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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-03-01 · 320 added, 508 removed, 493 unchanged (63% of the section changed)

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Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”), a financial holding company, registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), is one of the largest community banks in Florida, with $14.6 billion in assets and $11.8 billion in deposits as of December 31, 2023.

Its principal subsidiary is Seacoast National Bank (“Seacoast Bank”), a wholly owned national banking association.

Its principal subsidiary is Seacoast National Bank

(“Seacoast Bank”), a wholly owned national banking association.

The Company provides integrated financial services including commercial and consumer banking, wealth management, mortgage and insurance services to customers through advanced online and mobile banking solutions, and Seacoast Bank's network of 77 traditional branches and commercial banking centers.

Seacoast operates primarily in Florida, with concentrations in the state's fastest growing markets, each with unique characteristics and opportunities.

The Company delivers integrated banking services, combining traditional retail locations with online and mobile technology and a convenient telephone banking center.

Seacoast has built a fully integrated distribution platform across all channels to provide customers with convenient options to satisfy their banking needs, allowing the Company an opportunity to reach customers through a variety of sales channels.

The Company believes its digital delivery and products are contributing to the franchise's growth.

Seacoast is executing a balanced growth strategy, combining organic growth with strategic acquisitions in Florida's most attractive growing markets.

The Company has enhanced its footprint with 16 acquisitions since 2014, generating continued expansion and strengthening market share, increasing the customer base and lowering operating costs through economies of scale.

The Company has expanded its presence across the state with 16 acquisitions since 2014, strengthening market share, increasing the customer base and lowering operating costs through economies of scale.

The acquisition of Professional Holding Corp.

(“Professional”) (NASDAQ:

PFHD), parent company of Professional Bank, was completed on January 31, 2023.

The transaction further expands Seacoast’s presence in the tri-county South Florida market, which includes Miami-Dade, Broward, and Palm Beach counties, Florida’s largest MSA and the 8th largest in the nation.

Professional Bank, the sixth largest bank headquartered in South Florida, had deposits of approximately $2.2 billion and loans of approximately $2.1 billion as of December 31, 2022.

The Company's acquisition strategy has not only increased customer households and been accretive to earnings, but has also opened markets and Seacoast's customer base.

The table below summarizes acquisition activity in recent years:

(“Professional”), parent company of Professional Bank, was completed on January 31, 2023.

The transaction further expanded Seacoast’s presence in the tri-county South Florida market, which includes Miami-Dade, Broward, and Palm Beach counties, Florida’s largest MSA and the 8th largest in the nation.

The Company's acquisition strategy has not only increased customer households and been accretive to earnings, but has also opened markets and expanded Seacoast's customer base.

The table below summarizes acquisition activity in the past ten years:

(In millions) Primary Market(s) Year of Acquisition Acquired Loans Acquired Deposits

Drummond Banking Company Gainesville and Ocala 2022 $ 545 $ 881

Apollo Bancshares, Inc.

Professional Bank/ Professional Holding Corp.

Miami-Dade County and West Palm Beach 2023 $ 1,986 $ 2,119

Drummond Community Bank/ Drummond Banking Company Gainesville and Ocala 2022 545 881

Apollo Bank/ Apollo Bancshares, Inc.

Miami-Dade County 2022 667 855

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Legacy Bank of Florida Boca Raton and Palm Beach 2021 477 495

Freedom Bank/ Fourth Street Banking Company

Freedom Bank/ Fourth Street Banking Company Tampa- St.

Petersburg 2020 303 330

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Orlando 2014 365 516

1 Acquired loans and deposits presented are preliminary and do not include fair value/purchase accounting adjustments.

Results of Operations

2023 Financial Performance Highlights

• Net income of $104 million, a decrease of $2.5 million, or 2%, compared to 2022, and adjusted net income 1 of $154.7 million, an increase of $18.5 million, or 14%, compared to 2022.

• Net interest income increased $122.1 million, or 33%, to $488.2 million, and net interest margin (on a fully tax equivalent basis) 1 increased to 3.77% in 2023 from 3.69% in 2022 .

• Cost of deposits, supported by Seacoast’s longstanding relationship-based approach, remained low at 11 basis points in 2022 compared to 8 basis points in 2021.

• Achieved organic loan growth of 9% while maintaining strict credit underwriting standards and broad distribution amongst industries and collateral types.

• Tangible common equity to tangible assets of 9.1% and peer-leading capital levels support Seacoast’s continued achievement of strategic growth initiatives.

• Continued strong asset quality trends, with nonperforming loans representing 0.35% of total loans at December 31, 2022.

• Completed four acquisitions in 2022, further expanding the franchise in Florida’s most dynamic markets.

The Seacoast Bank footprint reaches from the south in Miami-Dade county, along the east coast to Jacksonville, throughout central and north Florida including Orlando, Gainesville, and Ocala, and on the west coast from Tampa/St.

Petersburg south to Naples.

First Second Third Fourth Year

2022 2022 2022 2022 2022 2021

Return on average tangible assets 0.85 % 1.29 % 1.17 % 0.94 % 1.06 % 1.41 %

Return on average tangible common equity 8.02 13.01 11.53 10.36 10.70 13.27

Efficiency ratio 62.33 56.22 57.13 63.39 60.01 55.39

Adjusted return on average tangible assets 1

1.06 % 1.38 % 1.27 % 1.36 % 1.27 % 1.48 %

Adjusted return on average tangible common equity 1

10.01 13.97 12.48 15.05 12.86 13.97

Adjusted efficiency ratio 1

54.86 53.15 53.28 51.52 53.03 52.59

• Pre-tax pre-provision earnings 1 were $172.6 million in 2023, an increase of 5% compared to 2022.

Adjusted pre-tax pre-provision earnings 1 were $242.6 million in 2023, an increase of 19% compared to 2022.

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

Results of Operations

Earnings Summary

For the year ended December 31, 2022, net income totaled $106.5 million, or $1.66 per diluted share, compared to $124.4 million, or $2.18 per diluted share, for the year ended December 31, 2021.

Return on average assets (“ROA”) was 0.96% and return on average equity (“ROE”) was 7.51% in 2022, compared to 1.33% and 10.24%, respectively, in 2021.

Adjusted net income 1 for the year ended December 31, 2022 totaled $136.1 million, or $2.12 per diluted share, compared to $135.0 million, or $2.36 per diluted share, in 2021.

In 2022, the Company's efficiency ratio, defined as noninterest expense less foreclosed property expense and amortization of intangibles divided by net operating revenue (net interest income on a fully tax equivalent basis plus noninterest income excluding securities gains and losses), was 60.01%, compared to 55.39% for 2021.

Changes from the prior year reflect higher 2022 expenses, resulting from organic and acquisition-related expansion of the Company's footprint and investments in commercial banking talent.

The adjusted efficiency ratio 1 in 2022 was 53.03% compared to 52.59% in 2021.

• Continued strong capital, with a Tier 1 capital ratio of 14.5%, and the ratio of tangible common equity to tangible assets increasing to 9.31%.

• Tangible book value per share increased to $15.08 at December 31, 2023 from $14.69 at December 31, 2022.

• Executed strategic expense management actions in 2023 to optimize efficiency in 2024.

Fourth quarter 2023 expenses were 8% lower than the prior quarter.

Net Interest Income and Margin

Net interest income for the year ended December 31, 2023, totaled $488.2 million, increasing $122.1 million, or 33%, compared to the year ended December 31, 2022.

The increase in net interest income is primarily due to higher balances added through the Professional acquisition and higher yields on securities and loans, partially offset by the higher cost of deposits.

Net interest income (on a fully taxable equivalent basis) 1 for the year ended December 31, 2023, was $489.0 million, increasing $122.4 million, or 33%, compared to the year ended December 31, 2022.

In 2022 and 2021, net interest margin (on a fully tax equivalent basis) 1 was 3.69% and 3.27%, respectively.

The rising interest rate environment during 2022 resulted in higher yields on securities and loans.

Yield on securities increased by 60 basis points from 1.61% to 2.21% while the yield on loans increased 24 basis points from 4.38% to 4.62%.

The effect on net interest margin of interest and fees from Paycheck Protection Program ("PPP") loans was an increase of 2 basis points in 2022 compared to an increase of 11 basis points in 2021.

The effect on net interest margin of purchase discounts on acquired loans was an increase of 18 basis points in 2022 compared to an increase of 15 basis points in 2021.

The cost of deposits increased by three basis points to 11 basis points in 2022.

Accretion on acquired loans totaled $56.7 million for the year ended December 31, 2023, compared to $18.4 million for the year ended December 31, 2022.

The year-over-year increase in accretion reflects the impact of purchase marks from bank acquisitions in late 2022 and early 2023.

Net interest margin (on a fully taxable equivalent basis) 1 increased eight basis points to 3.77% for 2023 compared to 3.69% in 2022.

Average interest earning assets increased $3.0 billion, or 31%, during 2023 to $13.0 billion compared to $9.9 billion in 2022, primarily the result of acquisitions in the fourth quarter of 2022 and the first quarter of 2023.

During 2023, yields on interest earning assets increased to 5.32% from 3.84% in 2022 due to the higher interest rate environment.

The cost of average interest-bearing liabilities in 2023 increased 215 basis points to 2.40% from 0.25% in 2022, reflecting the impact of higher interest rates.

During 2023, average securities increased $34.3 million to $2.6 billion, partially due to the acquisition of Professional.

Yields on securities increased 97 basis points from 2.21% in 2022 to 3.18% in 2023, benefiting from the higher rate environment and favorable repricing on variable rate bonds.

Average loans totaled $9.9 billion for the year ended December 31, 2023, reflecting an increase of $3.1 billion, or 45%, compared to $6.8 billion for the year ended December 31, 2022, the result of acquisitions in late 2022 and early 2023.

Yields on loans increased 126 basis points from 4.62% in 2022 to 5.88% in 2023, benefiting from higher rates on new production and increasing rates on variable rate loans.

Accretion of purchase discounts on acquired loans added 57 basis points to loan yields in 2023, compared to 27 basis points in 2022.

During 2023, average transaction deposits (noninterest and interest bearing demand deposits) increased $0.9 billion, or 15%, compared to 2022.

The Company’s deposit mix remains favorable, with 89% of average deposit balances comprised of savings, money market, and demand deposits in 2023.

The cost of average total deposits (including noninterest bearing demand deposits) increased by 139 basis points to 1.50% in 2023, compared to 0.11% in 2022, primarily the result of higher short term interest rates and an increasingly competitive deposit market.

Sweep repurchase agreements with customers had an average balance of $271.0 million for the year ended December 31, 2023, increasing $149.7 million, or 123%, compared to $121.3 million for the year ended December 31, 2022.

The average rate on customer repurchase accounts was 3.07% in 2023 compared to 0.81% in 2022.

The Company had an average balance of $175.2 million in FHLB borrowings outstanding for the year ended December 31, 2023, with an average interest rate of 3.64%.

The average balance of FHLB borrowings was $10.3 million in 2022.

In 2023, average long-term debt of $104.2 million carried an average cost of 6.96%, up from 4.09% in 2022, reflecting the impact of higher interest rates.

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

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Other investments 90,692 5,718 6.30 69,604 3,517 5.05 65,533 1,947 2.97

Loan excluding PPP loans 6,812,654 313,450 4.60 5,369,204 230,552 4.29 5,259,653 242,736 4.62

PPP loans 25,612 2,623 10.24 381,860 21,282 5.57 419,154 11,974 2.86

Total Loans 6,838,266 316,073 4.62 5,751,064 251,834 4.38 5,678,807 254,710 4.49

Loans 9,889,070 581,825 5.88 6,838,266 316,073 4.62 5,751,064 251,834 4.38

Total Earning Assets 12,973,453 689,778 5.32 9,931,985 380,994 3.84 8,445,380 284,760 3.37

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Other investments 1,198 1,003 2,201 163 1,407 1,570

Loans excluding PPP loans 64,197 18,701 82,898 4,880 (17,064) (12,184)

PPP loans (28,169) 9,510 (18,659) (1,572) 10,880 9,308

Total Loans 36,028 28,211 64,239 3,308 (6,184) (2,876)

Loans 160,253 105,499 265,752 36,028 28,211 64,239

Total Earning Assets 160,372 148,412 308,784 48,125 48,109 96,234

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Changes attributable to rate/volume (mix) are allocated to rate and volume on an equal basis.

Total average loans increased $1.1 billion, or 19%, during 2022 compared to 2021.

Average loans as a percentage of average earning assets totaled 69% in 2022, compared to 68% in 2021.

Loans secured by commercial real estate represented 57% of total loans, excluding PPP loans, at December 31, 2022, compared to 53% at December 31, 2021.

Residential loan balances with individuals (including home equity loans and lines) represented 23% of total loans, excluding PPP loans, at both December 31, 2022 and 2021.

(see “Loan Portfolio”).

Average debt securities increased $725.8 million, or 39%, from 2021 reflecting the investment of excess liquidity into the securities portfolio early in 2022.

Securities comprised 26% and 22% of average earning assets in 2022 and 2021, respectively.

Yields on securities increased from 1.61% in 2021 to 2.21% in 2022.

Loan production is detailed in the following table for the periods specified:

For the Year Ended December 31,

(In thousands) 2022 2021

Commercial/commercial real estate loan pipeline at period end $ 395,652 $ 397,822

Commercial/commercial real estate loans closed 1,664,884 1,137,847

Residential pipeline - saleable at period end $ 4,207 $ 30,102

Residential loans - sold 120,921 422,796

Residential pipeline - portfolio at period end $ 17,149 $ 25,589

Residential loans - retained 421,997 464,631

Consumer pipeline at period end $ 36,585 $ 29,739

Consumer originations 408,724 249,473

PPP originations $ — $ 256,007

Commercial and commercial real estate loan production in 2022 totaled $1.7 billion, compared to $1.1 billion in 2021.

Commercial originations remained strong and reflect the addition of well-established commercial bankers and expansion into new markets across the state, generating disciplined growth in full relationships, including credit facilities, deposit relationships, and wealth opportunities.

Residential loan production totaled $542.9 million in 2022, compared to $887.4 million in 2021.

Included in 2022 and 2021 are purchases of $111.3 million and $219.2 million, respectively, in residential loans from the wholesale market.

Limited housing inventory and slowing refinance activity contributed to lower production.

Consumer originations totaled $408.7 million during 2022, compared to $249.5 million during 2021.

The increases are primarily the result of consumer lending teams that joined the Company in late 2021.

In 2022, the cost of average interest-bearing liabilities increased nine basis points to 0.25% from 2021, reflecting the impact of the rising interest rate environment.

The low overall cost of funding reflects the Company’s successful core deposit focus and relationship-based approach.

Noninterest bearing demand deposits at December 31, 2022 represented 41% of total deposits, compared to 38% at December 31, 2021.

The cost of average total deposits (including noninterest bearing demand deposits) in 2022 was 0.11%, compared to 0.08% in 2021.

Given the decreasing money supply, increasing competition for deposits, and higher interest rates, we expect the cost of interest bearing liabilities to increase in coming periods.

The following table details the Company's customer relationship funding as of:

(In thousands, except percentages) 2022 2021

Noninterest demand $ 4,070,973 $ 3,075,534

Interest-bearing demand 2,337,590 1,890,212

Money market 1,985,974 1,651,881

Savings 1,064,392 895,019

Time certificates of deposit 522,666 554,943

Total deposits $ 9,981,595 $ 8,067,589

Customer sweep accounts $ 172,029 $ 121,565

Noninterest demand deposit mix 41 % 38 %

The Company’s focus on convenience, with high-quality customer service, expanded digital offerings and distribution channels provides stable, low-cost core deposit funding.

The acquisitions in 2022 contributed to higher deposit balances, partially offset by outflows in the second half of 2022 spurred by the rising rate environment.

Despite increasing interest rates, the Company continued to manage its cost of deposits effectively, increasing to only 21 basis points in the fourth quarter of 2022.

During 2022, average transaction deposits (noninterest and interest bearing demand deposits) increased $1.2 billion, or 27%, compared to 2021.

The Company’s deposit mix remains favorable, with 95% of average deposit balances comprised of savings, money market, and demand deposits in 2022.

Sweep repurchase agreements with customers increased $50.5 million, or 42%, to $172.0 million at December 31, 2022 compared to $121.6 million at December 31, 2021.

The average rate on customer repurchase accounts was 0.81% in 2022 compared to 0.12% in 2021.

No federal funds purchased were utilized at December 31, 2022 or 2021.

The Company had $150 million in FHLB borrowings outstanding at December 31, 2022, with a weighted average rate of 3.42%.

No FHLB borrowings were utilized in 2021 (see “Note 9 - Borrowings” to the Company’s consolidated financial statements).

In 2022, average subordinated debt of $74.7 million related primarily to trust preferred securities issued by subsidiary trusts of the Company carried an average cost of 4.09%, up from 2.36% in 2021, reflecting the impact of rising interest rates as the subordinated debt cost is based on LIBOR plus a spread.

In the fourth quarter of 2022 through a bank acquisition the Company acquired $12.3 million in subordinated debt.

The notes carry a fixed interest rate of 5.50% until 2025, convert to a floating rate until maturity in 2030, and are callable at the Company’s discretion (see “Note 9 - Borrowings”).

Provision for Credit Losses

The provision for credit losses was $26.2 million for the full year 2022 compared to a net benefit of $9.4 million for the full year 2021.

The increase in provision during 2022 was primarily driven by loan growth, provisioning for loans related to the four acquisitions during the year, along with changes in economic forecast factors.

The provision for credit losses was $37.5 million for the full year 2023 compared to $26.2 million for the full year 2022.

Included is $26.6 million in 2023 and $20.2 million in 2022 of day-1 provision for credit losses on loans added through bank acquisitions.

Noninterest Income

Noninterest income (excluding securities gains and losses) totaled $67.2 million in 2022, a decrease of $4.1 million, or 6%, compared to 2021.

Noninterest income (excluding securities gains and losses) totaled $82.0 million in 2023, an increase of $14.9 million, or 22%, compared to 2022.

Noninterest income accounted for 14% of total revenue in 2023 and 16% in 2022 (net interest income plus noninterest income, excluding securities gains and losses).

Noninterest income is detailed as follows:

For the Year Ended December 31, % Change

(In thousands, except percentages) 2022 2021 22/21

For the Year Ended December 31,

(In thousands, except percentages) 2023 2022 % Change

Service charges on deposit accounts $ 18,278 $ 13,709 33%

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Mortgage banking fees 1,790 3,478 (49)

Marine finance fees 920 665 38

Insurance agency income 4,510 805 460

SBA gains 2,105 842 150

BOLI income 8,401 5,572 51

SBIC income 1,305 6,778 (81)

Other income 13,139 10,759 22

Other 20,304 14,559 39

82,045 67,187 22

Securities gains (losses), net (1,096) (578) 90

Securities losses, net (2,893) (1,096) 164

Total Noninterest Income $ 79,152 $ 66,091 20%

Service charges on deposits for the year ended December 31, 2022 compared to the year ended December 31, 2021 increased $3.9 million, or 40%, to $13.7 million.

This increase reflects the benefit of an expanded deposit base from acquisition activity in 2022.

Overdraft fees on business and consumer accounts represented 37% of total service charges on deposits in 2022 compared to 41% in 2021.

Interchange revenue totaled $17.2 million in 2022, an increase of 6% from $16.2 million in 2021, primarily attributed to an expanded customer base.

Despite the impact of market declines, wealth management revenues, including brokerage commissions and fees and trust income, increased $1.4 million, or 15%, to $11.1 million for the year ended December 31, 2022.

The wealth management team has continued to demonstrate success in building new relationships, resulting in a 12% increase in assets under management year-over-year to $1.4 billion as of December 31, 2022.

Mortgage banking fees decreased by $8.3 million, or 70%, to $3.5 million for the year ended December 31, 2022 compared to 2021.

The prior year results benefited from historically low interest rates which resulted in strong refinance demand, while 2022 results reflect a slowdown in refinance and purchase activity.

Gains on sale of the guaranteed portion of SBA loans totaled $0.8 million for the year ended December 31, 2022, a decrease of $0.7 million compared to 2021.

Service charges on deposits for the year ended December 31, 2023 compared to the prior year increased $4.6 million, or 33%, to $18.3 million.

This increase primarily reflects the benefit of an expanded deposit base, including from acquisitions, and the continued benefit of the expansion of treasury management services to commercial customers.

Overdraft-related fees for both consumer and commercial accounts represented 35% of total service charges on deposits in 2023 compared to 37% in 2022.

Interchange revenue totaled $13.9 million in 2023, a decrease of 19% from $17.2 million in 2022.

The decrease in interchange income was due to the impact of the Durbin amendment, which became effective for the first time for the Company on July 1, 2023, limiting network interchange fees earned on debit card transactions.

Wealth management revenues, including brokerage commissions and fees and trust income, increased $1.7 million, or 16%, to $12.8 million for the year ended December 31, 2023.

The wealth management team continued to demonstrate notable success in building relationships, resulting in a 23% increase in assets under management year-over-year to $1.7 billion as of December 31, 2023.

Insurance agency income totaled $4.5 million in 2023, an increase of 460% from $0.8 million in 2022.

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

Mortgage banking fees decreased $1.7 million, or 49%, to $1.8 million for the year ended December 31, 2023 compared to 2022, reflecting lower saleable production due to the impact on demand of higher interest rates and limited housing inventory.

Gains on sale of the guaranteed portion of SBA loans totaled $2.1 million for the year ended December 31, 2023, an increase of $1.3 million compared to 2022.

Bank owned life insurance (“BOLI”) income totaled $8.4 million in 2023, an increase of $2.8 million, or 51%, compared to the prior year.

The Company added $53.1 million in BOLI through bank acquisitions in 2022.

Income from the Company's investments in Small Business Investment Companies (“SBICs”) decreased by $5.5 million to $1.3 million compared to 2021.

The amounts recognized on SBIC investments will vary amongst periods.

Other income increased by $2.4 million, or 22% year-over-year, reflecting higher loan swap fees and insurance agency commissions.

The Company added $53.1 million in BOLI in the fourth quarter of 2022 and $55.1 million in the first quarter of 2023 from bank acquisitions.

Other income totaled $20.3 million in 2023, reflecting an increase of $5.7 million, or 39%, year-over-year.

The increase was attributable to BOLI death benefits totaling $2.1 million in 2023, higher SBIC investment income, and increases in other fees correlating to growth in customers and accounts.

Securities losses in 2023 totaled $2.9 million, resulting from the sale in the fourth quarter of 2023 of approximately $82.9 million, or 3%, of the bank’s investment securities portfolio.

The Company recognized an opportunity to sell low-yielding holdings with modest losses and use the proceeds to reinvest into higher-yielding bonds with strong prepayment protection and good convexity, expecting an earnback period of only 1.3 years.

Securities losses in 2022 totaled $1.1 million resulting solely from the decline in the market value of the CRA-qualified mutual fund investment.

Securities losses in 2021 totaled $0.6 million, resulting from a $0.4 million net loss on the sale of debt securities, and a $0.2 million decline in the value of the CRA-qualified mutual fund investment.

Noninterest Expense

The Company has demonstrated its commitment to efficiency through disciplined, proactive management of its cost structure.

Noninterest expenses in 2022 totaled $267.9 million and included acquisition-related expenses of $27.9 million, and expenses related to branch consolidation and other expense reduction initiatives of $1.2 million.

Noninterest expenses in 2023 totaled $395.6 million, including $33.2 million in acquisition-related expenses, and $5.2 million related to branch consolidation and other expense reduction initiatives.

In 2022, noninterest expenses totaled $267.9 million, including $27.9 million in acquisition-related expenses and $1.2 million in expenses related to branch consolidation and other expense reduction initiatives.

Adjusted noninterest expense 1 in 2022 totaled $229.7 million, an increase

of 26% from 2021, reflecting overall growth of the organization.

Changes in the categories of noninterest expense for the year ended 2022 compared to 2021 are further described below.

For the Year Ended December 31, % Change

(In thousands, except percentages) 2022 2021 22/21

Adjusted noninterest expense 1 in 2023 totaled $328.5 million, an increase of 43% from 2022, reflecting overall growth of the organization.

For the Year Ended December 31,

(In thousands, except percentages) 2023 2022 % Change

Salaries and wages $ 177,637 $ 130,100 37%

1 unchanged sentence

Outsourced data processing costs 52,098 27,510 89

Telephone and data lines 3,799 3,223 18

Telephone / data lines 5,204 3,799 37

Occupancy 26,668 18,539 44

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Amortization of intangibles 28,726 9,101 216

Foreclosed property expense and net gain on sale (1,534) (264) 481

Other real estate owned expense and net loss (gain) on sale 985 (1,534) N/A

Provision for credit losses on unfunded commitments 1,239 1,157 7

3 unchanged sentences

Results in 2023 include $10.4 million in bank acquisition-related charges compared to $9.2 million in 2022.

The remaining increase compared to the prior year reflects higher salaries from headcount added through acquisitions and investments made to support organic growth.

Excluding merger-related charges, the increase is the result of the net addition of branch locations, associates, and bankers from recent acquisitions.

In the third quarter of 2023, the Company completed a 6% reduction in headcount, resulting in $3.2 million in severance-related expenses.

During 2023, employee benefit costs, which include costs associated with the Company's self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, increased $10.9 million, or 57%, compared to 2022.

The increase reflects the impact of higher health insurance related costs and payroll taxes resulting from headcount added through acquisitions and investments made to support organic growth.

The increase reflects the overall growth of the organization, including as a result of the acquisitions completed in 2023 and 2022.

The Company utilizes third parties for core data processing systems.

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

Outsourced data processing costs totaled $27.5 million in 2022, an increase of $7.6 million, or 38%.

Results include $3.4 million in acquisition-related charges compared to $0.9 million in 2021.

Investments in 2022 included an upgrade of the online and mobile banking platform, providing an enhanced digital experience for consumers.

Outsourced data processing costs may continue to increase in the future as customers adopt improved products and as business volumes grow.

Telephone and data line expenses, including electronic communications with customers, between branch locations and personnel, and with third party data processors, increased by $0.6 million in 2022 to $3.8 million.

Total occupancy, furniture and equipment expenses in 2022 totaled $25.0 million, an increase of $5.4 million, or 28%, compared to 2021, primarily due to expansion through acquisitions.

The Company continues to evolve its branch footprint in order to redirect capacity into attractive growth markets.

In 2022 and 2021, marketing expenses totaled $6.3 million and $4.6 million, respectively.

The Company continues to carefully manage the use of marketing campaigns to target potential high value customers in a cost effective manner through a mix of digital communications, direct mail, event sponsorships and donations.

Legal and professional fees increased by $9.3 million in 2022, or 82%, to $20.7 million, which includes $10.3 million in merger-related expenses in 2022, compared to $3.5 million in 2021.

Outsourced data processing costs totaled $52.1 million in 2023, an increase of $24.6 million, or 89%, compared to 2022.

Results in 2023 include $17.4 million in direct acquisition-related costs, including termination penalties on acquired technology contracts upon system conversion, compared to $3.4 million in 2022.

The remainder of the increase reflects the overall growth of the organization.

Total occupancy, furniture, equipment, and communication expenses in 2023 totaled $40.6 million, an increase of $11.8 million, or 41%, compared to 2022, primarily due to expansion of the Company's footprint across Florida.

During 2023, marketing expenses totaled $9.2 million, an increase of $2.9 million, or 46%, compared to $6.3 million in 2022.

The Company has increasingly invested in targeted marketing campaigns focused on deposit growth, and on advertising and branding campaigns across the footprint.

Legal and professional fees decreased by $3.2 million in 2023, or 15%, to $17.5 million, and included $6.5 million in merger-related expenses in 2023, compared to $10.3 million in 2022.

FDIC assessments were $8.6 million in 2023, compared to $3.1 million in 2022.

Foreclosed property expenses were more than offset in each year by net gains on sale, resulting in a benefit of $1.5 million in 2022, compared to a benefit of $0.3 million in 2021.

The increase reflects the Company's growth in asset size.

Amortization of intangibles increased $19.6 million, or 216%, to $28.7 million during 2023 from $9.1 million in 2022.

The acquisitions in 2022 and in 2023 added $118.8 million in core deposit intangible assets, which are amortized using an accelerated amortization method.

Other real estate owned expense and net loss (gain) on sale was a net loss of $1.0 million in 2023, compared to a net gain of $1.5 million in 2022.

Charges during 2023 related to valuation adjustments on former branch properties.

The Company expects the final disposition of several properties in the first quarter of 2024.

Provision for credit losses on unfunded commitments totaled $1.2 million in both 2023 and 2022.

The expense in each period is primarily related to the increase in customer relationships from bank acquisitions.

Other expense totaled $29.2 million and $23.7 million in 2023 and 2022, respectively.

The increase of $7.3 million, or 45%, includes higher loan production-related expenses, and higher recruiting costs.

The increase of $5.5 million, or 23%, includes higher costs in general business and customer support activities resulting from growth in the customer base and the expanded branch footprint and to maintaining parallel activities and processes prior to the conversion of Professional in June 2023.

In 2023, the provision for income taxes totaled $30.2 million, compared to $31.6 million in 2022.

The decrease reflects lower pre-tax income primarily resulting from higher provision for credit losses, and a $1.0 million refund of Florida corporate income tax paid in the prior year.

Discrete tax benefits related to share-based compensation were $1.1 million in 2022 and $0.9 million in 2021.

The decrease reflects lower pre-tax income in 2023.

Discrete tax benefits related to share-based compensation were $0.5 million and $1.1 million in 2023 and 2022, respectively.

Fourth Quarter Results and Analysis

Net income totaled $23.9 million in the fourth quarter of 2022, a decrease of $5.3 million, or 18%, from the third quarter of 2022, and a decrease of $12.4 million, or 34%, compared to the fourth quarter of 2021.

The fourth quarter of 2022 included $16.1 million in merger-related costs and $15.0 million in provision for credit losses associated with the Apollo and Drummond acquisitions.

Adjusted net income 1 totaled $39.9 million, an increase of $7.1 million, or 22%, from the third quarter of 2022, and an increase of $3.1 million, or 8%, compared to the fourth quarter of 2021.

Diluted earnings per common share (“EPS”) was $0.34 and adjusted diluted EPS 1 2 was $0.56 in the fourth quarter of 2022, compared to diluted EPS of $0.47 and adjusted diluted EPS 1 of $0.53 in the third quarter of 2022 and compared to diluted EPS of $0.62 and adjusted diluted EPS 1 of $0.62 in the fourth quarter of 2021.

Net revenues, which are calculated as net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses, increased $33.0 million, or 32%, from the third quarter of 2022 and increased $46.4 million, or 51%, from the fourth quarter of 2021.

Net interest income increased $31.4 million, or 36%, compared to the third quarter of 2022 and increased $47.4 million, or 66%, compared to the fourth quarter of 2021.

Net interest income (on a tax-equivalent basis), for the fourth quarter of 2022 totaled $119.9 million, an increase of $31.5 million, or 36%, from the third quarter of 2022, and an increase of $47.4 million, or 66%, from the fourth quarter 2021.

Net interest margin (on a tax-equivalent basis), increased 69 basis points to 4.36% from 3.67% in the third quarter of 2022.

Noninterest income, excluding securities gains and losses, totaled $17.6 million for the fourth quarter of 2022, an increase of $1.2 million, or 7%, when compared to the third quarter of 2022, and a decrease of $1.5 million, or 8%, compared to the fourth quarter of 2021.

• Service charges on deposits increased $0.5 million compared to the third quarter of 2022 and $1.4 million compared to the fourth quarter of 2021, reflecting the benefit of an expanded deposit base including from acquisitions.

• Interchange income increased $0.5 million compared to both the third quarter of 2022 and the fourth quarter of 2021, primarily attributed to an expanded customer base.

• Despite the impact of market declines, the wealth management division has demonstrated continued success in building relationships, and during the fourth quarter of 2022, assets under management grew $159.5 million, driving a $0.2 million, or 6%, increase in wealth management income compared to the third quarter of 2022 and a $0.5 million, or 22%, increase compared to the fourth quarter of 2021.

During the full year 2022, the wealth management division added a record breaking $425 million in new assets under management.

• Mortgage banking fees were $0.4 million, flat compared to the third quarter of 2022 and decreasing $1.6 million, or 79%, compared to the fourth quarter of 2021 as a result of the overall slowdown attributed to significant increases in mortgage rates and low inventory levels during 2022.

Noninterest expenses for the fourth quarter of 2022 totaled $91.5 million, an increase of $30.2 million, or 49%, from the third quarter of 2022 and an increase of $41.2 million, or 82%, from the fourth quarter of 2021.

The fourth quarter of 2022 included $16.1 million of merger related expenses, compared to $2.1 million in the third quarter of 2022 and $0.5 million in the fourth quarter of 2021.

• Salaries and wages increased $17.0 million to $45.4 million in the fourth quarter of 2022 compared to the third quarter of 2022.

The fourth quarter of 2022 includes $5.7 million in merger-related expenses as well as higher headcount associated with adding 20 branch locations, bankers, and operational staff with the acquisitions of Apollo and Drummond.

We expect the full benefit of cost synergies to materialize beginning in the second quarter of 2023.

Net income totaled $29.5 million in the fourth quarter of 2023, a decrease of $1.9 million, or 6%, from the third quarter of 2023, and an increase of $5.6 million, or 23%, compared to the fourth quarter of 2022.

Adjusted net income 1 totaled $36.5 million, a decrease of $3.2 million, or 8%, from the third quarter of 2023, and a decrease of $3.4 million, or 9%, compared to the fourth quarter of 2022.

Diluted earnings per share (“EPS”) was $0.35 and adjusted diluted EPS 1 2 was $0.43 in the fourth quarter of 2023, compared to diluted EPS of $0.37 and adjusted diluted EPS 1 of $0.46 in the third quarter of 2023 and compared to diluted EPS of $0.34 and adjusted diluted EPS 1 of $0.56 in the fourth quarter of 2022.

Net revenues, which are calculated as net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses were $128.2 million, a decrease of $8.9 million, or 7%, from the third quarter of 2023 and a decrease of $9.2 million, or 7%, from the fourth quarter of 2022.

Net interest income totaled $110.8 million in the fourth quarter of 2023, a decrease of $8.5 million, or 7%, from the third quarter of 2023 and a decrease of $8.9 million, or 7%, compared to the fourth quarter of 2022.

During the fourth quarter of 2023, higher interest expense on deposits was driven by higher rates and changes in product mix.

Accretion on acquired loans totaled $11.3 million in the fourth quarter of 2023, $14.8 million in the third quarter of 2023, and $9.7 million in the fourth quarter of 2022.

Net interest margin decreased 21 basis points to 3.36% in the fourth quarter of 2023 compared to 3.57% in the third quarter of 2023.

Excluding the effects of accretion on acquired loans, net interest margin decreased 11 basis points to 3.02% in the fourth quarter of 2023 compared to 3.13% in the third quarter of 2023.

Loan yields contracted eight basis points from the prior quarter to 5.85% due to lower accretion of purchase discount on acquired loans.

Excluding the effects of accretion on acquired loans, loan yields increased six basis points, from 5.34% in the third quarter of 2023 to 5.40% in the fourth quarter of 2023.

Securities yields increased 10 basis points to 3.42%, compared to 3.32% in the prior quarter.

The cost of deposits increased 21 basis points, from 1.79% in the prior quarter, to 2.00% for the fourth quarter of 2023.

The provision for credit losses was $4.0 million in the fourth quarter of 2023, compared to $2.7 million in the third quarter of 2023 and $14.1 million in the fourth quarter of 2022.

Included in the fourth quarter of 2022 was a $15.0 million day-1 provision associated with two bank acquisitions.

Noninterest income, excluding securities gains and losses, totaled $19.8 million for the fourth quarter of 2023, an increase of $1.6 million, or 9%, when compared to the third quarter of 2023, and an increase of $2.1 million, or 12%, compared to the fourth quarter of 2022.

1 2 Non-GAAP measure, see “ Explanation of Certain Unaudited Non-GAAP Financial Measures ” for more information and a reconciliation to GAAP.

• Employee benefits increased $1.2 million to $5.3 million in the fourth quarter of 2022 compared to the third quarter of 2022, reflecting higher payroll taxes and healthcare-related costs attributed to higher headcount.

• Outsourced data processing costs increased by $4.5 million in the fourth quarter of 2022 compared to the third quarter of 2022, including $2.6 million in direct acquisition related expenses.

The remainder of the increase is the result of higher transaction volume and the growth in customers with the two bank acquisitions.

• Occupancy, telephone and data lines, and furniture and equipment expenses collectively increased $1.1 million to $8.6 million in the fourth quarter of 2022 compared to the third quarter of 2022, reflecting the expanded footprint from the addition of Apollo and Drummond locations.

• Legal and professional fees increased by $5.4 million to $9.2 million in the fourth quarter of 2022 compared to the third quarter of 2022, including a $4.7 million increase in merger-related expenses during the quarter.

• Other expenses decreased by $1.4 million compared to the third quarter of 2022, driven by lower recruiting costs.

• Amortization of intangibles increased $3.3 million compared to the third quarter of 2022, with the addition of $61.7 million in intangible assets from the acquisitions of Drummond and Apollo.

These assets are comprised primarily of core deposit intangibles, which will be amortized using an accelerated amortization method over approximately six years.

The provision for credit losses was $14.1 million in the fourth quarter of 2022, compared to a provision of $4.7 million in the third quarter of 2022.

A $15.0 million provision recorded in the Apollo and Drummond acquisitions during the fourth quarter of 2022 was partially offset by the release of $2.1 million added in the third quarter of 2022 for potential losses related to Hurricane Ian that did not materialize.

• Interchange income increased $0.7 million, or 44%, to $2.4 million, benefiting from an annual volume-based incentive earned from the payment network provider.

• SBA gains increased $0.3 million, or 50%, to $0.9 million due to higher saleable originations.

• Other income increased $0.4 million, or 8%, to $4.7 million, reflecting higher loan swap-related income.

Noninterest expenses for the fourth quarter of 2023 totaled $86.4 million, a decrease of $7.5 million, or 8%, from the third quarter of 2023 and a decrease of $5.1 million, or 6%, from the fourth quarter of 2022.

• Salaries and wages decreased $8.0 million to $38.4 million.

The third quarter of 2023 included $3.2 million in severance-related expenses arising from the Company’s reduction in workforce.

Of the remaining $4.8 million decrease, $1.7 million reflects the full quarter impact of the workforce reduction on salaries expense, and $2.8 million is attributed to higher loan production resulting in higher deferral of salary-related costs.

• Marketing expense increased $1.1 million to $3.0 million reflecting additional investments in branding and targeted campaigns.

• Legal and professional fees increased $0.6 million to $3.3 million in the fourth quarter of 2023, primarily the result of one-time legal fees associated with a closed matter.

• FDIC assessments increased $0.6 million to $2.8 million, with the full year expense reflecting the year-over-year growth in the Company’s asset size.

• Other real estate owned expense increased $0.3 million to $0.6 million in the fourth quarter of 2023 due to write-downs in the value of properties previously used in bank operations.

• Other noninterest expenses decreased $0.7 million to $6.5 million, benefiting from ongoing expense discipline.

Explanation of Certain Unaudited Non-GAAP Financial Measures

7 unchanged sentences

These disclosures should not be considered an alternative to GAAP.

The following tables provide reconciliation between GAAP and adjusted (non-GAAP) financial measures.

Fourth Third Second First Total

(In thousands except per share data) 2022 2022 2022 2022 Year

The following table provides reconciliations between GAAP and adjusted (non-GAAP) financial measures.

Fourth Third Fourth Full Year Full Year

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

Net income $ 29,543 $ 31,414 $ 23,927 $ 104,033 $ 106,507

1 unchanged sentence

Securities losses (gains), net 2,437 387 (18) 2,893 1,096

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

Total Adjustments to Noninterest Income 2,437 387 (18) 776 1,096

Total Adjusted Noninterest Income $ 19,775 $ 18,180 $ 17,633 $ 79,928 $ 67,187

Total noninterest expense $ 91,510 $ 61,359 $ 56,148 $ 58,917 $ 267,934

Noninterest expense $ 86,367 $ 93,915 $ 91,510 $ 395,622 $ 267,934

Merger-related charges

— — (16,140) (33,180) (27,925)

Amortization of intangibles (6,888) (7,457) (4,763) (28,726) (9,101)

Branch reductions and other expense initiatives — (3,305) (176) (5,167) (1,210)

Fourth Third Fourth Full Year Full Year

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

Total Adjustments to Noninterest Expense (6,888) (10,762) (21,079) (67,073) (38,236)

Fourth Third Second First Total

(In thousands except per share data) 2022 2022 2022 2022 Year

Total Adjusted Noninterest Expense $ 79,479 $ 83,153 $ 70,431 $ 328,549 $ 229,698

1 unchanged sentence

Tax effect of adjustments 2,363 2,826 5,062 17,196 9,693

Tax expense on BOLI surrender (276) — — — (276)

Total Adjustments to Income Taxes 5,062 1,222 1,213 2,196 9,693

Adjusted Income Taxes 10,620 11,902 12,856 47,415 41,322

2 unchanged sentences

Adjusted Earnings per Diluted Share 0.43 0.46 0.56 1.83 2.12

Average diluted shares outstanding (in thousands) 71,374 61,961 61,923 61,704 64,264

Average diluted shares outstanding 85,336 85,666 71,374 84,329 64,264

Adjusted Noninterest Expense $ 79,479 $ 83,153 $ 70,431 $ 328,549 $ 229,698

Provision for credit losses on unfunded commitments — — — (1,239) (1,157)

Fourth Third Second First Total

(In thousands except per share data) 2022 2022 2022 2022 Year

Foreclosed property expense and net gain (loss) on sale 411 (9) 968 164 1,534

Other real estate owned expense and net (loss) gain on sale (573) (274) 411 (985) 1,534

Net Adjusted Noninterest Expense $ 78,906 $ 82,879 $ 70,842 $ 326,325 $ 230,075

28 unchanged sentences

Less average goodwill and intangible assets (832,029) (839,787) (521,412) (816,662) (360,217)

Average Tangible Equity $1,052,292 $1,043,540 $1,043,157 $1,096,214 $1,058,638

Return on Average Shareholders' Equity 6.03 % 8.60 % 9.73 % 5.96 % 7.51 %

Impact of removing average intangible assets and related amortization 4.33 2.93 3.28 2.06 3.19

Return on Average Tangible Common Equity (“ROTCE”)

10.36 11.53 13.01 8.02 10.70

Impact of other adjustments for Adjusted Net Income 4.69 0.95 0.96 1.99 2.16

Adjusted Return on Average Tangible Common Equity 15.05 % 12.48 % 13.97 % 10.01 % 12.86 %

Loan interest income 1

$ 105,437 $ 74,050 $ 69,388 $ 67,198 $ 316,073

Fourth Third Second First Total

(In thousands except per share data) 2022 2022 2022 2022 Year

Accretion on acquired loans (9,710) (2,242) (2,720) (3,717) (18,389)

Interest and fees on PPP loans (39) (320) (741) (1,523) (2,623)

Loan interest income excluding PPP and accretion on acquired loans $ 95,688 $ 71,488 $ 65,927 $ 61,958 $ 295,061

Yield on loans 1

5.29 % 4.45 % 4.29 % 4.30 % 4.62 %

Impact of accretion on acquired loans (0.49) (0.14) (0.16) (0.24) (0.27)

Impact of PPP — (0.01) (0.03) (0.06) (0.02)

Yield on loans excluding PPP and accretion on acquired loans 4.80 % 4.30 % 4.10 % 4.00 % 4.33 %

Net interest income 1

$ 119,858 $ 88,399 $ 81,764 $ 76,639 $ 366,660

Accretion on acquired loans (9,710) (2,242) (2,720) (3,717) (18,389)

Interest and fees on PPP (39) (320) (741) (1,523) (2,623)

Net interest income excluding PPP and accretion on acquired loans $ 110,109 $ 85,837 $ 78,303 $ 71,399 $ 345,648

Net interest margin 4.36 % 3.67 % 3.38 % 3.25 % 3.69 %

Impact of accretion on acquired loans (0.35) (0.09) (0.12) (0.15) (0.18)

Impact of PPP — (0.01) (0.02) (0.05) (0.02)

Net interest margin excluding PPP and accretion on acquired loans 4.01 % 3.57 % 3.24 % 3.05 % 3.49 %

Security interest income 1

$ 18,694 $ 15,827 $ 12,562 $ 10,218 $ 57,301

Tax equivalent adjustment to securities (34) (35) (36) (37) (142)

Securities interest income excluding tax equivalent adjustment $ 18,660 $ 15,792 $ 12,526 $ 10,181 $ 57,159

Loan interest income 1

$ 105,437 $ 74,050 $ 69,388 $ 67,198 $ 316,073

Tax equivalent adjustment to loans (115) (80) (81) (80) (356)

Loan interest income excluding tax equivalent adjustment $ 105,322 $ 73,970 $ 69,307 $ 67,118 $ 315,717

Net Interest Income 1

$ 119,858 $ 88,399 $ 81,764 $ 76,639 $ 366,660

Tax equivalent adjustment to securities (34) (35) (36) (37) (142)

Tax equivalent adjustment to loans (115) (80) (81) (80) (356)

Net interest income excluding tax equivalent adjustments $ 119,709 $ 88,284 $ 81,647 $ 76,522 $ 366,162

1 On a fully taxable equivalent basis.

All yields and rates have been computed using amortized cost.

Fourth Third Second First Total

(In thousands except per share data) 2021

Net income $ 36,330 $ 22,944 $ 31,410 $ 33,719 $ 124,403

Total noninterest income $ 18,706 $ 19,028 $ 15,322 $ 17,671 $ 70,727

Securities losses (gains), net 379 30 55 114 578

Gain on sale of domain name (included in other income) (755) — — — (755)

Total Adjustments to Noninterest Income (376) 30 55 114 (177)

Total Adjusted Noninterest Income $ 18,330 $ 19,058 $ 15,377 $ 17,785 $ 70,550

Total noninterest expense $ 50,263 $ 55,268 $ 45,784 $ 46,120 $ 197,435

Fourth Third Second First Total

(In thousands except per share data) 2021

Merger-related charges (482) (6,281) (509) (581) (7,853)

Amortization of intangibles (1,304) (1,306) (1,212) (1,211) (5,033)

Branch reductions and other expense initiatives (168) (870) (663) (449) (2,150)

Total Adjustments to Noninterest Expense (1,954) (8,457) (2,384) (2,241) (15,036)

Total Adjusted Noninterest Expense $ 48,309 $ 46,811 $ 43,400 $ 43,879 $ 182,399

Fourth Third Second First Total

(In thousands except per share data) 2021

Income Taxes $ 8,344 $ 7,049 $ 8,785 $ 10,157 $ 34,335

Tax effect of adjustments 280 2,081 598 577 3,536

Effect of change in corporate tax rate on deferred tax assets 774 — — — 774

Total Adjustments to Income Taxes 1,054 2,081 598 577 4,310

Adjusted Income Taxes 9,398 9,130 9,383 10,734 38,645

Adjusted Net Income $ 36,854 $ 29,350 $ 33,251 $ 35,497 $ 134,952

Earnings per diluted share, as reported $ 0.62 $ 0.40 $ 0.56 $ 0.60 $ 2.18

Adjusted diluted earnings per share $ 0.62 $ 0.51 $ 0.59 $ 0.63 $ 2.36

Average diluted shares outstanding (in thousands) 59,016 57,645 55,901 55,992 57,088

Adjusted Noninterest Expense $ 48,309 $ 46,811 $ 43,400 $ 43,879 $ 182,399

Provision for credit losses on unfunded commitments — (133) — — (133)

Foreclosed property expense and net (loss)/gain on sale 175 (66) 90 65 264

Total Adjusted Noninterest Expense $ 48,484 $ 46,612 $ 43,490 $ 43,944 $ 182,530

Revenue $ 90,995 $ 90,352 $ 81,124 $ 84,281 $ 346,752

Total Adjustments to Revenue (376) 30 55 114 (177)

Impact of FTE adjustment 123 131 131 131 516

Adjusted Revenue on a fully taxable equivalent basis $ 90,742 $ 90,513 $ 81,310 $ 84,526 $ 347,091

Adjusted Efficiency Ratio 53.43 % 51.50 % 53.49 % 51.99 % 52.59 %

Net Interest Income $ 72,289 $ 71,324 $ 65,802 $ 66,610 $ 276,025

Impact of FTE adjustment 123 131 131 131 516

Net Interest Income including FTE adjustment 72,412 71,455 65,933 66,741 276,541

Total noninterest income 18,706 19,028 15,322 17,671 70,727

Total noninterest expense 50,263 55,268 45,784 46,120 197,435

Pre-Tax Pre-Provision Earnings 40,855 35,215 35,471 38,292 149,833

Total Adjustments to Noninterest Income (376) 30 55 114 (177)

Total Adjustments to Noninterest Expense (1,779) (8,656) (2,294) (2,176) (14,905)

Adjusted Pre-Tax Pre-Provision Earnings $ 42,258 $ 43,901 $ 37,820 $ 40,582 $ 164,561

Average Assets $10,061,382 $9,753,734 $9,025,846 $8,485,354 $9,337,054

Less average goodwill and intangible assets (267,692) (254,980) (235,964) (237,323) (249,089)

Average Tangible Assets $9,793,690 $9,498,754 $8,789,882 $8,248,031 $9,087,965

Return on Average Assets (“ROA”)

1.43 % 0.93 % 1.40 % 1.61 % 1.33 %

Impact of removing average intangible assets and related amortization 0.08 0.07 0.08 0.09 0.08

Return on Average Tangible Assets (“ROTA”)

1.51 1.00 1.48 1.70 1.41

Impact of other adjustments for Adjusted Net Income (0.02) 0.23 0.04 0.05 0.07

Adjusted Return on Average Tangible Assets 1.49 % 1.23 % 1.52 % 1.75 % 1.48 %

Pre-Tax Pre-Provision Return on average tangible assets 1.66 % 1.47 % 1.62 % 1.88 % 1.69 %

Impact of adjustments on Pre-Tax Pre-Provision earnings 0.05 0.36 0.11 0.12 0.12

Adjusted Pre-Tax Pre-Provision Return on Tangible Assets 1.71 1.83 1.73 2.00 1.81

Fourth Third Second First Total

Fourth Third Fourth Full Year Full Year

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

Average Shareholders' Equity $1,303,686 $1,248,547 $1,170,395 $1,136,416 $1,215,312

Less average goodwill and intangible assets (267,692) (254,980) (235,964) (237,323) (249,089)

Average Tangible Equity $ 1,226,883 $ 1,232,960 $ 1,052,292 $ 1,208,720 $ 1,058,638

8 unchanged sentences

Accretion on acquired loans (11,324) (14,843) (9,710) (56,689) (18,389)

Interest and fees on PPP loans (3,352) (5,917) (5,127) (6,886) (21,282)

Loan interest income excluding accretion on acquired loans $ 136,680 $ 135,205 $ 95,727 $ 525,136 $ 297,684

2 unchanged sentences

Impact of accretion on acquired loans (0.45) (0.59) (0.49) (0.57) (0.27)

Interest and fees on PPP loans (0.13) (0.22) 0.01 (0.04) (0.10)

Yield on loans excluding accretion on acquired loans 5.40 % 5.34 % 4.80 % 5.31 % 4.35 %

2 unchanged sentences

Accretion on acquired loans (11,324) (14,843) (9,710) (56,689) (18,389)

Interest and fees on PPP loans (3,352) (5,917) (5,127) (6,886) (21,282)

Net interest income excluding accretion on acquired loans $ 99,711 $ 104,662 $ 110,148 $ 432,354 $ 348,271

1 unchanged sentence

Impact of accretion on acquired loans (0.34) (0.44) (0.35) (0.44) (0.18)

Impact of PPP loans (0.10) (0.18) (0.06) (0.11) (0.11)

Net interest margin excluding accretion on acquired loans 3.02 % 3.13 % 4.01 % 3.33 % 3.51 %

Securities Interest Income 1

Security interest income 1

$ 21,451 $ 21,520 $ 18,694 $ 83,364 $ 57,301

Tax equivalent adjustment to securities (13) (22) (34) (83) (142)

Security interest income excluding tax equivalent adjustment $ 8,713 $ 7,918 $ 6,706 $ 6,446 $ 29,783

Securities interest income excluding tax equivalent adjustment $ 21,438 $ 21,498 $ 18,660 $ 83,281 $ 57,159

Loan interest income 1

10 unchanged sentences

Financial Condition

Total assets increased $2.5 billion, or 25%, year-over-year to $12.1 billion at December 31, 2022, reflecting a combination of organic growth and acquisitions.

Total assets increased $2.4 billion, or 20%, year-over-year to $14.6 billion at December 31, 2023, largely the result of the acquisition of Professional in January 2023.

Information related to yields, maturities, carrying values and fair value of the Company’s securities is set forth in Tables 7 and 8 and “Note 3 - Securities” of the Company’s consolidated financial statements.

At December 31, 2023, the Company had $1.8 billion in securities available-for-sale, and $680.3 million in securities held-to-maturity.

The Company's total debt securities portfolio increased $336.2 million, or 15%, from December 31, 2021.

The Company's total debt securities portfolio decreased $102.8 million, or 4%, from December 31, 2022.

During the year ended December 31, 2023, there were $100.9 million of debt securities purchased, $167.1 million acquired through the acquisition of Professional and $287.9 million in paydowns and maturities over the same period.

$113.4 million of securities were sold in 2023, with $2.9 million in realized losses.

During the year ended December 31, 2022, there were $899.7 million of debt security purchases and $367.7 million in paydowns and maturities over the same period.

For the year ended December 31, 2022, debt securities with a fair value of $515.2 million obtained through bank acquisition were sold with no gains or losses recognized.

During the year ended December 31, 2021, there were $1.5 billion of debt security purchases and $679.3 million in paydowns and maturities over the same period.

For the year ended December 31, 2021, debt securities with a fair value of $102.1 million were sold with net losses of $0.4 million.

For the year ended December 31, 2022, debt securities with a fair value of $515.2 million obtained through bank acquisitions were sold with no gains or losses recognized.

Debt securities generally return principal and interest monthly.

The modified duration of the available-for-sale securities portfolio at December 31, 2022 was 3.7 and at December 31, 2021 was 3.8.

The modified duration of the available-for-sale securities portfolio and the total portfolio was 4.5 and 4.9, respectively, at December 31, 2023, compared to 3.7 and 4.2, respectively, at December 31, 2022.

At December 31, 2023, available-for-sale securities had gross unrealized losses of $217.7 million and gross unrealized gains of $4.4 million, compared to gross unrealized losses of $248.7 million and gross unrealized gains of $1.1 million at December 31, 2022.

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

As of December 31, 2022, the Company expected to recover the entire amortized cost basis of these securities and therefore no allowance for credit losses was recorded.

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

Treasury and U.S.

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

Treasury securities, obligations of U.S.

government agencies, and obligations of U.S.

1 unchanged sentence

The portfolio includes $135.9 million, with a fair value of $125.0 million, in private label residential and commercial mortgage-backed securities and collateralized mortgage obligations.

Included are $161.9 million, with a fair value of $150.1 million, in private label mortgage-backed residential securities with weighted average credit support of 25%.

The collateral underlying these mortgage investments includes both fixed-rate and adjustable-rate mortgage loans.

Private label commercial securities total $17.2 million, with a fair value of $16.3 million.

Included are $123.6 million, with a fair value of $113.5 million, in private label residential securities with weighted average credit support of 23%.

The collateral underlying these mortgage investments includes both fixed-rate and adjustable-rate residential mortgage loans.

Commercial securities totaled $12.2 million, with a fair value of $11.5 million.

These securities have weighted average credit support of 22%.

The collateral underlying these mortgages are primarily pooled multifamily loans.

The Company also has $313.2 million, with a fair value of $302.9 million, in uncapped 3-month LIBOR floating rate collateralized loan obligations.

The Company also has invested $300.9 million in floating rate collateralized loan obligations.

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

As of December 31, 2022, all of the Company's collateralized loan obligations were in AAA/AA tranches with average credit support of 32%.

As of December 31, 2023, all of the Company's collateralized loan obligations were in AAA/AA tranches with weighted average credit support of 33%.

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

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

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

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

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

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

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

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Loan Portfolio

Loans, net of unearned income and excluding the allowance for credit losses, were $8.1 billion at December 31, 2022, an increase of $2.2 billion, or 37%, compared to December 31, 2021.

The increase reflects organic growth along with the addition of acquired banks.

For the year ended December 31, 2022, the Company originated $1.7 billion in commercial and commercial real estate loans, compared to $1.1 billion for the year ended December 31, 2021, an increase of $527.0 million, or 46%.

The late-stage pipeline for commercial and commercial real estate loans totaled $395.7 million at December 31, 2022.

The Company originated $310.7 million in residential loans retained in the portfolio during the year ended December 31, 2022, compared to originations of $245.4 million during the year ended December 31, 2021, an increase of $65.3 million, or 27%.

Saleable production decreased for the year ended December 31, 2022, representing $120.9 million versus $422.8 million during the year ended December 31, 2021, a decrease of 71%.

Saleable production in 2022 was impacted by the rapid increase in mortgage rates and low inventory levels.

The Company originated $408.7 million in consumer loans during the year ended December 31, 2022 compared to $249.5 million originated in the year ended December 31, 2021.

The increases are primarily the result of consumer lending teams that joined the Company in late 2021.

The Company remains committed to sound risk management procedures.

11 unchanged sentences

Consumer 175,969 74,854 744 251,567

Paycheck Protection Program 1,474 3,116 — 4,590

Totals $ 6,571,454 $ 3,227,169 $ 264,317 $ 10,062,940

8 unchanged sentences

Consumer 177,338 89,458 19,791 286,587

Paycheck Protection Program 69,503 21,604 — 91,107

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

Loans, net of unearned income and excluding the allowance for credit losses, were $10.1 billion at December 31, 2023, an increase of $1.9 billion, or 24%, compared to December 31, 2022.

The increase includes the addition of $2.0 billion in loans from the Professional acquisition in the first quarter of 2023.

The amortized cost basis of loans at December 31, 2023, and 2022 included net deferred costs of $43.1 million and $35.1 million, respectively.

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

Commercial real estate (“CRE) loans, inclusive of owner-occupied commercial real estate, increased $1.1 billion, or 39%, totaling $4.1 billion at December 31, 2022, compared to December 31, 2021.

Owner-occupied commercial real estate loans represent $1.5 billion, or 36%, of the commercial real estate portfolio.

Co mmercial and financial loans increased year-over-year by $279.3 million, or 26%, totaling $1.3 billion at December 31, 2022.

The addition of well-established commercial bankers and expansion into new markets across the state have generated disciplined loan growth.

Construction and land development loans increased $180.3 million, or 31%, totaling $767.6 million at December 31, 2023, compared to December 31, 2022.

In the first quarter of 2023, the Company acquired $151.0 million in construction and land development loans from Professional.

Commercial real estate owner occupied loans totaled $1.7 billion at December 31, 2023, an increase of $192 million, or 13%, compared to December 31, 2022.

In the first quarter of 2023, the Company acquired $274.1 million in commercial real estate owner occupied loans from Professional.

Commercial real estate non-owner occupied loans, increased $0.7 billion, or 28%, totaling $3.3 billion at December 31, 2023, compared to December 31, 2022.

In the first quarter of 2023, the Company acquired $692.7 million in commercial real estate non-owner occupied loans from Professional.

Collateral types and characteristics of non-owner occupied commercial real estate loans as of December 31, 2023 were as follows:

December 31, 2023

(In thousands)

Balance Balance % of Total Loans Average Loan Size 30+ Days Past-Accruing Non Accrual Weighted Avg LTV 1

Retail $ 1,091,605 10.8 % $ 2,059 $ — $ — 51 %

Office 576,840 5.7 1,638 11,510 334 55

Multifamily 5+ 353,184 3.5 1,799 — — 55

Hotel/Motel 389,180 3.9 3,819 — 1,012 51

Industrial/Warehouse 357,947 3.6 1,767 — 861 54

Other 551,134 5.5 1,447 752 6,528 51

Total $ 3,319,890 33.0 % $ 1,917 $ 12,262 $ 8,735 53 %

1 Loan-to-value is calculated based on the real estate value at the time of origination, renewal, or update, whichever is more recent.

Loans in the retail segment are generally grocery or credit tenant anchored shopping plazas, single credit tenant retail buildings, smaller outparcels and other retail units.

The office segment targets low to mid-rise suburban offices, and is broadly diversified across many categories of professional services.

Two loans in the office segment (2.0% of office exposure) were past due 30-59 days at December 31, 2023.

Residential mortgage loans increased $596.2 million, or 32%, year-over-year to $2.4 billion as of December 31, 2023.

Included in the balance as of December 31, 2022 were $964.3 million of fixed rate mortgages, $402.3 million of adjustable rate mortgages, and $482.9 million in home equity loans and home equity lines of credit ("HELOCs"), compared to $773.7 million, $278.9 million and $336.6 million, respectively, as of December 31, 2021.

The increases during 2022 include approximately $232 million acquired through bank acquisitions, and a $111 million residential mortgage pool purchased in the first quarter of 2022.

Borrowers in the residential real estate portfolio have an average credit score of 752.

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

Included in the balance as of December 31, 2023 were $1.0 billion of fixed rate mortgages, $865.2 million of adjustable rate mortgages, and $488.2 million in home equity loans and home equity lines of credit ("HELOCs"), compared to $964.3 million, $402.3 million and $482.9 million, respectively, as of December 31, 2022.

In the first quarter of 2023, the Company acquired $483.6 million residential loans from Professional.

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

The average LTV of our HELOC portfolio is 63% with 35% of the portfolio being in the first lien position at December 31, 2023, compared to an average LTV of 69% with 31% of the portfolio being in the first lien position at December 31, 2022.

The Company also provides consumer loans, which include installment loans, auto loans, marine loans and other consumer loans, which increased $112.4 million, or 65%, year-over-year to a total of $286.6 million at December 31, 2022, compared to $174.2 million at December 31, 2021.

As part of the acquisition of Drummond Bank in the fourth quarter of 2022, the Company acquired approximately $90 million in digitally originated unsecured consumer loans, and as of the acquisition date, the Company ceased further originations of this type.

Commercial and financial loans increased year-over-year by $254.7 million, or 19%, totaling $1.6 billion at December 31, 2023.

The addition of well-established commercial bankers and expansion into new markets across the state have generated disciplined loan growth.

In the first quarter of 2023, the Company acquired $350.6 million in commercial and financial loans from Professional.

The Company also provides consumer loans, which include installment loans, auto loans, marine loans and other consumer loans, which decreased $35.0 million, or 12%, year-over-year to a total of $251.6 million at December 31, 2023, compared to $286.6 million at December 31, 2022.

At December 31, 2023, the Company had unfunded commitments to extend credit of $2.7 billion, compared to $2.8 billion at December 31, 2022 (see “Note 15 - Contingent Liabilities and Commitments with Off-Balance Sheet Risk” to the Company’s consolidated financial statements).

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

For the Year Ended December 31,

(In thousands) 2023 2022

Commercial/commercial real estate loan pipeline at period end $ 306,531 $ 389,697

Commercial/commercial real estate loans closed 1,055,889 1,637,402

SBA pipeline at period end $ 20,600 $ 5,955

SBA originations 48,914 27,482

Residential pipeline - saleable at period end $ 2,657 $ 4,207

Residential loans - sold 66,252 120,921

Residential pipeline - portfolio at period end $ 44,422 $ 17,149

Residential loans - retained 260,500 421,997

Consumer pipeline at period end $ 18,745 $ 36,585

Consumer originations 346,164 431,633

Commercial and commercial real estate originations in 2023 totaled $1.1 billion, compared to $1.6 billion in 2022.

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

Commercial and commercial real estate pipelines were $306.5 million as of December 31, 2023, a decrease of 17% from $389.7 million at December 31, 2022.

SBA originations totaled $48.9 million in 2023, an increase of $21.4 million from 2022 .

The SBA pipeline increased to $20.6 million at December 31, 2023 from $6.0 million at December 31, 2022 .

Residential loans originated for sale in the secondary market totaled $66.3 million in 2023, a decrease of 45% compared to $120.9 million in 2022.

Residential saleable pipelines were $2.7 million as of December 31, 2023, compared to $4.2 million as of December 31, 2022.

Residential loan production retained in the portfolio for 2023 was $260.5 million, compared to $422.0 million in 2022.

Included in 2022 are purchases of $111.3 million in residential loans from the wholesale market.

The pipeline of residential loans intended to be retained in the portfolio was $44.4 million as of December 31, 2023, compared to $17.1 million as of December 31, 2022.

Consumer originations, which includes HELOCs, totaled $346.2 million during 2023, compared to $431.6 million during 2022, reflecting a decrease of $85.47 million, or 20%.

The consumer pipeline was $18.7 million as of December 31, 2023, compared to $36.6 million as of December 31, 2022.

Loan Concentrations

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

Outstanding balances for commercial and commercial real estate (“CRE”) loan relationships greater than $10 million totaled $2.2 billion, representing 27% of the total portfolio at December 31, 2022, compared to $1.2 billion, or 20%, at December 31, 2021.

The Company’s ten largest commercial and commercial real estate funded and unfunded loan relationships at December 31, 2022 aggregated to $468.9 million, of which $312.4 million was funded, compared to $312.0 million at December 31, 2021, of which $157.8 million was funded.

The Company had 250 commercial and commercial real estate relationships in excess of $5 million totaling $3.2 billion, of which $2.4 billion was funded at December 31, 2022, compared to 174 relationships totaling $1.9 billion at December 31, 2021, of which $1.4 billion was funded.

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

Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital, were 45% and 230%, respectively, at December 31, 2022, compared to 21% and 177% as of December 31, 2021.

Outstanding balances for commercial and commercial real estate loan relationships greater than $10 million totaled $2.3 billion, representing 23% of the total portfolio at December 31, 2023, compared to $2.2 billion, or 27%, at December 31, 2022.

The Company’s ten largest commercial and commercial real estate funded and unfunded relationships at December 31, 2023 aggregated to $505.7 million, of which $348.3 million was funded, compared to $468.9 million at December 31, 2022, of which $312.4 million was funded.

Concentrations in total construction and land development loans and total commercial real estate loans are maintained well below regulatory limits.

Construction and land development and commercial real estate loan concentrations as a percentage of subsidiary bank total risk based capital, were 48% and 244%, respectively, at December 31, 2023, compared to 45% and 230% as of December 31, 2022.

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

On a consolidated basis, construction and land development and commercial real estate loans represent 41% and 210%, respectively, of total consolidated risk based capital.

To determine these ratios, the Company defines CRE in accordance with the guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) issued by the federal bank regulatory agencies in 2006 (and reinforced in 2015), which defines CRE loans as exposures secured by land development and construction, including 1-4 family residential construction, multifamily property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property (i.e.

On a consolidated basis,

construction and land development and commercial real estate loans represent 45% and 228%, respectively, of total consolidated risk based capital.

To determine these ratios, the Company defines commercial real estate in accordance with the guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) issued by the federal bank regulatory agencies in 2006 (and reinforced in 2015), which defines commercial real estate loans as exposures secured by land development and construction, including 1-4 family residential construction, multifamily property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property (i.e.

loans for which 50 percent or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property.

Loans to real estate investment trusts (“REITs”) and unsecured loans to developers that closely correlate to the inherent risks in CRE markets would also be considered CRE loans under the Guidance.

Loans on owner-occupied CRE are generally excluded.

Loans to real estate investment trusts (“REITs”) and unsecured loans to developers that closely correlate to the inherent risks in commercial real estate markets would also be considered commercial real estate loans under the Guidance.

Loans on owner-occupied commercial real estate are generally excluded.

In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.

Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality

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

Table 6 provides certain information concerning nonperforming assets for the years indicated.

Nonperforming assets (“NPAs”) at December 31, 2022 totaled $31.1 million, a decrease of $13.1 million, or 29.6%, compared to 2021, and were comprised of $28.8 million of nonaccrual loans and other real estate owned (“OREO”) of $2.3 million that includes $1.8 million of branches taken out of service.

Compared to December 31, 2021, nonaccrual loans decreased by $1.8 million, or 6%, and non-branch OREO decreased $11.7 million.

Nonperforming assets (“NPAs”) at December 31, 2023 totaled $72.7 million, an increase of $41.5 million, or 133.3%, compared to 2022, and were comprised of $65.1 million of nonaccrual loans, and $7.6 million of other real estate owned (“OREO”), including $7.3 million of branches taken out of service.

Compared to December 31, 2022, nonaccrual loans totaled $28.8 million and OREO of $2.3 million that includes $1.8 million of branches taken out of service.

Approximately 45% of nonaccrual loans were secured with real estate at December 31, 2023.

Nonaccrual loans have been written down by approximately $5.8 million, including reserves on individually evaluated loans.

Nonperforming loans to total loans outstanding at December 31, 2022 decreased to 0.35% from 0.52% at December 31, 2021.

Nonperforming assets to total assets at December 31, 2022 decreased to 0.26% from 0.46% at December 31, 2021.

The Company’s asset mitigation staff handles all foreclosure actions together with outside legal counsel.

The Company pursues loan restructurings in selected cases where it expects to realize better values than may be expected through traditional collection activities.

The Company has worked with retail mortgage customers, when possible, to achieve lower payment structures in an effort to avoid foreclosure.

Troubled debt restructurings (“TDRs”) have been a part of the Company’s loss mitigation activities and can include rate reductions, payment extensions and principal deferrals.

Company policy requires TDRs that are classified as nonaccrual loans after restructuring remain on nonaccrual until performance can be verified, which usually requires six months of performance under the restructured loan terms.

Accruing TDRs totaled $4.0 million at December 31, 2022, compared to $3.9 million at December 31, 2021.

Accruing TDRs are excluded from nonperforming asset ratios.

The table below sets forth details related to nonaccrual and accruing restructured loans.

Nonperforming loans to total loans outstanding at December 31, 2023 increased to 0.65% from 0.35% at December 31, 2022.

Nonperforming assets to total assets at December 31, 2023 increased to 0.50% from 0.26% at December 31, 2022.

The increases are largely attributed to overall growth including from the acquisition of Professional in January 2023.

The table below sets forth details related to nonaccrual loans.

December 31, 2023

Nonaccrual Loans Accruing

(In thousands) Non-Current Current Total Loans

Nonaccrual Loans

(In thousands) Non-Current Current Total

Construction & land development $ 109 $ 715 $ 824

6 unchanged sentences

December 31, 2022

Nonaccrual Loans Accruing

(In thousands) Non-Current Current Total Loans

Nonaccrual Loans

(In thousands) Non-Current Current Total

Construction & land development $ 53 $ 562 $ 615

1 unchanged sentence

Commercial real estate mortgages - non-owner occupied 2,892 1,292 4,184

Residential real estate mortgages 5,130 7,915 13,045 3,298

Residential real estate 2,213 6,896 9,109

Commercial and financial 4,189 7,426 11,615

1 unchanged sentence

Total loans $ 9,365 $ 19,478 $ 28,843

At December 31, 2022 and December 31, 2021, total TDRs (performing and nonperforming) were comprised of the following loans by type of modification:

December 31, 2022 December 31, 2021

(Dollars in thousands) Number Amount Number Amount

Maturity extended 45 $ 4,498 56 $ 5,385

Rate reduction 17 963 25 2,769

Chapter 7 bankruptcies 3 126 1 39

Not elsewhere classified 6 398 12 378

Total loans 71 $ 5,985 94 $ 8,571

During the year ended December 31, 2022, nine loans totaling $0.9 million were modified to a TDR, compared to 12 loans totaling $0.8 million for the year ended December 31, 2021.

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

There were three defaults totaling $41 thousand on loans that had been modified in TDRs within the twelve months preceding December 31, 2022, and there was one default totaling $0.2 million on loans that had been modified in TDRs within the twelve months preceding December 31, 2021.

A restructured loan is considered in default when it becomes 90 days or more past due under the modified terms, has been transferred to nonaccrual status, or has been transferred to OREO.

In accordance with regulatory reporting requirements, loans are placed on nonaccrual following the Retail Classification of Loan interagency guidance.

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

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

The loan carrying value is analyzed and any changes are appropriately made as described above quarterly.

As of December 31, 2023, the Company had troubled borrower modification ("TBM") loans with an amortized cost of $17.5 million.

Allowance for Credit Losses on Loans

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

The provision for credit losses was $26.2 million for the year ended December 31, 2022, compared to a net benefit of $9.4 million for the year ended December 31, 2021.

The 2022 provision includes $20.2 million in initial provisioning for loans acquired through bank acquisitions, along with increases reflecting organic loan growth and changes in economic forecast factors.

The net benefit of $9.4 million in 2021 reflects the improvement in the economic outlook following the COVID-19 pandemic.

Net charge-offs for 2022 were $0.8 million, or 0.01% of average loans, excluding PPP loans, compared to $3.0 million, or 0.06%, for 2021.

Excluding PPP loans, the ratio of allowance to total loans decreased to 1.40% at December 31, 2022 from 1.43% at December 31, 2021.

The provision for credit losses was $37.5 million for the year ended December 31, 2023, compared to $26.2 million for the year ended December 31, 2022.

The 2023 provision includes $26.6 million for loans acquired in the Professional acquisition, along with increases reflecting organic loan growth and changes in economic forecast factors.

The 2022 provision included $20.2 million in initial provisioning for loans acquired through bank acquisitions.

Net charge-offs for 2023 were $21.4 million, or 0.22% of average loans, compared to $0.8 million, or 0.01%, for 2022.

Activity in 2023 included the complete charge-off of an $11.3 million acquired loan.

The charge-off had no impact on earnings or capital, as the Company expected and fully reserved for the loss at acquisition through purchase accounting.

The ratio of allowance to total loans increased to 1.48% at December 31, 2023 from 1.40% at December 31, 2022.

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

December 31, 2022

For the Year Ended December 31, 2023

(In thousands) Beginning

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Balance Allowance on PCD Loans Acquired During the Period Provision

Losses Charge-

Offs Recoveries TDR

Adjustments Ending

Offs Recoveries Ending

Construction and land development $ 6,464 $ 5 $ 2,160 $ — $ 8 $ 8,637

4 unchanged sentences

Consumer 12,869 161 5,204 (5,754) 638 13,118

Paycheck Protection Program — — — — — — —

Total $ 113,895 $ 18,879 $ 37,518 $ (24,795) $ 3,434 $ 148,931

December 31, 2021

For the Year Ended December 31, 2022

(In thousands) Beginning

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Balance Allowance on PCD Loans Acquired During the Period Provision

Losses Charge-

7 unchanged sentences

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

Paycheck Protection Program — — — — — — —

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

Concentrations of credit risk, discussed under the caption “Loan Portfolio” of this discussion and analysis, can affect the level of the allowance and may involve loans to one borrower, an affiliated group of borrowers, borrowers engaged in or dependent upon the same industry, or a group of borrowers whose loans are predicated on the same type of collateral.

At December 31, 2022, the Company's largest concentrations of credit risk were $4.1 billion in loans secured by commercial real estate and $1.8 billion in loans secured by residential real estate, representing 50% and 23% of total loans outstanding, respectively.

In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.

LIBOR Transition

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

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

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

In 2021, the Company ceased issuance of new LIBOR loans, and as of December 31, 2022, has approximately $244 million in existing loans for which the repricing index is tied to LIBOR.

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

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

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

ISDA has developed fallback language

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

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

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

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

Cash and Cash Equivalents, Liquidity Risk Management and Contractual Commitments

1 unchanged sentence

Liquidity planning and management are necessary to ensure the ability to fund operations cost effectively and to meet current and future potential obligations such as loan commitments and unexpected deposit outflows.

Funding sources include primarily customer-based deposits, collateral-backed borrowings, brokered deposits, cash flows from operations, cash flows from our loan and investment portfolios and asset sales, primarily secondary marketing for residential real estate mortgages and marine loans.

Funding sources include primarily customer-based deposits, collateral-backed borrowings, brokered deposits, cash flows from operations, cash flows from the loan and investment portfolios and asset sales, primarily secondary marketing for residential real estate mortgages.

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

Cash and cash equivalents, including interest bearing deposits, totaled $447.2 million at December 31, 2023, compared to $201.9 million at December 31, 2022.

Higher cash and cash equivalent balances at December 31, 2023 are consistent with the Company’s strategic balance sheet management.

Deposits are a primary source of liquidity.

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

The Company routinely uses debt securities and loans as collateral for secured borrowings.

In the event of severe market disruptions, the Company has access to secured borrowings through the FHLB and the Federal Reserve Bank of Atlanta under its borrower-in-custody program.

The Company does not rely on and is not dependent on off-balance sheet financing or significant amounts of wholesale funding.

Total uninsured deposits were estimated to be $4.1 billion at December 31, 2023, representing 35% of overall deposit accounts.

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

Excluding such balances, the uninsured and uncollateralized deposits were 29% of total deposits.

The Company has liquidity sources as discussed below, including cash and lines of credit with the FRB and FHLB, that represent 145% of uninsured deposits, and 176% of uninsured and uncollateralized deposits.

In addition to $447.2 million in cash and cash equivalents at December 31, 2023, the Company had $5.5 billion in available borrowing capacity, including $4.5 billion in available collateralized lines of credit, $700.0 million of unpledged debt securities available as collateral for potential additional borrowings, and available unsecured lines of credit of $300.0 million.

Included in available borrowing capacity is $215.0 million under the FRB's Bank Term Funding Program, which the Company has not utilized and does not plan to utilize.

The Company may also access funding by acquiring brokered deposits.

Brokered deposits at December 31, 2023 totaled $122.3 million compared to $58.6 million at December 31, 2022.

Cash and cash equivalents, including interest bearing deposits, totaled $201.9 million at December 31, 2022, compared to $737.7 million at December 31, 2021.

Lower cash and cash equivalent balances at December 31, 2022 are primarily the result of loan growth, securities purchases, and deposit outflows.

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

Sources of liquidity, both anticipated and unanticipated, are maintained through a portfolio of high-quality marketable assets, such as residential mortgage loans, available-for-sale debt securities and interest-bearing deposits.

Sources of liquidity are maintained through a portfolio of high quality marketable assets, such as residential mortgage loans, debt securities available-for-sale and interest-bearing deposits.

The Company is also able to provide short-term financing of its activities by selling, under an agreement to repurchase, United States Treasury and Government agency debt securities not pledged to secure public deposits or trust funds.

At December 31, 2022, the Company had available unsecured lines of $175.0 million and lines of credit under current lendable collateral value, which are subject to change, of $2.4 billion.

In addition, the Company had $2.0 billion of debt securities and $1.1 billion in residential and commercial real estate loans available as collateral.

In comparison, at December 31, 2021, the Company had available unsecured lines of $165.0 million and lines of credit of $1.6 billion, and $1.9 billion of debt securities and $614.2 million in residential and commercial real estate loans available as collateral.

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

During 2023, Seacoast Bank distributed $40.7 million to the Company and, at December 31, 2023, is eligible to distribute dividends to the Company of approximately $205.7 million without prior regulatory approval.

Seacoast Bank distributed $47.7 million to the Company during 2021.

At December 31, 2022, the Company had cash and cash equivalents at the parent of approximately $111.8 million compared to $98.5 million at December 31, 2021.

At December 31, 2023, the Company had cash and cash equivalents at the parent of $101.7 million, compared to $111.8 million at December 31, 2022.

The following table presents contractual obligations by remaining maturity.

All deposits presented in the table with indeterminate maturities such as interest bearing and noninterest bearing demand deposits, savings accounts and money market accounts are presented as having a maturity of one year or less.

The Company considers these low cost deposits to be its largest, most stable funding source, despite no contracted maturity.

The Company considers these low cost deposits to be its largest, most stable funding source, despite having no contracted maturity.

December 31, 2023

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50,000 — — 50,000 —

Subordinated debt 84,533 — — — 84,533

Long-term debt

106,302 — — — 106,302

Operating leases

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Total $ 12,366,613 $ 12,032,140 $ 72,635 $ 92,398 $ 169,440

1 Includes $75 million in a callable advance structure, which may be called at specified intervals with a maturity of up to 10 years.

2 Of the $60.2 million, approximately $3 million is related to offices taken out of service (closed).

1 Callable advance structure which, as of December 31, 2023, may be called at three month intervals with a maturity of up to five years.

Deposits and Borrowings

The Company’s balance sheet continues to be primarily funded by core deposits.

The following table details the Company's customer relationship funding as of:

(In thousands, except percentages) 2023 2022

Noninterest demand $ 3,544,981 $ 4,070,973

Interest-bearing demand 2,790,210 2,282,813

Money market 3,314,288 1,985,974

Savings 651,454 1,064,392

Time certificates of deposit 1,353,655 518,868

Brokered deposits 122,347 58,575

Total deposits $ 11,776,935 $ 9,981,595

Customer sweep accounts 374,573 172,029

Total customer funding 1

$ 12,029,161 $ 10,095,049

Noninterest demand deposit mix 30 % 41 %

1 Total deposits and customer sweep accounts, excluding brokered deposits.

The Company benefits from a diverse and granular deposit base that serves as a significant source of strength.

Total deposits increased $1.8 billion, or 18%, to $11.8 billion at December 31, 2023 compared to December 31, 2022.

The increase reflects the addition of new customers and the impact of the acquired banks, which added $2.3 billion in deposits during 2022, partially offset as the rising rate environment contributed to deposit outflows in the second half of 2022.

As a result of increasing interest rates and the Federal Reserve's monetary policy actions, we expect the competition for deposits to accelerate in the coming periods.

Since December 31, 2021, interest bearing deposits, which includes interest bearing demand, savings and money markets deposits, increased $950.8 million, or 21%, to $5.4 billion at December 31, 2022.

Noninterest bearing demand deposits increased $995.4 million, or 32%, to $4.1 billion, and CDs decreased $32.3 million, or 6%, to $522.7 million.

Noninterest demand deposits represented 41% of deposits at December 31, 2022 and 38% at December 31, 2021.

Transaction account balances (noninterest demand and interest-bearing demand) increased to 64% of total deposits at December 31, 2022 compared to 62% at December 31, 2021.

The increase includes the addition of $2.1 billion in deposits from the Professional acquisition in the first quarter of 2023.

Noninterest demand deposits represented 30% of total deposits at December 31, 2023 compared to 41% at December 31, 2022 primarily driven by the higher interest rate environment driving a mix shift to interest bearing products.

Transaction account balances (noninterest demand and interest-bearing demand) represented 54% of total deposits at December 31, 2023, compared to 64% at December 31, 2022.

Time deposits over $250,000 were $550.3 million and $149.5 million at December 31, 2023 and December 31, 2022, respectively.

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Total Certificates of Deposit of $250,000 and Greater $ 550,262 100% $ 149,479 100%

Total uninsured deposits were estimated to be $3.5 billion at December 31, 2022.

Customer repurchase agreements totaled $374.6 million at December 31, 2023, increasing $202.5 million, or 118%, from December 31, 2022.

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

The increase reflects higher overall balances held by existing customers in 2022.

Public funds comprise a significant amount of the outstanding balance.

The Company participates in programs with third party deposit networks as part of its liquidity management strategy.

Through these programs, the Company can offer its customers access to FDIC insurance on large balances, and the Company can retain or sell, on an overnight basis, the underlying deposits.

At December 31, 2022, the Company had sold no deposits under these programs, compared to $228 million sold on an overnight basis at December 31, 2021, which were not included in the Consolidated Balance Sheet at that date.

No unsecured federal funds purchased were outstanding at December 31, 2022 or December 31, 2021.

At December 31, 2022 and 2021, borrowings included $71.9 million and $71.6 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company.

Under Basel III and Federal Reserve rules, qualified trust preferred securities and other restricted capital elements can be included as Tier 1 capital, within limitations.

The Company believes that its trust preferred securities qualify under these capital rules.

At December 31, 2022, the weighted average rate in effect on our outstanding subordinated debt related to trust preferred securities was 6.46%, compared to 1.91% at December 31, 2021.

The acquired junior subordinated debentures (in accordance with ASC Topic 805 Business Combinations ) were recorded at fair value, which collectively was $3.3 million lower than face value at December 31, 2022.

At December 31, 2023 and December 31, 2022, long-term debt included $72.2 million and $71.9 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company.

At December 31, 2023, the average interest rate in effect on our outstanding subordinated debt related to trust preferred securities was 7.34%, compared to 6.46% at December 31, 2022.

The acquired junior subordinated debentures were recorded at fair value, which collectively was $3.1 million lower than face value at December 31, 2023.

This amount is being amortized into interest expense over the acquired subordinated debts' remaining term to maturity.

All trust preferred securities are guaranteed by the Company on a junior subordinated basis.

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

Under Basel III and FRB rules, qualified trust preferred securities and other restricted capital elements can be included as Tier 1 capital, within limitations.

The Company believes that its trust preferred securities qualify under these capital rules.

In 2022, the Company acquired $12.3 million in senior debt through the acquisition of Apollo.

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

The debt was recorded at fair value, resulting in a $0.4 million premium that is being amortized into interest expense over the remaining term to maturity.

Outstanding FHLB advances totaled $150.0 million at December 31, 2022, of which $75.0 million mature within 30 days with a weighted average rate of 4.28%.

The remaining $75.0 million is a callable advance structure with a fixed rate of 2.57% that could be called in the future at specified intervals throughout the life of the advance with a maturity of up to 10 years.

There were no borrowings from the FHLB outstanding at December 31, 2021.

In 2023, the Company acquired $25.0 million in subordinated debt through the acquisition of Professional that qualifies as Tier 2 Capital.

Contractual interest is paid on a semiannual basis at a fixed interest rate of 3.375% until January 30, 2027, at which point the rate converts to a 3-month SOFR rate plus 203 basis points paid quarterly.

The debt was recorded at fair value, resulting in a $3.9 million discount that is being accreted into interest expense over the remaining term to maturity.

Federal Home Loan Bank advances totaled $50 million at December 31, 2023 with an interest rate of 3.23%, compared to $150.0 million at December 31, 2022 with a weighted average interest rate of 3.42%.

See “Note 9 - Borrowings” to the Company's consolidated financial statements for more detailed information pertaining to borrowings.

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For commercial customers, loan commitments generally take the form of revolving credit arrangements.

For retail customers, loan commitments are generally lines of credit secured by residential property.

For retail customers, loan commitments generally are lines of credit secured by residential property.

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

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There was no reserve requirement at December 31, 2023 or December 31, 2022.

Under Federal Reserve regulation, Seacoast Bank is limited as to the amount it may loan to its affiliates, including the Company, unless such loans are collateralized by specified obligations.

Under FRB regulation, Seacoast Bank is limited as to the amount it may loan to its affiliates, including the Company, unless such loans are collateralized by specified obligations.

At December 31, 2023, the maximum amount available for transfer from Seacoast Bank to the Company in the form of loans approximated $183.8 million, if the Company has sufficient acceptable collateral.

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The Company's equity capital at December 31, 2023 increased $500.3 million, or 31%, from December 31, 2022, to $2.1 billion.

Changes in equity included increases from net income and the issuance of equity in conjunction with the acquisitions, partially offset by the issuance of common stock dividends and a decrease in accumulated other comprehensive income due to declines in the value of available-for-sale securities associated with the increasing interest rate environment.

Changes in equity included increases from net income of $104.0 million, the issuance of $421.0 million in equity in conjunction with the Professional acquisition, and an increase in accumulated other comprehensive income of $28.2 million due to increases in the value of available-for-sale securities associated with changes in the interest rate environment, partially offset by the issuance of common stock dividends totaling $60.6 million.

The ratio of shareholders’ equity to period end total assets was 14.46% and 13.24% at December 31, 2023 and December 31, 2022, respectively.

The ratio of tangible shareholders’ equity to tangible assets was 9.31% and 9.08% at December 31, 2023 and December 31, 2022, respectively.

Activity in shareholders’ equity for the year ended December 31, 2022 and December 31, 2021 follows:

Changes in the value of securities are not reflected in Shareholders' Equity under GAAP;

however, illustratively, if all held-to-maturity securities were presented at fair value, the tangible common equity ratio would have been 8.68% at December 31, 2023.

Activity in shareholders’ equity for the years ended December 31, 2023 and December 31, 2022 follows:

For the Year Ended December 31,

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Change in other comprehensive income 28,155 (181,039)

Repurchases of common stock (10,868) —

Ending balance at December 31, 2023 and 2022 $ 2,108,086 $ 1,607,775

$ 1,607,775 $ 1,310,736

Capital ratios are well above regulatory requirements for well-capitalized institutions.

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

The capital measures are not necessarily comparable to similar capital measures that may be presented by other companies and Seacoast does not nor should investors consider such non-GAAP financial measures in isolation from, or as a substitute for GAAP financial information (see “Table 1 - Capital Resources” and “Note 13 - Shareholders’ Equity”).

(Consolidated) Seacoast

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1 For subsidiary bank only.

The Company’s total risk-based capital ratio was 15.79% at December 31, 2022, a decrease from 18.21% at December 31, 2021.

The Company’s total risk-based capital ratio was 15.92% at December 31, 2023, an increase from 15.79% at December 31, 2022.

As of December 31, 2023, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was 10.32%, compared to 10.44% at December 31, 2022, well above the minimum to be well capitalized under regulatory guidelines.

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Without Office of the Comptroller of the Currency (“OCC”) approval, Seacoast Bank can pay up to $205.7 million of dividends to the Company (see “Part I.

The OCC and the Federal Reserve have policies that encourage banks and bank holding companies to pay dividends from current earnings, and have the general authority to limit the dividends paid by national banks and bank holding companies, respectively, if such payment may be deemed to constitute an unsafe or unsound practice.

If, in the particular circumstances, either of these federal regulators determined that the payment of dividends would constitute an unsafe or unsound banking practice, either the OCC or the Federal Reserve may, among other things, issue a cease and desist order prohibiting the payment

of dividends by Seacoast Bank or the Company, respectively.

Under a recently adopted Federal Reserve policy, the board of directors of a bank holding company must consider different factors to ensure that its dividend level is prudent relative to the organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may occur before the payment date that could affect its ability to pay, while still maintaining a strong financial position.

As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company, such as Seacoast, should consult with the Federal Reserve and eliminate, defer, or significantly reduce the bank holding company’s dividends if:

(i) its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends;

The OCC and the FRB have policies that encourage banks and bank holding companies to pay dividends from current earnings, and have the general authority to limit the dividends paid by national banks and bank holding companies, respectively, if such payment may be deemed to constitute an unsafe or unsound practice.

If, in the particular circumstances, either of these federal regulators determined that the payment of dividends would constitute an unsafe or unsound banking practice, either the OCC or the FRB may, among other things, issue a cease and desist order prohibiting the payment of dividends by Seacoast Bank or us, respectively.

The board of directors of a bank holding company must consider different factors to ensure that its dividend level, if any, is prudent relative to the organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may occur before the payment date that could affect its ability to pay, while still maintaining a strong financial position.

As a general matter, the FRB has indicated that the board of directors of a bank holding company, such as Seacoast, should consult with the FRB and eliminate, defer, or significantly reduce the bank holding company’s dividends if:

(i) its net income available to shareholders for the past four quarters, net of dividends previously paid during that

period, is not sufficient to fully fund the dividends;

(ii) its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition;

or (iii) it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

The Company has seven wholly owned trust subsidiaries that issued trust preferred securities, all of which are guaranteed by the Company on a junior subordinated basis.

The Federal Reserve’s rules permit qualified trust preferred securities and other restricted capital elements to be included under Basel III capital guidelines, with limitations, and net of goodwill and intangibles.

The Company believes that its trust preferred securities qualify under these revised regulatory capital rules and believes that it will be able to treat all its trust preferred securities as Tier 1 capital.

The Company has paid quarterly dividends since the second quarter of 2021.

Whether the Company continues to pay quarterly dividends and the amount of any such dividends will be at the discretion of the Company's Board of Directors and will depend on the Company's earnings, financial condition, results of operations, business prospects, capital requirements, regulatory restrictions, and other factors that the Board of Directors may deem relevant.

The Company has seven wholly owned trust subsidiaries that have issued trust preferred stock.

Trust preferred securities from acquisitions were recorded at fair value when acquired.

All trust preferred securities are guaranteed by the Company on a junior subordinated basis.

The FRB’s rules permit qualified trust preferred securities and other restricted capital elements to be included under Basel III capital guidelines, with limitations, and net of goodwill and intangibles.

The Company believes that its trust preferred securities qualify under these revised regulatory capital rules and believes that it can treat all its trust preferred securities as Tier 1 capital.

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

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• acquisition accounting and purchased loans;

• intangible assets and impairment testing;

• other fair value measurements;

• impairment of debt securities, and;

• contingent liabilities.

• intangible assets and impairment testing, and;

• impairment of debt securities.

The following is a discussion of the critical accounting policies intended to facilitate a reader’s understanding of the judgments, estimates and assumptions underlying these accounting policies and the possible or likely events or uncertainties known to the Company that could have a material effect on reported financial information.

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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.

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

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

The forecasts of future economic conditions are over a period that has been deemed reasonable and supportable, and in

segments where it can no longer develop reasonable and supportable forecasts, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans.

The 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.

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

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

The weighting applied in the December 31, 2022 analysis reflects a deterioration in the economic outlook as compared to the December 31, 2021 analysis and considers the continued actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, the ongoing Russia-Ukraine conflict and the magnitude of the resulting market disruption, the potential impact of persistent high inflation on economic growth and expectations around a recession occurring over the next 12 to 24 months.

The weighting applied in the December 31, 2023 analysis reflects a deterioration in the economic outlook as compared to the December 31, 2022 analysis and considers the continued actions taken by the FRB with regard to monetary policy and interest rates and the potential impact of those actions.

The forecasted credit losses incorporate numerous macroeconomic variables, although specific variables have a greater impact on the outcome than others.

Specifically, changes in expectations indicated by the Commercial Real Estate Price Index have the most significant impact on the estimate of expected losses for commercial real estate non-owner-occupied loans and construction and land development loans, the housing price index is the economic forecast variable most significantly impacting the estimate of expected losses for residential loans, and the unemployment rate is a significant contributor to commercial and consumer loans.

Changes in the assumptions and forecasts of economic conditions could significantly affect the estimate for the Company’s estimate of expected credit losses at the balance sheet date or lead to significant changes in the estimate from one reporting period to the next.

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

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

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

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

Changes in the assumptions and forecasts of economic conditions could significantly affect the Company’s estimate of expected credit losses at the balance sheet date or lead to significant changes in the estimate from one reporting period to the next.

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

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Acquisition Accounting and Purchased Loans – Critical Accounting Policies and Estimates

The Company accounts for acquisitions under ASC Topic 805, Business Combinations , which requires the use of the acquisition method of accounting.

The Company accounts for acquisitions using the acquisition method of accounting.

All identifiable assets acquired, including loans, are recorded at fair value.

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

The non-credit discount or premium related to PCD loans and the fair value adjustment on non-PCD loans are amortized or accreted to Interest and fees on loans over the contractual life of the loans using the effective interest method.

In the event of prepayment, unamortized discounts or premiums are recognized in Interest and fees on loans.

Fair value estimates for acquired assets and assumed liabilities are based on the information available, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.

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The core deposit intangible represents the excess intangible value of acquired deposit customer relationships.

Core deposit intangibles are amortized using an amortization method that reflects the expected value over time, and are evaluated for indications of potential

Core deposit intangibles are

amortized using an amortization method that reflects the expected value over time, and are evaluated for indications of potential

impairment at least annually.

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Other Fair Value Measurements – Critical Accounting Policies and Estimates

The fair value of collateral-dependent loans, OREO and repossessed assets is typically based on current appraisals, which are reviewed quarterly to determine if fair value adjustments are necessary based on known changes in the market and/or the projected assumptions.

When necessary, the appraised value may be adjusted based on more recent appraisal assumptions received by the Company on other similar properties, the tax assessed market value, comparative sales and/or an internal valuation.

Collateral-dependent loans are loans where repayment is solely dependent on the liquidation of the collateral or operation of the collateral for repayment.

The Company also holds 11,330 shares of Visa Class B stock which, following resolution of Visa’s litigation, will be converted to Visa Class A shares.

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

The Company's ownership is related to prior ownership in Visa’s network while Visa operated as a cooperative.

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

Impairment of Debt Securities – Critical Accounting Policies and Estimates

On January 1, 2020, the Company adopted ASC Topic 326 – Financial Instruments – Credit Losses , which requires expected credit losses on both held-to-maturity (“HTM”) and available-for-sale (“AFS”) securities to be recognized through a valuation allowance instead of as a direct write-down to the amortized cost basis of the security.

For HTM securities, the guidance requires management to estimate expected credit losses over the remaining expected life and recognize this estimate as an allowance for credit losses.

An AFS security is considered impaired if the fair value is less than amortized cost basis.

For AFS securities, if any portion of the decline in fair value is related to credit, the amount of allowance is determined as the portion related to credit, limited to the difference between the amortized cost basis and the fair value of the security.

For held-to-maturity (“HTM”) securities, expected credit losses are estimated over the remaining expected life and this estimate is recognized as an allowance for credit losses.

Available-for-sale (“AFS”) securities are considered impaired if the fair value is less than amortized cost basis.

value of the security.

If the fair value of the security increases in subsequent periods, or changes in factors used within the credit loss assessment result in a change in the estimated credit loss, the Company would reflect the change by decreasing the allowance.

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

Contingent Liabilities – Critical Accounting Policies and Estimates

Seacoast is subject to contingent liabilities, including judicial, regulatory and arbitration proceedings, and tax and other claims arising from the conduct of the Company's business activities.

These proceedings include actions brought against the Company and/or its subsidiaries with respect to transactions in which the Company and/or its subsidiaries acted as a lender, a financial adviser, a broker or acted in a related activity.

Accruals are established for legal and other claims when it becomes probable that the Company will incur an expense and the amount can be reasonably estimated.

Company management, together with attorneys, consultants and other professionals, assesses the probability and estimated amounts involved in a contingency.

Throughout the life of a contingency, the Company or its advisers may learn of additional information that can affect the assessments about probability or about the estimates of amounts involved.

Changes in these assessments can lead to changes in recorded reserves.

In addition, the actual costs of resolving these claims may be substantially higher or lower than the amounts reserved for the claims.

At December 31, 2022 and 2021, the Company had no significant accruals for contingent liabilities and had no known pending matters that could potentially be significant.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis