SEACOAST BANKING CORP OF FLORIDA 10-Q

Item 1. Financial Statements SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except per share data) 2022 2021 2022 2021 Interest and fees on loans $ 73,970 $ 64,424 $ 210,395 $ 187,070 Interest and dividends on securities 15,791 7,918 38,497 21,070 Interest on interest bearing deposits and other investments 1,643 867 4,493 2,162 Total Interest Income 91,404 73,209 253,385 210,302 Interest on deposits 1,623 849 3,384 2,894 Interest on time certificates 380 583 1,284 2,294 Interest on borrowed money 1,117 453 2,264 1,378 Total Interest Expense 3,120 1,885 6,932 6,566 Net Interest Income 88,284 71,324 246,453 203,736 Provision for credit losses 4,676 5,091 12,054 ( 5,479 ) Net Interest Income after Provision for Credit Losses 83,608 66,233 234,399 209,215 Noninterest income: Service charges on deposit accounts 3,504 2,495 9,713 7,171 Interchange income 4,138 4,131 12,521 12,096 Wealth management income 2,732 2,562 8,165 7,272 Mortgage banking fees 434 2,550 3,052 9,752 Marine finance fees 209 152 712 518 SBA gains 108 812 737 1,331 BOLI income 1,363 1,128 4,046 2,859 Other 3,977 5,228 10,608 11,221 16,465 19,058 49,554 52,220 Securities losses, net ( 362 ) ( 30 ) ( 1,114 ) ( 199 ) Total Noninterest Income 16,103 19,028 48,440 52,021 Noninterest Expense: Salaries and wages 28,420 27,919 84,695 72,278 Employee benefits 4,074 4,177 13,726 13,110 Outsourced data processing costs 5,393 5,610 17,592 14,754 Telephone / data lines 973 810 2,614 2,433 Occupancy 5,046 3,541 13,082 10,640 Furniture and equipment 1,462 1,567 4,476 3,987 Marketing 1,461 1,353 4,514 3,523 Legal and professional fees 3,794 4,151 11,529 8,915 FDIC assessments 760 651 2,248 1,692 3 Table of Contents Amortization of intangibles 1,446 1,306 4,338 3,729 Foreclosed property expense and net loss (gain) on sale 9 66 ( 1,123 ) ( 89 ) Provision for credit losses on unfunded commitments 1,015 133 1,157 133 Other 7,506 3,984 17,576 12,067 Total Noninterest Expense 61,359 55,268 176,424 147,172 Income Before Income Taxes 38,352 29,993 106,415 114,064 Provision for income taxes 9,115 7,049 23,835 25,991 Net Income $ 29,237 $ 22,944 $ 82,580 $ 88,073 Share Data Net income per share of common stock Diluted $ 0.47 $ 0.40 $ 1.33 $ 1.56 Basic 0.48 0.40 1.35 1.57 Average common shares outstanding Diluted 61,961 57,645 61,867 56,441 Basic 61,442 57,148 61,327 55,954 See notes to unaudited condensed consolidated financial statements. 4 Table of Contents SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2022 2021 2022 2021 Net Income $ 29,237 $ 22,944 $ 82,580 $ 88,073 Other comprehensive (loss) income: Available-for-sale securities: 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 $ 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 the nine months ended September 30, 2021 — — — 91 Available-for-sale securities, net of tax $ ( 63,747 ) $ ( 4,438 ) $ ( 180,230 ) $ ( 14,858 ) 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 ) Total other comprehensive (loss) income $ ( 63,682 ) $ ( 4,532 ) $ ( 180,220 ) $ ( 15,101 ) Comprehensive (Loss) Income $ ( 34,445 ) $ 18,412 $ ( 97,640 ) $ 72,972 See notes to unaudited condensed consolidated financial statements. 5 Table of Contents SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, (In thousands, except share data) 2022 2021 Assets Cash and due from banks $ 176,463 $ 238,750 Interest bearing deposits with other banks 42,152 498,979 Total cash and cash equivalents 218,615 737,729 Time deposits with other banks 4,481 — Debt securities: Securities available-for-sale (at fair value) 1,860,734 1,644,319 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 Total debt securities 2,635,440 2,282,959 Loans held for sale (at fair value) 1,620 31,791 Loans 6,690,845 5,925,029 Less: Allowance for credit losses ( 95,329 ) ( 83,315 ) Loans, net of allowance for credit losses 6,595,516 5,841,714 Bank premises and equipment, net 81,648 72,404 Other real estate owned 2,419 13,618 Goodwill 286,606 252,154 Other intangible assets, net 18,583 14,845 Bank owned life insurance 209,087 205,041 Net deferred tax assets 83,139 27,321 Other assets 208,081 201,857 Total Assets $ 10,345,235 $ 9,681,433 Liabilities Deposits $ 8,765,414 $ 8,067,589 Securities sold under agreements to repurchase, maturing within 30 days 94,191 121,565 Subordinated debt 71,857 71,646 Other liabilities 125,971 109,897 Total Liabilities 9,057,433 8,370,697 Shareholders' Equity 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 6,148 5,850 Other shareholders' equity 1,281,654 1,304,886 Total Shareholders' Equity 1,287,802 1,310,736 Total Liabilities and Shareholders' Equity $ 10,345,235 $ 9,681,433 See notes to unaudited condensed consolidated financial statements. 6 Table of Contents SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (In thousands) 2022 2021 Cash Flows from Operating Activities Net income $ 82,580 $ 88,073 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,267 4,139 Amortization of premiums and discounts on securities, net 630 5,353 Amortization of operating lease right-of-use assets 4,434 3,263 Other amortization and accretion, net 557 ( 11,715 ) Stock based compensation 6,620 7,492 Origination of loans designated for sale ( 148,444 ) ( 406,392 ) Sale of loans designated for sale 184,045 438,422 Provision for credit losses 12,054 ( 5,479 ) Deferred income taxes 1,309 3,325 Losses on sale of securities — 73 Gains on sale of loans ( 5,082 ) ( 12,450 ) Gains on sale and write-downs of other real estate owned ( 1,302 ) ( 380 ) Losses on disposition of fixed assets and write-downs upon transfer of bank premises to other real estate owned 1,127 684 Changes in operating assets and liabilities, net of effects from acquired companies: 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 Cash Flows from Investing Activities Maturities and repayments of debt securities available-for-sale 219,868 417,189 Maturities and repayments of debt securities held-to-maturity 69,665 103,254 Proceeds from sale of debt securities available-for-sale 26,011 57,209 Purchases of debt securities available-for-sale ( 673,656 ) ( 848,122 ) Purchases of debt securities held-to-maturity ( 206,065 ) ( 235,077 ) Maturities of time deposits with other banks 1,992 — Net new loans and principal repayments ( 282,514 ) 559,920 Purchases of loans held for investment ( 111,292 ) ( 236,699 ) Proceeds from sale of other real estate owned 14,208 4,954 Additions to other real estate owned ( 590 ) ( 2,134 ) Proceeds from sale of FHLB and Federal Reserve Bank Stock — 3,945 Purchase of FHLB and Federal Reserve Bank Stock ( 3,428 ) ( 59 ) Net cash from bank acquisitions 208,933 98,100 Purchase of bank owned life insurance — ( 50,000 ) Additions to bank premises and equipment ( 11,799 ) ( 1,697 ) Net cash used in investing activities $ ( 748,667 ) $ ( 129,217 ) See notes to unaudited condensed consolidated financial statements. 7 Table of Contents SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (In thousands) 2022 2021 Cash Flows from Financing Activities Net increase in deposits $ 135,545 $ 906,690 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 Dividends paid ( 29,012 ) ( 14,856 ) Net cash provided by financing activities $ 82,190 $ 848,060 Net (decrease) increase in cash and cash equivalents ( 519,114 ) 823,607 Cash and cash equivalents at beginning of period 737,729 404,088 Cash and cash equivalents at end of period $ 218,615 $ 1,227,695 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 6,906 $ 8,334 Cash paid during the period for taxes 19,591 28,200 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: Transfer of debt securities from available-for-sale to held-to-maturity $ — $ 210,805 Unsettled purchases of debt securities available-for-sale — 8,064 Transfers from bank premises to other real estate owned 1,008 3,318 See notes to unaudited condensed consolidated financial statements. 8 Table of Contents SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Accumulated Other Comprehensive Income (Loss) Common Stock Paid-in Capital Retained Earnings Treasury Stock (In thousands) Shares Amount Total 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 ) Stock based compensation expense 21 — 2,504 — — — 2,504 Common stock transactions related to stock based employee benefit plans 7 3 ( 33 ) — 93 — 63 Common stock issued for stock options 38 4 603 — — — 607 Dividends on common stock ($ 0.17 per share) — — — ( 10,502 ) — — ( 10,502 ) 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 Accumulated Other Comprehensive Income (Loss) Common Stock Paid-in Capital Retained Earnings Treasury Stock (In thousands) Shares Amount Total Balance at June 30, 2021 55,436 $ 5,544 $ 862,598 $ 314,584 $ ( 10,180 ) $ 9,801 $ 1,182,347 Comprehensive income — — — 22,944 — ( 4,532 ) 18,412 Stock based compensation expense 23 — 2,358 — — — 2,358 Common stock transactions related to stock based employee benefit plans 25 5 ( 22 ) — 34 — 17 Common stock issued for stock options 178 17 2,885 — — — 2,902 Issuance of common stock, pursuant to acquisition 2,687 269 86,218 — — — 86,487 Conversion of options, pursuant to acquisition — — 5,607 — — — 5,607 Dividends on common stock ($ 0.13 per share) — — — ( 7,610 ) — — ( 7,610 ) Three months ended September 30, 2021 2,913 291 97,046 15,334 34 ( 4,532 ) 108,173 Balance at September 30, 2021 58,349 $ 5,835 $ 959,644 $ 329,918 $ ( 10,146 ) $ 5,269 $ 1,290,520 Accumulated Other Comprehensive Income (Loss) Common Stock Paid-in Capital Retained Earnings Treasury Stock (In thousands) Shares Amount Total Balance at December 31, 2021 58,504 $ 5,850 $ 963,851 $ 358,598 $ ( 10,569 ) $ ( 6,994 ) $ 1,310,736 Comprehensive income (loss) — — — 82,580 — ( 180,220 ) ( 97,640 ) Stock based compensation expense 21 — 6,620 — — — 6,620 Common stock transactions related to stock based employee benefit plans 183 21 ( 69 ) — ( 970 ) — ( 1,018 ) Common stock issued for stock options 218 22 4,027 — — — 4,049 Issuance of common stock, pursuant to acquisition 2,550 255 89,979 — — — 90,234 Conversion of options, pursuant to acquisition — — 3,833 — — — 3,833 Dividends on common stock ($ 0.47 per share) — — — ( 29,012 ) — — ( 29,012 ) Nine months ended September 30, 2022 2,972 298 104,390 53,568 ( 970 ) ( 180,220 ) ( 22,934 ) Balance at September 30, 2022 61,476 $ 6,148 $ 1,068,241 $ 412,166 $ ( 11,539 ) $ ( 187,214 ) $ 1,287,802 9 Table of Contents Accumulated Other Comprehensive Income (Loss) Common Stock Paid-in Capital Retained Earnings Treasury Stock (In thousands) Shares Amount Total Balance at December 31, 2020 55,243 $ 5,524 $ 856,092 $ 256,701 $ ( 8,285 ) $ 20,370 $ 1,130,402 Comprehensive income (loss) — — — 88,073 — ( 15,101 ) 72,972 Stock based compensation expense 23 — 6,620 — — — 6,620 Common stock transactions related to stock based employee benefit plans 139 17 ( 40 ) — ( 1,861 ) — ( 1,884 ) 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 ) Nine months ended September 30, 2021 3,106 311 103,552 73,217 ( 1,861 ) ( 15,101 ) 160,118 Balance at September 30, 2021 58,349 $ 5,835 $ 959,644 $ 329,918 $ ( 10,146 ) $ 5,269 $ 1,290,520 See notes to unaudited condensed consolidated financial statements. 10 Table of Contents SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 – Basis of Presentation Basis of Presentation: The accompanying unaudited condensed consolidated financial statements of Seacoast Banking Corporation of Florida and its subsidiaries (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current period presentation. Operating results for the three and nine months ended September 30, 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. Use of Estimates: The preparation of these condensed consolidated financial statements requires management to make judgments in the application of certain accounting policies that involve significant estimates and assumptions. The Company has established policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements. Specific areas, among others, requiring the application of management’s estimates include determination of the allowance for credit losses, acquisition accounting and purchased loans, intangible assets and impairment testing, other fair value measurements and contingent liabilities. Recently Issued Accounting Standards, Not Yet Adopted In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures . ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (“TDRs”) in ASC 310-40, Receivables - Troubled Debt Restructurings by Creditors , and introduces new disclosures related to modifications with borrowers that are experiencing financial difficulties. ASU 2022-02 also requires the disclosure of current-period gross 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. The impact to the Company’s consolidated financial statements of the adoption of ASU 2022-02 is not expected to be material. 11 Table of Contents Note 2 – Earnings per Share Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. For the three and nine months ended September 30, 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 Basic earnings per share Net income $ 29,237 $ 22,944 $ 82,580 $ 88,073 Average common shares outstanding 61,442 57,148 61,327 55,954 Net income per share $ 0.48 $ 0.40 $ 1.35 $ 1.57 Diluted earnings per share Net income $ 29,237 $ 22,944 $ 82,580 $ 88,073 Average common shares outstanding 61,442 57,148 61,327 55,954 Add: Dilutive effect of employee restricted stock and stock options 519 497 540 487 Average diluted shares outstanding 61,961 57,645 61,867 56,441 Net income per share $ 0.47 $ 0.40 $ 1.33 $ 1.56 Net income has not been allocated to unvested restricted stock awards that are participating securities because the amounts that would be allocated are not material to net income per share of common stock. Unvested restricted stock awards that are participating securities represent less than one percent of all of the outstanding shares of common stock for each of the periods presented. Note 3 – Securities 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 Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Debt securities available-for-sale U.S. Treasury securities and obligations of U.S. government agencies $ 5,398 $ 4 $ ( 330 ) $ 5,072 Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 1,573,618 86 ( 220,135 ) 1,353,569 Private mortgage-backed securities and collateralized mortgage obligations 183,740 22 ( 11,798 ) 171,964 Collateralized loan obligations 314,214 — ( 12,140 ) 302,074 Obligations of state and political subdivisions 30,167 139 ( 2,251 ) 28,055 Totals $ 2,107,137 $ 251 $ ( 246,654 ) $ 1,860,734 Debt securities held-to-maturity Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities $ 774,706 $ 65 $ ( 129,332 ) $ 645,439 Totals $ 774,706 $ 65 $ ( 129,332 ) $ 645,439 12 Table of Contents December 31, 2021 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Debt securities available-for-sale U.S. Treasury securities and obligations of U.S. government agencies $ 6,466 $ 316 $ ( 3 ) $ 6,779 Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 1,234,721 8,308 ( 20,309 ) 1,222,720 Private mortgage-backed securities and collateralized mortgage obligations 88,096 1,091 ( 420 ) 88,767 Collateralized loan obligations 292,751 63 ( 124 ) 292,690 Obligations of state and political subdivisions 31,624 1,740 ( 1 ) 33,363 Totals $ 1,653,658 $ 11,518 $ ( 20,857 ) $ 1,644,319 Debt securities held-to-maturity Mortgage-backed securities of U.S. government-sponsored entities $ 638,640 $ 3,828 $ ( 15,070 ) $ 627,398 Totals $ 638,640 $ 3,828 $ ( 15,070 ) $ 627,398 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 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 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. 13 Table of Contents September 30, 2022 Held-to-Maturity Available-for-Sale (In thousands) Amortized Cost Fair Value Amortized Cost Fair Value Due in less than one year $ — $ — $ 1,546 $ 1,544 Due after one year through five years — — 15,959 15,817 Due after five years through ten years — — 3,788 3,645 Due after ten years — — 14,272 12,121 — — 35,565 33,127 Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 774,706 645,439 1,573,618 1,353,569 Private mortgage-backed securities and collateralized mortgage obligations — — 183,740 171,964 Collateralized loan obligations — — 314,214 302,074 Totals $ 774,706 $ 645,439 $ 2,107,137 $ 1,860,734 The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, or using observable market data. The tables below indicate the fair value of available-for-sale debt securities with unrealized losses for which no allowance for credit losses has been recorded. September 30, 2022 Less Than 12 Months 12 Months or Longer Total (In thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government agencies $ 3,987 $ ( 318 ) $ 292 $ ( 12 ) $ 4,279 $ ( 330 ) Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 941,663 ( 119,928 ) 398,769 ( 100,207 ) 1,340,432 ( 220,135 ) Private mortgage-backed securities and collateralized mortgage obligations 162,976 ( 10,801 ) 7,721 ( 997 ) 170,697 ( 11,798 ) Collateralized loan obligations 249,362 ( 10,404 ) 52,711 ( 1,736 ) 302,073 ( 12,140 ) Obligations of state and political subdivisions 23,049 ( 2,172 ) 421 ( 79 ) 23,470 ( 2,251 ) Totals $ 1,381,037 $ ( 143,623 ) $ 459,914 $ ( 103,031 ) $ 1,840,951 $ ( 246,654 ) December 31, 2021 Less Than 12 Months 12 Months or Longer Total (In thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government agencies $ 97 $ ( 1 ) $ 245 $ ( 2 ) $ 342 $ ( 3 ) Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 955,881 ( 19,575 ) 11,953 ( 734 ) 967,834 ( 20,309 ) Private mortgage-backed securities and collateralized mortgage obligations 33,640 ( 173 ) 9,628 ( 247 ) 43,268 ( 420 ) Collateralized loan obligations 123,202 ( 81 ) 9,461 ( 43 ) 132,663 ( 124 ) Obligations of state and political subdivisions 499 ( 1 ) — — 499 ( 1 ) Totals $ 1,113,319 $ ( 19,831 ) $ 31,287 $ ( 1,026 ) $ 1,144,606 $ ( 20,857 ) 14 Table of Contents 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. government and have a long history of no credit losses. The implied government guarantee of principal and interest payments and the high credit rating of the portfolio provide a sufficient basis for the current expectation that there is no risk of loss if default were to occur. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at September 30, 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 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. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at September 30, 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. The securities have average credit support of 20 %. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at September 30, 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. 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. 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 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 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. The Company holds 11,330 shares of Visa Class B stock, which, following resolution of Visa litigation, will be converted to Visa Class A shares. Under the current conversion ratio that became effective June 29, 2022, the Company would receive 1.6059 shares of Class A stock for each share of Class B stock for a total of 18,194 shares of Visa Class A stock. The ownership of Visa stock is related to prior ownership in Visa's network while Visa operated as a cooperative, and is recorded on the Company's financial records at a zero basis. Note 4 – Loans Loans held for investment are categorized into the following segments: 15 Table of Contents • Construction and land development: Loans are extended to both commercial and consumer customers which are collateralized by and for the purpose of funding land development and construction projects, including 1-4 family residential construction, multi-family property and non-farm residential property where the primary source of repayment is from proceeds of the sale, refinancing or permanent financing of the property. • Commercial real estate - owner-occupied: Loans are extended to commercial customers for the purpose of acquiring real estate to be occupied by the borrower's business. These loans are collateralized by the subject property and the repayment of these loans is largely dependent on the performance of the company occupying the property. • Commercial real estate - non owner-occupied: Loans are extended to commercial customers for the purpose of acquiring commercial property where occupancy by the borrower is not their primary intent. These loans are viewed primarily as cash flow loans, collateralized by the subject property, and the repayment of these loans is largely dependent on rental income from the successful operation of the property. • Residential real estate: Loans are extended to consumer customers and collateralized primarily by 1-4 family residential properties and include fixed and variable rate mortgages, home equity mortgages, and home equity lines of credit. Loans are primarily written based on conventional loan agency guidelines, including loans that exceed agency value limitations. Sources of repayment are largely dependent on the occupant of the residential property. • Commercial and financial: Loans are extended to commercial customers. The purpose of the loans can be working capital, physical asset expansion, asset acquisition or other business purposes. Loans may be collateralized by assets owned by the borrower or the borrower's business. Commercial loans are based primarily on the historical and projected cash flow of the borrower's business and secondarily on the capacity of credit enhancements, guarantees and underlying collateral provided by the borrower. • Consumer: Loans are extended to consumer customers. The segment includes both installment loans and lines of credit which may be collateralized or non-collateralized. • Paycheck Protection Program (“PPP”): Loans originated under a temporary program established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and extended by the Economic Aid Act. 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. government. 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.” 16 Table of Contents The following tables present net loan balances by segment as of: September 30, 2022 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 338,070 $ 23,808 $ 35 $ 361,913 Commercial real estate - owner-occupied 988,614 245,943 18,902 1,253,459 Commercial real estate - non owner-occupied 1,568,138 469,363 70,113 2,107,614 Residential real estate 1,488,359 106,597 4,809 1,599,765 Commercial and financial 1,091,665 78,406 12,313 1,182,384 Consumer 176,895 3,521 — 180,416 Paycheck Protection Program 1,616 3,678 — 5,294 Totals $ 5,653,357 $ 931,316 $ 106,172 $ 6,690,845 December 31, 2021 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 199,341 $ 31,438 $ 45 $ 230,824 Commercial real estate - owner occupied 983,517 186,812 27,445 1,197,774 Commercial real estate - non-owner occupied 1,278,180 382,554 75,705 1,736,439 Residential real estate 1,261,306 156,957 7,091 1,425,354 Commercial and financial 968,318 84,395 16,643 1,069,356 Consumer 169,507 4,658 10 174,175 Paycheck Protection Program 69,503 21,604 — 91,107 Totals $ 4,929,672 $ 868,418 $ 126,939 $ 5,925,029 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 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 $ 17.6 million and $ 14.7 million at September 30, 2022 and December 31, 2021, respectively. 17 Table of Contents 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 30-59 Days Past Due Accruing 60-89 Days Past Due Accruing Greater Than 90 Days Nonaccrual Total Portfolio Loans Construction and land development $ 338,063 $ — $ — $ — $ 7 $ 338,070 Commercial real estate - owner-occupied 987,534 — — — 1,080 988,614 Commercial real estate - non owner-occupied 1,568,107 — — — 31 1,568,138 Residential real estate 1,476,907 4,458 291 — 6,703 1,488,359 Commercial and financial 1,087,617 1,197 119 — 2,732 1,091,665 Consumer 176,351 387 47 — 110 176,895 Paycheck Protection Program 1 1,315 29 272 — — 1,616 Total Portfolio Loans $ 5,635,894 $ 6,071 $ 729 $ — $ 10,663 $ 5,653,357 Acquired Non-PCD Loans Construction and land development $ 23,808 $ — $ — $ — $ — $ 23,808 Commercial real estate - owner-occupied 245,943 — — — — 245,943 Commercial real estate - non owner-occupied 467,459 122 — 738 1,044 469,363 Residential real estate 105,653 426 — — 518 106,597 Commercial and financial 77,935 89 — — 382 78,406 Consumer 3,263 26 6 — 226 3,521 Paycheck Protection Program 1 3,671 — 7 — — 3,678 Total Acquired Non-PCD Loans $ 927,732 $ 663 $ 13 $ 738 $ 2,170 $ 931,316 PCD Loans Construction and land development $ 33 $ — $ — $ — $ 2 $ 35 Commercial real estate - owner-occupied 18,343 — — — 559 18,902 Commercial real estate - non owner-occupied 66,965 — — — 3,148 70,113 Residential real estate 3,852 260 — — 697 4,809 Commercial and financial 8,088 — — — 4,225 12,313 Consumer — — — — — — Total PCD Loans $ 97,281 $ 260 $ — $ — $ 8,631 $ 106,172 Total Loans $ 6,660,907 $ 6,994 $ 742 $ 738 $ 21,464 $ 6,690,845 1 Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government. 18 Table of Contents December 31, 2021 (In thousands) Current Accruing 30-59 Days Past Due Accruing 60-89 Days Past Due Accruing Greater Than 90 Days Nonaccrual Total Portfolio Loans Construction and land development $ 199,087 $ — $ — $ — $ 254 $ 199,341 Commercial real estate - owner occupied 982,804 — — — 713 983,517 Commercial real estate - non-owner occupied 1,276,582 — — — 1,598 1,278,180 Residential real estate 1,248,160 3,457 143 — 9,546 1,261,306 Commercial and financial 963,828 851 41 — 3,598 968,318 Consumer 168,791 565 23 15 113 169,507 Paycheck Protection Program 1 69,434 — — 69 — 69,503 Total Portfolio Loans $ 4,908,686 $ 4,873 $ 207 $ 84 $ 15,822 $ 4,929,672 Acquired Non-PCD Loans Construction and land development $ 31,438 $ — $ — $ — $ — $ 31,438 Commercial real estate - owner occupied 186,652 — 160 — — 186,812 Commercial real estate - non-owner occupied 381,510 — — — 1,044 382,554 Residential real estate 154,981 182 — — 1,794 156,957 Commercial and financial 84,180 — 40 — 175 84,395 Consumer 4,082 135 — — 441 4,658 Paycheck Protection Program 1 21,567 — — 37 — 21,604 Total Acquired Non-PCD Loans $ 864,410 $ 317 $ 200 $ 37 $ 3,454 $ 868,418 PCD Loans Construction and land development $ 40 $ — $ — $ — $ 5 $ 45 Commercial real estate - owner occupied 24,192 — — — 3,253 27,445 Commercial real estate - non-owner occupied 72,442 — — — 3,263 75,705 Residential real estate 5,386 — — — 1,705 7,091 Commercial and financial 13,547 — — — 3,096 16,643 Consumer 10 — — — — 10 Total PCD Loans $ 115,617 $ — $ — $ — $ 11,322 $ 126,939 Total Loans $ 5,888,713 $ 5,190 $ 407 $ 121 $ 30,598 $ 5,925,029 1 Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest subsequently received on such loans is accounted for under the cost-recovery method, whereby interest income is not recognized until the loan balance is reduced to zero. 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 $ 0.2 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. 19 Table of Contents The following tables present net balances of loans on nonaccrual status and the related allowance for credit losses, if any, as of: September 30, 2022 (In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses Construction and land development $ 9 $ — $ 9 $ — Commercial real estate - owner-occupied 1,080 559 1,639 45 Commercial real estate - non owner-occupied 2,342 1,881 4,223 1,300 Residential real estate 7,684 234 7,918 173 Commercial and financial 4,980 2,359 7,339 1,472 Consumer 46 290 336 290 Totals $ 16,141 $ 5,323 $ 21,464 $ 3,280 December 31, 2021 (In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses Construction and land development $ 37 $ 222 $ 259 $ 92 Commercial real estate - owner-occupied 2,976 990 3,966 419 Commercial real estate - non owner-occupied 4,490 1,415 5,905 27 Residential real estate 12,358 687 13,045 357 Commercial and financial 2,676 4,193 6,869 2,384 Consumer 29 525 554 525 Totals $ 22,566 $ 8,032 $ 30,598 $ 3,804 Collateral-Dependent Loans Loans are considered collateral-dependent when the repayment, based on the Company's assessment as of the reporting date, is expected to be provided substantially through the operation or sale of the underlying collateral and there are no other available and reliable sources of repayment. The following table presents collateral-dependent loans as of: (In thousands) September 30, 2022 December 31, 2021 Construction and land development $ 11 $ 271 Commercial real estate - owner-occupied 2,368 4,706 Commercial real estate - non owner-occupied 3,218 4,923 Residential real estate 9,779 16,334 Commercial and financial 5,476 8,741 Consumer 481 741 Totals $ 21,333 $ 35,716 Loans by Risk Rating The Company utilizes an internal asset classification system as a means of identifying problem and potential problem loans. The following classifications are used to categorize loans under the internal classification system: • Pass: Loans that are not problem loans or potential problem loans are considered to be pass-rated. • Special Mention: Loans that do not currently expose the Company to sufficient risk to warrant classification in the Substandard or Doubtful categories, but possess weaknesses that deserve management's close attention are deemed to be Special Mention. 20 Table of Contents • Substandard: Loans with the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. • Substandard Impaired: Loans typically placed on nonaccrual and considered to be collateral-dependent or accruing TDRs. • Doubtful: Loans that have all the weaknesses inherent in those classified Substandard with the added characteristic that the weakness present makes collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are likely to be charged off. The following tables present the risk rating of loans by year of origination as of: September 30, 2022 (In thousands) 2022 2021 2020 2019 2018 Prior Revolving Total Construction and Land Development Risk Ratings: Pass $ 138,044 $ 127,715 $ 12,724 $ 17,839 $ 6,943 $ 12,573 $ 46,064 $ 361,902 Special Mention — — — — — — — — Substandard — — — — — — — — Substandard Impaired — — — — — 11 — 11 Doubtful — — — — — — — — Total $ 138,044 $ 127,715 $ 12,724 $ 17,839 $ 6,943 $ 12,584 $ 46,064 $ 361,913 Commercial real estate - owner-occupied Risk Ratings: Pass $ 137,279 $ 194,852 $ 153,023 $ 180,220 $ 116,511 $ 445,680 $ 13,926 $ 1,241,491 Special Mention 694 — — — 764 2,909 — 4,367 Substandard — — — 2,646 — 1,956 — 4,602 Substandard Impaired — — — 314 304 2,381 — 2,999 Doubtful — — — — — — — — Total $ 137,973 $ 194,852 $ 153,023 $ 183,180 $ 117,579 $ 452,926 $ 13,926 $ 1,253,459 Commercial real estate - non owner-occupied Risk Ratings: Pass $ 379,918 $ 430,128 $ 213,128 $ 291,043 $ 194,840 $ 548,896 $ 26,578 $ 2,084,531 Special Mention — — 738 — — 1,436 — 2,174 Substandard — — 4,709 — 5,515 5,724 — 15,948 Substandard Impaired — — 1,044 1,849 31 2,037 — 4,961 Doubtful — — — — — — — — Total $ 379,918 $ 430,128 $ 219,619 $ 292,892 $ 200,386 $ 558,093 $ 26,578 $ 2,107,614 Residential real estate Risk Ratings: Pass $ 165,480 $ 496,317 $ 104,888 $ 69,576 $ 89,632 $ 249,545 $ 411,635 $ 1,587,073 Special Mention 24 — 50 — — 343 843 1,260 Substandard — — — — — — 194 194 Substandard Impaired — — 136 123 86 8,896 1,997 11,238 Doubtful — — — — — — — — Total $ 165,504 $ 496,317 $ 105,074 $ 69,699 $ 89,718 $ 258,784 $ 414,669 $ 1,599,765 21 Table of Contents September 30, 2022 (In thousands) 2022 2021 2020 2019 2018 Prior Revolving Total Commercial and financial Risk Ratings: Pass $ 220,218 $ 292,894 $ 151,871 $ 75,083 $ 51,569 $ 59,354 $ 299,146 $ 1,150,135 Special Mention 1,288 452 121 566 205 333 361 3,326 Substandard — — 11,098 5,756 1,875 2,304 256 21,289 Substandard Impaired 6 — 204 270 4,298 2,829 27 7,634 Doubtful — — — — — — — — Total $ 221,512 $ 293,346 $ 163,294 $ 81,675 $ 57,947 $ 64,820 $ 299,790 $ 1,182,384 Consumer Risk Ratings: Pass $ 36,074 $ 41,798 $ 25,282 $ 18,908 $ 12,322 $ 18,192 $ 24,793 $ 177,369 Special Mention — 31 136 58 10 160 1,914 2,309 Substandard — — 12 12 2 8 223 257 Substandard Impaired — 7 24 57 52 130 211 481 Doubtful — — — — — — — — Total $ 36,074 $ 41,836 $ 25,454 $ 19,035 $ 12,386 $ 18,490 $ 27,141 $ 180,416 Paycheck Protection Program Risk Ratings: Pass $ — $ 3,210 $ 2,084 $ — $ — $ — $ — $ 5,294 Total $ — $ 3,210 $ 2,084 $ — $ — $ — $ — $ 5,294 Consolidated Risk Ratings: Pass $ 1,077,013 $ 1,586,914 $ 663,000 $ 652,669 $ 471,817 $ 1,334,240 $ 822,142 $ 6,607,795 Special Mention 2,006 483 1,045 624 979 5,181 3,118 13,436 Substandard — — 15,819 8,414 7,392 9,992 673 42,290 Substandard Impaired 6 7 1,408 2,613 4,771 16,284 2,235 27,324 Doubtful — — — — — — — — Total $ 1,079,025 $ 1,587,404 $ 681,272 $ 664,320 $ 484,959 $ 1,365,697 $ 828,168 $ 6,690,845 December 31, 2021 (In thousands) 2021 2020 2019 2018 2017 Prior Revolving Total Construction and Land Development Risk Ratings: Pass $ 94,318 $ 23,860 $ 38,058 $ 25,507 $ 3,995 $ 15,466 $ 29,349 $ 230,553 Special Mention — — — — — — — — Substandard — — — — — — — — Substandard Impaired — — — 222 — 49 — 271 Doubtful — — — — — — — — Total $ 94,318 $ 23,860 $ 38,058 $ 25,729 $ 3,995 $ 15,515 $ 29,349 $ 230,824 Commercial real estate - owner-occupied Risk Ratings: Pass $ 205,404 $ 154,432 $ 179,786 $ 132,353 $ 125,763 $ 363,986 $ 10,005 $ 1,171,729 Special Mention — 6,527 5,370 649 218 3,250 — 16,014 Substandard — — — — 3,290 1,610 — 4,900 Substandard Impaired — — 2,742 310 596 1,483 — 5,131 Doubtful — — — — — — — — Total $ 205,404 $ 160,959 $ 187,898 $ 133,312 $ 129,867 $ 370,329 $ 10,005 $ 1,197,774 22 Table of Contents December 31, 2021 (In thousands) 2021 2020 2019 2018 2017 Prior Revolving Total Commercial real estate - non owner-occupied Risk Ratings: Pass $ 395,308 $ 207,824 $ 298,021 $ 186,339 $ 110,990 $ 460,435 $ 6,477 $ 1,665,394 Special Mention — — 844 — 289 13,850 — 14,983 Substandard — 4,776 3,009 23,206 1,900 17,266 — 50,157 Substandard Impaired — 1,044 1,849 — 326 2,686 — 5,905 Doubtful — — — — — — — — Total $ 395,308 $ 213,644 $ 303,723 $ 209,545 $ 113,505 $ 494,237 $ 6,477 $ 1,736,439 Residential real estate Risk Ratings: Pass $ 394,547 $ 114,364 $ 90,566 $ 119,836 $ 118,556 $ 213,950 $ 354,439 $ 1,406,258 Special Mention — — — 70 — 1,243 532 1,845 Substandard — 340 — — 58 422 86 906 Substandard Impaired — 149 724 39 4,415 8,507 2,511 16,345 Doubtful — — — — — — — — Total $ 394,547 $ 114,853 $ 91,290 $ 119,945 $ 123,029 $ 224,122 $ 357,568 $ 1,425,354 Commercial and financial Risk Ratings: Pass $ 340,826 $ 180,677 $ 97,072 $ 68,232 $ 39,331 $ 56,053 $ 246,568 $ 1,028,759 Special Mention 530 15,587 — 237 251 84 876 17,565 Substandard — 371 2,605 3,594 1,436 3,217 339 11,562 Substandard Impaired — 196 4,561 3,694 1,371 1,520 128 11,470 Doubtful — — — — — — — — Total $ 341,356 $ 196,831 $ 104,238 $ 75,757 $ 42,389 $ 60,874 $ 247,911 $ 1,069,356 Consumer Risk Ratings: Pass $ 45,063 $ 31,342 $ 26,194 $ 17,300 $ 9,979 $ 16,019 $ 25,418 $ 171,315 Special Mention — 24 431 37 167 3 1,199 1,861 Substandard — — 18 — 17 — 223 258 Substandard Impaired — — 92 23 74 118 434 741 Doubtful — — — — — — — — Total $ 45,063 $ 31,366 $ 26,735 $ 17,360 $ 10,237 $ 16,140 $ 27,274 $ 174,175 Paycheck Protection Program Risk Ratings: Pass $ 87,036 $ 4,071 $ — $ — $ — $ — $ — $ 91,107 Total $ 87,036 $ 4,071 $ — $ — $ — $ — $ — $ 91,107 Consolidated Risk Ratings: Pass $ 1,562,502 $ 716,570 $ 729,697 $ 549,567 $ 408,614 $ 1,125,909 $ 672,256 $ 5,765,115 Special Mention 530 22,138 6,645 993 925 18,430 2,607 52,268 Substandard — 5,487 5,632 26,800 6,701 22,515 648 67,783 Substandard Impaired — 1,389 9,968 4,288 6,782 14,363 3,073 39,863 Doubtful — — — — — — — — Total $ 1,563,032 $ 745,584 $ 751,942 $ 581,648 $ 423,022 $ 1,181,217 $ 678,584 $ 5,925,029 Troubled Debt Restructured Loans The Company’s TDR concessions granted to certain borrowers generally do not include forgiveness of principal balances, but may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a limited period of time. 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. 23 Table of Contents 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, 2022 2021 (In thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Construction and land development $ — $ — $ — $ — $ — $ — Commercial real estate - owner-occupied — — — — — — Commercial real estate - non owner-occupied — — — — — — Residential real estate — — — 1 152 152 Commercial and financial — — — — — — Consumer — — — — — — Totals $ — $ — $ — $ 1 $ 152 $ 152 Nine Months Ended September 30, 2022 2021 (In thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Construction and land development $ — $ — $ — $ — $ — $ — Commercial real estate - owner-occupied — — — — — — Commercial real estate - non owner-occupied — — — — — — Residential real estate 3 785 785 4 231 231 Commercial and financial 2 54 54 1 142 142 Consumer 4 23 23 — — — 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 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, $ 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. 24 Table of Contents Note 5 – Allowance for Credit Losses Activity in the allowance for credit losses is summarized as follows: Three Months Ended September 30, 2022 (In thousands) Beginning Balance Provision for Credit Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance Construction and land development $ 2,552 $ 792 $ — $ 1 $ — $ 3,345 Commercial real estate - owner-occupied 7,376 ( 2,182 ) — — — 5,194 Commercial real estate - non owner-occupied 46,459 ( 6,841 ) ( 179 ) 23 — 39,462 Residential real estate 14,821 11,193 — 31 ( 8 ) 26,037 Commercial and financial 17,144 ( 1,457 ) ( 77 ) 92 ( 1 ) 15,701 Consumer 2,417 3,171 ( 152 ) 158 ( 4 ) 5,590 Paycheck Protection Program — — — — — — Totals $ 90,769 $ 4,676 $ ( 408 ) $ 305 $ ( 13 ) $ 95,329 Three Months Ended September 30, 2021 (In thousands) Beginning Balance Initial Allowance on PCD Loans Acquired During the Period Provision for Credit Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance Construction and land development $ 4,053 $ — $ ( 1,459 ) $ — $ 10 $ ( 1 ) $ 2,603 Commercial real estate - owner occupied 8,676 — ( 24 ) — — — 8,652 Commercial real estate - non-owner occupied 34,807 1,327 5,278 ( 1,327 ) — — 40,085 Residential real estate 12,543 — 1,456 ( 27 ) 158 ( 3 ) 14,127 Commercial and financial 18,016 1,719 ( 2 ) ( 535 ) 326 — 19,524 Consumer 3,032 — ( 158 ) ( 163 ) 126 ( 5 ) 2,832 Paycheck Protection Program — — — — — — — Totals $ 81,127 $ 3,046 $ 5,091 $ ( 2,052 ) $ 620 $ ( 9 ) $ 87,823 Nine Months Ended September 30, 2022 (In thousands) Beginning Balance Initial Allowance on PCD Loans Acquired During the Period Provision for Credit Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance Construction and land development $ 2,751 $ — $ 529 $ — $ 65 $ — $ 3,345 Commercial real estate - owner-occupied 8,579 — ( 3,385 ) — — — 5,194 Commercial real estate - non owner-occupied 36,617 31 2,961 ( 179 ) 32 — 39,462 Residential real estate 12,811 17 12,901 ( 1 ) 334 ( 25 ) 26,037 Commercial and financial 19,744 3 ( 3,585 ) ( 899 ) 440 ( 2 ) 15,701 Consumer 2,813 — 2,633 ( 446 ) 596 ( 6 ) 5,590 Paycheck Protection Program — — — — — — — Totals $ 83,315 $ 51 $ 12,054 $ ( 1,525 ) $ 1,467 $ ( 33 ) $ 95,329 25 Table of Contents 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 Commercial real estate - owner occupied 9,868 — ( 1,216 ) — — — 8,652 Commercial real estate - non-owner occupied 38,266 1,327 1,817 ( 1,327 ) 2 — 40,085 Residential real estate 17,500 — ( 4,323 ) ( 48 ) 1,008 ( 10 ) 14,127 Commercial and financial 18,690 1,719 1,172 ( 2,855 ) 798 — 19,524 Consumer 3,489 — ( 491 ) ( 547 ) 388 ( 7 ) 2,832 Paycheck Protection Program — — — — — — — 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. 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, 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. 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 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 the transition from a portfolio level estimate to a 26 Table of Contents 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 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. government and have not been assigned a reserve. The allowance for credit losses is composed of specific allowances for loans individually evaluated and general allowances for loans grouped into loan pools based on similar characteristics, which are collectively evaluated. The Company’s loan portfolio and related allowance at September 30, 2022 and December 31, 2021 is shown in the following tables: September 30, 2022 Individually Evaluated Collectively Evaluated Total (In thousands) Recorded Investment Associated Allowance Recorded Investment Associated Allowance Recorded Investment Associated Allowance Construction and land development $ 11 $ — $ 361,902 $ 3,345 $ 361,913 $ 3,345 Commercial real estate - owner occupied 2,999 45 1,250,460 5,149 1,253,459 5,194 Commercial real estate - non owner-occupied 4,961 1,300 2,102,653 38,162 2,107,614 39,462 Residential real estate 11,238 399 1,588,527 25,638 1,599,765 26,037 Commercial and financial 7,634 1,768 1,174,750 13,933 1,182,384 15,701 Consumer 481 411 179,935 5,179 180,416 5,590 Paycheck Protection Program — — 5,294 — 5,294 — Totals $ 27,324 $ 3,923 $ 6,663,521 $ 91,406 $ 6,690,845 $ 95,329 December 31, 2021 Individually Evaluated Collectively Evaluated Total (In thousands) Recorded Investment Associated Allowance Recorded Investment Associated Allowance Recorded Investment Associated Allowance Construction and land development $ 271 $ 92 $ 230,553 $ 2,659 $ 230,824 $ 2,751 Commercial real estate - owner occupied 5,131 419 1,192,643 8,160 1,197,774 8,579 Commercial real estate - non owner-occupied 5,905 27 1,730,534 36,590 1,736,439 36,617 Residential real estate 16,345 646 1,409,009 12,165 1,425,354 12,811 Commercial and financial 11,470 2,885 1,057,886 16,859 1,069,356 19,744 Consumer 741 685 173,434 2,128 174,175 2,813 Paycheck Protection Program — — 91,107 — 91,107 — Totals $ 39,863 $ 4,754 $ 5,885,166 $ 78,561 $ 5,925,029 $ 83,315 27 Table of Contents Note 6 – Derivatives Back-to-Back Swaps The Company offers interest rate swaps when requested by customers to allow them to hedge the risk of rising interest rates on their variable rate loans. Upon entering into these swaps, the Company enters into offsetting positions with counterparties in order to minimize the interest rate risk. These back-to-back swaps qualify as freestanding financial derivatives with the fair values reported in other assets and other liabilities. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under the arrangements for financial statement presentation purposes. Gains and losses on these back-to-back swaps, which offset, are recorded through noninterest income. No net gains or losses have been recognized to date on these instruments. 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 6.8 years at September 30, 2022 and 6.7 years at December 31, 2021. Interest Rate Floors Designated as Cash Flow Hedges The Company has entered into interest rate floor contracts to mitigate exposure to the variability of future cash flows due to changes in interest rates on certain segments of its variable-rate loans. During 2020, the Company entered into two interest rate floor contracts, each with a notional amount of $ 150.0 million, maturing in October 2023 and November 2023. The Company considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest rates and has designated them as cash flow hedges. Therefore, changes in the fair value of these derivative instruments are recognized in other comprehensive income. Amortization of the premium paid on cash flow hedges is recognized in earnings over the term of the hedge in the same caption as the hedged item. For the three and nine months ended September 30, 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 September 30, 2022 Back-to-back swaps $ 302,840 $ 24,096 Other Assets and Other Liabilities Interest rate floors 300,000 20 Other Assets At December 31, 2021 Back-to-back swaps $ 175,392 $ 8,022 Other Assets and Other Liabilities Interest rate floors 300,000 290 Other Assets Note 7 – Securities Sold Under Agreements to Repurchase Securities sold under agreements to repurchase are accounted for as secured borrowings. For securities sold under agreements to repurchase, the Company is required to pledge collateral with value sufficient to fully collateralize borrowings. Company securities pledged were as follows by collateral type and maturity as of: (In thousands) September 30, 2022 December 31, 2021 Fair value of pledged securities - overnight and continuous: Mortgage-backed securities and collateralized mortgage obligations of U.S. government sponsored entities $ 125,824 $ 134,577 28 Table of Contents Note 8 – Equity Capital 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 The Company and its subsidiaries, because of the nature of their business, are at all times subject to numerous legal actions, threatened or filed. Management presently believes that none of the legal proceedings to which it is a party are likely to have a materially adverse effect on the Company’s consolidated financial condition, operating results or cash flows. 29 Table of Contents Note 10 – Fair Value 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 Measurements Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) At September 30, 2022 Financial Assets Available-for-sale debt securities 1 $ 1,860,734 $ 184 $ 1,860,550 $ — Derivative financial instruments 2 24,116 — 24,116 — Loans held for sale 2 1,620 — 1,620 — Loans 3 5,990 — 1,262 4,728 Other real estate owned 4 2,419 — 2,419 — Equity securities 5 8,202 8,202 — — Financial Liabilities Derivative financial instruments 2 $ 24,096 $ — $ 24,096 $ — At December 31, 2021 Financial Assets Available-for-sale debt securities 1 $ 1,644,319 $ 197 $ 1,644,122 $ — Derivative financial instruments 2 8,312 — 8,312 — Loans held for sale 2 31,791 — 31,791 — Loans 3 8,443 — 1,558 6,885 Other real estate owned 4 13,618 — — 13,618 Equity securities 5 9,316 9,316 — — Financial Liabilities Derivative financial instruments 2 $ 8,022 $ — $ 8,022 $ — 1 See “Note 3 – Securities” for further detail of fair value of individual investment categories. 2 Recurring fair value basis determined using observable market data. 3 S e e “Note 4 – Loans.” N onrecurring fair value adjustments to collateral-dependent loans reflect full or partial write-downs that are based on current appraised values of the collateral in accordance with ASC Topic 310. 4 Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360. 5 An investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities, reported at fair value in Other Assets. Recurring fair value basis is determined using market quotations. Available-for-sale debt securities : Level 1 securities consist of U.S. Treasury securities. Other securities are reported at fair value utilizing Level 2 inputs. The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available. The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. The fair value of collateralized loan obligations is determined from broker quotes. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using internal models. Derivative financial instruments : The Company offers interest rate swaps to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while 30 Table of Contents providing a contract for fixed interest payments for the customer. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2. Other derivatives consist of interest rate floors designated as cash flow hedges. The fair values of these instruments are based upon the estimated amount the Company would receive or pay to terminate the instruments, taking into account current interest rates and, when appropriate, the current creditworthiness of the counterparties. Interest rate floors designated as cash flow hedges are classified within Level 2. Loans held for sale : Fair values are based upon estimated values to be received from independent third party purchasers. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Fair market value changes occur due to changes in interest rates, the borrower’s credit, the secondary loan market and the market for a borrower’s debt. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of the loans were 90 days or more past due or on nonaccrual as of September 30, 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 Contractual balance 1,565 30,963 Excess 55 828 Loans : Loans measured at fair value consist of collateral-dependent real estate loans. Fair value is based on recent real estate appraisals less estimated costs of sale. These evaluations may use either a single valuation approach or a combination of approaches, such as comparative sales, cost and/or income approach. A significant unobservable input in the income approach is the estimated capitalization rate for a given piece of collateral. 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 $ 9.9 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 : When appraisals are used to determine fair value and the appraisals are based on a market approach, the fair value of other real estate owned (“OREO”) is classified as a Level 2 input. When the fair value of OREO is based on appraisals which require significant adjustments to market-based valuation inputs or apply an income approach based on unobservable cash flows, the fair value of OREO is classified as Level 3. 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 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. 31 Table of Contents The carrying amount and fair value of the Company’s other financial instruments that were not disclosed previously in the balance sheet and for which carrying amount is not fair value as of September 30, 2022 and December 31, 2021 is as follows: (In thousands) Carrying Amount Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) September 30, 2022 Financial Assets Debt securities held-to-maturity 1 $ 774,706 $ — $ 645,439 $ — Time deposits with other banks 4,481 — 4,266 — Loans, net 6,589,526 — — 6,525,588 Financial Liabilities Deposit liabilities 8,765,414 — — 8,753,505 Subordinated debt 71,857 — 69,552 — December 31, 2021 Financial Assets Debt securities held-to-maturity 1 $ 638,640 $ — $ 627,398 $ — Loans, net 5,833,271 — — 5,907,447 Financial Liabilities Deposit liabilities 8,067,589 — — 8,067,995 Subordinated debt 71,646 — 69,348 — 1 See “Note 3 – Securities” for further detail of individual investment categories. The short maturity of Seacoast’s assets and liabilities results in having a significant number of financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following balance sheet captions: cash and due from banks, interest bearing deposits with other banks, FHLB borrowings and securities sold under agreements to repurchase, maturing within 30 days. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value at September 30, 2022 and December 31, 2021: Held-to-maturity debt securities : These debt securities are reported at fair value utilizing level 2 inputs. The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available. The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using internal models. Loans : Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial or mortgage. Each loan category is further segmented into fixed and adjustable-rate interest terms as well as performing and nonperforming categories. The fair value of loans is calculated by discounting scheduled cash flows through the estimated life including prepayment considerations, using estimated market discount rates that reflect the risks inherent in the loan. The fair value approach considers market-driven variables including credit related factors and reflects an “exit price” as defined in ASC Topic 820. Deposit liabilities : The fair value of demand deposits, savings accounts and money market deposits is the amount payable at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for funding of similar remaining maturities. 32 Table of Contents Note 11 – Business Combinations Acquisition of Business Bank of Florida, Corp. On January 3, 2022, the Company completed its acquisition of Business Bank of Florida, Corp., (“BBFC”). Simultaneously, upon completion of the merger of BBFC and the Company, BBFC’s wholly owned subsidiary bank, Florida Business Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Florida Business Bank operated one branch in Melbourne, Florida. As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results. The Company acquired 100 % of the outstanding common stock of BBFC. Under the terms of the definitive agreement, each share of BBFC common stock was converted into the right to receive 0.7997 of a share of Seacoast common stock. (In thousands, except per share data) January 3, 2022 Number of BBFC common shares outstanding 1,112 Per share exchange ratio 0.7997 Number of shares of common stock issued 889 Multiplied by common stock price per share on January 3, 2022 $ 35.39 Value of common stock issued 31,480 Fair value of options converted 497 Total purchase price $ 31,977 The acquisition of BBFC was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations . The Company recognized goodwill of $ 8.0 million for this acquisition that is nondeductible for tax purposes. 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. As part of the BBFC acquisition, 52,432 options were granted to replace outstanding BBFC options. These options had a weighted average exercise price of $ 26.63 and were fully vested upon acquisition. In accordance with ASC Topic 805, Business Combinations , the value of the replacement awards associated with pre-combination service, $ 0.5 million, was considered purchase consideration. (In thousands) Initially Measured January 3, 2022 Assets: Cash $ 38,332 Investment securities 26,011 Loans 121,774 Bank premises and equipment 2,102 Core deposit intangibles 2,621 Goodwill 7,962 Total assets $ 198,802 Liabilities: Deposits 166,326 Other liabilities 499 Total liabilities $ 166,825 33 Table of Contents The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date. January 3, 2022 (In thousands) Book Balance Fair Value Loans: Construction and land development $ 8,677 $ 8,414 Commercial real estate - owner-occupied 45,403 44,564 Commercial real estate - non owner-occupied 53,065 52,034 Residential real estate 5,377 5,421 Commercial and financial 9,376 9,321 Consumer 59 61 PPP loans 1,959 1,959 Total acquired loans $ 123,916 $ 121,774 The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination: (In thousands) January 3, 2022 Book balance of loans at acquisition $ 714 Allowance for credit losses at acquisition ( 15 ) Non-credit related discount ( 48 ) Total PCD loans acquired $ 651 The acquisition of BBFC resulted in the addition of $ 1.8 million in allowance for credit losses, including the $ 15 thousand identified in the table above for PCD loans, and $ 1.8 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition. The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships. Acquisition of Sabal Palm Bancorp, Inc. On January 3, 2022, the Company completed its acquisition of Sabal Palm Bancorp, Inc. (“Sabal Palm”). Simultaneously, upon completion of the merger of Sabal Palm and the Company, Sabal Palm’s wholly owned subsidiary bank, Sabal Palm Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Sabal Palm Bank operated three branches in the Sarasota area. As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results. The Company acquired 100 % of the outstanding common stock of Sabal Palm. Under the terms of the definitive agreement, each share of Sabal Palm common stock was converted into the right to receive 0.2203 of a share of Seacoast common stock. (In thousands, except per share data) January 3, 2022 Number of Sabal Palm common shares outstanding 7,536 Per share exchange ratio 0.2203 Number of shares of common stock issued 1,660 Multiplied by common stock price per share on January 3, 2022 $ 35.39 Value of common stock issued 58,762 Fair value of options converted 3,336 Total purchase price $ 62,098 The acquisition of Sabal Palm was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations . The Company recognized goodwill of $ 26.5 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a 34 Table of Contents 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. As part of the Sabal Palm acquisition, 188,253 options were granted to replace outstanding Sabal Palm options. These options had a weighted average exercise price of $ 17.84 and were fully vested upon acquisition. In accordance with ASC Topic 805, Business Combinations , the value of the replacement awards associated with pre-combination service, $ 3.3 million, was considered purchase consideration. (In thousands) Initially Measured January 3, 2022 Assets: Cash $ 170,609 Time deposits with other banks 6,473 Loans 246,152 Bank premises and equipment 1,745 Core deposit intangibles 5,587 Goodwill 26,489 Other assets 5,189 Total assets $ 462,244 Liabilities: Deposits 395,952 Other liabilities 4,194 Total liabilities $ 400,146 35 Table of Contents The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date. January 3, 2022 (In thousands) Book Balance Fair Value Loans: Construction and land development $ 9,256 $ 9,009 Commercial real estate - owner-occupied 57,690 56,591 Commercial real estate - non owner-occupied 89,153 87,280 Residential real estate 71,469 72,227 Commercial and financial 17,797 17,501 Consumer 233 232 PPP loans 3,312 3,312 Total acquired loans $ 248,910 $ 246,152 The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination: (In thousands) January 3, 2022 Book balance of loans at acquisition $ 3,703 Allowance for credit losses at acquisition ( 37 ) Non-credit related discount ( 663 ) Total PCD loans acquired $ 3,003 The acquisition of Sabal Palm resulted in the addition of $ 3.4 million in allowance for credit losses, including the $ 37 thousand identified in the table above for PCD loans, and $ 3.4 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition. The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships. Acquisition of Legacy Bank of Florida On August 6, 2021, the Company completed its acquisition of Legacy Bank of Florida (“Legacy Bank”). Prior to the acquisition, Legacy Bank operated five branches in Broward and Palm Beach counties. As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results. The Company acquired 100 % of the outstanding common stock of Legacy Bank. Under the terms of the definitive agreement, each share of Legacy Bank common stock was converted into the right to receive 0.1703 of a share of Seacoast common stock. (In thousands, except per share data) August 6, 2021 Number of Legacy Bank common shares outstanding 15,778 Per share exchange ratio 0.1703 Number of shares of common stock issued 2,687 Multiplied by common stock price per share on August 6, 2021 $ 32.19 Value of common stock issued 86,487 Cash paid for fractional shares 7 Fair value of options converted 4,736 Total purchase price $ 91,230 The acquisition of Legacy Bank was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations . The Company recognized goodwill of $ 31.0 million for this acquisition that is nondeductible for tax purposes. 36 Table of Contents 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. These options had a weighted average exercise price of $ 16.70 and were fully vested upon acquisition. In accordance with ASC Topic 805, Business Combinations , the value of the replacement awards associated with pre-combination service, $ 4.7 million, was considered purchase consideration, and the value of the replacement awards associated with post-combination service, $ 0.9 million, was recognized as compensation expense in 2021. (In thousands) Initially Measured August 6, 2021 Assets: Cash $ 98,107 Investment securities 992 Loans 477,215 Bank premises and equipment 2,577 Core deposit intangibles 3,454 Goodwill 30,978 Other assets 15,532 Total assets $ 628,855 Liabilities: Deposits 494,921 Other liabilities 42,705 Total liabilities $ 537,626 37 Table of Contents The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date. August 6, 2021 (In thousands) Book Balance Fair Value Loans: Construction and land development $ 37,558 $ 36,651 Commercial real estate - owner-occupied 35,765 35,363 Commercial real estate - non owner-occupied 241,322 237,091 Residential real estate 71,118 70,541 Commercial and financial 61,274 58,324 Consumer 647 647 PPP loans 38,598 38,598 Total acquired loans $ 486,282 $ 477,215 The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination: (In thousands) August 6, 2021 Book balance of loans at acquisition $ 66,371 Allowance for credit losses at acquisition ( 3,046 ) Non-credit related discount ( 736 ) Total PCD loans acquired $ 62,589 The acquisition of Legacy Bank resulted in the addition of $ 11.2 million in allowance for credit losses, including the $ 3.0 million identified in the table above for PCD loans, and $ 8.2 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition. The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships. Pro-Forma Information 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 September 30, Nine Months Ended September 30, (In thousands, except per share amounts) 2022 2021 2022 2021 Net interest income $ 88,284 $ 79,030 $ 246,453 $ 235,175 Net income 29,237 29,950 87,262 98,700 EPS - basic $ 0.48 $ 0.48 $ 1.42 $ 1.61 EPS - diluted 0.47 0.48 1.41 1.60 Fourth Quarter 2022 Acquisitions Acquisition of Apollo Bancshares, Inc. On October 7, 2022, the Company completed its acquisition of Apollo Bancshares, Inc. (“Apollo”). 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. 38 Table of Contents (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. 39 Table of Contents