What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-04 · 180 added, 140 removed, 1060 unchanged (23% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

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

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

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

49 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

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

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

(In thousands) 2022 2021 2022 2021

2 unchanged sentences

Available-for-sale securities:

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

Unrealized losses on available-for-sale securities, net of tax benefit of $ 20.3 million and $ 56.8 million for the three and nine months ended September 30, 2022, respectively, and net of tax benefit of $ 1.3 million and $ 4.3 million for the three and nine months ended September 30, 2021, respectively

$ ( 63,736 ) $ ( 4,459 ) $ ( 180,221 ) $ ( 15,014 )

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

Amortization of unrealized gains and losses on securities transferred to held-to-maturity, net of tax benefit of $ 3 thousand and $ 4 thousand for the three and nine months ended September 30, 2022, respectively, and tax expense of $ 5 thousand and $ 16 thousand for the three and nine months ended September 30, 2021, respectively

( 11 ) 21 ( 9 ) 65

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

Reclassification adjustment for losses included in net income, net of tax benefit of $ 19 thousand for the nine months ended September 30, 2021

Available-for-sale securities, net of tax $ ( 63,747 ) $ ( 4,438 ) $ ( 180,230 ) $ ( 14,858 )

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

Unrealized gains (losses) on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax expense of $ 22 thousand and $ 3 thousand for the three and nine months ended September 30, 2022, respectively, and tax benefit of $ 32 thousand and $ 83 thousand for the three and nine months ended September 30, 2021, respectively

65 ( 94 ) 10 ( 243 )

4 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

June 30, December 31,

September 30, December 31,

(In thousands, except share data) 2022 2021

5 unchanged sentences

Securities available-for-sale (at fair value) 1,860,734 1,644,319

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

Securities held-to-maturity (fair value $ 645.4 million at September 30, 2022 and $ 627.4 million at December 31, 2021)

774,706 638,640

18 unchanged sentences

Shareholders' Equity

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

Common stock, par value $ 0.10 per share, authorized 120,000,000 shares, issued 61,909,774 and outstanding 61,476,328 at September 30, 2022, and authorized 120,000,000 , issued 58,909,369 and outstanding 58,504,250 shares at December 31, 2021

Other shareholders' equity 1,281,654 1,304,886

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2022 2021

16 unchanged sentences

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

Net decrease in other assets 11,213 1,086

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

Net (increase) decrease in other assets ( 6,273 ) 4,899

Net increase (decrease) in other liabilities 10,841 ( 14,543 )

Net cash provided by operating activities $ 147,363 $ 104,764

15 unchanged sentences

Additions to bank premises and equipment ( 11,799 ) ( 1,697 )

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

Net cash used in investing activities $ ( 748,667 ) $ ( 129,217 )

See notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2022 2021

1 unchanged sentence

Net increase in deposits $ 135,545 $ 906,690

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

Net decrease in repurchase agreements ( 27,374 ) ( 14,061 )

Repayments of FHLB borrowings with original maturities of more than three months — ( 33,000 )

Stock based employee benefit plans 3,031 3,287

1 unchanged sentence

Net cash provided by financing activities $ 82,190 $ 848,060

Net increase in cash and cash equivalents 163,639 1,044,757

Net (decrease) increase in cash and cash equivalents ( 519,114 ) 823,607

Cash and cash equivalents at beginning of period 737,729 404,088

3 unchanged sentences

Cash paid during the period for taxes 19,591 28,200

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

Recognition of operating lease liabilities, other than through bank acquisitions 3,370 35

Recognition of operating lease right-of-use assets, other than through bank acquisitions, net of terminations 1,968 35

Recognition of operating lease liabilities, other than through bank acquisitions, net of terminations 1,968 35

Supplemental disclosure of non-cash investing activities:

11 unchanged sentences

(In thousands) Shares Amount Total

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

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

Comprehensive income (loss) — — — 29,237 — ( 63,682 ) ( 34,445 )

4 unchanged sentences

— — — ( 10,502 ) — — ( 10,502 )

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

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

Three months ended September 30, 2022 66 7 3,074 18,735 93 ( 63,682 ) ( 71,015 )

Balance at September 30, 2022 61,476 $ 6,148 $ 1,068,241 $ 412,166 $ ( 11,539 ) $ ( 187,214 ) $ 1,287,802

Comprehensive

4 unchanged sentences

(In thousands) Shares Amount Total

Balance at March 31, 2021

Balance at June 30, 2021

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

3 unchanged sentences

Common stock issued for stock options 178 17 2,885 — — — 2,902

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

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

Dividends on common stock ($ 0.13 per share)

— — — ( 7,610 ) — — ( 7,610 )

Three months ended June 30, 2021

Three months ended September 30, 2021

2,913 291 97,046 15,334 34 ( 4,532 ) 108,173

Balance at June 30, 2021

Balance at September 30, 2021

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

12 unchanged sentences

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

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

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

Dividends on common stock ($ 0.47 per share)

— — — ( 29,012 ) — — ( 29,012 )

Six months ended June 30, 2022

Nine months ended September 30, 2022

2,972 298 104,390 53,568 ( 970 ) ( 180,220 ) ( 22,934 )

Balance at June 30, 2022

Balance at September 30, 2022

61,476 $ 6,148 $ 1,068,241 $ 412,166 $ ( 11,539 ) $ ( 187,214 ) $ 1,287,802

10 unchanged sentences

Common stock issued for stock options 257 25 5,147 — — — 5,172

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

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

Dividends on common stock ($ 0.26 per share)

— — — ( 14,856 ) — — ( 14,856 )

Six months ended June 30, 2021

Nine months ended September 30, 2021

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

Balance at June 30, 2021

Balance at September 30, 2021

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

11 unchanged sentences

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

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

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

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

7 unchanged sentences

ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (“TDRs”) in ASC 310-40, Receivables - Troubled Debt Restructurings by Creditors , and introduces new disclosures related to modifications with borrowers that are experiencing financial difficulties.

ASU 2022-02 also requires the disclosure of current-period gross writeoffs by year of origination for financing receivables held at amortized cost.

ASU 2022-02 also requires the disclosure of current-period gross write-offs by year of origination for financing receivables held at amortized cost.

The amendments in ASU 2022-02 are effective for fiscal years beginning after December 15, 2022, and early adoption is permitted.

2 unchanged sentences

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

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

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

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

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

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

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

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

12 unchanged sentences

Note 3 – Securities

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

June 30, 2022

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

September 30, 2022

(In thousands) Amortized

30 unchanged sentences

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

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

During the first quarter of 2022, securities with a fair value of $ 26.0 million obtained in the acquisition of Business Bank of Florida Corp.

were immediately sold.

No gain or loss was recognized on the sale.

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

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

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

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

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

Proceeds from the sales of securities for the three and nine months ended September 30, 2021 were $ 1.0 million, and $ 57.2 million, respectively, resulting in gross gains of $ 0.2 million and gross losses of $ 0.3 million.

Also included in “Securities losses, net” are decreases of $ 0.4 million and $ 1.1 million for the three and nine months ended September 30, 2022, respectively, and decreases of $ 30 thousand and $ 0.1 million for the three and nine months ended September 30, 2021, respectively, in the value of an investment in shares of a mutual fund that invests in CRA-qualified debt securities.

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

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

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

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

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

At September 30, 2022, debt securities with a fair value of $ 387.8 million were pledged primarily as collateral for public deposits and secured borrowings.

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

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

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

June 30, 2022

September 30, 2022

Held-to-Maturity Available-for-Sale

13 unchanged sentences

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

June 30, 2022

September 30, 2022

Less Than 12 Months 12 Months or Longer Total

25 unchanged sentences

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

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

At September 30, 2022, the Company had unrealized losses of $ 220.1 million on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $ 1.3 billion.

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

2 unchanged sentences

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

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

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

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

At September 30, 2022, the Company had $ 12.1 million of unrealized losses in floating rate collateralized loan obligations (“CLOs”) having a fair value of $ 302.1 million.

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

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

As of September 30, 2022, all positions held by the Company are in AAA and AA tranches, with average credit support of 37 % and 36 %, respectively.

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

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

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

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

At September 30, 2022, the Company had $ 11.8 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of $ 170.7 million.

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

1 unchanged sentence

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

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

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

At September 30, 2022, the Company had $ 2.3 million of unrealized losses on municipal securities having a fair value of $ 23.5 million.

These securities are highly rated issuances of state or local municipalities, all of which are continuing to make timely contractual payments.

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

All held-to-maturity (“HTM”) debt securities are issued by government-sponsored entities, which are either explicitly or implicitly guaranteed by the U.S.

government and have a long history of no credit losses.

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

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

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

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

Included in Other Assets at September 30, 2022 is $ 38.2 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value.

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

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

Accrued interest receivable on available-for-sale (“AFS”) securities and HTM debt securities of $ 5.8 million and $ 1.3 million, respectively, at September 30, 2022, and $ 3.4 million and $ 1.0 million, respectively, at December 31, 2021, is included in Other Assets.

Also included in Other Assets is an $ 8.2 million investment in a CRA-qualified mutual fund carried at fair value.

15 unchanged sentences

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

Sources of repayment may be from the occupant of the residential property or from cash flows on rental income from the successful operation of the property.

Sources of repayment are largely dependent on the occupant of the residential property.

• Commercial and financial:

8 unchanged sentences

Under the terms of the program, balances may be forgiven if the borrower uses the funds in a manner consistent with the program guidelines, and repayment is guaranteed by the U.S.

In the third quarter of 2022, to align with the Company’s transition of the calculation of expected credit losses to a new modeling tool, $ 100 million in loans to commercial borrowers collateralized by residential properties were reclassified from “Residential real estate” to “Commercial real estate - non owner-occupied.”

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

June 30, 2022

September 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 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.

The amortized cost basis of loans at September 30, 2022 included net deferred costs of $ 30.1 million.

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

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

At September 30, 2022, the remaining fair value adjustments on acquired loans were $ 19.1 million, or 1.8 % of the outstanding acquired loan balances, compared to $ 23.1 million, or 2.3 % of the acquired loan balances at December 31, 2021.

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

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

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

June 30, 2022

Accrued interest receivable is included within Other Assets and was $ 17.6 million and $ 14.7 million at September 30, 2022 and December 31, 2021, respectively.

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

September 30, 2022

(In thousands) Current Accruing

70 unchanged sentences

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

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

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

The Company recognized $ 0.2 million and $ 0.3 million in interest income on nonaccrual loans during each of the three months ended September 30, 2022 and 2021, respectively.

The Company recognized $ 1.4 million and $ 0.9 million in interest income on nonaccrual loans during the nine months ended September 30, 2022 and 2021, respectively.

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

June 30, 2022

September 30, 2022

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

18 unchanged sentences

The following table presents collateral-dependent loans as of:

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

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

Construction and land development $ 11 $ 271

18 unchanged sentences

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

June 30, 2022

September 30, 2022

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

31 unchanged sentences

Total $ 165,504 $ 496,317 $ 105,074 $ 69,699 $ 89,718 $ 258,784 $ 414,669 $ 1,599,765

June 30, 2022

September 30, 2022

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

90 unchanged sentences

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

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

Three Months Ended June 30,

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

Three Months Ended September 30,

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

6 unchanged sentences

Totals $ — $ — $ — $ 1 $ 152 $ 152

Six Months Ended June 30,

Nine Months Ended September 30,

6 unchanged sentences

Totals $ 9 $ 862 $ 862 $ 5 $ 373 $ 373

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

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

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

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

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

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

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

For loans measured based on the present value of expected future cash flows, $ 13 thousand and $ 9 thousand for the three months ended September 30, 2022, and 2021, respectively, and $ 33 thousand and $ 20 thousand for the nine months ended September 30, 2022, and 2021, respectively, was included in interest income and represents the change in present value attributable to the passage of time.

Note 5 – Allowance for Credit Losses

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

(In thousands) Beginning

11 unchanged sentences

Totals $ 90,769 $ 4,676 $ ( 408 ) $ 305 $ ( 13 ) $ 95,329

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

(In thousands) Beginning

Balance Provision

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Losses Charge-

9 unchanged sentences

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(In thousands) Beginning

11 unchanged sentences

Totals $ 83,315 $ 51 $ 12,054 $ ( 1,525 ) $ 1,467 $ ( 33 ) $ 95,329

Six Months Ended June 30, 2021

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

Nine Months Ended September 30, 2021

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

Construction and land development $ 4,920 $ — $ ( 2,438 ) $ — $ 124 $ ( 3 ) $ 2,603

6 unchanged sentences

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

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

Forecast data is sourced primarily from Moody’s Analytics (“Moody’s”), a firm widely recognized for its research, analysis, and economic forecasts.

For portfolio segments with a weighted average life longer than three years, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans within each segment.

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

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

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

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

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

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

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

Forecast data is sourced from Moody’s Analytics (“Moody’s”), a firm widely recognized for its research, analysis, and economic forecasts.

The forecasts of future economic conditions are over a period that has been deemed reasonable and supportable, and in segments where it can no longer develop reasonable and supportable forecasts, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans.

During the third quarter of 2022, the Company transitioned to a tool that calculates the quantitative portion of expected credit losses using a discounted cash flow methodology for its commercial loans and using a loss rate methodology for its consumer loans.

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

Macroeconomic Outlook Baseline” and “Alternative Scenario 3 - Downside - 90th Percentile” scenarios and considered the uncertainty associated with the assumptions in both scenarios, including continued actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, the ongoing Russia-Ukraine conflict and the magnitude of the resulting market disruption, the potential impact of persistent high inflation on economic growth and expectations around a recession occurring over the next 12 to 24 months.

Furthermore, the Company considered the impact that Hurricane Ian may have on future losses, and as a result increased the allowance by $ 2.1 million.

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

The following section discusses changes in the level of the allowance for credit losses for the three months ended September 30, 2022.

In the Construction and Land Development segment, the increase in reserves reflects higher loan balances as well as a more negative economic outlook.

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

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

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

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

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

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

In the Commercial Real Estate - Owner-Occupied segment, the decrease in the allowance is primarily attributed to the transition to a discounted cash flow approach which, while continuing to consider relevant macroeconomic forecast variables, also considers loan-specific available collateral.

In the Commercial Real Estate - Non Owner-Occupied segment, the decrease in reserves reflects the impact of transitioning from a portfolio level estimate to a discounted cash flow approach, utilizing macroeconomic variables specific to the loan segment.

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

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

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

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

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

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

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

The increase in reserves is due to a deterioration in the economic forecast, including the transition to a loss rate tool for estimating credit losses, utilizing macroeconomic variables specific to the loan segment.

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

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

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

The decrease in reserves is attributed to the transition from a portfolio level estimate to a

discounted cash flow tool, utilizing macroeconomic variables specific to the loan segment.

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

Consumer loans include installment and revolving lines, loans for automobiles, boats, and other personal or family purposes.

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

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

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

The increase in reserves reflects the increasing likelihood of economic recession reflected within the forecast.

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

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

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

June 30, 2022

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

September 30, 2022

Individually Evaluated Collectively Evaluated Total

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

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

As of September 30, 2022, the interest rate swaps had an aggregate notional value of $ 302.8 million, with a fair value of $ 24.1 million recorded in other assets and other liabilities.

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

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

The weighted average maturity was 6.8 years at September 30, 2022 and 6.7 years at December 31, 2021.

Interest Rate Floors Designated as Cash Flow Hedges

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

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

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

For the three and nine months ended September 30, 2022, the Company recognized a loss through other comprehensive income of $ 0.1 million and $ 0.3 million, respectively, and reclassified $ 0.1 million and $ 0.3 million, respectively, out of accumulated other comprehensive income and into interest income.

As of September 30, 2022 and December 31, 2021, the interest rate floors had a fair value of $ 20 thousand and $ 290 thousand, respectively, recorded in other assets in the consolidated balance sheet.

Over the next twelve months, the Company expects to reclassify $ 0.6 million from accumulated other comprehensive income into interest income related to these agreements.

(In thousands) Notional Amount Fair Value Balance Sheet Category

At June 30, 2022

At September 30, 2022

Back-to-back swaps $ 302,840 $ 24,096 Other Assets and Other Liabilities

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

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

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

Fair value of pledged securities - overnight and continuous:

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Note 8 – Equity Capital

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

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

Note 9 – Contingent Liabilities

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Note 10 – Fair Value

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

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

(In thousands) Fair Value

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(Level 2) Significant

At June 30, 2022

At September 30, 2022

Financial Assets

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

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

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

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

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

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

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

Aggregate fair value $ 1,620 $ 31,791

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

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

At September 30, 2022 capitalization rates utilized to determine fair value of the underlying collateral averaged approximately 6.8 %.

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

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

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

Collateral-dependent loans measured at fair value totaled $ 9.9 million with a specific reserve of $ 3.9 million at September 30, 2022, compared to $ 13.1 million with a specific reserve of $ 4.7 million at December 31, 2021.

Other real estate owned :

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

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

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

The carrying amount and fair value of the Company’s other financial instruments that were not disclosed previously in the balance sheet and for which carrying amount is not fair value as of June 30, 2022 and December 31, 2021 is as follows:

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

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

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

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(Level 2) Significant Unobservable Inputs

June 30, 2022

September 30, 2022

Financial Assets

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

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

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

Held-to-maturity debt securities :

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The Company recognized goodwill of $ 31.0 million for this acquisition that is nondeductible for tax purposes.

Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a

complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.

The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes known.

Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.

As part of the Legacy Bank acquisition, 356,497 options were granted to replace outstanding Legacy Bank options.

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

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

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

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

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EPS - diluted 0.47 0.48 1.41 1.60

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 $ 930.3 million and loans of $ 736.0 million as of June 30, 2022.

Regulatory approvals for the transaction have been received.

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

Proposed Acquisition of Drummond Banking Company.

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

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

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

Fourth Quarter 2022 Acquisitions

Acquisition of Apollo Bancshares, Inc.

On October 7, 2022, the Company completed its acquisition of Apollo Bancshares, Inc.

Simultaneously, upon completion of the merger of Apollo and the Company, Apollo Bank was merged with and into Seacoast Bank.

Prior to the acquisition, Apollo Bank operated five branches in Miami-Dade County.

Apollo shareholders received 1.006529 shares of Seacoast common stock for each share of Apollo common stock, and the minority interest holders in Apollo Bank received 1.195651 shares of Seacoast common stock for each share of Apollo Bank common stock.

(In thousands, except per share data) October 7, 2022

Number of Apollo Bancshares, Inc.

common shares outstanding 3,766,412

Per share exchange ratio 1.006529

Number of shares of SBCF common stock issued 3,790,848

Number of Apollo Bank minority interest shares outstanding 608,635

Per share exchange ratio 1.195651

Number of shares of SBCF common stock issued 727,714

Total number of shares of SBCF common stock issued 4,518,562

Multiplied by common stock price per share at October 7, 2022 $ 30.83

Value of SBCF common stock issued $ 139,307

Cash paid for fractional shares 5

Fair value of Apollo Bancshares, Inc.

options and warrants converted 6,530

Total purchase price $ 145,842

Acquisition of Drummond Banking Company.

On October 7, 2022, the Company completed its acquisition of Drummond Banking Company (“Drummond”).

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

Prior to the acquisition, Drummond Community Bank operated 18 branches across North Florida.

The Company acquired 100 % of the outstanding common stock of Drummond.

Under the terms of the definitive agreement, common stock was converted into the right to receive 51.9561 shares of Seacoast common stock.

(In thousands, except per share data) October 7, 2022

Number of Drummond Banking Company.

common shares outstanding 98,846

Per share exchange ratio 51.9561

Number of shares of SBCF common stock issued 5,135,631

Multiplied by common stock price per share at October 7, 2022 $ 30.83

Total purchase price $ 158,332

The acquisitions of Apollo and Drummond will be accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations .

The Company's assessment of the fair value of assets acquired and liabilities assumed as of the acquisition date is incomplete at the time of this filing;

therefore, certain disclosures have been omitted.

The Company expects to recognize goodwill in each of these transactions, which is expected to be nondeductible for tax purposes.

Proposed Acquisition of Professional Holding Corp.

On August 8, 2022, the Company announced its proposed acquisition of Professional Holding Corp.

(“Professional”).

The transaction, which is expected to close early in the first quarter of 2023, will expand the Company’s presence in the tri-county South Florida market, which includes Miami-Dade, Broward, and Palm Beach counties, Florida’s largest MSA and the 8 th largest in the nation.

Professional operates nine branches across Miami-Dade, Broward, and Palm Beach counties with deposits of approximately $ 2.2 billion and loans of $ 2.0 billion as of September 30, 2022.

All regulatory approvals for the transaction have been received.

The Professional merger remains subject to the approval of Professional shareholders and the satisfaction of other customary closing conditions.

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

What changed 10-Q

Item 1. Financial Statements