020

29 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2021 2020 2021 2020

2 unchanged sentences

Available-for-sale securities:

Unrealized gains (losses) on available-for-sale securities, 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, and tax expense of $ 3.6 million for each of the three and six months ended June 30, 2020

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 $ 11 thousand for the three and six months ended June 30, 2021, respectively, and tax expense of $ 12 thousand and $ 25 thousand for the three and six months ended June 30, 2020, respectively

Reclassification adjustment for losses (gains) included in net income, net of tax benefit of $ 19 thousand for each of the three and six months ended June 30, 2021, and tax expense of $ 0.3 million for each of the three and six months ended June 30, 2020

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

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 $ 4 thousand and $ 51 thousand for the three and six months ended June 30, 2021, respectively

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 ) —

4 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

June 30, December 31,

September 30, December 31,

(In thousands, except share data) 2021 2020

5 unchanged sentences

Securities available-for-sale (at fair value) 1,546,155 1,398,157

Securities held-to-maturity (fair value $ 489.3 million at June 30, 2021 and $ 192.2 million at December 31, 2020)

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

18 unchanged sentences

Shareholders' Equity

Common stock, par value $ 0.10 per share, authorized 120,000,000 shares, issued 55,830,068 and outstanding 55,436,036 at June 30, 2021, and authorized 120,000,000 , issued 55,584,979 and outstanding 55,243,226 shares at December 31, 2020

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

Other shareholders' equity 1,284,685 1,124,878

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2021 2020

35 unchanged sentences

Additions to bank premises and equipment ( 1,697 ) ( 1,373 )

Net cash provided by (used in) investing activities 65,590 ( 363,598 )

Net cash used in investing activities $ ( 129,217 ) $ ( 382,095 )

See notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2021 2020

1 unchanged sentence

Net increase in deposits $ 906,690 $ 826,686

Net increase in repurchase agreements 364 6,004

Net (decrease) increase in repurchase agreements ( 14,061 ) 3,387

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

8 unchanged sentences

Cash paid during the period for taxes 28,200 21,712

Recognition of operating lease right-of-use assets 35 52

Recognition of operating lease liabilities 35 52

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

Supplemental disclosure of non-cash investing activities:

12 unchanged sentences

(In thousands) Shares Amount Total

Balance at March 31, 2021 55,294 $ 5,529 $ 858,688 $ 290,420 $ ( 8,693 ) $ 9,405 $ 1,155,349

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

2 unchanged sentences

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 June 30, 2021 142 15 3,910 24,164 ( 1,487 ) 396 26,998

Balance at June 30, 2021 55,436 $ 5,544 $ 862,598 $ 314,584 $ ( 10,180 ) $ 9,801 $ 1,182,347

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

Comprehensive

4 unchanged sentences

(In thousands) Shares Amount Total

Balance at March 31, 2020

Balance at June 30, 2020

52,991 $ 5,299 $ 811,321 $ 204,726 $ ( 8,037 ) $ 17,294 $ 1,030,603

3 unchanged sentences

Common stock issued for stock options 1 — 16 — — — 16

Three months ended June 30, 2020

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 June 30, 2020

Balance at September 30, 2020

55,169 $ 5,517 $ 854,188 $ 227,354 $ ( 7,941 ) $ 19,223 $ 1,098,341

11 unchanged sentences

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 )

Six months ended June 30, 2021

Nine months ended September 30, 2021

3,106 311 103,552 73,217 ( 1,861 ) ( 15,101 ) 160,118

Balance at June 30, 2021

Balance at September 30, 2021

58,349 $ 5,835 $ 959,644 $ 329,918 $ ( 10,146 ) $ 5,269 $ 1,290,520

12 unchanged sentences

Issuance of common stock, pursuant to acquisition 3,163 316 61,836 — — — 62,152

Six months ended June 30, 2020

Nine months ended September 30, 2020

3,655 366 67,946 31,541 ( 1,909 ) 14,758 112,702

Balance at June 30, 2020 52,991 $ 5,299 $ 811,321 $ 204,726 $ ( 8,037 ) $ 17,294 $ 1,030,603

Balance at September 30, 2020

55,169 $ 5,517 $ 854,188 $ 227,354 $ ( 7,941 ) $ 19,223 $ 1,098,341

See notes to unaudited condensed consolidated financial statements.

10 unchanged sentences

Certain prior period amounts have been reclassified to conform to the current period presentation.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other period.

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 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.

8 unchanged sentences

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 six months ended June 30, 2021, no options to purchase shares of the Company's common stock were anti-dilutive, compared to 508,000 and 489,000 shares that were excluded in the computation of diluted earnings per share for the three and six months ended June 30, 2020, respectively.

Three Months Ended June 30, Six Months Ended June 30,

For the three and nine months ended September 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.

Three Months Ended September 30, Nine Months Ended September 30,

(Dollars in thousands, except per share data) 2021 2020 2021 2020

12 unchanged sentences

Note D – Securities

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

June 30, 2021

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

September 30, 2021

(In thousands) Amortized

30 unchanged sentences

Totals $ 184,484 $ 7,818 $ ( 123 ) $ 192,179

Proceeds from sales of securities for the three and six months ended June 30, 2021 were $ 56.2 million, resulting in gross gains of $ 0.2 million and gross losses of $ 0.3 million.

For the three months ended June 30, 2020, proceeds from sales of securities were $ 64.5 million, which resulted in gross gains of $ 2.3 million and gross losses of $ 1.1 million.

For the six months ended June 30, 2020, proceeds from sales of securities were $ 92.3 million, which resulted in gross gains of $ 2.4 million and gross losses of $ 1.3 million.

Also included in “Securities gains (losses), net” is an increase of $ 18 thousand and a decrease of $ 0.1 million for the three and six months ended June 30, 2021, respectively, and increases of $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2020, respectively, in the value of a CRA-qualified mutual fund.

Proceeds from sales of securities were $ 1.0 million for the three months ended September 30, 2021, with no gain or loss recognized.

For the nine months ended September 30, 2021, proceeds from sales of securities were $ 57.2 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), net” is a decrease of $ 30 thousand and a decrease of $ 0.1 million for the three and nine months ended September 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 a CRA-qualified mutual fund.

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, as it has the ability and intent to hold these securities to maturity.

1 unchanged sentence

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 June 30, 2021, debt securities with a fair value of $ 388.1 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 June 30, 2021, by contractual maturity, are shown below.

At September 30, 2021, debt securities with a fair value of $ 385.5 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 30, 2021, 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.

September 30, 2021

Held-to-Maturity Available-for-Sale

13 unchanged sentences

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.

June 30, 2021

September 30, 2021

Less Than 12 Months 12 Months or Longer Total

9 unchanged sentences

Collateralized loan obligations 64,232 ( 58 ) 9,459 ( 47 ) 73,691 ( 105 )

Obligations of state and political subdivisions 5,443 ( 57 ) — — 5,443 ( 57 )

Totals $ 742,721 $ ( 9,017 ) $ 27,767 $ ( 833 ) $ 770,488 $ ( 9,850 )

12 unchanged sentences

Totals $ 332,099 $ ( 1,530 ) $ 73,338 $ ( 568 ) $ 405,437 $ ( 2,098 )

At June 30, 2021, the Company had $ 5.9 million of unrealized losses on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $ 543.3 million.

At September 30, 2021, the Company had $ 9.4 million of unrealized losses on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $ 675.4 million.

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 guarantee of principal and interest payments and the high credit rating of the portfolio provide 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 June 30, 2021, no allowance for credit losses has been recorded.

At June 30, 2021, the Company had $ 0.2 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of $ 16.7 million.

The implied government

guarantee of principal and interest payments and the high credit rating of the portfolio provide 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 30, 2021, no allowance for credit losses has been recorded.

At September 30, 2021, the Company had $ 0.2 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.

1 unchanged sentence

Therefore, at June 30, 2021, no allowance for credit losses has been recorded.

At June 30, 2021, the Company had $ 0.2 million in unrealized losses in uncapped 3-month LIBOR floating rate collateralized loan obligations ("CLOs") having a fair value of $ 91.6 million.

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") having a fair value of $ 73.7 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 June 30, 2021, these positions are in AAA and AA tranches, with average credit support of 34 % and 23 %, respectively.

As of September 30, 2021, these positions are in AAA and AA tranches, with average credit support of 37 % and 24 %, respectively.

The Company evaluates the securities for potential credit losses by modeling expected loan-level defaults, recoveries, and prepayments for each CLO security.

Therefore, at June 30, 2021, no allowance for credit losses has been recorded.

Therefore, at September 30, 2021, 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.

1 unchanged sentence

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 June 30, 2021, no allowance for credit losses has been recorded.

Included in other assets at June 30, 2021 is $ 31.2 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value.

As a result, as of September 30, 2021, no allowance for credit losses has been recorded.

Included in other assets at September 30, 2021 is $ 31.5 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 may have a significant adverse effect on the fair value of these cost method investment securities.

Also included in other assets is a $ 9.4 million investment in a CRA-qualified mutual fund carried at fair value.

Accrued interest receivable on AFS and HTM debt securities of $ 2.6 million and $ 0.8 million at June 30, 2021, respectively, and $ 3.2 million and $ 0.4 million at December 31, 2020, respectively, is also included in other assets.

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.

10 unchanged sentences

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 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.

These loans are viewed

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

Loans are primarily written based on conventional loan agency guidelines, including loans that exceed agency value limitations.

8 unchanged sentences

• Paycheck Protection Program ("PPP"):

Loans originated under a temporary program established by the CARES Act, and extended by the Economic Aid Act.

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.

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

June 30, 2021

September 30, 2021

(In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total

17 unchanged sentences

Totals $ 4,711,737 $ 925,434 $ 98,178 $ 5,735,349

The amortized cost basis of loans at June 30, 2021 included net deferred costs of $ 25.2 million on non-PPP portfolio loans and net deferred fees of $ 10.6 million on PPP loans.

The amortized cost basis of loans at September 30, 2021 included net deferred costs of $ 32.1 million on non-PPP portfolio loans and net deferred fees of $ 5.4 million on PPP loans.

At December 31, 2020, the amortized cost basis included net deferred costs of $ 22.6 million on non-PPP portfolio loans and net deferred fees of $ 9.5 million on PPP loans.

At June 30, 2021, the remaining fair value adjustments on acquired loans were $ 24.4 million, or 3.0 %, of the outstanding acquired loan balances, compared to $ 30.2 million, or 2.9 %, of the acquired loan balances at December 31, 2020.

At September 30, 2021, the remaining fair value adjustments on acquired loans were $ 26.6 million, or 2.3 %, of the outstanding acquired loan balances, compared to $ 30.2 million, or 2.9 %, of the acquired loan balances at December 31, 2020.

These amounts are accreted into interest income over the remaining lives of the related loans on a level yield basis.

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

The following tables present the status of net loan balances as of June 30, 2021 and December 31, 2020.

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

The following tables present the status of net loan balances as of September 30, 2021 and December 31, 2020.

Loans on short-term payment deferral at the reporting date are reported as current.

June 30, 2021

September 30, 2021

(In thousands) Current Accruing

30 unchanged sentences

Total Loans $ 5,866,282 $ 4,233 $ 943 $ 1,814 $ 32,612 $ 5,905,884

1 Paycheck 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.

December 31, 2020

32 unchanged sentences

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 $ 0.4 million and $ 0.3 million in interest income on nonaccrual loans during the three months ended June 30, 2021 and 2020, respectively.

The Company recognized $ 0.6 million and $ 0.4 million in interest income on nonaccrual loans during the six months ended June 30, 2021 and 2020, respectively.

The Company recognized $ 0.3 million and $ 0.1 million in interest income on nonaccrual loans during the three months ended September 30, 2021 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.

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

June 30, 2021

September 30, 2021

(In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses

18 unchanged sentences

The following table presents collateral-dependent loans as of:

(In thousands) June 30, 2021 December 31, 2020

(In thousands) September 30, 2021 December 31, 2020

Construction and land development $ 31 $ 189

18 unchanged sentences

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

June 30, 2021

September 30, 2021

(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Total

31 unchanged sentences

Total $ 364,563 $ 119,527 $ 111,288 $ 136,131 $ 137,509 $ 252,705 $ 345,606 $ 1,467,329

June 30, 2021

September 30, 2021

(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Total

94 unchanged sentences

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 $ 6.8 million, or 0.1 %, of total non-PPP loans as of June 30, 2021.

Types of outstanding accommodations at June 30, 2021 included a combination of one or more of the following:

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) June 30, 2021 December 31, 2020

(In thousands) September 30, 2021 December 31, 2020

Construction and land development $ — $ 1,032

8 unchanged sentences

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.

The following table presents loans that were modified in a troubled debt restructuring during the three and six months ended:

Three Months Ended June 30,

The following table presents loans that were modified in a troubled debt restructuring during the three and nine months ended:

Three Months Ended September 30,

(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

6 unchanged sentences

Totals 1 $ 152 $ 152 1 $ 41 $ 41

Six Months Ended June 30,

Nine Months Ended September 30,

6 unchanged sentences

Totals 5 $ 373 $ 373 8 $ 570 $ 570

The TDRs described above resulted in a specific allowance for credit losses of $ 0.2 million as of June 30, 2021 and $ 0.4 million as of June 30, 2020.

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 six months ended June 30, 2020, there were three defaults totaling $ 1.4 million of loans to a single borrower that had been modified to a TDR within the preceding twelve months.

The TDRs described above resulted in a specific allowance for credit losses of $ 0.2 million as of September 30, 2021 and September 30, 2020.

During the nine months ended September 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.

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, $ 6,000 and $ 21,000 for the three months ended June 30, 2021, and 2020, respectively, and $ 11,000 and $ 46,000 for the six months ended June 30, 2021, and 2020, respectively, was included in interest income and represents the change in present value attributable to the passage of time.

For loans measured based on the present value of expected future cash flows, $ 9,000 and $ 19,000 for the three months ended September 30, 2021, and 2020, respectively, and $ 20,000 and $ 65,000 for the nine months ended September 30, 2021, and 2020, respectively, was included in interest income and represents the change in present value attributable to the passage of time.

Note F – Allowance for Credit Losses

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

(In thousands) Beginning

Balance Provision

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Losses Charge-

9 unchanged sentences

Totals $ 81,127 $ 3,046 $ 5,091 $ ( 2,052 ) $ 620 $ ( 9 ) $ 87,823

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(In thousands) Beginning

Balance Provision

Balance Initial Allowance on PCD Loans Acquired During the Period

Losses Charge-

9 unchanged sentences

Totals $ 91,250 $ 5,763 $ ( 1,245 ) $ ( 2,175 ) $ 439 $ ( 19 ) $ 94,013

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

(In thousands) Beginning

Balance Provision

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Losses Charge-

9 unchanged sentences

Totals $ 92,733 $ 3,046 $ ( 5,479 ) $ ( 4,777 ) $ 2,320 $ ( 20 ) $ 87,823

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(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

12 unchanged sentences

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 June 30, 2021, the Company utilized Moody’s most recent “U.S.

As of September 30, 2021, 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 the potential for increasing COVID-19 infections, including from variants, and the resulting potential erosion in consumer confidence, and the risk that government stimulus programs are less effective than expected.

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.

In the Construction and Land Development segment, the decrease in reserves during the quarter reflects improved economic variables relating to residential real estate.

In the Construction and Land Development segment, the decrease in reserves during the quarter reflects lower loan balances and improved economic variables relating to residential real estate.

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, the decrease in reserves is primarily the result of improved economic variables relating to unemployment.

In the Commercial Real Estate - Owner-Occupied segment, increases in the allowance resulting from loan growth were offset by the impact of improved economic variables relating to unemployment.

Risk characteristics include but are not limited to, collateral type, loan seasoning, and lien position.

In the Commercial Real Estate - Non Owner-Occupied segment, the decrease in reserves reflects lower loan balances and improved economic forecast variables including lower unemployment.

In the Commercial Real Estate - Non Owner-Occupied segment, the increase in reserves reflects higher loan balances, partially offset by improved economic forecast variables including lower unemployment.

Repayment is often dependent upon rental income from the successful operation of the underlying property.

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The Residential Real Estate segment includes first mortgages secured by residential property, and home equity lines of credit.

The decrease in reserves reflects lower loan balances and improved economic forecast variables including lower unemployment.

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.

Risk characteristics considered for this segment include, but are not limited to, collateral type, lien position, 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 primarily attributed to improvement in economic forecast

variables including unemployment, partially offset by higher loan balances.

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.

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Risk characteristics considered for this segment include, but are not limited to, collateral type, loan to value ratios, loan seasoning and FICO score.

Nominal changes in the reserve during the quarter reflect changes in underlying economic variables.

The decline in the reserve during the quarter reflects lower loan balances and improved economic forecast variables.

Balances outstanding under the Paycheck Protection Program are guaranteed by the U.S.

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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 June 30, 2021 and December 31, 2020 is shown in the following tables:

June 30, 2021

The Company’s loan portfolio and related allowance at September 30, 2021 and December 31, 2020 is shown in the following tables:

September 30, 2021

Individually Evaluated Collectively Evaluated Total

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No net gains or losses have been recognized to date on these instruments.

As of June 30, 2021, the interest rate swaps had an aggregate notional value of $ 182.1 million, with a fair value of $ 9.5 million recorded in other assets and other liabilities.

As of September 30, 2021, the interest rate swaps had an aggregate notional value of $ 180.6 million, with a fair value of $ 9.1 million recorded in other assets and other liabilities.

As of December 31, 2020, the interest rate swaps had an aggregate notional value of $ 182.4 million, with a fair value of $ 13.3 million recorded in other assets and other liabilities.

The weighted average maturity was 7.2 years at June 30, 2021 and 7.5 years at December 31, 2020.

The weighted average maturity was 6.9 years at September 30, 2021 and 7.5 years at December 31, 2020.

Interest Rate Floors Designated as Cash Flow Hedges

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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 six months ended June 30, 2021, the Company recognized a loss through other comprehensive income of $ 0.1 million and $ 0.3 million, respectively, and reclassified $ 57 thousand and $ 100 thousand, respectively, out of accumulated other comprehensive income and into interest income.

As of June 30, 2021 and December 31, 2020, the interest rate floors had a fair value of $ 0.7 million and $ 1.0 million, respectively, recorded in other assets in the consolidated balance sheet.

For the three and nine months ended September 30, 2021, the Company recognized a loss through other comprehensive income of $ 0.2 million and $ 0.5 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 30, 2021 and December 31, 2020, the interest rate floors had a fair value of $ 0.5 million and $ 1.0 million, respectively, recorded in other assets in the consolidated balance sheet.

Over the next twelve months the Company expects to reclassify $ 0.4 million from accumulated other comprehensive income into interest income related to these agreements.

(In thousands) Notional Amount Fair Value Balance Sheet Category

At June 30, 2021

At September 30, 2021

Back-to-back swaps $ 180,610 $ 9,110 Other Assets and Other Liabilities

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Company securities pledged were as follows by collateral type and maturity as of:

(In thousands) June 30, 2021 December 31, 2020

(In thousands) September 30, 2021 December 31, 2020

Fair value of pledged securities - overnight and continuous:

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Note I – Noninterest Income and Expense

Details of noninterest income and expenses for the three and six months ended June 30, 2021 and 2020 are as follows:

Three Months Ended June 30, Six Months Ended June 30,

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

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Note J – Equity Capital

The Company is well capitalized and at June 30, 2021, 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.

The Company is well capitalized and at September 30, 2021, 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 K – Contingent Liabilities

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Note L – Fair Value

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

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

(In thousands) Fair Value

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(Level 2) Significant

At June 30, 2021

At September 30, 2021

Financial Assets

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The Company also enters into an offsetting swap with a correspondent bank.

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

providing a contract for fixed interest payments for the customer.

These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer.

The fair value of these derivatives is based on a discounted cash flow approach.

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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 June 30, 2021 and December 31, 2020.

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

(In thousands) June 30, 2021 December 31, 2020

None of the loans were 90 days or more past due or on nonaccrual as of September 30, 2021 and December 31, 2020.

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

(In thousands) September 30, 2021 December 31, 2020

Aggregate fair value $ 49,597 $ 68,890

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A significant unobservable input in the income approach is the estimated capitalization rate for a given piece of collateral.

At June 30, 2021 capitalization rates utilized to determine fair value of the underlying collateral averaged approximately 7.2 %.

At September 30, 2021 capitalization rates utilized to determine fair value of the underlying collateral averaged approximately 7.0 %.

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 $ 14.3 million with a specific reserve of $ 4.1 million at June 30, 2021, compared to $ 16.5 million with a specific reserve of $ 7.7 million at December 31, 2020.

For loans classified as Level 3, changes included loan additions of $ 3.7 million offset by $ 1.5 million in paydowns and charge-offs for the six months ended June 30, 2021.

Collateral-dependent loans measured at fair value totaled $ 14.2 million with a specific reserve of $ 4.3 million at September 30, 2021, compared to $ 16.5 million with a specific reserve of $ 7.7 million at December 31, 2020.

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 :

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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 June 30, 2021, changes during the six months ended included additions of $ 1.3 million offset by sales and writedowns of $ 1.6 million.

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.

There were no such transfers during the six months ended June 30, 2021 and 2020.

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 June 30, 2021 and December 31, 2020 is as follows:

There were no such transfers during the nine months ended September 30, 2021 and 2020.

(In thousands) Carrying Amount Quoted Prices in Active Markets for Identical Assets

1 unchanged sentence

(Level 2) Significant Unobservable Inputs

June 30, 2021

September 30, 2021

Financial Assets

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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 June 30, 2021 and December 31, 2020:

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 30, 2021 and December 31, 2020:

Held-to-maturity debt securities :

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Note M – Business Combinations

Proposed Acquisition of Legacy Bank of Florida

On March 23, 2021, the Company announced that it had entered into an agreement and plan of merger with Legacy Bank of Florida (“Legacy”).

Pursuant to the terms of the merger agreement, Legacy, headquartered in Boca Raton, FL, will be merged with and into Seacoast Bank.

Legacy operates five branches in Broward and Palm Beach counties in Florida’s largest metropolitan statistical area with $ 476.0 million in loans and $ 485.6 million in deposits as of June 30, 2021.

All regulatory and shareholder approvals have been received and the acquisition is expected to close in August 2021.

Proposed Acquisition of Sabal Palm Bancorp, Inc.

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 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.

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 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.

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 five 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 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 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.

(In thousands) Initially Measured

August 6, 2021

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

Deposits 494,921

Other liabilities 42,705

Total liabilities $ 537,626

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

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.

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 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 bank, Freedom Bank, was merged with and into Seacoast Bank.

Simultaneously, upon completion of the merger of Fourth Street and the Company, Fourth Street's wholly owned subsidiary

bank, Freedom Bank, was merged with and into Seacoast Bank.

Prior to the acquisition, Freedom Bank operated two branches in St.

16 unchanged sentences

(In thousands) Initially Measured

(In thousands)

August 21, 2020

27 unchanged sentences

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.

The Company believes the deposits assumed in the acquisition have an intangible value.

17 unchanged sentences

The Company recognized goodwill of $ 6.9 million for this acquisition that is nondeductible for tax purposes.

The adjustment reflected in the table below are the result of information obtained subsequent to the initial measurement.

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 adjustments reflected in the table below are the result of information obtained subsequent to the initial measurement.

(In thousands) Initially Measured

27 unchanged sentences

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.

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.

Pro-Forma Information

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, as follows:

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands, except per share amounts) 2021 2020 2021 2020

Net interest income $ 73,309 $ 68,164 $ 216,682 $ 207,388

Net income 43,401 24,098 104,521 39,930

EPS - basic $ 0.75 $ 0.42 $ 1.81 $ 0.72

EPS - diluted 0.74 0.44 1.79 0.71

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements