What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-06 · 287 added, 242 removed, 631 unchanged (46% 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 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.

The emphasis of this discussion will be on the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021 for the consolidated statements of income.

For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 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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uncertainty related to the impact of LIBOR calculations on securities, loans and debt;

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

• changes in borrower credit risks and payment behaviors, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity;

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

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Business Developments

Proposed Acquisition of Apollo Bankshares, Inc.

Proposed Acquisition of Apollo Bancshares, Inc.

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

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

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

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

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

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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 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.

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(“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.

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

Over the past several quarters, Seacoast has added experienced bankers in the 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 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.

For the second quarter of 2022, the Company reported net income of $32.8 million, or $0.53 per average diluted share, compared to $20.6 million, or $0.33 per average diluted share, for the first quarter of 2022 and $31.4 million, or $0.56 per average diluted share, for the second quarter of 2021.

For the six months ended June 30, 2022, net income totaled $53.3 million, or $0.86 per average diluted share, a decrease of $11.8 million, or 18%, compared to the six months ended June 30, 2021.

Adjusted net income 1 for the second quarter of 2022 totaled $36.3 million, or $0.59 per average diluted share, compared to $27.1 million, or $0.44 per average diluted share, for the first quarter of 2022 and $33.3 million, or $0.59 per average diluted share, for the second quarter of 2021.

For the six months ended June 30, 2022, adjusted net income 1 totaled $63.4 million, or $1.03 per average diluted share, compared to $68.7 million, or $1.23 per average diluted share for the six months ended June 30, 2021.

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

First Fourth First

Quarter Quarter Quarter

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

2022 2022 2021 2022 2021

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Net Interest Income and Margin

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.

Net interest income for the second quarter of 2022 totaled $81.6 million, increasing $5.1 million, or 7%, compared to the first quarter of 2022, and increasing $15.8 million, or 24%, compared to the second quarter of 2021.

For the six months ended June 30, 2022, net interest income totaled $158.2 million, an increase of $25.8 million, or 19%, compared to the six months ended June 30, 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.

Net interest margin (on a fully tax equivalent basis) 1 was 3.38% in the second quarter of 2022, compared to 3.25% in the first quarter of 2022, and 3.23% in the second quarter of 2021.

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

Compared to the first quarter of 2022, securities yields increased by 30 basis points to 1.98% and non-PPP loan yields increased by three basis points to 4.27% during the second quarter of 2022.

The effect on net interest margin of accretion of purchase discounts on acquired loans were increases of 12 basis points in the second quarter of 2022, 15 basis points in the first quarter of 2022, and 14 basis points in the second quarter of 2021.

The effect of interest and fees on PPP loans was an increase of two basis points in the second quarter of 2022, an increase of five basis points in the first quarter of 2022, and an increase of six basis points in the second quarter of 2021.

The cost of deposits was six basis points in each of the first and second quarters of 2022, and eight basis points in the second quarter of 2021.

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

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

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.

For the six months ended June 30, 2022, net interest margin (on a fully tax equivalent basis) 1 was 3.32%, compared to 3.37% for the six months ended June 30, 2021.

The yield on securities increased from 1.64% for the six months ended June 30, 2021 to 1.83% for the six months ended June 30, 2022, reflecting the impact of rising interest rates as the Company makes new purchases in higher yielding securities.

The yield on non-PPP loans declined from 4.36% for the six months ended June 30, 2021 to 4.25% for the six months ended June 30, 2022, reflecting the impact of elevated levels of prepayments of higher rate loans since mid-2020, and growth in the portfolio during recent periods of low rates.

Offsetting and favorable was the decline in the cost of deposits from 10 basis points for the six months ended June 30, 2021 to six basis points for the six months ended June 30, 2022.

The effect on net interest margin of purchase discounts on acquired loans was an increase of 14 basis points for the six months ended June 30, 2022 compared to an increase of 15 basis points for the six months ended June 30, 2021.

The effect of interest and fees on PPP loans was an increase of three basis points for the six months ended June 30, 2022, compared to an increase of eight basis points for the six months ended June 30, 2021.

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

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

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

Second quarter 2022 $ 81,764 3.38 % 3.46 % 0.14 %

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

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

Six months ended June 30, 2022 158,403 3.32 % 3.40 % 0.13 %

Six months ended June 30, 2021 132,674 3.37 % 3.49 % 0.19 %

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 $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.

Total average loans increased $141.9 million, or 2%, for the second quarter of 2022 compared to the first quarter of 2022, and increased $882.5 million, or 16%, from the second quarter of 2021.

The increase compared to the prior quarter reflects organic loan growth while the increase compared to the prior year quarter includes loans acquired from BBFC, Sabal Palm and Legacy Bank.

Average loans as a percentage of average earning assets totaled 67% for the second quarter of 2022, 66% for the first quarter of 2022 and 68% for the second 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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Quarter Quarter Quarter

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands) 2022 2022 2021 2022 2021

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PPP originations — — 23,529 — 256,007

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.

Commercial originations during the second quarter of 2022 were $461.9 million, an increase of $88.9 million, or 24%, compared to the first quarter of 2022, and an increase of $268.8 million, or 139%, compared to the second quarter of 2021.

For the six months ended June 30, 2022, commercial originations were $834.8 million compared to $397.3 million for the six months ended June 30, 2021, an increase of $437.6 million, or 110%.

Commercial originations remained strong and reflect 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 commercial pipeline decreased $142.9 million, or 23%, to $476.7 million at June 30, 2022, compared to a record $619.5 million at March 31, 2022, and increased $154.7 million, or 48%, compared to June 30, 2021.

As rates have increased, the Company has maintained its disciplined lending criteria, requiring lower leverage on commercial real estate projects.

Despite this, the pipeline remains strong and continues to build.

Residential loans originated for sale in the secondary market totaled $42.7 million in the second quarter of 2022, compared to $51.2 million in the first quarter of 2022 and $120.1 million in the second quarter of 2021.

For the six months ended June 30, 2022, residential loans originated for sale in the secondary market totaled $93.9 million compared to $258.4 million for the six months ended June 30, 2021, a decrease of $164.5 million, or 64%.

Limited housing inventory and slowing refinance activity

contributed to lower production.

Residential saleable pipelines were $14.7 million as of June 30, 2022, compared to $25.7 million as of March 31, 2022 and $60.6 million as of June 30, 2021.

Residential loan production retained in the portfolio for the second quarter of 2022 was $103.0 million compared to $175.5 million in the first quarter of 2022 and $118.1 million in the second quarter of 2021.

For the six months ended June 30, 2022, residential loan production retained in the portfolio totaled $278.5 million compared to $164.7 million for the six months ended June 30, 2021, an increase of $113.7 million, or 69%.

The first quarter of 2022 included the purchase of a $111.3 million wholesale residential home mortgage loan pool, and the second quarter of 2021 included the purchase of a $38.4 million wholesale residential home mortgage loan pool.

The Company fully underwrites acquired loans prior to executing transactions.

The pipeline of residential loans intended to be retained in the portfolio was $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 pipeline of residential loans intended to be retained in the portfolio was $53.1 million as of June 30, 2022, compared to $88.0 million as of March 31, 2022, and $54.1 million as of June 30, 2021.

Consumer originations totaled $126.5 million during the second quarter of 2022, compared to $79.0 million in the first quarter of 2022 and $63.7 million in the second quarter of 2021.

For the six months ended June 30, 2022, consumer originations totaled $205.5 million compared to $110.4 million for the six months ended June 30, 2021, an increase of $95.0 million, or 86%.

The consumer pipeline was $75.5 million as of June 30, 2022, compared to $61.6 million as of March 31, 2022 and $31.7 million at June 30, 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.

Average debt securities increased $109.9 million, or 5%, during the second quarter of 2022 compared to the first quarter of 2022, and were $885.3 million, or 53%, higher compared to the second quarter of 2021.

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

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.

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 $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.

Average debt securities were $2.5 billion for the six months ended June 30, 2022, an increase of $869.8 million, or 54%, compared to the six months ended June 30, 2021.

The cost of average interest-bearing liabilities increased two basis points in the second quarter of 2022 to 14 basis points from 12 basis points in the first quarter of 2022, and decreased from 16 basis points in the second quarter of 2021.

For the six months ended June 30, 2022, the cost of average interest-bearing liabilities was 0.13%, a decrease of six basis points compared to the six months ended June 30, 2021.

The cost of average total deposits (including noninterest bearing demand deposits) was six basis points in both the second quarter of 2022 and the first quarter of 2022 and 8 basis points in the second quarter of 2021, reflecting continued repricing downward of interest-bearing deposits and time deposits.

For the six months ended June 30, 2022, the cost of average total deposits (including noninterest bearing demand deposits) was 6 basis points compared to 10 basis points for the six months ended June 30, 2021.

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

For the six months ended June 30, 2022, average transaction deposits (noninterest and interest bearing demand) increased $1.3 billion, or 32%, compared to the six months ended June 30, 2021.

The Company’s deposit mix remains favorable, with 95% of average deposit balances comprised of savings, money market, and demand deposits for the six months ended June 30, 2022.

Average balances of sweep repurchase agreements with customers increased $2.3 million, or 2%, quarter-over quarter and $5.1 million, or 4%, year-over-year.

For the six months ended June 30, 2022, the average balance was $119.3 million compared to an average balance of $114.2 million for the six months ended June 30, 2021.

The average rate on customer sweep repurchase accounts was 0.22% for the six months ended June 30, 2022, compared to 0.13% for the six months ended June 30, 2021.

Subordinated debt balances averaged $71.7 million in each of the first and second quarters of 2022, and $71.5 million in the second quarter of 2021.

The average rate on subordinated debt for the second quarter of 2022 was 3.24%, an increase of 77 basis points compared to the first quarter of 2022 and an increase of 87 basis points compared to the second quarter of 2021.

For the six months ended June 30, 2022, subordinated debt averaged $71.7 million, compared to $71.4 million for the six months ended June 30, 2021.

The average rate on subordinated debt for the six months ended June 30, 2022 was 2.85%, compared to 2.40% for the six months ended June 30, 2021.

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

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

First Quarter Fourth Quarter First Quarter

Second Quarter First Quarter Second Quarter

Average Yield/ Average Yield/ Average Yield/

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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 $ 2,462,447 $ 22,428 1.82 % $ 1,590,152 $ 12,857 1.62 %

Nontaxable 23,238 352 3.03 25,756 373 2.90

Total Securities 2,485,685 22,780 1.83 1,615,908 13,230 1.64

Federal funds sold 691,105 1,631 0.48 556,425 299 0.11

Other investments 45,631 1,219 5.39 96,422 996 2.08

Loans excluding PPP loans 6,366,194 134,322 4.25 5,121,114 110,817 4.36

PPP Loans 44,024 2,264 10.37 557,247 12,013 4.35

Total Loans 6,410,218 136,586 4.30 5,678,361 122,830 4.36

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

Allowance for loan losses (88,862) (88,873)

Cash and due from banks 377,831 291,626

Premises and equipment 75,241 72,141

Intangible assets 305,875 236,640

Bank owned life insurance 206,173 132,785

Other assets 226,205 165,658

Total Assets $ 10,735,102 $ 8,757,093

Liabilities and Shareholders' Equity

Interest-bearing liabilities:

Interest-bearing demand $ 2,180,351 $ 483 0.04 % $ 1,646,587 $ 493 0.06 %

Savings 943,908 129 0.03 756,693 255 0.07

Money market 1,957,435 1,149 0.12 1,673,559 1,297 0.16

Time deposits 528,255 904 0.35 621,844 1,711 0.55

Securities sold under agreements to repurchase 119,298 133 0.22 114,181 76 0.13

Other borrowings 71,706 1,015 2.85 71,425 849 2.40

Total Interest-Bearing Liabilities 5,800,953 3,813 0.13 4,884,289 4,681 0.19

Noninterest demand 3,428,921 2,616,856

Other liabilities 129,815 102,450

Total Liabilities 9,359,689 7,603,595

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

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

Cost of deposits 0.06 % 0.10 %

Interest expense as a % of earning assets 0.08 % 0.12 %

Net interest income as a % of earning assets $ 158,403 3.32 % $ 132,674 3.37 %

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.

Noninterest Income

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 totaled $17.0 million for the second quarter of 2022, an increase of $1.6 million, or 10%, compared to the first quarter of 2022 and an increase of $1.6 million, or 11%, from the second quarter of 2021.

Noninterest income totaled $32.3 million for the six months ended June 30, 2022, a decrease of $0.7 million, or 2%, compared to the six months ended June 30, 2021.

Noninterest income is detailed as follows:

First Fourth First

Quarter Quarter Quarter

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands) 2022 2022 2021 2022 2021

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Total $ 16,964 $ 15,373 $ 15,322 $ 32,337 $ 32,993

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.

Service charges on deposits were $3.4 million in the second quarter of 2022, $2.8 million in the first quarter of 2022 and $2.3 million in the second quarter of 2021.

For the six months ended June 30, 2022, service charges on deposits totaled $6.2 million, an increase of $1.5 million, or 33%, compared to the six months ended June 30, 2021.

Increases in fees reflect growth in commercial deposit relationships and changes in monthly maintenance and ATM fees.

Overdraft-related fees for both consumer and commercial accounts represent 38% of total service charges on deposits for the six months ended June 30, 2022, and 39% for the six months ended June 30, 2021.

Interchange income increased to $4.3 million for the second quarter of 2022, compared to $4.1 million for the first quarter of 2022, and $4.1 million for the second quarter of 2021.

For the six months ended June 30, 2022, interchange income totaled $8.4 million, an increase of $0.4 million, or 5%, compared to the six months ended June 30, 2021.

Wealth management income, including trust fees and brokerage commissions and fees, was $2.8 million in the second quarter of 2022, increasing $0.1 million, or 4%, from the first quarter of 2022 and increasing $0.4 million, or 16%, compared to the second quarter of 2021.

For the six months ended June 30, 2022, wealth management income totaled $5.4 million, an increase of $0.7 million, or 15%, compared to the six months ended June 30, 2021, as the team continues to deliver strong returns through the addition of new relationships.

Mortgage banking fees decreased by $0.8 million, or 45%, to $0.9 million in the second quarter of 2022 compared to the first quarter of 2022, and decreased $2.0 million, or 69%, compared to the second quarter of 2021, reflecting lower saleable production due to the impact of rising interest rates and limited housing inventory.

For the six months ended June 30, 2022, mortgage banking fees totaled $2.6 million, a decrease of $4.6 million, or 64%, compared to the six months ended June 30, 2021.

SBA gains were $0.5 million in the second quarter of 2022, compared to $0.2 million in the first quarter of 2022, and $0.2 million in the second quarter of 2021.

The increase reflects improved saleable loan production for the second quarter of 2022.

For the six months ended June 30, 2022, SBA gains totaled $0.6 million, an increase of $0.1 million, or 21%, compared to the six months ended June 30, 2021.

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

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

BOLI income totaled $2.7 million for the six months ended June 30, 2022 and $1.7 million for the six months ended June 30, 2021.

Other income was $3.8 million in the second quarter of 2022, an increase of $0.9 million quarter-over-quarter and an increase of $1.5 million year-over-year, reflecting higher loan-swap related income.

For the six months ended June 30, 2022, other income totaled $6.6 million, an increase of $0.6 million, or 11%, compared to the six months ended June 30, 2021.

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

Noninterest Expenses

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.

For the second 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 56.22% compared to 62.33% for the first quarter of 2022 and 54.93% for the second 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.

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Quarter Quarter Quarter

For the six months ended June 30, 2022, the efficiency ratio was 59.17% compared to 54.05% for the six months ended June 30, 2021.

The adjusted efficiency ratio 1 2 was 53.15% in the second quarter of 2022, compared to 54.86% in the first quarter of 2022 and 53.49% in the second quarter of 2021.

In the second quarter of 2022, adjusted noninterest expense 1 as a percent of average tangible assets was 2.00% compared to 1.99% for the first quarter of 2022 and 1.98% for the second quarter of 2021.

For the six months ended June 30, 2022 the adjusted efficiency ratio 1 was 53.97% compared to 52.72% for the six months ended June 30, 2021.

The Company expects that the adjusted efficiency ratio 1 will continue to be in the low 50s for the remainder of 2022.

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands, except ratios) 2022 2022 2021 2022 2021

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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 expense for the second quarter of 2022 totaled $56.1 million, a decrease of $2.8 million, or 5%, compared to the first quarter of 2022, and an increase of $10.4 million, or 23%, from the second quarter of 2021.

For the six months ended June 30, 2022, noninterest expenses totaled $115.1 million, an increase of $23.2 million, or 25%, compared to the six months ended June 30, 2021.

Noninterest expenses are detailed as follows:

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Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands) 2022 2022 2021 2022 2021

13 unchanged sentences

Total $ 56,148 $ 58,917 $ 45,784 $ 115,065 $ 91,904

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.

Salaries and wages totaled $28.1 million for the second quarter of 2022, $28.2 million for the first quarter of 2022, and $23.0 million for the second quarter of 2021.

The second quarter of 2022 reflects higher compensation costs, with ongoing investments in commercial banking talent and production support roles, which was more than offset by higher merger-related expenses in the first quarter of 2022 associated with the BBFC and Sabal Palm acquisitions.

For the six months ended June 30, 2022, salaries and wages totaled $56.3 million, an increase of $11.9 million, or 27%, compared to the six months ended June 30, 2021.

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

During the second 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 $4.2 million, a decrease of $1.4 million, or 25%, compared to the first quarter of 2022, and an increase of $0.2 million, or 5%, compared to the second quarter of 2021.

The first quarter of 2022 included higher seasonal payroll taxes and 401(k) contributions.

For the six months ended June 30, 2022, employee benefit costs totaled $9.7 million, an increase of $0.7 million, or 8%, compared to the six months ended June 30, 2021 primarily related to growth in the associate base.

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

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

Outsourced data processing costs totaled $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.

Outsourced data processing costs totaled $6.0 million, $6.2 million, and $4.7 million for the second quarter of 2022, first quarter of 2022, and second quarter of 2021, respectively.

For the six months ended June 30, 2022 and June 30, 2021, outsourced data processing costs totaled $12.2 million and $9.1 million, respectively.

The increase year-over-year reflects increased cost associated with growth in the company’s footprint as well as ongoing upgrades to the Company’s various technology platforms.

Telephone and data line expenditures, including electronic communications with customers and between branch and customer support locations and personnel, as well as with third-party data processors, were $0.9 million, $0.7 million, and $0.8 million for the second quarter of 2022, first quarter of 2022, and second quarter of 2021, respectively.

Telephone and data line expenditures totaled $1.6 million in each of the six months ended June 30, 2022 and 2021.

Total occupancy, furniture and equipment expenses were $5.6 million in the second quarter of 2022, $5.4 million in the first quarter of 2022, and $4.5 million in the second quarter of 2021.

Increases compared to the second quarter of 2021 relate to expansion of the branch footprint through acquisitions and through organic growth into new markets including Naples, Sarasota and Jacksonville.

For the six months ended June 30, 2022, total occupancy, furniture and equipment expenses totaled $11.1 million, compared to $9.5 million for the six months ended June 30, 2021.

Marketing expenses totaled $1.9 million in the second quarter of 2022, $1.2 million in the first quarter of 2022, and $1.0 million in the second quarter of 2021.

Increases quarter-over-quarter are primarily the result of marketing campaigns focused on our expansion markets.

For the six months ended June 30, 2022, marketing expenses totaled $3.1 million, an increase of $0.9 million, or 41%, compared to the six months ended June 30, 2021.

Legal and professional fees for the second quarter of 2022 were $2.9 million, a decrease of $1.8 million, or 38%, compared to the first quarter of 2022, and an increase of $0.8 million, or 35%, compared to the second quarter of 2021.

For the six months ended June 30, 2022, legal and professional fees totaled $7.7 million, an increase of $3.0 million, or 62%, compared to the six months ended June 30, 2021.

Acquisition-related expenses were $1.4 million in the second quarter of 2022, $2.9 million in the first quarter of 2022, and $0.5 million in the second quarter of 2021.

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

For the six months ended June 30, 2022, FDIC assessments totaled $1.5 million compared to $1.0 million for the six months ended June 30, 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.

Other expense totaled $5.3 million, $4.7 million and $4.1 million for the second quarter of 2022, the first quarter of 2022 and the second quarter of 2021, respectively.

For the six months ended June 30, 2022, other expense totaled $10.1 million, an increase of $2.0 million, or 25%, compared to the six months ended June 30, 2021, reflecting higher recruiting and production-related costs.

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

Expenses in the 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.

Expenses in the third quarter of 2022 are expected to increase, primarily as a result of continued investments in talent and scaling the business.

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.

The provision for credit losses was $0.8 million for the second quarter of 2022 compared to a provision of $6.6 million for the first quarter of 2022 and a reversal of provision of $4.9 million for the second quarter of 2021.

The first quarter of 2022 included $5.1 million in provisioning for loans acquired in the Sabal Palm and BBFC transactions.

The reversal in the second quarter of 2021 lowered the ratio of allowance for credit losses to total loans, reflecting improvement in the economic forecast at that time.

For the second quarter of 2022, the Company recorded tax expense of $8.9 million compared to $5.8 million in the first quarter of 2022 and $8.8 million in the second quarter of 2021.

During the second quarter of 2022, the Company received a $1.0 million refund of Florida corporate income tax paid in prior periods.

Tax benefits related to stock-based compensation totaled $0.4 million in the second quarter of 2022, $0.5 million in the first quarter of 2022, and $0.6 million in the second quarter of 2021.

For the six months ended June 30, 2022, tax expense totaled $14.7 million, a decrease of $4.2 million, or 22%, compared to the six months ended June 30, 2021 due primarily to lower pre-tax income.

Explanation of Certain Unaudited Non-GAAP Financial Measures

7 unchanged sentences

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

First Fourth First

Quarter Quarter Quarter

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

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

3 unchanged sentences

Securities losses, net 300 452 55 752 169

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

Total adjustments to noninterest income 300 452 55 752 169

9 unchanged sentences

Tax effect of adjustments 1,213 2,196 598 3,409 1,175

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

Total adjustments to income taxes 1,213 2,196 598 3,409 1,175

15 unchanged sentences

2.00 % 1.99 % 1.98 % 2.00 % 2.07 %

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Quarter Quarter Quarter

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

Net Interest Income $ 81,647 $ 76,522 $ 65,802 $ 158,169 $ 132,412

7 unchanged sentences

Adjusted Pre-Tax Pre-Provision Earnings $ 46,397 $ 41,737 $ 37,820 $ 88,134 $ 78,402

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

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

Average Assets $ 10,840,518 $ 10,628,516 $ 9,025,846 $ 10,735,102 $ 8,757,093

32 unchanged sentences

$ 78,303 $ 71,399 $ 57,920 $ 149,702 $ 114,907

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

Net Interest Margin 2

8 unchanged sentences

Loan interest income excluding tax equivalent adjustment $ 69,307 $ 67,118 $ 60,348 $ 136,425 $ 122,646

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

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

Securities Interest Income 2

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Financial Condition

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.

Total assets increased $1.1 billion at June 30, 2022, or 12%, from December 31, 2021, reflecting organic growth, the acquisitions of BBFC and Sabal Palm, which combined added $661.0 million in assets, as well as higher cash and securities 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.

At June 30, 2022, the Company had $1.8 billion in securities available-for-sale and $794.8 million in securities held-to-maturity.

The Company's total debt securities portfolio increased $312.6 million, or 14%, from December 31, 2021.

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.

During the six months ended June 30, 2022, there were $680.3 million of debt security purchases and $213.9 million in paydowns and maturities over the same period.

The Company obtained securities in the first quarter of 2022 as part of the acquisition of BBFC which had a fair value of $26.0 million and were immediately sold with no gain or loss recognized.

For the six months ended June 30, 2021, there were $669.2 million of debt security purchases and $361.9 million in paydowns and maturities over the same period.

For the six months ended June 30, 2021, the Company had $56.2 million in proceeds from the sales of securities with a net loss of $0.1 million.

Debt securities generally return principal and interest monthly.

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 modified duration of the available-for-sale portfolio at June 30, 2022 was 3.3, compared to 3.1 at December 31, 2021.

At June 30, 2022, available-for-sale securities had gross unrealized losses of $163.2 million and gross unrealized gains of $0.7 million, compared to gross unrealized losses of $20.9 million and gross unrealized gains of $11.5 million at December 31, 2021.

The decline in value was the result of rising interest rates and changes in interest rate spreads during the period.

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

As of 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.

As of June 30, 2022, the Company expected to recover the entire amortized cost basis of these securities, and therefore, no allowance for credit losses was recorded.

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

10 unchanged sentences

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%.

As of June 30, 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.

1 unchanged sentence

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

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.

At June 30, 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 March 31, 2022, no allowance for credit losses has been recorded.

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

Loan Portfolio

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.

Loans, net of unearned income and excluding the allowance for credit losses, were $6.5 billion at June 30, 2022, a $616.5 million increase from December 31, 2021.

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

Removing the impacts of loans added through acquisitions and the purchased pool, loans grew 7% on an annualized basis in each of the first and second quarters of 2022.

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.

For the six months ended June 30, 2022, the Company originated $834.8 million in commercial and commercial real estate loans, compared to $397.3 million for the six months ended June 30, 2021, an increase of $437.6 million, or 110%.

The late-stage loan pipeline for commercial and commercial real estate loans totaled $476.7 million at June 30, 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%.

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 originated $278.5 million in residential loans retained in the portfolio during the six months ended June 30, 2022, compared to $164.7 million during the six months ended June 30, 2021, an increase of $113.7 million, or 69%.

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 and the $38.4 million purchased residential loan pool consisting of 30-year fixed rate jumbo residential loans purchased in the second quarter of 2021.

Saleable production decreased for the six months ended June 30, 2022, to $93.9 million compared to $258.4 million during the six months ended June 30, 2021, reflecting the impact of increasing interest rates and limited housing inventory.

Consumer originations totaled $205.5 million for the six months ended June 30, 2022, an increase of $95.0 million, or 86%, compared to the six months ended June 30, 2021.

The increase is primarily the result of consumer lending teams that joined in late 2021.

The Company remains committed to sound risk management procedures.

1 unchanged sentence

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 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

The following tables detail loan portfolio composition at June 30, 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.

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 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 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.

At June 30, 2022, the remaining fair value adjustments on acquired loans was a net discount of $21.4 million, or 1.8%, of the outstanding acquired loan balances.

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

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

Commercial real estate (“CRE”) loans, inclusive of owner-occupied CRE, increased by $292.7 million, or 10%, in the six months ended June 30, 2022, totaling $3.2 billion at June 30, 2022 compared to $2.9 billion at December 31, 2021.

Owner-occupied CRE loans represent $1.3 billion, or 39%, 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.

Residential real estate loans increased $222.1 million, or 16%, to $1.6 billion as of June 30, 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 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.

At June 30, 2022, approximately $314.4 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 $952.0 million, or 56%, at June 30, 2022, compared to $773.7 million, or 54%, at December 31, 2021.

Home equity lines of credit (“HELOCs”), primarily floating rates, totaled $381.1 million at June 30, 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 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 average LTV of our HELOC portfolio is 67% with 37% of the portfolio being in first lien position at June 30, 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 $1.0 million, or 1%, to total $175.2 million, compared to $174.2 million at December 31, 2021.

Borrowers in the consumer portfolio have an average credit score of 736.

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

At June 30, 2022, the Company had unfunded loan commitments of $2.2 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 $1.2 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.

Outstanding balances for commercial and CRE loan relationships greater than $10 million totaled $1.5 billion and represented 22% of the total portfolio at June 30, 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 June 30, 2022 aggregated to $378.9 million, of which $228.3 million was funded, compared to $312.0 million at December 31, 2021, of which $157.8 million was funded.

The Company had 189 commercial and commercial real estate relationships in excess of $5 million totaling $2.2 billion, of which $1.6 billion was funded at June 30, 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 22% and 189%, respectively, at March 31, 2022, compared to 23% and 168%, respectively, at December 31, 2021.

Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital were 29% and 192%, respectively, at June 30, 2022, compared to 21% and 177%, respectively, at December 31, 2021.

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

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Loans on owner-occupied CRE are generally excluded.

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.

At June 30, 2022, the Company had $1.6 billion in loans secured by residential real estate and $3.2 billion in loans secured by commercial real estate, representing 25% and 49% of total loans outstanding, respectively.

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

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

Nonperforming assets (“NPAs”) at 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”).

Nonperforming assets (“NPAs”) at June 30, 2022 totaled $28.9 million, and were comprised of $26.4 million of nonaccrual loans, and $2.4 million of other real estate owned (“OREO”).

Compared to December 31, 2021, nonaccrual loans decreased $4.2 million, primarily the result of paydowns.

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Overall, NPAs decreased $15.4 million, or 35%, from $44.2 million as of December 31, 2021.

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

At June 30, 2022, approximately 66% of nonaccrual loans were secured with real estate.

See the tables below for details about nonaccrual loans.

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.

At June 30, 2022, nonaccrual loans reflected cumulative write downs of approximately $4.8 million, including reserves on individually evaluated loans.

Nonperforming loans to total loans outstanding at June 30, 2022 decreased to 0.40% from 0.52% at December 31, 2021.

Nonperforming assets to total assets at June 30, 2022 decreased to 0.27% 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 $4.5 million at March 31, 2022, compared to $3.9 million at December 31, 2021.

Accruing TDRs totaled $4.0 million at June 30, 2022, compared to $3.9 million at December 31, 2021.

Accruing TDRs are excluded from the nonperforming asset ratios.

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

March 31, 2022

June 30, 2022

Nonaccrual Loans Accruing

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

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

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

June 30, 2022 December 31, 2021

(In thousands) Number Amount Number Amount

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Total 84 $ 6,461 94 $ 8,571

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.

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 totaling $0.1 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 agreements.

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

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 March 31, 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 $ — $ (493) $ — $ 10 $ — $ 2,268

Commercial real estate - owner-occupied 8,579 — 715 — — — 9,294

Commercial real estate - non owner-occupied 36,617 31 7,274 — — — 43,922

Residential real estate 12,811 17 1,060 (1) 191 (3) 14,075

Commercial and financial 19,744 3 (1,628) (569) 177 — 17,727

Consumer 2,813 — (372) (95) 208 (2) 2,552

Paycheck Protection Program — — — — — — —

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

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

Commercial real estate - owner-occupied 9,868 (76) — — — 9,792

Commercial real estate - non owner-occupied 38,266 (2,038) — 1 — 36,229

Residential real estate 17,500 (3,372) — 229 (4) 14,353

Commercial and financial 18,690 775 (756) 207 — 18,916

Consumer 3,489 (494) (185) 116 (1) 2,925

Paycheck Protection Program — — — — — —

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

During the second quarter of 2022, the Company recorded a provision of $0.8 million, reflecting the impact of higher loans outstanding.

The first quarter of 2022 included 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.

The Company reported net recoveries for the second quarter of 2022 of $0.1 million and, for the four most recent quarters, net charge-offs averaged 0.04% of outstanding loans.

The ratio of allowance for credit losses to total loans was 1.39% at June 30, 2022, 1.39% at March 31, 2022, and 1.49% at June 30, 2021.

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

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.

As of June 30, 2022, the Company has approximately $218 million in existing loans for which the repricing index is tied to LIBOR.

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

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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 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.

Brokered deposits at June 30, 2022 were $106.8 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 $901.4 million on a consolidated basis at June 30, 2022, compared to $737.7 million at December 31, 2021.

Higher cash and cash equivalent balances at June 30, 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 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.

At June 30, 2022, the Company had available unsecured lines of credit of $165.0 million and secured lines of credit, which are subject to change, of $2.2 billion.

In addition, the Company had $2.1 billion of debt securities and $744.8 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 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.

During the second quarter of 2022, Seacoast Bank distributed $8.4 million to the Company and, at June 30, 2022, is eligible to distribute dividends to the Company of approximately $169.5 million without prior regulatory approval.

At June 30, 2022, the Company had cash and cash equivalents at the parent of approximately $104.4 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:

March 31, December 31,

June 30, 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 $1.2 billion, or 15%, to $9.2 billion at March 31, 2022, compared to $8.1 billion at December 31, 2021.

Total deposits increased $1.1 billion, or 14%, to $9.2 billion at June 30, 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 $690.6 million, or 16%, to $5.1 billion, and CDs decreased $86.9 million, or 16%, to $468.0 million.

Noninterest demand deposits were higher by $517.7 million, or 17%, compared to year-end 2021, totaling $3.6 billion.

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.

Noninterest demand deposits represented 39% of total deposits at both June 30, 2022 and December 31, 2021.

As of June 30, 2022 and December 31, 2021, the Company did not hold any brokered CDs.

Customer repurchase agreements totaled $110.6 million at June 30, 2022, decreasing $11.0 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.

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.

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.

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.

At June 30, 2022 and December 31, 2021, borrowings were comprised of subordinated debt of $71.8 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 2.85% and 2.40% for the six months ended June 30, 2022 and June 30, 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 $2.1 billion at March 31, 2022 and $2.0 billion at December 31, 2021.

Loan commitments were $2.2 billion at June 30, 2022 and $2.0 billion at December 31, 2021.

Capital Resources

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

The Company’s equity capital at June 30, 2022 increased $18.8 million, or 1%, from December 31, 2021 to $1.3 billion.

Changes in equity included increases from net income of $53.3 million, and the issuance of $94.1 million in equity in connection with the BBFC and Sabal Palm acquisitions, partially offset by the issuance of a common stock dividend totaling $18.5 million and the decrease in accumulated other comprehensive income of $116.5 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:

The ratio of shareholders’ equity to period end total assets was 12.30% and 13.54% at June 30, 2022 and December 31, 2021, respectively.

The ratio of tangible shareholders’ equity to tangible assets was 9.74% and 11.09% at June 30, 2022 and December 31, 2021, respectively.

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

(In thousands) 2022 2021

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Change in accumulated other comprehensive income (116,538) (10,569)

Ending balance at March 31, 2022 and 2021

Ending balance at June 30, 2022 and 2021

$ 1,329,575 $ 1,182,347

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

March 31, 2022 Seacoast

June 30, 2022 Seacoast

(Consolidated) Seacoast

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1 For subsidiary bank only.

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’s total risk-based capital ratio was 17.70% at June 30, 2022, a decrease from 18.21% at December 31, 2021, primarily due to growth including the acquisitions of Sabal Palm and BBFC.

At June 30, 2022, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was 10.61%, well above the minimum to be well capitalized under regulatory guidelines.

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

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

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

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

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 $169.5 million of dividends to the Company.

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• contingent liabilities.

The following is a discussion of the critical accounting policies intended to facilitate a reader’s understanding of the judgments, estimates and assumptions underlying these accounting policies and the possible or likely events or uncertainties known to the

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

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

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

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.

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 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

Under the current conversion rate that became effective June 29, 2022, the Company expects to 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 Company’s ownership is related to prior ownership in Visa's network while Visa operated as a cooperative.

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Company management, together with attorneys, consultants and other professionals, assesses the probability and estimated amounts involved in a contingency.

Throughout the life of a contingency, the Company or its advisers may learn of additional information that can affect the assessments about probability or about the estimates of amounts involved.

Throughout the life of a contingency, the Company or its advisers may learn of additional information that can affect the

assessments about probability or about the estimates of amounts involved.

Changes in these assessments can lead to changes in recorded reserves.

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

At 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.

At June 30, 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 April 1, 2022, holding all balances on 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 July 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% (3.4%) (7.7%)

The Company had a positive gap position based on contractual and prepayment assumptions for the next 12 months, with a positive cumulative interest rate sensitivity gap as a percentage of total earning assets of 28.8% at March 31, 2022.

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

10 unchanged sentences

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