What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-08 compared with 2023-11-08 · 302 added, 413 removed, 403 unchanged (64% of the section changed)

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

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

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

The emphasis of this discussion will be on the three months ended March 31, 2024 compared to the three months ended March 31, 2023 for the consolidated statements of income.

For the consolidated balance sheets, the emphasis of this discussion will be the balances as of March 31, 2024 compared to December 31, 2023.

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

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All statements other than statements of historical fact could be forward-looking statements.

You can identify these forward-looking statements through the use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “support,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “further,” “plan,” “point to,” “project,” “could,” “intend,” “target” or other similar words and expressions of the future.

T a b l e o f C o n t e n t s

“target” or other similar words and expressions of the future.

These forward-looking statements may not be realized due to a variety of factors, including, without limitation:

• The impact of current and future economic and market conditions generally (including seasonality) and in the financial services industry, nationally and within Seacoast’s primary market areas, including the effects of inflationary pressures, changes in interest rates, slowdowns in economic growth, and the potential for high unemployment rates, as well as the financial stress on borrowers and changes to customer and client behavior and credit risk as a result of the foregoing;

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

• Potential impacts of adverse developments in the banking industry, including those highlighted by high-profile bank failures, and including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto (including increases in the cost of our deposit insurance assessments), the Company’s ability to effectively manage its liquidity risk and any growth plans, and the availability of capital and funding;

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

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

• Interest rate risks, sensitivities, and the shape of the yield curve;

• Interest rate risks (including the impact of interest rates on macroeconomic conditions, customer and client behavior, and on our net interest income), sensitivities, and the shape of the yield curve;

• Changes in accounting policies, rules, and practices;

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• The Company’s concentration in commercial real estate loans and in real estate collateral in Florida;

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

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

• Seacoast’s ability to comply with any regulatory requirements and the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and may reduce the anticipated benefit;

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

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

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

• The Company’s ability to identify and address increased cybersecurity risks, including those impacting vendors and other third parties which may be exacerbated by recent developments in generative artificial intelligence;

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

• Inability of Seacoast’s risk management framework to manage risks associated with the Company’s business;

• Dependence on key suppliers or vendors to obtain equipment or services for the business on acceptable terms, including the impact of supply chain disruptions;

• Dependence on key suppliers or vendors to obtain equipment or services for the business on acceptable terms, including the impact of supply chain distruptions;

• Reduction in or the termination of Seacoast’s ability to use the online- or mobile-based platform that is critical to the Company’s business growth strategy;

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

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

• The effects of war or other conflicts, including the impacts related to or resulting from Russia’s military action in Ukraine and the escalating conflicts in the Middle East, acts of terrorism, natural disasters, including hurricanes in the Company’s footprint, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions and/or increase costs, including, but not limited to, property and casualty and other insurance costs;

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

• Potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;

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

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

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

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

T a b l e o f C o n t e n t s

• Potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;

• The risks that deferred tax assets could be reduced if estimates of future taxable income from the Company’s operations and tax planning strategies are less than currently estimated, the results of tax audit findings, challenges to our tax positions, or adverse changes or interpretations of tax laws;

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

• Risks related to, and the costs associated with, environmental, social and governance (“ESG”) matters, including the scope and pace of related rulemaking activity and disclosure requirements;

• A deterioration of the credit rating for U.S.

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government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget;

• The risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and may reduce the anticipated benefit;

• The risk that balance sheet, revenue growth, and loan growth expectations may differ from actual results;

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

All written or oral forward-looking statements that are made or are attributable to Seacoast are expressly qualified in their entirety by this cautionary notice.

All written or oral forward-looking statements that are made or are attributable to Seacoast are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in the Company’s annual report on Form 10-K for the year ended December 31, 2023 and in other periodic reports that the Company files with the SEC.

The Company assumes no obligation to update, revise or correct any forward-looking statements that are made from time to time, either as a result of future developments, new information or otherwise, except as may be required by law.

Business Developments

Acquisition of Professional Holding Corp.

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

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

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

Results of Operations

For the third quarter of 2023, the Company reported net income of $31.4 million, or $0.37 per average diluted share, an increase of $0.2 million, or 1%, from the second quarter of 2023 and an increase of $2.2 million, or 7%, compared to the third quarter of 2022.

For the nine months ended September 30, 2023, net income totaled $74.5 million, or $0.89 per average diluted share, a decrease of $8.1 million, or 10%, compared to the nine months ended September 30, 2022.

Adjusted net income 1 for the third quarter of 2023 totaled $39.7 million, or $0.46 per average diluted share, a decrease of $9.5 million, or 19%, compared to the second quarter of 2023 and an increase of $6.9 million, or 21%, compared to the third quarter of 2022.

For the nine months ended September 30, 2023, adjusted net income 1 totaled $118.2 million, or $1.41 per average diluted share, compared to $96.2 million, or $1.56 per average diluted share for the nine months ended September 30, 2022.

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

For the first quarter of 2024, the Company reported net income of $26.0 million, or $0.31 per average diluted share, a decrease of $3.5 million, or 12%, from the fourth quarter of 2023 and an increase of $14.2 million, or 120%, compared to the first quarter of 2023.

Adjusted net income 1 for the first quarter of 2024 totaled $31.1 million, or $0.37 per average diluted share, a decrease of $0.2 million, or 1%, compared to the fourth quarter of 2023 and an increase of $7.5 million, or 31%, compared to the first quarter of 2023.

In the first quarter of 2023, the Company completed the acquisition of Professional Holding Corp.

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

First Fourth First

Quarter Quarter Quarter

2024 2023 2023

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

Net Interest Income and Margin

Net interest income for the third quarter of 2023 totaled $119.3 million, a decrease of $7.7 million, or 6% , compared to the second quarter of 2023, a nd an increase of $31.0 million, or 35%, c ompared to the third quarter of 2022.

The decrease from prior quarter reflects higher interest expense on deposits driven by higher rates and changes in product mix and was partially offset by higher interest income.

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

Net interest margin (on a fully tax equivalent basis) 1 was 3.57% in the third quarter of 2023, compared to 3.86% in the second quarter of 2023, and 3.67% in the third quarter of 2022.

The decrease during the third quarter of 2023 compared to the prior quarter was driven by the continued effect of an inverted yield curve and rising deposit costs.

Compared to the second quarter of 2023, securities yields increased 19 basis points to 3.32% and loan yields increased to 5.93% during the third quarter of 2023.

The effect on net interest margin of accretion of purchase discounts on acquired loans were increases of 44 basis points in the third quarter of 2023, 44 basis points in the second quarter of 2023, and 9 basis points in the third quarter of 2022.

The cost of deposits was 1.79% in the third quarter of 2023, compared to 1.38% in the second quarter of 2023, and nine basis points in the third quarter of 2022.

Notably impactful to deposit costs in the third quarter of 2023 was the Florida Bar Association’s IOTA program changes, enacted in May, requiring financial institutions to pay interest on these accounts at a specified spread to an index.

This contributed approximately five basis points to the increase in deposits costs in the third quarter of 2023.

For the nine months ended September 30, 2023, net interest margin (on a fully tax equivalent basis) 1 was 3.91%, compared to 3.44% for the nine months ended September 30, 2022.

The yield on securities increased from 2.02% for the nine months ended September 30, 2022 to 3.10% for the nine months ended September 30, 2023, and the yield on total loans increased from 4.35% for the nine months ended September 30, 2022 to 5.89% for the nine months ended September 30, 2023, each reflecting the impact of the higher interest rate environment.

The effect on net interest margin of purchase discounts on acquired loans was an increase of 47 basis points for the nine months ended September 30, 2023 compared to an increase of 12 basis points for the nine months ended September 30, 2022.

The cost of deposits increased from seven basis points for the nine months ended September 30, 2022 to 1.33% for the nine months ended September 30, 2023.

The higher cost of deposits during the year reflects the impact of the Professional acquisition and an increasingly competitive market for deposits.

Net interest income for the first quarter of 2024 totaled $105.1 million, a decrease of $5.7 million, or 5% , compared to the fourth quarter of 2023, and a decrease of $26.1 million , or 20% , c ompared to the first quarter of 2023.

The decrease from the prior quarter reflects higher interest expense on deposits driven by higher deposit costs attributed in part to overall growth in deposit balances.

The decrease was partially offset by higher yields on loans and securities.

The decrease from the prior year is primarily due to the higher cost of deposits.

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

T a b l e o f C o n t e n t s

Net interest income (on a fully taxable equivalent basis) 1 for the first quarter of 2024 was $105.3 million, a decrease of $5.7 million, or 5%, compared to the fourth quarter of 2023, and a decrease of $26.1 million, or 20%, c ompared to the first quarter of 2023.

Accretion on acquired loans totaled $10.6 million for the first quarter of 2024, compared to $11.3 million for the fourth quarter of 2023, and $15.9 million for the first quarter of 2023.

Net interest margin (on a fully tax equivalent basis) 1 was 3.24% in the first quarter of 2024, compared to 3.36% in the fourth quarter of 2023, and 4.31% in the first quarter of 2023.

The decrease during the first quarter of 2024 was largely driven by the growth in deposit costs.

Compared to the fourth quarter of 2023, securities yields expanded five basis points to 3.47% and loan yields increased to 5.90% during the first quarter of 2024.

The effect on net interest margin of accretion of purchase discounts on acquired loans were increases of 33 basis points in the first quarter of 2024, 34 basis points in the fourth quarter of 2023, and 53 basis points in the first quarter of 2023.

The cost of deposits was 2.19% in the first quarter of 2024, compared to 2.00% in the fourth quarter of 2023, and 0.77% in the first quarter of 2023.

For the first quarter of 2024, the higher cost of deposits reflects the impact of the continuing elevated interest rate environment.

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

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Bearing Liabilities

Third quarter 2023 $ 119,505 3.57 % 5.38 % 2.76 %

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

Third quarter 2022 88,399 3.67 % 3.80 % 0.22 %

Nine months ended September 30, 2023 378,009 3.91 % 5.30 % 2.19 %

Nine months ended September 30, 2022 246,803 3.44 % 3.53 % 0.16 %

First quarter 2024 $ 105,298 3.24 % 5.41 % 3.20 %

Fourth quarter 2023 111,035 3.36 % 5.36 % 2.98 %

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

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

Total average loans decreased $57.6 million, or 0.6%, for the third quarter of 2023 compared to the second quarter of 2023, and increased $3.4 billion, or 52%, from the third quarter of 2022.

Average loans as a percentage of average earning assets totaled 76% for the third quarter of 2023, 76% for the second quarter of 2023 and 69% for the third quarter of 2022.

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

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

(In thousands) 2023 2023 2022 2023 2022

Commercial/commercial real estate loan pipeline at period end $ 300,798 $ 217,574 $ 530,430 $ 300,798 $ 530,430

Commercial/commercial real estate loans closed 106,497 317,378 340,438 745,540 1,175,279

Residential pipeline - saleable at period end 6,820 11,492 6,563 6,820 6,563

Residential loans - sold 17,625 19,078 16,381 50,638 110,269

Residential pipeline - portfolio at period end 20,945 27,110 60,684 20,945 60,684

Residential loans - retained 43,962 85,294 69,272 219,314 347,725

Consumer pipeline at period end 24,482 28,446 43,732 24,482 43,732

Consumer originations 76,531 97,184 133,093 284,317 342,887

Commercial originations during the third quarter of 2023 were $106.5 million, a decrease of $210.9 million, or 66%, compared to the second quarter of 2023, and a decrease of $233.9 million, or 69%, compared to the third quarter of 2022.

For the nine months ended September 30, 2023, commercial originations were $745.5 million, compared to $1.2 billion for the nine months ended September 30, 2022, a decrease of $429.7 million, or 37%.

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

Commercial pipelines were $300.8 million as of September 30, 2023, an increase of 38% from $217.6 million at June 30, 2023, and a decrease of 43% from $530.4 million at September 30, 2022.

Residential loans originated for sale in the secondary market totaled $17.6 million in the third quarter of 2023, compared to $19.1 million in the second quarter of 2023 and $16.4 million in the third quarter of 2022.

For the nine months ended September 30, 2023, residential loans originated for sale in the secondary market totaled $50.6 million, compared to $110.3 million for the nine months ended September 30, 2022, a decrease of $59.6 million, or 54%.

Residential saleable pipelines were $6.8 million as of September 30, 2023, compared to $11.5 million as of June 30, 2023 and $6.6 million as of September 30, 2022.

Residential loan production retained in the portfolio for the third quarter of 2023 was $44.0 million, compared to $85.3 million in the second quarter of 2023 and $69.3 million in the third quarter of 2022.

The pipeline of residential loans intended to be retained in the portfolio was $20.9 million as of September 30, 2023, compared to $27.1 million as of June 30, 2023, and $60.7 million as of September 30, 2022.

Consumer originations totaled $76.5 million during the third quarter of 2023, compared to $97.2 million in the second quarter of 2023 and $133.1 million in the third quarter of 2022.

For the nine months ended September 30, 2023, consumer originations totaled $284.3 million compared to $342.9 million for the nine months ended September 30, 2022, a decrease of $58.6 million, or 17%.

The consumer pipeline was $24.5 million as of September 30, 2023, compared to $28.4 million as of June 30, 2023 and $43.7 million at September 30, 2022.

Average investment securities decreased $99.0 million, or 4%, during the third quarter of 2023 compared to the second quarter of 2023, and were $96.9 million, or 4%, lower compared to the third quarter of 2022.

Average investment securities were $2.7 billion for the nine months ended September 30, 2023, an increase of $111.3 million, or 4%, compared to the nine months ended 2022.

Increases during the year include securities added through the Professional acquisition, partially offset by paydowns and maturities.

The cost of average interest-bearing liabilities increased 50 basis points in the third quarter of 2023 to 2.76% from 2.26% in the second quarter of 2023, and from 22 basis points in the third quarter of 2022.

The cost of average total deposits (including noninterest bearing demand deposits) was 1.79% in the third quarter of 2023, 1.38% in the second quarter of 2023 and nine basis points in the third quarter of 2022.

For the nine months ended September 30, 2023, the cost of average total deposits (including noninterest bearing demand deposits) was 1.33% compared to seven basis points for the nine months ended September 30, 2022.

During the third quarter of 2023, average transaction deposits (noninterest and interest bearing demand) decreased $168.6 million, or 2%, compared to the second quarter of 2023 and increased $1.0 billion, or 18%, compared to the third quarter of 2022.

For the nine months ended September 30, 2023, average transaction deposits increased $1.2 billion, or 21%, compared to the nine months ended September 30, 2022.

The Company’s deposit mix remains favorable, with 89% of average deposit balances comprised of savings, money market, and demand deposits for the nine months ended September 30, 2023.

Average balances of sweep repurchase agreements with customers increased $82.9 million, or 34%, from the second quarter of 2023 and increased $215.8 million, or 193%, compared to the third quarter of 2022.

The average rate on customer sweep repurchase accounts was 3.48% for the third quarter of 2023, compared to 2.61% for the second quarter of 2023, and 1.10% for the third quarter of 2022.

For the nine months ended September 30, 2023, the average balance was $249.2 million compared to an average balance of $116.8 million for the nine months ended September 30, 2022.

The average rate on customer sweep repurchase accounts was 2.86% for the nine months ended September 30, 2023, compared to 0.51% for the nine months ended September 30, 2022.

Subordinated debt balances averaged $106.0 million in the third quarter of 2023, $105.9 million in the second quarter of 2023, and $71.8 million in the third quarter of 2022.

The average rate on subordinated debt for the third quarter of 2023 was 7.18%, an increase of 38 basis points compared to the second quarter of 2023 and an increase of 272 basis points compared to the third quarter of 2022.

For the nine months ended September 30, 2023, subordinated debt averaged $103.5 million, compared to $71.8 million for the nine months ended September 30, 2022.

The average rate on subordinated debt for the nine months ended September 30, 2023 was 6.88%, an increase of 349 basis points compared to the nine months ended September 30, 2022.

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

Average loans increased $1.4 million for the first quarter of 2024 compared to the fourth quarter of 2023, and increased $665.5 million, or 7%, from the first quarter of 2023.

Average loans as a percentage of average earning assets totaled 77% for the first quarter of 2024, 77% for the fourth quarter of 2023 and 76% for the first quarter of 2023.

Average investment securities increased $78.0 million, or 3%, during the first quarter of 2024 compared to the fourth quarter of 2023, and were $131.5 million, or 5%, lower compared to the first quarter of 2023.

Securities yields expanded five basis points to 3.47% during the first quarter of 2024 from 3.42% in the fourth quarter of 2023, benefiting from recent portfolio restructurings.

The cost of average interest-bearing liabilities increased 22 basis points in the first quarter of 2024 to 3.20% from 2.98% in the fourth quarter of 2023, and increased 177 basis points from 1.43% in the first quarter of 2023.

The cost of average total deposits (including noninterest bearing demand deposits) was 2.19% in the first quarter of 2024, 2.00% in the fourth quarter of 2023 and 0.77% in the first quarter of 2023.

During the first quarter of 2024, average transaction deposits (noninterest and interest bearing demand) decreased $311.9 million, or 5%, compared to the fourth quarter of 2023 and decreased $539.3 million, or 8%, compared to the first quarter of 2023.

The Company’s deposit mix remains favorable, with 87% of average deposit balances comprised of savings, money market, and demand deposits for the three months ended March 31, 2024.

Average balances of sweep repurchase agreements with customers decreased $2.2 million, or 1%, from the fourth quarter of 2023 and increased $159.9 million, or 92%, compared to the first quarter of 2023.

The average rate on customer sweep repurchase accounts was 3.71% for the first quarter of 2024, compared to 3.54% for the fourth quarter of 2023, and 2.02% for the first quarter of 2023.

The Company had an average balance of $102.4 million in FHLB borrowings outstanding for the first quarter of 2024, with a weighted average interest rate of 4.15%, compared to $59.0 million for the fourth quarter of 2023, with a weighted average interest rate of 3.23%, and $282.4 million for the first quarter of 2023, with a weighted average interest rate of 4.26%.

Long-term debt balances averaged $106.4 million in the first quarter of 2024, $106.2 million in the fourth quarter of 2023, and $98.4 million in the first quarter of 2023.

The average rate on long-term debt for the first quarter of 2024 was 7.31%, an increase of 15 basis points compared to the fourth quarter of 2023 and an increase of 66 basis points compared to the first quarter of 2023.

T a b l e o f C o n t e n t s

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

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

Third Quarter Second Quarter Third Quarter

2024 2023 2023

First Quarter Fourth Quarter First Quarter

Average Yield/ Average Yield/ Average Yield/

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Interest bearing deposits with other banks and other investments 95,619 1,128 4.74 91,230 1,190 5.18 178,463 2,180 4.95

Loans excluding PPP loans 10,039,270 150,037 5.93 10,096,394 148,420 5.90 6,597,828 73,730 4.43

PPP Loans 4,341 11 1.01 4,834 12 1.00 10,114 320 12.54

Total Loans 10,034,658 147,308 5.90 10,033,245 148,004 5.85 9,369,201 135,341 5.86

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Federal Home Loan Bank borrowings 102,418 960 3.77 59,022 442 2.97 282,444 2,776 3.99

Subordinated debt 106,036 1,919 7.18 105,861 1,795 6.80 71,810 808 4.46

Total Interest-Bearing Liabilities 8,711,647 60,540 2.76 8,407,547 47,320 2.26 5,595,593 3,121 0.22

Noninterest demand 3,987,761 4,294,251 3,529,844

Other liabilities 133,846 114,962 110,426

Total Liabilities 12,833,254 12,816,760 9,235,863

Shareholders' equity 2,072,747 2,070,529 1,349,475

Total Liabilities & Equity $ 14,906,003 $ 14,887,289 $ 10,585,338

Cost of deposits 1.79 % 1.38 % 0.09 %

Interest expense as a % of earning assets 1.81 % 1.44 % 0.13 %

Net interest income as a % of earning assets $ 119,505 3.57 % $ 127,153 3.86 % $ 88,399 3.67 %

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

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

Fees on loans have been included in interest on loans.

Nonaccrual loans are included in loan balances.

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

Year to Date Year to Date

Average Yield/ Average Yield/

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

Earning assets:

Taxable $ 2,649,127 $ 61,543 3.10 % $ 2,530,742 $ 38,081 2.01 %

Nontaxable 15,721 370 3.14 22,842 526 3.07

Total Securities 2,664,848 61,913 3.10 2,553,584 38,607 2.02

Federal funds sold 336,022 12,444 4.95 526,890 2,693 0.68

Interest bearing deposits with other banks and other investments 90,511 4,530 6.69 45,483 1,800 5.29

Loans excluding PPP loans 9,835,653 433,786 5.90 6,444,253 208,052 4.32

PPP Loans 4,831 35 0.97 32,597 2,584 10.60

Total Loans 9,840,484 433,821 5.89 6,476,850 210,636 4.35

Total Earning Assets 12,931,865 512,708 5.30 9,602,807 253,736 3.53

Allowance for credit losses (151,613) (89,700)

Cash and due from banks 185,426 362,369

Premises and equipment 116,840 75,617

Intangible assets 811,483 305,895

Bank owned life insurance 287,756 206,854

Other assets including deferred tax assets 402,175 220,790

Total Assets $ 14,583,932 $ 10,684,632

Liabilities and Shareholders' Equity

Interest-bearing liabilities:

Interest-bearing demand $ 2,642,180 $ 25,780 1.30 % $ 2,192,331 $ 1,240 0.08 %

Savings 909,184 1,292 0.19 943,982 194 0.03

Money market 2,831,747 54,540 2.58 1,906,407 1,951 0.14

Time deposits 1,288,736 36,490 3.79 500,482 1,284 0.34

Securities sold under agreements to repurchase 249,242 5,333 2.86 116,805 442 0.51

Federal Home Loan Bank borrowings 214,415 5,936 3.70 — — —

Subordinated debt 103,469 5,328 6.88 71,741 1,823 3.40

Long-term debt 106,373 1,934 7.31 106,205 1,916 7.16 98,425 1,614 6.65

Total Interest-Bearing Liabilities 8,889,220 70,628 3.20 8,793,538 66,036 2.98 7,585,346 26,839 1.43

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Nonaccrual loans are included in loan balances.

T a b l e o f C o n t e n t s

Noninterest Income

Noninterest income totaled $17.8 million for the third quarter of 2023, a decrease of $3.8 million, or 18%, compared to the second quarter of 2023 and an increase of $1.7 million, or 10%, from the third quarter of 2022.

Noninterest income totaled $61.8 million for the nine months ended September 30, 2023, an increase of $13.4 million, or 28%, compared to the nine months ended September 30, 2022.

Noninterest income totaled $20.5 million for the first quarter of 2024, an increase of $3.2 million, or 18%, compared to the fourth quarter of 2023 and a decrease of $1.9 million, or 9% from the first quarter of 2023.

Noninterest income is detailed as follows:

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

First Fourth First

Quarter Quarter Quarter

(In thousands) 2024 2023 2023

8 unchanged sentences

20,268 19,775 22,338

Securities (losses) gains, net (387) (176) (362) (456) (1,114)

Securities gains (losses), net 229 (2,437) 107

Total $ 20,497 $ 17,338 $ 22,445

Service charges on deposits were $4.6 million in both the second and third quarters of 2023 and $3.5 million in the third quarter of 2022.

For the nine months ended September 30, 2023, service charges on deposits totaled $13.5 million, an increase of $3.7 million, or 38%, compared to the nine months ended September 30, 2022.

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

Overdraft-related fees for both consumer and commercial accounts represent 35% of total service charges on deposits for the nine months ended September 30, 2023, and 37% for the nine months ended September 30, 2022.

Interchange income decreased to $1.7 million for the third quarter of 2023, compared to $5.1 million for the second quarter of 2023, and $4.1 million for the third quarter of 2022.

For the nine months ended September 30, 2023, interchange income totaled $11.4 million, a decrease of $1.1 million, or 9%, compared to the nine months ended September 30, 2022.

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

Wealth management income, including trust fees and brokerage commissions and fees, was $3.1 million in the third quarter of 2023, compared to $3.3 million for the second quarter of 2023 and $2.7 million for the third quarter of 2022.

Assets under management increased by $0.7 million in the third quarter of 2023, bringing total assets under management to $1.6 billion.

For the nine months ended September 30, 2023, wealth management income totaled $9.5 million, an increase of $1.4 million, or 17%, compared to the nine months ended September 30, 2022.

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

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

For the nine months ended September 30, 2023, mortgage banking fees totaled $1.4 million, a decrease of $1.6 million, or 54%, compared to the nine months ended September 30, 2022, reflecting lower saleable production due to significantly higher interest rates and limited housing inventory.

Insurance agency income increased $22 thousand, or 2%, compared to the second quarter of 2023 and totaled $1.2 million.

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

SBA gains were $0.6 million in the third quarter of 2023, compared to $0.2 million in the second quarter of 2023, and $0.1 million in the third quarter of 2022.

For the nine months ended September 30, 2023, SBA gains totaled $1.2 million, an increase of $0.4 million, or 61%, compared to the nine months ended September 30, 2022.

Bank owned life insurance (“BOLI”) income was $2.2 million for the third quarter of 2023, an increase of $0.1 million, or 6%, compared to the second quarter of 2023 and an increase of $0.8 million, or 61%, compared to the third quarter of 2022.

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

BOLI income totaled $6.2 million for the nine months ended September 30, 2023 and $4.0 million for the nine months ended September 30, 2022.

Other income was $4.3 million in the third quarter of 2023, a decrease of $0.4 million compared to the second quarter of 2023, and an increase of $0.1 million, compared to the third quarter of 2022.

For the nine months ended September 30, 2023, other income totaled $15.6 million, an increase of $4.3 million, or 38%, compared to the nine months ended September 30, 2022.

The Company recognized losses from mark to market adjustments on its investments in CRA qualified mutual funds, totaling $0.4 million in the third quarter of 2023, $0.2 million in the second quarter of 2023, and $0.4 million in the third quarter of 2022.

Service charges on deposits were $5.0 million in the first quarter of 2024, compared to $4.8 million in the fourth quarter of 2023, and $4.2 million in the first quarter of 2023.

The increase in fees primarily reflects the benefit of an expanded deposit base and the continued expansion of commercial treasury management services and new customer acquisition.

Interchange income decreased to $1.9 million for the first quarter of 2024, compared to $2.4 million for the fourth quarter of 2023, and $4.7 million for the first quarter of 2023.

The decrease in interchange income compared to the prior quarter is due to an annual volume-based incentive earned from the payment network provider in the previous quarter.

The decrease compared to the prior year quarter is due to the impact of the Durbin amendment, which became effective for the first time for the Company on July 1, 2023, limiting network interchange fees earned on debit card transactions.

Wealth management income, including trust fees and brokerage commissions and fees, was $3.5 million in the first quarter of 2024, compared to $3.3 million for the fourth quarter of 2023 and $3.1 million for the first quarter of 2023.

The wealth management division continues to demonstrate success in building relationships, and during the first quarter of 2024, assets under management grew $160 million, or 9%, to $1.9 billion.

Insurance agency income increased $0.2 million, or 21%, compared to the fourth quarter of 2023 and totaled $1.3 million.

Bank owned life insurance (“BOLI”) income was $2.3 million for the first quarter of 2024 compared to $2.2 million for the fourth quarter of 2023 and $1.9 million for the first quarter of 2023.

The increase of $0.3 million, or 18%, compared to the first quarter of 2023 is attributed to additions, including those from bank acquisitions.

Other income was $5.2 million in the first quarter of 2024, an increase of $0.5 million, or 12%, compared to the fourth quarter of 2023, and a decrease of $1.4 million, or 21% compared to the first quarter of 2023.

The increase compared to the prior quarter reflects higher marine and aircraft loan production sold, as well as higher SBIC income.

The decrease compared to the first quarter of 2023 was attributed to BOLI death benefits of $2.1 million in the first quarter of 2023.

Net securities gains of $0.2 million in the first quarter of 2024 include gains of $4.1 million on the sale of the Company’s holdings of Visa Class B stock.

This was largely offset by losses of $3.8 million on the sale of $86.8 million, or 3%, of the bank’s investment securities portfolio.

The proceeds were reinvested at a yield of 5.53%, with an expected earnback on the trade of 1.9 years.

T a b l e o f C o n t e n t s

Noninterest Expenses

Noninterest expense for the third quarter of 2023 totaled $93.9 million, a decrease of $14.0 million, or 13%, compared to the second quarter of 2023, and an increase of $32.6 million, or 53%, from the third quarter of 2022.

For the nine months ended September 30, 2023, noninterest expense totaled $309.3 million, an increase of $132.8 million, or 75%, compared to the nine months ended September 30, 2022.

Noninterest expense for the first quarter of 2024 totaled $90.4 million, an increase of $4.0 million, or 5%, compared to the fourth quarter of 2023, and a decrease of $17.1 million, or 16%, from the first quarter of 2023.

Noninterest expenses are detailed as follows:

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

First Fourth First

Quarter Quarter Quarter

(In thousands) 2024 2023 2023

2 unchanged sentences

Outsourced data processing costs 12,118 8,609 14,553

Telephone/data lines 1,409 1,518 973 4,008 2,614

Occupancy 8,037 7,512 8,019

4 unchanged sentences

Amortization of intangibles 6,292 6,888 6,727

Foreclosed property expense and net (gain) loss on sale 274 (57) 9 412 (1,123)

Other real estate owned expense and net (gain) loss on sale (26) 573 195

Provision for credit losses on unfunded commitments 250 — 1,239

1 unchanged sentence

Total $ 90,371 $ 86,367 $ 107,475

Salaries and wages totaled $46.4 million for the third quarter of 2023, $45.2 million for the second quarter of 2023, and $28.4 million for the third quarter of 2022.

The Company completed a reduction in force in the third quarter of 2023, reducing headcount by 6%, and incurring $3.2 million in severance-related expenses.

For the nine months ended September 30, 2023, salaries and wages totaled $139.2 million, an increase of $54.5 million, or 64%, compared to the nine months ended September 30, 2022, reflecting the overall growth of the organization, including as a result of the acquisitions completed in the fourth quarter of 2022 and first quarter of 2023.

During the third quarter of 2023, employee benefit costs, which include costs associated with the Company's self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $7.2 million, a decrease of $0.3 million, or 4%, compared to the second quarter of 2023, and an increase of $3.1 million, or 77%, compared to the third quarter of 2022.

For the nine months ended September 30, 2023, employee benefit costs totaled $23.2 million, an increase of $9.5 million, or 69%, compared to the nine months ended September 30, 2022, reflecting the overall growth of the organization, including as a result of the acquisitions completed in the fourth quarter of 2022 and first quarter of 2023.

Salaries and wages totaled $40.3 million for the first quarter of 2024, $38.4 million for the fourth quarter of 2023, and $47.6 million for the first quarter of 2023.

The increase compared to the fourth quarter of 2023 reflects severance-related costs arising from reductions in the workforce early in the first quarter of 2024.

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

The first quarter of 2023 also included expenses related to the net addition of branch locations and associates, as well as new bankers and operational staff associated with acquisitions.

During the first quarter of 2024, employee benefit costs, which include costs associated with the Company’s self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $7.9 million, an increase of $1.2 million, or 18%, compared to the fourth quarter of 2023, and a decrease of $0.7 million, or 8%, compared to the first quarter of 2023.

The increase compared to the fourth quarter of 2023 reflects higher seasonal payroll taxes and 401(k) contributions.

The decrease compared to the first quarter of 2023 is related to reductions in the workforce.

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

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

Outsourced data processing costs totaled $8.7 million, $20.2 million, and $5.4 million for the third quarter of 2023, second quarter of 2023, and third quarter of 2022, respectively.

The second quarter of 2023 included $10.9 million in direct acquisition-related costs, including termination penalties on acquired technology contracts upon system conversion.

For the nine months ended September 30, 2023 and September 30, 2022, outsourced data processing costs totaled $43.5 million and $17.6 million, respectively.

Telephone and data line expenditures, including electronic communications with customers and between branch and customer support locations and personnel, as well as with third-party data processors, were $1.4 million, $1.5 million, and $1.0 million for the third quarter of 2023, second quarter of 2023, and third quarter of 2022, respectively.

For the nine months ended September 30, 2023, telephone and data line expenditures totaled $4.0 million, an increase of $1.4 million, or 53%, compared to the nine months ended September 30, 2022.

The increases during 2023 reflect the expansion of the Company’s branch footprint.

Total occupancy, furniture and equipment expenses were $8.4 million in the third quarter of 2023, $9.4 million in the second quarter of 2023, and $6.5 million in the third quarter of 2022.

For the nine months ended September 30, 2023, total occupancy, furniture and equipment expenses totaled $27.0 million, an increase of $9.5 million, or 54%, compared to the nine months ended September 30, 2022.

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

Marketing expenses totaled $1.9 million in the third quarter of 2023, $2.0 million in the second quarter of 2023, and $1.5 million in the third quarter of 2022.

For the nine months ended September 30, 2023, marketing expenses totaled $6.2 million, an increase of $1.6 million, or 36%, compared to the nine months ended September 30, 2022.

Additional investments in marketing are expected in the fourth quarter of 2023 focused on supporting deposit growth.

Legal and professional fees for the third quarter of 2023 were $2.7 million, a decrease of $1.4 million, or 34%, compared to the second quarter of 2023, and a decrease of $1.1 million, or 29%, compared to the third quarter of 2022.

There were no acquisition-related expenses in the third quarter of 2023, $1.7 million in the second quarter of 2023, and $1.8 million in the third quarter of 2022.

For the nine months ended September 30, 2023, legal and professional fees totaled $14.2 million, an increase of $2.7 million, or 23%, compared to the nine months ended September 30, 2022.

Acquisition-related expenses were $6.5 million for the nine months ended September 30, 2023 and $6.1 million for the nine months ended September 30, 2022.

FDIC assessments were $2.3 million for the third quarter of 2023, $2.1 million in the second quarter of 2023, and $0.8 million in the third quarter of 2022.

For the nine months ended September 30, 2023, FDIC assessments totaled $5.8 million compared to $2.2 million for the nine months ended September 30, 2022.

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

Amortization of intangibles decreased by $0.2 million compared to the second quarter of 2023 and increased $6.0 million compared to the third quarter of 2022.

For the nine months ended September 30, 2023, amortization of intangibles totaled $21.8 million compared to $4.3 million for the nine months ended September 30, 2022.

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

Foreclosed property expense and net gain/loss on sale was a net loss of $0.3 million in the third quarter of 2023, a net gain of $0.1 million in the second quarter of 2023, and a net loss of $9 thousand in the third quarter of 2022.

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

This compares to $1.0 million in provision recorded during the third quarter of 2022, reflecting adjustments to the modeled results for changes in economic factors.

Other expenses totaled $7.2 million, $8.3 million and $7.5 million for the third quarter of 2023, the second quarter of 2023 and the third quarter of 2022, respectively.

For the nine months ended September 30, 2023, other expense totaled $22.6 million, an increase of $5.0 million, or 29%, compared to the nine months ended September 30, 2022.

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

For the third quarter of 2023, the efficiency ratio, defined as noninterest expense less amortization of intangibles and gains, losses, and expenses on foreclosed properties divided by net operating revenue (net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses), was 62.60%, compared to 67.34% for the second quarter of 2023 and 57.13% for the third quarter of 2022.

For the nine months ended September 30, 2023, the efficiency ratio was 65.19%, compared to 58.45% for the nine months ended September 30, 2022.

The adjusted efficiency ratio 1 was 60.19% in the third quarter of 2023, compared to 56.44% in the second quarter of 2023 and 53.28% in the third quarter of 2022.

The increase in the adjusted efficiency ratio in the third quarter of 2023 reflects the impact of higher deposit rates, including the first full quarter of the Florida Bar Association's change to rates required to be paid on certain trust accounts, and the first time impact of the Durbin Amendment on interchange income.

For the nine months ended September 30, 2023, the adjusted efficiency ratio 1 was 56.47%, compared to 53.73% for the nine months ended September 30, 2022.

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

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

Noninterest expense, as reported $ 93,915 $ 107,865 $ 61,359 $ 309,255 $ 176,424

Merger related charges

Salaries and wages — (1,573) — (5,813) (3,605)

Outsourced data processing costs — (10,904) — (17,455) (1,052)

Legal and professional fees — (1,664) (1,791) (6,453) (6,055)

Other categories — (1,507) (263) (3,459) (1,073)

Total merger related charges — (15,648) (2,054) (33,180) (11,785)

Amortization of intangibles (7,457) (7,654) (1,446) (21,838) (4,338)

Branch reductions and other expense initiatives (3,305) (571) (960) (5,167) (1,034)

Adjusted noninterest expense 1

$ 83,153 $ 83,992 $ 56,899 $ 249,070 $ 159,267

Foreclosed property expense and net gain (loss) on sale (274) 57 (9) (412) 1,123

Provision for credit losses on unfunded commitments — — (1,015) (1,239) (1,157)

Net adjusted noninterest expense 1

$ 82,879 $ 84,049 $ 55,875 $ 247,419 $ 159,233

Efficiency ratio 62.60 % 67.34 % 57.13 % 65.19 % 58.45 %

Adjusted efficiency ratio 1,2

60.19 56.44 53.28 56.47 53.73

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

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

Outsourced data processing costs totaled $12.1 million, $8.6 million, and $14.6 million for the first quarter of 2024, fourth quarter of 2023, and first quarter of 2023, respectively.

The increased costs in the first quarter of 2024 are attributed to $4.1 million in charges associated with contract terminations and modifications to consolidate systems, which should lead to lower ongoing operating expenses.

Total occupancy, furniture and equipment expenses were $10.0 million in the first quarter of 2024, $9.5 million in the fourth quarter of 2023, and $10.3 million in the first quarter of 2023.

Expenses in the first quarter of 2024 included charges of $0.8 million associated with early lease terminations and consolidation of locations as part of the Company’s expense reduction initiative.

Marketing expenses totaled $2.7 million in the first quarter of 2024, $3.0 million in the fourth quarter of 2023, and $2.2 million in the first quarter of 2023.

Legal and professional fees for the first quarter of 2024 were $2.2 million, a decrease of $1.1 million, or 35%, compared to the fourth quarter of 2023, and a decrease of $5.3 million, or 71%, compared to the first quarter of 2023.

There were no acquisition-related expenses in the first quarter of 2024 or the fourth quarter of 2023, compared to $4.8 million in the first quarter of 2023.

T a b l e o f C o n t e n t s

Provision for Credit Losses

The provision for credit losses was $2.7 million for the third quarter of 2023, compared to a net benefit of $0.8 million for the second quarter of 2023, and provision expense of $4.7 million for the third quarter of 2022.

For the third quarter of 2023, the Company recorded tax expense of $9.1 million, compared to $10.2 million in the second quarter of 2023 and $9.1 million in the third quarter of 2022.

For the nine months ended September 30, 2023, tax expense totaled $22.0 million, a decrease of $1.9 million, or 8%, compared to the nine months ended September 30, 2022 due to lower pre-tax income.

The provision for credit losses was $1.4 million for the first quarter of 2024, compared to $4.0 million for the fourth quarter of 2023, and $31.6 million for the first quarter of 2023.

The first quarter of 2023 included a $26.6 million day-one provision associated with the acquisition of Professional.

For the first quarter of 2024, the Company recorded tax expense of $7.8 million, compared to $8.3 million in the fourth quarter of 2023 and $2.7 million in the first quarter of 2023.

Lower income tax expense in the first quarter of 2024 compared to the fourth quarter of 2023 and the first quarter of 2023 is primarily due to lower pre-tax income.

Explanation of Certain Unaudited Non-GAAP Financial Measures

7 unchanged sentences

These disclosures should not be considered an alternative to GAAP.

T a b l e o f C o n t e n t s

Reconciliation of Non-GAAP Measures

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

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

Net income, as reported:

First Fourth First

Quarter Quarter Quarter

(Amounts in thousands, except per share data) 2024 2023 2023

Net income $ 26,006 $ 29,543 $ 11,827

Noninterest Income $ 17,793 $ 21,576 $ 16,103 $ 61,814 $ 48,440

Securities losses (gains), net 387 176 362 456 1,114

Total noninterest income $ 20,497 $ 17,338 $ 22,445

Securities (gains) losses, net (229) 2,437 (107)

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

Total adjustments to noninterest income (229) 2,437 (2,224)

Total Adjusted Noninterest Income $ 18,180 $ 21,752 $ 16,465 $ 60,153 $ 49,554

Noninterest Expense $ 93,915 $ 107,865 $ 61,359 $ 309,255 $ 176,424

Adjusted noninterest income $ 20,268 $ 19,775 $ 20,221

Total noninterest expense $ 90,371 $ 86,367 $ 107,475

Merger related charges:

Salaries and wages — — (4,240)

Outsourced data processing costs — (10,904) — (17,455) (1,052)

Outsourced data processing — — (6,551)

Legal and professional fees — — (4,789)

Other categories — (1,507) (263) (3,459) (1,073)

Other — — (1,952)

Total merger related charges — — (17,532)

Amortization of intangibles (7,457) (7,654) (1,446) (21,838) (4,338)

Branch reductions and other expense initiatives 1 :

Salaries and wages (2,073) — (539)

Outsourced data processing (4,089) — —

Occupancy (771) — —

Other (161) — (752)

Total branch reductions and other expense initiatives 1

(7,094) — (1,291)

Total adjustments to noninterest expense (10,762) (23,873) (4,460) (60,185) (17,157)

Total Adjusted Noninterest Expense $ 83,153 $ 83,992 $ 56,899 $ 249,070 $ 159,267

Adjustments to noninterest expense (7,094) — (18,823)

Adjusted noninterest expense 2

$ 83,277 $ 86,367 $ 88,652

Income taxes $ 7,830 $ 8,257 $ 2,697

2 unchanged sentences

Adjusted net income 2

$ 31,132 $ 31,363 $ 23,682

Earnings per diluted share, as reported $ 0.31 $ 0.35 $ 0.15

Adjusted diluted earnings per share 0.46 0.58 0.53 1.41 1.56

Adjusted earnings per diluted share 0.37 0.37 0.29

Average diluted shares outstanding 85,270 85,336 80,717

1 unchanged sentence

Provision for credit losses on unfunded commitments (250) — (1,239)

Foreclosed property expense and net gain (loss) on sale (274) 57 (9) (412) 1,123

Other real estate owned expense and net gain (loss) on sale 26 (573) (195)

Amortization of intangibles (6,292) (6,888) (6,727)

Net adjusted noninterest expense $ 76,761 $ 78,906 $ 80,491

Average tangible assets $ 13,865,245 $ 13,906,005 $ 13,197,282

Net adjusted noninterest expense to average tangible assets 2.23 % 2.25 % 2.47 %

Revenue $ 125,575 $ 128,157 $ 153,597

Total adjustments to revenue (229) 2,437 (2,224)

T a b l e o f C o n t e n t s

First Fourth First

Quarter Quarter Quarter

(Amounts in thousands, except per share data) 2024 2023 2023

Impact of FTE adjustment 220 216 199

Adjusted revenue on a fully tax equivalent basis $ 137,685 $ 148,905 $ 104,864 $ 438,162 $ 296,356

Adjusted revenue on a fully taxable equivalent basis $ 125,566 $ 130,810 $ 151,572

Adjusted efficiency ratio 61.13 % 60.32 % 53.10 %

2 unchanged sentences

Net interest income including FTE adjustment 105,298 111,035 131,351

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

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

Noninterest income 17,793 21,576 16,103 61,814 48,440

Noninterest expense 93,915 107,865 61,359 309,255 176,424

Total noninterest income 20,497 17,338 22,445

Total noninterest expense less provision for credit losses on unfunded commitments 90,121 86,367 106,236

Pre-tax pre-provision earnings 35,674 42,006 47,560

Adjustments to noninterest income 387 176 362 (1,661) 1,114

Adjustments to noninterest expense (11,036) (23,816) (5,484) (61,836) (17,191)

Total adjustments to noninterest income (229) 2,437 (2,224)

Total adjustments to noninterest expense including foreclosed property expense 7,068 573 19,018

Adjusted pre-tax pre-provision earnings 2

$ 42,513 $ 45,016 $ 64,354

Average assets $ 14,690,776 $ 14,738,034 $ 13,947,976

8 unchanged sentences

Impact of adjustments on pre-tax pre-provision earnings 0.20 0.09 0.51

Adjusted Pre-Tax Pre-Provision Return on Tangible Assets 1.55 % 1.85 % 1.89 % 1.85 % 1.77 %

Adjusted pre-tax pre-provision return on average tangible assets 2

1.42 % 1.48 % 2.18 %

Average shareholders’ equity $ 2,118,381 $ 2,058,912 $ 1,897,045

16 unchanged sentences

5.48 % 5.40 % 5.17 %

T a b l e o f C o n t e n t s

First Fourth First

Quarter Quarter Quarter

(Amounts in thousands, except per share data) 2024 2023 2023

Net interest income 3

3 unchanged sentences

$ 94,703 $ 99,711 $ 115,409

Third Second Third Nine Months Ended

Quarter Quarter Quarter September 30,

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

Net interest margin 3

17 unchanged sentences

1 Includes severance, contract termination costs, disposition of branch premises and fixed assets, and other costs to effect the Company’s branch consolidation and other expense reduction strategies.

2 As of 1Q’24, amortization of intangibles is excluded from adjustments to noninterest expense;

prior periods have been updated to reflect the change.

3 On a fully taxable equivalent basis.

1 unchanged sentence

Financial Condition

Total assets as of September 30, 2023 were $14.8 billion, an increase of $2.7 billion, or 22%, from December 31, 2022.

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

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

At September 30, 2023, the Company had $1.8 billion in securities available-for-sale and $691.4 million in securities held-to-maturity.

The Company's total debt securities portfolio decreased $85.9 million from December 31, 2022.

During the nine months ended September 30, 2023, there were $28.1 million of debt securities purchased, $167.1 million acquired through the acquisition of Professional and $212.2 million in paydowns and maturities over the same period.

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

Total assets as of March 31, 2024 were $14.8 billion, an increase of $0.2 billion, or 2%, from December 31, 2023.

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

At March 31, 2024, the Company had $1.9 billion in AFS securities and $669.9 million in HTM securities.

The Company’s total debt securities portfolio increased $103.0 million from December 31, 2023.

During the three months ended March 31, 2024, the Company recognized a $4.1 million gain on the opportunistic sale of Visa Class B shares.

The gain was offset by a partial repositioning of the securities portfolio, in which $86.8 million of securities were sold, with $3.8 million in realized losses.

Additionally, during the three months ended March 31, 2024, there were $261.0 million of debt securities purchased and $61.2 million in paydowns and maturities over the same period.

Debt securities generally return principal and interest monthly.

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

At September 30, 2023, available-for-sale securities had gross unrealized losses of $287.3 million and gross unrealized gains of $0.7 million, compared to gross unrealized losses of $248.7 million and gross unrealized gains of $1.1 million at December 31, 2022.

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

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

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

The modified duration of the AFS securities portfolio and the total portfolio was 4.5 and 4.9, respectively, at both March 31, 2024 and December 31, 2023.

At March 31, 2024, AFS securities had gross unrealized losses of $223.6 million and gross unrealized gains of $3.6 million, compared to gross unrealized losses of $217.7 million and gross unrealized gains of $4.4 million at December 31, 2023.

T a b l e o f C o n t e n t s

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

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The portfolio includes $136.6 million, with a fair value of $126.2 million, in private label residential and commercial mortgage-backed securities and collateralized mortgage obligations.

Included are $126.8 million, with a fair value of $114.1 million, in private label mortgage-backed residential securities with weighted average credit support of 22%.

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

Non-guaranteed agency commercial securities totaled $12.2 million, with a fair value of $11.1 million.

Included are $127.0 million, with a fair value of $116.9 million, in private label residential securities with weighted average credit support of 23%.

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

Commercial securities totaled $9.6 million, with a fair value of $9.2 million.

These securities have weighted average credit support of 26%.

The collateral underlying these mortgages is primarily pooled multifamily loans.

The collateral underlying these mortgages are primarily pooled multifamily loans.

The Company also has invested $284.7 million in floating rate collateralized loan obligations.

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

As of September 30, 2023, all of the Company’s collateralized loan obligations were in AAA/AA tranches with weighted average credit support of 33%.

As of March 31, 2024, all of the Company’s collateralized loan obligations were in AAA/AA tranches with weighted average credit support of 34%.

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

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

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

HTM securities consist solely of mortgage-backed securities and collateralized mortgage obligations guaranteed by U.S.

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

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

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

At March 31, 2024, the Company has determined that all debt securities in an unrealized loss position are the result of both broad investment type spreads and the current interest rate environment.

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

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

Therefore, at March 31, 2024, no allowance for credit losses has been recorded.

Loan Portfolio

Loans, net of unearned income and excluding the allowance for credit losses, were $10.0 billion at September 30, 2023, a $1.9 billion, or 23%, increase from December 31, 2022.

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

Loans, net of unearned income and excluding the allowance for credit losses, were $10.0 billion at March 31, 2024, an $84.9 million, or 1%, decrease from December 31, 2023.

The Company remains committed to sound risk management procedures.

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

The average loan size is only $306 thousand, and the average commercial loan size is only $683 thousand at September 30, 2023, reflecting the Company's longtime focus on granularity and on creating valuable customer relationships.

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

The average loan size is only $332 thousand, and the average commercial loan size is only $742 thousand at March 31, 2024, reflecting the Company’s longtime focus on granularity and on creating valuable customer relationships.

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

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

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

September 30, 2023

T a b l e o f C o n t e n t s

The following tables detail loan portfolio composition at March 31, 2024 and December 31, 2023 for portfolio loans, purchased credit deteriorated (“PCD”) and loans purchased which are not considered purchased credit deteriorated (“Non-PCD”) as defined in “Note 4 - Loans”.

March 31, 2024

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

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Consumer 164,387 77,677 675 242,739

PPP Loans 809 3,293 — 4,102

Totals $ 6,613,764 $ 3,121,609 $ 242,679 $ 9,978,052

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Consumer 175,969 74,854 744 251,567

PPP Loans 1,474 3,116 — 4,590

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

The amortized cost basis of loans included net deferred costs of $38.1 million at September 30, 2023 and $35.1 million at December 31, 2022.

At September 30, 2023, the remaining fair value adjustments on acquired loans were $186.5 million, or 4.9%, of the outstanding acquired loan balances, compared to $97.7 million, or 4.3%, of the acquired loan balances at December 31, 2022.

The amortized cost basis of loans included net deferred costs of $44.9 million at March 31, 2024 and $43.1 million at December 31, 2023.

At March 31, 2024, the remaining fair value adjustments on acquired loans were $163.4 million, or 4.6%, of the outstanding acquired loan balances, compared to $174.0 million, or 4.8%, of the acquired loan balances at December 31, 2023.

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

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

September 30, 2023

(In thousands) Amortized Cost Basis % of Total Loans

Commercial real estate - non-owner occupied

Collateral types and characteristics of non-owner occupied commercial real estate (“CRE”) loans as of March 31, 2024 were as follows:

March 31, 2024

(In thousands)

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

Retail $ 1,120,440 11.2 % $ 2,138 $ — $ 1,608 51 %

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Other 588,194 5.9 967 — 6,216 53

Total commercial real estate - non-owner occupied $ 3,285,974 32.82 %

Commercial real estate (“CRE”) non-owner occupied loans increased by $696.2 million in the nine months ended September 30, 2023, totaling $3.3 billion at September 30, 2023 compared to $2.6 billion at December 31, 2022.

Total $ 3,368,339 33.8 % $ 1,688 $ 4,867 $ 21,188 52 %

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

CRE non-owner occupied loans increased by $48.4 million in the three months ended March 31, 2024, totaling $3.37 billion at March 31, 2024 compared to $3.32 billion at December 31, 2023.

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

Within the non-owner occupied CRE portfolio, the largest segment is Retail properties, which totaled approximately $1.0 billion at September 30, 2023.

Within the non-owner occupied CRE portfolio, the largest segment is Retail properties, which totaled approximately $1.12 billion at March 31, 2024.

T a b l e o f C o n t e n t s

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

Loans in this segment have a weighted average loan to value of 51% and an average loan size of $2.1 million.

The second-largest segment in the non-owner occupied CRE portfolio is Office properties, which totaled approximately $595.4 million at September 30, 2023.

The second-largest segment in the non-owner occupied CRE portfolio is Office properties, which totaled $565.1 million at March 31, 2024.

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

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Loans in this segment have a weighted average loan to value of 55% and an average loan size of $1.6 million.

Owner-occupied CRE loans increased by $197.6 million in the nine months ended September 30, 2023 to $1.7 billion.

Owner-occupied CRE loans decreased by $14.2 million in the three months ended March 31, 2024 to $1.7 billion.

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

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

Balances increased from December 31, 2022 by $235.4 million, or 17%, totaling $1.6 billion at September 30, 2023, largely attributed to the Professional acquisition.

Residential mortgage loans increased $569.4 million to $2.4 billion during the nine months ended September 30, 2023.

Included in the balance as of September 30, 2023, were $1.0 billion of fixed rate mortgages, $840.1 million of adjustable rate mortgages and $478.6 million in primarily floating rate home equity lines of credit (“HELOCs”), compared to $964.3 million, $402.3 million and $482.9 million, respectively, at December 31, 2022.

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

Balances decreased $41.7 million, or 3%, from December 31, 2023, totaling $1.6 billion at March 31, 2024.

Residential mortgage loans increased $75.7 million to $2.5 billion during the three months ended March 31, 2024.

Included in the balance as of March 31, 2024, were $1.0 billion of fixed rate mortgages, $932.3 million of adjustable rate mortgages and $475.9 million in primarily floating rate home equity lines of credit (“HELOCs”), compared to $1.0 billion, $865.2 million and $488.2 million, respectively, at December 31, 2023.

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

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

The average LTV of our HELOC portfolio is 63%, with 31% of the loans being in first lien position at September 30, 2023, compared to an average LTV of 69%, with 31% of the portfolio being in the first lien position at December 31, 2022.

The Company also provides consumer loans, which include installment loans, auto loans, marine loans, and other consumer loans, which decreased $38.0 million, or 13%, to total $248.5 million at September 30, 2023, compared to $286.6 million at December 31, 2022.

At September 30, 2023, the Company had unfunded commitments to extend credit of $3.9 billion, compared to $2.8 billion at December 31, 2022.

The average LTV of our HELOC portfolio is 63%, with 33% of the loans being in first lien position at March 31, 2024, compared to an average LTV of 63%, with 35% of the portfolio being in the first lien position at December 31, 2023.

The Company also provides consumer loans, which include installment loans, auto loans, marine loans, and other consumer loans, which decreased $8.8 million, or 4%, to total $242.7 million at March 31, 2024, compared to $251.6 million at December 31, 2023.

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

First Fourth First

Quarter Quarter Quarter

(In thousands) 2024 2023 2023

Commercial/commercial real estate loan pipeline at period end $ 498,617 $ 306,531 $ 289,162

Commercial/commercial real estate loans closed 260,032 334,229 320,209

SBA pipeline at period end 15,630 20,600 8,218

SBA originations 18,944 25,034 1,456

Residential pipeline - saleable at period end 9,279 2,657 6,614

Residential loans - sold 4,618 15,614 13,935

Residential pipeline - portfolio at period end 24,364 44,422 48,371

Residential loans - retained 36,412 41,186 90,058

Consumer pipeline at period end 25,057 18,745 38,742

Consumer originations 48,244 61,847 110,602

Commercial and commercial real estate originations during the first quarter of 2024 were $260.0 million, a decrease of $74.2 million, or 22%, compared to the fourth quarter of 2023, and a decrease of $60.2 million, or 19%, compared to the first quarter of 2023.

Lower originations compared to the fourth quarter of 2023 were consistent with typical seasonality.

Lower originations compared to the first quarter of 2023 were largely the result of the impact of higher rates on customer demand.

Commercial and commercial real estate pipelines were $498.6 million as of March 31, 2024, an increase of 63% from $306.5 million at December 31, 2023, and an increase of 72% from $289.2 million at March 31, 2023.

T a b l e o f C o n t e n t s

SBA originations totaled $18.9 million during the first quarter of 2024, a decrease of $6.1 million compared to the fourth quarter of 2023, and an increase of $17.5 million compared to the first quarter of 2023.

Residential loans originated for sale in the secondary market totaled $4.6 million in the first quarter of 2024, compared to $15.6 million in the fourth quarter of 2023 and $13.9 million in the first quarter of 2023.

Residential saleable pipelines were $9.3 million as of March 31, 2024, compared to $2.7 million as of December 31, 2023 and $6.6 million as of March 31, 2023.

Residential loan production retained in the portfolio for the first quarter of 2024 was $36.4 million, compared to $41.2 million in the fourth quarter of 2023 and $90.1 million in the first quarter of 2023.

The pipeline of residential loans intended to be retained in the portfolio was $24.4 million as of March 31, 2024, compared to $44.4 million as of December 31, 2023, and $48.4 million as of March 31, 2023.

Consumer originations, which include HELOCs, totaled $48.2 million during the first quarter of 2024, compared to $61.8 million in the fourth quarter of 2023 and $110.6 million in the first quarter of 2023.

The consumer pipeline was $25.1 million as of March 31, 2024, compared to $18.7 million as of December 31, 2023 and $38.7 million at March 31, 2023.

Loan Concentrations

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

Outstanding balances for commercial and CRE loans individually greater than $15 million totaled $574.9 million and represented 6% of the total portfolio at September 30, 2023.

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

Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital were 51% and 248%, respectively, at September 30, 2023, compared to 45% and 230%, respectively, at December 31, 2022.

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

Outstanding balances for commercial and commercial real estate loan relationships greater than $10 million totaled $2.3 billion, representing 23% of the total portfolio, at both March 31, 2024 and December 31, 2023.

The Company’s ten largest commercial and commercial real estate funded and unfunded relationships at March 31, 2024 aggregated to $552.1 million, of which $386.8 million was funded, compared to $505.7 million at December 31, 2023, of which $348.3 million was funded.

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

Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital were 39% and 236%, respectively, at March 31, 2024, compared to 48% and 244%, respectively, at December 31, 2023.

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

On a consolidated basis, construction and land development and commercial real estate loans represent 48% and 234%, respectively, of total consolidated risk based capital.

On a consolidated basis, construction and land development and commercial real estate loans represent 36% and 222%, respectively, of total consolidated risk based capital as of March 31, 2024.

To determine these ratios, the Company defines CRE in accordance with the guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) issued by the federal bank regulatory agencies in 2006 (and reinforced in 2015), which defines CRE loans as exposures secured by land development and construction, including 1-4 family residential construction, multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property (i.e., loans for which 50 percent or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property.

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

Nonperforming assets (“NPAs”) at September 30, 2023 totaled $48.7 million, and were comprised of $41.5 million of nonaccrual loans, and $7.2 million of other real estate owned (“OREO”).

Compared to December 31, 2022, nonaccrual loans increased $12.7 million, or 44%, including loans acquired from Professional.

The $4.9 million increase in OREO is the result of closures of three branch properties in the first quarter of 2023.

Nonperforming assets (“NPAs”) at March 31, 2024 totaled $84.5 million, and were comprised of $77.2 million of nonaccrual loans, and $7.3 million of other real estate owned (“OREO”), including $7.0 million of branches taken out of service.

Overall, NPAs increased $11.9 million, or 16%, from $72.7 million as of December 31, 2023.

At September 30, 2023, approximately 67% of nonaccrual loans were secured with real estate.

See the tables below for details about nonaccrual loans.

At September 30, 2023, nonaccrual loans reflected cumulative write downs of approximately $6.5 million, including reserves on individually evaluated loans.

Nonperforming loans to total loans outstanding at September 30, 2023 increased to 0.41% from 0.35% at December 31, 2022.

Nonperforming assets to total assets at September 30, 2023 increased to 0.33% from 0.26% at December 31, 2022.

Nonperforming assets to total assets at March 31, 2024 increased to 0.57% from 0.50% at December 31, 2023.

Compared to December 31, 2023, nonaccrual loans increased $12.1 million, or 19%.

Approximately 58% of nonaccrual loans were secured with real estate at March 31, 2024.

Nonperforming loans to total loans outstanding at March 31, 2024 increased to 0.77% from 0.65% at December 31, 2023.

See the tables below for the payment status of nonaccrual loans.

T a b l e o f C o n t e n t s

The table below sets forth details related to nonaccrual loans.

September 30, 2023

March 31, 2024

Nonaccrual Loans

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

On January 1, 2023, the Company adopted ASU 2022-02 which includes disclosure requirements related to certain modifications of loans to borrowers experiencing financial difficulty, which the Company refers to as troubled borrower modifications (“TBMs”).

TBMs are typically in the form of an interest rate reduction, an extension of the amortization period and/or converting the loan to interest only for a limited period of time.

In addition to the change in payment terms, the Company seeks to obtain additional collateral and/or guarantors to provide additional support for the loan.

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

As of September 30, 2023, there were eight loans totaling $2.2 million that were TBMs, which is considered immaterial.

In certain circumstances, the Company provides modifications of loans to borrowers experiencing financial difficulty, which the Company refers to as troubled borrower modifications (“TBMs”).

Loans that were modified as TBMs during the three months ended March 31, 2024 are included in “Note 4 - Loans”.

Allowance for Credit Losses on Loans

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

During the nine months ended September 30, 2023, the Company recorded provision expense of $33.5 million.

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

The Company reported net charge-offs for the nine months ended September 30, 2023 of $16.6 million.

The ratio of allowance for credit losses to total loans was 1.49% at September 30, 2023, 1.40% at December 31, 2022, and 1.42% at September 30, 2022.

LIBOR Transition

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

The remaining tenors of U.S.

dollar LIBOR ceased publication after June 30, 2023.

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

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

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

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

During the three months ended March 31, 2024, the Company recorded provision expense of $1.4 million.

The Company reported net charge-offs for the three months ended March 31, 2024 of $3.6 million.

The ratio of allowance for credit losses to total loans was 1.47% at March 31, 2024, 1.48% at December 31, 2023, and 1.54% at March 31, 2023.

T a b l e o f C o n t e n t s

Cash and Cash Equivalents and Liquidity Risk Management

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

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

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

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

Cash and cash equivalents, including interest bearing deposits, totaled $696.0 million at September 30, 2023, compared to $201.9 million at December 31, 2022.

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

Cash and cash equivalents, including interest bearing deposits, totaled $682.7 million at March 31, 2024, compared to $447.2 million at December 31, 2023.

Higher cash and cash equivalent balances at March 31, 2024 are consistent with the Company’s strategic balance sheet management.

Deposits are a primary source of liquidity.

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

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

Total uninsured deposits were estimated to be $4.2 billion at March 31, 2024, representing 35% of overall deposit accounts.

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

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

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

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

The Company has liquidity sources as discussed below, including cash and lines of credit with the Federal Reserve and FHLB, that represent 158% of uninsured deposits, and 182% of uninsured and uncollateralized deposits.

In addition to $696.0 million in cash and cash equivalents at September 30, 2023, the Company had $5.7 billion in available borrowing capacity, including $4.8 billion in available collateralized lines of credit, $0.6 billion of unpledged debt securities available as collateral for potential additional borrowings, and available unsecured lines of credit of $0.3 billion.

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

Excluding such balances, the uninsured and uncollateralized deposits were 29% of total deposits at March 31, 2024.

The Company has liquidity sources as discussed below, including cash and lines of credit with the FRB and FHLB, that represent 138% of uninsured deposits, and 164% of uninsured and uncollateralized deposits.

In addition to $682.7 million in cash and cash equivalents at March 31, 2024, the Company had $5.1 billion in available borrowing capacity, including $4.4 billion in available collateralized lines of credit, $391.3 million of unpledged debt securities available as collateral for potential additional borrowings, and available unsecured lines of credit of $300.0 million.

The Company may also access funding by acquiring brokered deposits.

Brokered deposits at September 30, 2023, December 31, 2022, and September 30, 2022 totaled $308.0 million, $58.6 million, and $81.8 million, respectively.

Brokered deposits at March 31, 2024 totaled $142.7 million compared to $122.3 million at December 31, 2023.

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

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

During the third quarter of 2023, Seacoast Bank distributed $12.8 million to the Company and, at September 30, 2023, is eligible to distribute dividends to the Company of approximately $188.3

million without prior regulatory approval.

At September 30, 2023, the Company had cash and cash equivalents at the parent of approximately $115.0 million, compared to $111.8 million at December 31, 2022.

During the first quarter of 2024, Seacoast Bank distributed $15.1 million to the Company and, at March 31, 2024, is eligible to distribute dividends to the Company of approximately $138.7 million without prior regulatory approval.

At March 31, 2024, the Company had cash and cash equivalents at the parent of approximately $101.5 million, compared to $101.7 million at December 31, 2023.

T a b l e o f C o n t e n t s

Deposits and Borrowings

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

September 30, December 31,

March 31, December 31,

(In thousands, except ratios) 2024 2023

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Savings 608,088 651,454

Time certificates of deposit 1,574,095 522,666

Time deposits 1,467,564 1,353,655

Brokered deposits $ 142,717 $ 122,347

Total deposits $ 12,015,840 $ 11,776,935

Customer sweep accounts 326,732 374,573

Total customer funding 1

$ 12,199,855 $ 12,029,161

Noninterest demand deposits as % of total deposits 30 % 30 %

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

Consumer deposits represent 43% of total deposits, with an average balance per account of $24 thousand.

Business deposits represent 57% of total deposits, with an average balance per account of $111 thousand.

Highlighting the Company's longstanding relationship-based strategy, the average tenure for a Seacoast customer is 9.7 years.

Total deposits increased $2.1 billion, or 21%, to $12.1 billion at September 30, 2023, compared to $10.0 billion at December 31, 2022.

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

Noninterest demand deposits represented 32% of total deposits at September 30, 2023 and 41% at December 31, 2022.

Transaction account balances (noninterest demand and interest-bearing demand) represented 55% of total deposits at September 30, 2023, compared to 64% at December 31, 2022.

Customer repurchase agreements totaled $276.5 million at September 30, 2023, increasing $104.4 million, or 61%, from December 31, 2022.

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

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

Total deposits increased $238.9 million, or 2%, to $12.0 billion at March 31, 2024 compared to December 31, 2023.

Noninterest demand deposits represented 30% of total deposits at both March 31, 2024 and December 31, 2023.

Transaction account balances (noninterest demand and interest-bearing demand) represented 52% of total deposits at March 31, 2024, compared to 54% at December 31, 2023.

Customer sweep accounts totaled $326.7 million at March 31, 2024, decreasing $47.8 million, or 13%, from December 31, 2023.

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

At September 30, 2023 and December 31, 2022, borrowings included $72.1 million and $71.9 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company.

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

At March 31, 2024 and December 31, 2023, long-term debt included $72.3 million and $72.2 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company.

At March 31, 2024, the average interest rate in effect on our outstanding subordinated debt related to trust preferred securities was 7.29%, compared to 7.34% at December 31, 2023.

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

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

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

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

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.

On January 31, 2023, the Company acquired $25.0 million in subordinated debt through the acquisition of Professional.

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

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

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

The weighted average interest rate of outstanding subordinated debt was 6.88% and 3.40% for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Federal Home Loan Bank advances totaled $110.0 million at September 30, 2023 with a weighted average interest rate of 2.88%, compared to $150.0 million at December 31, 2022 with a weighted average interest rate of 3.42%.

Federal Home Loan Bank advances totaled $110.0 million at March 31, 2024 with a weighted average interest rate of 4.15%, compared to $50.0 million at December 31, 2023 with an interest rate of 3.23%.

T a b l e o f C o n t e n t s

Off-Balance Sheet Transactions

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

Unfunded commitments to extend credit were $3.9 billion at September 30, 2023 and $2.8 billion at December 31, 2022.

Unfunded commitments to extend credit were $2.7 billion at both March 31, 2024 and December 31, 2023.

In the normal course of business, the Company and Seacoast Bank enter into agreements, or are subject to regulatory agreements that result in cash, debt and dividend restrictions.

A summary of the most restrictive items follows:

Seacoast Bank may be required to maintain reserve balances with the FRB.

There was no reserve requirement at March 31, 2024 or December 31, 2023.

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

At March 31, 2024, the maximum amount available for transfer from Seacoast Bank to the Company in the form of loans approximated $184.1 million, if the Company has sufficient acceptable collateral.

There were no loans made to affiliates during the three months ended March 31, 2024.

Capital Resources

The Company’s equity capital at September 30, 2023 increased $440.6 million, or 27%, from December 31, 2022 to $2.0 billion.

Changes in equity included increases in net income of $74.5 million and the issuance of $421.0 million in equity in connection with the Professional acquisition, partially offset by the issuance of common stock dividends totaling $45.2 million and a decrease in accumulated other comprehensive income of $24.2 million.

The ratio of shareholders’ equity to period end total assets was 13.82% and 13.24% at September 30, 2023 and December 31, 2022, respectively.

The ratio of tangible shareholders’ equity to tangible assets was 8.68% and 9.08% at September 30, 2023 and December 31, 2022, respectively.

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

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

however, illustratively, if all held-to-maturity securities were presented at fair value, the tangible common equity ratio would have been 7.89% at September 30, 2023.

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

The Company’s equity capital at March 31, 2024 increased $9.7 million from December 31, 2023 to $2.1 billion.

Changes in equity included an increase from net income of $26.0 million, partially offset by the payment of common stock dividends totaling $15.3 million and a decrease in accumulated other comprehensive income of $4.1 million.

The ratio of shareholders’ equity to period end total assets was 14.28% and 14.46% at March 31, 2024 and December 31, 2023, respectively.

The ratio of tangible shareholders’ equity to tangible assets was 9.25% and 9.31% at March 31, 2024 and December 31, 2023, respectively.

Changes in the value of HTM securities are not reflected in shareholders’ equity under GAAP;

however, illustratively, if all HTM securities were presented at fair value, the tangible common equity ratio would have been 8.59% at March 31, 2024 and 8.68% at December 31, 2023.

Activity in shareholders’ equity for the three months ended March 31, 2024 and 2023 follows:

(In thousands) 2024 2023

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Common stock transactions related to stock based employee benefit plans 813 3,617

Issuance of common stock and conversion of options pursuant to acquisitions 421,042 94,067

Stock compensation, net of Treasury shares acquired 10,290 9,651

Issuance of common share dividend (45,236) (29,012)

Issuance of common stock and conversion of options pursuant to acquisition — 421,042

Stock based compensation expense 2,217 2,642

Dividends on common stock ($0.18 per share and $0.17 per share, respectively)

(15,294) (14,419)

Change in accumulated other comprehensive income (4,078) 18,600

Repurchase of common stock (45) —

Ending balance at September 30, 2023 and 2022

Ending balance at March 31, 2024 and 2023

$ 2,117,750 $ 2,051,084

T a b l e o f C o n t e n t s

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

1 unchanged sentence

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

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

September 30, 2023 Seacoast

March 31, 2024 Seacoast

(Consolidated) Seacoast

5 unchanged sentences

1 For subsidiary bank only.

The Company’s total risk-based capital ratio was 15.09% at September 30, 2023, a decrease from 15.79% at December 31, 2022, primarily due to growth including the acquisition of Professional.

At September 30, 2023, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was 10.05%, well above the minimum to be well-capitalized under regulatory guidelines.

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

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

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

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

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

1 unchanged sentence

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

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

The Company has paid quarterly dividends to the holders of its common stock since the second quarter of 2021.

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

2 unchanged sentences

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

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

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

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

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

T a b l e o f C o n t e n t s

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements are prepared in accordance with U.S.

generally accepted accounting principles, (“GAAP”), including prevailing practices within the financial services industry.

The preparation of consolidated financial statements requires management to make judgments in the application of certain of its accounting policies that involve significant estimates and assumptions.

The Company has established policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period.

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

Management, after consultation with the Company’s Audit Committee, believes the most critical accounting estimates and assumptions that involve the most difficult, subjective and complex assessments are:

• the allowance and the provision for credit losses;

• acquisition accounting and purchased loans;

• intangible assets and impairment testing;

• other fair value measurements;

• impairment of debt securities;

• contingent liabilities.

The critical accounting policies are discussed in MD&A in Seacoast’s Annual Report on Form 10-K for the year ended December 31, 2022.

The Company’s critical accounting policies are discussed in the MD&A in Seacoast’s Annual Report on Form 10-K for the year ended December 31, 2023.

Significant accounting policies and changes in accounting principles and effects of recently issued accounting pronouncements are discussed in “Note 1 – Significant Accounting Policies” in Form 10-K for the year ended December 31, 2023.

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The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to assess the impact of market interest rate swings.

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

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

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

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

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

The following table presents the ALCO simulation model’s projected impact of a change in interest rates on the projected baseline net interest income for the 12 and 24 month periods beginning April 1, 2024, holding all balances on the balance sheet static.

This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve nor changes in balance sheet size or mix.

% Change in Projected Baseline

Change in Interest Rates Net Interest Income

+3.00% (14.3)%

Net Interest Income

March 31, 2024

Change in Interest Rates 1-12 months 13-24 months

+2.00% (8.1)% (7.6)%

+1.00% (3.5)% (3.1)%

Current —% —%

-1.00% 0.7% —%

11 unchanged sentences

Mortgage origination and refinancing tends to slow as interest rates increase, and higher interest rates likely will reduce the Company’s earnings from such activities and the income from the sale of residential mortgage loans in the secondary market.

T a b l e o f C o n t e n t s

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis