What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-02-28 · 432 added, 345 removed, 1568 unchanged (33% of the section changed)

10 unchanged sentences

(2013) issued by COSO.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2020 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification No.

326, Financial Instruments – Credit Losses (ASC 326) .

The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

Basis for Opinions

9 unchanged sentences

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

As permitted, the Company has excluded the operations of Drummond Banking Company acquired during 2022, which is described in Note 17 of the consolidated financial statements, from the scope of management’s report on internal control over financial reporting.

As such, it has also been excluded from the scope of our audit of internal control over financial reporting.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

6 unchanged sentences

Allowance and Provision for Credit Losses on Loans

The allowance for credit losses (the “ACL”) is an accounting estimate of expected credit losses over the contractual life of loans carried at amortized cost as described in Notes 1 and 5 of the consolidated financial statements.

T he Company's loan portfolio, which is measured at amortized cost, is required to be presented at the net amount expected to be collected.

Estimates of expected credit losses for loans are based on historical experience, current conditions and reasonable and supportable forecasts over the expected life of the loans.

The Company estimates expected credit losses for loans using a methodology based on the probability of default (“PD”) and loss given default (“LGD”), which is defined as credit loss incurred when an obligor of the bank defaults.

PDs and LGDs are developed by analyzing the average historical loss migration of loans to default.

The ACL estimation process for loans also applies economic forecast scenarios over a three-year forecast period.

The forecast may use a single scenario or a composite of scenarios.

The allowance for credit losses (the “ACL”) is an accounting estimate of expected credit losses over the contractual term of loans carried at amortized cost as described in Notes 1 and 5 of the consolidated financial statements.

The Company's loan portfolio, which is measured at amortized cost, is required to be presented at the net amount expected to be collected.

Estimates of expected credit losses for loans are based on information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

The Company estimates expected credit losses for loans at the individual loan level using a discounted cash flow methodology for its commercial loans and using a loss rate methodology for its consumer loans.

Expected losses are estimated using a blend of forecast scenarios.

Specifically, the forecast scenarios selected were the “U.S.

Macroeconomic Outlook Baseline” and “Alternative Scenario 3 - Downside - 90th Percentile” scenarios.

The forecasted credit losses also incorporate macroeconomic variables such as changes in expectations indicated by the commercial real estate price index, changes in the housing price index, and changes in the unemployment rate.

The forecasts of future economic conditions are over a period that the Company has 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.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments.

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

Adjustments may be made to baseline reserves based on an assessment of internal and external influences on credit quality not fully reflected in the quantitative components of the allowance model.

These influences may include elements such as changes in concentration, macroeconomic conditions, recent observable asset quality trends, staff turnover, regional market conditions, employment levels and loan growth.

Outcomes in any or all of these factors could differ from the baseline scenario, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions.

These qualitative adjustments are based upon management's assessment of the factors.

We determined that auditing the allowance for credit losses on loans was a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by management throughout the application processes, including the need to involve our valuation services specialists.

The Company may incorporate qualitative adjustments to modeled reserves based on an assessment of internal and external influences on credit quality not fully reflected in the quantitative components of the allowance model.

A significant amount of judgment was required when assessing the conceptual design and statistical methodology of the employed model and whether the model was relevant to the Company’s loan portfolio and suitable for use in the Company’s estimation process, which in turn involved especially complex and subjective judgment.

The Company’s discounted cash flow methodology includes probability of default (“PD”) and loss given default (“LGD”) assumptions that required assessing the conceptual soundness and reasonableness of those assumptions.

We utilized Crowe LLP employed valuation specialists (“Crowe VS”) to evaluate the soundness of the model’s methodology, conceptual design, and applicability to the Company.

Crowe VS also performed procedures to assess the relationships between the Company’s PD and LGD rates and model rates during development.

The principal considerations resulting in our determination included the following:

• Significant auditor judgment in evaluating the selection and application of the reasonable and supportable forecasts of economic variables and reasonableness of other model assumptions.

• Significant auditor judgment and effort were used in evaluating the qualitative adjustments used in the model computation.

• Significant audit effort related to the completeness and accuracy of the high volume of data used to develop assumptions and in the model computation

• Significant auditor effort in evaluating probability-weighted forecast scenarios with PD and LGD assumptions that involved the use of management judgment and a high degree of auditor judgment, including the need to involve Crowe VS.

• Significant audit effort related to testing the completeness and accuracy of internal data used and evaluating the relevance and reliability of proxy loan information.

The primary procedures performed to address the critical audit matter included:

• Testing the effectiveness of management’s internal controls over the Company’s significant model assumptions and judgments, reasonable and supportable forecasts, qualitative adjustments, and information systems.

• Testing the effectiveness of controls over the completeness and accuracy of historical inputs, including loan segmentation, used in the development of the PD method and LGD assumptions, data imputation, use of third-party data, and loan data used in the computation.

• Testing the effectiveness of controls over the Company’s preparation and review of the allowance for credit losses calculation, including the relevance and reliability of data used as the basis for adjustments related to the qualitative factors and the development and reasonableness of qualitative adjustments and mathematical accuracy and appropriateness of the overall calculation.

• With the assistance of our valuation specialists, evaluating the reasonableness of assumptions and judgments related to the PD, LGD and loan segmentation, the conceptual design of the credit losses estimation models, and model assumption sensitivity analysis.

• Evaluating management’s judgments in the selection and application of reasonable and supportable forecasts of economic variables

• Substantively testing management’s process for developing the qualitative factors and assessing reasonableness, relevance and reliability of data used to develop factors, including evaluating management’s judgments and assumptions for reasonableness

• Substantively testing the mathematical accuracy of the PD and LGD methods on a pooled loan level with the assistance of valuation specialists, including the completeness and accuracy of loan data used in the model

• Testing the effectiveness of management’s internal controls over the appropriate application of management’s methodology, including the transition to an individual loan level tool, in accordance with generally accepted accounting principles.

• Testing the effectiveness of controls over the completeness and accuracy of internal data inputs, including loan segmentation data used in the development of PD and LGD assumptions, and the relevance and reliability of third-party data used in the computation.

• Testing the effectiveness of management’s internal controls over the Company’s significant model assumptions and judgments, qualitative adjustments, and information systems.

• Testing the effectiveness of controls over the Company’s preparation and review of the allowance for credit losses calculation, including the reasonableness of management's judgments over the forecasted period and economic scenarios selected.

• With the assistance of Crowe VS, evaluating the reasonableness of assumptions and judgments related to management’s methodology and transition to an individual loan level tool, as well as, the conceptual design of the credit losses estimation models.

• Substantively testing the completeness and accuracy of internal loan level data used, loan segmentation, the relevance and reliability of third party data, and management’s judgments and assumptions for reasonableness.

• Substantive univariate directionality testing with the assistance of Crowe VS and other substantive analytical procedures to test significant assumptions made by management, and testing the process of management’s assessment for the incorporation of qualitative adjustments.

• Evaluating management’s judgments in the selection and application of reasonable and supportable forecasts, and the reasonableness of forecasted economic scenarios provided by a third-party, assisted by Crowe VS.

/s/ Crowe LLP

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Interest on Federal Home Loan Bank (“FHLB”) borrowings

— 1,540 3,010

Interest on subordinated debt 3,056 1,685 2,184

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67,187 71,305 60,335

Securities (losses) gains, net (includes net gains of $ 2.2 million for 2021, net gains of $ 0.2 million for 2020 and net gains of $ 6.2 million for 2019 in other comprehensive income reclassifications)

Securities (losses) gains, net (includes $ 0 for 2022, net gains of $ 2.2 million for 2021 and net gains of $ 0.2 million for 2020 in other comprehensive income reclassifications)

( 1,096 ) ( 578 ) 1,235

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Net Income $ 106,507 $ 124,403 $ 77,764

Per share data

Net income per share of common stock

1 unchanged sentence

Basic 1.67 2.20 1.45

Average common shares outstanding

Average common shares outstanding (in thousands)

Diluted 64,264 57,088 53,930

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Other comprehensive income (loss):

Available-for-sale securities:

Unrealized (losses) gains on available-for-sale securities, net of tax benefit of $ 8.2 million in 2021, tax expense of $ 5.0 million in 2020 and tax expense of $ 5.9 million in 2019

Unrealized (losses) gains on available-for-sale securities, net of tax benefit of $ 57.1 million in 2022, tax benefit of $ 8.2 million in 2021 and tax expense of $ 5.0 million in 2020

$ ( 181,096 ) $ ( 27,377 ) $ 16,628

Reclassification of unrealized losses on securities transferred to available-for-sale upon adoption of new accounting pronouncement, net of tax benefit of $ 154 thousand in 2019

Amortization of unrealized losses on securities transferred to held-to-maturity, net of tax expense of $ 21 thousand, $ 40 thousand, and $ 87 thousand, respectively

Reclassification adjustment for losses (gains) included in net income, net of tax benefit of $ 85 thousand in 2021, tax expense of $ 314 thousand in 2020 and tax expense of $ 95 thousand in 2019

Amortization of unrealized (gains) losses on securities transferred to held-to-maturity, net of tax benefit of $ 7 thousand in 2022, tax expense of $ 21 thousand in 2021, and tax expense of $ 40 thousand in 2020

( 20 ) 86 184

Available-for-sale securities, net of tax $ ( 27,013 ) $ 16,030 $ 17,525

Unrealized losses on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax expense of $ 120 thousand in 2021 and tax expense of $ 42 thousand in 2020

Reclassification adjustment for losses (gains) included in net income, net of tax benefit of $ 85 thousand in 2021 and tax expense of $ 314 thousand in 2020

— 278 ( 782 )

Total other comprehensive income (loss) $ ( 27,364 ) $ 15,905 $ 17,525

Comprehensive Income $ 97,039 $ 93,669 $ 116,264

Unrealized gains (losses) on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax benefit of $ 26 thousand in 2022, tax expense of $ 120 thousand in 2021, and tax expense of $ 42 thousand in 2020

77 ( 351 ) ( 125 )

Total other comprehensive (loss) income $ ( 181,039 ) $ ( 27,364 ) $ 15,905

Comprehensive (Loss) Income $ ( 74,532 ) $ 97,039 $ 93,669

See notes to consolidated financial statements.

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Securities sold under agreements to repurchase, maturing within 30 days 172,029 121,565

Federal Home Loan Bank (“FHLB”) borrowings

Subordinated debt 84,533 71,646

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1,795,808 1,317,730

Accumulated other comprehensive (loss) income, net ( 6,994 ) 20,370

Accumulated other comprehensive loss, net ( 188,033 ) ( 6,994 )

Total Shareholders' Equity $ 1,607,775 $ 1,310,736

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Losses on disposition of fixed assets 1,394 817 791

Bank owned life insurance death benefits — — ( 956 )

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

Net increase in other assets ( 42,437 ) ( 35,555 ) ( 5,614 )

Net increase (decrease) in other liabilities 28,883 18,776 ( 4,206 )

Net decrease (increase) in other assets 508 ( 42,437 ) ( 35,555 )

Net increase in other liabilities 22,042 28,883 18,776

Net Cash Provided by Operating Activities 195,859 154,572 60,652

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Redemption of bank owned life insurance 25,782 — —

Net cash from bank acquisitions 98,100 71,965 —

Purchase of bank owned life insurance ( 25,000 ) ( 60,000 ) —

Net cash from bank acquisitions 281,747 98,100 71,965

Additions to bank premises and equipment ( 12,645 ) ( 4,327 ) ( 1,587 )

3 unchanged sentences

Cash Flows From Financing Activities

Net increase in deposits 640,108 844,405 407,513

Net increase (decrease) in repurchase agreements 1,956 33,488 ( 128,202 )

Net (decrease) increase in deposits ( 384,403 ) 640,108 844,405

Net increase in repurchase agreements 50,464 1,956 33,488

Net decrease in FHLB borrowings with original maturities of three months or less ( 62,500 ) — ( 235,000 )

3 unchanged sentences

Dividends paid ( 41,242 ) ( 22,506 ) —

Net Cash Provided by Financing Activities 591,580 561,407 212,176

Net increase in cash and cash equivalents 333,641 279,557 8,580

Net Cash (Used in) Provided by Financing Activities ( 366,773 ) 591,580 561,407

Net (decrease) increase in cash and cash equivalents ( 535,789 ) 333,641 279,557

Cash and Cash Equivalents at Beginning of Year 737,729 404,088 124,531

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Cash paid during the period for taxes 29,591 30,887 27,712

Recognition of operating lease right-of-use assets, other than through bank acquisition 12,459 2,095 30,301

Recognition of operating lease liabilities, other than through bank acquisition 12,459 2,095 34,627

Recognition of operating lease right-of-use assets, other than through bank acquisition, net of terminations 3,370 12,459 2,095

Recognition of operating lease liabilities, other than through bank acquisition, net of terminations 3,370 12,459 2,095

Supplemental disclosure of non-cash investing activities:

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

Transfer of debt securities from held-to-maturity to available-for-sale — — 52,796

Unsettled sales of debt securities available-for-sale — 17,147 —

1 unchanged sentence

Transfer from bank premises to other real estate owned 1,674 3,318 1,289

Transfer from loans held for investment to loans held for sale — — 801

1 See "Note 17 - Business Combinations" for common stock issued in business combinations.

See notes to consolidated financial statements.

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Common stock issued for stock options 62 6 760 — — — 766

Other — — 104 — — — 104

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

Issuance of common stock, pursuant to acquisitions 3,163 316 61,836 — — — 62,152

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

Comprehensive income — — — 77,764 — 15,905 93,669

Comprehensive income (loss) — — — 124,403 — ( 27,364 ) 97,039

Stock based compensation expense 23 — 8,685 — — — 8,685

1 unchanged sentence

Common stock issued for stock options 384 38 7,298 — — — 7,336

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

Issuance of common stock, pursuant to acquisitions 3,163 316 61,836 — — — 62,152

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 ($ 0.39 per share)

— — — ( 22,506 ) — — ( 22,506 )

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

Comprehensive income — — — 124,403 — ( 27,364 ) 97,039

Comprehensive income (loss) — — — 106,507 — ( 181,039 ) ( 74,532 )

Stock based compensation expense 21 — 11,155 — — — 11,155

1 unchanged sentence

Common stock issued for stock options 522 52 5,864 — — — 5,916

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

Issuance of common stock, pursuant to acquisitions 12,204 1,220 396,016 — — — 397,236

Conversion of options, pursuant to acquisition — — 1,013 — — — 1,013

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Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) is a single segment financial holding company with one operating subsidiary bank, Seacoast National Bank (“Seacoast Bank”).

The Company provides integrated financial services including commercial and consumer banking, wealth management, mortgage services to customers at more than 50 full-service branches across Florida, and through advanced mobile and online banking solutions.

The Company provides integrated financial services including commercial and consumer banking, wealth management, and mortgage and insurance services to customers at 78 full-service branches across Florida, and through advanced mobile and online banking solutions.

The consolidated financial statements include the accounts of Seacoast and all its majority-owned subsidiaries but exclude trusts created for the issuance of trust preferred securities.

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Credit losses on securities:

For securities classified as held-to-maturity, management must estimate expected credit losses over the remaining expected life and recognize this estimate as an allowance for credit losses.

Debt securities that are available-for-sale are analyzed quarterly for credit losses.

The analysis is performed on an individual security basis for all securities where fair value has declined below amortized cost.

Fair value is based upon pricing obtained from third party pricing services.

However, on occasion pricing provided by the pricing services may not be consistent with other observed prices in the market for similar securities.

Using observable market factors, including interest rate and yield curves, volatilities, prepayment speeds, loss severities and default rates, the Company may at times validate the observed prices using a discounted cash flow model and using the observed prices for similar securities to determine the fair value of its securities.

For securities classified as held-to-maturity, management estimates expected credit losses over the remaining expected life and recognizes this estimate as an allowance for credit losses.

Debt securities that are available-for-sale are considered impaired if the fair value is less than amortized cost.

Impairments are analyzed at an individual security level on a quarterly basis and both quantitative and qualitative assessments are utilized to determine if a security has a credit loss.

Qualitative assessments consider a range of factors including:

percent decline in fair value, rating downgrades, subordination, duration, amortized loan-to-value, and the ability of the issuers to pay all amounts due in accordance with the contractual terms.

Quantitative assessments are based on a discounted cash flow analysis, which includes evaluating the timing and amount of the expected cash flows.

If any portion of the decline in fair value is related to credit, then the credit loss is recognized as an allowance for credit loss and the noncredit portion is recognized in other comprehensive income.

Both quantitative and qualitative assessments are utilized to determine if a security has a credit loss.

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Interest income is recognized on an accrual basis.

As a part of business acquisitions, the Company acquires loans that are recorded at fair value on the acquisition date.

Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.

Any losses after acquisition are recognized through the allowance for credit losses.

Loans acquired through business acquisitions are recorded at fair value on the acquisition date.

Loans that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination are classified as purchased credit deteriorated (“PCD”).

Acquired loans that do not meet the definition of PCD are classified by the Company as acquired Non-PCD.

An allowance for expected credit losses on PCD loans is recorded at the date of acquisition through an adjustment to the loans' amortized cost basis.

In contrast, expected credit losses on loans not considered PCD are recognized through the provision for credit losses in net income at the date of acquisition.

The accrual of interest is generally discontinued on loans, except consumer loans, that become 90 days past due as to principal or interest unless collection of both principal and interest is assured by way of collateralization, guarantees or other security.

When interest accruals are discontinued, unpaid interest is reversed against interest income.

Consumer loans that become 120 days past due are generally charged off.

When borrowers demonstrate over an extended period the ability to repay a loan in accordance with the contractual terms of a loan classified as nonaccrual, the loan is returned to accrual status.

Interest income on nonaccrual loans is either recorded using the cash basis method of accounting or recognized after the principal has been reduced to zero, depending on the type of loan.

In response to the COVID-19 pandemic beginning in early 2020 and effective through 2021, rules defined in the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and a joint statement issued by federal regulators in consultation with FASB provided financial institutions with the option not to apply troubled debt restructure (“TDR”) accounting to eligible loan modifications provided to borrowers affected by the economic impact of the COVID-19 pandemic.

Outside of this guidance, a loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulty, is considered to be a TDR.

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

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

It is the Company's practice to ensure that the charge-off policy meets or exceeds regulatory minimums.

Losses on unsecured consumer loans are recognized at 90 days past due, compared to the regulatory loss criteria of 120 days.

In compliance with Federal Financial Institution Examination Council guidelines, secured consumer loans, including residential real estate, are typically charged-off or charged down between 120 and 180 days past due, depending on the collateral type.

Commercial loans and real estate loans are typically placed on nonaccrual status when principal or interest is past due for 90 days or more, unless the loan is both secured by collateral having realizable value sufficient to discharge the debt in-full and the loan is in process of collection.

Secured loans may be charged-down to the estimated value of the collateral with previously accrued unpaid interest

reversed against interest income.

Subsequent charge-offs may be required as a result of changes in the market value of collateral or other repayment prospects.

Initial charge-off amounts are based on valuation estimates derived from appraisals, broker price opinions, or other market information.

Generally, new appraisals are not received until the foreclosure process is completed;

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

Expected credit losses on loans not considered PCD are recognized through the provision for credit losses when the initial allowance is recorded.

A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulty, is considered to be a troubled debt restructuring (“TDR”).

The allowance for credit losses policy discusses the measurement of allowance for TDRs.

Allowance for credit losses on loans:

On January 1, 2020, the Company adopted Accounting Standards Codification No.

326, Financial Instruments - Credit Losses (ASC 326), which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology.

The Company adopted ASC Topic 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures.

Results for the reporting period beginning January 1, 2020 are presented under ASC Topic 326, while prior amounts continue to be reported in accordance with previously applicable GAAP.

ASC Topic 326 introduced new definitions and criteria for categorizing purchased loans.

Loans that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination are classified as purchased credit ("PCD").

Acquired loans which do not meet the definition of PCD are classified by the Company as acquired Non-PCD.

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

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

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

The allowance for credit losses is measured on a collective basis when similar risk characteristics exist.

For loans analyzed on a collective basis, the Company has developed an allowance model based on an analysis of the probability of default (“PD”) and loss given default (“LGD”) to determine an expected loss by loan segment.

PDs and LGDs are developed by analyzing the average historical loss migration of loans to default.

The allowance for credit losses represents management's best estimate of expected future credit losses related to the loan portfolio at the balance sheet date.

The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount to be collected on loans.

Loan balances deemed uncollectible are charged off against the allowance for credit losses and recoveries are credited to the allowance.

In order to adjust the allowance to the current estimate of expected credit losses, charges or credits to the provision for credit losses are reflected in the Consolidated Statements of Income.

The Company excludes accrued interest on loans from its determination of allowance.

The allowance estimation process also applies an economic forecast scenario over a three year forecast period.

Portfolio segments represent the level at which the Company develops and documents its methodology for determining its allowance for credit losses.

See Note 4 - Loans, for a description of each of the segments, which are disaggregated by similar risk characteristics such as customer and/or collateral type.

The allowance for credit losses is measured on a collective basis when similar risk characteristics exist.

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 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.

The forecast may utilize one scenario or a composite of scenarios based on management's judgment and expectations around the current and future macroeconomic outlook.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

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

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

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

Adjustments may be made to baseline reserves for some of the loan pools based on an assessment of internal and external influences on credit quality not fully reflected in the quantitative components of the allowance model.

In the implementation of CECL at January 1, 2020 and through June 30, 2022, the Company utilized a top-down allowance model based on an analysis of the probability of default (“PD”) and loss given default (“LGD”) to determine an expected loss by loan segment.

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

The new tool being utilized produces more granular results of expected loan loss, incorporates more extensive historical loss data, and allows for a more efficient process.

This change did not result in a material impact to the Company’s financial statements.

Adjustments may be made to baseline reserves based on an assessment of internal and external influences on credit quality not fully reflected in the quantitative components of the allowance model.

Based upon management's assessments of these factors, the Company may apply qualitative adjustments to the allowance.

1 unchanged sentence

Loans evaluated individually are not also included in the collective evaluation.

For loans that are individually evaluated, the allowance is determined through review of data specific to the borrower and the related collateral, if any.

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

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

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

The allowance for PCD loans is determined at the time of acquisition as the estimated expected credit loss of the outstanding balance or par value, based on the methodologies described previously for loans.

The allowance recognized at acquisition is added to the acquisition date purchase price to determine the asset’s amortized cost basis.

The allowance for credit losses on TDRs is measured using the fair value of the collateral method when the repayment is expected to be provided substantially through the operation or sale of the collateral.

Otherwise, when the value of a concession can only be measured using the discounted cash flow method, the allowance for credit losses is determined by discounting the expected future cash flows at the original interest rate of the loan.

It is the Company's practice to ensure that the charge-off policy meets or exceeds regulatory requirements.

Losses on unsecured consumer loans are recognized at 90 days past due, compared to the regulatory loss criteria of 120 days.

In compliance with Federal Financial Institution Examination Council guidelines, secured consumer loans, including residential real estate, are typically charged off or charged down between 120 and 180 days past due, depending on the collateral type.

Secured loans may be charged down to the estimated value of the collateral with previously accrued unpaid interest reversed against interest income.

Subsequent charge-offs may be required as a result of changes in the market value of collateral or other repayment prospects.

Initial charge-off amounts are based on valuation estimates derived from appraisals or other market information.

Generally, new appraisals are not received until the foreclosure process is completed;

Derivative Instruments and Hedging Activities :

4 unchanged sentences

When hedge accounting on a cash flow hedge is discontinued, any subsequent changes in fair value of the derivative are recognized in earnings.

The cumulative unrealized gain or loss related to a discontinuing cash flow hedge continues to be reported in Accumulated Other Comprehensive Income (“AOCI”) and is subsequently reclassified into earnings in the same period in which the hedged transactions affects earnings, unless it is probable that the forecasted transaction will not occur by the end of the originally specified time period, in which case the cumulative unrealized gain or loss in AOCI is reclassified into earnings immediately.

probable that the forecasted transaction will not occur by the end of the originally specified time period, in which case the cumulative unrealized gain or loss in AOCI is reclassified into earnings immediately.

Cash flows resulting from derivative financial instruments that are accounted for as hedges are classified in the cash flow statement in the same category as the cash flows from the hedged items.

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When identical assets and liabilities are not traded in active markets, the Company looks to market observable data for similar assets and liabilities.

Nevertheless, certain assets and liabilities are not actively traded in observable markets and the Company must use alternative valuation techniques to derive a fair value measurement.

Certain assets and liabilities are not actively traded in observable markets and the Company must use alternative valuation techniques to derive a fair value measurement.

Bank Premises and Equipment:

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buildings - 25 - 40 years, leasehold improvements - 5 - 25 years, furniture and equipment - 3 - 12 years.

Leasehold improvements typically amortize over the shorter of lease terms or estimated useful life.

Premises and equipment and other long-term assets

are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows.

If impaired, the assets are written down to fair value with a corresponding impact to noninterest expense.

Leasehold improvements amortize over the shorter of lease terms or estimated useful life.

Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows.

If impaired, the assets are written down to fair value with a corresponding increase to noninterest expense.

Other Real Estate Owned:

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Any valuation adjustments required at the date of transfer are charged to the allowance for credit losses.

Subsequently, unrealized losses and realized gains and losses are included in other noninterest expense.

Subsequently, unrealized

losses and realized gains and losses are included in other noninterest expense.

Operating results from OREO are recorded in other noninterest expense.

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Intangible Assets.

The Company’s intangible assets consist of goodwill, core deposit intangibles (CDIs) and mortgage servicing rights.

The Company’s intangible assets consist of goodwill, core deposit intangibles (CDIs), customer relationship intangibles and loan servicing rights.

Goodwill results from business combinations and represents the difference between the purchase price and the fair value of net assets acquired.

Goodwill may be adjusted for up to one year from the acquisition date in the event new information is obtained which, if known at the date of acquisitions would have impacted the fair value of the acquired assets and liabilities.

Goodwill may be adjusted for up to one year from the acquisition date in the event new information is obtained which, if known at the date of the acquisition would have impacted the fair value of the acquired assets and liabilities.

Goodwill is considered to have an indefinite useful life and is not amortized, but rather tested for impairment annually in the fourth quarter, or more often if circumstances arise that may indicate risk of impairment.

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The Company recognizes CDIs that result from either whole bank acquisitions or branch acquisitions.

They are initially measured at fair value and then amortized over periods ranging from six to eight years on a straight line basis.

The Company evaluates CDIs for impairment annually, or more often if circumstances arise that may indicate risk of impairment.

If impaired, the CDI is written down with a corresponding impact to noninterest expense.

They are initially measured at fair value and then amortized over periods ranging from six to eight years generally on an accelerated basis.

Customer relationship intangibles are measured at fair value and amortized on a straight-line basis over ten years .

The Company evaluates other identifiable intangibles for impairment annually, or more often if circumstances arise that may indicate risk of impairment.

If impaired, the intangible asset is written down with a corresponding increase to noninterest expense.

Bank Owned Life Insurance (BOLI):

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SBIC investments are held at cost less impairment, if any.

Income from SBIC investments will vary amongst periods and is recognized in earnings.

Income from SBIC investments will vary amongst periods and is recognized in noninterest income.

Seacoast Bank is a member of the Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) systems.

Members are required to own a certain amount of FHLB and FRB stock based on the level of borrowings and other factors, and may invest in additional amounts.

The FHLB and FRB stock are accounted for at cost less impairment, if any.

Both cash and stock dividends are recognized in earnings.

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Service fees may be assessed monthly, quarterly, or annually;

however, the account agreements to which these fees relate can be canceled at any time by Seacoast and/or the customer.

however, the account agreements to which these fees relate can be

canceled at any time by Seacoast and/or the customer.

Therefore, the contract term is considered a single day (a day-to-day contract).

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The stock option plans are accounted for under ASC Topic 718 - Compensation - Stock Compensation and the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with market assumptions.

This amount is amortized on a straight-line basis over the vesting period, generally 5 years.

This amount is amortized on a straight-line basis over the vesting period, generally five years .

For restricted stock awards, which generally vest based on continued service with the Company, the deferred compensation is measured as the fair value of the shares on the date of grant, and the deferred compensation is amortized as salaries and employee benefits in accordance with the applicable vesting schedule, generally straight-line over three years .

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The effect on deferred tax assets and liabilities of a change in rates is recognized as income or expense in the period in which the change occurs.

Recently Issued Accounting Standards

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 Disclo sures.

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 Company adopted the standard effective January 1, 2023, and the adoption did not have a material impact to the consolidated financial statements.

Note 2 - Earnings Per Share

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

Diluted earnings per share are based on the weighted-average number of common shares outstanding during each period, plus common share equivalents calculated for stock options and performance restricted stock outstanding using the treasury stock method.

In 2021 no options to purchase shares of the Company's common stock were antidilutive.

In 2020 and 2019, options to purchase 508,000 , and 491,000 shares, respectively, were antidilutive and accordingly were excluded in determining diluted earnings per share.

Diluted earnings per share are based on the weighted-average number of common shares outstanding during each period, plus common share equivalents, calculated for share-based awards outstanding using the treasury stock method.

In 2022 and 2020, options to purchase 1,505 and 508,000 shares of the Company's common stock, respectively, were antidilutive and accordingly were excluded in determining diluted earnings per share.

In 2021, no options were antidilutive.

For the Year Ended December 31,

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Total weighted average common stock outstanding 63,707 56,586 53,502

Dilutive effect of employee restricted stock and stock options (See “Note 10 - Employee Benefits and Stock Compensation”)

Dilutive effect of share-based awards outstanding

Total weighted average diluted stock outstanding 64,264 57,088 53,930

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Note 3 - Securities

The amortized cost, gross unrealized gains and losses and fair value of available-for-sale and held-to-maturity securities at December 31, 2021 and December 31, 2020 are summarized as follows:

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

December 31, 2022

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Obligations of state and political subdivisions 29,350 122 ( 1,731 ) 27,741

Other debt securities 22,640 197 ( 427 ) 22,410

Totals $ 2,119,303 $ 1,101 $ ( 248,662 ) $ 1,871,742

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

Debt securities with a fair value of $ 102.1 million were sold during 2021, with gross gains of $ 0.3 million and gross losses of $ 0.6 million.

During 2022, debt securities with a fair value of $ 515.2 million obtained in bank acquisitions were sold.

No gain or loss was recognized on these sales, and there were no other sales of securities in 2022.

During 2021, debt securities with a fair value of $ 102.1 million were sold with gross gains of $ 0.3 million and gross losses of $ 0.6 million.

Debt securities with a fair value of $ 96.7 million were sold during 2020, with gross gains of $ 2.4 million and gross losses of $ 1.3 million.

Also included in “Securities gains (losses) net” is a decrease of $ 0.2 million in 2021 and increases of $ 0.1 million and $ 0.2 million in 2020 and 2019, respectively, in the value of an investment in shares of a mutual fund that invests in CRA-qualified debt securities.

Also included in “Securities gains (losses) net” are decreases of $ 1.1 million and $ 0.2 million in 2022 and 2021, respectively, and an increase of $ 0.1 million in 2020 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.

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.

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Collateralized loan obligations — — 313,155 302,904

Other debt securities — — 22,640 22,410

Totals $ 747,408 $ 617,741 $ 2,119,303 $ 1,871,742

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Obligations of state and political subdivisions 23,804 ( 1,656 ) 425 ( 75 ) 24,229 ( 1,731 )

Other debt securities 11,459 ( 427 ) — — 11,459 ( 427 )

Totals $ 1,058,560 $ ( 73,965 ) $ 753,962 $ ( 174,697 ) $ 1,812,522 $ ( 248,662 )

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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 )

At December 31, 2021, the Company had unrealized losses of $ 20.3 million on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $ 967.8 million.

At December 31, 2022, the Company had unrealized losses of $ 223.1 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.

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At December 31, 2022, the Company had $ 12.8 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of $ 155.7 million.

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

The securities have average credit support of 24 %.

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

At December 31, 2021, the Company had $ 0.1 million of unrealized losses in uncapped 3-month LIBOR floating rate collateralized loan obligations (“CLOs”) having a fair value of $ 132.7 million.

At December 31, 2022, the Company had $ 10.3 million of unrealized losses in floating rate collateralized loan obligations (“CLOs”) having a fair value of $ 302.9 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.

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

At December 31, 2022, the Company had $ 1.7 million of unrealized losses on municipal securities having a fair value of $ 24.2 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 December 31, 2022, no allowance for credit losses has been recorded.

At December 31, 2022, the Company had $ 0.4 million of unrealized losses on floating rate student loan asset-backed securities having a fair value of $ 11.5 million.

These securities were issued under the U.S.

Department of Education’s Federal Family Education Loan program, which generally provides a minimum of 97% U.S.

Department of Education guarantee of principal.

These securities also have added credit enhancement through over-collateralization and have an average credit support of 8 %.

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

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

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

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.

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 December 31, 2022, no allowance for credit losses has been recorded.

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Under the current conversion ratio that became effective December 29, 2022, the Company would receive 1.5991 shares of Class A stock for each share of Class B stock for a total of 18,117 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.

The ownership of Visa stock is related to prior ownership in Visa's network, while Visa operated as a cooperative.

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

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• 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, non-farm residential property, and various commercial purpose properties where the primary source of repayment is from proceeds of the sale, refinancing or permanent financing of the property.

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:

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

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

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

• Commercial and financial:

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

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

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

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

The amortized cost basis of loans at December 31, 2021 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 December 31, 2020, the amortized cost basis included net deferred costs of $ 22.6 million on non-PPP portfolio loans and net deferred fees of $ 9.5 million on PPP loans.

The amortized cost basis of loans at December 31, 2022 and 2021 included net deferred costs of $ 35.1 million and $ 28.6 million, respectively.

At December 31, 2022, the remaining fair value adjustments on acquired loans were $ 97.7 million, or 4.3 % of the outstanding acquired loan balances, compared to $ 23.1 million, or 2.3 % of the acquired loan balances at December 31, 2021.

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

Accrued interest receivable is included within Other Assets and was $ 14.7 million and $ 25.8 million at December 31, 2021 and December 31, 2020, respectively.

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 $ 28.2 million and $ 14.7 million at December 31, 2022 and 2021, respectively.

Loans to directors and executive officers totaled $ 0.4 million and $ 0.6 million at December 31, 2022 and 2021, respectively.

Two new loans were originated to directors or officers in 2021.

Two new loans were originated to officers or directors in 2022.

The following table presents the status of net loan balances as of December 31, 2022 and December 31, 2021.

Loans on short-term payment deferral at the reporting date are reported as current.

December 31, 2022

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Paycheck Protection Program 1,099 33 — 342 — 1,474

69,434 — — 69 — 69,503

Total Portfolio Loans $ 5,924,031 $ 2,787 $ 942 $ 783 $ 15,650 $ 5,944,193

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Paycheck Protection Program 3,116 — — — — 3,116

21,567 — — 37 — 21,604

Total Acquired Non-PCD Loans $ 1,958,490 $ 3,104 $ 1,000 $ 525 $ 2,630 $ 1,965,749

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Total Loans $ 8,104,803 $ 6,929 $ 2,301 $ 1,848 $ 28,843 $ 8,144,724

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.

December 31, 2021

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Substandard Impaired — 196 4,561 3,694 1,371 1,520 128 11,470

— — — — — — 20 20

Doubtful — — — — — — — —

Total $ 341,356 $ 196,831 $ 104,238 $ 75,757 $ 42,389 $ 60,874 $ 247,911 $ 1,069,356

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Substandard Impaired — 5,460 9,968 4,288 6,782 14,363 3,073 43,934

— — — — — — 20 20

Doubtful — — — — — — — —

Total $ 1,563,032 $ 745,584 $ 751,942 $ 581,648 $ 423,022 $ 1,181,217 $ 678,584 $ 5,925,029

1 Loans classified as doubtful were fully reserved as of December 31, 2020.

Loans Modified in Connection with COVID-19 Pandemic

The CARES Act, which was signed into law on March 27, 2020 and amended by the Consolidated Appropriations Act on December 27, 2020, encouraged financial institutions to practice prudent efforts to work with borrowers financially impacted by the COVID-19 pandemic by providing an option to exclude from TDR consideration certain loan modifications that might otherwise be categorized as TDRs under ASC 310-40.

This option was available for modifications that were deemed to be COVID-related, where the borrower was not more than 30 days past due on December 31, 2019, and the modification was

executed between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency.

Federal banking regulators issued similar guidance that also allowed lenders to conclude that short-term modifications for borrowers affected by the pandemic should not be considered TDRs if the borrower was current at the time of modification.

Seacoast provided financially impacted borrowers with loan accommodations, primarily consisting of payment deferrals of up to six months.

At its peak on June 30, 2020, loans on deferral represented $ 1.1 billion, or 21 % of total non-PPP loans.

In the second half of 2020, the large majority of these borrowers successfully resumed making contractual payments, and the level of loans with accommodations decreased to $ 74.1 million, or 1 % of total non-PPP loans at December 31, 2020, and to $ 1.2 million, or 0.02 % of total non-PPP loans as of December 31, 2021.

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.

The following table presents loans that were modified in a troubled debt restructuring during the years ended:

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

At December 31, 2021:

Construction and land development — $ — $ —

Commercial real estate - owner-occupied — — —

Commercial real estate - non owner-occupied — — —

Residential real estate 5 261 261

Commercial and financial 3 457 457

Consumer 4 84 84

Totals 12 $ 802 $ 802

At December 31, 2020:

Construction and land development — $ — $ —

Commercial real estate - owner-occupied — — —

Commercial real estate - non owner-occupied

Residential real estate 2 150 150

Commercial and financial 4 437 437

Consumer 4 112 112

Totals 10 $ 699 $ 699

At December 31, 2019:

Construction and land development — $ — $ —

Commercial real estate 2 2,166 2,166

Commercial real estate - non owner-occupied — — —

Residential real estate 3 1,193 1,193

Commercial and financial 3 1,326 1,326

Consumer 1 19 19

Totals 9 $ 4,704 $ 4,704

The TDRs described above resulted in a specific allowance for credit losses of $ 0.2 million as of December 31, 2021, and $ 0.2 million in specific allowance for credit losses as of December 31, 2020.

During the year ended December 31, 2021 there

were three defaults totaling $ 0.2 million on loans that had been modified in TDRs within the preceding twelve months.

During the year ended December 31, 2020, there were no defaults on loans that had been modified in TDRs within the preceding twelve months.

The Company’s TDR concessions granted to certain borrowers 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.

The Company typically does not provide forgiveness of principal as a concession.

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.

There were nine loans totaling $ 0.9 million modified in TDRs in 2022, 12 loans totaling $ 0.8 million in 2021, and 10 loans totaling $ 0.7 million in 2020.

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

During the year ended December 31, 2022, there were three defaults totaling $ 41 thousand on loans that had been modified in TDRs within the preceding twelve months compared to three defaults totaling $ 0.2 million in 2021.

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, $ 16 thousand, $ 0.1 million, and $ 0.1 million for the years ended December 31, 2021, 2020, and 2019, respectively, was included in interest income and represents the change in present value attributable to the passage of time.

For loans measured based on the present value of expected future cash flows, $ 37 thousand, $ 16 thousand and $ 0.1 million for the years ended December 31, 2022, 2021, and 2020, respectively, was included in interest income and represents the change in present value attributable to the passage of time.

Note 5 - Allowance for Credit Losses

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Consumer 2,813 1,911 8,834 ( 1,415 ) 733 ( 7 ) 12,869

Paycheck Protection Program — — — — — — —

Total $ 83,315 $ 5,275 $ 26,183 $ ( 2,911 ) $ 2,070 $ ( 37 ) $ 113,895

2 unchanged sentences

(In thousands) Beginning

Balance Impact of Adoption of ASC 326 Initial Allowance on PCD Loans Acquired During the Period Provision

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Losses Charge-

Offs Recoveries TDR

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Consumer 3,489 — ( 638 ) ( 727 ) 697 ( 8 ) 2,813

Paycheck Protection Program — — — — — — — —

Total $ 92,733 $ 3,046 $ ( 9,421 ) $ ( 6,098 ) $ 3,071 $ ( 16 ) $ 83,315

1 In addition, the Company recorded a $ 0.4 million provision to establish a valuation allowance on accrued interest receivable.

For the Year Ended

1 unchanged sentence

(In thousands) Beginning

Balance Provision

Losses Charge-

Balance Impact of Adoption of ASC 326 Initial Allowance on PCD Loans Acquired During the Period Provision

Offs Recoveries TDR

1 unchanged sentence

Construction and land development $ 1,842 $ 1,479 $ 87 $ 1,399 $ — $ 114 $ ( 1 ) $ 4,920

Commercial real estate 11,112 1,677 ( 248 ) 744 ( 61 ) 13,224

Commercial real estate - owner occupied 5,361 80 1,161 3,632 ( 310 ) 18 ( 74 ) 9,868

Commercial real estate - non-owner occupied 7,863 9,341 2,236 18,966 ( 177 ) 37 — 38,266

Residential real estate 7,667 5,787 124 3,840 ( 240 ) 350 ( 28 ) 17,500

2 unchanged sentences

Total $ 35,154 $ 21,226 $ 6,279 $ 37,779 $ ( 9,842 ) $ 2,251 $ ( 114 ) $ 92,733

Forecast data is sourced primarily from Moody’s Analytics, a firm widely recognized for its research, analysis, and economic

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

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

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

As of December 31, 2021, the Company utilized Moody’s most recent “U.S.

Macroeconomic Outlook Baseline” scenario and considered the uncertainty associated with the assumptions in the Baseline scenario, including the potential for recurring COVID-19 infections, including from variants, actions contemplated by the Federal Reserve to address inflation through changes in monetary policy, and the resulting potential impact on the progress of the economic recovery.

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

In the Construction and Land Development segment, the decrease in reserves during the year reflects lower loan balances and improved economic variables relating to residential real estate and consumer confidence.

1 In addition, the Company recorded a $ 0.4 million provision to establish a valuation allowance on accrued interest receivable.

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

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.

The new tool being utilized produces more granular results of expected loan loss, allows for greater differentiation and a more efficient process.

This change did not result in a material impact to the Company’s financial statements.

As of December 31, 2022 and 2021, 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 for the 2022 analysis the 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.

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 year ended December 31, 2022.

In the Construction and Land Development segment, the increase in the allowance during the year is primarily attributed to higher loan balances.

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

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

In the Commercial Real Estate - Owner-Occupied segment, increases in the allowance resulting from loan growth were offset by the impact of improved economic variables primarily relating to unemployment.

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

The decrease is partially offset by increases due to loan growth.

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

In the Commercial Real Estate - Non Owner-Occupied segment, the decrease in reserves reflects improved economic forecast variables including lower unemployment, partially offset by higher loan balances.

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

In the Commercial Real Estate - Non Owner-Occupied segment, the increase in the allowance reflects higher loan balances, partially offset by the impact of transitioning from a portfolio level estimate to a discounted cash flow approach, utilizing macroeconomic variables specific to the loan segment.

Repayment is often dependent upon rental income from the successful

operation of the underlying property.

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

1 unchanged sentence

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

The decrease in reserves reflects the impact of improved economic forecast variables including lower unemployment partially offset by higher loan balances.

The increase in the allowance reflects both higher loan balances and 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, borrower FICO score, lien position, loan to value ratios, and loan seasoning.

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

The increase in reserves is attributed to higher loan balances partially offset by improved economic variables primarily relating to unemployment.

The decrease in reserves is attributed to the transition from a portfolio level estimate to a discounted cash flow tool, utilizing macroeconomic variables specific to the loan segment.

The decrease was partially offset by the impact of higher loan balances.

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

1 unchanged sentence

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

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

The increase in the reserve during the year reflects higher loan balances and an increasing likelihood of economic recession reflected within the forecast.

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

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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.

The weighted average maturity was 6.7 years at December 31, 2021 and 7.5 years at December 31, 2020.

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

Interest Rate Floors Designated as Cash Flow Hedges

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

As of December 31, 2021 and 2020, the interest rate floors had a fair value of $ 0.3 million and $ 1.0 million, respectively, and are recorded in Other Assets in the consolidated balance sheet.

For the years ended December 31, 2021 and 2020, the Company recognized losses through other comprehensive income of $ 0.7 million and $ 0.2 million, respectively, and reclassified $ 0.2 million and $ 18 thousand, respectively, out of accumulated other comprehensive income and into interest income.

As of December 31, 2022 and 2021, the interest rate floors had a fair value of $ 2 thousand and $ 0.3 million, respectively, and are recorded in Other Assets in the consolidated balance sheet.

For the years ended December 31, 2022 and 2021, the Company recognized losses through other comprehensive income of $ 0.3 million and $ 0.7 million, respectively, and reclassified $ 0.4 million and $ 0.2 million, respectively, out of accumulated other comprehensive income and into interest income.

Over the next 12 months the Company expects to reclassify $ 0.5 million from accumulated other comprehensive income into interest income related to these agreements.

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Total $ 480,319 $ 252,154 $ 221,176

The Company performs an analysis for goodwill impairment on an annual basis in the fourth quarter.

Based on the analysis performed, the Company has concluded goodwill was not impaired during the periods presented.

Acquired intangible assets consist of core deposit intangibles (“CDI”), which are intangible assets arising from the purchase of deposits separately or from bank acquisitions.

The Company performs an analysis for goodwill impairment annually in the fourth quarter or more frequently as considered necessary.

The Company performed a qualitative goodwill assessment in the fourth quarter of 2022, and concluded that a quantitative goodwill impairment test was not necessary as it was not more likely-than-not that the fair value of the Company’s reporting unit was below the carrying amount.

Based on the analyses performed, the Company concluded that goodwill was not impaired during the periods presented.

Acquired intangible assets primarily consist of core deposit intangibles (“CDI”), which are intangible assets arising from the purchase of deposits separately or from bank acquisitions.

The change in balance for CDI is as follows:

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Core deposit intangible $ 97,778 $ ( 26,493 ) $ 41,596 $ ( 28,598 )

The annual amortization expense for the Company's CDI determined using the straight line method for each of the five years subsequent to December 31, 2021 is $ 4.8 million, $ 4.1 million, $ 1.5 million, $ 1.1 million and $ 0.9 million, respectively.

The annual amortization expense for the Company's CDI for each of the five years subsequent to December 31, 2022 is $ 17.7 million, $ 13.4 million, $ 11.3 million, $ 9.4 million and $ 7.7 million, respectively.

Certain customer relationships were acquired through the acquisition of Drummond and its insurance agency subsidiary.

The value assigned to these relationships, $ 2.6 million, is being amortized on a straight line basis over 10 years.

The carrying value of servicing rights retained from the sale of the guaranteed portion of Small Business Administration (“SBA”) loans totaled $ 1.7 million and $ 1.8 million at December 31, 2022 and December 31, 2021, respectively.

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government-sponsored entities $ 184,967 $ 134,577 $ 137,268

The Company has available secured lines of credit of $ 1.6 billion, no ne of which was outstanding at December 31, 2021.

At December 31, 2022, the Company had available secured lines of credit of $ 2.4 billion, of which $ 150.0 million was outstanding from the Federal Home Loan Bank ("FHLB") at December 31, 2022.

During 2022, the average interest rate on FHLB borrowings was 3.22 % and the weighted average interest rate on balances outstanding at December 31, 2022 was 3.42 %.

The following table summarizes the Company's junior subordinated debentures and related trust preferred and common equity securities as of December 31, 2022:

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SBCF Statutory Trust III 6/29/2007 n/a 6/15/2037 12,372 12,000 372 3 month LIBOR + 135 bps

BANKshares, Inc.

The BANKshares, Inc.

Statutory Trust I 12/19/2002 10/1/2014 12/26/2032 5,155 5,000 155 3 month LIBOR + 325 bps

BANKshares, Inc.

The BANKshares, Inc.

Statutory Trust II 3/17/2004 10/1/2014 3/17/2034 4,124 4,000 124 3 month LIBOR + 279 bps

BANKshares, Inc.

The BANKshares, Inc.

Capital Trust I 12/15/2005 10/1/2014 12/15/2035 5,155 5,000 155 3 month LIBOR + 139 bps

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The obligations of the Company under the junior subordinated notes, the trust agreement establishing the Trusts, the guarantees and agreements as to expenses and liabilities, in aggregate, constitute a full and conditional guarantee by the Company of the Trusts' obligations under the trust preferred securities.

On October 7, 2022, the Company obtained $ 12.3 million in subordinated debt through the acquisition of Apollo Bancshares, Inc.

Contractual interest is paid on a semiannual basis on April 30 and October 30 of each year at a fixed 5.50 % until April 30, 2025, at which point the rate converts to a floating rate of 3-month SOFR plus 533 basis points.

The subordinated debt matures on October 30, 2030.

As part of the acquisition, the Company recorded a fair value adjustment of $ 0.4 million, which is being amortized into interest expense over the remaining term.

Note 10 - Employee Benefits and Stock Compensation

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The Company's contributions to this plan charged to operations were $ 3.5 million in 2022, $ 3.1 million in 2021, and $ 2.8 million in 2020.

of various share-based awards, including stock options, restricted stock awards (“RSAs”), or restricted stock units (“RSUs”).

The Company, through its Compensation and Governance Committee of the board of directors (the “Compensation Committee”), offers equity compensation to employees and non-employee directors of Seacoast and Seacoast Bank in the form of various share-based awards, including stock options, restricted stock awards (“RSAs”), or restricted stock units (“RSUs”).

The awards may vest over time, have certain performance based criteria, or both.

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The 2021 Plan was modified in August 2021 to authorize 356,497 shares for issuance related to options granted in the acquisition of Legacy Bank of Florida (“Legacy Bank”).

The 2021 Plan was further modified in January 2022 to authorize 52,432 shares and 188,253 shares, respectively, for issuance related to options granted in the acquisitions of Business Bank of Florida, Corp.

("BBFC") and Sabal Palm Bancorp, Inc.

("Sabal Palm").

In October 2022, the 2021 Plan was further modified to authorize 274,373 shares for issuance related to options and warrants granted in the acquisition of Apollo Bancshares, Inc.

The 2021 Plan expires on May 26, 2031.

The 2021 Plan replaced the Prior Plan.

Upon adoption of the 2021 Plan, no further awards were granted under the Prior Plan, which remains in effect only so long as awards granted thereunder remain outstanding.

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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 2022, as part of the acquisitions of BBFC, Sabal Palm and Apollo, 52,432 , 188,253 and 274,373 options, respectively, were granted to replace outstanding options.

These options had weighted average exercise prices of $ 26.63 , $ 17.84 and $ 9.94 , respectively, and were fully vested upon acquisition.

Additionally, as part of the acquisition of Apollo, 37,240 warrants were granted to replace outstanding Apollo warrants.

These warrants had a weighted average exercise price of $ 9.94 and were fully vested upon acquisition.

The full value of the options and warrants issued through acquisitions in 2022, $ 10.4 million, was considered purchase consideration.

The impact of share-based compensation on the Company’s financial results is presented below:

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Income tax benefit ( 2,827 ) ( 2,067 ) ( 1,737 )

1 Excludes $ 0.9 million in 2021 associated with replacement options granted in the acquisition of Legacy Bank.

1 Excludes $ 10.4 million in 2022 and $ 4.7 million in 2021 associated with replacement awards granted in bank acquisitions.

The total unrecognized compensation cost and the weighted-average period over which unrecognized compensation cost is expected to be recognized related to non-vested share-based compensation arrangements at December 31, 2022 is presented below:

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Stock Options

The fair value of options granted is estimated on the date of grant using the Black-Scholes options-pricing model.

In 2021, as part of the acquisition of Legacy Bank, the Company granted to each holder of Legacy Bank options, an option to purchase shares of Seacoast common stock on the same terms and conditions as the Legacy Bank option, with the number of shares and exercise price reflective of the conversion ratio specified in the merger agreement.

The fair value of options and warrants granted is estimated on the date of grant using the Black-Scholes options-pricing model.

In 2022 and 2021, 552,298 and 356,497 , respectively, of options to purchase shares of Seacoast stock were granted to optionholders of acquired entities in accordance with the terms of the merger agreements.

The Company issued no stock options in 2020.

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Exercisable at December 31, 2022 837,622 $ 21.72 3.25 $ 7,936

The following table presents i nformation related to stock options during each of the following years:

The following table presents information related to stock options during each of the following years:

For the Year Ended December 31,

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Accrued interest and fee income 16,035 —

Other 1,755 477

Gross deferred tax assets 131,702 43,864

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Accrued interest and fee income — ( 1,660 )

Net unrealized securities gains — ( 5,890 )

Premises and equipment ( 2,214 ) ( 776 )

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In 2022, unrealized losses of $ 247.4 million resulted in a deferred tax asset of $ 59.4 million.

In 2020, unrealized gains of $ 26.3 million resulted in a deferred tax liability of $ 5.9 million.

In 2021, unrealized losses of $ 9.3 million resulted in a deferred tax asset of $ 2.3 million.

At December 31, 2022, the Company's net deferred tax assets (“DTAs”) of $ 94.5 million consisted of $ 76.8 million of net U.S.

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The tax rate increased to 5.5% effective January 1, 2022, resulting in a tax benefit of $ 0.8 million which was recognized in 2021 upon the adjustment of the value of deferred tax assets affected by the change.

As a result of the adoption of ASC 326 - Credit Losses on January 1, 2020, the tax impact relating to the incremental allowance for expected credit losses on loans held at amortized cost was reflected as a credit to retained earnings to reflect the tax impact of increased credit reserves.

Accordingly, $ 5.5 million of such impact was reflected as an income tax credit and deferred tax asset on the Company's Consolidated Statements of Financial Condition.

On March 27, 2020, the CARES Act was enacted, and Section 2303(b) of this act provided the Company with an opportunity to carry back net operating losses arising from 2018, 2019 and 2020 to the prior five tax years.

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Net (increase) decrease in other assets ( 13,823 ) ( 489 ) 1,772

Net increase (decrease) in other liabilities 400 256 265

Net increase in other liabilities 499 400 256

Net cash provided by operating activities 32,559 45,795 20,043

Cash flows from investing activities

Net cash paid for bank acquisition — ( 1,462 ) —

Net (advances)/repayments with subsidiary ( 28,324 ) ( 17,095 ) ( 12,861 )

Net cash used in investment activities ( 28,324 ) ( 18,557 ) ( 12,861 )

Net cash from bank acquisitions 17,610 — ( 1,462 )

Net advances with subsidiary ( 13,300 ) ( 28,324 ) ( 17,095 )

Net cash provided by (used in) investment activities 4,310 ( 28,324 ) ( 18,557 )

Cash flows from financing activities

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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, or operating results or cash flows.

The Company's subsidiary bank is party to financial instruments with off balance sheet risk in the normal course of business to meet the financing needs of its customers.

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The subsidiary bank holds collateral supporting these commitments for which collateral is deemed necessary.

Collateral held for secured standby letters of credit at December 31, 2021 and 2020 totaled $ 13.3 million and $ 12.4 million, respectively.

Collateral held for secured standby letters of credit at December 31, 2022 totaled $ 29.9 million.

Unfunded limited partner equity commitments at December 31, 2022 totaled $ 26.8 million that the Company has committed to small business investment companies under the SBIC Act to be used to provide capital to small businesses and entities that provide low income housing tax credits.

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3 See “Note 4 - Loans”.

Nonrecurring 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.

Nonrecurring fair value adjustments to collateral-dependent loans reflect full or partial write-downs that are based on current appraised values of the collateral.

4 Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360.

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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 quarter valuation process.

During the year ended December 31, 2022, two of the three properties held in OREO at the beginning of the year were sold.

Properties remaining in OREO at December 31, 2022 are valued based on appraisals using a market approach.

There were no such transfers during the twelve months ended December 31, 2022 and 2021.

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$ 747,408 $ — $ 617,741 $ —

Time deposits with other banks 3,236 — 2,989 —

Loans, net 8,022,316 — — 7,845,375

1 unchanged sentence

Deposits 9,981,595 — — 9,976,125

Federal Home Loan Bank (FHLB) borrowings 150,000 — — 149,450

Subordinated debt 84,533 — 82,226 —

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$ 638,640 $ — $ 627,398 $ —

Time deposits with other banks 750 — 762 —

Loans, net 5,833,271 — — 5,907,447

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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 agreement to repurchase.

cash and due from banks, interest bearing deposits with other banks, short-term FHLB borrowings and securities sold under agreement to repurchase.

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 December 31, 2022 and December 31, 2021:

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Note 17 - Business Combinations

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.

Acquisition of Apollo Bancshares, Inc.

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

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

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

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 share of Seacoast common stock.

(In thousands, except per share data) August 6, 2021

Number of Legacy Bank common shares outstanding $ 15,778

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

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

Number of Apollo common shares outstanding 3,766

Per share exchange ratio 1.0065

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

Number of shares of SBCF common stock issued 3,791

Number of Apollo Bank minority interest shares outstanding 609

Per share exchange ratio 1.1957

Number of shares of SBCF common stock issued 728

Total number of shares of SBCF common stock issued 4,519

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 options converted 4,736

Fair value of Apollo options and warrants converted 6,530

Total purchase price $ 145,842

The acquisition of Legacy Bank was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations .

The acquisition of Apollo was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations .

The Company recognized goodwill of $ 90.2 million for this acquisition that is nondeductible for tax purposes.

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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 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 thousands) Initially Measured

August 6, 2021

Cash $ 98,107

As part of the acquisition of Apollo, options and warrants were granted to replace outstanding Apollo awards.

These awards were fully vested upon acquisition.

The full value of the replacement awards, $ 6.5 million, was associated with pre-combination service and was therefore included in the calculation of the total purchase consideration.

(In thousands) Measured October 7, 2022

Cash and cash equivalents $ 41,001

Investment securities 203,596

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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

October 7, 2022

(In thousands) Book Balance Fair Value

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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

(In thousands) October 7, 2022

Book balance of loans at acquisition $ 107,744

2 unchanged sentences

Total PCD loans acquired $ 90,895

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 acquisition of Apollo resulted in the addition of $ 7.8 million in allowance for credit losses, including the $ 2.7 million identified in the table above for PCD loans, and $ 5.1 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 Fourth Street Banking Company

On August 21, 2020, the Company completed its acquisition of Fourth Street Banking Company (“Fourth Street”).

Simultaneously, upon completion of the merger of Fourth Street and the Company, Fourth Street's wholly owned subsidiary bank, Freedom Bank, was merged with and into Seacoast Bank.

Prior to the acquisition, Freedom Bank operated two branches in St.

Petersburg, Florida.

As a result of this acquisition, the Company expects to enhance its presence in St.

Petersburg, 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 Fourth Street.

Under the terms of the definitive agreement, each share of Fourth Street common stock was converted into the right to receive 0.1275 share of Seacoast common stock.

(In thousands, except per share data) August 21, 2020

Number of Fourth Street common shares outstanding 11,220

Shares issued upon conversion of convertible debt 5,405

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.

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 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 common shares outstanding 99

Per share exchange ratio 51.9561

Number of shares of common stock issued 2,120

Multiplied by common stock price per share on August 21, 2020 $ 19.40

Value of common stock issued 41,121

Cash paid for Fourth Street vested stock options 596

Number of shares of SBCF common stock issued 5,136

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

Total purchase price $ 158,332

The acquisition of Fourth Street was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations .

The acquisition of Drummond was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations .

The Company recognized goodwill of $ 103.5 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 complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.

(In thousands) Initially Measured

August 21, 2020

(In thousands) Measured October 7, 2022

Cash and cash equivalents $ 31,805

Investment securities 327,852

Loans 544,694

Bank premises and equipment 29,370

Core deposit and other intangibles 32,983

Goodwill 103,476

Other Assets 49,812

Total Assets $ 1,119,992

Deposits $ 881,281

Other Liabilities 80,379

Total Liabilities $ 961,660

The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.

October 7, 2022

(In thousands) Book Balance Fair Value

Construction and land development $ 155,041 $ 140,401

Commercial real estate - owner-occupied 112,768 106,152

Commercial real estate - non owner-occupied 26,520 24,744

Residential real estate 85,767 78,663

Commercial and financial 88,026 82,067

Consumer 118,880 112,667

Total acquired loans $ 587,002 $ 544,694

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) October 7, 2022

Book balance of loans at acquisition $ 58,878

Allowance for credit losses at acquisition ( 2,566 )

Non-credit related discount ( 4,607 )

Total PCD loans acquired $ 51,705

The acquisition of Drummond resulted in the addition of $ 12.5 million in allowance for credit losses, including the $ 2.6 million identified in the table above for PCD loans, and $ 9.9 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 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 SBCF common stock issued 889

Multiplied by common stock price per share on January 3, 2022 $ 35.39

Value of SBCF common stock issued $ 31,480

Fair value of BBFC 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.

As part of the BBFC acquisition, options were granted to replace outstanding BBFC options.

These options were fully vested upon acquisition.The full value of the replacement options, $ 0.5 million, was associated with pre-combination service and was therefore included in the calculation of the total purchase consideration.

(In thousands) Measured

January 3, 2022

Cash $ 38,332

4 unchanged sentences

Goodwill 7,962

Total assets $ 198,802

Deposits 166,326

Other liabilities 499

Total liabilities $ 166,825

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

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 SBCF common stock issued 1,660

Multiplied by common stock price per share on January 3, 2022 $ 35.39

Value of SBCF common stock issued $ 58,762

Fair value of Sabal Palm 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.

As part of the Sabal Palm acquisition, options were granted to replace outstanding Sabal Palm options.

These options were fully vested upon acquisition.

The full value of the replacement options, $ 3.3 million, was associated with pre-combination service and was therefore included in the calculation of the total purchase consideration.

(In thousands) Measured

January 3, 2022

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

4 unchanged sentences

The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.

August 21, 2020

January 3, 2022

(In thousands) Book Balance Fair Value

8 unchanged sentences

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 21, 2020

(In thousands) January 3, 2022

Book balance of loans at acquisition $ 3,703

2 unchanged sentences

Total PCD loans acquired $ 3,003

The acquisition of Fourth Street resulted in the addition of $ 10.4 million in allowance for credit losses, including the $ 5.8 million identified in the table above for PCD loans, and $ 4.6 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition.

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 First Bank of the Palm Beaches

On March 13, 2020, the Company completed its acquisition of First Bank of the Palm Beaches (“FBPB”).

FBPB was merged with and into Seacoast Bank.

FBPB operated two branches in the Palm Beach market.

As a result of this acquisition, the Company expects to enhance its presence in the Palm Beach market, 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 FBPB.

Under the terms of the definitive agreement, each share of FBPB common stock was converted into the right to receive 0.2000 share of Seacoast common stock.

(In thousands, except per share data) March 13, 2020

Number of FBPB common shares outstanding 5,213

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 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 1,043

Multiplied by common stock price per share on March 13, 2020 $ 20.17

Value of common stock issued 21,031

Cash paid for FBPB vested stock options 866

Number of shares of SBCF common stock issued 2,687

Multiplied by common stock price per share on August 6, 2021 $ 32.19

Value of SBCF common stock issued $ 86,487

Cash paid for fractional shares 7

Fair value of Legacy Bank options converted 4,736

Total purchase price $ 91,230

The acquisition of FBPB was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations .

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.

(In thousands) Initially Measured

March 13, 2020 Measurement Period Adjustments As Adjusted March 13, 2020

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

These options were fully vested upon acquisition.

(In thousands) Measured

August 6, 2021

Cash $ 98,107

10 unchanged sentences

The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.

March 13, 2020

August 6, 2021

(In thousands) Book Balance Fair Value

5 unchanged sentences

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) March 13, 2020

(In thousands) August 6, 2021

Book balance of loans at acquisition $ 66,371

2 unchanged sentences

Total PCD loans acquired $ 62,589

The acquisition of FBPB resulted in the addition of $ 2.3 million in allowance for credit losses, including the $ 0.5 million 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.

2 unchanged sentences

Acquisition costs included in the Company's income statement for the years ended December 31, 2022, 2021 and 2020 were $ 27.9 million, $ 7.9 million and $ 9.1 million, respectively.

Pro-Forma Information

Pro-forma data as of 2021 and 2020 present information as if the acquisition of Legacy Bank occurred at the beginning of 2020:

Pro-Forma Information (unaudited)

Pro-forma data as of 2022 and 2021 present information as if the acquisitions of Legacy Bank, BBFC, Sabal Palm, Apollo and Drummond occurred at the beginning of 2021.

The pro-forma information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have occurred if the transactions had been effected on the assumed dates.

Twelve Months Ended

4 unchanged sentences

EPS - diluted 2.51 2.67

2022 Acquisitions

Acquisition of Florida Business Bank

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.

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 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

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.

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 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 acquisitions of BBFC and Sabal Palm 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;

2023 Acquisition

Acquisition of Professional Holding Corp.

On January 31, 2023, the Company completed its acquisition of Professional Holding Corp.

(“Professional”).

The transaction further expands 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 operated nine branches across South Florida with deposits of approximately $ 2.2 billion and loans of approximately $ 2.1 billion as of December 31, 2022.

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

Under the terms of the merger agreement, Professional shareholders received 0.8909 shares of Seacoast common stock for each share of Professional common stock held immediately prior to the merger, and Professional option holders received options to purchase Seacoast common stock, with the number of shares underlying each such option and the applicable exercise price adjusted using the same 0.8909 exchange ratio.

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

The Company’s calculation of the purchase price, including the value of Professional options converted, and 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.

The Company expects to recognize goodwill in this transaction, which is expected to be nondeductible for tax purposes.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data