What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-10 · 330 added, 243 removed, 521 unchanged (52% of the section changed)

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Such discussion and analysis should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related notes included in this report.

The emphasis of this discussion will be on the three months ended March 31, 2023 compared to the three months ended March 31, 2022 for the consolidated statements of income.

For the consolidated balance sheets, the emphasis of this discussion will be the balances as of March 31, 2023 compared to December 31, 2022.

The emphasis of this discussion will be on the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 for the consolidated statements of income.

For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 2023 compared to December 31, 2022.

This discussion and analysis contain statements that may be considered “forward-looking statements” as defined in, and subject to the protections of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

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• Potential impacts of the recent adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto;

• Governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve, as well as legislative, tax and regulatory changes, including those that impact the money supply and inflation and the possibility that the U.S.

could default on its debt obligations;

• The risks of changes in interest rates on the level and composition of deposits (as well as the cost of, and competition for, deposits), loan demand, liquidity and the values of loan collateral, securities, and interest rate sensitive assets and liabilities;

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• Changes in retail distribution strategies, customer preferences and behavior generally and as a result of economic factors, including heightened inflation;

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• Changes in the availability and cost of credit and capital in the financial markets;

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• Seacoast's ability to comply with any regulatory requirements;

• The effects of problems encountered by other financial institutions that adversely affect Seacoast or the banking industry, including bank failures;

• The effects of problems encountered by other financial institutions that adversely affect Seacoast or the banking industry;

• Inaccuracies or other failures from the use of models, including the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit conditions;

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• Changes in technology or products that may be more difficult, costly, or less effective than anticipated;

• The Company’s ability to identify and address increased cybersecurity risks;

• The Company’s ability to identify and address increased cybersecurity risks, including those impacting vendors and other third parties;

• Fraud or misconduct by internal or external parties, which Seacoast may not be able to prevent, detect or mitigate;

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• The effects of war or other conflicts, including the impacts related to or resulting from Russia’s military action in Ukraine, acts of terrorism, natural disasters, including hurricanes in the Company's footprint, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions;

• Unexpected outcomes of and the costs associated with, existing or new litigation involving the Company, including as a result of the Company’s participation in the Paycheck Protection Program (“PPP”);

• Unexpected outcomes of and the costs associated with, existing or new litigation involving the Company;

• Seacoast’s ability to maintain adequate internal controls over financial reporting;

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• The risks that deferred tax assets could be reduced if estimates of future taxable income from the Company’s operations and tax planning strategies are less than currently estimated and sales of capital stock could trigger a reduction in the amount of net operating loss carryforwards that the Company may be able to utilize for income tax purposes;

elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet;

• The effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, non-bank financial technology providers, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in the Company’s market areas and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet;

• The failure of assumptions underlying the estimate of reserves for expected credit losses;

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• Risks related to environmental, social and governance ("ESG") matters, the scope and pace of which could alter Seacoast's reputation and shareholder, associate, customer and third-party affiliations;

• The risks relating to bank acquisitions including the the merger with Professional Holding Corp.

including, without limitation:

the diversion of management's time on issues related to the merger;

unexpected transaction costs, including the costs of integrating operations;

the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected;

the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following the mergers being lower than expected;

the risk of deposit and customer attrition;

regulatory enforcement and litigation risk;

any changes in deposit mix;

unexpected operating and other costs, which may differ or change from expectations;

the risks of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees;

increased competitive pressures and solicitations of customers by competitors;

as well as the difficulties and risks inherent with entering new markets;

• Other factors and risks described under “Risk Factors” herein and in any of the Company's subsequent reports filed with the SEC and available on its website at www.sec.gov.

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(“Professional”), parent company of Professional Bank, adding deposits of approximately $2.1 billion and loans of approximately $2.0 billion.

Full integration and system conversion activities are expected to be completed late in the second quarter of 2023.

Full integration and system conversion activities, including the consolidation of five branches in the South Florida market, were completed in June 2023.

Merger related expense synergies are expected to be fully realized in the second half of 2023.

Results of Operations

For the first quarter of 2023, the Company reported net income of $11.8 million, a decrease of $12.1 million, or 51%, from the fourth quarter of 2022 and a decrease of $8.8 million, or 43%, compared to the first quarter of 2022.

The first quarter of 2023 included $31.6 million in provision for credit losses, including $26.6 million recorded for loans acquired in the Professional acquisition.

The provision for credit losses in the fourth quarter of 2022 was $14.1 million, including $15.0 million recorded for the Apollo and Drummond acquisitions.

The prior year quarter provision of $6.6 million included a $5.1 million increase associated with the acquisitions of BBFC and Sabal Palm during the quarter.

Adjusted net income 1 for the first quarter of 2023 totaled $29.2 million, a decrease of $10.7 million, or 27%, compared to the fourth quarter of 2022 and an increase of $2.2 million, or 8%, compared to the first quarter of 2022.

Diluted earnings per common share (“EPS”) was $0.15 and adjusted diluted EPS 1 was $0.36 in the first quarter of 2023, compared to diluted EPS of $0.34 and adjusted diluted EPS 1 of $0.56 in the fourth quarter of 2022 and compared to diluted EPS of $0.33 and adjusted diluted EPS 1 of $0.44 in the first quarter of 2022.

Pre-tax pre-provision earnings 1 were $46.3 million in the first quarter of 2023, an increase of 1% compared to the fourth quarter of 2022 and an increase of 40% compared to the first quarter of 2022.

Adjusted pre-tax pre-provision earnings 1 were $71.1 million in the first quarter of 2023, an increase of 7% compared to the fourth quarter of 2022 and an increase of 70% compared to the first quarter of 2022.

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

First Fourth First

Quarter Quarter Quarter

For the second quarter of 2023, the Company reported net income of $31.2 million, or $0.37 per average diluted share, an increase of $19.4 million, or 164%, from the first quarter of 2023 and a decrease of $1.5 million, or 5%, compared to the second quarter of 2022.

The second quarter of 2023 included a $0.8 million reversal of provision for credit losses.

The prior quarter included $31.6 million of provision for credit losses, including $26.6 million for loans acquired in the Professional acquisition.

For the six months ended June 30, 2023, net income totaled $43.1 million, or $0.52 per average diluted share, a decrease of $10.3 million, or 19%, compared to the six months ended June 30, 2022.

Adjusted net income 1 for the second quarter of 2023 totaled $49.2 million, or $0.58 per average diluted share, an increase of $20.0 million, or 68%, compared to the first quarter of 2023 and an increase of $12.9 million, or 35%, compared to the second quarter of 2022.

For the six months ended June 30, 2023, adjusted net income 1 totaled $78.4 million, or $0.94 per average diluted share, compared to $63.4 million, or $1.03 per average diluted share for the six months ended June 30, 2022.

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

2023 2023 2022 2023 2022

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Net Interest Income and Margin

Net interest income for the first quarter of 2023 totaled $131.2 million, an increase of $11.4 million, or 10%, compared to the fourth quarter of 2022, and an increase of $54.6 million, or 71%, compared to the first quarter of 2022.

The increases reflect higher balances and higher yields on securities and loans, partially offset by the higher cost of deposits.

Net interest margin (on a fully tax equivalent basis) 1 was 4.31% in the first quarter of 2023, compared to 4.36% in the fourth quarter of 2022, and 3.25% in the first quarter of 2022.

The decrease during the first quarter of 2023 compared to prior quarter was driven by the continued effect of an inverted yield curve, and additional excess liquidity added to the balance sheet late in the quarter.

Compared to the fourth quarter of 2022, securities yields increased by eight basis points to 2.85% and loan yields increased by 57 basis points to 5.86% during the first quarter of 2023.

The effect on net interest margin of accretion of purchase discounts on acquired loans were increases of 53 basis points in the first quarter of 2023, 35 basis points in the fourth quarter of 2022, and 15 basis points in the first quarter of 2022.

The cost of deposits was 77 basis points in the first quarter of 2023, compared to 21 basis points in the fourth quarter of 2022, and 6 basis points in the first quarter of 2022.

The higher cost of deposits in the first quarter of 2023 reflects the impact of the Professional acquisition and an increasingly competitive market for deposits.

Net interest income for the second quarter of 2023 totaled $127.0 million, a decrease of $4.2 million, or 3%, compared to the first quarter of 2023, and an increase of $45.3 million, or 56%, compared to the second quarter of 2022.

The decrease from prior quarter reflects a decline of $1.8 million in accretion of purchase discount on acquired loans, and the impact of increasing competition on deposit rates.

The increase from prior year is primarily due to higher balances and higher yields on securities and loans, partially offset by the higher cost of deposits.

Net interest margin (on a fully tax equivalent basis) 1 was 3.86% in the second quarter of 2023, compared to 4.31% in the first quarter of 2023, and 3.38% in the second quarter of 2022.

The decrease during the second quarter of 2023 compared to the prior quarter was driven by the continued effect of an inverted yield curve, a

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

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decline in accretion on acquired loans and rising deposit costs.

Compared to the first quarter of 2023, securities yields increased 28 basis points to 3.13% and loan yields increased three basis points to 5.89% during the second quarter of 2023.

The securities yield benefited 12 basis points from swaps initiated during the quarter.

The effect on net interest margin of accretion of purchase discounts on acquired loans were increases of 43 basis points in the second quarter of 2023, 53 basis points in the first quarter of 2023, and 12 basis points in the second quarter of 2022.

For the six months ended June 30, 2023, net interest margin (on a fully tax equivalent basis) 1 was 4.09%, compared to 3.32% for the six months ended June 30, 2022.

The yield on securities increased from 1.83% for the six months ended June 30, 2022 to 2.99% for the six months ended June 30, 2023, reflecting the impact of a higher interest rate environment.

The yield on total loans increased from 4.30% for the six months ended June 30, 2022 to 5.88% for the six months ended June 30, 2023, reflecting the impact of the higher interest rate environment.

Cost of deposits increased from six basis points for the six months ended June 30, 2022 to 1.09% for the six months ended June 30, 2023.

The effect on net interest margin of purchase discounts on acquired loans was an increase of 48 basis points for the six months ended June 30, 2023 compared to an increase of 14 basis points for the six months ended June 30, 2022.

The cost of deposits was 1.38% in the second quarter of 2023, compared to 77 basis points in the first quarter of 2023, and six basis points in the second quarter of 2022.

For the six months ended June 30, 2023, the cost of deposits was 1.09%, an increase of 103 basis points compared to the six months ended June 30, 2022.

The higher cost of deposits in the first half of 2023 reflects the impact of the Professional acquisition and an increasingly competitive market for deposits.

The following table details the trend for net interest income and margin results (on a tax equivalent basis) 1 , the yield on earning assets and the rate paid on interest bearing liabilities for the periods specified:

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Bearing Liabilities

First quarter 2023 $ 131,351 4.31 % 5.19 % 1.43 %

Fourth quarter 2022 119,858 4.36 % 4.63 % 0.48 %

Second quarter 2023 $ 127,153 3.86 % 5.30 % 2.26 %

First quarter 2023 131,351 4.31 % 5.19 % 1.43 %

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

Six months ended June 30, 2023 258,504 4.09 % 5.26 % 1.87 %

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

1 On tax equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.

Total average loans increased $1.5 billion, or 18%, for the first quarter of 2023 compared to the fourth quarter of 2022, and increased $3.0 billion, or 48%, from the first quarter of 2022.

The increase compared to the prior quarter includes $2.0 billion in loans acquired from Professional.

Average loans as a percentage of average earning assets totaled 76% for the first quarter of 2023, 73% for the fourth quarter of 2022 and 66% for the first quarter of 2022.

Total average loans increased $0.7 billion, or 8%, for the second quarter of 2023 compared to the first quarter of 2023, and increased $3.6 billion, or 56%, from the second quarter of 2022.

The increase compared to the prior year quarter includes $3.2 billion in loans added in recent bank acquisitions.

Average loans as a percentage of average earning assets totaled 76% for the second quarter of 2023, 76% for the first quarter of 2023 and 67% for the second quarter of 2022.

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Loan production and late-stage pipelines (loans in underwriting and approval or approved and not yet closed) are detailed in the following table for the periods specified:

First Fourth First

Quarter Quarter Quarter

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands) 2023 2023 2022 2023 2022

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Residential loans - retained 85,294 90,058 102,996 175,352 278,453

90,058 74,272 175,457

Consumer pipeline at period end 28,446 38,742 75,532 28,446 75,532

Consumer originations 97,184 110,602 130,784 207,786 214,008

1 Includes purchases of $111.3 million in 1Q’22

Commercial originations during the first quarter of 2023 were $321.7 million, a decrease of $167.9 million, or 34%, compared to the fourth quarter of 2022, and a decrease of $51.3 million, or 14%, compared to the first quarter of 2022.

Commercial pipelines were $297.4 million as of March 31, 2023, a decrease of 25% from $395.7 million at December 31, 2022, and a decrease of 52% from $619.5 million at March 31, 2022.

The declines were the result of the impact of higher rates on new production volumes and a more selective approach on new credit facilities given a cautious economic outlook.

Residential loans originated for sale in the secondary market totaled $13.9 million in the first quarter of 2023, compared to $10.7 million in the fourth quarter of 2022 and $51.2 million in the first quarter of 2022.

Residential saleable pipelines were $6.6 million as of March 31, 2023, compared to $4.2 million as of December 31, 2022 and $25.7 million as of March 31, 2022.

Residential loan production retained in the portfolio for the first quarter of 2023 was $90.1 million, compared to $74.3 million in the fourth quarter of 2022 and $175.5 million in the first quarter of 2022.

The pipeline of residential loans intended to be retained in the portfolio was $48.4 million as of March 31, 2023, compared to $17.1 million as of December 31, 2022, and $88.0 million as of March 31, 2022.

The increase in pipelines in residential lending during the first quarter of 2023 was a result of mortgage rates moving lower in conjunction with a declining 10-year Treasury rate.

Consumer originations totaled $59.5 million during the first quarter of 2023, compared to $74.6 million in the fourth quarter of 2022 and $79.0 million in the first quarter of 2022.

The consumer pipeline was $11.6 million as of March 31, 2023, compared to $36.6 million as of December 31, 2022 and $61.6 million at March 31, 2022.

The Company expects consumer demand to be lower moving forward as a result of higher rates.

Average investment securities increased $15.3 million, or 1%, during the first quarter of 2023 compared to the fourth quarter of 2022, and were $286.0 million, or 12%, higher compared to the first quarter of 2022.

Increases in the first quarter of 2023 include securities added through the Professional acquisition, partially offset by pay downs and maturities.

The cost of average interest-bearing liabilities increased 95 basis points in the first quarter of 2023 to 143 basis points from 48 basis points in the fourth quarter of 2022, and from 12 basis points in the first quarter of 2022.

The cost of average total deposits (including noninterest bearing demand deposits) was 77 basis points in the first quarter of 2023, 21 basis points in the fourth quarter of 2022 and 6 basis points in the first quarter of 2022.

During the first quarter of 2023, average noninterest demand deposits increased $61.0 million compared to the fourth quarter of 2022 and increased $1.0 billion compared to the first quarter of 2022.

The Company’s deposit mix remains favorable, with 93% of average deposit balances comprised of savings, money market, and demand deposits for the three months ended March 31, 2023.

Average balances of sweep repurchase agreements with customers increased $38.8 million, or 29%, from the fourth quarter.

For the three months ended March 31, 2023, the average balance was $173.5 million compared to an average balance of $134.7 million for the three months ended December 31, 2022, and $118.1 million for the three months ended March 31, 2022.

The average rate on customer sweep repurchase accounts was 2.02% for the three months ended March 31, 2023, compared to 1.60% for the three months ended December 31, 2022, and 0.13% for the three months ended March 31, 2022.

Subordinated debt balances averaged $98.4 million in the first quarter of 2023, $83.5 million in the fourth quarter of 2022, and $71.7 million in the first quarter of 2022.

The average rate on subordinated debt for the first quarter of 2023 was 6.65%, an increase of 79 basis points compared to the fourth quarter of 2022 and an increase of 418 basis points compared to the first quarter of 2022.

Commercial originations during the second quarter of 2023 were $317.4 million, a decrease of $4.3 million, or 1%, compared to the first quarter of 2023, and a decrease of $144.5 million, or 31%, compared to the second quarter of 2022.

For the six months ended June 30, 2023, commercial originations were $639.0 million compared to $834.8 million for the six months ended June 30, 2022, a decrease of $195.8 million, or 23%.

Commercial pipelines were $217.6 million as of June 30, 2023, a decrease of 27% from $297.4 million at March 31, 2023, and a decrease of 54% from $476.7 million at June 30, 2022.

The declines were the result of the impact of higher rates and a continued selective approach on new credit facilities given a cautious economic outlook.

Residential loans originated for sale in the secondary market totaled $19.1 million in the second quarter of 2023, compared to $13.9 million in the first quarter of 2023 and $42.7 million in the second quarter of 2022.

For the six months ended June 30, 2023, residential loans originated for sale in the secondary market totaled $33.0 million compared to $93.9 million for the six months ended June 30, 2022, a decrease of $60.9 million, or 65%.

Residential saleable pipelines were $11.5 million as of June 30, 2023, compared to $6.6 million as of March 31, 2023 and $14.7 million as of June 30, 2022.

Residential loan production retained in the portfolio for the second quarter of 2023 was $85.3 million, compared to $90.1 million in the first quarter of 2023 and $103.0 million in the second quarter of 2022.

The pipeline of residential loans intended to be retained in the portfolio was $27.1 million as of June 30, 2023, compared to $48.4 million as of March 31, 2023, and $53.1 million as of June 30, 2022.

Consumer originations totaled $97.2 million during the second quarter of 2023, compared to $110.6 million in the first quarter of 2023 and $130.8 million in the second quarter of 2022.

For the six months ended June 30, 2023, consumer originations totaled $207.8 million compared to $214.0 million for the six months ended June 30, 2022, a decrease of $6.2 million, or 3%.

The consumer pipeline was $28.4 million as of June 30, 2023, compared to $38.7 million as of March 31, 2023 and $75.5 million at June 30, 2022.

Average investment securities decreased $27.1 million, or 1%, during the second quarter of 2023 compared to the first quarter of 2023, and were $148.9 million, or 6%, higher compared to the second quarter of 2022.

Average investment securities were $2.7 billion for the six months ended June 30, 2023, an increase of $217.1 million, or 9%, compared to the six months ended 2022.

Increases in the first half of 2023 include securities added through the Professional acquisition, partially offset by paydowns and maturities.

The cost of average interest-bearing liabilities increased 83 basis points in the second quarter of 2023 to 2.26% from 1.43% in the first quarter of 2023, and from 14 basis points in the second quarter of 2022.

The cost of average total deposits (including noninterest bearing demand deposits) was 1.38% in the second quarter of 2023, 77 basis points in the first quarter of 2023 and six basis points in the second quarter of 2022.

For the six months ended June 30, 2023, the cost of average total deposits (including noninterest bearing demand deposits) was 1.09% compared to six basis points for the six months ended June 30, 2022.

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During the second quarter of 2023, average transaction deposits (noninterest and interest bearing demand) increased $173.5 million, or 3%, compared to the first quarter of 2023 and increased $1.2 billion, or 20%, compared to the second quarter of 2022.

For the six months ended June 30, 2023, average transaction deposits increased $1.3 billion or 23%, compared to the six months ended June 30, 2022.

The Company’s deposit mix remains favorable, with 90% of average deposit balances comprised of savings, money market, and demand deposits for the six months ended June 30, 2023.

Average balances of sweep repurchase agreements with customers increased $71.3 million, or 41%, from the first quarter of 2023 and $124.4 million, or 103% compared to the second quarter of 2022.

The average rate on customer sweep repurchase accounts was 2.61% for the three months ended June 30, 2023, compared to 2.02% for the three months ended March 31, 2023, and 0.31% for the three months ended June 30, 2022.

For the six months ended June 30, 2023, the average balance was $209.4 million compared to an average balance of $119.3 million for the six months ended June 30, 2022.

The average rate on customer sweep repurchase accounts was 2.37% for the six months ended June 30, 2023, compared to 0.22% for the six months ended June 30, 2022.

Subordinated debt balances averaged $105.9 million in the second quarter of 2023, $98.4 million in the first quarter of 2023, and $71.7 million in the second quarter of 2022.

The average rate on subordinated debt for the second quarter of 2023 was 6.80%, an increase of 15 basis points compared to the first quarter of 2023 and an increase of 3.56% compared to the second quarter of 2022.

For the six months ended June 30, 2023, subordinated debt averaged $102.2 million, compared to $71.7 million for the six months ended June 30, 2022.

The average rate on subordinated debt for the six months ended June 30, 2023 was 6.73%, an increase of 3.88% compared to the six months ended June 30, 2022.

The subordinated debt is comprised of trust preferred securities issued by subsidiary trusts of the Company, and subordinated notes assumed in bank acquisitions in 2022 and 2023.

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The following tables detail average balances, net interest income and margin results (on a tax equivalent basis, a non-GAAP measure) for the periods presented:

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

First Quarter Fourth Quarter First Quarter

Second Quarter First Quarter Second Quarter

Average Yield/ Average Yield/ Average Yield/

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Interest expense as a % of earning assets 1.44 % 0.88 % 0.09 %

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Net interest income as a % of earning assets $ 127,153 3.86 % $ 131,351 4.31 % $ 81,764 3.38 %

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Nonaccrual loans are included in loan balances.

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

Year to Date Year to Date

Average Yield/ Average Yield/

(In thousands, except ratios) Balance Interest Rate Balance Interest Rate

Earning assets:

Taxable $ 2,686,804 $ 40,142 2.99 % $ 2,462,447 $ 22,428 1.82 %

Nontaxable 15,944 251 3.15 23,238 352 3.03

Total Securities 2,702,748 40,393 2.99 2,485,685 22,780 1.83

Federal funds sold 228,491 5,787 5.11 691,105 1,631 0.48

Interest bearing deposits with other banks and other investments 90,750 2,710 6.02 45,631 1,219 5.39

Loans excluding PPP loans 9,732,156 283,749 5.88 6,366,194 134,322 4.25

PPP Loans 5,080 24 0.95 44,024 2,264 10.37

Total Loans 9,737,236 283,773 5.88 6,410,218 136,586 4.30

Total Earning Assets 12,759,225 332,663 5.26 9,632,639 162,216 3.40

Allowance for credit losses (148,143) (88,862)

Cash and due from banks 193,811 377,831

Premises and equipment 116,909 75,241

Intangible assets 797,096 305,875

Bank owned life insurance 283,936 206,173

Other assets including deferred tax assets 417,393 226,205

Total Assets $ 14,420,227 $ 10,735,102

Liabilities and Shareholders' Equity

Interest-bearing liabilities:

Interest-bearing demand $ 2,559,805 $ 10,767 0.85 % $ 2,180,351 $ 483 0.04 %

Savings 979,674 827 0.17 943,908 129 0.03

Money market 2,760,207 31,622 2.31 1,957,435 1,149 0.12

Time deposits 1,120,576 20,029 3.60 528,255 904 0.35

Securities sold under agreements to repurchase 209,358 2,456 2.37 119,298 133 0.22

Federal Home Loan Bank borrowings 266,935 5,048 3.81 — — —

Subordinated debt 102,164 3,410 6.73 71,706 1,015 2.85

Total Interest-Bearing Liabilities 7,998,719 74,159 1.87 5,800,953 3,813 0.13

Noninterest demand 4,314,498 3,428,921

Other liabilities 122,746 129,815

Total Liabilities 12,435,963 9,359,689

Shareholders' equity 1,984,264 1,375,413

Total Liabilities & Equity $ 14,420,227 $ 10,735,102

Cost of deposits 1.09 % 0.06 %

Interest expense as a % of earning assets 1.17 % 0.08 %

Net interest income as a % of earning assets $ 258,504 4.09 % $ 158,403 3.32 %

1 On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.

All yields and rates have been computed on an annual basis using amortized cost.

Fees on loans have been included in interest on loans.

Nonaccrual loans are included in loan balances.

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Noninterest Income

Noninterest income totaled $22.4 million for the first quarter of 2023, an increase of $4.8 million, or 27%, compared to the fourth quarter of 2022 and an increase of $7.1 million, or 46%, from the first quarter of 2022.

Noninterest income totaled $21.6 million for the second quarter of 2023, a decrease of $0.9 million, or 4%, compared to the first quarter of 2023 and an increase of $4.6 million, or 27%, from the second quarter of 2022.

Noninterest income totaled $44.0 million for the six months ended June 30, 2023, an increase of $11.7 million, or 36%, compared to the six months ended months ended June 30, 2022.

Noninterest income is detailed as follows:

First Fourth First

Quarter Quarter Quarter

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands) 2023 2023 2022 2023 2022

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21,752 22,338 17,264 44,090 33,089

Securities gains (losses), net 107 18 (452)

Securities (losses) gains, net (176) 107 (300) (69) (752)

Total $ 21,576 $ 22,445 $ 16,964 $ 44,021 $ 32,337

Service charges on deposits were $4.2 million in the first quarter of 2023, $4.0 million in the fourth quarter of 2022 and $2.8 million in the first quarter of 2022.

Increases in fees primarily reflect the benefit of an expanded deposit base, including from acquisitions.

Overdraft-related fees for both consumer and commercial accounts represent 38% of total service charges on deposits for the three months ended March 31, 2023, 37% for the three months ended December 31, 2022 and 43% for the three months ended March 31, 2022.

Interchange income was $4.7 million in both the first quarter of 2023, and the fourth quarter of 2022, compared to $4.1 million for the first quarter of 2022.

Wealth management income, including trust fees and brokerage commissions and fees, was $3.1 million in the first quarter of 2023, compared to $2.9 million for the fourth quarter of 2022 and $2.7 million for the first quarter of 2022.

Service charges on deposits were $4.6 million in the second quarter of 2023, $4.2 million in the first quarter of 2023 and $3.4 million in the second quarter of 2022.

For the six months ended June 30, 2023, service charges on deposits totaled $8.8 million, an increase of $2.6 million, or 42%, compared to the six months ended June 30, 2022.

Increases in fees primarily reflect the benefit of an expanded deposit base, including from acquisitions, and the continued benefit of the expansion of treasury management services to commercial customers.

Overdraft-related fees for both consumer and commercial accounts represent 35% of total service charges on deposits for the six months ended June 30, 2023, and 38% for the six months ended June 30, 2022.

Interchange income increased to $5.1 million for the second quarter of 2023, compared to $4.7 million for the first quarter of 2023, and $4.3 million for the second quarter of 2022.

For the six months ended June 30, 2023, interchange income totaled $9.8 million, an increase of $1.4 million, or 16%, compared to the six months ended June 30, 2022.

Beginning in the third quarter of 2023, the Company’s interchange income will be reduced by the requirements of the Durbin amendment, which became effective for the Company on July 1, 2023.

Wealth management income, including trust fees and brokerage commissions and fees, was $3.3 million in the second quarter of 2023, compared to $3.1 million for the first quarter of 2023 and $2.8 million for the second quarter of 2022.

Assets under management increased by $60.0 million in the second quarter of 2023, bringing total assets under management to $1.6 billion.

For the six months ended June 30, 2023, wealth management income totaled $6.4 million, an increase of $0.9 million, or 17%, compared to the six months ended June 30, 2022.

The wealth management team continues to demonstrate notable success in building relationships.

The group added another $123 million in assets under management in the first quarter of 2023, bringing overall total assets under management to $1.5 billion, up 24% from the prior year.

Mortgage banking fees were $0.4 million in both the first quarter of 2023 and in the fourth quarter of 2022, and $1.7 million in the first quarter of 2022.

Mortgage banking fees decreased $1.3 million, or 75%, compared to the first quarter of 2022, reflecting lower saleable production due to significantly higher interest rates and limited housing inventory.

Insurance agency income increased $0.3 million, or 37%, compared to the fourth quarter of 2022 and totaled $1.1 million.

Mortgage banking fees totaled $0.6 million in the second quarter of 2023, compared to $0.4 million the first quarter of 2023, and $0.9 million in the second quarter of 2022.

For the six months ended June 30, 2023, mortgage banking fees totaled $1.0 million, a decrease of $1.6 million, or 62%, compared to the six months ended June 30, 2022, reflecting lower saleable production due to significantly higher interest rates and limited housing inventory.

Insurance agency income increased $0.1 million, or 5%, compared to the first quarter of 2023 and totaled $1.2 million.

The Company acquired a commercial insurance agency during the fourth quarter of 2022 in conjunction with the acquisition of Drummond, adding another source of noninterest income.

SBA gains were $0.3 million in the first quarter of 2023, compared to $0.1 million in the fourth quarter of 2022, and $0.2 million in the first quarter of 2022.

Bank owned life insurance (“BOLI”) income was $1.9 million for the first quarter of 2023, an increase of $0.4 million, or 26%, compared to the fourth quarter of 2022 and an increase of $0.6 million, or 44%, compared to the first quarter of 2022.

The increases are attributed to additions of $53.1 million in BOLI for the fourth quarter of 2022 and $55.1 million in the first quarter of 2023 from bank acquisitions.

Other income was $6.6 million in the first quarter of 2023, an increase of $3.3 million quarter-over-quarter and an increase of $3.5 million year-over-year.

Changes amongst periods are attributable to increases in SBIC investment income of $0.4 million, loan-swap related income of $0.3 million, and BOLI death benefits of $2.1 million.

Securities gains in the first quarter of 2023 totaled $0.1 million, resulting from the increase in mark to market adjustments on the Company’s CRA qualified mutual funds.

SBA gains were $0.2 million in the second quarter of 2023, compared to $0.3 million in the first quarter of 2023, and $0.5 million in the second quarter of 2022.

For the six months ended June 30, 2023, SBA gains totaled $0.6 million, a decrease of $0.1 million, or 9%, compared to the six months ended June 30, 2022.

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Bank owned life insurance (“BOLI”) income was $2.1 million for the second quarter of 2023, an increase of $0.2 million, or 8%, compared to the first quarter of 2023 and an increase of $0.7 million, or 53%, compared to the second quarter of 2022.

The increases are attributed to additions of $53.1 million in BOLI in the fourth quarter of 2022 and $55.1 million in the first quarter of 2023 from bank acquisitions.

BOLI income totaled $4.0 million for the six months ended June 30, 2023 and $2.7 million for the six months ended June 30, 2022.

Other income was $4.8 million in the second quarter of 2023, a decrease of $1.8 million quarter-over-quarter and an increase of $0.7 million year-over-year.

The decrease from prior quarter is primarily the result of BOLI death benefits of $2.1 million recognized in the prior quarter.

For the six months ended June 30, 2023, other income totaled $11.3 million, an increase of $4.2 million, or 59%, compared to the six months ended June 30, 2022.

Securities losses in the second quarter of 2023 totaled $0.2 million, resulting from mark to market adjustments on the Company’s CRA qualified mutual funds.

Noninterest Expenses

Noninterest expense for the first quarter of 2023 totaled $107.5 million, an increase of $16.0 million, or 17%, compared to the fourth quarter of 2022, and an increase of $48.6 million, or 82%, from the first quarter of 2022.

Noninterest expense for the second quarter of 2023 totaled $107.9 million, an increase of $0.4 million, or 0.4%, compared to the first quarter of 2023, and an increase of $51.7 million, or 92%, from the second quarter of 2022.

For the six months ended June 30, 2023, noninterest expense totaled $215.3 million, an increase of $100.3 million, or 87%, compared to the six months ended June 30, 2022.

Noninterest expenses are detailed as follows:

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Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands) 2023 2023 2022 2023 2022

9 unchanged sentences

Amortization of intangibles 7,654 6,727 1,446 14,381 2,892

Foreclosed property expense and net loss (gain) on sale 195 (411) (164)

Foreclosed property expense and net (gain) loss on sale (57) 195 (968) 138 (1,132)

Provision for credit losses on unfunded commitments — 1,239 — 1,239 142

1 unchanged sentence

Total $ 107,865 $ 107,475 $ 56,148 $ 215,340 $ 115,065

Salaries and wages totaled $47.6 million for the first quarter of 2023, $45.4 million for the fourth quarter of 2022, and $28.2 million for the first quarter of 2022.

The first quarter of 2023 reflects $4.2 million in merger-related expenses compared to $5.7 million in the fourth quarter of 2022 and $3.0 million in the first quarter of 2022.

Excluding merger-related expenses, the increases in the first quarter of 2023 compared to the fourth quarter of 2022 and to the prior year quarter were the result of the net addition of branch locations and associates, as well as new bankers and operational staff associated with the acquisitions.

During the first quarter of 2023, employee benefit costs, which include costs associated with the Company's self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $8.6 million, an increase of $3.3 million, or 62%, compared to the fourth quarter of 2022, and an increase of $3.1 million, or 56%, compared to the first quarter of 2022.

The increases from both the fourth quarter of 2022 and the first quarter of 2022 reflect higher seasonal payroll taxes, 401(k) contributions and healthcare-related costs attributed to higher headcount.

Salaries and wages totaled $45.2 million for the second quarter of 2023, $47.6 million for the first quarter of 2023, and $28.1 million for the second quarter of 2022.

The second quarter of 2023 reflects $1.6 million in merger-related expenses compared to $4.2 million in the first quarter of 2023.

For the six months ended June 30, 2023, salaries and wages totaled $92.8 million, an increase of $36.5 million, or 65%, compared to the six months ended June 30, 2022.

Excluding merger-related expenses, increases in 2023 are the result of the overall growth in the organization.

In the third quarter of 2023, the Company is continuing its focus on efficiency and streamlining operations, and in late July 2023, executed a reduction in the Company’s workforce by approximately 5%.

The Company will incur severance charges in a range of approximately $2.0 to $3.0 million in the third quarter of 2023.

The resulting lower compensation expense in the third quarter of 2023 will largely be offset by investments in marketing to drive low-cost deposit growth, and lower expense deferral associated with slowing loan originations.

The Company expects the full benefit of the reduction in workforce to materialize in the fourth quarter of 2023.

During the second quarter of 2023, employee benefit costs, which include costs associated with the Company's self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $7.5 million, a decrease of $1.1

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million, or 13%, compared to the first quarter of 2023, and an increase of $3.3 million, or 80%, compared to the second quarter of 2022.

The decrease from the first quarter of 2023 reflects higher seasonal payroll taxes impacting the first quarter of 2023.

For the six months ended June 30, 2023, employee benefit costs totaled $16.0 million, an increase of $6.4 million, or 66%, compared to the six months ended June 30, 2022.

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

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

Outsourced data processing costs totaled $14.6 million, $9.9 million, and $6.2 million for the first quarter of 2023, fourth quarter of 2022, and first quarter of 2022, respectively.

Higher expenses in the first quarter of 2023 included $6.6 million in direct acquisition-related costs, compared to $2.6 million in the fourth quarter of 2022 and $0.6 million in the first quarter of 2022.

Telephone and data line expenditures, including electronic communications with customers and between branch and customer support locations and personnel, as well as with third-party data processors, were $1.1 million, $1.2 million, and $0.7 million for the first quarter of 2023, fourth quarter of 2022, and first quarter of 2022, respectively.

Total occupancy, furniture and equipment expenses were $9.2 million in the first quarter of 2023, $7.4 million in the fourth quarter of 2022, and $5.4 million in the first quarter of 2022.

Increases in the first quarter reflect the impact of the Company’s expansion of its footprint across Florida.

Marketing expenses totaled $2.2 million in the first quarter of 2023, $1.8 million in the fourth quarter of 2022, and $1.2 million in the first quarter of 2022.

Legal and professional fees for the first quarter of 2023 were $7.5 million, a decrease of $1.7 million, or 18%, compared to the fourth quarter of 2022, and an increase of $2.7 million, or 56%, compared to the first quarter of 2022.

Acquisition-related expenses were $4.8 million in the first quarter of 2023, $6.5 million in the fourth quarter of 2022, and $2.9 million in the first quarter of 2022.

FDIC assessments were $1.4 million for the first quarter of 2023, $0.9 million in the fourth quarter of 2022, and $0.8 million in the first quarter of 2022.

Amortization of intangibles increased by $2.0 million compared to the fourth quarter of 2022 and $5.3 million compared to the first quarter of 2022.

The acquisition of Professional added $48.9 million in core deposit intangible assets, which will be amortized using an accelerated amortization method.

Foreclosed property expense and net loss (gain) on sale was $0.2 million in the first of 2023, net gain of $0.4 million in the fourth quarter of 2022, and net gain of $0.2 million in the first quarter of 2022.

A provision of $1.2 million was recorded for potential credit losses on unfunded lending commitments in the first quarter of 2023, which included $1.0 million associated with the acquisition of Professional.

This compares to no provision recorded during the fourth quarter of 2022, and $0.1 million for the first quarter of 2022.

Other expenses totaled $7.1 million, $6.1 million and $4.7 million for the first quarter of 2023, the fourth quarter of 2022 and the first quarter of 2022, respectively.

Increases reflect higher costs in general business and customer support activities resulting from growth in the customer base and the expanded branch footprint.

For the first quarter of 2023, the efficiency ratio, defined as noninterest expense less amortization of intangibles and gains, losses, and expenses on foreclosed properties divided by net operating revenue (net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses), was 65.43%, compared to 63.39% for the fourth quarter of 2022 and 62.33% for the first quarter of 2022.

The adjusted efficiency ratio 1 was 53.10% in the first quarter of 2023, compared to 51.52% in the fourth quarter of 2022 and 54.86% in the first quarter of 2022.

In the first quarter of 2023, adjusted noninterest expense 1 as a percent of average tangible assets was 2.47%, compared to 2.42% for the fourth quarter of 2022 and 1.99% for the first quarter of 2022.

The Company expects that the adjusted efficiency ratio 1 will benefit from merger-related expense synergies beginning in the third quarter of 2023.

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Quarter Quarter Quarter

Outsourced data processing costs totaled $20.2 million, $14.6 million, and $6.0 million for the second quarter of 2023, first quarter of 2023, and second quarter of 2022, respectively.

For the six months ended June 30, 2023 and June 30, 2022, outsourced data processing costs totaled $34.8 million and $12.2 million, respectively.

Higher expenses in the second quarter of 2023 included $10.9 million in direct acquisition-related costs, including termination penalties on acquired technology contracts upon system conversion, compared to $6.6 million in the first quarter of 2023, and $0.4 million in the second quarter of 2022.

Telephone and data line expenditures, including electronic communications with customers and between branch and customer support locations and personnel, as well as with third-party data processors, were $1.5 million, $1.1 million, and $0.9 million for the second quarter of 2023, first quarter of 2023, and second quarter of 2022, respectively.

For the six months ended June 30, 2023, telephone and data line expenditures totaled $2.6 million, an increase of $1.0 million, or 58%, compared to the six months ended June 30, 2022.

The increases during 2023 reflect the expansion of the branch footprint.

Total occupancy, furniture and equipment expenses were $9.4 million in the second quarter of 2023, $9.2 million in the first quarter of 2023, and $5.6 million in the second quarter of 2022.

For the six months ended June 30, 2023, total occupancy, furniture and equipment expenses totaled $18.6 million, an increase of $7.6 million, or 68%, compared to the six months ended June 30, 2022.

Year over year increases reflect the expansion of the Company’s footprint across Florida.

Marketing expenses totaled $2.0 million in the second quarter of 2023, $2.2 million in the first quarter of 2023, and $1.9 million in the second quarter of 2022.

For the six months ended June 30, 2023, marketing expenses totaled $4.3 million, an increase of $1.2 million, or 40%, compared to the six months ended June 30, 2022.

Legal and professional fees for the second quarter of 2023 were $4.1 million, a decrease of $3.4 million, or 46%, compared to the first quarter of 2023, and an increase of $1.1 million, or 38%, compared to the second quarter of 2022.

Acquisition-related expenses were $1.7 million in the second quarter of 2023, $4.8 million in the first quarter of 2023, and $1.4 million in the second quarter of 2022.

For the six months ended June 30, 2023, legal and professional fees totaled $11.5 million, an increase of $3.8 million, or 49%, compared to the six months ended June 30, 2022.

Acquisition-related expenses were $6.5 million for the six months ended June 30, 2023 and $4.3 million for the six months ended June 30, 2022.

FDIC assessments were $2.1 million for the second quarter of 2023, $1.4 million in the first quarter of 2023, and $0.7 million in the second quarter of 2022.

For the six months ended June 30, 2023, FDIC assessments totaled $3.6 million compared to $1.5 million for the six months ended June 30, 2022.

The increases reflect deposit growth from acquisitions in the fourth quarter of 2022 and first quarter of 2023.

Amortization of intangibles increased by $0.9 million compared to the first quarter of 2023 and $6.2 million compared to the second quarter of 2022.

For the six months ended June 30, 2023, amortization of intangibles totaled $14.4 million compared to $2.9 million for the six months ended June 30, 2022.

The acquisitions in the fourth quarter of 2022 and first quarter of 2023 added $110.6 million in core deposit intangible assets, which are amortized using an accelerated amortization method.

Foreclosed property expense and net gain/loss on sale was net a gain of $0.1 million in the second of 2023, a net loss of $0.2 million in the first quarter of 2023, and a net gain of $1.0 million in the second quarter of 2022.

No adjustments were recorded to the reserve for potential credit losses on unfunded lending commitments in the second quarter of 2023.

This compares to $1.2 million in provision recorded during the first quarter of 2023, primarily associated with the acquisition of Professional, and no adjustments recorded for the second quarter of 2022.

Other expenses totaled $8.3 million, $7.1 million and $5.3 million for the second quarter of 2023, the first quarter of 2023 and the second quarter of 2022, respectively.

For the six months ended June 30, 2023, other expense totaled $15.4 million, an increase of $5.3 million, or 53%, compared to the six months ended June 30, 2022.

Increases reflect higher costs in general business and customer support activities resulting from growth in the customer base and the expanded branch footprint, and to maintaining parallel activities and processes prior to the conversion of Professional in June 2023.

For the second quarter of 2023, the efficiency ratio, defined as noninterest expense less amortization of intangibles and gains, losses, and expenses on foreclosed properties divided by net operating revenue (net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses), was 67.34%, compared to 65.43% for the first

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quarter of 2023 and 56.22% for the second quarter of 2022.

For the six months ended June 30, 2023, the efficiency ratio was 66.37%, compared to 59.17% for the six months ended June 30, 2022.

The adjusted efficiency ratio 1 was 56.44% in the second quarter of 2023, compared to 53.10% in the first quarter of 2023 and 53.15% in the second quarter of 2022.

The increase from first quarter 2023 primarily reflects the impact of higher deposit rates on net interest income during the period.

For the six months ended June 30, 2023, the adjusted efficiency ratio 1 was 54.76%, compared to 53.97% for the six months ended June 30, 2022.

Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands, except ratios) 2023 2023 2022 2023 2022

10 unchanged sentences

$ 83,992 $ 81,925 $ 51,663 $ 165,917 $ 102,368

Foreclosed property expense and net gain on sale (195) 411 164

Foreclosed property expense and net gain (loss) on sale 57 (195) 968 (138) 1,132

Provision for credit losses on unfunded commitments — (1,239) — (1,239) (142)

4 unchanged sentences

56.44 53.10 53.15 54.76 53.97

Adjusted noninterest expense as a percent of average tangible assets 1,2

2.47 2.42 1.99

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

2 Adjusted efficiency ratio is defined as noninterest expense, including adjustments to noninterest expense divided by aggregated tax equivalent net interest income and noninterest income, including adjustments to revenue.

The Company continues to be keenly focused on disciplined expense control and expects to benefit from merger-related expense synergies beginning in the third quarter of 2023.

Provision for Credit Losses

The provision for credit losses was $31.6 million for the first quarter of 2023, compared to $14.1 million for the fourth quarter of 2022 and $6.6 million for the first quarter of 2022.

Each quarter included an increase in provision related to loans acquired through bank acquisitions, representing $26.6 million, $15.0 million, and $5.1 million, respectively.

The provision for credit losses in the first quarter of 2023 on the Professional acquisition was in line with the allowance coverage rate expected at the announcement of the transaction.

For the first quarter of 2023, the Company recorded tax expense of $2.7 million, compared to $7.8 million in the fourth quarter of 2022 and $5.8 million in the first quarter of 2022, with an effective tax rate of 18.6%, 24.6% and 22.1%, respectively.

The first quarter of 2023 included a discrete benefit of $0.6 million related to the BOLI distribution, which combined with lower overall pre-tax income, resulted in a lower effective tax rate when compared to prior quarters.

Tax benefits related to stock-based compensation totaled $0.2 million in the first quarter of 2023, $0.2 million in the fourth quarter of 2022, and $0.5 million in the first quarter of 2022.

The presentation of adjusted results excludes the discrete benefit associated with BOLI, and applies an incremental tax rate of 25.3% on adjusted expenses.

The resulting effective tax rate on adjusted net income 1 is 22.7%.

The provision for credit losses was a net benefit of $0.8 million for the second quarter of 2023, compared to provision expense of $31.6 million for the first quarter of 2023, and provision expense of $0.8 million for the second quarter of 2022.

The first quarter of 2023 included $26.6 million day one provision recorded in conjunction with the Professional acquisition.

For the second quarter of 2023, the Company recorded tax expense of $10.2 million, compared to $2.7 million in the first quarter of 2023 and $8.9 million in the second quarter of 2022, with an effective tax rate of 24.6%, 18.6% and 21.3%, respectively.

The first quarter of 2023 included a discrete benefit of $0.6 million related to the BOLI distribution which, combined with lower overall pre-tax income, resulted in a lower effective tax rate.

Tax expense related to stock-based compensation totaled $0.3 million in the second quarter of 2023, compared to a tax benefit of $0.2 million in the first quarter of 2023, and a tax benefit of $0.4 million in the second quarter of 2022.

For the six months ended June 30, 2023, tax expense totaled $12.9 million, a decrease of $1.8 million, or 12%, compared to the six months ended June 30, 2022 due to lower pre-tax income.

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Explanation of Certain Unaudited Non-GAAP Financial Measures

7 unchanged sentences

These disclosures should not be considered an alternative to GAAP.

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Reconciliation of Non-GAAP Measures

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Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands, except per share data) 2023 2023 2022 2023 2022

2 unchanged sentences

Noninterest Income $ 21,576 $ 22,445 $ 16,964 $ 44,021 $ 32,337

Securities losses, net (107) (18) 452

Securities losses (gains), net 176 (107) 300 69 752

BOLI benefits on death (included in other income) — (2,117) — (2,117) —

20 unchanged sentences

Adjusted Noninterest Expense $ 83,992 $ 81,925 $ 51,663 $ 165,917 $ 102,368

Foreclosed property expense and net (loss) gain on sale (195) 411 164

Foreclosed property expense and net gain (loss) on sale 57 (195) 968 (138) 1,132

Provision for credit losses on unfunded commitments — (1,239) — (1,239) (142)

10 unchanged sentences

Noninterest expense 107,865 107,475 56,148 215,340 115,065

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Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands, except per share data) 2023 2023 2022 2023 2022

11 unchanged sentences

Adjusted Return on Average Tangible Assets 1.41 % 0.90 % 1.38 % 1.16 % 1.23 %

Pre-Tax Pre-Provision return on Average Tangible Assets 1.33 % 1.58 % 1.66 % 1.45 % 1.51 %

Impact of adjustments on Pre-Tax Pre-Provision earnings 0.52 0.60 0.11 0.56 0.19

Adjusted Pre-Tax Pre-Provision Return on Tangible Assets 1.85 % 2.18 % 1.77 % 2.01 % 1.70 %

Average Shareholders' Equity $ 2,070,529 $ 1,897,045 $ 1,350,568 $ 1,984,264 $ 1,375,413

21 unchanged sentences

$ 112,962 $ 115,409 $ 79,044 $ 228,371 $ 151,966

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Second First Second Six Months Ended

Quarter Quarter Quarter June 30,

(In thousands, except per share data) 2023 2023 2022 2023 2022

Net Interest Margin 2

7 unchanged sentences

Loan interest income excluding tax equivalent adjustment $ 148,265 $ 135,168 $ 69,307 $ 283,433 $ 136,425

First Fourth First

Quarter Quarter Quarter

(In thousands, except per share data) 2023 2022 2022

Securities Interest Income 2

11 unchanged sentences

Financial Condition

Total assets as of March 31, 2023 were $15.3 billion, an increase of $3.1 billion, or 26%, from December 31, 2022.

Total assets as of June 30, 2023 were $15.0 billion, an increase of $2.9 billion, or 24%, from December 31, 2022.

The increase primarily reflects the acquisition of Professional on January 31, 2023, which added $2.7 billion in assets.

Information related to yields, maturities, carrying values and fair value of the Company’s debt securities is set forth in “Note 3 – Securities” of the Company’s condensed consolidated financial statements.

At March 31, 2023, the Company had $2.0 billion in securities available-for-sale and $737.9 million in securities held-to-maturity.

The Company's total debt securities portfolio increased $134.7 million, or 5%, from December 31, 2022.

During the three months ended March 31, 2023, there were $22.4 million of debt securities purchased, $167.1 million acquired through the acquisition of Professional and $48.7 million in paydowns and maturities over the same period.

At June 30, 2023, the Company had $1.9 billion in securities available-for-sale and $707.8 million in securities held-to-maturity.

The Company's total debt securities portfolio increased $4.9 million from December 31, 2022.

During the six months ended June 30, 2023, there were $22.4 million of debt securities purchased, $167.1 million acquired through the acquisition of Professional and $149.6 million in paydowns and maturities over the same period.

$22.1 million of the securities acquired from Professional were immediately sold with no gain or loss recognized.

Debt securities generally return principal and interest monthly.

The modified duration of the available-for-sale portfolio at March 31, 2023 was 3.8 years, compared to 3.7 years at December 31, 2022.

At March 31, 2023, available-for-sale securities had gross unrealized losses of $224.8 million and gross unrealized gains of $1.6 million, compared to gross unrealized losses of $248.7 million and gross unrealized gains of $1.1 million at December 31, 2022.

The increase in market value was the result of the change in benchmark interest rates and product spreads during the period.

The modified duration of the available-for-sale portfolio at June 30, 2023 was 4.1, compared to 3.7 at December 31, 2022.

At June 30, 2023, available-for-sale securities had gross unrealized losses of $253.4 million and gross unrealized gains of $0.9 million, compared to gross unrealized losses of $248.7 million and gross unrealized gains of $1.1 million at December 31, 2022.

The changes were the result of changes in benchmark interest rates and product spreads during the period.

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

As of March 31, 2023, the Company expected to recover the entire amortized cost basis of these securities, and therefore, no allowance for credit losses was recorded.

As of June 30, 2023, the Company expected to recover the entire amortized cost basis of these securities, and therefore, no allowance for credit losses was recorded.

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

2 unchanged sentences

government sponsored entities totaled $2.1 billion, or 82%, of the total portfolio.

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The portfolio includes $143.0 million, with a fair value of $129.7 million, in private label residential and commercial mortgage-backed securities and collateralized mortgage obligations.

6 unchanged sentences

Collateralized loan obligations are special purpose vehicles that purchase first lien broadly syndicated corporate loans while providing support to senior tranche investors.

As of March 31, 2023, all of the Company’s collateralized loan obligations were in AAA/AA tranches with average credit support of 32%.

The Company utilizes credit models with assumptions of loan level defaults, recoveries, and

prepayments to evaluate each security for potential credit losses.

As of June 30, 2023, all of the Company’s collateralized loan obligations were in AAA/AA tranches with average credit support of 32%.

The Company utilizes credit models with assumptions of loan level defaults, recoveries, and prepayments to evaluate each security for potential credit losses.

The result of this analysis did not indicate expected credit losses.

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

government agencies, each of which is expected to recover any price depreciation over its holding period as the debt securities move to maturity.

government-sponsored entities, each of which is expected to recover any price depreciation over its holding period as the debt securities move to maturity.

The Company has significant liquidity and available borrowing capacity through other sources if needed, and has the intent and ability to hold these investments to maturity.

At March 31, 2023, the Company has determined that all debt securities in an unrealized loss position are the result of both broad investment type spreads and the current interest rate environment.

At June 30, 2023, the Company has determined that all debt securities in an unrealized loss position are the result of both broad investment type spreads and the current interest rate environment.

Management believes that each investment will recover any price depreciation over its holding period as the debt securities move to maturity, and management has the intent and ability to hold these investments to maturity if necessary.

Therefore, at March 31, 2023, no allowance for credit losses has been recorded.

Therefore, at June 30, 2023, no allowance for credit losses has been recorded.

Loan Portfolio

Loans, net of unearned income and excluding the allowance for credit losses, were $10.1 billion at March 31, 2023, a $2.0 billion increase from December 31, 2022.

The increase during the first quarter of 2023 included $2.0 billion added through the Professional acquisition.

Loans, net of unearned income and excluding the allowance for credit losses, were $10.1 billion at June 30, 2023, a $2.0 billion increase from December 31, 2022.

The increase during the first half of 2023 included $2.0 billion added through the Professional acquisition.

The Company remains committed to sound risk management procedures.

Portfolio diversification in terms of asset mix, industry, and loan type has been an important element of the Company's lending strategy.

The average loan size is only $289 thousand, and the average commercial loan size is only $717 thousand at March 31, 2023, reflecting the Company's longtime focus on granularity and on creating valuable customer relationships.

The average loan size is only $278 thousand, and the average commercial loan size is only $685 thousand at June 30, 2023, reflecting the Company's longtime focus on granularity and on creating valuable customer relationships.

Lending policies contain guardrails that pertain to lending by type of collateral and purpose, along with limits regarding loan concentrations and the principal amount of loans.

The Company's exposure to commercial real estate lending remains well below regulatory limits (see “Loan Concentrations”).

The following table details loan portfolio composition at March 31, 2023 and December 31, 2022 for portfolio loans, purchased credit deteriorated (“PCD”) and loans purchased which are not considered purchased credit deteriorated (“Non-PCD”) as defined in Note 4-Loans.

March 31, 2023

The following table details loan portfolio composition at June 30, 2023 and December 31, 2022 for portfolio loans, purchased credit deteriorated (“PCD”) and loans purchased which are not considered purchased credit deteriorated (“Non-PCD”) as defined in Note 4-Loans.

June 30, 2023

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

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Totals $ 6,264,044 $ 3,499,670 $ 354,205 $ 10,117,919

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December 31, 2022

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Totals $ 5,944,193 $ 1,965,749 $ 234,782 $ 8,144,724

The amortized cost basis of loans at March 31, 2023 included net deferred costs of $35.7 million and included $35.1 million at December 31, 2022.

At March 31, 2023, the remaining fair value adjustments on acquired loans were $216.0 million, or 5.0%, of the outstanding acquired loan balances, compared to $97.7 million, or 4.3%, of the acquired loan balances at December 31, 2022.

The amortized cost basis of loans included net deferred costs of $37.6 million at June 30, 2023 and $35.1 million at December 31, 2022.

At June 30, 2023, the remaining fair value adjustments on acquired loans were $201.8 million, or 5.0%, of the outstanding acquired loan balances, compared to $97.7 million, or 4.3%, of the acquired loan balances at December 31, 2022.

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

The following table details commercial real estate - non-owner occupied loans.

March 31, 2023

June 30, 2023

(In thousands) Amortized Cost Basis % of Total Loans

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Total commercial real estate - non-owner occupied $ 3,370,211 33.32 %

Commercial real estate (“CRE”) non-owner occupied loans increased by $822.3 million in the three months ended March 31, 2023, totaling $3.4 billion at March 31, 2023 compared to $2.6 billion at December 31, 2022.

Commercial real estate (“CRE”) non-owner occupied loans increased by $780.4 million in the six months ended June 30, 2023, totaling $3.4 billion at June 30, 2023 compared to $2.6 billion at December 31, 2022.

Non-owner occupied CRE loans are collateralized by properties where the source of repayment is typically from the sale or lease of the property.

Within the non-owner occupied CRE portfolio, the largest segment is Retail properties, which totaled approximately $1.0 billion at March 31, 2023.

Within the non-owner occupied CRE portfolio, the largest segment is Retail properties, which totaled approximately $1.1 billion at June 30, 2023.

This segment targets grocery or credit tenant-anchored shopping plazas, single credit tenant retail buildings, smaller outparcels, and other small retail units.

Loans in this segment have a weighted average loan to value of 52% and an average loan size of $2.1 million.

The second-largest segment in the non-owner occupied CRE portfolio is Office properties, which totaled approximately $618 million at March 31, 2023.

The second-largest segment in the non-owner occupied CRE portfolio is Office properties, which totaled approximately $625.6 million at June 30, 2023.

This segment targets low to mid-rise suburban offices and is broadly diversified across many types of professional services.

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Loans in this segment have a weighted average loan to value of 55% and an average loan size of $1.7 million.

Owner-occupied CRE loans increased by $174.2 million in the three months ended March 31, 2023 to $1.7 billion.

Owner-occupied CRE loans increased by $191.1 million in the six months ended June 30, 2023 to $1.7 billion.

Owner-occupied CRE is used by the owner, where the primary source of repayment is the cash flow from business operations housed within the property.

Commercial and financial loans are extended to commercial customers for working capital, physical asset expansion, asset acquisition or other business purposes.

Balances increased from December 31, 2022 by $301.8 million, or 22%, totaling $1.7 billion at March 31, 2023, largely attributed to the Professional acquisition.

Residential mortgage loans increased $504.9 million to $2.4 billion as of March 31, 2023.

Included in the balance as of March 31, 2023, were $1.1 billion of fixed rate mortgages, $823.4 million of adjustable rate mortgages and $479.0 million in primarily floating rate home equity lines of credit (“HELOCs”), compared to $964.3 million, $402.3 million and $482.9 million, respectively, at December 31, 2022.

Balances increased from December 31, 2022 by $262.3 million, or 19%, totaling $1.6 billion at June 30, 2023, largely attributed to the Professional acquisition.

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Residential mortgage loans increased $546.8 million to $2.4 billion as of June 30, 2023.

Included in the balance as of June 30, 2023, were $1.1 billion of fixed rate mortgages, $817.2 million of adjustable rate mortgages and $481.2 million in primarily floating rate home equity lines of credit (“HELOCs”), compared to $964.3 million, $402.3 million and $482.9 million, respectively, at December 31, 2022.

The increases from December 31, 2022 include approximately $483.6 million acquired through the Professional acquisition.

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Substantially all residential originations have been underwritten to conventional loan agency standards, including loan balances that exceed agency value limitations.

The average LTV of our HELOC portfolio is 63%, with 32% of the loans being in first lien position at March 31, 2023, compared to an average LTV of 69%, with 31% of the portfolio being in the first lien position at December 31, 2022.

The Company also provides consumer loans, which include installment loans, auto loans, marine loans, and other consumer loans, which increased $15.2 million, or 5%, to total $301.7 million at March 31, 2023, compared to $286.6 million at December 31, 2022.

At March 31, 2023, the Company had unfunded commitments to extend credit of $3.8 billion, compared to $2.8 billion at December 31, 2022.

The average LTV of our HELOC portfolio is 62%, with 31% of the loans being in first lien position at June 30, 2023, compared to an average LTV of 69%, with 31% of the portfolio being in the first lien position at December 31, 2022.

The Company also provides consumer loans, which include installment loans, auto loans, marine loans, and other consumer loans, which decreased $14.5 million, or 5%, to total $272.1 million at June 30, 2023, compared to $286.6 million at December 31, 2022.

At June 30, 2023, the Company had unfunded commitments to extend credit of $4.2 billion, compared to $2.8 billion at December 31, 2022.

Loan Concentrations

The Company has developed prudent guardrails to manage loan types that are most impacted by stressed market conditions in order to minimize credit risk concentration to capital.

Outstanding balances for commercial and CRE loans individually greater than $15 million totaled $585.6 million and represented 6% of the total portfolio at March 31, 2023.

The Company has developed prudent guardrails to manage loan types that are most impacted by stressed market conditions to minimize credit risk concentration to capital.

Outstanding balances for commercial and CRE loans individually greater than $15 million totaled $628.3 million and represented 6% of the total portfolio at June 30, 2023.

Concentrations in total construction and land development loans and total CRE loans are maintained well below regulatory limits.

Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital were 48% and 258%, respectively, at March 31, 2023, compared to 45% and 230%, respectively, at December 31, 2022.

The increase quarter over quarter was primarily the result of the acquisition of Professional Bank.

Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital were 52% and 256%, respectively, at June 30, 2023, compared to 45% and 230%, respectively, at December 31, 2022.

The increase was primarily the result of the acquisition of Professional Bank.

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

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Nonperforming Loans, Troubled Borrower Modifications, Other Real Estate Owned and Credit Quality

Nonperforming assets (“NPAs”) at March 31, 2023 totaled $58.5 million, and were comprised of $50.8 million of nonaccrual loans, and $7.8 million of other real estate owned (“OREO”).

Compared to December 31, 2022, nonaccrual loans increased $21.9 million, primarily the result of the addition of one CRE non-owner occupied relationship.

The $5.5 million increase in OREO is the result of closures of three branch properties.

Nonperforming assets (“NPAs”) at June 30, 2023 totaled $55.9 million, and were comprised of $48.3 million of nonaccrual loans, and $7.5 million of other real estate owned (“OREO”).

Compared to December 31, 2022, nonaccrual loans increased $19.5 million, primarily the result of the acquisition of Professional.

The $5.2 million increase in OREO is the result of closures of three branch properties in the first quarter of 2023.

Overall, NPAs increased $24.7 million from $31.1 million as of December 31, 2022.

At March 31, 2023, approximately 75% of nonaccrual loans were secured with real estate.

At June 30, 2023, approximately 49% of nonaccrual loans were secured with real estate.

See the tables below for details about nonaccrual loans.

At March 31, 2023, nonaccrual loans reflected cumulative write downs of approximately $9.2 million, including reserves on individually evaluated loans.

Nonperforming loans to total loans outstanding at March 31, 2023 increased to 0.50% from 0.35% at December 31, 2022.

Nonperforming assets to total assets at March 31, 2023 increased to 0.38% from 0.26% at December 31, 2022.

At June 30, 2023, nonaccrual loans reflected cumulative write downs of approximately $18.7 million, including reserves on individually evaluated loans.

Nonperforming loans to total loans outstanding at June 30, 2023 increased to 0.48% from 0.35% at December 31, 2022.

Nonperforming assets to total assets at June 30, 2023 increased to 0.37% from 0.26% at December 31, 2022.

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The table below sets forth details related to nonaccrual loans.

March 31, 2023

June 30, 2023

Nonaccrual Loans

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

During the quarter ending March 31, 2023, there was one loan totaling $29 thousand that was a TBM, which is considered immaterial.

As of June 30, 2023, there were five loans totaling $0.9 million that were TBMs, which is considered immaterial.

Allowance for Credit Losses on Loans

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

During the three months ended March 31, 2023, the Company recorded a provision of $31.6 million, including $26.6 million for loans acquired in the Professional acquisition.

The Company reported net charge-offs for the first quarter of 2023 of $3.2 million and, for the four most recent quarters, net charge-offs averaged 0.05% of outstanding loans.

The ratio of allowance for credit losses to total loans was 1.54% at March 31, 2023, 1.40% at December 31, 2022, and 1.39% at March 31, 2022.

During the six months ended June 30, 2023, the Company recorded provision expense of $30.8 million.

The provision expense included $26.6 million for loans acquired in the Professional acquisition.

The Company reported net charge-offs for the six months ended June 30, 2023 of $3.9 million and, for the four most recent quarters, net charge-offs averaged 0.06% of outstanding loans.

The ratio of allowance for credit losses to total loans was 1.58% at June 30, 2023, 1.40% at December 31, 2022, and 1.39% at June 30, 2022.

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LIBOR Transition

The Company’s LIBOR transition steering committee is responsible for overseeing the execution of the Company’s enterprise-wide LIBOR transition program, and for evaluating and mitigating risks associated with the transition from LIBOR.

The LIBOR transition program includes a comprehensive review of the financial products, agreements, contracts, and business processes that may use LIBOR as a reference rate, and the development and execution of strategy to transition away from LIBOR, with appropriate consideration of the potential financial, customer, counterpart, regulatory and legal impacts.

The Company continues to execute its LIBOR transition program, and to monitor regulatory and legislative activity to identify any necessary actions and facilitate the transition to alternative reference rates.

In 2021, the Company ceased issuance of new LIBOR loans, and as of March 31, 2023, the Company has approximately $277.2 million in existing loans for which the repricing index is tied to LIBOR.

The Company is actively working to address contracts without an alternative rate or sufficient fallback language in advance of cessation of LIBOR in June 2023;

however, the Company expects to leverage the LIBOR Act for its intended purpose, to address LIBOR exposures when necessary.

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

ISDA has developed fallback language for swap agreements and has established a protocol to allow counterparties to modify legacy trades to include the new fallback language.

The Company also invests in securities and has issued subordinated debt tied to LIBOR.

The Company continues to monitor regulatory and legislative activity with regard to these products to identify and execute necessary actions to facilitate the transition to alternative reference rates.

At this time, alternative reference rates are predominantly SOFR based.

The Company’s LIBOR transition steering committee has been responsible for overseeing the execution of the Company’s enterprise-wide LIBOR transition program, and for evaluating and mitigating risks associated with the transition from LIBOR.

The remaining tenors of U.S.

dollar LIBOR ceased publication after June 30, 2023.

The Company reviewed its LIBOR loan contracts and customer swap agreements to identify required remediation to support the transition away from LIBOR.

As of June 30, 2023, substantially all of these contracts include standardized fallback language or have been amended to new reference rates, which are predominantly SOFR-based.

The Company also invests in securities and has issued subordinated debt indexed to LIBOR which, as expected, have transitioned to SOFR-based reference rates or will transition on their next reset date in accordance with existing fallback provisions of the LIBOR Act.

The transition did not have a material impact on the Company’s financial position, and results and operations.

Cash and Cash Equivalents and Liquidity Risk Management

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Cash flows from operations are a significant component of liquidity risk management and the Company considers both deposit maturities and the scheduled cash flows from loan and investment maturities and payments when managing risk.

Cash and cash equivalents, including interest bearing deposits, totaled $791.2 million at March 31, 2023, compared to $201.9 million at December 31, 2022.

Higher cash and cash equivalent balances at March 31, 2023 reflect the Company’s increased liquidity position strategy during the quarter.

Cash and cash equivalents, including interest bearing deposits, totaled $727.9 million at June 30, 2023, compared to $201.9 million at December 31, 2022.

Higher cash and cash equivalent balances at June 30, 2023 reflect the Company’s increased liquidity position strategy during the year.

Deposits are a primary source of liquidity.

The stability of this funding source is affected by numerous factors, including returns available to customers on alternative investments, the quality of customer service levels, perception of safety and competitive forces.

Uninsured deposits represented only 36% of overall deposit accounts at March 31, 2023.

Uninsured deposits represented only 34% of overall deposit accounts at June 30, 2023.

This includes public funds under the Florida Qualified Public Depository program, which provides loss protection to depositors beyond FDIC insurance limits.

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The Company has liquidity sources as discussed below, including cash and lines of credit with the Federal Reserve and FHLB, that represent 155% of uninsured deposits, and 184% of uninsured and uncollateralized deposits.

In addition to $0.8 billion in cash and cash equivalents at March 31, 2023, the Company had $5.6 billion in available borrowing capacity, including $4.6 billion in available collateralized lines of credit, $0.7 billion of unpledged debt securities available as collateral for potential additional borrowings, and available unsecured lines of credit of $0.3 billion.

In addition to $0.7 billion in cash and cash equivalents at June 30, 2023, the Company had $5.7 billion in available borrowing capacity, including $4.7 billion in available collateralized lines of credit, $0.7 billion of unpledged debt securities available as collateral for potential additional borrowings, and available unsecured lines of credit of $0.3 billion.

Included in available borrowing capacity is approximately $0.4 billion under the Federal Reserve's Bank Term Funding Program, which the Company has not utilized and does not plan to utilize.

The Company may also access funding by acquiring brokered deposits.

Brokered deposits at March 31, 2023, December 31, 2022, and March 31, 2022 totaled $415.9 million, $58.6 million, and $126.2 million, respectively.

Brokered deposits at June 30, 2023, December 31, 2022, and June 30, 2022 totaled $591.5 million, $58.6 million, and $106.8 million, respectively.

Contractual maturities for assets and liabilities are reviewed to meet current and expected future liquidity requirements.

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The Company has traditionally relied upon dividends from Seacoast Bank and securities offerings to provide funds to pay the Company’s expenses and to service the Company’s debt.

During the first quarter of 2023, Seacoast Bank distributed $9.9 million to the Company and, at March 31, 2023, is eligible to distribute dividends to the Company of approximately $141.9 million without prior regulatory approval.

At March 31, 2023, the Company had cash and cash equivalents at the parent of approximately $128.8 million, compared to $111.8 million at December 31, 2022.

During the second quarter of 2023, Seacoast Bank distributed $5.1 million to the Company and, at June 30, 2023, is eligible to distribute dividends to the Company of approximately $168.8

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million without prior regulatory approval.

At June 30, 2023, the Company had cash and cash equivalents at the parent of approximately $117.9 million, compared to $111.8 million at December 31, 2022.

Deposits and Borrowings

Customer relationship funding is detailed in the following table for the periods specified:

March 31, December 31,

June 30, December 31,

(In thousands, except ratios) 2023 2022

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Highlighting the Company's longstanding relationship-based strategy, the average tenure for a Seacoast customer is 9.6 years.

Total deposits increased $2.3 billion, or 23%, to $12.3 billion at March 31, 2023, compared to $10.0 billion at December 31, 2022.

Total deposits increased $2.3 billion, or 23%, to $12.3 billion at June 30, 2023, compared to $10.0 billion at December 31, 2022.

The increase primarily reflects the impact of the Professional acquisition, which added $2.1 billion in deposits during the first quarter of 2023.

Noninterest demand deposits represented 37% of total deposits at March 31, 2023 and 41% at December 31, 2022.

Transaction account balances (noninterest demand and interest-bearing demand) represented 59% of total deposits at March 31, 2023, compared to 64% at December 31, 2022.

Though the proportion of total deposits decreased as a result of the addition of higher-rate deposits during the quarter, balances in transaction accounts remained steady throughout the period.

Customer repurchase agreements totaled $267.6 million at March 31, 2023, increasing $95.6 million from December 31, 2022.

Repurchase agreements are offered by Seacoast to select customers who wish to sweep excess balances on a daily basis for investment purposes, and during the first quarter of 2023, approximately $100 million in deposits migrated to customer sweep balances.

At March 31, 2023 and December 31, 2022, borrowings included $72.0 million and $71.6 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company.

Noninterest demand deposits represented 34% of total deposits at June 30, 2023 and 41% at December 31, 2022.

Transaction account balances (noninterest demand and interest-bearing demand) represented 57% of total deposits at June 30, 2023, compared to 64% at December 31, 2022.

Customer repurchase agreements totaled $290.2 million at June 30, 2023, increasing $118.1 million from December 31, 2022.

Repurchase agreements are offered by Seacoast to select customers who wish to sweep excess balances on a daily basis for investment purposes.

At June 30, 2023 and December 31, 2022, borrowings included $72.1 million and $71.6 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company.

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

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The acquired debt carries a fixed interest rate of 3.375% until 2027, then converts to a floating rate note until maturity in 2032.

The weighted average interest rate of outstanding subordinated debt was 6.65% and 2.47% for the three months ended March 31, 2023 and March 31, 2022, respectively.

The Company increased borrowings to bolster its liquidity position during the first quarter.

Federal Home Loan Bank advances totaled $385.0 million at March 31, 2023 with a weighted average interest rate of 4.26%.

The weighted average interest rate of outstanding subordinated debt was 6.73% and 2.85% for the six months ended June 30, 2023 and June 30, 2022, respectively.

Federal Home Loan Bank advances totaled $160.0 million at June 30, 2023 with a weighted average interest rate of 3.64%, compared to $150.0 million at December 31, 2022 with a weighted average interest rate of 3.42%.

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Off-Balance Sheet Transactions

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These instruments are not recorded on the balance sheet until funds are advanced under the commitment.

Unfunded commitments to extend credit were $3.8 billion at March 31, 2023 and $2.8 billion at December 31, 2022.

Unfunded commitments to extend credit were $4.2 billion at June 30, 2023 and $2.8 billion at December 31, 2022.

Capital Resources

The Company’s equity capital at March 31, 2023 increased $443.3 million, or 28%, from December 31, 2022 to $2.1 billion.

Changes in equity included increases from net income of $11.8 million, the issuance of $421.0 million in equity in connection with the Professional acquisition, and an increase in accumulated other comprehensive income of $18.6 million, partially offset by the issuance of a common stock dividend totaling $14.4 million.

The ratio of shareholders’ equity to period end total assets was 13.44% and 13.24% at March 31, 2023 and December 31, 2022, respectively.

The ratio of tangible shareholders’ equity to tangible assets was 8.36% and 9.08% at March 31, 2023 and December 31, 2022, respectively.

The decrease during the first quarter of 2023 was due to growth in the balance sheet from the Professional acquisition.

The Company’s equity capital at June 30, 2023 increased $446.3 million, or 28%, from December 31, 2022 to $2.1 billion.

Changes in equity included increases from net income of $43.1 million, the issuance of $421.0 million in equity in connection with the Professional acquisition, and an increase in accumulated other comprehensive income of $1.2 million, partially offset by the issuance of common stock dividends totaling $29.9 million.

The ratio of shareholders’ equity to period end total assets was 13.66% and 13.24% at June 30, 2023 and December 31, 2022, respectively.

The ratio of tangible shareholders’ equity to tangible assets was 8.53% and 9.08% at June 30, 2023 and December 31, 2022, respectively.

The decrease in the tangible common equity ratio was due to growth in the balance sheet from the Professional acquisition.

Changes in the value of held-to-maturity securities are not reflected under GAAP;

however, illustratively, if all held-to-maturity securities were presented at fair value, the tangible common equity ratio would have been 7.77% at March 31, 2023.

Activity in shareholders’ equity for the three months ended March 31, 2023 and 2022 follows:

however, illustratively, if all held-to-maturity securities were presented at fair value, the tangible common equity ratio would have been 7.87% at June 30, 2023.

Activity in shareholders’ equity for the six months ended June 30, 2023 and 2022 follows:

(In thousands) 2023 2022

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Change in accumulated other comprehensive income 1,209 (116,538)

Ending balance at March 31, 2023 and 2022

Repurchase of common stock (45) —

Ending balance at June 30, 2023 and 2022

$ 2,054,032 $ 1,329,575

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Management’s use of risk-based capital ratios in its analysis of the Company’s capital adequacy are not GAAP financial measures.

Seacoast’s management uses these

measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company.

Seacoast’s management uses these measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company.

The capital measures are not necessarily comparable to similar capital measures that may be presented by other companies and Seacoast does not nor should investors consider such non-GAAP financial measures in isolation from, or as a substitute for GAAP financial information (see “Note 8 – Equity Capital”).

March 31, 2023 Seacoast

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June 30, 2023 Seacoast

(Consolidated) Seacoast

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1 For subsidiary bank only.

The Company’s total risk-based capital ratio was 14.62% at March 31, 2023, a decrease from 15.79% at December 31, 2022, primarily due to growth including the acquisition of Professional.

At March 31, 2023, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was 10.32%, well above the minimum to be well-capitalized under regulatory guidelines.

The Company’s total risk-based capital ratio was 14.70% at June 30, 2023, a decrease from 15.79% at December 31, 2022, primarily due to growth including the acquisition of Professional.

At June 30, 2023, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was 9.87%, well above the minimum to be well-capitalized under regulatory guidelines.

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

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For regulatory purposes, the trust preferred securities are added to the Company’s tangible common shareholders’ equity to calculate Tier 1 capital.

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Critical Accounting Policies and Estimates

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The analysis of the impact on net interest income over a twelve-month period is subjected to instantaneous changes in market rates and is monitored on a quarterly basis.

The following table presents the ALCO simulation model's projected impact of a change in interest rates on the projected baseline net interest income for the 12 and 24 month periods beginning April 1, 2023, holding all balances on the balance sheet static.

The following table presents the ALCO simulation model's projected impact of a change in interest rates on the projected baseline net interest income for the 12 month period beginning July 1, 2023, holding all balances on the balance sheet static.

This change in interest rates assumes parallel shifts in the yield curve and does not consider changes in the slope of the yield curve.

In particular, the steepening or inversion of the yield curve as well as gradually changing interest rate changes could result in different outcomes when compared to the parallel shifts contemplated below.

% Change in Projected Baseline Net

Change in Interest Rates Interest Income

1-12 months 13-24 months

+2.00% 3.5% 7.3%

+1.00% 1.7% 3.6%

Current —% —%

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% Change in Projected Baseline

Change in Interest Rates Net Interest Income

+2.00% (8.5)%

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis