What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-06 · 190 added, 110 removed, 1010 unchanged (23% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended March 31,

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

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

33 unchanged sentences

Amortization of intangibles 1,446 1,212 2,892 2,423

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

Foreclosed property expense and net loss (gain) on sale ( 968 ) ( 90 ) ( 1,132 ) ( 155 )

Provision for credit losses on unfunded commitments — — 142 —

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Three Months Ended March 31,

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

(In thousands) 2022 2021 2022 2021

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

Other comprehensive income (loss):

Other comprehensive (loss) income:

Available-for-sale securities:

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

Unrealized (losses) gains on available-for-sale securities, net of tax benefit of $ 16.0 million and $ 36.6 million for the three and six months ended June 30, 2022 and net of tax expense of $ 0.2 million and tax benefit of $ 3.0 million for the three and six months ended June 30, 2021, respectively

$ ( 50,473 ) $ 296 $ ( 116,485 ) $ ( 10,555 )

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

Amortization of unrealized gains and losses on securities transferred to held-to-maturity, net of tax benefit of $ 7 thousand and no minal tax expense for the three and six months ended June 30, 2022, respectively, and tax expense of $ 5 thousand and $ 11 thousand for the three and six months ended June 30, 2021, respectively

( 34 ) 20 2 44

Reclassification adjustment for losses included in net income, net of tax benefit of $ 19 thousand for each of the three and six months ended June 30, 2021

Available-for-sale securities, net of tax $ ( 50,507 ) $ 407 $ ( 116,483 ) $ ( 10,420 )

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

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

9 ( 11 ) ( 55 ) ( 149 )

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

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

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

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

March 31, December 31,

June 30, December 31,

(In thousands, except share data) 2022 2021

5 unchanged sentences

Securities available-for-sale (at fair value) 1,800,791 1,644,319

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

Securities held-to-maturity (fair value $ 706.2 million at June 30, 2022 and $ 627.4 million at December 31, 2021)

794,785 638,640

18 unchanged sentences

Shareholders' Equity

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

Common stock, par value $ 0.10 per share, authorized 120,000,000 shares, issued 61,846,470 and outstanding 61,410,300 at June 30, 2022, and authorized 120,000,000 , issued 58,909,369 and outstanding 58,504,250 shares at December 31, 2021

Other shareholders' equity 1,323,434 1,304,886

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2022 2021

11 unchanged sentences

Deferred income taxes 4,026 4,833

Losses on sale of securities — 73

Gains on sale of loans ( 3,992 ) ( 9,411 )

3 unchanged sentences

Net decrease in other assets 11,213 1,086

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

Net decrease in other liabilities ( 4,318 ) ( 10,726 )

Net cash provided by operating activities $ 98,341 $ 81,714

13 unchanged sentences

Net cash from bank acquisitions 208,933 —

Purchase of bank owned life insurance — ( 25,000 )

Additions to bank premises and equipment ( 2,545 ) ( 701 )

Net cash used in investing activities $ ( 178,519 ) $ 84,955

Net cash (used in)/provided by investing activities $ ( 466,651 ) $ 65,590

See notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2022 2021

1 unchanged sentence

Net increase in deposits $ 559,085 $ 903,875

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

Net (decrease) increase in repurchase agreements ( 10,987 ) 364

Stock based employee benefit plans 2,361 369

6 unchanged sentences

Cash paid during the period for interest $ 3,779 $ 6,462

Cash paid during the period for taxes 9,591 17,700

Recognition of operating lease right-of-use assets, other than through bank acquisitions 3,370 35

2 unchanged sentences

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

Unsettled purchases of debt securities available-for-sale — 28,750

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

8 unchanged sentences

(In thousands) Shares Amount Total

Balance at December 31, 2021 58,504 $ 5,850 $ 963,851 $ 358,598 $ ( 10,569 ) $ ( 6,994 ) $ 1,310,736

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

Comprehensive income (loss) — — — 32,755 — ( 50,498 ) ( 17,743 )

Stock based compensation expense — — 2,697 — — — 2,697

Common stock transactions related to stock based employee benefit plans 169 17 ( 31 ) — ( 1,173 ) — ( 1,187 )

Common stock issued for stock options 2 — 39 — — — 39

Dividends on common stock ($ 0.17 per share)

— — — ( 10,516 ) — — ( 10,516 )

Three months ended June 30, 2022 171 17 2,705 22,239 ( 1,173 ) ( 50,498 ) ( 26,710 )

Balance at June 30, 2022 61,410 $ 6,141 $ 1,065,167 $ 393,431 $ ( 11,632 ) $ ( 123,532 ) $ 1,329,575

Comprehensive

Income (Loss)

Common Stock Paid-in

Capital Retained

Earnings Treasury

(In thousands) Shares Amount Total

Balance at March 31, 2021

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

Comprehensive income — — — 31,410 — 396 31,806

2 unchanged sentences

Common stock issued for stock options 48 5 1,425 — — — 1,430

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

Dividends on common stock ($ 0.13 per share)

— — — ( 7,246 ) — — ( 7,246 )

Three months ended June 30, 2021

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

Balance at June 30, 2021

55,436 $ 5,544 $ 862,598 $ 314,584 $ ( 10,180 ) $ 9,801 $ 1,182,347

Comprehensive

Income (Loss)

Common Stock Paid-in

Capital Retained

Earnings Treasury

(In thousands) Shares Amount Total

Balance at December 31, 2021

58,504 $ 5,850 $ 963,851 $ 358,598 $ ( 10,569 ) $ ( 6,994 ) $ 1,310,736

Comprehensive income (loss) — — — 53,343 — ( 116,538 ) ( 63,195 )

Stock based compensation expense — — 4,116 — — — 4,116

Common stock transactions related to stock based employee benefit plans 176 18 ( 36 ) — ( 1,063 ) — ( 1,081 )

Common stock issued for stock options 180 18 3,424 — — — 3,442

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

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

1 unchanged sentence

— — — ( 18,510 ) — — ( 18,510 )

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

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

Six months ended June 30, 2022

2,906 291 101,316 34,833 ( 1,063 ) ( 116,538 ) 18,839

Balance at June 30, 2022

61,410 $ 6,141 $ 1,065,167 $ 393,431 $ ( 11,632 ) $ ( 123,532 ) $ 1,329,575

Comprehensive

5 unchanged sentences

Balance at December 31, 2020 55,243 $ 5,524 $ 856,092 $ 256,701 $ ( 8,285 ) $ 20,370 $ 1,130,402

Comprehensive income — — — 33,719 — ( 10,965 ) 22,754

Comprehensive income (loss) — — — 65,129 — ( 10,569 ) 54,560

Stock based compensation expense — — 4,262 — — — 4,262

1 unchanged sentence

Common stock issued for stock options 79 8 2,262 — — — 2,270

Three months ended March 31, 2021

Dividends on common stock ($ 0.13 per share)

— — — ( 7,246 ) — — ( 7,246 )

Balance at March 31, 2021

Six months ended June 30, 2021

193 20 6,506 57,883 ( 1,895 ) ( 10,569 ) 51,945

Balance at June 30, 2021

55,436 $ 5,544 $ 862,598 $ 314,584 $ ( 10,180 ) $ 9,801 $ 1,182,347

See notes to unaudited condensed consolidated financial statements.

10 unchanged sentences

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

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

Operating results for the three and six months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any other period.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

12 unchanged sentences

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

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

Three Months Ended March 31,

For the three and six months ended June 30, 2022, 1,505 options to purchase shares of the Company’s common stock were anti-dilutive.

For the three and six months ended June 30, 2021, no options to purchase shares of the Company's common stock were anti-dilutive.

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

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

12 unchanged sentences

Note 3 – Securities

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

March 31, 2022

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

June 30, 2022

(In thousands) Amortized

33 unchanged sentences

No gain or loss was recognized on the sale.

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

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

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

There were no other sales of securities during the three and six months ended June 30, 2022.

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

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

During the three months ended March 31, 2021, the Company reclassified debt securities with an amortized cost of $ 210.8 million from available-for-sale to held-to-maturity, as it has the ability and intent to hold these securities to maturity.

1 unchanged sentence

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

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

The amortized cost and fair value of securities at March 31, 2022, by contractual maturity, are shown below.

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

The amortized cost and fair value of securities at June 30, 2022, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because prepayments of the underlying collateral for these securities may occur, due to the right to call or repay obligations with or without call or prepayment penalties.

Securities not due at a single maturity date are shown separately.

March 31, 2022

June 30, 2022

Held-to-Maturity Available-for-Sale

13 unchanged sentences

The tables below indicate the fair value of available-for-sale debt securities with unrealized losses for which no allowance for credit losses has been recorded.

March 31, 2022

June 30, 2022

Less Than 12 Months 12 Months or Longer Total

25 unchanged sentences

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

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

At June 30, 2022, the Company had unrealized losses of $ 143.3 million on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $ 1.3 billion.

These securities are either explicitly or implicitly guaranteed by the U.S.

2 unchanged sentences

Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities.

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

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

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

The securities have average credit support of 24 %.

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

At March 31, 2022, the Company had $ 2.0 million of unrealized losses in uncapped 3-month LIBOR floating rate collateralized loan obligations (“CLOs”) having a fair value of $ 313.1 million.

Therefore, at June 30, 2022, no allowance for credit losses has been recorded.

At June 30, 2022, the Company had $ 11.0 million of unrealized losses in uncapped 3-month LIBOR floating rate collateralized loan obligations (“CLOs”) having a fair value of $ 304.2 million.

CLOs are special purpose vehicles and those in which the Company has invested acquire nearly all first-lien, broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors.

As of March 31, 2022, all positions held by the Company are in AAA and AA tranches, with average credit support of 37 % and 25 %, respectively.

As of June 30, 2022, all positions held by the Company are in AAA and AA tranches, with average credit support of 37 % and 25 %, respectively.

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

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

Therefore, at June 30, 2022, no allowance for credit losses has been recorded.

At June 30, 2022, the Company had $ 7.4 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of $ 148.9 million.

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

The securities have average credit support of 22 %.

Therefore, at June 30, 2022, no allowance for credit losses has been recorded.

All HTM debt securities are issued by government-sponsored entities, which are either explicitly or implicitly guaranteed by the U.S.

1 unchanged sentence

While the potential for default on these securities may be something greater than zero, the long history with no credit losses, the implied government guarantee of principal and interest payments and the high credit rating of the HTM portfolio provide sufficient basis for the current expectation that there is no risk of loss if default were to occur.

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

Included in Other Assets at March 31, 2022 is $ 38.1 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value.

As a result, as of June 30, 2022, no allowance for credit losses has been recorded.

Included in Other Assets at June 30, 2022 is $ 38.1 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value.

The Company has not identified events or changes in circumstances, which may have a significant adverse effect on the fair value of these cost method investment securities.

Accrued interest receivable on AFS and HTM debt securities of $ 3.4 million and $ 1.2 million, respectively, at March 31, 2022, and $ 3.4 million and $ 1.0 million, respectively, at December 31, 2021, is included in Other Assets.

Accrued interest receivable on AFS and HTM debt securities of $ 4.4 million and $ 1.3 million, respectively, at June 30, 2022, and $ 3.4 million and $ 1.0 million, respectively, at December 31, 2021, is included in Other Assets.

Also included in Other Assets is an $ 8.6 million investment in a CRA-qualified mutual fund carried at fair value.

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

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

Under the current conversion ratio that became effective June 29, 2022, the Company would receive 1.6059 shares of Class A stock for each share of Class B stock for a total of 18,194 shares of Visa Class A stock.

The ownership of Visa stock is related to prior ownership in Visa's network while Visa operated as a cooperative, and is recorded on the Company's financial records at a zero basis.

24 unchanged sentences

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

March 31, 2022

June 30, 2022

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

17 unchanged sentences

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

The amortized cost basis of loans at 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.

The amortized cost basis of loans at June 30, 2022 included net deferred costs of $ 30.8 million on non-PPP portfolio loans and net deferred fees of $ 0.3 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 March 31, 2022, the remaining fair value adjustments on acquired loans were $ 24.1 million, or 1.9 % of the outstanding acquired loan balances,

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

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

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

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

March 31, 2022

At June 30, 2022, the remaining fair value adjustments on acquired loans were $ 21.4 million, or 1.8 % of the outstanding acquired loan balances, compared to

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

The discount is accreted into interest income over the remaining lives of the related loans on a level yield basis.

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

The following tables present the status of net loan balances as of June 30, 2022 and December 31, 2021.

June 30, 2022

(In thousands) Current Accruing

70 unchanged sentences

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and future payments are reasonably assured.

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

The Company recognized $ 0.4 million in interest income on nonaccrual loans during each of the three months ended June 30, 2022 and 2021.

The Company recognized $ 1.2 million and $ 0.6 million in interest income on nonaccrual loans during the six months ended June 30, 2022 and 2021, respectively.

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

March 31, 2022

June 30, 2022

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

18 unchanged sentences

The following table presents collateral-dependent loans as of:

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

(In thousands) June 30, 2022 December 31, 2021

Construction and land development $ 16 $ 271

18 unchanged sentences

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

March 31, 2022

June 30, 2022

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

31 unchanged sentences

Total $ 91,195 $ 542,597 $ 116,842 $ 83,869 $ 103,993 $ 302,582 $ 406,387 $ 1,647,465

March 31, 2022

June 30, 2022

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

90 unchanged sentences

Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements.

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

Three Months Ended March 31,

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

Three Months Ended June 30,

(In thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment

6 unchanged sentences

Totals 1 $ 21 $ 21 3 $ 194 $ 194

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

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

During the three months ended March 31, 2021, there were no defaults on loans that had been modified to a TDR within the preceding twelve months.

Six Months Ended June 30,

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

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

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

Residential real estate 3 785 785 3 79 79

Commercial and financial 2 54 54 1 142 142

Consumer 4 23 23 — — —

Totals 9 $ 862 $ 862 4 $ 221 $ 221

The TDRs described above resulted in a specific allowance for credit losses of $ 0.1 million and $ 0.2 million as of June 30, 2022 and June 30, 2021, respectively.

During the six months ended June 30, 2022, there was one default totaling $ 2 thousand on a loan that had been modified to a TDR within the preceding twelve months.

During the six months ended June 30, 2021, there were two defaults on loans totaling $ 0.1 million that had been modified to a TDR within the preceding twelve months.

The Company considers a loan to have defaulted when it becomes 90 days or more delinquent under the modified terms, has been transferred to nonaccrual status, is charged off or has been transferred to other real estate owned.

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

For loans measured based on the present value of expected future cash flows, $ 15 thousand and $ 6 thousand for the three months ended June 30, 2022, and 2021, respectively, and $ 20 thousand and $ 11 thousand for the six months ended June 30, 2022, and 2021, respectively, was included in interest income and represents the change in present value attributable to the passage of time.

Note 5 – Allowance for Credit Losses

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(In thousands) Beginning

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Balance Provision

Losses Charge-

9 unchanged sentences

Totals $ 89,838 $ 822 $ ( 452 ) $ 576 $ ( 15 ) $ 90,769

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

(In thousands) Beginning

11 unchanged sentences

Totals $ 86,643 $ ( 4,855 ) $ ( 1,784 ) $ 1,129 $ ( 6 ) $ 81,127

Six Months Ended June 30, 2022

(In thousands) Beginning

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Losses Charge-

Offs Recoveries TDR

Adjustments Ending

Construction and land development $ 2,751 $ — $ ( 263 ) $ — $ 64 $ — $ 2,552

Commercial real estate - owner-occupied 8,579 — ( 1,203 ) — — — 7,376

Commercial real estate - non owner-occupied 36,617 31 9,802 — 9 — 46,459

Residential real estate 12,811 17 1,708 ( 1 ) 303 ( 17 ) 14,821

Commercial and financial 19,744 3 ( 2,128 ) ( 822 ) 348 ( 1 ) 17,144

Consumer 2,813 — ( 538 ) ( 294 ) 438 ( 2 ) 2,417

Paycheck Protection Program — — — — — —

Totals $ 83,315 $ 51 $ 7,378 $ ( 1,117 ) $ 1,162 $ ( 20 ) $ 90,769

Six Months Ended June 30, 2021

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

Construction and land development $ 4,920 $ ( 979 ) $ — $ 114 $ ( 2 ) $ 4,053

Commercial real estate - owner occupied 9,868 ( 1,192 ) — — — 8,676

Commercial real estate - non-owner occupied 38,266 ( 3,461 ) — 2 — 34,807

Residential real estate 17,500 ( 5,779 ) ( 21 ) 850 ( 7 ) 12,543

Commercial and financial 18,690 1,174 ( 2,320 ) 472 — 18,016

Consumer 3,489 ( 333 ) ( 384 ) 262 ( 2 ) 3,032

Paycheck Protection Program — — — — — —

Totals $ 92,733 $ ( 10,570 ) $ ( 2,725 ) $ 1,700 $ ( 11 ) $ 81,127

Management establishes the allowance using relevant available information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts to project losses over a three-year forecast period.

3 unchanged sentences

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

As of March 31, 2022, the Company utilized Moody’s most recent “U.S.

Macroeconomic Outlook Baseline” scenario and considered the uncertainty associated with the assumptions in the Baseline scenario, including actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, the Russian invasion of Ukraine and the magnitude of the resulting market disruption, and the potential impact of persistent high inflation on economic growth.

As of June 30, 2022, the Company utilized Moody’s most recent “U.S.

Macroeconomic Outlook Baseline” scenario and considered the uncertainty associated with the assumptions in the Baseline scenario, including actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, the ongoing Russia-Ukraine conflict and the magnitude of the resulting market disruption, and the potential impact of persistent high inflation on economic growth.

Outcomes in any or all of these factors could differ from the Baseline scenario, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions, and for additional dimensions of risk not captured in the quantitative model.

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

In the Construction and Land Development segment, the decrease in reserves reflects continuing low historical loss rates for this segment and improved economic variables relating to residential real estate.

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

In the Construction and Land Development segment, the increase in reserves reflects higher loan balances, partially offset by continuing low historical loss rates for this segment.

In this segment, the primary source of repayment is typically from proceeds of the sale, refinancing, or permanent financing of the underlying property;

therefore, industry and collateral type and estimated collateral values are among the relevant factors in assessing expected losses.

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

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

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

In the Commercial Real Estate - Owner-Occupied segment, the decrease in the allowance reflects lower loan balances, changes in the proportion of loan types in this category, and lower specific reserves.

Risk characteristics include but are not limited to, collateral type, loan seasoning, and note structure.

In the Commercial Real Estate - Non Owner-Occupied segment, the increase in reserves reflects higher loan balances and the impact of considerations of the increasing risk of economic recession on loans in this category.

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

Loan performance may be adversely affected by general economic conditions or conditions specific to the real estate market, including property types.

Collateral type, loan seasoning, and lien position are among the risk characteristics analyzed for this segment.

Collateral type, loan seasoning, and note structure are among the risk characteristics analyzed for this segment.

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

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

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

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

In the Commercial and Financial segment, borrowers are primarily small to medium sized professional firms and other businesses, and loans are generally supported by projected cash flows of the business, collateralized by business assets, and/or guaranteed by the business owners.

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

The decrease in reserves is attributed to lower loan balances and lower specific reserves.

Industry, collateral type, estimated collateral values and loan seasoning are among the relevant factors in assessing expected losses.

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

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

The decline in the reserve reflects continuing low historical loss rates and an increasing proportion of seasoned loans in this segment.

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

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The allowance for credit losses is composed of specific allowances for loans individually evaluated and general allowances for loans grouped into loan pools based on similar characteristics, which are collectively evaluated.

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

March 31, 2022

The Company’s loan portfolio and related allowance at June 30, 2022 and December 31, 2021 is shown in the following tables:

June 30, 2022

Individually Evaluated Collectively Evaluated Total

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

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

As of June 30, 2022, the interest rate swaps had an aggregate notional value of $ 253.5 million, with a fair value of $ 9.3 million recorded in other assets and other liabilities.

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

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

The weighted average maturity was 6.7 years at June 30, 2022 and 6.7 years at December 31, 2021.

Interest Rate Floors Designated as Cash Flow Hedges

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Amortization of the premium paid on cash flow hedges is recognized in earnings over the term of the hedge in the same caption as the hedged item.

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

As of March 31, 2022 and December 31, 2021, the interest rate floors had a fair value of $ 0.1 million and $ 0.3 million, respectively, recorded in other assets in the consolidated balance sheet.

For the three and six months ended June 30, 2022, the Company recognized a loss through other comprehensive income of $ 0.1 million and $ 0.2 million, respectively, and reclassified $ 0.1 million and $ 0.2 million, respectively, out of accumulated other comprehensive income and into interest income.

As of June 30, 2022 and December 31, 2021, the interest rate floors had a fair value of $ 41 thousand and $ 290 thousand, respectively, recorded in other assets in the consolidated balance sheet.

Over the next twelve months, the Company expects to reclassify $ 0.5 million from accumulated other comprehensive income into interest income related to these agreements.

(In thousands) Notional Amount Fair Value Balance Sheet Category

At March 31, 2022

At June 30, 2022

Back-to-back swaps $ 253,524 $ 9,320 Other Assets and Other Liabilities

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

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

(In thousands) June 30, 2022 December 31, 2021

Fair value of pledged securities - overnight and continuous:

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Note 8 – Equity Capital

The Company is well capitalized and at March 31, 2022, the Company and the Company’s principal banking subsidiary, Seacoast Bank, exceeded the common equity Tier 1 (CET1) capital ratio regulatory threshold of 6.5 % for well-capitalized institutions under the Basel III standardized transition approach, as well as risk-based and leverage ratio requirements for well capitalized banks under the regulatory framework for prompt corrective action.

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

Note 9 – Contingent Liabilities

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Note 10 – Fair Value

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

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

(In thousands) Fair Value

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(Level 2) Significant

At March 31, 2022

At June 30, 2022

Financial Assets

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Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment.

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

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

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

None of the loans were 90 days or more past due or on nonaccrual as of June 30, 2022 and December 31, 2021.

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

(In thousands) June 30, 2022 December 31, 2021

Aggregate fair value $ 14,205 $ 31,791

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Excess 459 828

Loans carried at fair value consist of collateral-dependent real estate loans.

Loans measured at fair value consist of collateral-dependent real estate loans.

Fair value is based on recent real estate appraisals less estimated costs of sale.

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

At March 31, 2022 capitalization rates utilized to determine fair value of the underlying collateral averaged approximately 7.0 %.

At June 30, 2022 capitalization rates utilized to determine fair value of the underlying collateral averaged approximately 6.9 %.

Adjustments to comparable sales may be made by an appraiser to reflect local market conditions or other economic factors and may result in changes in the fair value of an asset over time.

As such, the fair value of these loans is considered level 3 in the fair value hierarchy.

Collateral-dependent loans measured at fair value totaled $ 12.7 million with a specific reserve of $ 4.3 million at March 31, 2022, compared to $ 13.1 million with a specific reserve of $ 4.7 million at December 31, 2021.

Collateral-dependent loans measured at fair value totaled $ 9.0 million with a specific reserve of $ 3.7 million at June 30, 2022, compared to $ 13.1 million with a specific reserve of $ 4.7 million at December 31, 2021.

Other real estate owned :

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Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and/or quarterly valuation process.

During the three months ended March 31, 2022, an updated appraisal was obtained on a former branch property, and the value was transferred from Level 3 to Level 2.

There were no transfers during the three months ended March 31, 2021.

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

During the six months ended June 30, 2022, an updated appraisal was obtained on a former branch property, and the value was transferred from Level 3 to Level 2.

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

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

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(Level 2) Significant Unobservable Inputs

March 31, 2022

June 30, 2022

Financial Assets

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cash and due from banks, interest bearing deposits with other banks, FHLB borrowings and securities sold under agreements to repurchase, maturing within 30 days.

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

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

Held-to-maturity debt securities :

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Pro-Forma Information

Pro-forma data for the three months ended March 31, 2022 presents information as if the acquisition of Legacy Bank occurred at the beginning of 2020, and the acquisitions of BBFC and Sabal Palm occurred at the beginning of 2021, as follows:

Three Months Ended March 31,

Pro-forma data presents information as if the acquisition of Legacy Bank occurred at the beginning of 2020, and the acquisitions of BBFC and Sabal Palm occurred at the beginning of 2021, as follows:

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

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

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The transaction, which is expected to close early in the fourth quarter of 2022, will expand the Company’s presence in Miami-Dade County, part of the Miami-Fort Lauderdale-Pompano Beach MSA, Florida’s largest MSA and the 8 th largest in the nation.

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

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

Note 12 – Subsequent Event

Apollo operates five branches across Miami-Dade County with deposits of approximately $ 930.3 million and loans of $ 736.0 million as of June 30, 2022.

Regulatory approvals for the transaction have been received.

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

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.

Drummond operates 18 branches across North Florida with deposits of approximately $ 919.0 million and loans of $ 570.9 million as of June 30, 2022.

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

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

What changed 10-Q

Item 1. Financial Statements