What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-03-01 · 427 added, 493 removed, 1507 unchanged (38% of the section changed)

21 unchanged sentences

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

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

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

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

3 unchanged sentences

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

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

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

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

21 unchanged sentences

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

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

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

The principal considerations resulting in our determination included the following:

3 unchanged sentences

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

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

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

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

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

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

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

• With the assistance of Crowe VS, evaluating the reasonableness of assumptions and judgments related to management’s methodology.

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

20 unchanged sentences

Interest on securities sold under agreement to repurchase 8,323 986 141

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

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

Interest on Federal Home Loan Bank borrowings

Interest on long-term debt 7,245 3,056 1,685

Total Interest Expense 200,735 14,332 8,219

7 unchanged sentences

Mortgage banking fees 1,790 3,478 11,782

Marine finance fees 920 665 690

Insurance agency income 4,510 805 —

SBA gains 2,105 842 1,531

BOLI income 8,401 5,572 4,154

SBIC income 1,305 6,778 1,373

Other 20,304 14,559 18,202

82,045 67,187 71,305

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

Securities losses, net (includes net losses of $ 2.9 million for 2023, $ 0 for 2022 and net gains of $ 2.2 million for 2021 in other comprehensive income reclassifications)

( 2,893 ) ( 1,096 ) ( 578 )

11 unchanged sentences

Amortization of intangibles 28,726 9,101 5,033

Foreclosed property expense and net (gain) loss on sale ( 1,534 ) ( 264 ) 2,263

Other real estate owned expense and net loss (gain) on sale

985 ( 1,534 ) ( 264 )

Provision for credit losses on unfunded commitments 1,239 1,157 133

8 unchanged sentences

Basic 1.24 1.67 2.20

Average common shares outstanding (in thousands)

Average common shares outstanding

Diluted 84,329 64,264 57,088

7 unchanged sentences

Other comprehensive income (loss):

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

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

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

Available-for-sale securities:

Unrealized gains (losses) on available-for-sale securities, net of tax expense of $ 7.7 million in 2023, tax benefit of $ 57.1 million in 2022, and tax benefit of $ 8.2 million in 2021

$ 23,645 $ ( 181,096 ) $ ( 27,377 )

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

Amortization of unrealized (gains) losses on securities transferred to held-to-maturity, net of tax benefit of $ 13 thousand in 2023, tax benefit of $ 7 thousand in 2022, and tax expense of $ 21 thousand in 2021

( 42 ) ( 20 ) 86

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

Reclassification adjustment for losses included in net income, net of tax benefit of $ 0.7 million in 2023 and tax benefit of $ 85 thousand in 2021

Unrealized gains on derivatives designated as fair value hedges, net of reclassifications to income, net of tax expense of $ 0.7 million in 2023

Unrealized gains (losses) on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax expense of $ 0.1 million in 2023, tax benefit of $ 26 thousand in 2022, and tax expense of $ 0.1 million in 2021

390 77 ( 351 )

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

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

Total other comprehensive income (loss) $ 28,155 $ ( 181,039 ) $ ( 27,364 )

Comprehensive Income (Loss) $ 132,188 $ ( 74,532 ) $ 97,039

See notes to consolidated financial statements.

32 unchanged sentences

Securities sold under agreements to repurchase, maturing within 30 days 374,573 172,029

Federal Home Loan Bank (“FHLB”) borrowings

Subordinated debt 84,533 71,646

FHLB borrowings

50,000 150,000

Long-term debt, net 106,302 84,533

Other liabilities 164,353 149,830

21 unchanged sentences

Depreciation 8,245 6,115 5,482

Amortization of premiums and discounts on securities, net 576 6,220 5,019

(Accretion of discounts) and amortization of premiums on securities, net ( 949 ) 576 6,220

Amortization of operating lease right-of-use assets 8,053 6,485 4,576

5 unchanged sentences

Deferred income taxes 9,442 ( 10,398 ) 3,836

Losses (gains) on sale of securities — 363 ( 1,096 )

Losses on sale of securities 2,935 — 363

Gains on sale of loans ( 4,211 ) ( 5,687 ) ( 15,276 )

(Gains) losses on sale and write-downs of other real estate owned ( 1,749 ) ( 635 ) 1,139

Losses on disposition of fixed assets 1,394 817 791

Losses (gains) on sale and write-downs of other real estate owned 450 ( 1,749 ) ( 635 )

Losses on disposition of fixed assets and write-downs upon transfer of bank premises to other real estate owned 1,842 1,394 817

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

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

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

Net (increase) decrease in other assets ( 8,967 ) 508 ( 42,437 )

Net (decrease) increase in other liabilities ( 8,755 ) 22,042 28,883

Net Cash Provided by Operating Activities 150,613 195,859 154,572

6 unchanged sentences

Maturities of time deposits with other banks 1,984 3,237 750

Purchases of time deposits with other banks ( 4,605 ) — —

Net new loans and principal repayments 110,665 ( 513,343 ) 566,348

Purchases of loans held for investment — ( 111,292 ) ( 259,267 )

Proceeds from the sale of other real estate owned 15,951 5,598 8,521

Proceeds from sale of other real estate owned 577 15,951 5,598

Additions to other real estate owned — ( 591 ) ( 2,513 )

5 unchanged sentences

Additions to bank premises and equipment ( 10,293 ) ( 12,645 ) ( 4,327 )

Net Cash Used in Investing Activities ( 364,875 ) ( 412,511 ) ( 342,502 )

Net Cash Provided by (Used in) Investing Activities

527,446 ( 364,875 ) ( 412,511 )

For the Year Ended December 31,

7 unchanged sentences

Stock based employee benefit plans 5,100 3,408 5,022

Repurchase of common stock ( 10,868 ) — —

Dividends paid ( 60,591 ) ( 41,242 ) ( 22,506 )

Net Cash (Used in) Provided by Financing Activities ( 432,817 ) ( 366,773 ) 591,580

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

Net increase (decrease) in cash and cash equivalents

245,242 ( 535,789 ) 333,641

Cash and Cash Equivalents at Beginning of Year 201,940 737,729 404,088

2 unchanged sentences

Cash paid during the period for interest $ 191,225 $ 13,743 $ 9,977

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

Net (refund received) cash paid during the period for taxes ( 5,921 ) 29,591 30,887

Recognition of operating lease right-of-use assets, other than through bank acquisition, net of terminations 2,068 3,370 12,459

3 unchanged sentences

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

Transfer from loans to other real estate owned — — 5,624

Transfer from bank premises to other real estate owned 6,286 1,674 3,318

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

1 See "Note 17 - Business Combinations" for non cash transactions related to business combinations.

See notes to consolidated financial statements.

4 unchanged sentences

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

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

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

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

1 unchanged sentence

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

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

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

Conversion of options, pursuant to acquisition — — 5,607 — — — 5,607

Dividends on common stock ($ 0.39 per share)

— — — ( 22,506 ) — — ( 22,506 )

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

8 unchanged sentences

Balance at December 31, 2022 71,618 $ 7,162 $ 1,377,802 $ 423,863 $ ( 13,019 ) $ ( 188,033 ) $ 1,607,775

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

Comprehensive income — — — 104,033 — 28,155 132,188

Stock based compensation expense 30 — 13,440 — — — 13,440

Common stock issued for stock based employee benefit plans 970 100 8,691 — ( 3,691 ) — 5,100

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

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

Issuance of common stock, pursuant to acquisition 12,792 1,279 409,459 — — — 410,738

Conversion of options, pursuant to acquisition — — 10,304 — — — 10,304

Repurchase of common stock ( 549 ) ( 55 ) ( 10,813 ) — — — ( 10,868 )

Dividends on common stock ($ 0.71 per share)

15 unchanged sentences

These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements.

Specific areas, among others, requiring the application of management’s estimates include determination of the allowance for credit losses, acquisition accounting and purchased loans, intangible assets and impairment testing, other fair value measurements, and contingent liabilities.

Specific areas, among others, requiring the application of management’s estimates include the determination of the allowance for credit losses, acquisition accounting and purchased loans, intangible assets and impairment testing, and other fair value measurements .

Cash and Cash Equivalents:

8 unchanged sentences

The fair value of securities purchased and sold is monitored and collateral is obtained from or returned to the counterparty when appropriate.

Debt securities are classified at date of purchase as available-for-sale or held-to-maturity.

Debt securities that may be sold as part of the Company's asset/liability management or in response to, or in anticipation of, changes in interest rates and resulting prepayment risk, or for other factors are stated at fair value with unrealized gains or losses reflected as a component of shareholders' equity net of tax or included in noninterest income as appropriate.

Debt securities that the Company has the ability and intent to hold to maturity are carried at amortized cost.

Equity securities are stated at fair value with unrealized gains or losses included in noninterest income as securities gains or losses.

Debt securities are classified as available-for-sale or held-to-maturity.

Debt securities available-for-sale may be sold as part of the Company's asset/liability management or in response to, or in anticipation of, changes in interest rates and resulting prepayment risk, or for other factors, and are stated at fair value.

Unrealized gains or losses are reflected as a component of shareholders' equity net of tax or included in noninterest income as appropriate.

Debt securities held-to-maturity that the Company has the ability and intent to hold to maturity are carried at amortized cost.

Equity securities with readily determinable fair values are considered marketable and measured at fair value with unrealized gains or losses included in noninterest income as securities gains or losses.

Equity investments that do not have readily determinable fair values are considered non-marketable and are accounted for at cost under the measurement alternative to fair value, with adjustments for impairment and observable price changes if applicable.

The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available.

1 unchanged sentence

Interest and dividends on securities, including amortization of premiums and accretion of discounts on debt securities, is recognized in interest income on an accrual basis using the interest method.

The Company anticipates prepayments of principal in the calculation of the effective yield for collateralized mortgage obligations and mortgage backed securities by obtaining estimates of prepayments from independent third parties.

independent third parties.

The adjusted cost of each specific security sold is used to compute realized gains or losses on the sale of securities on a trade date basis.

7 unchanged sentences

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

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

For securities classified as available-for-sale, both quantitative and qualitative assessments are utilized to determine if a security has a credit loss.

Quantitative assessments are based on a discounted cash flow method.

5 unchanged sentences

The Company designates other loans as held for sale when it has the intent to sell them.

Such loans are transferred to held for sale at the lower of cost or estimated fair value less cost to sell.

At the time of transfer, write-downs on the loans are recorded as charge-offs, establishing a new cost basis upon transfer.

These loans are recorded at the lower of cost or estimated fair value on an individual basis.

When such loans are transferred to held for sale, any previously recorded allowance for credit losses is reversed into earnings and the loan is recorded at its amortized cost basis.

Prior to the transfer, write-downs on the loans are recorded as charge-offs, establishing a new cost basis upon transfer.

Loans Held for Investment:

8 unchanged sentences

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

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

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

A loan for which the terms have been modified with principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay or a term extension and for which the borrower is experiencing financial difficulty, is considered to be a troubled borrower modification ("TBM").

Allowance for credit losses on loans:

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

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

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

6 unchanged sentences

Management establishes the allowance using relevant available information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

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

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

The forecasts of future economic conditions are over a period that has been deemed reasonable and supportable, and in segments where it can no longer develop reasonable and supportable forecasts, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans.

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

The forecast may utilize one scenario or a composite of scenarios based on management's judgment and

expectations around the current and future macroeconomic outlook.

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

1 unchanged sentence

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

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

The Moody's tool being utilized produces more granular results, 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.

6 unchanged sentences

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

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

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

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

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

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

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

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

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

It is the Company's practice to ensure that the charge-off policy aligns with regulatory requirements.

Losses on unsecured consumer loans are recognized at 90 days past due.

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

9 unchanged sentences

The gain or loss resulting from changes in the fair value of interest rate swaps designated and qualifying as cash flow hedging instruments is initially reported as a component of other comprehensive income and subsequently reclassified into earnings through interest income in the same period in which the hedged transaction affects earnings.

The gain or loss resulting from changes in the fair value of interest rate swaps designed as fair value hedges is classified in the statement of income or comprehensive income in the line item associated with the instrument being hedged.

The Company discontinues hedge accounting prospectively when it is determined that the derivative contract is no longer effective in offsetting changes in the cash flows of the hedged item, the derivative expires or is terminated, management determines that the designation of the derivative as a hedging instrument is no longer appropriate or, for a cash flow hedge, the occurrence of the forecasted transaction is no longer probable.

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

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

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

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

5 unchanged sentences

The Company estimates a reserve for potential losses on unfunded commitments, which is reported separately from the allowance for credit losses within Other Liabilities.

Changes to the allowance for credit losses on unfunded commitments are recorded in noninterest expense on the income statement.

The reserve is based upon the same quantitative and qualitative factors applied to the collectively evaluated loan portfolio.

Fees received for providing loan commitments and letters of credit that may result in loans are typically deferred and amortized to interest income over the life of the related loan, beginning with the initial borrowing.

Fees on commitments and letters of credit are amortized to noninterest income as banking fees and commissions on a straight-line basis over the commitment period when funding is not expected.

Fees on commitments are typically deferred and amortized to interest income over the life of the related loan, beginning with the initial borrowing.

Fair Value Measurements:

The Company measures or monitors the fair value of many of its assets and liabilities.

Certain assets are measured on a recurring basis, including available-for-sale securities and loans held for sale.

Certain assets are measured on a recurring basis, including available-for-sale securities, equity securities and derivatives.

These assets are carried at fair value on the Company’s balance sheets.

Additionally, fair value is measured on a non-recurring basis to evaluate assets or liabilities for impairment or for disclosure purposes.

Examples include collateral-dependent loans, other real estate owned, loan servicing rights, goodwill, and long-lived assets.

Additionally, fair value is measured on a non-recurring basis to evaluate assets or liabilities for impairment.

Examples include collateral-dependent loans, other real estate owned, loan servicing rights, and long-lived assets.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

1 unchanged sentence

The Company applies the following fair value hierarchy:

Level 1 – Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments or futures contracts.

Level 1 – Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments.

Level 2 – Assets and liabilities valued based on observable market data for similar instruments.

10 unchanged sentences

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

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

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

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

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

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

Other Real Estate Owned:

Other real estate owned (“OREO”) consists primarily of real estate acquired in lieu of unpaid loan balances.

Other real estate owned (“OREO”) consists of real estate taken in foreclosure of defaulted loan balances.

These assets are carried at an amount equal to the loan balance prior to foreclosure plus costs incurred for improvements to the property, but no more than the estimated fair value of the property less estimated selling costs.

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

Subsequently, unrealized

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

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

Operating results from OREO are recorded in other noninterest expense.

OREO may also include bank premises no longer utilized in the course of the Company's business (closed branches) that are initially recorded at the lower of carrying value or fair value, less costs to sell.

If the fair value of the premises is less than amortized book value, a write down is recorded through noninterest expense.

If the fair value of the premises is less than carrying value, a write down is recorded through noninterest expense.

Costs to maintain the property are expensed.

2 unchanged sentences

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

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

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

the acquired assets and liabilities.

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

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

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

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

The Company recognizes CDI that results from either whole bank acquisitions or branch acquisitions.

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

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

2 unchanged sentences

Bank Owned Life Insurance (BOLI):

The Company, through its subsidiary bank, has purchased or acquired through bank acquisitions, life insurance policies on certain key executives.

The Company, through its subsidiary bank, has purchased or acquired through bank acquisitions, life insurance policies on certain key executives and members of management.

BOLI is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

4 unchanged sentences

Under this method, the investor amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits allocated to the investor.

The amortization is recorded in income tax expense within the income statement, which is the location the related tax credits are recorded.

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

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

Income from SBIC investments is recognized in noninterest income.

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

10 unchanged sentences

Revenue Recognition:

Revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for the services provided and is recognized when the promised services (performance obligations) are transferred to a customer, requiring the application of the following five-steps:

(i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes two types of revenue in its Consolidated Statements of Income, interest income and noninterest income.

The Company's principal source of revenue is interest income from loans and securities which is recognized on an accrual basis using the effective interest method.

Noninterest income includes revenue from various types of transactions and services provided to customers.

The Company recognizes revenue from contracts with customers as performance obligations are satisfied.

Performance obligations are typically satisfied in one year or less.

Relevant activity includes:

3 unchanged sentences

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

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

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

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

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

9 unchanged sentences

Such fees are recognized by the Company upon fulfilling its performance obligation to approve the card transaction.

Treasury Stock:

The Company's repurchase of shares of its common stock are recorded at cost as treasury stock and result in a reduction of shareholders' equity.

• Insurance Agency Income:

Insurance commissions are earned upon the sale of insurance products as agent and are paid by the insurance companies upon the completion of application requirements and receipt of client payment to the insurance company.

The commissions are recognized upon the placement date of the insurance policies, representing the Company’s related performance obligations.

Commission payment is normally received within the policy period.

Treasury Stock and Share Repurchases:

The Company's repurchases of shares of its common stock are recorded at cost as additional paid-in capital and result in a reduction of shareholders' equity.

Shares repurchased in 2023 pursuant to the Company's share repurchase program were immediately retired, and therefore were not included in treasury stock.

Activity in treasury stock represents shares traded to offset employee payroll taxes on vested shares.

Shares held in treasury are used for employee share purchases through the Company's stock purchase plan.

Shares held in treasury are also used for employee share purchases through the Company's employee stock purchase plan.

Stock-Based Compensation:

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

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

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

Some shares vest based upon the Company achieving certain performance goals and salary amortization expense is based on an estimate of the most likely results on a straight line basis.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with market assumptions.

The fair value is amortized on a straight-line basis over the vesting period, generally five years .

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

Some award shares vest based upon the Company achieving certain performance goals and the amortization expense recorded within salaries and wages is based on an estimate of the most likely results on a straight line basis.

The Company accounts for forfeitures as they occur.

Income Taxes :

The Company uses the asset and liability method of accounting for income taxes.

Deferred tax assets and liabilities are determined based on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and their related tax bases and are measured using the enacted tax rates and laws that are in effect.

1 unchanged sentence

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

Recently Issued Accounting Standards

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclo sures.

ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (“TDRs”) in ASC 310-40, Receivables - Troubled Debt Restructurings by Creditors , and introduces new disclosures related to modifications with borrowers that are experiencing financial difficulties.

Recently Adopted Accounting Standards

On January 1, 2023, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2022-02, “Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (“TDRs”) in ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors , and introduces new disclosures related to modifications with borrowers that are experiencing financial difficulties.

ASU 2022-02 also requires the disclosure of current-period gross write-offs by year of origination for financing receivables held at amortized cost.

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

Upon adoption, the Company eliminated the separate credit loss estimation process for loans classified as TDRs.

The adoption did not have a material impact to the consolidated financial statements.

For additional information on the loans modified for borrowers in financial difficulty and for the disclosure of current-period gross write-offs by year of origination, see “Note 4 – Loans.”

On January 1, 2023, the Company adopted FASB ASU 2022-01, “Fair Value Hedging - Portfolio Layer Method.” ASU 2022-01 permits the designation of multiple hedging relationships on a single closed portfolio.

The guidance also expands the scope of the portfolio layer method to include non-prepayable assets, specifies eligible hedging instruments in a single-layer hedge, and provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method.

The adoption did not have a material impact to the consolidated financial statements.

For additional information on fair value hedges, see “Note 6 – Derivatives.”

Issued Accounting Standards

In November 2023, the FASB issued ASU 2023-07, "Improvements to Reportable Segment Disclosures." ASU 2023-07 requires disclosure of significant segment expenses and other segment items on an interim and annual basis.

The standard is effective for fiscal years beginning after December 15, 2023 and for interim periods beginning after December 15, 2024.

The Company is evaluating the impact of the changes to its existing disclosures.

In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures." ASU 2023-09 requires disclosure of specific categories in the income tax rate reconciliation and requires additional information for reconciling items that meet a quantitative threshold.

The standard requires an annual disclosure of income taxes paid, net of refunds received,

disaggregated by federal, state and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold.

The standard is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted.

The Company does not expect the adoption of the standard to have a material impact to its disclosures.

Note 2 - Earnings Per Share

18 unchanged sentences

Note 3 - Securities

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

The amortized cost, gross unrealized gains and losses and fair value of AFS and HTM securities at December 31, 2023 and December 31, 2022 are summarized as follows:

December 31, 2023

3 unchanged sentences

government agencies $ 37,718 $ 205 $ ( 478 ) $ 37,445

Mortgage-backed securities and collateralized mortgage obligations of U.S.

Residential mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 1,152,753 780 ( 184,152 ) 969,381

Commercial mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 385,013 2,824 ( 19,565 ) 368,272

Private mortgage-backed securities and collateralized mortgage obligations 135,878 36 ( 10,911 ) 125,003

4 unchanged sentences

Held-to-Maturity Debt Securities

Mortgage-backed securities and collateralized mortgage obligations of U.S.

Residential mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities $ 590,676 $ — $ ( 111,746 ) $ 478,930

Commercial mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 89,637 — ( 10,208 ) 79,429

Totals $ 680,313 $ — $ ( 121,954 ) $ 558,359

4 unchanged sentences

government agencies $ 13,813 $ 173 $ ( 339 ) $ 13,647

Mortgage-backed securities and collateralized mortgage obligations of U.S.

Residential mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 1,170,062 539 ( 196,272 ) 974,329

Commercial mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 391,135 — ( 26,811 ) 364,324

Private mortgage-backed securities and collateralized mortgage obligations 179,148 70 ( 12,831 ) 166,387

1 unchanged sentence

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

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

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

Held-to-Maturity Debt Securities

Mortgage-backed securities of U.S.

Residential mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities $ 634,300 $ 64 $ ( 116,711 ) $ 517,653

Commercial mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 113,108 — ( 13,020 ) 100,088

Totals $ 747,408 $ 64 $ ( 129,731 ) $ 617,741

During the year ended December 31, 2023, debt securities with a fair value of $ 113.4 million were sold, with gross gains of $ 25 thousand and gross losses of $ 3.0 million.

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

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

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

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

Also included in “Securities gains (losses) net” are decreases of $ 1.1 million and $ 0.2 million in 2022 and 2021, respectively, and an increase of $ 0.1 million in 2020 in the value of an investment in shares of a mutual fund that invests in CRA-qualified debt securities.

During the first quarter of 2021, the Company reclassified debt securities with an amortized cost of $ 210.8 million from available-for-sale to held-to-maturity, as it has the ability and intent to hold these securities to maturity.

These securities had net unrealized gains of $ 0.8 million at the date of transfer, which will continue to be reported in accumulated other comprehensive income and will be amortized over the remaining life of the securities as an adjustment of yield.

The effect on interest income of the amortization of net unrealized gains is offset by the amortization of the premium on the securities transferred.

At December 31, 2022, debt securities with a fair value of $ 484.2 million were pledged primarily as collateral for public deposits and secured borrowings.

Also included in “Securities losses, net” is an increase of $ 42 thousand in 2023, and decreases of $ 1.1 million and $ 0.2 million in 2022 and 2021, respectively, in the value of investments in mutual funds that invest in CRA-qualified debt securities.

At December 31, 2023, debt securities with a fair value of $ 1.7 billion were pledged primarily as collateral for public deposits and secured borrowings.

The amortized cost and fair value of securities at December 31, 2023, by contractual maturity, are shown below.

9 unchanged sentences

$ — $ — $ 48,204 $ 46,835

Mortgage-backed securities and collateralized mortgage obligations of U.S.

Residential mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities $ 590,676 $ 478,930 $ 1,152,753 $ 969,381

Commercial mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 89,637 79,429 385,013 368,272

Private mortgage-backed securities and collateralized mortgage obligations — — 135,878 125,003

2 unchanged sentences

Totals $ 680,313 $ 558,359 $ 2,049,302 $ 1,836,020

The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, using observable market data where available.

The tables below indicate the fair value of available-for-sale debt securities with unrealized losses for which no allowance for credit losses has been recorded.

7 unchanged sentences

government agencies $ 24,933 $ ( 143 ) $ 3,594 $ ( 335 ) $ 28,527 $ ( 478 )

Mortgage-backed securities and collateralized mortgage obligations of U.S.

Residential mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 91,867 ( 9,320 ) 826,324 ( 174,832 ) 918,191 ( 184,152 )

Commercial mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 24,251 ( 1,270 ) 262,666 ( 18,295 ) 286,917 ( 19,565 )

Private mortgage-backed securities and collateralized mortgage obligations 3,945 ( 69 ) 119,475 ( 10,842 ) 123,420 ( 10,911 )

3 unchanged sentences

Totals $ 215,988 $ ( 11,128 ) $ 1,453,668 $ ( 206,586 ) $ 1,669,656 $ ( 217,714 )

1 Comprised of 504 individual securities

December 31, 2022

6 unchanged sentences

government agencies $ 3,788 $ ( 328 ) $ 249 $ ( 11 ) $ 4,037 $ ( 339 )

Mortgage-backed securities and collateralized mortgage obligations of U.S.

Residential mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 304,732 ( 33,401 ) 645,115 ( 162,870 ) 949,847 ( 196,271 )

Commercial mortgage-backed securities and collateralized mortgage obligations of U.S.

government-sponsored entities 341,920 ( 21,555 ) 22,404 ( 5,257 ) 364,324 ( 26,812 )

Private mortgage-backed securities and collateralized mortgage obligations 130,488 ( 8,255 ) 25,234 ( 4,576 ) 155,722 ( 12,831 )

1 unchanged sentence

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

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

Totals $ 1,058,561 $ ( 73,965 ) $ 753,961 $ ( 174,697 ) $ 1,812,522 $ ( 248,662 )

At December 31, 2022, the Company had unrealized losses of $ 223.1 million on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $ 1.3 billion.

1 Comprised of 420 individual securities

At December 31, 2023, the Company had unrealized losses of $ 203.7 million on commercial and residential mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $ 1.2 billion.

These securities are either explicitly or implicitly guaranteed by the U.S.

1 unchanged sentence

The implied government guarantee of principal and interest payments and the high credit rating of the portfolio provide sufficient basis for the current expectation that there is no risk of loss if default were to occur.

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

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

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

1 unchanged sentence

The securities have average credit support of 23 %.

Based on the evaluation of available information relevant to collectibility, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality and expects to recover the entire amortized cost basis of these securities.

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

At December 31, 2023, the Company had $ 1.4 million of unrealized losses in floating rate collateralized loan obligations (“CLOs”) having a fair value of $ 292.6 million.

CLOs are special purpose vehicles and those in which the Company has invested acquire nearly all first-lien, broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors.

CLOs are special purpose vehicles and those in which the Company has invested are nearly all first-lien, broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors.

As of December 31, 2023, all positions held by the Company are in AAA and AA tranches, with average credit support of 35 % and 26 % respectively.

The Company evaluates the securities for potential credit losses by modeling expected loan-level defaults, recoveries, and prepayments for each CLO security.

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

Based on the evaluation of available information relevant to collectibility, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movement and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities.

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

1 unchanged sentence

These securities are highly rated issuances of state or local municipalities, all of which are continuing to make timely contractual payments.

Based on the evaluation of available information relevant to collectibility, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities.

As a result, as of December 31, 2023, no allowance for credit losses has been recorded.

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

These securities were issued under the U.S.

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

Department of Education guarantee of principal.

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

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

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

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

3 unchanged sentences

As a result, as of December 31, 2023, no allowance for credit losses has been recorded.

The Company has the intent and ability to hold these securities until maturity.

Included in Other Assets at December 31, 2023, is $ 67.7 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value.

1 unchanged sentence

Accrued interest receivable on AFS and HTM debt securities of $ 7.9 million and $ 1.1 million, respectively, at December 31, 2023, and $ 7.0 million and $ 1.3 million, respectively, at December 31, 2022, is included in Other Assets .

Also included in Other Assets is an investment in a CRA-qualified mutual fund carried at fair value of $ 8.2 million and $ 9.3 million at December 31, 2022 and December 31, 2021, respectively.

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

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

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

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

Also included in Other Assets are investments in CRA-qualified mutual funds carried at fair value of $ 13.6 million and $ 8.2 million at December 31, 2023 and December 31, 2022, respectively.

At December 31, 2023, the Company held 11,330 shares of Visa Class B stock.

The ownership of Visa stock was related to prior ownership in Visa's network while Visa operated as a cooperative, and was recorded on the Company's financial records at a zero basis.

In January of 2024, the Company sold all of its Visa Class B stock, receiving net proceeds of $ 4.1 million.

Note 4 - Loans

19 unchanged sentences

The segment includes both installment loans and lines of credit which may be collateralized or non-collateralized.

• Paycheck Protection Program (“PPP”):

Loans originated under a temporary program established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and extended by the Economic Aid Act.

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

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

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

7 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

7 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

4 unchanged sentences

Loans to directors and executive officers totaled $ 0.3 million and $ 0.4 million at December 31, 2023 and 2022, respectively.

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

No new loans were originated to officers or directors in 2023.

The following table presents the status of net loan balances as of December 31, 2023 and December 31, 2022.

11 unchanged sentences

Consumer 174,798 763 290 — 118 175,969

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

Total Portfolio Loans $ 6,537,201 $ 7,212 $ 1,950 $ 219 $ 24,872 $ 6,571,454

6 unchanged sentences

Consumer 71,986 568 618 618 1,064 74,854

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

Total Acquired Non-PCD Loans $ 3,192,780 $ 17,363 $ 1,964 $ 806 $ 14,256 $ 3,227,169

19 unchanged sentences

Consumer 176,444 550 252 1 91 177,338

Paycheck Protection Program 69,434 — — 69 — 69,503

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

6 unchanged sentences

Consumer 87,317 779 616 525 221 89,458

Paycheck Protection Program 21,567 — — 37 — 21,604

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

13 unchanged sentences

December 31, 2023

(In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses

(In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans

Construction and land development $ — $ 824 $ 824

6 unchanged sentences

December 31, 2022

(In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses

Construction and land development $ 37 $ 222 $ 259 $ 92

Commercial real estate - owner-occupied 2,976 990 3,966 419

Commercial real estate - non-owner occupied 4,490 1,415 5,905 27

Residential real estate 12,358 687 13,045 357

Commercial and financial 2,676 4,193 6,869 2,384

Consumer 29 525 554 525

Totals $ 22,566 $ 8,032 $ 30,598 $ 3,804

Collateral-Dependent Loans

Loans are considered collateral-dependent when the repayment, based on the Company's assessment as of the reporting date, is expected to be provided substantially through the operation or sale of the underlying collateral and there are no other available and reliable sources of repayment.

The following table presents collateral-dependent loans as of:

(In thousands) December 31, 2022 December 31, 2021

(In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans

Construction and land development $ 615 $ — $ 615

5 unchanged sentences

Totals $ 17,755 $ 11,088 $ 28,843

Loans by Risk Rating

Credit Quality Evaluation

The Company utilizes an internal asset classification system as a means of identifying problem and potential problem loans.

6 unchanged sentences

• Substandard Impaired:

Loans typically placed on nonaccrual and considered to be collateral-dependent or accruing TDRs.

Loans typically placed on nonaccrual and considered to be collateral-dependent.

Loans that have all the weaknesses inherent in those classified Substandard with the added characteristic that the weakness present makes collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Some portion of the principal balance of loans classified as doubtful are likely to be charged off.

The following tables present the risk rating of loans by year of origination as of:

The principal balance of loans classified as doubtful is likely to be charged off.

The following tables present the risk rating of loans and gross charge-offs by year of origination as of:

December 31, 2023

8 unchanged sentences

Total $ 80,750 $ 296,450 $ 107,158 $ 20,199 $ 21,942 $ 29,794 $ 211,329 $ 767,622

Gross Charge-Offs

$ — $ — $ — $ — $ — $ — $ — $ —

Commercial real estate - owner occupied

6 unchanged sentences

Total $ 145,642 $ 278,567 $ 284,262 $ 172,466 $ 179,537 $ 572,790 $ 37,017 $ 1,670,281

Gross Charge-Offs

$ — $ — $ — $ — $ — $ — $ — $ —

Commercial real estate - non-owner occupied

6 unchanged sentences

Total $ 234,226 $ 814,591 $ 668,314 $ 301,109 $ 407,458 $ 867,988 $ 26,204 $ 3,319,890

Gross Charge-Offs

$ — $ — $ 11 $ — $ — $ — $ 109 $ 120

Residential real estate

6 unchanged sentences

Total $ 177,303 $ 450,366 $ 650,005 $ 161,012 $ 95,660 $ 423,161 $ 488,185 $ 2,445,692

Commercial and financial

Risk Ratings:

Pass $ 359,833 $ 320,307 $ 140,450 $ 77,562 $ 57,924 $ 58,648 $ 292,818 $ 1,307,542

Special Mention 1,244 423 106 474 195 259 2,998 5,699

Substandard — 67 942 6,304 1,603 1,683 13,114 23,713

Substandard Impaired 5 58 5,109 147 3,642 2,545 176 11,682

Doubtful — — — — — — — —

Total $ 361,082 $ 320,855 $ 146,607 $ 84,487 $ 63,364 $ 63,135 $ 309,106 $ 1,348,636

Gross Charge-Offs

$ — $ — $ — $ 44 $ — $ 159 $ 153 $ 356

December 31, 2023

(In thousands) 2023 2022 2021 2020 2019 Prior Revolving Total

Commercial and financial

Risk Ratings:

5 unchanged sentences

Total $ 315,696 $ 356,796 $ 355,820 $ 129,454 $ 72,557 $ 102,305 $ 275,260 $ 1,607,888

Paycheck Protection Program

Risk Ratings:

Pass $ — $ 2,708 $ 1,882 $ — $ — $ — $ — $ 4,590

Total $ — $ 2,708 $ 1,882 $ — $ — $ — $ — $ 4,590

Gross Charge-Offs

$ 1,198 $ 117 $ 659 $ 3,007 $ 582 $ 12,584 $ 418 $ 18,565

Risk Ratings:

5 unchanged sentences

Total $ 20,628 $ 67,963 $ 46,704 $ 19,927 $ 20,356 $ 19,451 $ 56,538 $ 251,567

Gross Charge-Offs

$ 74 $ 1,910 $ 2,218 $ 362 $ 263 $ 666 $ 261 $ 5,754

Total $ 974,245 $ 2,264,733 $ 2,112,263 $ 804,167 $ 797,510 $ 2,015,489 $ 1,094,533 $ 10,062,940

Gross Charge-Offs

$ 1,272 $ 2,027 $ 2,888 $ 3,413 $ 845 $ 13,409 $ 941 $ 24,795

December 31, 2022

47 unchanged sentences

Total $ 93,012 $ 77,889 $ 28,011 $ 29,077 $ 11,728 $ 16,908 $ 29,962 $ 286,587

Paycheck Protection Program

Risk Ratings:

Pass $ 87,036 $ 4,071 $ — $ — $ — $ — $ — $ 91,107

Total $ 1,771,386 $ 1,972,420 $ 752,699 $ 749,534 $ 545,447 $ 1,469,313 $ 883,925 $ 8,144,724

Risk Ratings:

Pass $ 1,562,502 $ 716,570 $ 729,697 $ 549,567 $ 408,614 $ 1,125,909 $ 672,256 $ 5,765,115

Special Mention 530 22,138 6,645 993 925 18,430 2,607 52,268

Substandard — 5,487 5,632 26,800 6,701 22,515 648 67,783

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

Doubtful — — — — — — — —

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

Troubled Debt Restructured Loans

The Company’s TDR concessions granted to certain borrowers may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a limited period of time.

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

Loan modifications are not reported in calendar years after modification if the

loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements.

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

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

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

The Company considers a loan to have defaulted when it becomes 90 days or more delinquent under the modified terms, has been transferred to nonaccrual status, is charged off or has been transferred to other real estate owned.

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

Troubled Borrower Modifications

The following table presents the amortized cost of troubled borrower modification (TBM) loans that were modified during the year ended December 31, 2023.

December 31, 2023

(In thousands) Term Extension and/or Payment Delay 1

% of Total Class of Loans

Residential real estate 818 0.03 %

Commercial and financial 12,711 0.79 %

Consumer 3,988 1.59 %

Totals $ 17,517 0.17 %

1 At December 31, 2023, there were no unfunded lending related commitments associated with TBMs.

December 31, 2023

(In thousands) Current Accruing

30-59 Days Past Due Accruing

60-89 Days Past Due Accruing

Than 90 Days Nonaccrual Total

Residential real estate 596 — — — 222 818

Commercial and financial 244 — — — 12,467 12,711

Consumer 3,166 211 156 143 312 3,988

Totals $ 4,006 $ 211 $ 156 $ 143 $ 13,001 $ 17,517

During the year ending December 31, 2023, there were no subsequent defaults of TBMs.

Note 5 - Allowance for Credit Losses

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

For the Year Ended

December 31, 2022

For the Year Ended December 31, 2023

(In thousands) Beginning

1 unchanged sentence

Losses Charge-

Offs Recoveries TDR

Adjustments Ending

Offs Recoveries Ending

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

5 unchanged sentences

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

For the Year Ended

December 31, 2021

For the Year Ended December 31, 2022

(In thousands) Beginning

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

For the Year Ended

December 31, 2020

For the Year Ended December 31, 2021

(In thousands) Beginning

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

Balance Initial Allowance on PCD Loans Acquired During the Period Provision

Losses Charge-

Offs Recoveries TDR

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

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

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

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 using a discounted cash flow methodology for its commercial loans and using a loss rate methodology for its consumer loans.

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

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

As of December 31, 2023 and 2022, the Company utilized a blend of Moody’s most recent “U.S.

Macroeconomic Outlook Baseline” and “Alternative Scenario 3 - Downside - 90th Percentile” scenarios and considered the uncertainty associated with the assumptions in both scenarios, including for the 2022 analysis the continued actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, the ongoing Russia-Ukraine conflict and the magnitude of the resulting market disruption, the potential impact of persistent high inflation on economic growth, and expectations around a recession occurring over the next 12 to 24 months.

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

and interest rates and the potential impact of those actions, the conflicts in the Middle East and Russia-Ukraine and the magnitude of the resulting market disruption, and the potential impact of persistent high inflation on economic growth.

The following section discusses changes in the level of the allowance for credit losses for the year ended December 31, 2023.

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

In the Construction and Land Development segment, the increase in the allowance is primarily due to an increase in loan balances.

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

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

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

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

In the Commercial Real Estate - Owner-Occupied segment, the allowance decreased from the prior year due to changes in loan mix and slight improvements in the forecast for macroeconomic factors.

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

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

Repayment is often dependent upon rental income from the successful

operation of the underlying property.

In the Commercial Real Estate - Non Owner-Occupied segment, the increase in the allowance reflects higher loan balances and an increase in reserves for individually evaluated loans, partially offset by a decrease in expected losses due to improvements in the forecast for macroeconomic factors.

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

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

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

The increase in the allowance reflects both higher loan balances and deterioration in the economic forecast, including the transition to a loss rate tool for estimating credit losses, utilizing macroeconomic variables specific to the loan segment.

The increase in the allowance reflects higher loan balances.

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

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

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

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

The increase in reserves is due to an increase in loan balances, both through acquisition and organic loan growth, combined with an increase in expected losses on commercial and industrial unsecured loans.

Charge-offs for this segment include the charge-off of an $ 11.3 million acquired PCD loan that was fully reserved.

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

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

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

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

government and have not been assigned a reserve.

The allowance for credit losses is comprised of specific allowances for loans individually evaluated and general allowances for loans grouped into loan pools based on similar characteristics, which are collectively evaluated.

The Company’s loan portfolio and related allowance at December 31, 2022 and 2021 is shown in the following tables.

December 31, 2022

Individually Evaluated Collectively Evaluated Total

(In thousands) Recorded

Investment Associated

Allowance Recorded

Investment Associated

Allowance Recorded

Investment Associated

Construction and land development $ 59 $ — $ 587,273 $ 6,464 $ 587,332 $ 6,464

Commercial real estate - owner occupied 3,346 41 1,474,956 6,010 1,478,302 6,051

Commercial real estate - non-owner occupied 4,183 230 2,585,591 43,028 2,589,774 43,258

Residential real estate 11,333 275 1,838,170 29,330 1,849,503 29,605

Commercial and financial 12,167 2,639 1,336,469 13,009 1,348,636 15,648

Consumer 426 362 286,161 12,507 286,587 12,869

Paycheck Protection Program — — 4,590 — 4,590 —

Total $ 31,514 $ 3,547 $ 8,113,210 $ 110,348 $ 8,144,724 $ 113,895

December 31, 2021

Individually Evaluated Collectively Evaluated Total

(In thousands) Recorded

Investment Associated

Allowance Recorded

Investment Associated

Allowance Recorded

Investment Associated

Construction and land development $ 271 $ 92 $ 230,553 $ 2,659 $ 230,824 $ 2,751

Commercial real estate - owner occupied 5,131 419 1,192,643 8,160 1,197,774 8,579

Commercial real estate - non-owner occupied 5,905 27 1,730,534 36,590 1,736,439 36,617

Residential real estate 16,345 646 1,409,009 12,165 1,425,354 12,811

Commercial and financial 11,470 2,885 1,057,886 16,859 1,069,356 19,744

Consumer 741 685 173,434 2,128 174,175 2,813

Paycheck Protection Program — — 91,107 — 91,107 —

Total $ 39,863 $ 4,754 $ 5,885,166 $ 78,561 $ 5,925,029 $ 83,315

The increase in the reserve during the year reflects higher expected losses due to changes in loan mix, partly offset by a decrease in loan balances.

Note 6 – Derivatives

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Upon entering into these swaps, the Company enters into offsetting positions with counterparties in order to minimize the interest rate risk.

These back-to-back swaps qualify as freestanding financial derivatives with the fair values reported in Other Assets and Other Liabilities.

These back-to-back swaps are freestanding financial derivatives with the fair values reported in Other Assets and Other Liabilities.

The Company is party to master netting arrangements with its financial institution counterparties;

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Gains and losses on these back-to-back swaps, which offset, are recorded through noninterest income.

No net gains or losses have been recognized to date on these instruments.

As of December 31, 2022, the interest rate swaps had an aggregate notional value of $ 312.8 million, with a fair value of $ 23.1 million recorded in Other Assets and Other Liabilities.

As of December 31, 2021, the interest rate swaps had an aggregate notional value of $ 175.4 million with a fair value of $ 8.0 million.

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

Interest Rate Floors Designated as Cash Flow Hedges

The Company has entered into interest rate floor contracts to mitigate exposure to the variability of future cash flows due to changes in interest rates on certain segments of its variable-rate loans.

During 2020, the Company entered into two interest rate floor contracts, each with a notional amount of $ 150.0 million, maturing in October 2023 and November 2023.

The Company considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest

rates and has designated them as cash flow hedges.

Therefore, changes in the fair value of these derivative instruments are recognized in other comprehensive income.

The Company entered into interest rate floor contracts to mitigate exposure to the variability of future cash flows due to changes in interest rates on certain segments of its variable-rate loans, which matured in the fourth quarter of 2023.

The Company considered these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest rates and had designated them as cash flow hedges.

Therefore, changes in the fair value of these derivative instruments were recognized in other comprehensive income.

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

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

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

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

For the year ended December 31,

2023, the Company recognized a nominal amount through other comprehensive income and reclassified $ 0.5 million out of accumulated other comprehensive income into interest income.

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

Interest Rate Swaps Designated as Fair Value Hedges

The Company entered into interest rate swap contracts to hedge the risk of changes in fair value of the AFS portfolio due to changes in the Secured Overnight Financing Rate ("SOFR").

The Company considers these derivatives to be highly effective at offsetting changes in interest rates and will assess the effectiveness on a quarterly basis.

The changes in interest rates affecting the fair value of these derivative contracts are recognized in other comprehensive income.

These derivative instruments are primarily for risk management purposes.

For the year ended December 31, 2023, the Company recognized gains through other comprehensive income of $ 2.6 million and reclassified gains of $ 35 thousand, out of accumulated other comprehensive income into interest income.

The Company entered into interest rate swap contracts to hedge the risk of changes in the fair value of a pool of residential mortgages due to changes in SOFR.

These fair values hedges utilize the portfolio layer method.

The Company considers these derivatives to be highly effective at offsetting changes in interest rates and will assess the effectiveness on a quarterly basis.

The changes in interest rates affecting the fair value of these derivative contracts are recognized in interest income.

These derivative instruments are primarily for risk management purposes.

For the year ended December 31, 2023, the Company recognized gains through interest income of $ 16 thousand.

(In thousands) Notional Amount Fair Value Balance Sheet Category

December 31, 2023

Back-to-back swaps $ 312,808 $ 23,140 Other Assets and Other Liabilities

Interest rate floors 300,000 2 Other Assets

Back-to-back swaps 1

$ 605,735 $ 28,804 Other Assets and Other Liabilities

Securities fair value hedges 400,000 2,677 Other Assets

Residential mortgage fair value hedges 200,000 75 Other Liabilities

December 31, 2022

Back-to-back swaps $ 175,392 $ 8,022 Other Assets and Other Liabilities

Back-to-back swaps 1

$ 312,808 $ 23,140 Other Assets and Other Liabilities

Interest rate floors 300,000 2 Other Assets

1 Back-to-back swaps include risk participation agreements with notional amounts of $ 9.4 million and nominal fair value.

The following table presents amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges.

Carrying amount of the hedged items at December 31,

Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items at December 31,

(In thousands) 2023 2022 2023 2022

Securities available-for-sale 1

$ 584,108 $ — $ 2,643 $ —

633,693 — 44 —

1 At December 31, 2023, and December 31, 2022, the amortized cost basis and unallocated basis adjustments used in hedging relationships was $ 680.6 million and $ 0 , respectively.

Refer to Note 3 for a reconciliation of the amortized cost and fair value of available-for-sale securities.

2 These amounts represent the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios a nticipated to be outstanding for the designated hedge period.

At December 31, 2023, and December 31, 2022, the portfolio layer method was $ 200 million an d $ 0 , respectively, of which $ 200 million and $ 0 , respectively, was designated as hedged..

Note 7 - Bank Premises and Equipment

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End of year $ 91,702 $ 71,285 $ 12,998

Remaining average amortization period for CDI 49 39 44

The gross carrying amount and accumulated amortization of the Company's CDI subject to amortization as of:

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The annual amortization expense for the Company's CDI for each of the five years subsequent to December 31, 2023 is $ 23.6 million, $ 19.9 million, $ 16.4 million, $ 13.0 million and $ 9.3 million, respectively.

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

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

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

Certain customer relationships were acquired in 2022 through the acquisition of Drummond and its insurance agency subsidiary.

The gross carrying amount assigned to these relationships as of December 31, 2023 is $ 2.6 million and the accumulated amortization is $ 0.3 million.

The intangible asset is being amortized on a straight line basis over 10 years.

The carrying value of servicing rights retained from the sale of the guaranteed portion of Small Business Administration (“SBA”) loans totaled $ 1.7 million at December 31, 2023 and 2022.

Note 9 - Borrowings

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government-sponsored entities $ 396,378 $ 184,967

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

At December 31, 2023, the Company had available secured lines of credit totaling $ 4.5 billion, inclusive of lendable collateral of $ 2.8 billion and $ 1.7 billion at the Federal Reserve and the Federal Home Loan Bank ("FHLB"), respectively.

Of the $ 1.7 billion at the FHLB, $ 50.0 million was outstanding at December 31, 2023.

During 2023, the average interest rate on FHLB borrowings was 3.64 % and the weighted average interest rate on balances outstanding at December 31, 2023 was 3.23 %.

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

The following table summarizes the Company's junior subordinated trust preferred debentures and related common equity securities as of December 31, 2023:

(In thousands)

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Maturity Date Junior Subordinated Debt Trust Preferred Securities Common Equity Securities Contractual Interest Rate Interest Rate at December 31, 2023

SBCF Capital Trust I 3/31/2005 n/a 3/31/2035 $ 20,619 $ 20,000 $ 619 3 month LIBOR + 175 bps

SBCF Statutory Trust II 12/16/2005 n/a 12/16/2035 20,619 20,000 619 3 month LIBOR + 133 bps

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

SBCF Capital Trust I 3/31/2005 n/a 3/31/2035 $ 20,619 $ 20,000 $ 619 3 month SOFR + 533 bps

SBCF Statutory Trust II 12/16/2005 n/a 12/16/2035 20,619 20,000 619 3 month SOFR + 538 bps

SBCF Statutory Trust III 6/29/2007 n/a 6/15/2037 12,372 12,000 372 3 month SOFR + 538 bps

The BANKshares, Inc.

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

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

The BANKshares, Inc.

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

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

The BANKshares, Inc.

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

Grand Bank Capital Trust I 10/29/2004 7/17/2015 10/29/2034 7,217 7,000 217 3 month LIBOR + 198 bps

Capital Trust I 12/15/2005 10/1/2014 12/15/2035 5,155 5,000 155 3 month SOFR + 538 bps

Grand Bank Capital Trust I 10/29/2004 7/17/2015 10/29/2034 7,217 7,000 217 3 month SOFR + 198 bps

$ 75,261 $ 73,000 $ 2,261

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this amount is being amortized into interest expense over the remaining term to maturity.

Interest on the trust preferred securities is calculated on the basis of 3-month LIBOR plus spread and is re-set quarterly.

The trust preferred securities may be redeemed without penalty, upon approval of the Federal Reserve or upon occurrence of certain events affecting their tax or regulatory capital treatment.

Interest on the trust preferred securities is calculated on the basis of 3-month SOFR plus spread and is re-set quarterly.

The trust preferred securities may be redeemed without penalty, upon approval of the FRB or upon occurrence of certain events affecting their tax or regulatory capital treatment.

The proceeds of the offering of trust preferred securities and common equity securities were used by SBCF Capital Trust I and SBCF Statutory Trust II to purchase the $ 41.2 million junior subordinated deferrable interest notes issued by the Company, and by SBCF Statutory Trust III to purchase the $ 12.4 million junior subordinated deferrable interest notes issued by the Company, all of which have terms substantially similar to the trust preferred securities.

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

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

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

The subordinated debt matures on October 30, 2030.

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

In 2022, the Company obtained $ 12.3 million in senior notes 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.

In 2023, the Company acquired $ 25.0 million in subordinated debt through the acquisition of Professional.

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.

Note 10 - Employee Benefits and Stock Compensation

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In addition, amounts of compensation contributed by employees are matched on a percentage basis under the plan.

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

The Company's contributions to this plan charged to expense were $ 4.8 million in 2023, $ 3.5 million in 2022, and $ 3.1 million in 2021.

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

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The Compensation Committee may, at its discretion, accelerate vesting upon retirement or upon the event of a change-in-control.

Awards are currently granted under the Seacoast 2021 Incentive Plan (“2021 Plan”), which shareholders approved on May 26, 2021 with 1,750,000 authorized shares for issuance, plus shares of underlying awards outstanding under the 2013 Incentive Plan (the “Prior Plan”) that thereafter terminate or expire unexercised or are cancelled, forfeited or lapse for any reason under the Prior Plan.

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

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

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

("Sabal Palm").

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

The 2021 Plan expires on May 26, 2031.

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

Awards are currently granted under the Seacoast 2021 Incentive Plan (“2021 Plan”), with 3,750,000 authorized shares for issuance, plus shares of underlying awards outstanding under the 2013 Incentive Plan (the “Prior Plan”) that thereafter terminate or expire unexercised or are cancelled, forfeited or lapse for any reason under the Prior Plan.

In 2021, as part of the Legacy Bank acquisition, 356,497 options were granted to replace outstanding Legacy Bank options.

These options had a weighted average exercise price of $ 16.70 and were fully vested upon acquisition.

In accordance with ASC Topic 805, Business Combinations , the value of the replacement awards associated with pre-combination service, $ 4.7 million, was considered purchase consideration, and the value of the replacement awards associated with post-combination service, $ 0.9 million, was recognized as compensation expense in 2021.

The value of the replacement awards associated with pre-combination service, $ 4.7 million, was considered purchase consideration, and the value of the replacement awards associated with post-combination service, $ 0.9 million, was recognized as compensation expense in 2021.

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

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

In 2023, as part of the acquisition of Professional, 501,561 options were granted to replace outstanding options.

These options had a weighted average exercise price of $ 12.63 and were fully vested upon acquisition.

The full value of the options issued through the Professional acquisition was $ 10.3 million and was considered purchase consideration.

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

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Income tax benefit ( 3,406 ) ( 2,827 ) ( 2,067 )

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

1 Excludes $ 10.3 million in 2023, $ 10.4 million in 2022 and $ 4.7 million in 2021 associated with replacement awards granted in bank acquisitions.

The total unrecognized compensation cost and the weighted-average period over which unrecognized compensation cost is expected to be recognized related to non-vested share-based compensation arrangements at December 31, 2023 is presented below:

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Restricted stock units 5,636 2.30

Stock options — —

Total $ 20,028 2.04

13 unchanged sentences

2023 2022 2021

Shares granted 422,745 218,695 379,869

Weighted-average grant date fair value $ 24.57 $ 33.08 $ 35.08

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2023 2022 2021

Shares granted 121,025 103,073 171,287

Weighted-average grant date fair value $ 22.84 $ 34.11 $ 35.24

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

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

The Company issued no stock options in 2020.

In 2023, 2022, and 2021, options to purchase shares of Seacoast stock were granted to option holders of acquired entities in accordance with the terms of the merger agreements.

For the Year Ended December 31,

2023 2022 2021

Risk-free interest rates 2.21 % 0.12 % n/a

Expected dividend yield 1.95 % 1.65 % n/a

Expected volatility 32.09 % 36.87 % n/a

Expected lives (years) 1.0 1.0 n/a

Risk-free interest rates 4.25 % 2.21 % 0.12 %

Expected dividend yield 2.45 % 1.95 % 1.65 %

Expected volatility 64.32 % 32.09 % 36.87 %

Expected lives (years) 1.8 1.0 1.0

A summary of the Company’s stock options as of December 31, 2023, and changes during the year then ended, is presented below:

Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate

Options Weighted-Average Exercise Price

Outstanding at January 1, 2023 837,622 $ 21.72

Granted 553,803 14.28

Granted in Acquisition

501,561 12.63

Exercised ( 507,133 ) 14.76

Forfeited ( 8,087 ) 20.77

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

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

Outstanding and Exercisable at December 31, 2023

823,963 $ 20.48

Weighted-Average Remaining Contractual Term (Years) 3.29

Aggregate Intrinsic Value (000s)

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

1 unchanged sentence

2023 2022 2021

Options granted 553,803 356,497 n/a

Weighted-average grant date fair value $ 14.28 $ 16.70 n/a

Weighted-average grant date fair value $ 12.63 $ 14.28 $ 16.70

Intrinsic value of stock options exercised, in thousands 5,969 8,860 5,808

The following table presents information related to stock options as of December 31, 2022:

Range of Exercise Prices Options

Outstanding Remaining

Life (Years) Options

Exercisable Weighted

$ 5.88 to $ 14.82

323,241 1.40 323,241 $ 11.83

$ 15.80 to $ 28.69

332,939 4.19 332,939 26.19

$ 29.38 to $ 35.78

181,442 4.83 181,442 31.15

Total 837,622 3.25 837,622 $ 21.72

Supplemental Executive Retirement Plan

The Company sponsors a Supplemental Executive Retirement Plan (“SERP”), which is a non-qualified deferred compensation arrangement that provides the Company's Chief Executive Officer with supplemental retirement benefits.

The present value of the accumulated benefit, which is recorded as an accrued liability, was $ 0.4 million and $ 0.2 million as of December 31, 2023 and 2022, respectively.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (“ESPP”), as amended, was approved by shareholders on April 25, 1989, and additional shares were authorized for issuance by shareholders in 2009, 2013, and 2021.

Under the ESPP, the Company is authorized to issue up to 800,000 common shares of the Company’s common stock to eligible employees of the Company.

The Employee Stock Purchase Plan (“ESPP”) authorizes the Company to issue up to 800,000 common shares of the Company’s common stock to eligible employees of the Company.

These shares may be purchased by employees at a price equal to 95 % of the fair market value of the shares on the purchase date.

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(In thousands)

2024 $ 10,465

Thereafter 16,181

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Increase (decrease) resulting from the effects of:

Tax law change — — ( 375 )

Nondeductible acquisition costs 300 924 419

Tax exempt interest on loans, obligations of states and political subdivisions and bank owned life insurance ( 1,341 ) ( 1,276 ) ( 1,110 )

Tax exempt interest on loans and securities ( 639 ) ( 406 ) ( 414 )

Income from bank owned life insurance ( 2,217 ) ( 935 ) ( 862 )

State income taxes ( 1,256 ) ( 1,081 ) ( 813 )

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Deferred tax assets net of valuation allowance 157,249 131,702

Core deposit base intangible ( 18,767 ) ( 3,134 )

Accrued interest and fee income — ( 1,660 )

Core deposit intangible ( 24,301 ) ( 18,767 )

Net unrealized derivatives gains ( 670 ) —

Premises and equipment ( 1,771 ) ( 2,214 )

3 unchanged sentences

Net deferred tax assets $ 113,232 $ 94,457

Included in the table above is the effect of temporary differences associated with the Company's investments in debt securities accounted for under ASC Topic 320, for which no deferred tax expense or benefit was recognized.

Included in the table above is the effect of temporary differences associated with the Company's investments in debt securities accounted for under ASC Topic 320, Investments - Debt Securities, for which no deferred tax expense or benefit was recognized.

These items are recorded as Accumulated Other Comprehensive Income in the shareholders' equity section of the consolidated balance sheet.

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

In 2023, unrealized losses on debt securities of $ 212.7 million resulted in a deferred tax asset of $ 50.8 million.

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

4 unchanged sentences

Management assesses the necessity of a valuation allowance recorded against DTAs at each reporting period.

The determination of whether a valuation allowance for net DTAs is appropriate is subject to considerable judgment and requires an evaluation of all positive and negative evidence.

Based on an assessment of all of the evidence, including favorable trending in asset quality and certainty regarding the amount of future taxable income that the Company forecasts, management concluded that it was more likely than not that its net DTAs will be realized based upon future taxable income.

Management's confidence in the realization of projected future taxable income is based upon analysis of the Company's risk profile and its trending financial performance, including credit quality.

The determination of whether a valuation allowance for net DTAs is appropriate is subject to considerable judgment and requires an evaluation of positive and negative evidence.

Based on an assessment of relevant evidence, including favorable trending in asset quality and certainty regarding the amount of future taxable income that the Company forecasts, management concluded that it was more likely than not that its net DTAs will be realized based upon future taxable income.

Management's determination in the realization of projected future taxable income is based upon analysis of the Company's risk profile and its trending financial performance, including credit quality.

The Company believes it can reasonably predict future results of operations that result in taxable income at sufficient levels over the future period of time that the Company has available to realize its net DTA.

A valuation allowance could be required in future periods based on the assessment of positive and negative evidence.

Management's conclusion at December 31, 2022 that it is more likely than not that the net DTAs of $ 94.5 million will be realized is based upon estimates of future taxable income that are supported by internal projections which consider historical performance, various internal estimates and assumptions, as well as certain external data, all of which management believes to be reasonable although inherently subject to judgment.

If actual results differ significantly from the current estimates of future taxable income, even if caused by adverse macro-economic conditions, a valuation allowance may need to be recorded for some

or all of the Company's DTAs.

The establishment of a DTA valuation allowance could have a material adverse effect on the Company's financial condition and results of operations.

Management expects to realize the $ 113.2 million in net DTAs well in advance of the statutory carryforward period.

15 unchanged sentences

United States of America 2020

In September 2019, the State of Florida announced a reduction in the corporate income tax rate from 5.5% to 4.458% for the years 2019, 2020 and 2021.

This change resulted in additional income tax expense of $ 1.1 million upon the write down in 2019 of deferred tax assets affected by the change.

During 2021, the State of Florida announced a temporary further reduction in the corporate income tax rate from 4.458% to 3.535%, retroactive to the beginning of 2021.

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

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

Such NOLs were previously valued at the current federal corporate income tax rate of 21%.

However, the provisions of the CARES Act provide for NOL carryback claims to be calculated based on a rate of 35%, which was the federal corporate tax rate in effect for many of the carryback years.

Consequently, for the year ended December 31, 2020, the Company filed amended tax returns and recorded the resulting benefit reflecting taxes recoverable at the 35% tax rate.

This resulted in the recognition in 2020 of an additional $ 0.4 million income tax benefit on the Company's Consolidated Statements of Income.

Note 13 - Shareholders’ Equity

Note 13 - Regulatory Capital

Required Regulatory Capital

12 unchanged sentences

At December 31, 2023:

Total Risk-Based Capital Ratio (to risk-weighted assets) $ 1,454,168 15.79 % n/a n/a $ 736,709 ≥ 8.00 %

Tier 1 Capital Ratio (to risk-weighted assets) 1,361,832 14.79 n/a n/a 552,532 ≥ 6.00

Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 1,277,295 13.87 n/a n/a 414,399 ≥ 4.50

Leverage Ratio (to adjusted average assets) 1,361,832 11.46 n/a n/a 475,134 ≥ 4.00

Total Risk-Based Capital Ratio $ 1,713,797 15.92 % n/a n/a $ 861,355 ≥ 8.00 %

Tier 1 Capital Ratio 1,565,710 14.54 n/a n/a 646,017 ≥ 6.00

Common Equity Tier 1 Capital Ratio 1,493,499 13.87 n/a n/a 484,512 ≥ 4.50

Leverage Ratio 1,565,710 11.00 n/a n/a 569,317 ≥ 4.00

At December 31, 2022:

Total Risk-Based Capital Ratio (to risk-weighted assets) $ 1,200,885 18.21 % n/a n/a $ 527,630 ≥ 8.00 %

Tier 1 Capital Ratio (to risk-weighted assets) 1,147,306 17.40 n/a n/a 395,723 ≥ 6.00

Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 1,075,656 16.31 n/a n/a 296,792 ≥ 4.50

Leverage Ratio (to adjusted average assets) 1,147,306 11.68 n/a n/a 392,763 ≥ 4.00

Total Risk-Based Capital Ratio $ 1,454,168 15.79 % n/a n/a $ 736,709 ≥ 8.00 %

Tier 1 Capital Ratio 1,361,832 14.79 n/a n/a 552,532 ≥ 6.00

Common Equity Tier 1 Capital Ratio 1,277,295 13.87 n/a n/a 414,399 ≥ 4.50

Leverage Ratio 1,361,832 11.46 n/a n/a 475,134 ≥ 4.00

Seacoast National Bank

1 unchanged sentence

At December 31, 2023:

Total Risk-Based Capital Ratio (to risk-weighted assets) $ 1,330,836 14.47 % $ 919,904 ≥ 10.00 % $ 735,923 ≥ 8.00 %

Tier 1 Capital Ratio (to risk-weighted assets) 1,238,500 13.46 735,923 ≥ 8.00 551,942 ≥ 6.00

Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 1,238,496 13.46 597,938 ≥ 6.50 413,957 ≥ 4.50

Leverage Ratio (to adjusted average assets) 1,238,500 10.44 620,398 ≥ 5.00 496,318 ≥ 4.00

Total Risk-Based Capital Ratio $ 1,593,431 14.82 % $ 1,075,494 ≥ 10.00 % $ 860,395 ≥ 8.00 %

Tier 1 Capital Ratio 1,466,878 13.64 860,395 ≥ 8.00 645,296 ≥ 6.00

Common Equity Tier 1 Capital Ratio 1,466,874 13.64 699,071 ≥ 6.50 483,972 ≥ 4.50

Leverage Ratio 1,466,878 10.32 711,039 ≥ 5.00 568,831 ≥ 4.00

At December 31, 2022:

Total Risk-Based Capital Ratio (to risk-weighted assets) $ 1,099,439 16.68 % $ 658,819 ≥ 10.00 % $ 527,055 ≥ 8.00 %

Tier 1 Capital Ratio (to risk-weighted assets) 1,045,860 15.86 527,055 ≥ 8.00 395,291 ≥ 6.00

Common Equity Tier 1 Capital Ratio (to risk-weighted assets) 1,045,856 15.86 428,232 ≥ 6.50 296,468 ≥ 4.50

Leverage Ratio (to adjusted average assets) 1,045,860 10.65 490,798 ≥ 5.00 392,638 ≥ 4.00

Total Risk-Based Capital Ratio $ 1,330,836 14.47 % $ 919,904 ≥ 10.00 % $ 735,923 ≥ 8.00 %

Tier 1 Capital Ratio 1,238,500 13.46 735,923 ≥ 8.00 551,942 ≥ 6.00

Common Equity Tier 1 Capital Ratio 1,238,496 13.46 597,938 ≥ 6.50 413,957 ≥ 4.50

Leverage Ratio 1,238,500 10.44 620,398 ≥ 5.00 496,318 ≥ 4.00

1 Excludes the Basel III capital conservation buffer of 2.5 %, which if not exceeded may constrain dividends, equity repurchases and compensation.

n/a - not applicable.

The Company has reserved 800,000 common shares for issuance in connection with an employee stock purchase plan and 1,750,000 common shares for issuance in connection with an employee stock-based incentive plan.

Holders of common stock are entitled to one vote per share on all matters presented to shareholders as provided in the Company’s Articles of Incorporation.

The Company's Board of Directors has authorized the Company to repurchase up to $ 100 million of its shares of outstanding common stock.

The amount and timing of repurchases, if any, will be based on a variety of factors, including share acquisition price, regulatory limitations, market conditions and other factors.

The Company has made no repurchases under the program.

Note 14 - Seacoast Banking Corporation of Florida (Parent Company Only) Financial Information

4 unchanged sentences

Investment in subsidiaries 2,109,341 1,578,786

Other assets 2,335 1,140

$ 2,215,835 $ 1,692,877

Liabilities and Shareholders' Equity

Subordinated debt $ 84,533 $ 71,646

Long-term debt $ 106,302 $ 84,533

Other liabilities 1,551 673

23 unchanged sentences

Equity in undistributed income of subsidiaries ( 67,194 ) ( 60,624 ) ( 78,519 )

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

Net increase in other assets

( 3,029 ) ( 13,823 ) ( 489 )

Net increase in other liabilities 22,646 499 400

7 unchanged sentences

Stock based employment benefit plans 4,904 4,374 5,022

Repurchase of common stock ( 10,868 ) — —

Net cash used in financing activities ( 66,555 ) ( 36,868 ) ( 17,484 )

44 unchanged sentences

Financial Assets

Available-for-sale debt securities 1

Debt securities available-for-sale 1

$ 1,836,020 $ 192 $ 1,835,828 $ —

13 unchanged sentences

Financial Assets

Available-for-sale debt securities 1

Debt securities available-for-sale 1

$ 1,871,742 $ 186 $ 1,871,556 $ —

15 unchanged sentences

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

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

5 An investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities, reported at fair value in Other Assets.

4 Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360, Property, Plant, and Equipment.

5 Investment in shares of mutual funds that invest primarily in CRA-qualified debt securities, reported at fair value in Other Assets.

Recurring fair value basis is determined using market quotations.

Available-for-sale debt securities:

Debt securities available-for-sale:

Level 1 securities consist of U.S.

2 unchanged sentences

The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices.

The fair value of collateralized loan obligations is determined from broker quotes.

From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using internal models.

Derivative financial instruments :

The Company offers interest rate swaps to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans.

The Company originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer.

The Company also enters into an offsetting swap with a correspondent bank.

These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer.

The fair value of these derivatives is based on a discounted cash flow approach.

Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the

valuation of interest rate swaps is classified as Level 2.

Other derivatives consist of interest rate floors designated as cash flow hedges.

Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.

The fair values of these instruments are based upon the estimated amount the Company would receive or pay to terminate the instruments, taking into account current interest rates and, when appropriate, the current credit worthiness of the counterparties.

Interest rate floors designated as cash flow hedges are classified within Level 2.

Loans held for sale :

2 unchanged sentences

Fair market value changes occur due to changes in interest rates, the borrower’s credit, the secondary loan market and the market for a borrower’s debt.

Interest income is recorded based on contractual terms of the loan in accordance with Company policy on loans held for investment.

None of the loans are 90 days or more past due or on nonaccrual as of December 31, 2022 and 2021.

The aggregate fair value and contractual balance of loans held for sale as of December 31, 2022 and 2021 is as follows:

(In thousands) 2022 2021

Aggregate fair value $ 3,151 $ 31,791

Contractual balance 3,071 30,963

Excess 80 828

Loans carried at fair value consist of collateral-dependent real estate loans.

Fair value is based on recent real estate appraisals less estimated costs of sale.

Interest income is recorded based on contractual terms of the loan in accordance with Company's policy on loans held for investment.

Fair value of collateral-dependent real estate loans is based on recent real estate appraisals less estimated costs of sale.

For these loans, evaluations may use either a single valuation approach or a combination of approaches, such as comparative sales, cost and/or income approach.

7 unchanged sentences

When the fair value of OREO is based on appraisals which require significant adjustments to market-based valuation inputs or apply an income approach based on unobservable cash flows, the fair value of OREO is classified as Level 3.

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

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

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company's monthly and/or quarterly valuation process.

14 unchanged sentences

Deposits 11,776,935 — — 11,775,613

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

Subordinated debt 84,533 — 82,226 —

FHLB borrowings 50,000 — 49,745 —

Long-term debt 109,458 — 100,851 —

At December 31, 2022

2 unchanged sentences

$ 747,408 $ — $ 617,741 $ —

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

Loans, net 8,022,316 — — 7,845,375

1 unchanged sentence

Deposits 9,981,595 — — 9,976,125

Subordinated debt 71,646 — 69,348 —

FHLB borrowings

150,000 — — 149,450

Long-term debt 84,533 — 82,226 —

1 See “Note 3 - Securities” for further detail of recurring fair value basis of individual investment categories.

7 unchanged sentences

The fair value of loans is calculated by discounting scheduled cash flows through the estimated life including prepayment considerations, using estimated market discount rates that reflect the risks inherent in the loan.

The fair value approach considers market-driven variables including credit related factors and reflects an “exit price” as defined in ASC Topic 820.

The fair value approach considers market-driven variables including credit related factors and reflects an “exit price” as defined in ASC Topic 820, Fair Value Measurement .

Deposit Liabilities :

2 unchanged sentences

Note 17 - Business Combinations

Acquisition of Professional Holding Corp.

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

(“Professional”).

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

Prior to the acquisition, Professional Bank operated nine branches across South Florida.

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

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

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

(In thousands, except per share data) January 31, 2023

Number of Professional common shares outstanding 14,358

Per share exchange ratio 0.8909

Number of shares of SBCF common stock issued 12,792

Multiplied by common stock price per share at January 31, 2023 $ 32.11

Value of SBCF common stock issued $ 410,738

Cash paid for fractional shares 5

Fair value of Professional options converted 10,304

Total purchase price $ 421,047

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

The Company recognized goodwill of $ 251.7 million for this acquisition that is nondeductible for tax purposes.

Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.

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

These options were fully vested upon acquisition.

The full value of the replacement options, $ 10.3 million, was associated with pre-combination service and was therefore included in the calculation of the total purchase consideration.

Initially Measured Measurement As Adjusted

(In thousands) January 31, 2023 Period Adjustments January 31, 2023

Cash and cash equivalents $ 141,680 $ — $ 141,680

Investment securities 167,059 — 167,059

Loans 1,991,713 ( 5,544 ) 1,986,169

Bank premises and equipment 2,478 — 2,478

Core deposit intangibles 48,885 — 48,885

Goodwill 248,091 3,583 251,674

BOLI 55,071 — 55,071

Other Assets 74,232 2,561 76,793

Total Assets $ 2,729,209 $ 600 $ 2,729,809

Deposits $ 2,119,341 $ — $ 2,119,341

Subordinated debt 21,141 — 21,141

Other Liabilities 167,680 600 168,280

Total Liabilities $ 2,308,162 $ 600 $ 2,308,762

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

January 31, 2023

(In thousands) Book Balance Fair Value

Construction and land development $ 156,048 $ 151,012

Commercial real estate - owner occupied 293,473 274,068

Commercial real estate - non-owner occupied 752,393 692,746

Residential real estate 509,305 483,611

Commercial and financial 392,396 350,628

Consumer 33,656 32,153

PPP Loans 1,951 1,951

Total acquired loans $ 2,139,222 $ 1,986,169

The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:

(In thousands) January 31, 2023

Book balance of loans at acquisition $ 155,031

Allowance for credit losses at acquisition ( 18,879 )

Non-credit related discount ( 12,361 )

Total PCD loans acquired $ 123,791

The acquisition of Professional resulted in the addition of $ 45.5 million in allowance for credit losses, including the $ 18.9 million identified in the table above for PCD loans, and $ 26.6 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition.

Included within the $ 18.9 million initial PCD allowance is $ 5.5 million recorded as a measurement period adjustment during the three months ended June 30, 2023, reflecting information obtained by the Company relating to events or circumstances existing at the acquisition date.

The Company believes the deposits assumed in the acquisition have an intangible value.

In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.

The core deposit intangible asset acquired from Professional is being amortized over eight years using an accelerated method of amortization.

Acquisition of Apollo Bancshares, Inc.

2 unchanged sentences

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

As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.

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

As a result of this acquisition, the Company expects to expand its customer base and leverage economies of scale to positively affect the Company’s operating results.

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

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

14 unchanged sentences

The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes known.

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

1 unchanged sentence

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

(In thousands) Measured October 7, 2022

Initially Measured Measurement As Adjusted

(In thousands) October 7, 2022 Period Adjustments October 7, 2022

Cash and cash equivalents $ 41,001 $ — $ 41,001

18 unchanged sentences

Consumer 11,307 11,055

PPP loans 369 369

Total acquired loans $ 717,578 $ 666,522

12 unchanged sentences

Prior to the acquisition, Drummond Community Bank operated 18 branches across North Florida.

As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.The Company acquired 100 % of the outstanding common stock of Drummond.

Under the terms of the definitive agreement, common stock was converted into the right to receive 51.9561 shares of Seacoast common stock.

As a result of this acquisition, the Company expects to expand its customer base and leverage economies of scale to positively affect the Company’s operating results.

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

Under the terms of the merger agreement, each share of Drummond common stock was converted into the right to receive 51.9561 shares of Seacoast common stock.

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

7 unchanged sentences

(In thousands) Measured October 7, 2022

Initially Measured Measurement As Adjusted

(In thousands) October 7, 2022 Period Adjustments October 7, 2022

Cash and cash equivalents $ 31,805 $ — $ 31,805

32 unchanged sentences

Prior to the acquisition, Florida Business Bank operated one branch in Melbourne, Florida.

As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.

As a result of this acquisition, the Company expects to expand its customer base and leverage economies of scale to positively affect the Company’s operating results.

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

Under the terms of the definitive agreement, each share of BBFC common stock was converted into the right to receive 0.7997 of a share of Seacoast common stock.

Under the terms of the merger agreement, each share of BBFC common stock was converted into the right to receive 0.7997 of a share of Seacoast common stock.

(In thousands, except per share data) January 3, 2022

10 unchanged sentences

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

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

These options were fully vested upon acquisition.

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

(In thousands) Measured

19 unchanged sentences

Consumer 59 61

PPP loans 1,959 1,959

Total acquired loans $ 123,916 $ 121,774

13 unchanged sentences

Prior to the acquisition, Sabal Palm Bank operated three branches in the Sarasota area.

As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.

As a result of this acquisition, the Company expects to expand its customer base and leverage economies of scale to positively affect the Company’s operating results.

The Company acquired 100 % of the outstanding common stock of Sabal Palm.

Under the terms of the definitive agreement, each share of Sabal Palm common stock was converted into the right to receive 0.2203 of a share of Seacoast common stock.

Under the terms of the merger agreement, each share of Sabal Palm common stock was converted into the right to receive 0.2203 of a share of Seacoast common stock.

(In thousands, except per share data) January 3, 2022

34 unchanged sentences

Consumer 233 232

PPP loans 3,312 3,312

Total acquired loans $ 248,910 $ 246,152

8 unchanged sentences

In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.

Acquisition of Legacy Bank of Florida

On August 6, 2021, the Company completed its acquisition of Legacy Bank of Florida (“Legacy Bank”).

Prior to the acquisition, Legacy Bank operated five branches in Broward and Palm Beach counties.

As a result of this acquisition, the Company expects to expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.

The Company acquired 100 % of the outstanding common stock of Legacy Bank.

Under the terms of the definitive agreement, each share of Legacy Bank common stock was converted into the right to receive 0.1703 share of Seacoast common stock.

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

Number of Legacy Bank common shares outstanding 15,778

Per share exchange ratio 0.1703

Number of shares of SBCF common stock issued 2,687

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

Value of SBCF common stock issued $ 86,487

Cash paid for fractional shares 7

Fair value of Legacy Bank options converted 4,736

Total purchase price $ 91,230

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

The Company recognized goodwill of $ 31.0 million for this acquisition that is nondeductible for tax purposes.

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

These options were fully vested upon acquisition.

(In thousands) Measured

August 6, 2021

Cash $ 98,107

Investment securities 992

Loans 477,215

Bank premises and equipment 2,577

Core deposit intangibles 3,454

Goodwill 30,978

Other assets 15,532

Total assets $ 628,855

Deposits 494,921

Other liabilities 42,705

Total liabilities $ 537,626

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

August 6, 2021

(In thousands) Book Balance Fair Value

Construction and land development $ 37,558 $ 36,651

Commercial real estate - owner-occupied 35,765 35,363

Commercial real estate - non owner-occupied 241,322 237,091

Residential real estate 71,118 70,541

Commercial and financial 61,274 58,324

Consumer 647 647

PPP loans 38,598 38,598

Total acquired loans $ 486,282 $ 477,215

The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:

(In thousands) August 6, 2021

Book balance of loans at acquisition $ 66,371

Allowance for credit losses at acquisition ( 3,046 )

Non-credit related discount ( 736 )

Total PCD loans acquired $ 62,589

The acquisition of Legacy Bank resulted in the addition of $ 11.2 million in allowance for credit losses, including the $ 3.0 million identified in the table above for PCD loans, and $ 8.2 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition.

The Company believes the deposits assumed in the acquisition have an intangible value.

In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.

Acquisition Costs

1 unchanged sentence

Pro-Forma Information (unaudited)

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

Pro-forma data as of 2023 and 2022 present information as if the acquisition of Professional occurred at the beginning of 2022.

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

5 unchanged sentences

EPS - diluted 1.50 1.39

2023 Acquisition

Acquisition of Professional Holding Corp.

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

(“Professional”).

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

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

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

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

The Company’s calculation of the purchase price, including the value of Professional options converted, and the Company’s assessment of the fair value of assets acquired and liabilities assumed as of the acquisition date is incomplete at the time of this filing;

therefore, certain disclosures have been omitted.

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

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data