What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-03 · 237 added, 334 removed, 883 unchanged (39% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

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

Three Months Ended March 31,

(In thousands, except per share data) 2022 2021

11 unchanged sentences

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)

Service charges on deposit accounts 2,801 2,338

Interchange income 4,128 3,820

Wealth management income 2,659 2,323

Mortgage banking fees 1,686 4,225

Marine finance fees 191 189

SBA gains 156 287

BOLI income 1,334 859

Other 2,870 3,744

15,825 17,785

Securities losses, net ( 452 ) ( 114 )

Total Noninterest Income 15,373 17,671

Noninterest Expense:

Salaries and wages 28,219 21,393

Employee benefits 5,501 4,980

Outsourced data processing costs 6,156 4,468

Telephone / data lines 733 785

Occupancy 3,986 3,789

Furniture and equipment 1,426 1,254

Marketing 1,171 1,168

Legal and professional fees 4,789 2,582

FDIC assessments 789 526

Amortization of intangibles 1,446 1,211

Foreclosed property expense and net gain on sale ( 164 ) ( 65 )

Provision for credit losses on unfunded commitments 142 —

Other 4,723 4,029

Total Noninterest Expense 58,917 46,120

Income Before Income Taxes 26,422 43,876

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

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

Three Months Ended March 31,

(In thousands) 2022 2021

2 unchanged sentences

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

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

Unrealized losses on available-for-sale securities, net of tax benefit of $ 20.6 million and $ 3.1 million for the three months ended March 31, 2022 and 2021, respectively

$ ( 66,012 ) $ ( 10,851 )

Amortization of unrealized gains and losses on securities transferred to held-to-maturity, net of tax expense of $ 7 thousand and $ 6 thousand for the three months ended March 31, 2022 and 2021, respectively

Available-for-sale securities, net of tax $ ( 65,976 ) $ ( 10,827 )

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

Unrealized losses on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax benefit of $ 22 thousand and $ 47 thousand for the three months ended March 31, 2022 and 2021, respectively

( 64 ) ( 138 )

Total other comprehensive income (loss) $ ( 4,532 ) $ 1,929 $ ( 15,101 ) $ 14,758

Comprehensive Income $ 18,412 $ 24,557 $ 72,972 $ 63,175

Total other comprehensive loss $ ( 66,040 ) $ ( 10,965 )

Comprehensive (Loss) Income $ ( 45,452 ) $ 22,754

See notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, December 31,

March 31, December 31,

(In thousands, except share data) 2022 2021

5 unchanged sentences

Securities available-for-sale (at fair value) 1,706,619 1,644,319

Securities held-to-maturity (fair value $ 518.5 million at September 30, 2021 and $ 192.2 million at December 31, 2020)

Securities held-to-maturity (fair value $ 709.5 million at March 31, 2022 and $ 627.4 million at December 31, 2021)

747,004 638,640

18 unchanged sentences

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

Common stock, par value $ 0.10 per share, authorized 120,000,000 shares, issued 61,640,882 and outstanding 61,238,897 at March 31, 2022, and authorized 120,000,000 , issued 58,909,369 and outstanding 58,504,250 shares at December 31, 2021

Other shareholders' equity 1,350,161 1,304,886

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2022 2021

11 unchanged sentences

Deferred income taxes 866 2,320

Losses (gains) on sale of securities 73 ( 1,102 )

Gains on sale of loans ( 2,324 ) ( 5,570 )

2 unchanged sentences

Changes in operating assets and liabilities, net of effects from acquired companies:

Net decrease (increase) in other assets 4,899 ( 27,735 )

Net decrease in other assets 15,471 4,658

Net (decrease) increase in other liabilities ( 3,001 ) 1,659

13 unchanged sentences

Purchase of FHLB and Federal Reserve Bank Stock ( 3,347 ) ( 55 )

Net cash from bank acquisition 98,100 71,965

Purchase of bank owned life insurance ( 50,000 ) —

Net cash from bank acquisitions 208,933 —

Additions to bank premises and equipment ( 825 ) ( 341 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2022 2021

1 unchanged sentence

Net increase in deposits $ 613,899 $ 453,188

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

Net decrease in repurchase agreements ( 643 ) ( 10,438 )

Stock based employee benefit plans 3,509 434

6 unchanged sentences

Cash paid during the period for interest $ 1,673 $ 3,695

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

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 3,370 —

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

Supplemental disclosure of non-cash investing activities:

Transfer of debt securities from available-for-sale to held-to-maturity $ — $ 210,805

Unsettled purchases of debt securities available-for-sale 8,064 —

Transfers from loans to other real estate owned — 5,552

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

8 unchanged sentences

(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

Comprehensive

Income (Loss)

Common Stock Paid-in

Capital Retained

Earnings Treasury

(In thousands) Shares Amount Total

Balance at June 30, 2020

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

Comprehensive income — — — 22,628 — 1,929 24,557

Stock based compensation expense 39 — 1,948 — — — 1,948

Common stock transactions related to stock based employee benefit plans 18 6 ( 6 ) — 96 — 96

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

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

Comprehensive

Income (Loss)

Common Stock Paid-in

Capital Retained

Earnings Treasury

(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

55,243 $ 5,524 $ 856,092 $ 256,701 $ ( 8,285 ) $ 20,370 $ 1,130,402

Comprehensive income — — — 20,588 — ( 66,040 ) ( 45,452 )

2 unchanged sentences

Common stock issued for stock options 178 18 3,385 — — — 3,403

Issuance of common stock, pursuant to acquisition 2,687 269 86,218 — — — 86,487

Conversion of options, pursuant to acquisition — — 5,607 — — — 5,607

Issuance of common stock, pursuant to acquisitions 2,550 255 89,979 — — — 90,234

Conversion of options, pursuant to acquisitions — — 3,833 — — — 3,833

Dividends on common stock ($ 0.13 per share)

— — — ( 7,994 ) — — ( 7,994 )

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

Three months ended March 31, 2022 2,735 274 98,611 12,594 110 ( 66,040 ) 45,549

Balance at March 31, 2022 61,239 $ 6,124 $ 1,062,462 $ 371,192 $ ( 10,459 ) $ ( 73,034 ) $ 1,356,285

Comprehensive

9 unchanged sentences

Common stock issued for stock options 31 3 837 — — — 840

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

Three months ended March 31, 2021

51 5 2,596 33,719 ( 408 ) ( 10,965 ) 24,947

Balance at September 30, 2020

Balance at March 31, 2021

55,294 $ 5,529 $ 858,688 $ 290,420 $ ( 8,693 ) $ 9,405 $ 1,155,349

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A – Basis of Presentation

Note 1 – Basis of Presentation

Basis of Presentation:

6 unchanged sentences

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

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.

Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 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, 2021.

4 unchanged sentences

Specific areas, among others, requiring the application of 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.

Note C – Earnings per Share

Recently Issued Accounting Standards, Not Yet Adopted

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.

Note 2 – 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 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,

For the three months ended March 31, 2022 and March 31, 2021, no options to purchase shares of the Company's common stock were anti-dilutive.

Three Months Ended March 31,

(Dollars in thousands, except per share data) 2022 2021

11 unchanged sentences

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 D – Securities

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

Note 3 – Securities

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

March 31, 2022

(In thousands) Amortized

30 unchanged sentences

Totals $ 638,640 $ 3,828 $ ( 15,070 ) $ 627,398

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.

During the three months ended March 31, 2022, securities with a fair value of $ 26.0 million obtained in the acquisition of Business Bank of Florida Corp.

were immediately sold.

No gain or loss was recognized on the sale.

There were no other sales of securities during the three months ended March 31, 2022.

There were no sales of securities for the three months ended March 31, 2021.

Also included in “Securities losses, net” is a decrease of $ 0.5 million for the three months ended March 31, 2022, and a decrease of $ 0.1 million for the three months ended March 31, 2021, in the value of an investment in shares of a mutual fund that invests in CRA-qualified debt securities.

During the 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 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.

At March 31, 2022, debt securities with a fair value of $ 446.7 million were pledged primarily as collateral for public deposits and secured borrowings.

The amortized cost and fair value of securities at March 31, 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.

September 30, 2021

March 31, 2022

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.

September 30, 2021

March 31, 2022

Less Than 12 Months 12 Months or Longer Total

23 unchanged sentences

Collateralized loan obligations 123,202 ( 81 ) 9,461 ( 43 ) 132,663 ( 124 )

Obligations of state and political subdivisions 499 ( 1 ) — — 499 ( 1 )

Totals $ 1,113,319 $ ( 19,831 ) $ 31,287 $ ( 1,026 ) $ 1,144,606 $ ( 20,857 )

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.

At March 31, 2022, the Company had unrealized losses of $ 91.5 million on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $ 1.2 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

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.

The implied government 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 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.

Therefore, at March 31, 2022, no allowance for credit losses has been recorded.

At March 31, 2022, the Company had $ 3.3 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of $ 89.1 million.

The collateral underlying these mortgage investments is primarily residential real estate.

1 unchanged sentence

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.

Therefore, at March 31, 2022, no allowance for credit losses has been recorded.

At March 31, 2022, the Company had $ 2.0 million of unrealized losses in uncapped 3-month LIBOR floating rate collateralized loan obligations (“CLOs”) having a fair value of $ 313.1 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 30, 2021, these positions are in AAA and AA tranches, with average credit support of 37 % and 24 %, respectively.

As of March 31, 2022, all positions held by the Company are in AAA and AA tranches, with average credit support of 37 % and 25 %, 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 September 30, 2021, no allowance for credit losses has been recorded.

Therefore, at March 31, 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.

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 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 $ 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.

As a result, as of March 31, 2022, no allowance for credit losses has been recorded.

Included in Other Assets at March 31, 2022 is $ 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, 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 $ 3.4 million and $ 1.2 million, respectively, at March 31, 2022, and $ 3.4 million and $ 1.0 million, respectively, at December 31, 2021, is included in Other Assets.

Also included in Other Assets is an $ 8.9 million investment in a CRA-qualified mutual fund carried at fair value.

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, the Company would receive 1.6228 shares of Class A stock for each share of Class B stock for a total of 18,386 shares of Visa Class A stock.

Under the current conversion ratio that became effective December 29, 2021, the Company would receive 1.6181 shares of Class A stock for each share of Class B stock for a total of 18,333 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 E – Loans

Note 4 – Loans

Loans held for investment are categorized into the following segments:

6 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:

13 unchanged sentences

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

September 30, 2021

March 31, 2022

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

17 unchanged sentences

Totals $ 4,929,672 $ 868,418 $ 126,939 $ 5,925,029

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.

The amortized cost basis of loans at March 31, 2022 included net deferred costs of $ 27.6 million on non-PPP portfolio loans and net deferred fees of $ 1.0 million on PPP loans.

At December 31, 2021, the amortized cost basis included net deferred costs of $ 31.0 million on non-PPP portfolio loans and net deferred fees of $ 2.4 million on PPP loans.

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.

At March 31, 2022, the remaining fair value adjustments on acquired loans were $ 24.1 million, or 1.9 % of the outstanding acquired loan balances,

compared to $ 23.1 million, or 2.3 % of the acquired loan balances at December 31, 2021.

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 $ 15.2 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.

September 30, 2021

Accrued interest receivable is included within Other Assets and was $ 15.5 million and $ 14.7 million at March 31, 2022 and December 31, 2021, respectively.

The following tables present the status of net loan balances as of March 31, 2022 and December 31, 2021.

March 31, 2022

(In thousands) Current Accruing

45 unchanged sentences

Paycheck Protection Program 1

69,434 — — 69 — 69,503

Total Portfolio Loans $ 4,908,686 $ 4,873 $ 207 $ 84 $ 15,822 $ 4,929,672

7 unchanged sentences

Paycheck Protection Program 1

21,567 — — 37 — 21,604

Total Acquired Non-PCD Loans $ 864,410 $ 317 $ 200 $ 37 $ 3,454 $ 868,418

7 unchanged sentences

Total Loans $ 5,888,713 $ 5,190 $ 407 $ 121 $ 30,598 $ 5,925,029

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.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.

1 unchanged sentence

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 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 Company recognized $ 0.8 million and $ 0.2 million in interest income on nonaccrual loans during the three months ended March 31, 2022 and 2021, respectively.

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

March 31, 2022

(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) September 30, 2021 December 31, 2020

(In thousands) March 31, 2022 December 31, 2021

Construction and land development $ 248 $ 271

18 unchanged sentences

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

September 30, 2021

March 31, 2022

(In thousands) 2022 2021 2020 2019 2018 Prior Revolving Total

31 unchanged sentences

Total $ 14,211 $ 564,750 $ 121,445 $ 90,554 $ 110,519 $ 323,950 $ 374,216 $ 1,599,645

September 30, 2021

March 31, 2022

(In thousands) 2022 2021 2020 2019 2018 Prior Revolving Total

67 unchanged sentences

Substandard Impaired — 196 4,561 3,694 1,371 1,520 128 11,470

— — — — — — 20 20

Doubtful — — — — — — — —

Total $ 341,356 $ 196,831 $ 104,238 $ 75,757 $ 42,389 $ 60,874 $ 247,911 $ 1,069,356

15 unchanged sentences

Substandard Impaired — 1,389 9,968 4,288 6,782 14,363 3,073 39,863

— — — — — — 20 20

Doubtful — — — — — — — —

Total $ 1,563,032 $ 745,584 $ 751,942 $ 581,648 $ 423,022 $ 1,181,217 $ 678,584 $ 5,925,029

1 Loans 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.

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

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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 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

Construction and land development — $ — $ — — $ — $ —

Commercial real estate - owner-occupied — — — — — —

Commercial real estate - non owner-occupied — — — — — —

Residential real estate 1 152 152 — — —

Commercial and financial — — — — — —

Consumer — — — 1 41 41

Totals 1 $ 152 $ 152 1 $ 41 $ 41

Nine Months Ended September 30,

The following table presents loans that were modified in a troubled debt restructuring during the three months ended March 31, 2022 and March 31, 2021:

Three Months Ended March 31,

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Totals 8 $ 840 $ 840 1 $ 27 $ 27

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 TDRs described above resulted in a specific allowance for credit losses of $ 0.2 million as of March 31, 2022 and March 31, 2021.

During the three months ended March 31, 2022, there was one default totaling $ 33 thousand on a loan that had been modified to a TDR within the preceding twelve months.

During the three months ended March 31, 2021, there were no defaults on 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 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

For loans measured based on the present value of expected future cash flows, $ 5,000 for each of the three months ended March 31, 2022, and 2021 was included in interest income and represents the change in present value attributable to the passage of time.

Note 5 – Allowance for Credit Losses

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

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

(In thousands) Beginning

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Totals $ 83,315 $ 51 $ 6,556 $ ( 665 ) $ 586 $ ( 5 ) $ 89,838

Three Months Ended September 30, 2020

(In thousands) Beginning

Balance Initial Allowance on PCD Loans Acquired During the Period

Losses Charge-

Offs Recoveries TDR

Adjustments Ending

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 March 31, 2021

(In thousands) Beginning

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Balance Provision

Losses Charge-

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Totals $ 92,733 $ ( 5,715 ) $ ( 941 ) $ 571 $ ( 5 ) $ 86,643

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

Construction and land development $ 1,842 $ 1,479 $ 87 $ 4,202 $ — $ 92 $ ( 1 ) $ 7,701

Commercial real estate - owner occupied 5,361 80 1,161 655 ( 45 ) 44 ( 37 ) 7,219

Commercial real estate - non-owner occupied 7,863 9,341 2,236 14,578 ( 37 ) 37 — 34,018

Residential real estate 7,667 5,787 124 3,638 ( 150 ) 283 ( 24 ) 17,325

Commercial and financial 9,716 3,677 2,643 12,144 ( 4,642 ) 1,116 — 24,654

Consumer 2,705 862 28 662 ( 1,442 ) 284 ( 3 ) 3,096

Paycheck Protection Program — — — — — — — —

Totals $ 35,154 $ 21,226 $ 6,279 $ 35,879 $ ( 6,316 ) $ 1,856 $ ( 65 ) $ 94,013

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, a firm widely recognized for its research, analysis, and economic forecasts.

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.

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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 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.

As of March 31, 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 impact of those actions, the Russian invasion of Ukraine and the magnitude of the resulting market disruption, and the 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.

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.

The following section discusses changes in the level of reserves for the three months ended March 31, 2022.

In the Construction and Land Development segment, the decrease in reserves reflects continuing low historical loss rates for this segment 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, increases in the allowance resulting from loan growth were offset by the impact of improved economic variables relating to unemployment.

In the Commercial Real Estate - Owner-Occupied segment, increases in the allowance correspond with the increase in loan balances during the quarter.

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 increase in reserves reflects higher loan balances, partially offset by improved economic forecast variables including lower unemployment.

In the Commercial Real Estate - Non Owner-Occupied segment, the increase in reserves reflects the increase in loan balances and changes in economic forecast variables including 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 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.

The increase in reserves reflects the impact of higher loan balances.

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 increase in reserves is attributed to higher loan balances.

The decrease in reserves is attributed to improved economic forecast variables including business profitability.

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.

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

The decline in the reserve 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 September 30, 2021 and December 31, 2020 is shown in the following tables:

September 30, 2021

The Company’s loan portfolio and related allowance at March 31, 2022 and December 31, 2021 is shown in the following tables:

March 31, 2022

Individually Evaluated Collectively Evaluated Total

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Totals $ 39,863 $ 4,754 $ 5,885,166 $ 78,561 $ 5,925,029 $ 83,315

Note G – Derivatives

Note 6 – Derivatives

Back-to-Back Swaps

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

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 March 31, 2022, the interest rate swaps had an aggregate notional value of $ 209.9 million, with a fair value of $ 8.9 million recorded in other assets and other liabilities.

As of December 31, 2021, the interest rate swaps had an aggregate notional value of $ 175.4 million, with a fair value of $ 8.0 million recorded in other assets and other liabilities.

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

The weighted average maturity was 6.5 years at March 31, 2022 and 6.7 years at December 31, 2021.

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 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.

For the three months ended March 31, 2022, the Company recognized a loss through other comprehensive income of $ 0.2 million, and reclassified $ 0.1 million, out of accumulated other comprehensive income and into interest income.

As of March 31, 2022 and December 31, 2021, the interest rate floors had a fair value of $ 0.1 million and $ 0.3 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 September 30, 2021

At March 31, 2022

Back-to-back swaps $ 209,904 $ 8,923 Other Assets and Other Liabilities

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Interest rate floors 300,000 290 Other Assets

Note H – Securities Sold Under Agreements to Repurchase

Note 7 – 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 borrowings.

For securities sold under agreements to repurchase, the Company is required to pledge collateral with value sufficient to fully 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) March 31, 2022 December 31, 2021

Fair value of pledged securities - overnight and continuous:

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government sponsored entities $ 152,817 $ 134,577

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 – Equity Capital

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

Note 8 – Equity Capital

The Company is well capitalized and at March 31, 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 9 – 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.

Note L – Fair Value

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:

Note 10 – Fair Value

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

(In thousands) Fair Value

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(Level 2) Significant

At September 30, 2021

At March 31, 2022

Financial Assets

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$ 8,022 $ — $ 8,022 $ —

1 See “Note D – Securities” for further detail of fair value of individual investment categories.

1 See “ Note 3 – Securities ” for further detail of fair value of individual investment categories.

2 Recurring fair value basis determined using observable market data.

3 S e e “ Note E – Loans .” N onrecurring 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.

3 S e e “ Note 4 – Loans .” N onrecurring 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.

4 Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360.

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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 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

None of the loans were 90 days or more past due or on nonaccrual as of March 31, 2022 and December 31, 2021.

The aggregate fair value and contractual balance of loans held for sale as of March 31, 2022 and December 31, 2021 is as follows:

(In thousands) March 31, 2022 December 31, 2021

Aggregate fair value $ 20,615 $ 31,791

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

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

At March 31, 2022 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 $ 14.2 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.

Collateral-dependent loans measured at fair value totaled $ 12.7 million with a specific reserve of $ 4.3 million at March 31, 2022, compared to $ 13.1 million with a specific reserve of $ 4.7 million at December 31, 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 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 nine months ended September 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 September 30, 2021 and December 31, 2020 is as follows:

During the three months ended March 31, 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 transfers during the three months ended March 31, 2021.

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 March 31, 2022 and December 31, 2021 is as follows:

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

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(Level 2) Significant Unobservable Inputs

September 30, 2021

March 31, 2022

Financial Assets

10 unchanged sentences

$ 638,640 $ — $ 627,398 $ —

Time deposits with other banks 750 — 762 —

Loans, net 5,833,271 — — 5,907,447

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Subordinated debt 71,646 — 69,348 —

1 See “Note D – Securities” for further detail of individual investment categories.

1 See “ 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.

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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 September 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 March 31, 2022 and December 31, 2021:

Held-to-maturity debt securities :

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The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for funding of similar remaining maturities.

Note M – Business Combinations

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.

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 one 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 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

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 August 6, 2021 $ 32.19

Multiplied by common stock price per share on January 3, 2022 $ 35.39

Value of common stock issued 31,480

Cash paid for fractional shares 7

Fair value of options converted 497

Total purchase price $ 31,977

The acquisition of Legacy Bank was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations .

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.

1 unchanged sentence

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

August 6, 2021

January 3, 2022

Cash $ 38,332

4 unchanged sentences

Goodwill 7,962

Other assets 15,532

Total assets $ 198,802

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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

January 3, 2022

(In thousands) Book Balance Fair Value

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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

(In thousands) January 3, 2022

Book balance of loans at acquisition $ 714

2 unchanged sentences

Total PCD loans acquired $ 651

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 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 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.

Prior to the acquisition, Freedom Bank operated two 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

Acquisition of Sabal Palm Bancorp, Inc.

On January 3, 2022, the Company completed its acquisition of Sabal Palm Bancorp, Inc.

(“Sabal Palm”).

Simultaneously, upon completion of the merger of Sabal Palm and the Company, Sabal Palm’s wholly owned subsidiary bank, Sabal Palm Bank, was merged with and into Seacoast Bank.

Prior to the acquisition, Sabal Palm Bank operated three branches in the Sarasota 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 August 21, 2020 $ 19.40

Multiplied by common stock price per share on January 3, 2022 $ 35.39

Value of common stock issued 58,762

Cash paid for Fourth Street vested stock options 596

Fair value of options converted 3,336

Total purchase price $ 62,098

The acquisition of Fourth Street was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations .

The acquisition of Sabal Palm was accounted for under the acquisition method in accordance with 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 complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.

(In thousands)

August 21, 2020

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.

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

Cash $ 170,609

Investment securities 3,498

Time deposits with other banks 6,473

Loans 246,152

8 unchanged sentences

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

January 3, 2022

(In thousands) Book Balance Fair Value

8 unchanged sentences

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

(In thousands) January 3, 2022

Book balance of loans at acquisition $ 3,703

2 unchanged sentences

Total PCD loans acquired $ 3,003

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 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 $ 3.4 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 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 two 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

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 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 March 13, 2020 $ 20.17

Multiplied by common stock price per share on August 6, 2021 $ 32.19

Value of common stock issued 86,487

Cash paid for FBPB vested stock options 866

Cash paid for fractional shares 7

Fair value of options converted 4,736

Total purchase price $ 91,230

The acquisition of FBPB was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations .

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.

1 unchanged sentence

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.

As part of 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

March 13, 2020 Measurement Period Adjustments As Adjusted March 13, 2020

August 6, 2021

Cash $ 98,107

10 unchanged sentences

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

August 6, 2021

(In thousands) Book Balance Fair Value

5 unchanged sentences

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) March 13, 2020

(In thousands) August 6, 2021

Book balance of loans at acquisition $ 66,371

2 unchanged sentences

Total PCD loans acquired $ 62,589

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.

1 unchanged sentence

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,

Pro-forma data for the three months ended March 31, 2022 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 March 31,

(In thousands, except per share amounts) 2022 2021

3 unchanged sentences

EPS - diluted 0.41 0.63

Proposed Acquisition of Apollo Bancshares, Inc.

On March 29, 2022, the Company announced its proposed acquisition of Apollo Bancshares, Inc.

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 8 th largest in the nation.

Apollo operates five branches across Miami-Dade County with deposits of approximately $ 947 million and loans of $ 705 million as of March 31, 2022.

Completion of the Apollo merger is subject to certain conditions, including the receipt of regulatory approvals, the approval of Apollo and Apollo Bank shareholders and the satisfaction of other customary closing conditions.

Note 12 – Subsequent Event

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 $ 932 million and loans of $ 543 million as of March 31, 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.

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