What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2021-11-03 · 305 added, 429 removed, 568 unchanged (56% of the section changed)

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Such discussion and analysis should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related notes included in this report.

The emphasis of this discussion will be on the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020 for the consolidated statements of income.

For the consolidated balance sheets, the emphasis of this discussion will be the balances as of September 30, 2021 compared to December 31, 2020.

The emphasis of this discussion will be on the three months ended March 31, 2022 compared to the three months ended March 31, 2021 for the consolidated statements of income.

For the consolidated balance sheets, the emphasis of this discussion will be the balances as of March 31, 2022 compared to December 31, 2021.

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

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Certain statements made or incorporated by reference herein which are not statements of historical fact, including those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are “forward-looking statements” within the meaning, and protections, of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

economy, which may be beyond the Company's control, and which may cause the actual results, performance or achievements of Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) or its wholly-owned banking subsidiary, Seacoast National Bank (“Seacoast Bank), to be materially different from those set forth in the forward-looking statements.

Forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, and intentions about future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond the Company's control, and which may cause the actual results, performance or achievements of Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) or its wholly-owned banking subsidiary, Seacoast National Bank (“Seacoast Bank”), to be materially different from those set forth in the forward-looking statements.

All statements other than statements of historical fact could be forward-looking statements.

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

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

• the ongoing adverse effects of COVID-19 and any variants thereof (economic and otherwise) on the Company and its customers, counterparties, employees, and third-party service providers, and the adverse impacts to our business, financial position, results of operations, and prospects;

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

• governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve ("Federal Reserve"), as well as legislative, tax and regulatory changes;

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

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

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

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

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uncertainty related to the impact of LIBOR calculations on securities, loans and debt;

• governmental actions to stimulate the economy and provide support for small businesses have resulted in material increases to the Company’s liquidity position, adversely affecting the net interest margin.

The duration of this liquidity remaining on the balance sheet is uncertain;

• changes in borrowing, borrower credit risks, payment behaviors, spending, or saving by businesses or households including as a result of the financial impact of COVID-19;

• changes in retail distribution strategies, customer preferences and behavior;

• changes in borrower credit risks and payment behaviors, including as a result of the financial impact of COVID-19;

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

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

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

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

• the Company's ability to comply with any regulatory requirements;

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

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• increases in regulatory capital requirements for banking organizations generally;

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

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

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

• dependence on key suppliers or vendors to obtain equipment or services for the business on acceptable terms;

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

• the effects of war or other conflicts, acts of terrorism, natural disasters, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions;

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

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

• reduction in or the termination of Seacoast's ability to use the online- or mobile-based platforms that are critical to the Company's business growth strategy;

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

• unexpected outcomes of, and the costs associated with, existing or new litigation involving the Company;

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

• potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;

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

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

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

• the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, non-bank financial technology providers, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in the Company's market areas and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet;

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

• the risks relating to the recently completed merger including, without limitation:

unexpected transaction costs, including the costs of integrating operations;

the risks that the business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected;

the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues being lower than expected;

• the risks relating to the proposed mergers including, without limitation:

the timing to consummate the proposed mergers;

the risk that a condition to closing of the proposed mergers may not be satisfied;

the risk that the mergers may not be completed at all;

the diversion of management time on issues related to the proposed mergers;

unexpected transaction costs, including the costs of integrating operations;

the risks that the businesses will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected;

the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following the mergers being lower than expected;

the risk of deposit and customer attrition;

any changes in deposit mix;

unexpected operating and other costs, which may differ or change from expectation;

the risk of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees;

increased competitive pressures on solicitations of customers by competitors;

as well as difficulties and risks inherent with entering new markets;

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

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Business Developments

Impact of COVID-19 Pandemic

The COVID-19 pandemic and related restrictive measures taken by governments, businesses and individuals have caused unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve.

As the restrictive measures eased during 2020 and over the course of 2021, the U.S.

economy has begun to recover and with the availability and distribution of multiple COVID-19 vaccines, we anticipate continued improvements in commercial and consumer activity and the U.S.

While the overall outlook has improved based on the availability of the vaccine to all adults and older children, there continues to be the risk of increases in infection rates in the country, as well as within the State of Florida, attributed to variants, including the Delta variant.

Therefore, the risk of further resurgence and possible reimplementation of business restrictions remains.

While indications of recovery exist, we recognize that our business and consumer customers are experiencing varying degrees of financial distress, which is expected to continue through the remainder of 2021, especially if new COVID-19 variant infections increase (or are not adequately contained) and new economic restrictions are mandated.

Changing consumer behavior and the impact of government support programs including the PPP have contributed to higher customer deposit balances, which may adversely affect our net interest income and net interest margin.

Commercial activity has improved, but has not returned in all industries to the levels existing prior to the outbreak of the pandemic, which may result in our customers’ inability to meet their loan obligations to us.

In addition, the economic pressures and uncertainties related to the COVID-19 pandemic have resulted in changes in consumer spending behaviors, which may negatively impact the demand for loans and other services we offer.

Our borrowers include customers in industries such as hotel/lodging, restaurants and retail and commercial real estate, all of which have been significantly impacted by the COVID-19 pandemic, or remain at heightened risk of future negative economic impact, which may be caused or exacerbated by increased COVID-19 variant infections, vaccine hesitancy, or new economic restrictions in our footprint.

We recognize that these industries may take longer to recover as consumers may be hesitant to return to full social interaction or may change their spending habits on a more permanent basis as a result of the pandemic.

We continue to monitor these customers closely.

We have taken deliberate actions to maintain our balance sheet strength to serve our clients and communities, including maintaining higher levels of liquidity and managing our assets and liabilities in order to maintain a strong capital position and support business growth and acquisition opportunities;

however, future economic conditions are subject to significant uncertainty.

Uncertainties associated with the pandemic include the duration of the COVID-19 outbreak and any related variant infections, and effectiveness of COVID-19 vaccines, the impact to our customers, employees and vendors and the impact to the economy as a whole.

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

Acquisition of Legacy Bank of Florida

In August 2021, the Company completed the acquisition of Legacy Bank of Florida (“Legacy Bank”), which added $477 million in loans and $495 million in deposits.

The acquisition strengthens the Company’s position in South Florida, one of the strongest and fastest growing markets in the country, and complements prior acquisitions in the market.

Consolidation activities and related expenses are substantially complete.

Announcement of Sabal Palm Bancorp, Inc.

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.

The acquisition will provide entry into Sarasota county, which is located in the North Port-Sarasota-Bradenton MSA.

Announcement of Business Bank of Florida, Corp.

On August 23, 2021, the Company announced that it had entered into an agreement and plan of merger with Business Bank of Florida, Corp.

(“BBFC”) and its wholly-owned subsidiary, Florida Business Bank.

BBFC operates one branch in Melbourne, FL with $139 million in loans and $169 million in deposits as of September 30, 2021.

The acquisition is expected to close in the first quarter of 2022 pending receipt of regulatory and shareholder approvals.

The acquisition will deepen the Company’s presence in Brevard County, which is located in the Palm Bay-Melbourne-Titusville MSA.

Proposed Acquisition of Apollo Bankshares, 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.

Proposed Acquisition of Drummond Banking Company

On May 4, 2022, the Company announced its proposed acquisition of Drummond Banking Company (“Drummond”).

The transaction, which is expected to close early in the fourth quarter of 2022, will expand the Company’s presence in new Florida markets including Ocala and Gainesville.

Drummond operates 18 branches across North Florida with deposits of approximately $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.

2022 Acquisitions to Date

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

(“Sabal Palm”) in Sarasota, and Business Bank of Florida, Corp.

(“BBFC”) in Brevard County, which added a combined $367.9 million in loans, $562.3 million in deposits, and for which the Company recorded a $5.1 million provision for credit losses at acquisition.

Consolidation activities for BBFC, including system conversion, are substantially complete.

System conversion for Sabal Palm is planned early in the second quarter of 2022.

Organic Growth and Expansion

Seacoast’s balanced growth strategy includes organic growth initiatives across the state.

During the first quarter of 2022, Seacoast expanded its footprint into Naples/Southwest Florida and Jacksonville/Northeast Florida with key additions to its commercial banking leadership and teams.

Also in the first quarter of 2022, Seacoast added 14 experienced bankers in the state’s most dynamic and fastest growing markets and expects to continue to invest in well-established seasoned bankers over the remainder of 2022.

Results of Operations

For the third quarter of 2021, the Company reported net income of $22.9 million, or $0.40 per average diluted share, compared to $31.4 million, or $0.56, for the second quarter of 2021 and $22.6 million, or $0.42, for the third quarter of 2020.

For the nine months ended September 30, 2021, net income totaled $88.1 million or $1.56 per average diluted share, an increase of $39.7 million, or 82%, compared to the nine months ended September 30, 2020.

Adjusted net income 1 for the third quarter of 2021 totaled $29.4 million, or $0.51 per average diluted share, compared to $33.3 million, or $0.59, for the second quarter of 2021 and $27.3 million, or $0.50, for the third quarter of 2020.

For the nine months ended September 30, 2021, adjusted net income 1 totaled $98.1 million, or $1.74 per average diluted share, compared to $58.3 million, or $1.09 per average diluted share for the nine months ended September 30, 2020.

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

For the first quarter of 2022, the Company reported net income of $20.6 million, or $0.33 per average diluted share, compared to $36.3 million, or $0.62 per average diluted share, for the fourth quarter of 2021 and $33.7 million, or $0.60 per average diluted share, for the first quarter of 2021.

The first quarter of 2022 included merger-related costs and a $5.1 million increase in the provision for credit losses associated with acquisition activity during the quarter.

Adjusted net income 1 for the first quarter of 2022 totaled $27.1 million, or $0.44 per average diluted share, compared to $36.9 million, or $0.62 per average diluted share, for the fourth quarter of 2021 and $35.5 million, or $0.63 per average diluted share, for the first quarter of 2021.

Adjusted net income 1 for the first quarter of 2022 includes the $5.1 million provision for credit losses associated with acquisition activity during the quarter.

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

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2022 2021 2021

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Net Interest Income and Margin

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

Net interest income for the third quarter of 2021 totaled $71.3 million, increasing $5.5 million, or 8%, compared to the second quarter of 2021, and increasing $7.8 million, or 12%, compared to the third quarter of 2020.

For the nine months ended September 30, 2021, net interest income totaled $203.7 million, an increase of $9.8 million, or 5%, compared to the nine months ended September 30, 2020.

The increase quarter over quarter and compared to the prior year quarter reflects higher loan and securities balances, and higher recognition of fees on Paycheck Protection Program (“PPP”) loans attributed to higher loan forgiveness.

Furthermore, lower interest expense reflects the continued low rate environment and the Company’s efforts to proactively manage rates paid on interest bearing deposits.

Net interest margin (on a fully tax equivalent basis) 1 was 3.22% in the third quarter of 2021, compared to 3.23% in the second quarter of 2021 and 3.40% in the third quarter of 2020.

The decrease during the third quarter of 2021 reflects decreases in yields on both securities and non-PPP loans, partially offset by the impact of higher fees due to higher loan forgiveness on PPP loans and lower rates on interest bearing deposits.

Compared to the second quarter of 2021, securities yields declined by four basis points to 1.59% and non-PPP loan yields declined by seven basis points to 4.29% during the third quarter of 2021.

Offsetting and favorable was the increase in yields on PPP loans from 4.07% to 8.33%, which includes the impact of higher fee accretion in the current quarter, and a decrease in the cost of deposits from eight basis points in the second quarter of 2021 to seven basis points in the third quarter of 2021.

The effect on net interest margin of purchase discounts on acquired loans was an increase of 15 basis points in the third quarter of 2021 compared to an increase of 14 basis points in the second quarter of 2021 and an increase of 17 basis points in the third quarter of 2020.

The effect of interest and fees on PPP loans was an increase of 18 basis points in the third quarter of 2021, an increase of six basis points in the second quarter of 2021 and an increase of seven basis points in the third quarter of 2020.

For the nine months ended September 30, 2021, net interest margin (on a fully tax equivalent basis) 1 was 3.32%, compared to 3.67% for the nine months ended September 30, 2020.

The yield on securities declined from 2.58% for the nine months ended September 30, 2020 to 1.62% for the nine months ended September 30, 2021, reflecting the impact of a lower interest rate environment including the payoff of higher yielding securities being replaced with lower yields on new purchases.

The yield on non-PPP loans declined from 4.63% for the nine months ended September 30, 2020 to 4.34% for the nine months ended September 30, 2021, reflecting the impact of the lower interest rate environment.

Offsetting and favorable was the increase in yield on PPP loans, which increased from 2.60% for the nine months ended September 30, 2020 to 5.16% for the nine months ended September 30, 2021 as well as the decline in the cost of deposits from 36 basis points for the nine months ended September 30, 2020 to 9 basis points for the nine months ended September 30, 2021.

The effect on net interest margin of purchase discounts on acquired loans was an increase of 15 basis points for the nine months ended September 30, 2021 compared to an increase of 20 basis points for the nine months ended September 30, 2020.

The effect of interest and fees on PPP loans was an increase of 12 basis points for the nine months ended September 30, 2021, compared to an increase of four basis points for the nine months ended September 30, 2020.

The cost of deposits declined to seven basis points in the third quarter of 2021, compared to eight basis points in the second quarter of 2021 and 24 basis points in the third quarter of 2020.

For the nine months ended September 30, 2021, the cost of deposits was nine basis points, a decrease of 27 basis points compared to the nine months ended September 30, 2020.

Lower cost of deposits reflects lower market rates, and a favorable shift in product mix to include a higher proportion of noninterest bearing demand deposits to total deposits.

Net interest income for the first quarter of 2022 totaled $76.5 million, increasing $4.2 million, or 6%, compared to the fourth quarter of 2021, and increasing $9.9 million, or 15%, compared to the first quarter of 2021.

The increases reflect higher balances and higher yields on securities and loans, partially offset by declines in interest and fees on Paycheck Protection Program (“PPP”) loans.

Net interest margin (on a fully tax equivalent basis) 1 was 3.25% in the first quarter of 2022, compared to 3.16% in the fourth quarter of 2021, and 3.51% in the first quarter of 2021.

The increase during the first quarter of 2022 reflects increases in yields on both securities and non-PPP loans.

Compared to the fourth quarter of 2021, securities yields increased by 11 basis points to 1.68% and non-PPP loan yields increased by six basis points to 4.24% during the first quarter of 2022.

The effect on net interest margin of accretion of purchase discounts on acquired loans was an increase of 15 basis points in each of the first quarter of 2022, the fourth quarter of 2021, and the first quarter of 2021.

The effect of interest and fees on PPP loans was an increase of five basis points in the first quarter of 2022, an increase of ten basis points in the fourth quarter of 2021, and an increase of 11 basis points in the first quarter of 2021.

The Company’s asset sensitive position, with significant core deposit funding and ample liquidity, will benefit in a higher rate environment.

Higher interest rates through the remainder of 2022 are expected to contribute to increased net interest margin and to benefit net interest income as the Company’s assets are expected to reprice faster and to a greater degree than its liabilities.

The cost of deposits was six basis points in the first quarter of 2022, compared to six basis points in the fourth quarter of 2021, and 13 basis points in the first quarter of 2021.

Lower cost of deposits from the prior year quarter reflects lower market rates, and a favorable shift in product mix to include a higher proportion of noninterest bearing demand deposits to total deposits.

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

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Bearing Liabilities

Third quarter 2021 $ 71,455 3.22 % 3.31 % 0.14 %

Second quarter 2021 65,933 3.23 % 3.33 % 0.16 %

Third quarter 2020 63,621 3.40 % 3.65 % 0.40 %

Nine months ended September 30, 2021 204,129 3.32 % 3.42 % 0.17 %

Nine months ended September 30, 2020 194,300 3.67 % 4.05 % 0.59 %

First quarter 2022 $ 76,639 3.25 % 3.33 % 0.12 %

Fourth quarter 2021 72,412 3.16 % 3.24 % 0.12 %

First quarter 2021 66,741 3.51 % 3.65 % 0.23 %

1 On tax equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.

Total average loans increased $105.8 million, or 2%, for the third quarter of 2021 compared to the second quarter of 2021, and decreased $156.8 million, or 3%, from the third quarter of 2020.

The increase compared to the prior quarter reflects loan growth including loans acquired from Legacy Bank, partially offset by a decrease in PPP loans attributed to loan forgiveness.

The decrease compared to the prior year quarter reflects the impact of PPP loan forgiveness.

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

Total average loans increased $397.8 million, or 7%, for the first quarter of 2022 compared to the fourth quarter of 2021, and increased $579.5 million, or 10%, from the first quarter of 2021.

The increase compared to the prior quarter reflects loan growth including loans acquired from BBFC and Sabal Palm.

Average loans as a percentage of average earning assets totaled 66% for the first quarter of 2022, 65% for the fourth quarter of 2021 and 75% for the first quarter of 2021.

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

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(In thousands) 2022 2021 2021

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PPP originations — — 232,478

Commercial originations during the third quarter of 2021 were $331.6 million, an increase of $138.6 million, or 72%, compared to the second quarter of 2021, and an increase of $243.4 million, or 276%, compared to the third quarter of 2020.

Recent investments in commercial banking talent contributed to the increase in production quarter-over-quarter.

Commercial originations for the third quarter of 2021 also includes a $17.1 million purchased loan pool.

The commercial pipeline increased $46.9 million, or 15%, to $368.9 million at September 30, 2021, compared to June 30, 2021, and increased $112.7 million, or 44%, compared to September 30, 2020, also reflecting the benefit of investments in commercial banking talent.

The Company originates residential mortgage loans identified for sale to investors in the secondary market.

The Company uses rate locks with investors at the time of application, thereby eliminating interest rate risk.

Residential loans originated for sale in the secondary market totaled $95.1 million in the third quarter of 2021, compared to $120.1 million in the second quarter of 2021 and $162.5 million in the third quarter of 2020, a decrease of 21% and a decrease of 41%, respectively.

Refinance activity has slowed from the peaks seen in 2020, and Florida’s housing inventory remains limited.

Residential saleable pipelines were $42.8 million as of September 30, 2021, compared to $60.6 million as of June 30, 2021 and $149.9 million as of September 30, 2020.

Residential loan production retained in the portfolio for the third quarter of 2021 was $250.8 million compared to $118.1 million in the second quarter of 2021 and $25.4 million in the third quarter of 2020.

Residential loans retained in the third quarter of 2021 includes $180.8 million in purchased loan pools compared to $38.4 million purchased during the second quarter of 2021.

Commercial originations during the first quarter of 2022 were $373.0 million, a decrease of $36.0 million, or 9%, compared to the fourth quarter of 2021, and an increase of $168.7 million, or 83%, compared to the first quarter of 2021.

Despite a seasonally slower quarter, commercial originations remained strong and pipelines continued to build during the first quarter of 2022.

The commercial pipeline increased $221.7 million, or 56%, to $619.5 million at March 31, 2022, compared to December 31, 2021, and increased $378.7 million, or 157%, compared to March 31, 2021.

The increase in pipeline reflects the addition of well-established commercial bankers and expansion into new markets across the state.

The addition of experienced commercial bankers in recent periods is generating disciplined growth in full relationships, including credit facilities, deposit relationships, and wealth opportunities.

Residential loans originated for sale in the secondary market totaled $51.2 million in the first quarter of 2022, compared to $69.2 million in the fourth quarter of 2021 and $138.3 million in the first quarter of 2021, a decrease of 26% and a decrease of 63%, respectively.

Limited housing inventory and slowing refinance activity contributed to lower production.

Residential saleable pipelines were $25.7 million as of March 31, 2022, compared to $30.1 million as of December 31, 2021 and $92.1 million as of March 31, 2021.

Residential loan production retained in the portfolio for the first quarter of 2022 was $175.5 million compared to $49.1 million in the fourth quarter of 2021 and $46.6 million in the first quarter of 2021.

The first quarter of 2022 includes the purchase of a $111.3 million wholesale residential home mortgage loan pool.

The Company fully underwrites acquired loans prior to executing transactions.

The pipeline of residential loans intended to be retained in the portfolio was $35.4 million as of September 30, 2021, compared to $54.1 million as of June 30, 2021, and $33.4 million as of September 30, 2020.

Consumer originations totaled $66.4 million during the third quarter of 2021, an increase of $2.7 million, or 4%, from the second quarter of 2021 and an increase of $4.1 million, or 7%, from the third quarter of 2020.

The consumer pipeline was $31.0 million as of September 30, 2021, compared to $31.7 million as of June 30, 2021 and $17.1 million at September 30, 2020.

In March 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law.

The CARES Act includes provisions for the Paycheck Protection Program (“PPP”) offered through the U.S.

Small Business Administration (“SBA”).

Loans originated under this program have a contractual rate of interest of 1% with principal and interest that may be forgiven, provided that the borrower uses the funds in a manner consistent with PPP guidelines.

Seacoast has assisted more than 8,000 borrowers through the PPP since inception, $675.7 million in PPP loan balances have been forgiven, and remaining outstanding balances total $190.6 million at September 30, 2021.

Average debt securities increased $341.8 million, or 21%, during the third quarter of 2021 compared to the second quarter of 2021, and were $651.1 million, or 48%, higher compared to the third quarter of 2020.

The pipeline of residential loans intended to be retained in the portfolio was $88.0 million as of March 31, 2022, compared to $25.6 million as of December 31, 2021, and $72.4 million as of March 31, 2021.

Consumer originations totaled $79.0 million during the first quarter of 2022, an increase of $6.4 million, or 9%, from the fourth quarter of 2021 and an increase of $32.3 million, or 69%, from the first quarter of 2021.

The consumer pipeline was $61.6 million as of March 31, 2022, compared to $29.7 million as of December 31, 2021 and $28.1 million at March 31, 2021.

The increases are primarily the result of consumer lending teams that joined the Company in late 2021.

Average debt securities increased $207.3 million, or 9%, during the first quarter of 2022 compared to the fourth quarter of 2021, and were $854.1 million, or 54%, higher compared to the first quarter of 2021.

Increases reflect the investment of excess liquidity, partially offset by paydowns and maturities.

The cost of average interest-bearing liabilities contracted in the third quarter of 2021 to 14 basis points from 16 basis points in the second quarter of 2021, and from 40 basis points in the third quarter of 2020.

The cost of average total deposits (including noninterest bearing demand deposits) in the third quarter of 2021 was 7 basis points compared to 8 basis points in the second quarter of 2021 and 24 basis points in the third quarter of 2020, reflecting continued repricing downward of interest-bearing deposits and time deposits.

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

The Company’s deposit mix remains favorable, with 93% of average deposit balances comprised of savings, money market, and demand deposits for the nine months ended September 30, 2021.

Seacoast's average cost of deposits, including noninterest bearing demand deposits, decreased to 9 basis points for the nine months ended September 30, 2021 compared to 36 basis points for the nine months ended September 30, 2020, reflecting the lower interest rate environment and shifts in deposit mix with a higher proportion of low cost deposits.

Brokered CDs totaled $20.0 million at September 30, 2021, with a weighted average rate of 0.32%.

The Company participates in programs with third party deposit networks as part of its liquidity management strategy, particularly as it approaches $10 billion in assets.

The cost of average interest-bearing liabilities remained flat in the first quarter of 2022 at 12 basis points from the fourth quarter of 2021, and decreased from 23 basis points in the first quarter of 2021.

The cost of average total deposits (including noninterest bearing demand deposits) was six basis points in both the first quarter of 2022 and the fourth quarter of 2021 and 13 basis points in the first quarter of 2021, reflecting continued repricing downward of interest-bearing deposits and time deposits.

During the first quarter of 2022, average transaction deposits (noninterest and interest bearing demand) increased $293.6 million, or 6%, compared to the fourth quarter of 2021 and increased $1.4 billion, or 35%, compared to the first quarter of 2021, reflecting the inflow of new customers, including from bank acquisitions, and higher deposit balances for existing customers.

The Company’s deposit mix remains favorable, with 94% of average deposit balances comprised of savings, money market, and demand deposits for the three months ended March 31, 2022.

The Company participates in programs with third party deposit networks as part of its liquidity management strategy.

Through these programs, the Company can offer its customers access to FDIC insurance on large balances, and the Company can retain or sell, on an overnight basis, the underlying deposits.

The Company expects to remain below $10 billion in assets at year end 2021, and at September 30, 2021, the Company had sold, on an overnight basis, $233.1 million in deposits, compared to $112.7 million at December 31, 2020.

At March 31, 2022, the Company had sold, on an overnight basis, $231.3 million in deposits, compared to $228.0 million at December 31, 2021.

These deposits are not included in the Consolidated Balance Sheet.

Sweep repurchase agreements with customers increased $37.5 million, or 48%, year-over-year.

For the nine months ended September 30, 2021, the average balance was $116.3 million compared to an average balance of $78.8 million for the nine months ended September 30, 2020.

The average rate on customer sweep repurchase accounts was 0.13% for the nine months ended September 30, 2021, compared to 0.41% for the nine months ended September 30, 2020.

No federal funds purchased were utilized at September 30, 2021 nor September 30, 2020.

In connection with the Legacy Bank transaction, the Company acquired $33.0 million in FHLB borrowings during the third quarter of 2021, which were immediately repaid for a nominal fee.

The Company had no other FHLB borrowings during the nine months ended September 30, 2021 compared to $180.9 million with an average rate of 1.08% for the nine months ended September 30, 2020.

The decrease reflects the impact of higher average deposit balances that were sufficient to fund the Company’s liquidity needs during 2021.

For the nine months ended September 30, 2021, subordinated debt averaged $71.5 million, compared to $71.2 million for the nine months ended September 30, 2020.

The average rate on subordinated debt for the nine months ended September 30, 2021 was 2.37%, compared to 3.28% for the nine months ended September 30, 2020.

Sweep repurchase agreements with customers increased $11.5 million, or 11%, quarter-over quarter and $5.3 million, or 5%, year-over-year.

For the three months ended March 31, 2022, the average balance was $118.1 million compared to an average balance of $106.7 million for the three months ended December 31, 2021, and $112.8 million for the three months ended March 31, 2021.

The average rate on customer sweep repurchase accounts was 0.13% for the three months ended March 31, 2022, compared to 0.11% for the three months ended December 31, 2021, and 0.15% for the three months ended March 31, 2021.

For the three months ended March 31, 2022, subordinated debt averaged $71.7 million, compared to $71.6 million for the three months ended December 31, 2021, and $71.4 million for the three months ended March 31, 2021.

The average rate on subordinated debt for the three months ended March 31, 2022 was 2.47%, compared to 2.32% for the three months ended December 31, 2021, and 2.43% for the three months ended March 31, 2021.

The subordinated debt relates to trust preferred securities issued by subsidiary trusts of the Company.

1 unchanged sentence

Average Balances, Interest Income and Expenses, Yields and Rates 1

Third Quarter Second Quarter Third Quarter

First Quarter Fourth Quarter First Quarter

Average Yield/ Average Yield/ Average Yield/

4 unchanged sentences

Total Securities 2,430,441 10,218 1.68 2,223,181 8,750 1.57 1,576,389 6,485 1.65

Federal funds sold and other investments 1,091,997 867 0.31 925,323 709 0.31 239,511 556 0.92

Loans excluding PPP loans 5,422,350 58,600 4.29 5,092,897 55,313 4.36 5,242,776 58,854 4.47

PPP Loans 281,724 5,917 8.33 505,339 5,127 4.07 618,088 1,719 1.11

Total Loans 5,704,074 64,517 4.49 5,598,236 60,440 4.33 5,860,864 60,573 4.11

Total Earning Assets 8,792,902 73,340 3.31 8,178,550 67,894 3.33 7,446,105 68,258 3.65

Allowance for loan losses (88,412) (86,042) (92,151)

Cash and due from banks 386,781 327,171 138,749

Premises and equipment 70,667 70,033 72,572

Intangible assets 254,980 235,964 228,801

Bank owned life insurance 164,879 133,484 129,156

Other assets 171,937 166,686 163,658

Total Assets $ 9,753,734 $ 9,025,846 $ 8,086,890

Liabilities and Shareholders' Equity

Interest-bearing liabilities:

Interest-bearing demand $ 1,891,092 $ 219 0.05 % $ 1,692,178 $ 235 0.06 % $ 1,364,947 $ 330 0.10 %

Savings 842,018 65 0.03 790,734 118 0.06 648,319 170 0.10

Money market 1,860,386 565 0.12 1,736,481 627 0.14 1,328,931 799 0.24

Time deposits 572,661 583 0.40 533,350 524 0.39 1,051,316 2,673 1.01

Securities sold under agreements to repurchase 120,507 35 0.12 115,512 35 0.12 90,357 40 0.18

Federal Home Loan Bank borrowings — — — — — — 93,913 181 0.77

Other borrowings 71,530 418 2.32 71,460 422 2.37 71,258 444 2.48

Total Interest-Bearing Liabilities 5,358,194 1,885 0.14 4,939,715 1,961 0.16 4,649,041 4,637 0.40

Noninterest demand 2,985,582 2,799,643 2,279,584

Other liabilities 161,411 116,093 96,458

Total Liabilities 8,505,187 7,855,451 7,025,083

Shareholders' equity 1,248,547 1,170,395 1,061,807

Total Liabilities & Equity $ 9,753,734 $ 9,025,846 $ 8,086,890

Cost of deposits 0.07 % 0.08 % 0.24 %

Interest expense as a % of earning assets 0.09 % 0.10 % 0.25 %

Net interest income as a % of earning assets $ 71,455 3.22 % $ 65,933 3.23 % $ 63,621 3.40 %

1 On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.

All yields and rates have been computed on an annual basis using amortized cost.

Fees on loans have been included in interest on loans.

Nonaccrual loans are included in loan balances.

Average Balances, Interest Income and Expenses, Yields and Rates 1

Year to Date Year to Date

Average Yield/ Average Yield/

(In thousands, except ratios) Balance Interest Rate Balance Interest Rate

Earning assets:

Taxable $ 1,718,671 $ 20,632 1.60 % $ 1,203,877 $ 23,241 2.57 %

Nontaxable 25,606 554 2.88 20,895 461 2.94

Total Securities 1,744,277 21,186 1.62 1,224,772 23,702 2.58

Federal funds sold and other investments 800,839 2,162 0.36 253,635 1,974 1.04

Federal funds sold 738,588 350 0.19 878,875 337 0.15 293,506 74 0.10

Other investments 44,999 583 5.25 34,992 491 5.57 83,838 512 2.48

Loans excluding PPP loans 6,276,964 65,675 4.24 5,804,149 61,135 4.18 5,149,642 55,504 4.37

16 unchanged sentences

Securities sold under agreements to repurchase 118,146 39 0.13 106,691 30 0.11 112,834 41 0.15

Federal Home Loan Bank borrowings — — — 180,893 1,460 1.08

Other borrowings 71,670 436 2.47 71,600 418 2.32 71,390 427 2.43

13 unchanged sentences

Noninterest Income

Noninterest income totaled $19.0 million for the third quarter of 2021, an increase of $3.7 million, or 24%, compared to the second quarter of 2021 and an increase of $2.1 million, or 12%, from the third quarter of 2020.

Noninterest income totaled $52.0 million for the nine months ended September 30, 2021, an increase of $5.4 million, or 12%, compared to the nine months ended September 30, 2020.

Noninterest income totaled $15.4 million for the first quarter of 2022, a decrease of $3.3 million, or 18%, compared to the fourth quarter of 2021 and a decrease of $2.3 million, or 13%, from the first quarter of 2021.

Noninterest income is detailed as follows:

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

First Fourth First

Quarter Quarter Quarter

(In thousands) 2022 2021 2021

8 unchanged sentences

15,825 19,085 17,785

Securities (losses) gains, net (30) (55) 4 (199) 1,253

Securities losses, net (452) (379) (114)

Total $ 15,373 $ 18,706 $ 17,671

Service charges on deposits were $2.5 million in the third quarter of 2021, $2.3 million in the second quarter of 2021 and $2.2 million in the third quarter of 2020.

For the nine months ended September 30, 2021, service charges on deposits totaled $7.2 million, an increase of $0.2 million, or 2%, compared to the nine months ended September 30, 2020.

The increase in service charges for the nine-month period reflects an increase in customer deposit accounts.

Overdraft fees represent 40% of total service charges on deposits for the nine months ended September 30, 2021 and 44% for the nine months ended September 30, 2020.

Interchange income remained flat at $4.1 million for the three months ended September 30, 2021, compared to the three months ended June 30, 2021, and increased $0.4 million, or 12%, compared to the three months ended September 30, 2020.

Third quarter activity reflects stable transaction volume despite the impact of the COVID-19 delta variant on spending early in the third quarter.

For the nine months ended September 30, 2021, interchange income totaled $12.1 million, an increase of $2.0 million, or 20%, compared to the nine months ended September 30, 2020.

The 2021 periods reflect the return of transactional volume and higher per-card spending in the current year when compared to the prior year, which was negatively affected by COVID-19-related shutdowns and reduced consumer consumption.

Wealth management income, including trust fees and brokerage commissions and fees, was a record $2.6 million in the third quarter of 2021, increasing $0.2 million, or 7%, from the second quarter of 2021 and increasing $0.6 million, or 30%, compared to the third quarter of 2020.

For the nine months ended September 30, 2021, wealth management income totaled $7.3 million, an increase of $1.7 million, or 31%, compared to the nine months ended September 30, 2020.

The wealth management team continues to successfully win business with commercial relationships and high net worth families across the Company’s footprint, as reflected through the growth of assets under management from $792.6 million at September 30, 2020 to $1.2 billion at September 30, 2021.

Mortgage banking fees decreased by $0.4 million, or 14%, to $2.5 million in the third quarter of 2021 compared to the second quarter of 2021, and decreased $2.7 million, or 52%, compared to the third quarter of 2020, reflecting the impact of lower refinance activity and low housing inventory levels.

For the nine months ended September 30, 2021, mortgage banking fees totaled $9.8 million, a decrease of $1.3 million, or 12%, compared to the nine months ended September 30, 2020.

SBA gains were a record $0.8 million, an increase of $0.6 million, compared to the second quarter of 2021 and an increase of $0.6 million, compared to the third quarter of 2020.

Higher saleable loan production reflects a renewed focus on saleable activity as the PPP program winds down.

For the nine months ended September 30, 2021, SBA gains totaled $1.3 million, an increase of $0.8 million, or 133%, compared to the nine months ended September 30, 2020.

Bank owned life insurance (“BOLI”) income was $1.1 million for the third quarter of 2021, an increase of $0.3 million compared to both the second quarter of 2021 and the third quarter of 2020.

The increase is attributed to additions to BOLI, including $25.0 million purchased late in the second quarter, with a tax equivalent yield of 4.50%.

In addition, the Company acquired $9.1 million in BOLI from Legacy Bank, and an additional $25.0 million was purchased late in the third quarter of 2021.

BOLI income totaled $2.9 million for the nine months ended September 30, 2021 and $2.7 million for the nine months ended September 30, 2020.

Other income was $5.2 million in the third quarter of 2021, an increase of $3.0 million quarter-over-quarter and an increase of $2.9 million year-over-year, reflecting the impact of gains on SBIC investments during the quarter.

Returns recognized on these investments will vary and are not expected to occur on a routine basis.

For the nine months ended September 30, 2021, other income totaled $11.2 million, an increase of $3.4 million, or 43%, compared to the nine months ended September 30, 2020.

Service charges on deposits were $2.8 million in the first quarter of 2022, $2.6 million in the fourth quarter of 2021 and $2.3 million in the first quarter of 2021.

Overdraft-related fees for both consumer and business accounts represent 43% of total service charges on deposits for the first quarter of 2022.

Interchange income remained flat at $4.1 million for the first quarter of 2022, compared to the fourth quarter of 2021, and increased $0.3 million, or 8%, compared to the first quarter of 2021.

Wealth management income, including trust fees and brokerage commissions and fees, was a record $2.7 million in the first quarter of 2022, increasing $0.3 million, or 13%, from the fourth quarter of 2021 and increasing $0.3 million, or 14%, compared to the first quarter of 2021.

The wealth management team continues to successfully win business with commercial relationships and high net worth families across the Company’s footprint.

Mortgage banking fees decreased by $0.3 million, or 17%, to $1.7 million in the first quarter of 2022 compared to the fourth quarter of 2021, and decreased $2.5 million, or 60%, compared to the first quarter of 2021, reflecting lower salable production due to low housing inventory and slowing refinance demand.

SBA gains were $0.2 million in the first quarter of 2022, compared to $0.2 million in the fourth quarter of 2021, and $0.3 million in the first quarter of 2021.

Bank owned life insurance (“BOLI”) income was $1.3 million for the first quarter of 2022, an increase of 3% compared to the fourth quarter of 2021 and 55% compared to the first quarter of 2021.

The increase is attributed to additions of $69.1 million in BOLI from acquisitions and purchases during 2021.

Other income was $2.9 million in the first quarter of 2022, a decrease of $3.4 million quarter-over-quarter and a decrease of $0.9 million year-over-year, reflecting lower income on SBIC investments and a gain in the fourth quarter of 2021 on the sale of a website domain name, partially offset by higher loan-swap related income.

The Company recognized $0.5 million in securities losses in the first quarter of 2022 compared to $0.4 million in the fourth quarter of 2021 and $0.1 million in the first quarter of 2021.

In the second quarter of 2022, the Company expects to continue its focus on growing a broad base of revenue sources, and expects second quarter 2022 noninterest income to increase.

Noninterest Expenses

The Company has demonstrated its commitment to efficiency through disciplined, proactive management of its cost structure.

For the third quarter of 2021, the efficiency ratio, defined as noninterest expense less amortization of intangibles and gains, losses, and expenses on foreclosed properties divided by net operating revenue (net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses), was 59.55% compared to 54.93% for the second quarter of 2021 and 61.65% for the third quarter of 2020.

The increase in the efficiency ratio quarter over quarter primarily reflects higher net interest income and higher non-interest income, which was more than offset by the impact of higher expenses, primarily resulting from the Legacy Bank acquisition during the third quarter of 2021.

The decrease in the efficiency ratio when compared to the prior year quarter reflects higher net interest income and higher noninterest income.

Both periods reflected the impact of higher expenses from acquisitions with the completion of the Freedom Bank acquisition in the third quarter of 2020.

For the nine months ended September 30, 2021, the efficiency ratio was 55.99% compared to 57.15% for the nine months ended September 30, 2020.

The adjusted efficiency ratio 1 2 was 51.50% in the third quarter of 2021, compared to 53.49% in the second quarter of 2021 and 54.82% in the third quarter of 2020.

The decrease in the adjusted efficiency ratio 1 compared to the prior quarter and the prior year quarter primarily reflects higher net interest income and higher noninterest income.

At September 30, 2021, adjusted noninterest expense 1 as a percent of average tangible assets was 1.95% for the third quarter of 2021 compared to 1.98% for the second quarter of 2021 and 2.24% for the third quarter of 2020.

For the nine months ended September 30, 2021 the adjusted efficiency ratio 1 was 52.29% compared to 52.64% for the nine months ended September 30, 2020.

1 2 Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

For the first quarter of 2022, the efficiency ratio, defined as noninterest expense less amortization of intangibles and gains, losses, and expenses on foreclosed properties divided by net operating revenue (net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses), was 62.33% compared to 53.70% for the fourth quarter of 2021 and 53.21% for the first quarter of 2021.

The higher efficiency ratio in the first quarter of 2022 primarily reflects the impact of merger-related expenses.

The adjusted efficiency ratio 1 2 was 54.86% in the first quarter of 2022, compared to 53.43% in the fourth quarter of 2021 and 51.99% in the first quarter of 2021.

At March 31, 2022, adjusted noninterest expense 1 as a percent of average tangible assets was 1.99% for the first quarter of 2022 compared to 1.96% for the fourth quarter of 2021 and 2.16% for the first quarter of 2021.

First Fourth First

Quarter Quarter Quarter

(In thousands, except ratios) 2022 2021 2021

2 unchanged sentences

Amortization of intangibles (1,446) (1,304) (1,211)

Business continuity expenses — — — — (307)

Branch reductions and other expense initiatives (74) (168) (449)

1 unchanged sentence

$ 50,705 $ 48,309 $ 43,879

Foreclosed property expense and net (loss)/gain on sale (66) 90 (512) 89 (442)

Foreclosed property expense and net gain on sale 164 175 65

Provision for credit losses on unfunded commitments (142) — —

8 unchanged sentences

2 Adjusted efficiency ratio is defined as noninterest expense, including adjustments to noninterest expense divided by aggregated tax equivalent net interest income and noninterest income, including adjustments to revenue.

Noninterest expense for the third quarter of 2021 totaled $55.3 million, an increase of $9.5 million, or 21%, compared to the second quarter of 2021, and an increase of $3.6 million, or 7%, from the third quarter of 2020.

For the nine months ended

September 30, 2021, noninterest expenses totaled $147.2 million, an increase of $5.3 million, or 4%, compared to the nine months ended September 30, 2020.

1 2 Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

Noninterest expense for the first quarter of 2022 totaled $58.9 million, an increase of $8.7 million, or 17%, compared to the fourth quarter of 2021, and an increase of $12.8 million, or 28%, from the first quarter of 2021.

Noninterest expenses are detailed as follows:

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

First Fourth First

Quarter Quarter Quarter

(In thousands) 2022 2021 2021

9 unchanged sentences

Amortization of intangibles 1,446 1,304 1,211

Foreclosed property expense and net loss (gain) on sale 66 (90) 512 (89) 442

Foreclosed property expense and net gain on sale (164) (175) (65)

Provision for credit losses on unfunded commitments 142 — —

1 unchanged sentence

Total $ 58,917 $ 50,263 $ 46,120

Salaries and wages totaled $27.9 million for the third quarter of 2021, $23.0 million for the second quarter of 2021, and $23.1 million for the third quarter of 2020.

The third quarter includes $2.6 million in merger-related expenses, as well as increases relating to the addition of the Legacy Bank branch franchise, and increases resulting from investments in commercial banking talent.

For the nine months ended September 30, 2021, salaries and wages totaled $72.3 million, an increase of $5.2 million, or 8%, compared to the nine months ended September 30, 2020.

The increase compared to the prior year reflects higher salaries from headcount added through acquisitions and investments made to support organic growth.

During the third quarter of 2021, employee benefit costs, which include costs associated with the Company's self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $4.2 million, an increase of $0.2 million, or 6%, compared to the second quarter of 2021 and an increase of $0.2 million, or 5%, compared to the third quarter of 2020.

The third quarter of 2021 included higher healthcare-related costs attributed to increased headcount.

For the nine months ended September 30, 2021, employee benefit costs totaled $13.1 million, an increase of $1.5 million, or 13%, compared to the nine months ended September 30, 2020.

The increase reflects the impact of higher health insurance related costs and payroll taxes resulting from headcount added through acquisitions and investments made to support organic growth.

Salaries and wages totaled $28.2 million for the first quarter of 2022, $25.0 million for the fourth quarter of 2021, and $21.4 million for the first quarter of 2021.

The first quarter of 2022 includes $3.0 million in merger-related expenses associated with the BBFC and Sabal Palm acquisitions.

The increase compared to the prior year quarter reflects higher salaries from headcount added through acquisitions and investments made to support organic growth.

During the first quarter of 2022, employee benefit costs, which include costs associated with the Company's self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $5.5 million, an increase of $0.7 million, or 15%, compared to the fourth quarter of 2021, and an increase of $0.5 million, or 10%, compared to the first quarter of 2021.

The first quarter of 2022 included higher seasonal payroll taxes and 401(k) contributions compared to the fourth quarter of 2021, and when compared to the first quarter of 2021, higher healthcare-related costs are attributed to increased headcount.

The Company utilizes third parties for its core data processing systems.

Ongoing data processing costs are directly related to the number of transactions processed and the negotiated rates associated with those transactions.

Outsourced data processing costs totaled $5.6 million, $4.7 million and $6.1 million for the third quarter of 2021, second quarter of 2021 and third quarter of 2020, respectively.

The third quarter of 2021 included $0.9 million in merger-related costs related to data conversion, while the third quarter of 2020 included $1.9 million in merger-related costs.

For the nine months ended September 30, 2021 and September 30, 2020, outsourced data processing costs totaled $14.8 million.

The Company continues to improve and enhance mobile and other digital products and services through key third parties.

Outsourced data processing costs may increase in the future as customers adopt improved products and as business volumes grow.

Telephone and data line expenditures, including electronic communications with customers and between branch and customer support locations and personnel, as well as with third-party data processors, were $0.8 million, $0.8 million, and $0.7 million for the third quarter of 2021, second quarter of 2021, and third quarter of 2020, respectively.

For the nine months ended September 30, 2021, telephone and data line expenditures totaled $2.4 million, an increase of $0.2 million, or 10%, compared to the nine months ended September 30, 2020.

Total occupancy, furniture and equipment expenses were $5.1 million in the third quarter of 2021, $4.5 million in the second quarter of 2021, and $5.4 million in the third quarter of 2020.

Increases in the third quarter reflect merger-related equipment disposals, as well as increases relating to the addition of the Legacy Bank branch franchise.

For the nine months ended

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

Marketing expenses totaled $1.4 million in the third quarter of 2021, $1.0 million in the second quarter of 2021 and $1.5 million in the third quarter of 2020.

For the nine months ended September 30, 2021, marketing expenses totaled $3.5 million, a decrease of $0.3 million, or 7%, compared to the nine months ended September 30, 2020.

Targeted marketing campaigns allow the Company to engage new and existing customers while maintaining a controlled expense base.

Legal and professional fees for the third quarter of 2021 were $4.2 million, an increase of $2.0 million, or 90%, compared to the second quarter of 2021, and an increase of $1.1 million, or 38%, compared to the third quarter of 2020.

For the nine months ended September 30, 2021, legal and professional fees totaled $8.9 million, an increase of $0.3 million, or 3%, compared to the nine months ended September 30, 2020.

Acquisition-related expenses were $2.0 million in the third quarter of 2021, $0.5 million in the second quarter of 2021, and $1.3 million in the third quarter of 2020.

FDIC assessments were $0.7 million for the third quarter of 2021 and $0.5 million in both the second quarter of 2021 and the third quarter of 2020.

For the nine months ended September 30, 2021, FDIC assessments totaled $1.7 million compared to $0.7 million for the nine months ended September 30, 2020 with 2020 benefiting from the FDIC small bank assessment credits which offset expense.

A provision of $0.1 million was recorded for credit losses on unfunded lending commitments in the third quarter of 2021 attributed to the acquisition of Legacy Bank, compared to no adjustment in the second quarter of 2021 and a $0.8 million provision in the third quarter of 2020 with the acquisition of Freedom Bank.

Other expense totaled $4.0 million, $4.1 million and $4.5 million for the third quarter of 2021, the second quarter of 2021 and the third quarter of 2020, respectively.

For the nine months ended September 30, 2021, other expense totaled $12.1 million, an increase of $0.1 million, or 1%, compared to the nine months ended September 30, 2020.

For the third quarter of 2021, the Company recorded tax expense of $7.0 million compared to tax expense of $8.8 million in the second quarter of 2021 and $7.0 million in the third quarter of 2020.

For the nine months ended September 30, 2021, tax expense totaled $26.0 million, an increase of $12.0 million, or 85%, compared to the nine months ended September 30, 2020 due to higher pre-tax income.

A tax benefit related to stock-based compensation totaled $0.3 million in the third quarter of 2021, compared to a tax benefit of $0.6 million in the second quarter of 2021 and nominal impact in the third quarter of 2020.

Outsourced data processing costs totaled $6.2 million, $5.2 million, and $4.5 million for the first quarter of 2022, fourth quarter of 2021, and first quarter of 2021, respectively.

The first quarter of 2022 included $0.6 million in merger-related costs related to data conversion.

The increase in outsourced data processing costs in the first quarter of 2022 also includes incremental expenses from the upgrade of the Company’s online and mobile banking platform, which was completed during the first quarter of 2022.

Telephone and data line expenditures, including electronic communications with customers and between branch and customer support locations and personnel, as well as with third-party data processors, were $0.7 million, $0.8 million, and $0.8 million for the first quarter of 2022, fourth quarter of 2021, and first quarter of 2021, respectively.

Total occupancy, furniture and equipment expenses were $5.4 million in the first quarter of 2022, $4.9 million in the fourth quarter of 2021, and $5.0 million in the first quarter of 2021.

Increases in the first quarter of 2022 reflect merger-related equipment disposals, as well as increases relating to the Company’s expansion during the quarter into Naples, Sarasota and Jacksonville.

Marketing expenses totaled $1.2 million in the first quarter of 2022, $1.1 million in the fourth quarter of 2021, and $1.2 million in the first quarter of 2021.

Legal and professional fees for the first quarter of 2022 were $4.8 million, an increase of $2.3 million, or 95%, compared to the fourth quarter of 2021, and an increase of $2.2 million, or 85%, compared to the first quarter of 2021.

Acquisition-related expenses were $2.9 million in the first quarter of 2022, $0.4 million in the fourth quarter of 2021, and $0.6 million in the first quarter of 2021.

FDIC assessments were $0.8 million for the first quarter of 2022, $0.7 million in the fourth quarter of 2021, and $0.5 million in the first quarter of 2021.

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

Other expense totaled $4.7 million, $4.3 million and $4.0 million for the first quarter of 2022, the fourth quarter of 2021 and the first quarter of 2021, respectively.

The Company expects to maintain expense discipline while investing for growth.

Expenses in the second quarter of 2022 are expected to increase, primarily as a result of continued investments in talent, and the full impact of additional overhead from new locations, including overhead associated with recent bank acquisitions.

The Company expects that the adjusted efficiency ratio 3 1 will remain below 55% in the second quarter of 2022, and will decline throughout the year resulting in a full year 2022 ratio that will be in the low 50s.

Provision for Credit Losses

The provision for credit losses was $6.6 million for the first quarter of 2022 compared to a reversal of provision of $3.9 million for the fourth quarter of 2021 and a reversal of provision of $5.7 million for the first quarter of 2021.

The first quarter of 2022 included $5.1 million in provisioning for loans acquired in the Sabal Palm and BBFC transactions as well as the impact of organic loan growth during the quarter.

For the first quarter of 2022, the Company recorded tax expense of $5.8 million compared to $8.3 million in the fourth quarter of 2021 and $10.2 million in the first quarter of 2021.

Changes to the Florida corporate income tax rate resulted in benefits of $1.5 million in the fourth quarter of 2021.

Tax benefits related to stock-based compensation totaled $0.5 million in the first quarter of 2022, $0.6 million in the fourth quarter of 2021, and were nominal in the first quarter of 2021.

Explanation of Certain Unaudited Non-GAAP Financial Measures

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These disclosures should not be considered an alternative to GAAP.

3 1 Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

Reconciliation of Non-GAAP Measures

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

First Fourth First

Quarter Quarter Quarter

(In thousands, except per share data) 2022 2021 2021

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Net income $ 20,588 $ 36,330 $ 33,719

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

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

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

Noninterest Income $ 15,373 $ 18,706 $ 17,671

Securities (gains) losses, net 30 55 (4) 199 (1,253)

Securities losses, net 452 379 114

Gain on sale of domain name (included in other income) — (755) —

Total adjustments to noninterest income 452 (376) 114

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Amortization of intangibles (1,446) (1,304) (1,211)

Business continuity expenses — — — — (307)

Branch reductions and other expense initiatives 1

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Tax effect of adjustments 2,196 280 577

Effect of change in corporate tax rate on deferred tax assets — 774 —

Total adjustments to income taxes 2,196 1,054 577

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Foreclosed property expense and net (loss) gain on sale 164 175 65

Provision for unfunded commitments (133) — (756) (133) (980)

Provision for credit losses on unfunded commitments (142) — —

Net Adjusted Noninterest Expense $ 50,727 $ 48,484 $ 43,944

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1.99 % 1.96 % 2.16 %

First Fourth First

Quarter Quarter Quarter

(In thousands, except per share data) 2022 2021 2021

Net Interest Income $ 76,522 $ 72,289 $ 66,610

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Adjusted Pre-Tax Pre-Provision Earnings $ 41,737 $ 42,258 $ 40,582

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

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

Average Assets $ 10,628,516 $ 10,061,382 $ 8,485,354

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$ 71,399 $ 65,540 $ 56,987

First Fourth First

Quarter Quarter Quarter

(In thousands, except per share data) 2022 2021 2021

Net Interest Margin 2

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Loan interest income excluding tax equivalent adjustment $ 67,118 $ 64,401 $ 62,298

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

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

Securities Interest Income 2

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Financial Condition

Total assets increased $1.6 billion at September 30, 2021, or 19%, from December 31, 2020, reflecting the acquisition of Legacy Bank, which added $628.9 million in assets, as well as higher cash balances due to higher customer deposit balances, and additional investments in debt securities.

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

At September 30, 2021, the Company had $1.5 billion in debt securities available-for-sale and $526.5 million in debt securities held-to-maturity.

Total assets increased $1.2 billion at March 31, 2022, or 13%, from December 31, 2021, reflecting the acquisitions of BBFC and Sabal Palm, which added $661.0 million in assets, as well as higher cash balances due to higher customer deposit balances.

Information related to yields, maturities, carrying values and fair value of the Company’s debt securities is set forth in “ Note 3 – Securities ” of the Company’s condensed consolidated financial statements.

At March 31, 2022, the Company had $1.7 billion in securities available-for-sale and $747.0 million in securities held-to-maturity.

The Company's total debt securities portfolio increased $170.7 million, or 7%, from December 31, 2021.

During the first quarter of 2021, the Company reclassified debt securities with an amortized cost of $210.8 million from available-for-sale to held-to-maturity.

These securities had net unrealized gains of $0.8 million at the date of transfer, which will continue to be reported in accumulated other comprehensive income and will be amortized over the remaining life of the securities as an adjustment of yield.

The effect on interest income of the amortization of net unrealized gains is offset by the amortization of the premium on the securities transferred.

The Company has the intent and ability to retain these securities until maturity.

During the nine months ended September 30, 2021, there were $1.1 billion of debt security purchases and $520.4 million in aggregated paydowns and maturities.

For the nine months ended September 30, 2021, the Company had $57.2 million in proceeds from sales of securities with net losses of $0.1 million.

For the nine months ended September 30, 2020, there were $626.7 million debt security purchases and aggregated maturities and principal paydowns totaled $237.1 million.

Proceeds from sales of securities during the nine months ended September 30, 2020 totaled $96.7 million, with net gains of $1.1 million.

During the three months ended March 31, 2022, there were $379.5 million of debt security purchases and $121.8 million in paydowns and maturities over the same period.

Securities obtained in the acquisition of BBFC had a fair value of $26.0 million and were immediately sold with no gain or loss recognized.

For the three months ended March 31, 2021, there were $196.5 million of debt security purchases and $199.2 million in paydowns and maturities over the same period.

For the three months ended March 31, 2021, there were no sales of securities.

In the second quarter of 2022, the Company expects to continue to steadily pace securities purchases, again expecting net growth in the portfolio of approximately $150 million to $250 million.

Debt securities generally return principal and interest monthly.

At September 30, 2021, available-for-sale debt securities had gross unrealized losses of $9.9 million and gross unrealized gains of $16.4 million, compared to gross unrealized losses of $2.1 million and gross unrealized gains of $28.7 million at December 31, 2020.

The modified duration of the available-for-sale portfolio at September 30, 2021 was 3.2, compared to 3.8 at December 31, 2020.

The modified duration of the available-for-sale portfolio at March 31, 2022 was 3.2, compared to 3.1 at December 31, 2021.

At March 31, 2022, available-for-sale securities had gross unrealized losses of $97.6 million and gross unrealized gains of $1.7 million, compared to gross unrealized losses of $20.9 million and gross unrealized gains of $11.5 million at December 31, 2021.

The decline in value was the result of rising interest rates during the period.

The Company assesses securities in an unrealized loss position on a quarterly basis.

As of March 31, 2022, the Company expected to recover the entire amortized cost basis of these securities, and therefore, no allowance for credit losses was recorded.

The credit quality of the Company’s securities holdings is primarily investment grade.

Treasuries, obligations of U.S.

Treasury and U.S.

government agencies and obligations of U.S.

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The collateral underlying these mortgage investments includes both fixed-rate and adjustable-rate mortgage loans.

Non-guaranteed agency commercial securities total $25.0 million, with a fair value of $26.0 million.

Non-guaranteed agency commercial securities totaled $20.1 million, with a fair value of $20.0 million.

These securities have weighted average credit support of 19%.

The collateral underlying these mortgages are primarily pooled multifamily loans.

The Company also has invested $277.3 million, with a fair value of $277.3 million, in uncapped 3-month LIBOR floating rate collateralized loan obligations (“CLOs”).

CLOs are special purpose vehicles, and the Company’s holdings purchase nearly all first lien broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors.

As of September 30, 2021, the Company held 32 total positions, all of which were in AAA/AA tranches with average credit support of 31%.

The collateral underlying these mortgages is primarily pooled multifamily loans.

The Company also has invested $315.2 million in uncapped 3-month LIBOR floating rate collateralized loan obligations.

Collateralized loan obligations are special purpose vehicles that purchase first lien broadly syndicated corporate loans while providing support to senior tranche investors.

As of March 31, 2022, all of the Company’s collateralized loan obligations were in AAA/AA tranches with average credit support of 32%.

The Company utilizes credit models with assumptions of loan level defaults, recoveries, and prepayments to evaluate each security for potential credit losses.

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

At September 30, 2021, the Company has determined that all debt securities in an unrealized loss position are the result of both broad investment type spreads and the current interest rate environment.

At March 31, 2022, the Company has determined that all debt securities in an unrealized loss position are the result of both broad investment type spreads and the current interest rate environment.

Management believes that each investment will recover any price depreciation over its holding period as the debt securities move to maturity, and management has the intent and ability to hold these investments to maturity if necessary.

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

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

Loan Portfolio

Loans, net of unearned income and excluding the allowance for credit losses, were $5.9 billion at September 30, 2021, a $170.5 million increase from December 31, 2020.

Increases include organic growth, along with the acquisition of Legacy Bank and the purchase of loan pools.

During the nine months ended September 30, 2021, the Company participated in the most recent round of the PPP, resulting in loan originations of $256.0 million.

Increases were offset by $675.1 million in PPP loans forgiven by the SBA during the nine months ended September 30, 2021.

For the nine months ended September 30, 2021, the Company originated $728.9 million in commercial and commercial real estate loans, compared to $378.4 million for the nine months ended September 30, 2020, an increase of $350.5 million, or 93%.

The late-stage loan pipeline for commercial and commercial real estate loans totaled $368.9 million at September 30, 2021.

Prior year’s production and pipeline reflect the impact of the onset of the COVID-19 pandemic when the Company purposefully slowed originations.

The current year activity reflects the Company’s return to its pre-pandemic credit policy and continuation of strict underwriting guidelines.

The Company originated $415.6 million in residential loans retained in the portfolio during the nine months ended September 30, 2021, compared to $74.7 million during the nine months ended September 30, 2020, an increase of $340.8 million, or 456%.

Residential loans retained in the portfolio includes $180.8 million in purchased pools consisting of 30-year fixed rate jumbo residential loans purchased in the third quarter of 2021 and a $38.4 million purchased pool consisting of 30-year fixed rate jumbo residential loans purchased in the second quarter of 2021.

Saleable production increased for the nine months ended September 30, 2021, representing $353.6 million versus $347.8 million during the nine months ended September 30, 2020, an increase of 2%.

Consumer originations totaled $176.8 million for the nine months ended September 30, 2021, an increase of $5.1 million, or 3%, compared to the nine months ended September 30, 2020.

Loans, net of unearned income and excluding the allowance for credit losses, were $6.5 billion at March 31, 2022, a $526.2 million increase from December 31, 2021.

Changes during the first quarter of 2022 included $367.9 million added through bank acquisitions, and the purchase of a $111.3 million residential loan pool.

Removing the impacts of loans added through acquisitions and the purchased pool during the quarter, loans grew 7% on an annualized basis.

The Company expects loan growth to continue, with an annualized growth rate excluding bank acquisitions in the high single digits for the remainder of 2022.

For the three months ended March 31, 2022, the Company originated $373.0 million in commercial and commercial real estate loans, compared to $204.3 million for the three months ended March 31, 2021, an increase of $168.7 million, or 83%.

The late-stage loan pipeline for commercial and commercial real estate loans totaled $619.5 million at March 31, 2022.

The addition of well-established commercial bankers and expansion into new markets across the state has generated disciplined loan growth.

The Company originated $175.5 million in residential loans retained in the portfolio during the three months ended March 31, 2022, compared to $46.6 million during the three months ended March 31, 2021, an increase of $128.8 million, or 276%.

Residential loans retained in the portfolio includes the $111.3 million purchased residential loan pool consisting of 30-year fixed rate jumbo residential loans purchased in the first quarter of 2022.

Saleable production decreased for the three months ended March 31, 2022, representing $51.2 million versus $138.3 million during the three months ended March 31, 2021, a decrease of $87.1 million, or 63%, reflecting limited housing inventory and slowing refinance activity.

Consumer originations totaled $79.0 million for the three months ended March 31, 2022, an increase of $32.3 million, or 69%, compared to the three months ended March 31, 2021.

The Company remains committed to sound risk management procedures.

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The Company's exposure to commercial real estate lending remains well below regulatory limits (see “Loan Concentrations”).

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

September 30, 2021

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

March 31, 2022

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

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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 was $26.6 million, or 2.3%, of the outstanding acquired loan balances.

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

At December 31, 2021, the remaining fair value adjustments for acquired loans was $23.1 million, or 2.3%, of the acquired loan balances.

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

Commercial real estate (“CRE”) loans, inclusive of owner-occupied commercial real estate, increased by $337.8 million, or 13%, in the nine months ended September 30, 2021, totaling $2.9 billion at September 30, 2021 compared to $2.5 billion at December 31, 2020.

Owner-occupied commercial real estate loans represent $1.2 billion, or 42%, of the commercial real estate portfolio.

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

During the nine months ended September 30, 2021, the Company participated in the most recent round of the PPP and originated 2,782 loans totaling $256.0 million.

Also during the nine months ended September 30, 2021, $675.1 million in PPP loans were forgiven by the SBA.

At September 30, 2021, Seacoast had $2.2 million of loans with payment accommodations to borrowers financially impacted by the COVID-19 pandemic, none of which have been classified as TDRs, compared to $74.1 million at December 31, 2020.

Interest and fees have continued to accrue on these loans during any payment deferral period.

Residential real estate loans increased $124.7 million, or 9%, to $1.5 billion as of September 30, 2021, compared to December 31, 2020.

Commercial real estate (“CRE”) loans, inclusive of owner-occupied CRE, increased by $316.5 million, or 11%, in the three months ended March 31, 2022, totaling $3.3 billion at March 31, 2022 compared to $2.9 billion at December 31, 2021.

Owner-occupied CRE loans represent $1.3 billion, or 40%, of the commercial real estate portfolio.

Residential real estate loans increased $174.3 million, or 12%, to $1.6 billion as of March 31, 2022, compared to December 31, 2021.

Substantially all residential mortgage originations have been underwritten to conventional loan agency standards, including loans having balances that exceed agency value limitations.

At September 30, 2021, approximately $315.3 million, or

21%, of the Company’s residential mortgage balances were adjustable 1-4 family mortgage loans, which includes hybrid adjustable-rate mortgages, compared to $436.3 million, or 32% at December 31, 2020.

Fixed-rate mortgages totaled approximately $0.8 billion, or 56%, at September 30, 2021, compared to $499.0 million, or 37% at December 31, 2020.

Home equity lines of credit ("HELOCs"), primarily floating rates, totaled $325.3 million at September 30, 2021 and $341.6 million at December 31, 2020.

At March 31, 2022, approximately $304.9 million, or 19%, of the Company’s residential mortgage balances were adjustable 1-4 family mortgage loans, which includes hybrid adjustable-rate mortgages, compared to $278.9 million, or 20%, at December 31, 2021.

Fixed-rate mortgages totaled approximately $943.7 million, or 57%, at March 31, 2022, compared to $773.7 million, or 54%, at December 31, 2021.

Home equity lines of credit (“HELOCs”), primarily floating rates, totaled $351.0 million at March 31, 2022 and $336.6 million at December 31, 2021.

Borrowers in the residential real estate portfolio have an average credit score of 750.

Specifically for HELOCs, borrowers have an average credit score of 763.

The average LTV of our HELOC portfolio is 67% with 43% of the portfolio being in first lien position at September 30, 2021, compared to an average LTV of 68% with 45% of the portfolio being in the first lien position at December 31, 2020.

The average LTV of our HELOC portfolio is 67% with 39% of the portfolio being in first lien position at March 31, 2022, compared to an average LTV of 69% with 42% of the portfolio being in the first lien position at December 31, 2021.

The Company also provides consumer loans, which include installment loans, auto loans, marine loans, and other consumer loans, which decreased $4.5 million, or 3%, to total $169.7 million, compared to $174.2 million at December 31, 2021.

Borrowers in the consumer portfolio have an average credit score of 735.

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

At March 31, 2022, the Company had unfunded loan commitments of $2.1 billion, compared to $2.0 billion at December 31, 2021.

Loan Concentrations

The Company has developed prudent guardrails to manage loan types that are most impacted by stressed market conditions in order to minimize credit risk concentration to capital.

Outstanding balances for commercial and CRE loan relationships greater than $10 million totaled $1.1 billion and represented 18% of the total portfolio at September 30, 2021 compared to $753.7 million, or 13%, at year-end 2020.

The Company’s ten largest commercial and commercial real estate funded and unfunded loan relationships at September 30, 2021 aggregated to $294.0 million, of which $193.9 million was funded compared to $254.3 million at December 31, 2020, of which $188.0 million was funded.

The Company had 180 commercial and commercial real estate relationships in excess of $5 million totaling $1.8 billion, of which $1.5 billion was funded at September 30, 2021 compared to 135 relationships totaling $1.3 billion at December 31, 2020, of which $1.2 billion was funded.

Outstanding balances for commercial and CRE loan relationships greater than $10 million totaled $1.2 billion and represented 18% of the total portfolio at March 31, 2022, compared to $1.2 billion, or 20%, at year-end 2021.

The Company’s ten largest commercial and commercial real estate funded and unfunded loan relationships at March 31, 2022 aggregated to $311.9 million, of which $166.2 million was funded, compared to $312.0 million at December 31, 2021, of which $157.8 million was funded.

The Company had 177 commercial and commercial real estate relationships in excess of $5 million totaling $1.9 billion, of which $1.5 billion was funded at March 31, 2022, compared to 174 relationships totaling $1.9 billion at December 31, 2021, of which $1.4 billion was funded.

Concentrations in total construction and land development loans and total CRE loans are maintained well below regulatory limits.

Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital were 21% and 175%, respectively, at September 30, 2021, compared to 23% and 168%, respectively, at December 31, 2020.

Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital were 22% and 189%, respectively, at March 31, 2022, compared to 23% and 168%, respectively, at December 31, 2021.

Regulatory guidance suggests limits of 100% and 300%, respectively.

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In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.

At March 31, 2022, the Company had $1.6 billion in loans secured by residential real estate and $3.3 billion in loans secured by commercial real estate, representing 25% and 50% of total loans outstanding, respectively.

In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.

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

Nonperforming assets (“NPAs”) at September 30, 2021 totaled $46.2 million, and were comprised of $32.6 million of nonaccrual loans, and $13.6 million of other real estate owned (“OREO”).

Nonperforming assets (“NPAs”) at March 31, 2022 totaled $37.8 million, and were comprised of $26.2 million of nonaccrual loans, and $11.6 million of other real estate owned (“OREO”).

Compared to December 31, 2021, nonaccrual loans decreased $4.4 million, primarily the result of paydowns.

The increase in OREO of $0.9 million reflects additions of $3.3 million, and $2.1 million of capital expenditures, offset by $4.1 million in sales and $0.4 million in write-downs.

The decrease in OREO of $2.1 million reflects $3.4 million in sales and $0.1 million of write-downs, offset by $1.0 million added upon closure of a branch property, $0.1 million in acquired OREO, and $0.3 million in capital expenditures.

Overall, NPAs decreased $6.4 million, or 15%, from $44.2 million as of December 31, 2021.

At September 30, 2021, approximately 76% of nonaccrual loans were secured with real estate.

At March 31, 2022, approximately 69% of nonaccrual loans were secured with real estate.

See the tables below for details about nonaccrual loans.

At September 30, 2021, nonaccrual loans were written down by approximately $7.1 million, including reserves on individually evaluated loans.

Nonperforming loans to total loans outstanding at September 30, 2021 decreased to 0.55% from 0.63% at December 31, 2020.

Nonperforming assets to total assets at September 30, 2021 decreased to 0.47% from 0.59% at December 31, 2020.

At March 31, 2022, nonaccrual loans were written down by approximately $5.9 million, including reserves on individually evaluated loans.

Nonperforming loans to total loans outstanding at March 31, 2022 decreased to 0.41% from 0.52% at December 31, 2021.

Nonperforming assets to total assets at March 31, 2022 decreased to 0.35% from 0.46% at December 31, 2021.

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

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Company policy requires TDRs that are classified as nonaccrual loans after restructuring remain on nonaccrual until performance can be verified, which usually requires six months of performance under the restructured loan terms.

Accruing TDRs totaled $4.0 million at September 30, 2021 compared to $4.2 million at December 31, 2020.

Accruing TDRs totaled $4.5 million at March 31, 2022, compared to $3.9 million at December 31, 2021.

Accruing TDRs are excluded from the nonperforming asset ratios.

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

As of September 30, 2021, pandemic-related deferrals totaled $2.2 million and are not considered TDRs.

If economic conditions deteriorate, these borrowers may be unable to resume scheduled payments, which may result in further modification of terms and the potential for classification as a TDR in future periods.

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

September 30, 2021

March 31, 2022

Nonaccrual Loans Accruing

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Total $ 11,569 $ 19,029 $ 30,598 $ 3,917

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

September 30, 2021 December 31, 2020

At March 31, 2022 and December 31, 2021, total TDRs (performing and nonperforming) were comprised of the following loans by type of modification:

March 31, 2022 December 31, 2021

(In thousands) Number Amount Number Amount

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Total 93 $ 7,002 94 $ 8,571

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.

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

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.

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

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

Historical credit losses provide the basis for estimation of expected credit losses.

Historical credit losses provide the basis for

estimation of expected credit losses.

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

During the third quarter of 2021, the Company recorded a provision of $5.1 million, reflecting the impact of higher loans outstanding, including loans acquired in the Legacy Bank acquisition.

Net charge-offs for the third quarter of 2021 were $1.4 million, or 0.10% of average loans and, for the four most recent quarters, averaged 0.10% of outstanding loans.

Excluding PPP loans, the ratio of allowance to total loans decreased to 1.54% at September 30, 2021 from 1.60% at June 30, 2021.

During the first quarter of 2022, the Company recorded a provision of $6.6 million, reflecting the impact of higher loans outstanding, including a provision of $5.1 million for loans acquired in the BBFC and Sabal Palm acquisitions as well as the impact of organic loan growth during the quarter.

Net charge-offs for the first quarter of 2022 were $0.1 million, or less than 0.01% of average loans and, for the four most recent quarters, averaged 0.05% of outstanding loans.

Excluding PPP loans, the ratio of allowance to total loans decreased to 1.40% at March 31, 2022 from 1.43% at December 31, 2021.

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

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

Nine Months Ended September 30, 2021

(In thousands) Beginning Balance Initial Impact on Allowance of PCD Loans Acquired During the Period Provision for Credit Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance

Three Months Ended March 31, 2021

(In thousands) Beginning Balance Provision for Credit Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance

Construction and land development $ 4,920 $ (510) $ — $ 18 $ — $ 4,428

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

At September 30, 2021, the Company had $1.5 billion in loans secured by residential real estate and $2.9 billion in loans secured by commercial real estate, representing 25% and 49% of total loans outstanding, respectively.

In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.

LIBOR Transition

The Company’s LIBOR transition steering committee is responsible for overseeing the execution of the Company’s enterprise-wide LIBOR transition program, and for evaluating and mitigating risks associated with the transition from LIBOR.

The LIBOR transition program includes a comprehensive review of the financial products, agreements, contracts, and business processes that may use LIBOR as a reference rate, and the development and execution of strategy to transition away from LIBOR, with appropriate consideration of the potential financial, customer, counterpart, regulatory and legal impacts.

The LIBOR transition program includes a comprehensive review of the financial products, agreements, contracts, and business

processes that may use LIBOR as a reference rate, and the development and execution of strategy to transition away from LIBOR, with appropriate consideration of the potential financial, customer, counterpart, regulatory and legal impacts.

The Company continues to execute its LIBOR transition program, and to monitor regulatory and legislative activity to identify any necessary actions and facilitate the transition to alternative reference rates.

As of December 31, 2021, the Company ceased issuance of new LIBOR loans.

As of March 31, 2022, the Company has approximately $225 million in existing loans for which the repricing index is tied to LIBOR.

The Company's swap agreements and other derivatives are governed by the International Swap Dealers Association (“ISDA”).

ISDA has developed fallback language for swap agreements and has established a protocol to allow counterparties to modify legacy trades to include the new fallback language.

The Company also invests in securities and has issued subordinated debt tied to LIBOR.

The Company continues to monitor regulatory and legislative activity with regard to these products to identify and execute necessary actions to facilitate the transition to alternative reference rates.

Cash and Cash Equivalents and Liquidity Risk Management

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The Company does not rely on and is not dependent upon off-balance sheet financing or significant amounts of wholesale funding.

Brokered certificates of deposit (“CDs”) at September 30, 2021 were $20.0 million, a decrease of $213.8 million, or 91%, from December 31, 2020.

Cash and cash equivalents, including interest bearing deposits, totaled $1.2 billion on a consolidated basis at September 30, 2021, compared to $404.1 million at December 31, 2020.

Higher cash and cash equivalent balances at September 30, 2021 reflect the benefit of deposits acquired from Legacy Bank in addition to favorable organic deposit growth.

Brokered deposits at March 31, 2022 were $126.2 million, an increase compared to $8.0 million at December 31, 2021, which reflected the Company’s year-end liquidity management activities.

Cash and cash equivalents, including interest bearing deposits, totaled $1.2 billion on a consolidated basis at March 31, 2022, compared to $737.7 million at December 31, 2021.

Higher cash and cash equivalent balances at March 31, 2022 reflect the benefit of deposits acquired from BBFC and Sabal Palm in addition to favorable organic deposit growth.

Contractual maturities for assets and liabilities are reviewed to meet current and expected future liquidity requirements.

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The Company is also able to provide short-term financing of its activities by selling, under an agreement to repurchase, United States Treasury and Government agency debt securities not pledged to secure public deposits or trust funds.

At September 30, 2021, the Company had available unsecured lines of credit of $165.0 million and secured lines of credit, which are subject to change, of $1.3 billion.

At March 31, 2022, the Company had available unsecured lines of credit of $165.0 million and secured lines of credit, which are subject to change, of $2.3 billion.

In addition, the Company had $2.0 billion of debt securities and $684.3 million in residential and commercial real estate loans available as collateral.

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The Company has traditionally relied upon dividends from Seacoast Bank and securities offerings to provide funds to pay the Company’s expenses and to service the Company’s debt.

During the third quarter of 2021, Seacoast Bank distributed $38.3 million to the Company and, at September 30, 2021, is eligible to distribute dividends to the Company of approximately $194.4 million without prior regulatory approval.

At September 30, 2021, the Company had cash and cash equivalents at the parent of approximately $95.5 million compared to $70.1 million at December 31, 2020.

During the first quarter of 2022, Seacoast Bank distributed $14.7 million to the Company and, at March 31, 2022, is eligible to distribute dividends to the Company of approximately $144.6 million without prior regulatory approval.

At March 31, 2022, the Company had cash and cash equivalents at the parent of approximately $108.2 million compared to $98.5 million at December 31, 2021.

Deposits and Borrowings

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

September 30, December 31,

March 31, December 31,

(In thousands, except ratios) 2022 2021

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

Total deposits increased $1.4 billion, or 20%, to $8.3 billion at September 30, 2021, compared to $6.9 billion at December 31, 2020.

The increase is largely the result of significant growth in transaction account deposit balances as new clients were onboarded and existing clients continue to see expansion in cash balances.

Since December 31, 2020, interest bearing deposits (interest bearing demand, savings and money market deposits) increased $819.5 million, or 21%, to $4.6 billion, and CDs (excluding brokered CDs) decreased $0.7 million, or 0.1%, to $596.6 million.

Total deposits increased $1.2 billion, or 15%, to $9.2 billion at March 31, 2022, compared to $8.1 billion at December 31, 2021.

The increase reflects growth in existing customer balances, the addition of new customers and the impact of the BBFC and Sabal Palm acquisitions, which added $166.3 million and $396.0 million, respectively, in deposits during the first quarter of 2022.

The Company expects deposit growth to moderate, with an annualized growth rate excluding bank acquisitions in the mid-single digits for the remainder of 2022.

Since December 31, 2021, interest bearing deposits (interest bearing demand, savings and money market deposits) increased $753.3 million, or 17%, to $5.2 billion, and CDs decreased $24.3 million, or 5%, to $530.6 million.

Noninterest demand deposits were higher by $447.2 million, or 15%, compared to year-end 2021, totaling $3.5 billion.

Noninterest demand deposits represented 37% of total deposits at September 30, 2021 and 33% at December 31, 2020.

During the nine months ended September 30, 2021, $213.8 million of brokered CDs at an average rate of 1.14% matured.

Brokered CDs at September 30, 2021 totaled $20.0 million, compared to $233.8 million at December 31, 2020, and mature in the fourth quarter of 2021.

Customer repurchase agreements totaled $105.5 million at September 30, 2021, decreasing $14.1 million from December 31, 2020.

Noninterest demand deposits represented 38% of total deposits at both March 31, 2022 and December 31, 2021.

As of March 31, 2022 and December 31, 2021, the Company did not hold any brokered CDs.

Customer repurchase agreements totaled $120.9 million at March 31, 2022, decreasing $0.6 million from December 31, 2021.

Repurchase agreements are offered by Seacoast to select customers who wish to sweep excess balances on a daily basis for investment purposes.

Public funds comprise a significant amount of the outstanding balance.

The Company participates in programs with third party deposit networks as part of its liquidity management strategy, particularly as it approaches $10 billion in assets.

The Company participates in programs with third party deposit networks as part of its liquidity management strategy.

Through these programs, the Company can offer its customers access to FDIC insurance on large balances, and the Company can retain or sell, on an overnight basis, the underlying deposits.

The Company expects to remain below $10 billion in assets at year end 2021, and at September 30, 2021, the Company had sold, on an

overnight basis, $233.1 million in deposits, compared to $112.7 million at December 31, 2020.

At March 31, 2022, the Company had sold, on an overnight basis, $231.3 million in deposits, compared to $228.0 million at December 31, 2021.

These deposits are not included in the Consolidated Balance Sheet.

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

At September 30, 2021 and December 31, 2020, borrowings were comprised of subordinated debt of $71.6 million and $71.4 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company, and there were no borrowings from FHLB.

For the nine months ended September 30, 2020, FHLB borrowings averaged $180.9 million with a weighted average rate of 1.08%.

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

At March 31, 2022 and December 31, 2021, borrowings were comprised of subordinated debt of $71.7 million and $71.6 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company, and there were no borrowings from FHLB during any of the periods presented.

The weighted average interest rate of outstanding subordinated debt related to trust preferred securities was 2.47% and 2.43% for the three months ended March 31, 2022 and March 31, 2021, respectively.

Off-Balance Sheet Transactions

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For loan commitments, the contractual amount of a commitment represents the maximum potential credit risk that could result if the entire commitment had been funded, the borrower had not performed according to the terms of the contract, and no collateral had been provided.

A large majority of loan commitments and standby letters of credit expire without being funded, and accordingly, total contractual amounts are not representative of actual future credit exposure or liquidity requirements.

A large majority of loan commitments and standby letters of credit expire without being funded, and

accordingly, total contractual amounts are not representative of actual future credit exposure or liquidity requirements.

Loan commitments and letters of credit expose the Company to credit risk in the event that the customer draws on the commitment and subsequently fails to perform under the terms of the lending agreement.

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These instruments are not recorded on the balance sheet until funds are advanced under the commitment.

Loan commitments were $1.8 billion at September 30, 2021 and $1.5 billion at December 31, 2020.

Loan commitments were $2.1 billion at March 31, 2022 and $2.0 billion at December 31, 2021.

Capital Resources

The Company’s equity capital at September 30, 2021 increased $160.1 million, or 14%, from December 31, 2020 to $1.3 billion.

Changes in equity included increases from net income of $88.1 million, partially offset by the issuance of a common stock dividend totaling $14.9 million and the decrease in accumulated other comprehensive income of $15.1 million primarily attributed to the decrease in market value of available-for-sale debt securities.

The ratio of shareholders’ equity to period end total assets was 13.04% and 13.55% at September 30, 2021 and December 31, 2020, respectively.

The ratio of tangible shareholders’ equity to tangible assets was 10.62% and 11.01% at September 30, 2021 and December 31, 2020, respectively.

The decrease was due to growth in the balance sheet, the result of bank acquisitions, PPP loans and associated liquidity.

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

The Company’s equity capital at March 31, 2022 increased $45.5 million, or 3%, from December 31, 2021 to $1.4 billion.

Changes in equity included increases from net income of $20.6 million, and the issuance of $94.1 million in equity in connection with the BBFC and Sabal Palm acquisitions, partially offset by the issuance of a common stock dividend totaling $8.0 million and the decrease in accumulated other comprehensive income of $66.0 million attributed to the impact of rising interest rates on the market value of available-for-sale debt securities.

The ratio of shareholders’ equity to period end total assets was 12.44% and 13.54% at March 31, 2022 and December 31, 2021, respectively.

The ratio of tangible shareholders’ equity to tangible assets was 9.90% and 11.09% at March 31, 2022 and December 31, 2021, respectively.

The decrease was due to growth in the balance sheet, the result of bank acquisitions and deposit growth, and the impact on equity of the decline in value of available-for-sale securities due to rising interest rates in the first quarter of 2022.

Activity in shareholders’ equity for the three months ended March 31, 2022 and 2021 follows:

(In thousands) 2022 2021

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Net income 20,588 33,719

Cumulative change in accounting principle upon adoption of new accounting pronouncement — (16,876)

Issuance of common stock and conversion of options pursuant to acquisition 92,094 62,152

Common stock issued for stock options 3,403 840

Issuance of common stock and conversion of options pursuant to acquisitions 94,067 —

Stock compensation, net of Treasury shares acquired 1,525 1,353

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Change in accumulated other comprehensive income (66,040) (10,965)

Ending balance at September 30, 2021 and 2020

Ending balance at March 31, 2022 and 2021

$ 1,356,285 $ 1,155,349

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Seacoast management's use of risk-based capital ratios in its analysis of the Company’s capital adequacy are “non-GAAP” financial measures.

Seacoast management

uses these measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company.

The capital measures are not necessarily comparable to similar capital measures that may be presented by other companies (see “ Note J – Equity Capital ”).

September 30, 2021 Seacoast

Seacoast management uses these measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company.

The capital measures are not necessarily comparable to similar capital measures that may be presented by other companies (see “ Note 8 – Equity Capital ”).

See “Reconciliation of Non-GAAP Measures” for more information.

March 31, 2022 Seacoast

(Consolidated) Seacoast

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1 For subsidiary bank only.

The Company’s total risk-based capital ratio was 18.56% at September 30, 2021, an increase from 18.51% at December 31, 2020.

During the first quarter of 2020, the Company adopted interagency guidance which delays the impact of CECL adoption on capital for two years followed by a three-year phase-in period.

At September 30, 2021, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was 10.71%, well above the minimum to be well capitalized under regulatory guidelines.

The Company’s total risk-based capital ratio was 17.72% at March 31, 2022, a decrease from 18.21% at December 31, 2021, primarily due to growth including the acquisitions of Sabal Palm and BBFC.

At March 31, 2022, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was 10.65%, well above the minimum to be well capitalized under regulatory guidelines.

The Company and Seacoast Bank are subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums.

The appropriate federal bank regulatory authority may prohibit the payment of dividends where it has determined that the payment of dividends would be an unsafe or unsound practice.

The Company is a legal entity separate and distinct from Seacoast Bank and its other subsidiaries, and the Company’s primary source of cash and liquidity, other than securities offerings and borrowings, is dividends from its bank subsidiary.

The Company is a legal entity separate and distinct from Seacoast Bank and its other subsidiaries,

and the Company’s primary source of cash and liquidity, other than securities offerings and borrowings, is dividends from its bank subsidiary.

Without Office of the Comptroller of the Currency (“OCC”) approval, Seacoast Bank can pay $144.6 million of dividends to the Company.

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or (iii) it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

The Company has paid quarterly dividends since the second quarter of 2021.

Whether the Company continues to pay quarterly dividends and the amount of any such dividends will be at the discretion of the Company's Board of Directors and will depend on the Company's earnings, financial condition, results of operations, business prospects, capital requirements, regulatory restrictions, and other factors that the Board of Directors may deem relevant.

In the second quarter of 2022, the Company's Board of Directors approved a quarterly increase from $0.13 to $0.17 per share.

The Company has seven wholly owned trust subsidiaries that have issued trust preferred stock.

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These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements.

Management believes the most critical accounting estimates and assumptions that involve the most difficult, subjective and complex assessments are:

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

Management, after consultation with the Company’s Audit Committee, believes the most critical accounting estimates and assumptions that involve the most difficult, subjective and complex assessments are:

• the allowance and the provision for credit losses;

• acquisition accounting and purchased loans;

• intangible assets and impairment testing;

• other fair value adjustments;

• impairment of debt securities;, and;

• other fair value measurements;

• impairment of debt securities;

• contingent liabilities.

The following is a discussion of the critical accounting policies intended to facilitate a reader’s understanding of the judgments, estimates and assumptions underlying these accounting policies and the possible or likely events or uncertainties known to the Company that could have a material effect on reported financial information.

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

Company that could have a material effect on reported financial information.

For more information regarding management’s judgments relating to significant accounting policies and recent accounting pronouncements, see “Note 1-Basis of Presentation” to the Company’s consolidated financial statements.

Allowance for Credit Losses – Critical Accounting Policies and Estimates

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

For loans, management estimates the allowance for credit losses using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

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When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

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

The contractual term of a loan excludes expected extensions, renewals, and modification unless either of the following applies:

management has a reasonable expectation at the reporting date that a troubled debt restructuring (“TDR”)will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and not unconditionally cancellable by the Company.

The allowance for credit losses on TDRs is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method.

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

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however, collateral values are evaluated periodically based on market information and incremental charge-offs are recorded if it is determined that collateral values have declined from their initial estimates.

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

Note 5 to the financial statements (titled “Allowance for Credit Losses”) summarizes the Company’s allocation of the allowance for credit losses on loans by loan segment and provides detail regarding charge-offs and recoveries for each loan segment and the composition of the loan portfolio at March 31, 2022 and March 31, 2021.

Acquisition Accounting and Purchased Loans – Critical Accounting Policies and Estimates

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Intangible Assets and Impairment Testing – Critical Accounting Policies and Estimates

Intangible assets consist of goodwill, core deposit intangibles and mortgage servicing rights.

Intangible assets consist of goodwill, core deposit intangibles and loan servicing rights.

Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions.

The core deposit intangible represents the excess intangible value of acquired deposit customer relationships.

The core deposit intangible represents the excess intangible value of acquired deposit customer relationships as determined by valuation specialists.

Core deposit intangibles are amortized on a straight-line basis, and are evaluated for indications of potential impairment at least annually.

Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis.

The Company performed an annual impairment test of goodwill, as required by ASC Topic 350, Intangibles—Goodwill and Other , in the fourth quarter of 2020, and concluded that no impairment existed.

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

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

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The fair value of collateral-dependent loans, OREO and repossessed assets is typically based on current appraisals, which are reviewed quarterly to determine if fair value adjustments are necessary based on known changes in the market and/or the project assumptions.

When necessary, the appraised value may be adjusted based on more recent appraisal assumptions received by the Company on other similar properties, the tax assessed market value, comparative sales and/or an internal

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

The Company 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.

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.

The Company also holds 11,330 shares of Visa Class B stock, which, following resolution of Visa’s litigation, will be converted to Visa Class A shares.

Under the current conversion rate that became effective December 29, 2021, the Company expects to 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

The Company’s ownership is related to prior ownership in Visa's network while Visa operated as a cooperative.

This ownership is recorded on the Company's financial records at a zero basis.

Impairment of Debt Securities – Critical Accounting Policies and Estimates

Expected credit losses on both held-to-maturity (“HTM”) and available-for-sale (“AFS”) securities are recognized through a valuation allowance.

For HTM securities, management estimates expected credit losses over the remaining expected life and recognizes this estimate as an allowance for credit losses.

On January 1, 2020, the Company adopted ASC Topic 326 – Financial Instruments – Credit Losses , which requires expected credit losses on both held-to-maturity (“HTM”) and available-for-sale (“AFS”) securities to be recognized through a valuation allowance instead of as a direct write-down to the amortized cost basis of the security.

For HTM securities, the guidance requires management to estimate expected credit losses over the remaining expected life and recognize this estimate as an allowance for credit losses.

An AFS security is considered impaired if the fair value is less than amortized cost basis.

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In addition, the actual costs of resolving these claims may be substantially higher or lower than the amounts reserved for the claims.

At September 30, 2021 and December 31, 2020, the Company had no significant accruals for contingent liabilities and had no known pending matters that could potentially be significant.

At March 31, 2022 and December 31, 2021, the Company had no significant accruals for contingent liabilities and had no known pending matters that could potentially be significant.

Interest Rate Sensitivity

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The analysis of the impact on net interest income over a twelve-month period is subjected to instantaneous changes in market rates of 100 basis point increases up to 200 basis points of change on net interest income and is monitored on a quarterly basis.

The following table presents the ALCO simulation model's projected impact of a change in interest rates on the projected baseline net interest income for the 12 and 24 month periods beginning on October 1, 2021, holding all other changes in the balance sheet static.

The following table presents the ALCO simulation model's projected impact of a change in interest rates on the projected baseline net interest income for the 12 and 24 month periods beginning on April 1, 2022, holding all balances on the balance sheet static.

This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve.

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-1.00% (2.7%) (8.6%)

The Company had a positive gap position based on contractual and prepayment assumptions for the next 12 months, with a positive cumulative interest rate sensitivity gap as a percentage of total earning assets of 30.8% at September 30, 2021.

This result includes assumptions for core deposit re-pricing validated for the Company by an independent third party consulting group.

This result includes assumptions for core deposit re-pricing from a statistical study commissioned from a third party consulting group.

The computations of interest rate risk do not necessarily include certain actions management may undertake to manage this risk in response to changes in interest rates.

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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 2. Management’s Discussion and Analysis