SEACOAST BANKING CORP OF FLORIDA 10-Q

Item 1. Financial Statements SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (In thousands, except per share data) 2023 2022 2023 2022 Interest and fees on loans $ 148,265 $ 69,307 $ 283,433 $ 136,425 Interest and dividends on securities 20,995 12,525 40,344 22,706 Interest on interest bearing deposits and other investments 5,023 1,917 8,497 2,850 Total Interest Income 174,283 83,749 332,274 161,981 Interest on deposits 27,183 994 43,216 1,761 Interest on time certificates 14,477 436 20,029 904 Interest on borrowed money 5,660 672 10,914 1,147 Total Interest Expense 47,320 2,102 74,159 3,812 Net Interest Income 126,963 81,647 258,115 158,169 Provision for credit losses ( 764 ) 822 30,834 7,378 Net Interest Income after Provision for Credit Losses 127,727 80,825 227,281 150,791 Noninterest income: Service charges on deposit accounts 4,560 3,408 8,802 6,209 Interchange income 5,066 4,255 9,760 8,383 Wealth management income 3,318 2,774 6,381 5,433 Mortgage banking fees 576 932 1,002 2,618 Insurance agency income 1,160 — 2,261 — SBA gains 249 473 571 629 BOLI income 2,068 1,349 3,984 2,683 Other 4,755 4,073 11,329 7,134 21,752 17,264 44,090 33,089 Securities losses, net ( 176 ) ( 300 ) ( 69 ) ( 752 ) Total Noninterest Income 21,576 16,964 44,021 32,337 Noninterest Expense: Salaries and wages 45,155 28,056 92,771 56,275 Employee benefits 7,472 4,151 16,034 9,652 Outsourced data processing costs 20,222 6,043 34,775 12,199 Telephone / data lines 1,518 908 2,599 1,641 Occupancy 7,065 4,050 14,003 8,036 Furniture and equipment 2,345 1,588 4,612 3,014 Marketing 2,047 1,882 4,285 3,053 Legal and professional fees 4,062 2,946 11,541 7,735 FDIC assessments 2,116 699 3,559 1,488 Amortization of intangibles 7,654 1,446 14,381 2,892 3 Table of Content s Foreclosed property expense and net (gain) loss on sale ( 57 ) ( 968 ) 138 ( 1,132 ) Provision for credit losses on unfunded commitments — — 1,239 142 Other 8,266 5,347 15,403 10,070 Total Noninterest Expense 107,865 56,148 215,340 115,065 Income Before Income Taxes 41,438 41,641 55,962 68,063 Provision for income taxes 10,189 8,886 12,886 14,720 Net Income $ 31,249 $ 32,755 $ 43,076 $ 53,343 Share Data Net income per share of common stock Diluted $ 0.37 $ 0.53 $ 0.52 $ 0.86 Basic 0.37 0.53 0.52 0.87 Average common shares outstanding Diluted 85,536 61,923 83,260 61,818 Basic 85,022 61,409 82,600 61,269 See notes to unaudited consolidated financial statements. 4 Table of Content s SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net Income $ 31,249 $ 32,755 $ 43,076 $ 53,343 Other comprehensive income (loss): Unrealized losses on available-for-sale securities, net of tax benefit of $ 7.1 million and $ 1.2 million for the three and six months ended June 30, 2023, respectively, and net of tax benefit of $ 16.0 million and $ 36.6 million for the three and six months ended June 30, 2022, respectively $ ( 22,215 ) $ ( 50,473 ) $ ( 3,699 ) $ ( 116,485 ) Amortization of unrealized (gains) losses on securities transferred to held-to-maturity, net of tax benefit of $ 3 thousand and $ 6 thousand for the three and six months ended June 30, 2023, respectively, and net of tax benefit of $ 7 thousand and nominal tax expense for the three and six months ended June 30, 2022, respectively ( 11 ) ( 34 ) ( 21 ) 2 Reclassification adjustment for gains included in net income, net of tax expense of $ 1 thousand for the six months ended June 30, 2023 — — ( 4 ) — Unrealized gains on derivatives designated as fair value hedges, net of reclassifications to income, net of tax expense of $ 1.6 million for the three and six months ended June 30, 2023, respectively 4,732 — 4,732 — Unrealized gains (losses) on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax expense of $ 38 thousand and $ 71 thousand for the three and six months ended June 30, 2023, respectively, and net of tax expense of $ 3 thousand and net of tax benefit of $ 19 thousand for the three and six months ended June 30, 2022, respectively 103 9 201 ( 55 ) Total other comprehensive income (loss) $ ( 17,391 ) $ ( 50,498 ) $ 1,209 $ ( 116,538 ) Comprehensive Income (Loss) $ 13,858 $ ( 17,743 ) $ 44,285 $ ( 63,195 ) See notes to unaudited consolidated financial statements. 5 Table of Content s SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, (In thousands, except share data) 2023 2022 Assets Cash and due from banks $ 164,193 $ 120,748 Interest bearing deposits with other banks 563,690 81,192 Total cash and cash equivalents 727,883 201,940 Time deposits with other banks 2,987 3,236 Debt securities: Securities available-for-sale (at fair value) 1,916,231 1,871,742 Securities held-to-maturity (fair value $ 577.6 million at June 30, 2023 and $ 617.7 million at December 31, 2022) 707,812 747,408 Total debt securities 2,624,043 2,619,150 Loans held for sale (at fair value) 5,967 3,151 Loans 10,117,919 8,144,724 Less: Allowance for credit losses ( 159,715 ) ( 113,895 ) Loans, net of allowance for credit losses 9,958,204 8,030,829 Bank premises and equipment, net 116,959 116,892 Other real estate owned 7,526 2,301 Goodwill 732,910 480,319 Other intangible assets, net 109,716 75,451 Bank owned life insurance 293,880 237,824 Net deferred tax assets 127,941 94,457 Other assets 333,916 280,212 Total Assets $ 15,041,932 $ 12,145,762 Liabilities Deposits $ 12,283,267 $ 9,981,595 Securities sold under agreements to repurchase, maturing within 30 days 290,156 172,029 Federal Home Loan Bank ("FHLB") borrowings 160,000 150,000 Subordinated debt 105,970 84,533 Other liabilities 148,507 149,830 Total Liabilities 12,987,900 10,537,987 Shareholders' Equity Common stock, par value $ 0.10 per share, authorized 120,000,000 shares, issued 85,615,136 and outstanding 85,086,269 at June 30, 2023, and authorized 120,000,000 , issued 72,099,136 and outstanding 71,617,852 shares at December 31, 2022 8,509 7,162 Additional paid-in-capital 1,809,431 1,377,802 Retained earnings 437,087 423,863 Less: Treasury stock ( 14,171 ) ( 13,019 ) 2,240,856 1,795,808 Accumulated other comprehensive loss, net ( 186,824 ) ( 188,033 ) Total Shareholders' Equity 2,054,032 1,607,775 Total Liabilities and Shareholders' Equity 15,041,932 12,145,762 See notes to unaudited consolidated financial statements. 6 Table of Content s SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, (In thousands) 2023 2022 Cash Flows from Operating Activities Net income $ 43,076 $ 53,343 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,071 2,832 Amortization of premiums and discounts on securities, net ( 424 ) 623 Amortization of operating lease right-of-use assets 3,961 2,961 Other amortization and accretion, net ( 10,558 ) ( 635 ) Stock based compensation 7,096 4,116 Origination of loans designated for sale ( 56,526 ) ( 121,402 ) Sale of loans designated for sale 55,710 143,326 Provision for credit losses 30,834 7,378 Deferred income taxes ( 9,439 ) 4,026 Gains on sale of securities ( 5 ) — Gains on sale of loans ( 1,828 ) ( 3,992 ) Gains on sale and write-downs of other real estate owned ( 64 ) ( 1,302 ) Losses on disposition of fixed assets and write-downs upon transfer of bank premises to other real estate owned 1,726 172 Changes in operating assets and liabilities, net of effects from acquired companies: Net decrease in other assets 14,447 11,213 Net decrease in other liabilities ( 24,002 ) ( 4,318 ) Net cash provided by operating activities $ 58,075 $ 98,341 Cash Flows from Investing Activities Maturities and repayments of debt securities available-for-sale 107,590 164,223 Maturities and repayments of debt securities held-to-maturity 41,995 49,652 Proceeds from sale of debt securities available-for-sale 30,490 26,011 Purchases of debt securities available-for-sale ( 22,402 ) ( 474,124 ) Purchases of debt securities held-to-maturity — ( 206,065 ) Maturities of time deposits with other banks 249 1,743 Net new loans and principal repayments 53,434 ( 133,458 ) Purchases of loans held for investment — ( 111,292 ) Proceeds from sale of other real estate owned 294 14,208 Additions to other real estate owned — ( 590 ) Proceeds from sale of FHLB and Federal Reserve Bank Stock 71,352 — Purchase of FHLB and Federal Reserve Bank Stock ( 87,273 ) ( 3,347 ) Net cash from bank acquisitions 141,674 208,933 Additions to bank premises and equipment ( 8,827 ) ( 2,545 ) Net cash provided by (used in) investing activities $ 328,576 $ ( 466,651 ) See notes to unaudited consolidated financial statements. 7 Table of Content s SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, (In thousands) 2023 2022 Cash Flows from Financing Activities Net increase in deposits $ 182,331 $ 559,085 Net increase (decrease) in repurchase agreements 118,127 ( 10,987 ) Net decrease in FHLB borrowings with original maturities of three months or less ( 170,000 ) — Repayments of FHLB borrowings with original maturities of more than three months ( 75,000 ) — Proceeds from FHLB borrowings with original maturities of more than three months 110,000 — Stock based employee benefit plans 3,731 2,361 Repurchase of common stock ( 45 ) — Dividends paid ( 29,852 ) ( 18,510 ) Net cash provided by financing activities $ 139,292 $ 531,949 Net increase in cash and cash equivalents 525,943 163,639 Cash and cash equivalents at beginning of period 201,940 737,729 Cash and cash equivalents at end of period $ 727,883 $ 901,368 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 67,991 $ 3,779 Cash paid during the period for taxes 6,080 9,591 Recognition of operating lease right-of-use assets, other than through bank acquisitions, net of terminations 1,890 3,370 Recognition of operating lease liabilities, other than through bank acquisitions, net of terminations 1,902 3,370 Supplemental disclosure of non-cash investing activities: 1 Transfers from bank premises to other real estate owned 5,455 1,008 1 See "Note 11 - Business Combinations" for non cash transactions related to business combinations. See notes to unaudited consolidated financial statements. 8 Table of Content s SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Common Stock Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) (In thousands) Shares Amount Total Balance at March 31, 2023 84,609 8,461 1,803,898 421,271 ( 13,113 ) ( 169,433 ) 2,051,084 Comprehensive income (loss) — — — 31,249 — ( 17,391 ) 13,858 Stock based compensation expense — — 4,454 — — — 4,454 Common stock transactions related to stock based employee benefit plans 377 38 ( 124 ) — ( 1,058 ) — ( 1,144 ) Common stock issued for stock options 103 10 1,248 — — — 1,258 Repurchase of common stock ( 3 ) — ( 45 ) — — — ( 45 ) Dividends on common stock ($ 0.18 per share) — — — ( 15,433 ) — — ( 15,433 ) Three months ended June 30, 2023 477 48 5,533 15,816 ( 1,058 ) ( 17,391 ) 2,948 Balance at June 30, 2023 85,086 $ 8,509 $ 1,809,431 $ 437,087 $ ( 14,171 ) $ ( 186,824 ) $ 2,054,032 Common Stock Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) (In thousands) Shares Amount Total Balance at March 31, 2022 61,239 6,124 1,062,462 371,192 ( 10,459 ) ( 73,034 ) 1,356,285 Comprehensive income (loss) — — — 32,755 — ( 50,498 ) ( 17,743 ) Stock based compensation expense — — 2,697 — — — 2,697 Common stock transactions related to stock based employee benefit plans 169 17 ( 31 ) — ( 1,173 ) — ( 1,187 ) Common stock issued for stock options 2 — 39 — — — 39 Dividends on common stock ($ 0.17 per share) — — — ( 10,516 ) — — ( 10,516 ) Three months ended June 30, 2022 171 17 2,705 22,239 ( 1,173 ) ( 50,498 ) ( 26,710 ) Balance at June 30, 2022 61,410 $ 6,141 $ 1,065,167 $ 393,431 $ ( 11,632 ) $ ( 123,532 ) $ 1,329,575 Common Stock Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) (In thousands) Shares Amount Total Balance at December 31, 2022 71,618 $ 7,162 1,377,802 423,863 ( 13,019 ) ( 188,033 ) 1,607,775 Comprehensive income — — — 43,076 — 1,209 44,285 Stock based compensation expense — — 7,096 — — — 7,096 Common stock transactions related to stock based employee benefit plans 448 46 ( 203 ) — ( 1,152 ) — ( 1,309 ) Common stock issued for stock options 231 22 5,018 — — — 5,040 Repurchase of common stock ( 3 ) — ( 45 ) — — — ( 45 ) Issuance of common stock, pursuant to acquisition 12,792 1,279 409,459 — — — 410,738 Conversion of options, pursuant to acquisition — — 10,304 — — — 10,304 Dividends on common stock ($ 0.35 per share) — — — ( 29,852 ) — — ( 29,852 ) Six months ended June 30, 2023 13,468 1,347 431,629 13,224 ( 1,152 ) 1,209 446,257 Balance at June 30, 2023 85,086 $ 8,509 $ 1,809,431 $ 437,087 $ ( 14,171 ) $ ( 186,824 ) $ 2,054,032 9 Table of Content s Common Stock Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) (In thousands) Shares Amount Total Balance at December 31, 2021 58,504 $ 5,850 $ 963,851 $ 358,598 $ ( 10,569 ) $ ( 6,994 ) 1,310,736 Comprehensive income (loss) — — — 53,343 — ( 116,538 ) ( 63,195 ) Stock based compensation expense — — 4,116 — — — 4,116 Common stock transactions related to stock based employee benefit plans 176 18 ( 36 ) — ( 1,063 ) — ( 1,081 ) Common stock issued for stock options 180 18 3,424 — — — 3,442 Issuance of common stock, pursuant to acquisitions 2,550 255 89,979 — — — 90,234 Conversion of options, pursuant to acquisitions — — 3,833 — — — 3,833 Dividends on common stock ($ 0.30 per share) — — — ( 18,510 ) — — ( 18,510 ) Six months ended June 30, 2022 2,906 291 101,316 34,833 ( 1,063 ) ( 116,538 ) 18,839 Balance at June 30, 2022 61,410 $ 6,141 $ 1,065,167 $ 393,431 $ ( 11,632 ) $ ( 123,532 ) $ 1,329,575 See notes to unaudited consolidated financial statements. 10 Table of Content s SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 – Basis of Presentation Basis of Presentation: The accompanying unaudited consolidated financial statements of Seacoast Banking Corporation of Florida and its subsidiaries (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current period presentation. Operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or any other period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Use of Estimates: The preparation of these consolidated financial statements requires management to make judgments in the application of certain accounting policies that involve significant estimates and assumptions. The Company has established policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements. Specific areas, among others, requiring the application of management’s estimates include determination of the allowance for credit losses, acquisition accounting and purchased loans, intangible assets and impairment testing, other fair value measurements and contingent liabilities. Adoption of New Accounting Pronouncement On January 1, 2023, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2022-02, “Troubled Debt Restructurings and Vintage Disclosures”. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (“TDRs”) in ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors, and introduces new disclosures related to modifications with borrowers that are experiencing financial difficulties. ASU 2022-02 also requires the disclosure of current-period gross write-offs by year of origination for financing receivables held at amortized cost. Upon adoption, the Company eliminated the separate allowance for credit loss estimation process for loans classified as TDRs. The adoption did not have a material impact to the consolidated financial statements. For additional information on the loans modified for borrowers in financial difficulty and for the disclosure of current-period gross write-offs by year of origination, see “Note 4 – Loans.” 11 Table of Content s Note 2 – Earnings per Share Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. For the three and six months ended June 30, 2023, options to purchase shares of the Company’s common stock totaling 400,998 and 368,169 , respectively, were anti-dilutive. For the three and six months ended June 30, 2022, 1,505 options to purchase shares of the Company's common stock were anti-dilutive. Three Months Ended June 30, Six Months Ended June 30, (Dollars in thousands, except per share data) 2023 2022 2023 2022 Basic earnings per share Net income $ 31,249 $ 32,755 $ 43,076 $ 53,343 Average common shares outstanding 85,022 61,409 82,600 61,269 Net income per share $ 0.37 $ 0.53 $ 0.52 $ 0.87 Diluted earnings per share Net income $ 31,249 $ 32,755 $ 43,076 $ 53,343 Average common shares outstanding 85,022 61,409 82,600 61,269 Add: Dilutive effect of employee restricted stock and stock options 514 514 660 549 Average diluted shares outstanding 85,536 61,923 83,260 61,818 Net income per share $ 0.37 $ 0.53 $ 0.52 $ 0.86 Net income has not been allocated to unvested restricted stock awards that are participating securities because the amounts that would be allocated are not material to net income per share of common stock. Unvested restricted stock awards that are participating securities represent less than one percent of all of the outstanding shares of common stock for each of the periods presented. Note 3 – Securities The amortized cost, gross unrealized gains and losses and fair value of securities available-for-sale and held-to-maturity at June 30, 2023 and December 31, 2022 are summarized as follows: June 30, 2023 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Available-for-Sale Debt Securities U.S. Treasury securities and obligations of U.S. government agencies $ 41,283 $ 188 $ ( 497 ) $ 40,974 Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 1,623,932 301 ( 230,690 ) 1,393,543 Private mortgage-backed securities and collateralized mortgage obligations 143,008 15 ( 13,352 ) 129,671 Collateralized loan obligations 310,516 — ( 7,204 ) 303,312 Obligations of state and political subdivisions 21,956 2 ( 1,506 ) 20,452 Other debt securities 27,991 415 ( 127 ) 28,279 Totals $ 2,168,686 $ 921 $ ( 253,376 ) $ 1,916,231 Held-to-Maturity Debt Securities Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities $ 707,812 $ — $ ( 130,226 ) $ 577,586 Totals $ 707,812 $ — $ ( 130,226 ) $ 577,586 12 Table of Content s December 31, 2022 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Available-for-Sale Debt Securities U.S. Treasury securities and obligations of U.S. government agencies $ 13,813 $ 173 $ ( 339 ) $ 13,647 Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 1,561,197 539 ( 223,083 ) 1,338,653 Private mortgage-backed securities and collateralized mortgage obligations 179,148 70 ( 12,831 ) 166,387 Collateralized loan obligations 313,155 — ( 10,251 ) 302,904 Obligations of state and political subdivisions 29,350 122 ( 1,731 ) 27,741 Other debt securities 22,640 197 ( 427 ) 22,410 Totals $ 2,119,303 $ 1,101 $ ( 248,662 ) $ 1,871,742 Held-to-Maturity Debt Securities Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities $ 747,408 $ 64 $ ( 129,731 ) $ 617,741 Totals $ 747,408 $ 64 $ ( 129,731 ) $ 617,741 During the three months ended March 31, 2023, debt securities with a fair value of $ 22.1 million obtained in the acquisition of Professional Holding Corp. (“Professional”) were sold. No gain or loss was recognized on the sale. There were $ 8.4 million in other sales of securities during the three months ended March 31, 2023, with gross gains of $ 24 thousand and gross losses of $ 19 thousand. There were no sales of securities during the three months ended June 30, 2023. During the three months ended March 31, 2022, securities with a fair value of $ 26.0 million obtained in the acquisition of Business Bank of Florida Corp. were immediately sold. No gain or loss was recognized on the sale. There were no other sales of securities during the three and six months ended June 30, 2022. Included in “Securities gains (losses), net” are decreases of $ 0.2 million and $ 0.1 million for the three and six months ended June 30, 2023, respectively, and decreases of $ 0.3 million and $ 0.8 million for the three and six months ended June 30, 2022, respectively, in the value of investments in mutual funds that invest in CRA-qualified debt securities. At June 30, 2023, debt securities with a fair value of $ 1.8 billion were pledged primarily as collateral for public deposits and secured borrowings. The amortized cost and fair value of securities at June 30, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because prepayments of the underlying collateral for these securities may occur, due to the right to call or repay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately. 13 Table of Content s June 30, 2023 Held-to-Maturity Available-for-Sale (In thousands) Amortized Cost Fair Value Amortized Cost Fair Value Due in less than one year $ — $ — $ 4,903 $ 4,811 Due after one year through five years — — 11,125 11,002 Due after five years through ten years — — 14,256 14,129 Due after ten years — — 32,955 31,484 — — 63,239 61,426 Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 707,812 577,586 1,623,932 1,393,543 Private mortgage-backed securities and collateralized mortgage obligations — — 143,008 129,671 Collateralized loan obligations — — 310,516 303,312 Other debt securities — — 27,991 28,279 Totals $ 707,812 $ 577,586 $ 2,168,686 $ 1,916,231 The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, or using observable market data. The tables below indicate the fair value of available-for-sale debt securities with unrealized losses for which no allowance for credit losses has been recorded. June 30, 2023 Less Than 12 Months 12 Months or Longer Total (In thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government agencies $ 32,164 $ ( 481 ) $ 439 $ ( 16 ) $ 32,603 $ ( 497 ) Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 368,235 ( 24,697 ) 1,002,455 ( 205,993 ) 1,370,690 ( 230,690 ) Private mortgage-backed securities and collateralized mortgage obligations 22,704 ( 788 ) 106,569 ( 12,564 ) 129,273 ( 13,352 ) Collateralized loan obligations 58,568 ( 1,742 ) 244,744 ( 5,462 ) 303,312 ( 7,204 ) Obligations of state and political subdivisions 8,575 ( 112 ) 8,607 ( 1,394 ) 17,182 ( 1,506 ) Other debt securities 5,606 ( 127 ) — — 5,606 ( 127 ) Totals $ 495,852 $ ( 27,947 ) $ 1,362,814 $ ( 225,429 ) $ 1,858,666 $ ( 253,376 ) 14 Table of Content s December 31, 2022 Less Than 12 Months 12 Months or Longer Total (In thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government agencies $ 3,788 $ ( 328 ) $ 249 $ ( 11 ) $ 4,037 $ ( 339 ) Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 646,651 ( 54,956 ) 667,520 ( 168,127 ) 1,314,171 ( 223,083 ) Private mortgage-backed securities and collateralized mortgage obligations 130,488 ( 8,255 ) 25,234 ( 4,576 ) 155,722 ( 12,831 ) Collateralized loan obligations 242,370 ( 8,343 ) 60,534 ( 1,908 ) 302,904 ( 10,251 ) Obligations of state and political subdivisions 23,804 ( 1,656 ) 425 ( 75 ) 24,229 ( 1,731 ) Other debt securities 11,459 ( 427 ) — — 11,459 ( 427 ) Totals $ 1,058,560 $ ( 73,965 ) $ 753,962 $ ( 174,697 ) $ 1,812,522 $ ( 248,662 ) At June 30, 2023, the Company had unrealized losses of $ 230.7 million on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $ 1.4 billion. These securities are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. The implied government guarantee of principal and interest payments and the high credit rating of the portfolio provide a sufficient basis for the current expectation that there is no risk of loss if default were to occur. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at June 30, 2023, no allowance for credit losses has been recorded. At June 30, 2023, the Company had $ 13.4 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of $ 129.3 million. The securities have weighted average credit support of 22 %. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at June 30, 2023, no allowance for credit losses has been recorded. At June 30, 2023, the Company had $ 7.2 million of unrealized losses in floating rate collateralized loan obligations (“CLOs”) having a fair value of $ 303.3 million. CLOs are special purpose vehicles and those in which the Company has invested are nearly all first-lien, broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors. As of June 30, 2023, all positions held by the Company are in AAA and AA tranches, with weighted average credit support of 38 % and 26 %, respectively. The Company evaluates the securities for potential credit losses by modeling expected loan-level defaults, recoveries, and prepayments for each CLO security. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at June 30, 2023, no allowance for credit losses has been recorded. At June 30, 2023, the Company had $ 1.5 million of unrealized losses on municipal securities having a fair value of $ 17.2 million. These securities are highly rated issuances of state or local municipalities, all of which are continuing to make timely contractual payments. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. As a result, as of June 30, 2023, no allowance for credit losses has been recorded. All held-to-maturity (“HTM”) debt securities are issued by government-sponsored entities, which are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. While the potential for default on these securities may be something greater than zero, the long history with no credit losses, the implied government guarantee of principal and interest payments and the high credit rating of the HTM portfolio provide sufficient basis for the current expectation that there is no risk of loss if default were to occur. As a result, as of June 30, 2023, no allowance for credit losses has been recorded. The Company has the intent and ability to hold these securities until maturity. 15 Table of Content s Included in Other Assets at June 30, 2023 is $ 69.0 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value. The Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of these cost method investment securities. Accrued interest receivable on available-for-sale (“AFS”) and HTM debt securities of $ 8.0 million and $ 1.2 million, respectively, at June 30, 2023, and $ 7.0 million and $ 1.3 million, respectively, at December 31, 2022, is included in Other Assets. Also included in Other Assets are investments in CRA-qualified mutual funds carried at fair value of $ 13.5 million and $ 8.2 million at June 30, 2023 and December 31, 2022, respectively. The Company holds 11,330 shares of Visa Class B stock, which, following resolution of Visa litigation, will be converted to Visa Class A shares. Under the current conversion ratio that became effective June 29, 2023, the Company would receive 1.5902 shares of Class A stock for each share of Class B stock for a total of 18,016 shares of Visa Class A stock. The ownership of Visa stock is related to prior ownership in Visa's network while Visa operated as a cooperative, and is recorded on the Company's financial records at a zero basis. Note 4 – Loans Loans held for investment are categorized into the following segments: • Construction and land development: Loans are extended to both commercial and consumer customers which are collateralized by and for the purpose of funding land development and construction projects, including 1-4 family residential construction, multi-family property and non-farm residential property where the primary source of repayment is from proceeds of the sale, refinancing or permanent financing of the property. • Commercial real estate - owner occupied: Loans are extended to commercial customers for the purpose of acquiring real estate to be occupied by the borrower's business. These loans are collateralized by the subject property and the repayment of these loans is largely dependent on the performance of the company occupying the property. • Commercial real estate - non-owner occupied: Loans are extended to commercial customers for the purpose of acquiring commercial property where occupancy by the borrower is not their primary intent. These loans are viewed primarily as cash flow loans, collateralized by the subject property, and the repayment of these loans is largely dependent on rental income from the successful operation of the property. • Residential real estate: Loans are extended to consumer customers and collateralized primarily by 1-4 family residential properties and include fixed and variable rate mortgages, home equity mortgages, and home equity lines of credit. Loans are primarily written based on conventional loan agency guidelines, including loans that exceed agency value limitations. Sources of repayment are largely dependent on the occupant of the residential property. • Commercial and financial: Loans are extended to commercial customers. The purpose of the loans can be working capital, physical asset expansion, asset acquisition or other business purposes. Loans may be collateralized by assets owned by the borrower or the borrower's business. Commercial loans are based primarily on the historical and projected cash flow of the borrower's business and secondarily on the capacity of credit enhancements, guarantees and underlying collateral provided by the borrower. • Consumer: Loans are extended to consumer customers. The segment includes both installment loans and lines of credit which may be collateralized or non-collateralized. 16 Table of Content s The following tables present net loan balances by segment as of: June 30, 2023 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 424,964 $ 347,876 $ 21,531 $ 794,371 Commercial real estate - owner occupied 1,026,700 594,211 48,458 1,669,369 Commercial real estate - non-owner occupied 1,818,307 1,381,801 170,103 3,370,211 Residential real estate 1,674,505 691,863 29,984 2,396,352 Commercial and financial 1,152,360 376,571 81,964 1,610,895 Consumer 166,250 103,667 2,165 272,082 PPP Loans 958 3,681 — 4,639 Totals $ 6,264,044 $ 3,499,670 $ 354,205 $ 10,117,919 December 31, 2022 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 364,900 $ 201,333 $ 21,100 $ 587,332 Commercial real estate - owner occupied 995,154 451,202 31,946 1,478,302 Commercial real estate - non-owner occupied 1,695,411 767,138 127,225 2,589,774 Residential real estate 1,558,643 271,378 19,482 1,849,503 Commercial and financial 1,151,273 182,124 15,238 1,348,636 Consumer 177,338 89,458 19,791 286,587 PPP Loans 1,474 3,116 — 4,590 Totals $ 5,944,193 $ 1,965,749 $ 234,782 $ 8,144,724 The amortized cost basis of loans at June 30, 2023 included net deferred costs of $ 37.6 million. At December 31, 2022, the amortized cost basis included net deferred costs of $ 35.1 million. 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. Accrued interest receivable is included within Other Assets and was $ 36.2 million and $ 28.2 million at June 30, 2023 and December 31, 2022, respectively. 17 Table of Content s The following tables present the status of net loan balances as of June 30, 2023 and December 31, 2022. June 30, 2023 (In thousands) Current Accruing 30-59 Days Past Due Accruing 60-89 Days Past Due Accruing Greater Than 90 Days Nonaccrual Total Portfolio Loans Construction and land development $ 424,834 $ 124 $ — $ — $ 6 $ 424,964 Commercial real estate - owner occupied 1,025,697 — — — 1,003 1,026,700 Commercial real estate - non-owner occupied $ 1,814,323 $ 354 $ — $ — $ 3,630 $ 1,818,307 Residential real estate 1,660,568 7,108 451 1 6,377 1,674,505 Commercial and financial 1,144,831 1,351 235 131 5,812 1,152,360 Consumer 163,848 1,568 224 291 319 166,250 PPP Loans 904 — — 54 — 958 Total Portfolio Loans $ 6,235,005 $ 10,505 $ 910 $ 477 $ 17,147 $ 6,264,044 Acquired Non-PCD Loans Construction and land development $ 347,590 $ 90 $ — $ 162 $ 34 $ 347,876 Commercial real estate - owner occupied 593,508 398 — — 305 594,211 Commercial real estate - non-owner occupied 1,379,727 67 — — 2,007 1,381,801 Residential real estate 686,338 3,493 315 — 1,717 691,863 Commercial and financial 375,198 46 69 — 1,258 376,571 Consumer 93,926 5,825 2,057 803 1,056 103,667 PPP Loans 3,625 35 — 21 — 3,681 Total Acquired Non-PCD Loans $ 3,479,912 $ 9,954 $ 2,441 $ 986 $ 6,377 $ 3,499,670 PCD Loans Construction and land development $ 21,325 $ — $ — $ — $ 206 $ 21,531 Commercial real estate - owner occupied 43,870 — — — 4,588 48,458 Commercial real estate - non-owner occupied 166,846 — 224 — 3,033 170,103 Residential real estate 28,504 193 730 — 557 29,984 Commercial and financial 65,559 6 — — 16,399 81,964 Consumer 2,057 32 57 — 19 2,165 Total PCD Loans $ 328,161 $ 231 $ 1,011 $ — $ 24,802 $ 354,205 Total Loans $ 10,043,078 $ 20,690 $ 4,362 $ 1,463 $ 48,326 $ 10,117,919 18 Table of Content s December 31, 2022 (In thousands) Current Accruing 30-59 Days Past Due Accruing 60-89 Days Past Due Accruing Greater Than 90 Days Nonaccrual Total Portfolio Loans Construction and land development $ 364,841 $ — $ — $ — $ 59 $ 364,900 Commercial real estate - owner occupied 993,690 — 67 440 957 995,154 Commercial real estate - non-owner occupied 1,695,381 — — — 30 1,695,411 Residential real estate 1,550,040 1,172 147 — 7,284 1,558,643 Commercial and financial 1,142,536 1,032 476 — 7,229 1,151,273 Consumer 176,444 550 252 1 91 177,338 PPP Loans 1,099 33 — 342 — 1,474 Total Portfolio Loans $ 5,924,031 $ 2,787 $ 942 $ 783 $ 15,650 $ 5,944,193 Acquired Non-PCD Loans Construction and land development $ 201,263 $ — $ — $ — $ 70 $ 201,333 Commercial real estate - owner occupied 450,109 796 297 — — 451,202 Commercial real estate - non-owner occupied 765,633 162 — — 1,343 767,138 Residential real estate 270,215 577 — — 586 271,378 Commercial and financial 180,837 790 87 — 410 182,124 Consumer 87,317 779 616 525 221 89,458 PPP Loans 3,116 — — — — 3,116 Total Acquired Non-PCD Loans $ 1,958,490 $ 3,104 $ 1,000 $ 525 $ 2,630 $ 1,965,749 PCD Loans Construction and land development $ 20,680 $ — $ — $ — $ 420 $ 21,100 Commercial real estate - owner occupied 30,517 23 23 — 1,383 31,946 Commercial real estate - non-owner occupied 124,115 — — — 3,110 127,225 Residential real estate 17,885 10 — — 1,587 19,482 Commercial and financial 11,201 4 — — 4,033 15,238 Consumer 17,884 1,001 336 540 30 19,791 Total PCD Loans $ 222,282 $ 1,038 $ 359 $ 540 $ 10,563 $ 234,782 Total Loans $ 8,104,803 $ 6,929 $ 2,301 $ 1,848 $ 28,843 $ 8,144,724 All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest subsequently received on such loans is accounted for under the cost-recovery method, whereby interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and future payments are reasonably assured. The Company recognized $ 0.3 million and $ 0.4 million in interest income on nonaccrual loans during the three months ended June 30, 2023 and 2022, respectively. The Company recognized $ 0.4 million and $ 1.2 million in interest income on nonaccrual loans during each of the six months ended June 30, 2023 and 2022, respectively. The following tables present net balances of loans on nonaccrual status and the related allowance for credit losses, if any, as of: 19 Table of Content s June 30, 2023 (In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses Construction and land development $ 40 $ 206 $ 246 $ 107 Commercial real estate - owner occupied 5,383 513 5,896 15 Commercial real estate - non-owner occupied 7,484 1,186 8,670 318 Residential real estate 7,550 1,101 8,651 22 Commercial and financial 6,832 16,637 23,469 14,449 Consumer 144 1,250 1,394 1,222 Totals $ 27,433 $ 20,893 $ 48,326 $ 16,133 December 31, 2022 (In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses Construction and land development $ 615 $ — $ 615 $ — Commercial real estate - owner occupied 957 1,641 2,597 41 Commercial real estate - non-owner occupied 3,347 837 4,184 230 Residential real estate 8,072 1,036 9,109 58 Commercial and financial 4,724 6,891 11,615 2,319 Consumer 40 683 723 257 Totals $ 17,755 $ 11,088 $ 28,843 $ 2,905 Collateral-Dependent Loans Loans are considered collateral-dependent when the repayment, based on the Company's assessment as of the reporting date, is expected to be provided substantially through the operation or sale of the underlying collateral and there are no other available and reliable sources of repayment. The following table presents collateral-dependent loans as of: (In thousands) June 30, 2023 December 31, 2022 Construction and land development $ 430 $ 59 Commercial real estate - owner occupied 6,261 2,733 Commercial real estate - non-owner occupied 6,283 1,698 Residential real estate 11,895 11,333 Commercial and financial 40,087 10,448 Consumer 2,598 426 Totals $ 67,554 $ 26,697 Loans by Risk Rating The Company utilizes an internal asset classification system as a means of identifying problem and potential problem loans. The following classifications are used to categorize loans under the internal classification system: • Pass: Loans that are not problem loans or potential problem loans are considered to be pass-rated. • Special Mention: Loans that do not currently expose the Company to sufficient risk to warrant classification in the Substandard or Doubtful categories, but possess weaknesses that deserve management's close attention are deemed to be Special Mention. • Substandard: Loans with the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. 20 Table of Content s • Substandard Impaired: Loans typically placed on nonaccrual and considered to be collateral-dependent. • Doubtful: Loans that have all the weaknesses inherent in those classified Substandard with the added characteristic that the weakness present makes collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are likely to be charged off. The following tables present the risk rating of loans and year-to-date gross charge offs by year of origination as of: June 30, 2023 (In thousands) 2023 2022 2021 2020 2019 Prior Revolving Total Construction and Land Development Risk Ratings: Pass $ 30,200 $ 265,371 $ 170,788 $ 36,370 $ 25,881 $ 27,596 $ 226,567 $ 782,773 Special Mention — 1,250 — — — 396 — 1,646 Substandard — — 9,685 — — — — 9,685 Substandard Impaired — — — — — 61 206 267 Doubtful — — — — — — — — Total $ 30,200 $ 266,621 $ 180,473 $ 36,370 $ 25,881 $ 28,053 $ 226,773 $ 794,371 Gross Charge Offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate - owner occupied Risk Ratings: Pass $ 57,149 $ 273,495 $ 298,639 $ 175,708 $ 191,891 $ 608,264 $ 29,902 $ 1,635,048 Special Mention — — 2,168 — 4,866 6,674 101 13,809 Substandard — 688 — 7,075 2,584 7,357 — 17,704 Substandard Impaired — — — — 317 2,491 — 2,808 Doubtful — — — — — — — — Total $ 57,149 $ 274,183 $ 300,807 $ 182,783 $ 199,658 $ 624,786 $ 30,003 $ 1,669,369 Gross Charge Offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate - non-owner occupied Risk Ratings: Pass $ 150,604 $ 835,973 $ 649,707 $ 299,717 $ 411,735 $ 914,410 $ 46,412 $ 3,308,558 Special Mention — 161 1,089 7,957 12,324 13,924 — 35,455 Substandard — — 190 6,085 2,982 8,270 248 17,775 Substandard Impaired — — — 1,068 1,849 5,506 — 8,423 Doubtful — — — — — — — — Total $ 150,604 $ 836,134 $ 650,986 $ 314,827 $ 428,890 $ 942,110 $ 46,660 $ 3,370,211 Gross Charge Offs $ — $ — $ — $ — $ — $ — $ 109 $ 109 Residential real estate Risk Ratings: Pass $ 120,812 $ 424,322 $ 641,362 $ 167,176 $ 99,298 $ 445,280 $ 479,136 $ 2,377,386 Special Mention — — — — 82 1,057 5,574 6,713 Substandard — — — — — 31 357 388 21 Table of Content s June 30, 2023 (In thousands) 2023 2022 2021 2020 2019 Prior Revolving Total Substandard Impaired — — 846 173 461 9,308 1,077 11,865 Doubtful — — — — — — — — Total $ 120,812 $ 424,322 $ 642,208 $ 167,349 $ 99,841 $ 455,676 $ 486,144 $ 2,396,352 Gross Charge Offs $ — $ — $ — $ — $ — $ 159 $ 109 $ 268 Commercial and financial Risk Ratings: Pass $ 176,563 $ 391,471 $ 376,754 $ 147,594 $ 82,400 $ 103,176 $ 254,426 $ 1,532,384 Special Mention 134 5,738 6,217 1,063 494 3,563 4,479 21,688 Substandard — 1,571 16,343 5,142 5,433 4,744 2,011 35,244 Substandard Impaired — 4 2,533 252 800 17,898 92 21,579 Doubtful — — — — — — — — Total $ 176,697 $ 398,784 $ 401,847 $ 154,051 $ 89,127 $ 129,381 $ 261,008 $ 1,610,895 Gross Charge Offs $ — $ 115 $ 109 $ 1,484 $ 265 $ 1,196 $ 200 $ 3,369 Consumer Risk Ratings: Pass $ 14,874 $ 81,377 $ 55,690 $ 22,334 $ 24,501 $ 23,240 $ 45,045 $ 267,061 Special Mention — 1,097 870 77 220 — 85 2,349 Substandard — — — — — — 74 74 Substandard Impaired — 577 1,094 62 70 533 262 2,598 Doubtful — — — — — — — — Total $ 14,874 $ 83,051 $ 57,654 $ 22,473 $ 24,791 $ 23,773 $ 45,466 $ 272,082 Gross Charge Offs $ — $ 557 $ 1,575 $ 277 $ 51 $ 22 $ 117 $ 2,599 Paycheck Protection Program Risk Ratings: Pass $ — $ — $ 2,211 $ 2,428 $ — $ — $ — $ 4,639 Substandard — — — — — — — — Substandard Impaired — — — — — — — — Total $ — $ — $ 2,211 $ 2,428 $ — $ — $ — $ 4,639 Gross Charge Offs $ — $ — $ — $ — $ — $ — $ — $ — Consolidated Risk Ratings: Pass $ 550,202 $ 2,272,009 $ 2,195,151 $ 851,327 $ 835,706 $ 2,121,966 $ 1,081,488 $ 9,907,849 Special Mention 134 8,246 10,344 9,097 17,986 25,614 10,239 81,660 Substandard — 2,259 26,218 18,302 10,999 20,402 2,690 80,870 Substandard Impaired — 581 4,473 1,555 3,497 35,797 1,637 47,540 Doubtful — — — — — — — — Total $ 550,336 $ 2,283,095 $ 2,236,186 $ 880,281 $ 868,188 $ 2,203,779 $ 1,096,054 $ 10,117,919 Gross Charge Offs $ — $ 672 $ 1,684 $ 1,761 $ 316 $ 1,377 $ 535 $ 6,345 22 Table of Content s December 31, 2022 (In thousands) 2022 2021 2020 2019 2018 Prior Revolving Total Construction and Land Development Risk Ratings: Pass $ 223,204 $ 209,738 $ 18,239 $ 24,600 $ 12,783 $ 19,022 $ 50,960 $ 558,546 Special Mention 14,523 452 — 3,153 — — 15 18,143 Substandard — 9,227 — — 959 — — 10,186 Substandard Impaired — 52 — — — 405 — 457 Doubtful — — — — — — — — Total $ 237,727 $ 219,469 $ 18,239 $ 27,753 $ 13,742 $ 19,427 $ 50,975 $ 587,332 Commercial real estate - owner occupied Risk Ratings: Pass $ 215,453 $ 251,638 $ 180,081 $ 185,286 $ 121,568 $ 467,963 $ 32,253 $ 1,454,242 Special Mention 694 — 2,363 4,403 2,548 2,869 — 12,877 Substandard — — 667 2,625 573 4,444 — 8,309 Substandard Impaired — — — 311 294 2,269 — 2,874 Doubtful — — — — — — — — Total $ 216,147 $ 251,638 $ 183,111 $ 192,625 $ 124,983 $ 477,545 $ 32,253 $ 1,478,302 Commercial real estate - non-owner occupied Risk Ratings: Pass $ 593,364 $ 530,462 $ 231,693 $ 331,173 $ 228,077 $ 575,656 $ 35,326 $ 2,525,751 Special Mention — 16,257 735 5,438 — 4,975 — 27,405 Substandard — 192 19,315 — 5,515 7,412 — 32,434 Substandard Impaired — — 1,044 1,849 30 1,261 — 4,184 Doubtful — — — — — — — — Total $ 593,364 $ 546,911 $ 252,787 $ 338,460 $ 233,622 $ 589,304 $ 35,326 $ 2,589,774 Residential real estate Risk Ratings: Pass $ 270,054 $ 552,950 $ 121,879 $ 77,100 $ 97,900 $ 292,867 $ 423,764 $ 1,836,514 Special Mention — — 50 — 25 269 884 1,228 Substandard — — — — — 343 85 428 Substandard Impaired — — 133 32 83 9,515 1,570 11,333 Doubtful — — — — — — — — Total $ 270,054 $ 552,950 $ 122,062 $ 77,132 $ 98,008 $ 302,994 $ 426,303 $ 1,849,503 Commercial and financial Risk Ratings: Pass $ 359,833 $ 320,307 $ 140,450 $ 77,562 $ 57,924 $ 58,648 $ 292,818 $ 1,307,542 Special Mention 1,244 423 106 474 195 259 2,998 5,699 Substandard — 67 942 6,304 1,603 1,683 13,114 23,713 Substandard Impaired 5 58 5,109 147 3,642 2,545 176 11,682 Doubtful — — — — — — — — Total $ 361,082 $ 320,855 $ 146,607 $ 84,487 $ 63,364 $ 63,135 $ 309,106 $ 1,348,636 Consumer Risk Ratings: Pass $ 93,012 $ 77,889 $ 27,982 $ 28,772 $ 11,690 $ 16,480 $ 29,725 $ 285,550 Special Mention — — — 250 2 134 30 416 Substandard — — 11 — — 191 — 202 Substandard Impaired — — 18 55 36 103 207 419 Doubtful — — — — — — — — Total $ 93,012 $ 77,889 $ 28,011 $ 29,077 $ 11,728 $ 16,908 $ 29,962 $ 286,587 Paycheck Protection Program Risk Ratings: Pass $ — $ 2,708 $ 1,882 $ — $ — $ — $ — $ 4,590 23 Table of Content s December 31, 2022 (In thousands) 2022 2021 2020 2019 2018 Prior Revolving Total Substandard $ — $ — $ — $ — $ — $ — $ — $ — Substandard Impaired $ — $ — $ — $ — $ — $ — $ — $ — Total $ — $ 2,708 $ 1,882 $ — $ — $ — $ — $ 4,590 Consolidated Risk Ratings: Pass $ 1,754,920 $ 1,945,692 $ 720,324 $ 724,493 $ 529,942 $ 1,430,636 $ 864,846 $ 7,972,735 Special Mention 16,461 17,132 3,254 13,718 2,770 8,506 3,927 65,768 Substandard — 9,486 20,935 8,929 8,650 14,073 13,199 75,272 Substandard Impaired 5 110 6,304 2,394 4,085 16,098 1,953 30,949 Doubtful — — — — — — — — Total $ 1,771,386 $ 1,972,420 $ 750,817 $ 749,534 $ 545,447 $ 1,469,313 $ 883,925 $ 8,144,724 Troubled Borrower Modifications On January 1, 2023, the Company adopted ASU 2022-02 which includes disclosure requirements related to certain modifications of loans to borrowers experiencing financial difficulty, which the Company refers to as troubled borrower modifications (“TBMs”). TBMs are typically in the form of an interest rate reduction, an extension of the amortization period and/or converting the loan to interest only for a limited period of time. In addition to the change in payment terms, the Company seeks to obtain additional collateral and/or guarantors to provide additional support for the loan. The Company does not typically provide forgiveness of principal as a modification. As of June 30, 2023, the Company had five loans classified as TBMs totaling $ 0.9 million, which is considered immaterial. To the extent there are additional modifications in subsequent periods, the Company will disclose additional information about the nature of the modifications, the financial effect of the modifications and payment defaults of TBMs in the 12 months prior to default, among any other relevant disclosures. 24 Table of Content s Note 5 – Allowance for Credit Losses Activity in the allowance for credit losses is summarized as follows: Three Months Ended June 30, 2023 (In thousands) Beginning Balance Initial Allowance on PCD Loans Acquired During the Period 1 Provision for Credit Losses Charge- Offs Recoveries Ending Balance Construction and land development $ 6,540 $ — $ 414 $ — $ 6 $ 6,960 Commercial real estate - owner-occupied 6,292 — 125 — 1 6,418 Commercial real estate - non-owner occupied 53,575 — 423 — 105 54,103 Residential real estate 39,894 — ( 3,248 ) ( 109 ) 173 36,710 Commercial and financial 31,593 5,544 2,202 ( 727 ) 1,660 40,272 Consumer 17,746 — ( 680 ) ( 1,904 ) 90 15,252 Totals $ 155,640 $ 5,544 $ ( 764 ) $ ( 2,740 ) $ 2,035 $ 159,715 1 Amount represents a measurement period adjustment of a PCD loan acquired through the acquisition of Professional, see Note 11 - Business Combinations Three Months Ended June 30, 2022 (In thousands) Beginning Balance Provision for Credit Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance Construction and land development 2,268 230 — 54 — 2,552 Commercial real estate - owner occupied 9,294 ( 1,918 ) — — — 7,376 Commercial real estate - non-owner occupied 43,922 2,528 — 9 — 46,459 Residential real estate 14,075 648 112 ( 14 ) 14,821 Commercial and financial 17,727 ( 500 ) ( 253 ) 171 ( 1 ) 17,144 Consumer 2,552 ( 166 ) ( 199 ) 230 — 2,417 Totals $ 89,838 $ 822 $ ( 452 ) $ 576 $ ( 15 ) $ 90,769 Six Months Ended June 30, 2023 (In thousands) Beginning Balance Initial Allowance on PCD Loans Acquired During the Period Provision for Credit Losses Charge- Offs Recoveries Ending Balance Construction and land development $ 6,464 $ 5 $ 483 $ — $ 8 $ 6,960 Commercial real estate - owner occupied 6,051 139 226 — 2 6,418 Commercial real estate - non-owner occupied 43,258 647 10,138 ( 109 ) 169 54,103 Residential real estate 29,605 400 6,650 ( 268 ) 323 36,710 Commercial and financial 15,648 17,527 8,616 ( 3,369 ) 1,850 40,272 Consumer 12,869 161 4,721 ( 2,599 ) 100 15,252 Totals $ 113,895 $ 18,879 $ 30,834 $ ( 6,345 ) $ 2,452 $ 159,715 25 Table of Content s Six Months Ended June 30, 2022 (In thousands) Beginning Balance Allowance on PCD Loans Acquired During the Period Provision for Credit Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance Construction and land development $ 2,751 $ — $ ( 263 ) $ — $ 64 $ — $ 2,552 Commercial real estate - owner occupied 8,579 — ( 1,203 ) — — — 7,376 Commercial real estate - non-owner occupied 36,617 31 9,802 — 9 — 46,459 Residential real estate 12,811 17 1,708 ( 1 ) 303 ( 17 ) 14,821 Commercial and financial 19,744 3 ( 2,128 ) ( 822 ) 348 ( 1 ) 17,144 Consumer 2,813 — ( 538 ) ( 294 ) 438 ( 2 ) 2,417 Totals $ 83,315 $ 51 $ 7,378 $ ( 1,117 ) $ 1,162 $ ( 20 ) $ 90,769 Management establishes the allowance using relevant available information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Forecast data is sourced from Moody’s Analytics (“Moody’s”), a firm widely recognized for its research, analysis, and economic forecasts. The forecasts of future economic conditions are over a period that has been deemed reasonable and supportable, and in segments where it can no longer develop reasonable and supportable forecasts, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans. As of June 30, 2023 and December 31, 2022, the Company utilized a blend of Moody’s most recent “U.S. Macroeconomic Outlook Baseline” and “Alternative Scenario 3 Downside 90th Percentile” scenarios and considered the uncertainty associated with the assumptions in both scenarios, including continued actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, the ongoing Russia-Ukraine conflict and the magnitude of the resulting market disruption, the potential impact of persistent high inflation on economic growth and expectations around a recession occurring over the next 12 to 24 months. Outcomes in any or all of these factors could differ from the scenarios identified above, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions, and for additional dimensions of risk not captured in the quantitative model. The following section discusses changes in the level of the allowance for credit losses for the three months ended June 30, 2023. In the Construction and Land Development segment, the increase in the allowance is attributed to higher loan balances. In this segment, the primary source of repayment is typically from proceeds of the sale, refinancing, or permanent financing of the underlying property; therefore, industry and collateral type and estimated collateral values are among the relevant factors in assessing expected losses. In the Commercial Real Estate - Owner-Occupied segment, the increase in the allowance reflects higher loan balances. Risk characteristics include but are not limited to, collateral type, note structure and loan seasoning. In the Commercial Real Estate - Non Owner-Occupied segment, the increase in the allowance is attributed to changes in economic forecast variables for commercial real estate, partially offset by lower loan balances. Repayment is often dependent upon rental income from the successful operation of the underlying property. Loan performance may be adversely affected by general economic conditions or conditions specific to the real estate market, including property types. Collateral type, note structure and loan seasoning are among the risk characteristics analyzed for this segment. The Residential Real Estate segment includes first mortgages secured by residential property, and home equity lines of credit. The decrease in the allowance is due to continued resilience in economic indicators relevant to the Florida housing market. partially offset by higher loan balances. Risk characteristics considered for this segment include, but are not limited to, borrower FICO score, lien position, loan to value ratios and loan seasoning. In the Commercial and Financial segment, borrowers are primarily small to medium sized professional firms and other businesses, and loans are generally supported by projected cash flows of the business, collateralized by business assets, and/or guaranteed by the business owners. The increase in reserves is primarily attributed to higher reserves on individually evaluated loans. Industry, collateral type, estimated collateral values and loan seasoning are among the relevant factors in assessing expected losses. 26 Table of Content s Consumer loans include installment and revolving lines, loans for automobiles, boats, and other personal or family purposes. Risk characteristics considered for this segment include, but are not limited to, collateral type, loan to value ratios, loan seasoning and FICO score. The decrease in the allowance is primarily due to lower loan balances. The allowance for credit losses is composed of specific allowances for loans individually evaluated and general allowances for loans grouped into loan pools based on similar characteristics, which are collectively evaluated. The Company’s loan portfolio and related allowance at June 30, 2023 and December 31, 2022 are shown in the following tables: June 30, 2023 Individually Evaluated Collectively Evaluated Total (In thousands) Recorded Investment Associated Allowance Recorded Investment Associated Allowance Recorded Investment Associated Allowance Construction and land development $ 430 $ 107 $ 793,941 $ 6,853 $ 794,371 $ 6,960 Commercial real estate - owner occupied 6,261 15 1,663,108 6,403 1,669,369 6,418 Commercial real estate - non-owner occupied 8,670 318 3,361,541 53,785 3,370,211 54,103 Residential real estate 11,775 22 2,384,577 36,688 2,396,352 36,710 Commercial and financial 40,162 20,009 1,575,372 20,263 1,615,534 40,272 Consumer 2,271 2,081 269,811 13,171 272,082 15,252 Totals $ 69,569 $ 22,552 $ 10,048,350 $ 137,163 $ 10,117,919 $ 159,715 December 31, 2022 Individually Evaluated Collectively Evaluated Total (In thousands) Recorded Investment Associated Allowance Recorded Investment Associated Allowance Recorded Investment Associated Allowance Construction and land development $ 59 $ — $ 587,273 $ 6,464 $ 587,332 $ 6,464 Commercial real estate - owner occupied 3,346 41 1,474,956 6,010 1,478,302 6,051 Commercial real estate - non-owner occupied 4,183 230 2,585,591 43,028 2,589,774 43,258 Residential real estate 11,333 275 1,838,170 29,330 1,849,503 29,605 Commercial and financial 12,167 2,639 1,341,059 13,009 1,353,226 15,648 Consumer 426 362 286,161 12,507 286,587 12,869 Totals $ 31,514 $ 3,547 $ 8,113,210 $ 110,348 $ 8,144,724 $ 113,895 Note 6 – Derivatives Back-to-Back Swaps The Company offers interest rate swaps when requested by customers to allow them to hedge the risk of rising interest rates on their variable rate loans. Upon entering into these swaps, the Company enters into offsetting positions with counterparties in order to minimize the interest rate risk. These back-to-back swaps qualify as freestanding financial derivatives with the fair values reported in Other Assets and Other Liabilities. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under the arrangements for financial statement presentation purposes. Gains and losses on these back-to-back swaps, which offset, are recorded through noninterest income. No net gains or losses have been recognized to date on these instruments. As of June 30, 2023, the interest rate swaps had an aggregate notional value of $ 457.2 million, with a fair value of $ 29.0 million recorded in Other Assets and Other Liabilities. As of December 31, 2022, the interest rate swaps had an aggregate notional value of $ 312.8 million, with a fair value of $ 23.1 million recorded in Other Assets and Other Liabilities. The weighted average maturity was 6.7 years at both June 30, 2023 and at December 31, 2022. Interest Rate Floors Designated as Cash Flow Hedges The Company has entered into interest rate floor contracts to mitigate exposure to the variability of future cash flows due to changes in interest rates on certain segments of its variable-rate loans. During 2020, the Company entered into two interest rate floor contracts, each with a notional amount of $ 150.0 million, maturing in October 2023 and November 2023, respectively. The Company considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to 27 Table of Content s changes in interest rates and has designated them as cash flow hedges. Therefore, changes in the fair value of these derivative instruments are recognized in other comprehensive income. Amortization of the premium paid on cash flow hedges is recognized in earnings over the term of the hedge in the same caption as the hedged item. As of June 30, 2023 and December 31, 2022, the interest rate floors had a nominal fair value. For the three and six months ended June 30, 2023, the Company recognized nominal amounts through other comprehensive income, and reclassified $ 0.2 million and $ 0.3 million, respectively, out of accumulated other comprehensive income and into interest income. For the three and six months ended June 30, 2022, the Company recognized a loss through other comprehensive income of $ 0.1 million and $ 0.2 million, respectively, and reclassified $ 0.1 million and $ 0.2 million, respectively, out of accumulated other comprehensive income and into interest income. During the next twelve months, the Company expects to reclassify $ 0.3 million from accumulated other comprehensive income into interest income related to these agreements. Interest Rate Swaps Designated as Fair Value Hedges During the three months ended June 30, 2023, the Company entered into two interest rate swap contracts to hedge the risk of changes in fair value of the AFS portfolio due to changes in the Secured Overnight Financing Rate (“SOFR”) interest rate. Each fair value hedge utilizes the portfolio layer method hedge designation type for a notional amount of $ 200 million, maturing April 2025. The Company considers these derivatives to be highly effective at offsetting changes in interest rates and will assess the effectiveness on a monthly basis. Therefore, changes in interest rates affecting the fair value of these derivative contracts are recognized in other comprehensive income. These derivative instruments are primarily for risk management purposes. As of June 30, 2023, the interest rate swaps had a notional value of $ 400 million with a fair value of $ 6.2 million. For the three months ended June 30, 2023, the Company recognized gains through other comprehensive income of $ 6.3 million, and reclassified $ 0.1 million out of accumulated other comprehensive income and into interest income. (In thousands) Notional Amount Fair Value Balance Sheet Category At June 30, 2023 Back-to-back swaps $ 457,193 $ 29,007 Other Assets and Other Liabilities Interest rate floors 300,000 — Other Assets Fair value hedges 400,000 6,232 Other Assets At December 31, 2022 Back-to-back swaps $ 312,808 $ 23,140 Other Assets and Other Liabilities Interest rate floors 300,000 2 Other Assets The following table presents amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges. Carrying amount of the hedged items Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items (In thousands) June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022 Available-for-sale securities 1 $ 609,295 $ — $ 6,338 $ — 1 At June 30, 2023, and December 31, 2022, the amortized cost basis and unallocated basis adjustments used in hedging relationships was $ 718.2 million and $ 0 , respectively. Refer to Note 3 for a reconciliation of the amortized cost and fair value of available-for-sale securities. 28 Table of Content s Note 7 – Securities Sold Under Agreements to Repurchase Securities sold under agreements to repurchase are accounted for as secured borrowings. For securities sold under agreements to repurchase, the Company is required to pledge collateral with value sufficient to fully collateralize borrowings. Company securities pledged were as follows by collateral type and maturity as of: (In thousands) June 30, 2023 December 31, 2022 Fair value of pledged securities - overnight and continuous: Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities $ 351,890 $ 184,967 Note 8 – Equity Capital The Company is well-capitalized and at June 30, 2023, the Company and the Company’s principal banking subsidiary, Seacoast Bank, exceeded the common equity Tier 1 (CET1) capital ratio regulatory threshold of 6.5 % for well-capitalized institutions under the Basel III standardized transition approach, as well as risk-based and leverage ratio requirements for well-capitalized banks under the regulatory framework for prompt corrective action. Note 9 – Contingent Liabilities The Company and its subsidiaries, because of the nature of their business, are at all times subject to numerous legal actions, threatened or filed. Management presently believes that none of the legal proceedings to which it is a party are likely to have a materially adverse effect on the Company’s consolidated financial condition, operating results or cash flows. 29 Table of Content s Note 10 – Fair Value Under ASC Topic 820, fair value measurements for items measured at fair value on a recurring and nonrecurring basis at June 30, 2023 and December 31, 2022 included: (In thousands) Fair Value Measurements Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) At June 30, 2023 Financial Assets Available-for-sale debt securities 1 $ 1,916,231 $ 187 $ 1,916,044 $ — Derivative financial instruments 2 35,240 — 35,240 — Loans held for sale 2 5,967 — 5,967 — Loans 3 20,391 — 1,105 19,286 Other real estate owned 4 7,526 — 7,526 — Equity securities 5 13,507 13,507 — — Financial Liabilities Derivative financial instruments 2 $ 29,007 $ — $ 29,007 $ — At December 31, 2022 At Financial Assets Available-for-sale debt securities 1 $ 1,871,742 $ 186 $ 1,871,556 $ — Derivative financial instruments 2 23,142 — 23,142 — Loans held for sale 2 3,151 — 3,151 — Loans 3 8,513 — 1,183 7,330 Other real estate owned 4 2,301 — 2,301 — Equity securities 5 8,220 8,220 — — Financial Liabilities Derivative financial instruments 2 $ 23,142 $ — $ 23,142 $ — 1 See “Note 3 – Securities” for further detail of fair value of individual investment categories. 2 Recurring fair value basis determined using observable market data. 3 See “Note 4 – Loans.” Nonrecurring fair value adjustments to collateral-dependent loans reflect full or partial write-downs that are based on current appraised values of the collateral in accordance with ASC Topic 310. 4 Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360. 5 Investment in shares of mutual funds that invest primarily in CRA-qualified debt securities, reported at fair value in Other Assets. Recurring fair value basis is determined using market quotations. Available-for-sale debt securities : Level 1 securities consist of U.S. Treasury securities. Other securities are reported at fair value utilizing Level 2 inputs. The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available. The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. The fair value of collateralized loan obligations is determined from broker quotes. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using internal models. Derivative financial instruments : The Company offers interest rate swaps to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while 30 Table of Content s providing a contract for fixed interest payments for the customer. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2. Other derivatives are also classified within Level 2. The fair values of these instruments are based upon the estimated amount the Company would receive or pay to terminate the instruments, taking into account current interest rates and, when appropriate, the current creditworthiness of the counterparties. Loans held for sale : Fair values are based upon estimated values to be received from independent third party purchasers. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Fair market value changes occur due to changes in interest rates, the borrower’s credit, the secondary loan market and the market for a borrower’s debt. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of the loans were 90 days or more past due or on nonaccrual as of June 30, 2023 and December 31, 2022. The aggregate fair value and contractual balance of loans held for sale as of June 30, 2023 and December 31, 2022 is as follows: (In thousands) June 30, 2023 December 31, 2022 Aggregate fair value $ 5,967 $ 3,151 Contractual balance 5,757 3,071 Excess 210 80 Loans : Loans carried at fair value consist of collateral-dependent real estate loans. Fair value is based on recent real estate appraisals and evaluations may use either a single valuation approach or a combination of approaches, such as comparative sales, cost and/or income approach. A significant unobservable input in the income approach is the estimated capitalization rate for a given piece of collateral. At June 30, 2023, capitalization rates utilized to determine fair value of the underlying collateral averaged approximately 6.7 %. Adjustments to comparable sales may be made by an appraiser to reflect local market conditions or other economic factors and may result in changes in the fair value of an asset over time. If such adjustments are made, the fair value of these loans is considered Level 3 in the fair value hierarchy. Collateral-dependent loans measured at fair value totaled $ 43.3 million with a specific reserve of $ 23.0 million at June 30, 2023, compared to $ 10.2 million with a specific reserve of $ 2.9 million at December 31, 2022. For loans classified as Level 3, changes included loan additions of $ 18.9 million offset by $ 6.9 million in paydowns and charge-offs for the six months ended June 30, 2023. Other real estate owned : When appraisals are used to determine fair value and the appraisals are based on a market approach, the fair value of other real estate owned (“OREO”) is classified as a Level 2 input. When the fair value of OREO is based on appraisals which require significant adjustments to market-based valuation inputs or apply an income approach based on unobservable cash flows, the fair value of OREO is classified as Level 3. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and/or quarterly valuation process. During the three and six months ended June 30, 2023, there were no such transfers. 31 Table of Content s The carrying amount and fair value of the Company’s other financial instruments that were not disclosed previously in the balance sheet and for which carrying amount is not fair value as of June 30, 2023 and December 31, 2022 is as follows: (In thousands) Carrying Amount Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) June 30, 2023 Financial Assets Debt securities held-to-maturity 1 $ 707,812 $ — $ 577,586 $ — Time deposits with other banks 2,987 — 2,741 — Loans, net 9,937,813 — — 9,756,252 Financial Liabilities Deposit liabilities 12,283,267 — — 12,270,266 Federal Home Loan Bank (“FHLB”) borrowings 160,000 — — 160,163 Subordinated debt, net 105,970 — 98,048 — December 31, 2022 Debt securities held-to-maturity 1 $ 747,408 $ — $ 617,741 $ — Time deposits with other banks 3,236 — 2,989 — Loans, net 8,022,316 — — 7,845,375 Financial Liabilities Deposit liabilities 9,981,595 — — 9,976,125 Federal Home Loan Bank (“FHLB”) borrowings 150,000 — — 149,450 Subordinated debt 84,533 — 82,226 — 1 See “Note 3 – Securities” for further detail of recurring fair value basis of individual investment categories. The short maturity of Seacoast’s assets and liabilities results in having a significant number of financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following balance sheet captions: cash and due from banks, interest bearing deposits with other banks, short-term FHLB borrowings and securities sold under agreements to repurchase. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value at June 30, 2023 and December 31, 2022: Held-to-maturity debt securities : These debt securities are reported at fair value utilizing Level 2 inputs. The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available. The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using internal models. Loans : Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial or mortgage. Each loan category is further segmented into fixed and adjustable-rate interest terms as well as performing and nonperforming categories. The fair value of loans is calculated by discounting scheduled cash flows through the estimated life including prepayment considerations, using estimated market discount rates that reflect the risks inherent in the loan. The fair value approach considers market-driven variables including credit related factors and reflects an “exit price” as defined in ASC Topic 820. 32 Table of Content s Deposit liabilities : The fair value of demand deposits, savings accounts and money market deposits is the amount payable at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for funding of similar remaining maturities. Note 11 – Business Combinations Acquisition of Professional Holding Corp. On January 31, 2023, the Company completed its acquisition of Professional Holding Corp. (“Professional”). Simultaneously, upon completion of the merger of Professional and the Company, Professional Bank was merged with and into Seacoast Bank. Prior to the acquisition, Professional Bank operated nine branches across South Florida. The transaction further expands the Company’s presence in the tri-county South Florida market, which includes Miami-Dade, Broward, and Palm Beach counties, Florida’s largest MSA and the 8 th largest in the nation. The Company acquired 100 % of the outstanding common stock of Professional. Under the terms of the merger agreement, Professional shareholders received 0.8909 shares of Seacoast common stock for each share of Professional common stock held immediately prior to the merger, and Professional option holders received options to purchase Seacoast common stock, with the number of shares underlying each such option and the applicable exercise price adjusted using the same 0.8909 exchange ratio. (In thousands, except per share data) January 31, 2023 Number of Professional common shares outstanding 14,358 Per share exchange ratio 0.8909 Number of shares of SBCF common stock issued 12,792 Multiplied by common stock price per share at January 31, 2023 $ 32.11 Value of SBCF common stock issued $ 410,738 Cash paid for fractional shares 5 Fair value of Professional options converted 10,304 Total purchase price $ 421,047 The acquisition of Professional was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations . The Company recognized goodwill of $ 252.4 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes known. As part of the acquisition of Professional, options were granted to replace outstanding Professional options. These options were fully vested upon acquisition. The full value of the replacement options, $ 10.3 million, was associated with pre-combination service and was therefore included in the calculation of the total purchase consideration. 33 Table of Content s Initially Measured Measurement As Adjusted (In thousands) January 31, 2023 Period Adjustments January 31, 2023 Assets: Cash and cash equivalents $ 141,680 $ — $ 141,680 Investment securities 167,059 — 167,059 Loans 1,991,713 ( 5,544 ) 1,986,169 Bank premises and equipment 2,478 — 2,478 Core deposit intangibles 48,885 — 48,885 Goodwill 248,091 4,288 252,379 BOLI 55,071 — 55,071 Other Assets 74,232 1,256 75,488 Total Assets $ 2,729,209 $ — $ 2,729,209 Liabilities: Deposits $ 2,119,341 $ — $ 2,119,341 Subordinated debt 21,141 — 21,141 Other Liabilities 167,680 — 167,680 Total Liabilities $ 2,308,162 $ — $ 2,308,162 The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date. January 31, 2023 (In thousands) Book Balance Fair Value Loans: Construction and land development $ 156,048 $ 151,012 Commercial real estate - owner occupied 293,473 274,068 Commercial real estate - non-owner occupied 752,393 692,746 Residential real estate 509,305 483,611 Commercial and financial 392,396 350,628 Consumer 33,656 32,153 PPP Loans 1,951 1,951 Total acquired loans $ 2,139,222 $ 1,986,169 The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination: (In thousands) January 31, 2023 Book balance of loans at acquisition $ 155,031 Allowance for credit losses at acquisition ( 18,879 ) Non-credit related discount ( 12,361 ) Total PCD loans acquired $ 123,791 The acquisition of Professional resulted in the addition of $ 45.5 million in allowance for credit losses, including the $ 18.9 million identified in the table above for PCD loans, and $ 26.6 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition. Included within the $ 18.9 million initial PCD allowance is $ 5.5 million recorded as a measurement period adjustment during the three months ended June 30, 2023, reflecting information obtained by the Company relating to events or circumstances existing at the acquisition date. 34 Table of Content s The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships. Acquisition of Apollo Bancshares, Inc. On October 7, 2022, the Company completed its acquisition of Apollo Bancshares, Inc. (“Apollo”). Simultaneously, upon completion of the merger of Apollo and the Company, Apollo Bank was merged with and into Seacoast Bank. Prior to the acquisition, Apollo Bank operated five branches in Miami-Dade County. As a result of this acquisition, the Company expects to expand its customer base and leverage operating costs through economies of scale, and positively affect the Company’s operating results. Apollo shareholders received 1.006529 shares of Seacoast common stock for each share of Apollo common stock, and the minority interest holders in Apollo Bank received 1.195651 shares of Seacoast common stock for each share of Apollo Bank common stock. (In thousands, except per share data) October 7, 2022 Number of Apollo common shares outstanding 3,766 Per share exchange ratio 1.0065 Number of shares of SBCF common stock issued 3,791 Number of Apollo Bank minority interest shares outstanding 609 Per share exchange ratio 1.1957 Number of shares of SBCF common stock issued 728 Total number of shares of SBCF common stock issued 4,519 Multiplied by common stock price per share at October 7, 2022 $ 30.83 Value of SBCF common stock issued $ 139,307 Cash paid for fractional shares 5 Fair value of Apollo options and warrants converted 6,530 Total purchase price $ 145,842 The acquisition of Apollo was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations . The Company recognized goodwill of $ 90.3 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes known. As part of the acquisition of Apollo, options and warrants were granted to replace outstanding Apollo awards. These awards were fully vested upon acquisition. The full value of the replacement awards, $ 6.5 million, was associated with pre-combination service and was therefore included in the calculation of the total purchase consideration. 35 Table of Content s Initially Measured Measurement As Adjusted (In thousands) October 7, 2022 Period Adjustments October 7, 2022 Assets: Cash and cash equivalents $ 41,001 $ — $ 41,001 Investment securities 203,596 — 203,596 Loans 666,522 — 666,522 Bank premises and equipment 7,809 — 7,809 Core deposit intangibles 28,699 — 28,699 Goodwill 90,237 81 90,318 Other Assets 52,724 ( 81 ) 52,643 Total Assets $ 1,090,588 $ — $ 1,090,588 Liabilities: Deposits $ 854,774 $ — $ 854,774 Other Liabilities 89,972 — 89,972 Total Liabilities $ 944,746 $ — $ 944,746 The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date. October 7, 2022 (In thousands) Book Balance Fair Value Loans: Construction and land development $ 74,126 $ 70,654 Commercial real estate - owner occupied 131,093 121,600 Commercial real estate - non-owner occupied 374,673 340,561 Residential real estate 76,254 75,957 Commercial and financial 50,125 46,695 Consumer 11,307 11,055 Total acquired loans $ 717,578 $ 666,522 The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination: (In thousands) October 7, 2022 Book balance of loans at acquisition $ 107,744 Allowance for credit losses at acquisition ( 2,658 ) Non-credit related discount ( 14,191 ) Total PCD loans acquired $ 90,895 The acquisition of Apollo resulted in the addition of $ 7.8 million in allowance for credit losses, including the $ 2.7 million identified in the table above for PCD loans, and $ 5.1 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition. The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships. 36 Table of Content s Acquisition of Drummond Banking Company. On October 7, 2022, the Company completed its acquisition of Drummond Banking Company (“Drummond”). Simultaneously, upon completion of the merger of Drummond and the Company, Drummond’s wholly owned subsidiary bank, Drummond Community Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Drummond Community Bank operated 18 branches across North Florida. As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results. The Company acquired 100 % of the outstanding common stock of Drummond. Under the terms of the definitive agreement, common stock was converted into the right to receive 51.9561 shares of Seacoast common stock. (In thousands, except per share data) October 7, 2022 Number of Drummond common shares outstanding 99 Per share exchange ratio 51.9561 Number of shares of SBCF common stock issued 5,136 Multiplied by common stock price per share at October 7, 2022 $ 30.83 Total purchase price $ 158,332 The acquisition of Drummond was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations . The Company recognized goodwill of $ 103.6 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes known. Initially Measured Measurement As Adjusted (In thousands) October 7, 2022 Period Adjustments October 7, 2022 Assets: Cash and cash equivalents $ 31,805 $ — $ 31,805 Investment securities 327,852 — 327,852 Loans 544,694 — 544,694 Bank premises and equipment 29,370 — 29,370 Core deposit and other intangibles 32,983 — 32,983 Goodwill 103,476 145 103,621 Other Assets 49,812 ( 145 ) 49,667 Total Assets $ 1,119,992 $ — $ 1,119,992 Liabilities: Deposits $ 881,281 $ — $ 881,281 Other Liabilities 80,379 — 80,379 Total Liabilities $ 961,660 $ — $ 961,660 The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date. 37 Table of Content s October 7, 2022 (In thousands) Book Balance Fair Value Loans: Construction and land development $ 155,041 $ 140,401 Commercial real estate - owner occupied 112,768 106,152 Commercial real estate - non-owner occupied 26,520 24,744 Residential real estate 85,767 78,663 Commercial and financial 88,026 82,067 Consumer 118,880 112,667 Total acquired loans $ 587,002 $ 544,694 The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination: (In thousands) October 7, 2022 Book balance of loans at acquisition $ 58,878 Allowance for credit losses at acquisition ( 2,566 ) Non-credit related discount ( 4,607 ) Total PCD loans acquired $ 51,705 The acquisition of Drummond resulted in the addition of $ 12.5 million in allowance for credit losses, including the $ 2.6 million identified in the table above for PCD loans, and $ 9.9 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition. The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships. Acquisition of Business Bank of Florida, Corp. On January 3, 2022, the Company completed its acquisition of Business Bank of Florida, Corp., (“BBFC”). Simultaneously, upon completion of the merger of BBFC and the Company, BBFC’s wholly owned subsidiary bank, Florida Business Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Florida Business Bank operated one branch in Melbourne, Florida. As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results. The Company acquired 100 % of the outstanding common stock of BBFC. Under the terms of the definitive agreement, each share of BBFC common stock was converted into the right to receive 0.7997 of a share of Seacoast common stock. (In thousands, except per share data) January 3, 2022 Number of BBFC common shares outstanding 1,112 Per share exchange ratio 0.7997 Number of shares of SBCF common stock issued 889 Multiplied by common stock price per share on January 3, 2022 $ 35.39 Value of SBCF common stock issued $ 31,480 Fair value of BBFC options converted 497 Total purchase price $ 31,977 The acquisition of BBFC was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations . The Company recognized goodwill of $ 8.0 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. 38 Table of Content s As part of the BBFC acquisition, options were granted to replace outstanding BBFC options. These options were fully vested upon acquisition. The full value of the replacement options, $ 0.5 million, was associated with pre-combination service and was therefore included in the calculation of the total purchase consideration. (In thousands) Measured January 3, 2022 Assets: Cash $ 38,332 Investment securities 26,011 Loans 121,774 Bank premises and equipment 2,102 Core deposit intangibles 2,621 Goodwill 7,962 Total assets $ 198,802 Liabilities: Deposits 166,326 Other liabilities 499 Total liabilities $ 166,825 The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date. January 3, 2022 (In thousands) Book Balance Fair Value Loans: Construction and land development $ 8,677 $ 8,414 Commercial real estate - owner occupied 45,403 44,564 Commercial real estate - non-owner occupied 53,065 52,034 Residential real estate 5,377 5,421 Commercial and financial 11,335 11,280 Consumer 59 61 Total acquired loans $ 123,916 $ 121,774 The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination: (In thousands) (In thousands) Book balance of loans at acquisition $ 714 Allowance for credit losses at acquisition ( 15 ) Non-credit related discount ( 48 ) Total PCD loans acquired $ 651 The acquisition of BBFC resulted in the addition of $ 1.8 million in allowance for credit losses, including the $ 15 thousand identified in the table above for PCD loans, and $ 1.8 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition. The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships. 39 Table of Content s Acquisition of Sabal Palm Bancorp, Inc. On January 3, 2022, the Company completed its acquisition of Sabal Palm Bancorp, Inc. (“Sabal Palm”). Simultaneously, upon completion of the merger of Sabal Palm and the Company, Sabal Palm’s wholly owned subsidiary bank, Sabal Palm Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Sabal Palm Bank operated three branches in the Sarasota area. As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results. The Company acquired 100 % of the outstanding common stock of Sabal Palm. Under the terms of the definitive agreement, each share of Sabal Palm common stock was converted into the right to receive 0.2203 of a share of Seacoast common stock. (In thousands, except per share data) January 3, 2022 Number of Sabal Palm common shares outstanding 7,536 Per share exchange ratio 0.2203 Number of shares of SBCF common stock issued 1,660 Multiplied by common stock price per share on January 3, 2022 $ 35.39 Value of SBCF common stock issued $ 58,762 Fair value of Sabal Palm options converted 3,336 Total purchase price $ 62,098 The acquisition of Sabal Palm was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations . The Company recognized goodwill of $ 26.5 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. As part of the Sabal Palm acquisition, options were granted to replace outstanding Sabal Palm options. These options were fully vested upon acquisition. The full value of the replacement options, $ 3.3 million, was associated with pre-combination service and was therefore included in the calculation of the total purchase consideration. (In thousands) Measured January 3, 2022 Assets: Cash $ 170,609 Time deposits with other banks 6,473 Loans 246,152 Bank premises and equipment 1,745 Core deposit intangibles 5,587 Goodwill 26,489 Other assets 5,189 Total assets $ 462,244 Liabilities: Deposits 395,952 Other liabilities 4,194 Total liabilities $ 400,146 40 Table of Content s The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date. January 3, 2022 (In thousands) Book Balance Fair Value Loans: Construction and land development $ 9,256 $ 9,009 Commercial real estate - owner occupied 57,690 56,591 Commercial real estate - non-owner occupied 89,153 87,280 Residential real estate 71,469 72,227 Commercial and financial 21,109 20,813 Consumer 233 232 Total acquired loans $ 248,910 $ 246,152 The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination: (In thousands) January 3, 2022 Book balance of loans at acquisition $ 3,703 Allowance for credit losses at acquisition ( 37 ) Non-credit related discount ( 663 ) Total PCD loans acquired $ 3,003 The acquisition of Sabal Palm resulted in the addition of $ 3.4 million in allowance for credit losses, including the $ 37 thousand identified in the table above for PCD loans, and $ 3.4 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition. The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships. Acquisition Costs Acquisition costs included in the Company's income statement for the three months ended June 30, 2023, and 2022 were $ 15.6 million and $ 3.0 million, respectively. Acquisition costs included in the Company’s income statement for the six months ended June 30, 2023, and 2022 were $ 33.2 million and $ 9.7 million, respectively. Pro-Forma Information Pro-forma data as of June 30, 2023 and 2022 present information as if the acquisition of Professional occurred at the beginning of 2022. The pro-forma information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have occurred if the transactions had been effected on the assumed dates. Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share data) 2023 2022 2023 2022 Net interest income $ 126,963 $ 112,275 $ 295,883 $ 217,872 Net income available to common shareholders 31,249 48,458 68,005 44,139 EPS - basic 0.37 0.65 0.80 0.60 EPS - diluted 0.37 0.65 0.80 0.59 41 Table of Content s