SEACOAST BANKING CORP OF FLORIDA 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of this discussion and analysis is to aid in understanding significant changes in the financial condition of Seacoast Banking Corporation of Florida and its subsidiaries (“Seacoast” or the “Company”) and their results of operations. Nearly all of the Company’s operations are contained in its banking subsidiary, Seacoast National Bank (“Seacoast Bank” or the “Bank”). 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 six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 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. See the following section for additional information regarding forward-looking statements. For purposes of the following discussion, the words “Seacoast” or the “Company” refer to the combined entities of Seacoast Banking Corporation of Florida and its direct and indirect wholly owned subsidiaries. Special Cautionary Notice Regarding Forward-Looking Statements Certain statements made or incorporated by reference herein which are not statements of historical fact, including those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are “forward-looking statements” within the meaning, and protections, of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, and intentions about future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond the Company’s control, and which may cause the actual results, performance or achievements of Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) or its wholly-owned banking subsidiary, Seacoast National Bank (“Seacoast Bank”), to be materially different from those set forth in the forward-looking statements. 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,” 32 Table of Contents “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “further,” “plan,” “point to,” “project,” “could,” “intend,” “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 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 proposed overdraft and late fee caps, 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 (including the impact of interest rates on macroeconomic conditions, customer and client behavior, and on our net interest income), as well as the impact of prolonged elevated interest rates on our financial projections and models, sensitivities, and the shape of the yield curve; • Changes in accounting policies, rules, and practices; • Changes in retail distribution strategies, customer preferences and behavior generally and as a result of economic factors, including heightened inflation; • Changes in the availability and cost of credit and capital in the financial markets; • Changes in the prices, values and sales volumes of residential and commercial real estate, especially as they relate to the value of collateral supporting the Company’s loans; • 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 and the risk that the regulatory environment may not be conducive to or may prohibit or delay 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; • The impact on the valuation of Seacoast’s investments due to market volatility or counterparty payment risk, as well as the effect of a decline in stock market prices on our fee income from our wealth management business; • Statutory and regulatory dividend restrictions; increases in regulatory capital requirements for banking organizations generally; • The risks of mergers, acquisitions and divestitures, including Seacoast’s ability to continue to identify acquisition targets, successfully acquire and integrate desirable financial institutions and realize expected revenues and revenue synergies; • 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 which may be exacerbated by 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; • 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, 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; 33 Table of Contents • 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 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; • 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. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the federal budget and economic policy; • The risk that balance sheet, revenue growth, and loan growth expectations may differ from actual results; and • 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, 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. Results of Operations Seacoast provides integrated financial services including commercial and consumer banking, wealth management, and mortgage services to customers at 77 full-service branches across Florida, and through advanced mobile and online banking solutions. The Company’s financial results in the second quarter of 2024 include emerging loan growth and stabilizing deposit costs, supporting an improved outlook for net interest income. Growth in noninterest income continues, and with significant cost-saving initiatives now complete, Seacoast continues to prudently manage expenses while strategically investing to support continued growth. Highlights include: • Net income of $30.2 million, or $0.36 per average diluted share, an increase of 16% from the prior quarter. • Pre-tax pre-provision earnings on an adjusted basis 1 increased $2.0 million to $44.5 million from the prior quarter. • Demonstrating the Company’s consistent focus on driving efficiency while making investments for organic growth, adjusted noninterest expense 1 is down 10% from the prior year quarter. • Continued success in the wealth management division, with assets under management increasing 12% year to date to reach a record $1.9 billion. • Continued growth in lending pipelines, with the overall pipeline increasing to $834.4 million. • Asset quality remains well controlled, including a reduction in nonperforming loans compared to the prior quarter. • Tangible book value per share increased to $15.41. • Strong capital position, with a Tier 1 capital ratio of 14.8%, and a tangible common equity to tangible assets ratio of 9.3%. As the Company completes its transition from a successful period of sequential bank acquisitions, the most recent of which was integrated in the second quarter of 2023, the renewed focus on organic customer growth is generating momentum across all markets and business segments. For the second quarter of 2024, the Company reported net income of $30.2 million, or $0.36 per average diluted share, an increase of $4.2 million, or 16%, from the first quarter of 2024 and a decrease of $1.0 million, or 3%, compared to the second quarter of 2023. Adjusted net income 1 for the second quarter of 2024 totaled $30.3 million, or $0.36 per average diluted share, a decrease of $0.9 million, or 3%, compared to the first quarter of 2024 and a decrease of $13.2 million, or 30%, compared to the second quarter of 2023. For the six months ended June 30, 2024, net income totaled $56.3 million, or $0.66 per average diluted share, an 1 Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP. 34 Table of Contents increase of $13.2 million, or 31%, compared to the six months ended June 30, 2023. For the six months ended June 30, 2024, adjusted net income 1 totaled $61.4 million, or $0.72 per average diluted share, compared to $67.7 million, or $0.81 per average diluted share for the six months ended June 30, 2023. Second First Second Six Months Ended Quarter Quarter Quarter June 30, 2024 2024 2023 2024 2023 Return on average tangible assets 1.00 % 0.89 % 1.06 % 0.94 % 0.80 % Return on average tangible shareholders’ equity 10.75 9.55 12.08 10.15 9.14 Efficiency ratio 60.21 66.78 67.34 63.48 66.37 Adjusted return on average tangible assets 1 1.00 % 1.04 % 1.41 % 1.02 % 1.16 % Adjusted return on average tangible shareholders’ equity 1 10.76 11.15 16.08 10.95 13.32 Adjusted efficiency ratio 1 60.21 61.13 56.44 60.67 54.76 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 second quarter of 2024 totaled $104.4 million, a modest decrease of $0.7 million, or 1%, compared to the first quarter of 2024, and a decrease of $22.5 million , or 18% , c ompared to the second quarter of 2023. The decrease from the prior quarter reflects higher interest expense on deposits resulting from growth in deposit balances and the impact of the continued elevated rate environment. 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. For the six months ended June 30, 2024, net interest income totaled $209.5 million, a decrease of $48.6 million, or 19%, compared to the six months ended June 30, 2023. 35 Table of Contents Net interest income (on a fully taxable equivalent basis) 1 for the second quarter of 2024 was $104.7 million, a decrease of $0.6 million, or 1%, compared to the first quarter of 2024, and a decrease of $22.5 million, or 18%, c ompared to the second quarter of 2023. Accretion on acquired loans totaled $10.2 million for the second quarter of 2024, compared to $10.6 million for the first quarter of 2024, and $14.6 million for the second quarter of 2023. For the six months ended June 30, 2024, net interest income (on a fully taxable equivalent basis) 1 was $210.0 million, a decrease of $48.6 million, or 1%, compared to the six months ended June 30, 2023. Net interest margin (on a fully taxable equivalent basis) 1 decreased six basis points from 3.24% in the first quarter of 2024 to 3.18% in the second quarter of 2024, and decreased 68 basis points from 3.86% in the second quarter of 2023, largely driven by the growth in deposit costs. Compared to the first quarter of 2024, securities yields increased 22 basis points in the second quarter of 2024 to 3.69% and compared to the second quarter of 2023, increased 56 basis points. The yield on loans increased to 5.93% for the second quarter of 2024 from 5.90% in the first quarter of 2024 and from 5.89% in the second quarter of 2023, reflecting the impact of a higher interest rate environment. The effect on net interest margin of accretion of purchase discounts on acquired loans was an increase of 30 basis points for the second quarter of 2024, 33 basis points in the first quarter, and 44 basis points in the second quarter of 2023. The cost of deposits was 2.31% in the second quarter of 2024, compared to 2.19% in the first quarter of 2024, and 1.38% in the second quarter of 2023. For the six months ended June 30, 2024, net interest margin (on a fully taxable equivalent basis) 1 decreased 88 basis points to 3.21% compared to the six months ended June 30, 2023, largely driven by the growth in deposit costs. The yield on total loans increased from 5.88% for the six months ended June 30, 2023 to 5.92% for the six months ended June 30, 2024, reflecting the impact of the higher interest rate environment. The yield on securities was 3.59% for the six months ended June 30, 2024, compared to 2.99% for the six months ended June 30, 2023, also reflecting the impact of a higher interest rate environment. The effect on net interest margin of accretion of purchase discounts on acquired loans was an increase of 31 basis points for the six months ended June 30, 2024, and 49 basis points for the six months ended June 30, 2023. The cost of deposits was 2.25% for the six months ended June 30, 2024, an increase of 116 basis points compared to the six months ended June 30, 2023. The following table details the trend for net interest income and margin results (on a fully taxable equivalent basis) 1 , the yield on earning assets and the rate paid on interest bearing liabilities for the periods specified: (In thousands, except ratios) Net Interest Income 1 Net Interest Margin 1 Yield on Earning Assets 1 Rate on Interest Bearing Liabilities Second quarter 2024 $ 104,657 3.18 % 5.47 % 3.33 % First quarter 2024 105,298 3.24 % 5.41 % 3.20 % Second quarter 2023 127,153 3.86 % 5.30 % 2.26 % Six months ended June 30, 2024 209,954 3.21 % 5.44 % 3.26 % Six months ended June 30, 2023 258,504 4.09 % 5.26 % 1.87 % 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. Average loans decreased $29.5 million for the second quarter of 2024 compared to the first quarter of 2024, and decreased $96.1 million, or 1%, from the second quarter of 2023. For the six months ended June 30, 2024, average loans increased $282.7 million, or 3%, from the six months ended June 30, 2023. Average loans as a percentage of average earning assets totaled 76% for the second quarter of 2024, 77% for the first quarter of 2024 and 76% for the second quarter of 2023. For each of the six months ended June 30, 2024 and June 30, 2023, average loans as a percentage of average earning assets totaled 76%. During the second quarter of 2024, average investment securities increased $50.3 million, or 2%, compared to the first quarter of 2024, and decreased $54.1 million, or 2.0%, compared to the second quarter of 2023. Securities yields increased 22 basis points to 3.69% during the second quarter of 2024 from 3.47% in the first quarter of 2024, benefiting from recent purchases. For the six months ended June 30, 2024, average investment securities were $2.6 billion, a decrease of $92.8 million, or 3%, compared to the six months ended June 30, 2023. The cost of average interest-bearing liabilities increased 13 basis points in the second quarter of 2024 to 3.33% from 3.20% in the first quarter of 2024, and increased 107 basis points from 2.26% in the second quarter of 2023. The cost of average total deposits (including noninterest bearing demand deposits) was 2.31% in the second quarter of 2024, 2.19% in the first quarter of 36 Table of Contents 2024 and 1.38% in the second quarter of 2023. For the six months ended June 30, 2024, the cost of average total deposits (including noninterest bearing demand deposits) was 2.25% compared to 1.09% for the six months ended June 30, 2023. During the second quarter of 2024, average transaction deposits (noninterest and interest-bearing demand) decreased $91.7 million, or 1%, compared to the first quarter of 2024 and decreased $804.4 million, or 12%, compared to the second quarter of 2023. For the six months ended June 30, 2024, average transaction deposits decreased $672.3 million, or 10%, compared to the six months ended June 30, 2023. The Company’s deposit mix remains favorable, with 87% of average deposit balances comprised of savings, money market, and demand deposits for the six months ended June 30, 2024. Average balances of sweep repurchase agreements with customers decreased $39.8 million, or 12%, from the first quarter of 2024 and increased $48.8 million, or 20%, compared to the second quarter of 2023. The average rate on customer sweep repurchase accounts was 3.68% for the second quarter of 2024, compared to 3.71% for the first quarter of 2024, and 2.61% for the second quarter of 2023. For the six months ended June 30, 2024, the average balance was $313.5 million compared to an average balance of $209.4 million for the six months ended June 30, 2023 with average rates of 3.70% and 2.37%, respectively. The Company had an average balance of $149.2 million in FHLB borrowings outstanding for the second quarter of 2024, with an average interest rate of 4.29%, compared to $102.4 million for the first quarter of 2024, with an average interest rate of 3.77%, and $251.6 million for the second quarter of 2023, with an average interest rate of 3.62%. The Company had an average balance of $125.8 million in FHLB borrowings outstanding for the six months ended June 30, 2024, with an average interest rate of 4.08%, compared to $266.9 million for the six months ended June 30, 2023, with an average interest rate of 3.81%. Long-term debt balances averaged $106.5 million in the second quarter of 2024, $106.4 million in the first quarter of 2024, and $105.9 million in the second quarter of 2023. The average rate on long-term debt for the second quarter of 2024 was 7.03%, a decrease of 28 basis points compared to the first quarter of 2024 and an increase of 23 basis points compared to the second quarter of 2023. For the six months ended June 30, 2024, long-term debt averaged $106.5 million, compared to $102.2 million for the six months ended June 30, 2023. The average rate on long-term debt for the six months ended June 30, 2024 was 7.17%, an increase of 44 basis points compared to the six months ended June 30, 2023. The long-term debt is comprised of trust preferred securities issued by subsidiary trusts of the Company, and notes assumed in bank acquisitions in 2022 and 2023. The following tables detail average balances, net interest income and margin results (on a fully taxable equivalent basis, a non-GAAP measure) for the periods presented: Average Balances, Interest Income and Expenses, Yields and Rates 1 2024 2023 Second Quarter First Quarter Second Quarter Average Yield/ Average Yield/ Average Yield/ (In thousands, except ratios) Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets Earning assets: Securities: Taxable ` $ 2,629,716 $ 24,155 3.69 % $ 2,578,938 $ 22,393 3.47 % $ 2,673,633 $ 20,898 3.13 % Nontaxable 5,423 40 2.97 5,907 41 2.75 15,621 120 3.08 Total Securities 2,635,139 24,195 3.69 2,584,845 22,434 3.47 2,689,254 21,018 3.13 Federal funds sold 510,401 6,967 5.49 370,494 5,056 5.49 327,433 4,313 5.28 Interest bearing deposits with other banks and other investments 98,942 1,361 5.53 95,619 1,128 4.74 90,783 710 3.14 Total Loans, net 10,005,122 147,518 5.93 10,034,658 147,308 5.90 10,101,228 148,432 5.89 Total Earning Assets 13,249,604 180,041 5.47 13,085,616 175,926 5.41 13,208,698 174,473 5.30 Allowance for credit losses (146,380) (148,422) (156,207) Cash and due from banks 168,439 166,734 165,625 Premises and equipment, net 110,709 112,391 117,726 Intangible assets 818,914 825,531 842,988 Bank owned life insurance 302,165 299,765 293,251 Other assets including deferred tax assets 336,256 349,161 415,208 Total Assets $ 14,839,707 $ 14,690,776 $ 14,887,289 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing demand $ 2,670,569 $ 14,946 2.25 % $ 2,719,334 $ 15,266 2.26 % $ 2,666,314 $ 7,560 1.14 % Savings 584,490 560 0.39 628,329 540 0.35 906,936 427 0.19 Money market 3,665,858 35,813 3.93 3,409,310 31,728 3.74 2,806,672 19,196 2.74 Time deposits 1,631,290 17,928 4.42 1,590,070 17,121 4.33 1,425,344 14,477 4.07 Securities sold under agreements to repurchase 293,603 2,683 3.68 333,386 3,079 3.71 244,824 1,593 2.61 Federal Home Loan Bank borrowings 149,234 1,592 4.29 102,418 960 3.77 251,596 2,272 3.62 Long-term debt, net 106,532 1,862 7.03 106,373 1,934 7.31 105,861 1,795 6.80 Total Interest-Bearing Liabilities 9,101,576 75,384 3.33 8,889,220 70,628 3.20 8,407,547 47,320 2.26 Noninterest demand 3,485,603 3,528,489 4,294,251 Other liabilities 134,900 154,686 114,962 Total Liabilities 12,722,079 12,572,395 12,816,760 Shareholders’ equity 2,117,628 2,118,381 2,070,529 Total Liabilities & Equity $ 14,839,707 $ 14,690,776 $ 14,887,289 Cost of deposits 2.31 % 2.19 % 1.38 % Interest expense as a % of earning assets 2.29 % 2.17 % 1.44 % Net interest income as a % of earning assets $ 104,657 3.18 % $ 105,298 3.24 % $ 127,153 3.86 % 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 2024 2023 Six Months Ended June 30, Six Months Ended June 30, Average Yield/ Average Yield/ (In thousands, except ratios) Balance Interest Rate Balance Interest Rate Assets Earning assets: Securities: Taxable $ 2,604,327 $ 46,548 3.59 % $ 2,686,804 $ 40,142 2.99 % Nontaxable 5,665 81 2.88 15,944 251 3.15 Total Securities 2,609,992 46,629 3.59 2,702,748 40,393 2.99 Federal funds sold 440,448 12,023 5.49 228,491 5,787 5.11 Interest bearing deposits with other banks and other investments 97,281 2,489 5.15 90,750 2,710 6.02 Total Loans, net 10,019,890 294,825 5.92 9,737,236 283,773 5.88 Total Earning Assets 13,167,611 355,966 5.44 12,759,225 332,663 5.26 Allowance for credit losses (147,401) (148,143) Cash and due from banks 167,586 193,811 Premises and equipment, net 111,550 116,909 Intangible assets 822,222 797,096 Bank owned life insurance 300,965 283,936 Other assets including deferred tax assets 342,708 417,393 Total Assets $ 14,765,241 $ 14,420,227 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing demand $ 2,694,952 $ 30,212 2.25 % $ 2,559,805 $ 10,767 0.85 % Savings 606,410 1,100 0.36 979,674 827 0.17 Money market 3,537,584 67,541 3.84 2,760,207 31,622 2.31 Time deposits 1,610,680 35,049 4.38 1,120,576 20,029 3.60 Securities sold under agreements to repurchase 313,494 5,762 3.70 209,358 2,456 2.37 Federal Home Loan Bank borrowings 125,826 2,552 4.08 266,935 5,048 3.81 Long-term debt, net 106,453 3,796 7.17 102,164 3,410 6.73 Total Interest-Bearing Liabilities 8,995,399 146,012 3.26 7,998,719 74,159 1.87 Noninterest demand 3,507,046 4,314,498 Other liabilities 144,791 122,746 Total Liabilities 12,647,236 12,435,963 Shareholders' equity 2,118,005 1,984,264 Total Liabilities & Equity $ 14,765,241 $ 14,420,227 Cost of deposits 2.25 % 1.09 % Interest expense as a % of earning assets 2.23 % 1.17 % Net interest income as a % of earning assets $ 209,954 3.21 % $ 258,504 4.09 % 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. 37 Table of Contents Noninterest Income Noninterest income totaled $22.2 million for the second quarter of 2024, an increase of $1.7 million, or 8%, compared to the first quarter of 2024 and an increase of $0.6 million, or 3% from the second quarter of 2023. Noninterest income totaled $42.7 million for the six months ended June 30, 2024, a decrease of $1.3 million, or 3%, compared to the six months ended June 30, 2023. Noninterest income is detailed as follows: Second First Second Six Months Ended Quarter Quarter Quarter June 30, (In thousands) 2024 2024 2023 2024 2023 Service charges on deposit accounts $ 5,342 $ 4,960 $ 4,560 $ 10,302 $ 8,802 Interchange income 1,940 1,888 5,066 3,828 9,760 Wealth management income 3,766 3,540 3,318 7,306 6,381 Mortgage banking fees 582 381 576 963 1,002 Insurance agency income 1,355 1,291 1,160 2,646 2,261 SBA gains 694 739 249 1,433 571 BOLI income 2,596 2,264 2,068 4,860 3,984 Other 5,953 5,205 4,755 11,158 11,329 22,228 20,268 21,752 42,496 44,090 Securities (losses) gains, net (44) 229 (176) 185 (69) Total $ 22,184 $ 20,497 $ 21,576 $ 42,681 $ 44,021 Service charges on deposits were $5.3 million in the second quarter of 2024, compared to $5.0 million in the first quarter of 2024, and $4.6 million in the second quarter of 2023. For the six months ended June 30, 2024, service charges on deposits totaled $10.3 million, an increase of $1.5 million, or 17%, compared to the six months ended June 30, 2023. Our investments in talent and market expansion across the state have resulted in continued growth in treasury management services to commercial customers. Interchange income increased $0.1 million, or 3%, compared to the first quarter of 2024 and decreased $3.1 million, or 62%, compared to the second quarter of 2023. 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. For the six months ended June 30, 2024, interchange income totaled $3.8 million, a decrease of $5.9 million, or 61%, compared to the six months ended June 30, 2023. Wealth management income, including trust fees and brokerage commissions and fees, was $3.8 million in the second quarter of 2024, compared to $3.5 million for the first quarter of 2024 and $3.3 million for the second quarter of 2023. For the six months ended June 30, 2024, wealth management income totaled $7.3 million, an increase of $0.9 million, or 14%, compared to the six months ended June 30, 2023. The wealth management division continues to demonstrate success in building relationships, and assets under management have increased $202.8 million, or 12%, from December 31, 2023, to $1.9 billion. Insurance agency income increased $0.1 million, or 5%, compared to the first quarter of 2024 and totaled $1.4 million for the three months ended June 30, 2024. For the six months ended June 30, 2024, insurance agency income totaled $2.6 million, an increase of $0.4 million, or 17%, compared to the six months ended June 30, 2023, reflecting continued growth and expansion of insurance services. Bank owned life insurance (“BOLI”) income was $2.6 million for the second quarter of 2024, compared to $2.3 million for the first quarter of 2024 and $2.1 million for the second quarter of 2023. For the six months ended June 30, 2024, BOLI income totaled $4.9 million, an increase of $0.9 million, or 22%, compared to the six months ended June 30, 2023, with policy exchanges executed in the first quarter of 2024 resulting in improved ongoing yields. Other income was $6.0 million in the second quarter of 2024, an increase of $0.7 million, or 14%, compared to the first quarter of 2024, and an increase of $1.2 million, or 25%, compared to the second quarter of 2023. The second quarter of 2024 includes a gain on the sale of a single nonperforming commercial real estate loan. For the six months ended June 30, 2024, other income totaled $11.2 million, a decrease of $0.2 million, or 2%, compared to the six months ended June 30, 2023. 38 Table of Contents Net securities activity resulted in losses of $44 thousand during the second quarter of 2024, gains of $0.2 million in the first quarter of 2024 , and losses of $0.2 million in the second quarter of 2023. The first quarter of 2024 included gains of $4.1 million on the sale of the Company’s holdings of Visa Class B stock, which 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. Noninterest Expenses Noninterest expense for the second quarter of 2024 totaled $82.5 million, a decrease of $7.8 million, or 9%, compared to the first quarter of 2024, and a decrease of $25.3 million, or 23%, from the second quarter of 2023. For the six months ended June 30, 2024, noninterest expense totaled $172.9 million, a decrease of $42.4 million, or 20%, compared to the six months ended June 30, 2023. The decreases can be attributed to the completion of cost-saving initiatives and prudent management of expenses while strategically investing to support continued growth, benefiting nearly every category of expense. Noninterest expenses are detailed as follows: Second First Second Six Months Ended Quarter Quarter Quarter June 30, (In thousands) 2024 2024 2023 2024 2023 Salaries and wages $ 38,937 $ 40,304 $ 45,155 $ 79,241 $ 92,771 Employee benefits 6,861 7,889 7,472 14,750 16,034 Outsourced data processing costs 8,210 12,118 20,222 20,328 34,775 Occupancy 7,180 8,037 8,583 15,217 16,602 Furniture and equipment 1,956 2,011 2,345 3,967 4,612 Marketing 3,266 2,655 2,047 5,921 4,285 Legal and professional fees 1,982 2,151 4,062 4,133 11,541 FDIC assessments 2,131 2,158 2,116 4,289 3,559 Amortization of intangibles 6,003 6,292 7,654 12,295 14,381 Other real estate owned expense and net (gain) loss on sale (109) (26) (57) (135) 138 Provision for credit losses on unfunded commitments 251 250 — 501 1,239 Other 5,869 6,532 8,266 12,401 15,403 Total $ 82,537 $ 90,371 $ 107,865 $ 172,908 $ 215,340 Salaries and wages totaled $38.9 million for the second quarter of 2024, $40.3 million for the first quarter of 2024, and $45.2 million for the second quarter of 2023. The first quarter of 2024 included $2.1 million in severance-related expenses arising from a reduction in the workforce . For the six months ended June 30, 2024, salaries and wages totaled $79.2 million, a decrease of $13.5 million, or 15%, compared to the six months ended June 30, 2023. The company continues to prioritize investment in growth-focused talent. During the second quarter of 2024, employee benefits, which include costs associated with the Company’s self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $6.9 million, a decrease of $1.0 million, or 13%, compared to the first quarter of 2024, and a decrease of $0.6 million, or 8%, compared to the second quarter of 2023. The decrease compared to the first quarter of 2024 reflects higher seasonal payroll taxes and 401(k) contributions impacting the first quarter. The decrease compared to the second quarter of 2023 is related to reductions in the workforce. For the six months ended June 30, 2024, employee benefit costs totaled $14.8 million, a decrease of $1.3 million, or 8%, compared to the six months ended June 30, 2023. 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 $8.2 million, $12.1 million, and $20.2 million for the second quarter of 2024, first quarter of 2024, and second quarter of 2023, respectively. The Company incurred one-time charges of $4.1 million early in the first quarter of 2024 associated with consolidation activities, leading to a comparative decline in expense in these categories in the second quarter of 2024. For the six months ended June 30, 2024, outsourced data processing costs totaled $20.3 million, a decrease of $14.4 million, or 42%, compared to the six months ended June 30, 2023. The 2023 period included $17.5 million in costs directly associated with bank acquisitions. 39 Table of Contents Total occupancy and furniture and equipment expenses were $9.1 million in the second quarter of 2024, $10.0 million in the first quarter of 2024, and $10.9 million in the second quarter of 2023. 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. For the six months ended June 30, 2024, occupancy and furniture and equipment expenses totaled $19.2 million, a decrease of $2.0 million, or 10%, compared to the six months ended June 30, 2023. Marketing expenses totaled $3.3 million in the second quarter of 2024, $2.7 million in the first quarter of 2024, and $2.0 million in the second quarter of 2023. For the six months ended June 30, 2024, marketing expenses totaled $5.9 million, an increase of $1.6 million, or 38%, compared to the six months ended June 30, 2023. Planned investments in branding and in marketing campaigns across the state led to higher marketing expenses. Legal and professional fees for the second quarter of 2024 were $2.0 million, a decrease of $0.2 million, or 8%, compared to the first quarter of 2024, and a decrease of $2.1 million, or 51%, compared to the second quarter of 2023, which included $1.7 million in acquisition-related expenses. For the six months ended June 30, 2024, legal and professional fees totaled $4.1 million, a decrease of $7.4 million, or 64%, compared to the six months ended June 30, 2023. The 2023 period included $6.5 million in costs directly associated with bank acquisitions. Provision for Credit Losses The provision for credit losses was $4.9 million for the second quarter of 2024, compared to $1.4 million for the first quarter of 2024, and a net benefit of $0.8 million for the second quarter of 2023. For the six months ended June 30, 2024, provision for credit losses was $6.3 million, compared to $30.8 million for the six months ended June 30, 2023. The first quarter of 2023 included a $26.6 million day-one provision recorded in conjunction with the Professional acquisition. Income Taxes For the second quarter of 2024, the Company recorded tax expense of $8.9 million, an increase of $1.1 million, or 14%, compared to the first quarter of 2024 and a decrease of $1.3 million, or 13%, compared to the second quarter of 2023. The effective tax rate for the second quarter of 2024 was 22.8%, compared to 24.6% in the first quarter of 2024 and 23.1% in the second quarter of 2023. For the six months ended June 30, 2024, tax expense totaled $16.7 million, an increase of $3.9 million, or 30%, compared to the six months ended June 30, 2023, with an effective tax rate of 22.9% for the six months ended June 30, 2024, compared to 23.0% for the six months ended June 30, 2023. Explanation of Certain Unaudited Non-GAAP Financial Measures This report contains financial information determined by methods other than Generally Accepted Accounting Principles (“GAAP”). The financial highlights provide reconciliations between GAAP and adjusted financial measures including net income, fully taxable equivalent net interest income, noninterest income, noninterest expense, tax adjustments, net interest margin and other financial ratios. Management uses these non-GAAP financial measures in its analysis of the Company’s performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company’s performance. The Company believes the non-GAAP measures enhance investors’ understanding of the Company’s business and performance and if not provided would be requested by the investor community. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might define or calculate these measures differently. The Company provides reconciliations between GAAP and these non-GAAP measures. These disclosures should not be considered an alternative to GAAP. 40 Table of Contents Reconciliation of Non-GAAP Measures Second First Second Six Months Ended Quarter Quarter Quarter June 30, (Amounts in thousands, except per share data) 2024 2024 2023 2024 2023 Net income $ 30,244 $ 26,006 $ 31,249 $ 56,250 $ 43,076 Total noninterest income $ 22,184 $ 20,497 $ 21,576 $ 42,681 $ 44,021 Securities losses (gains), net 44 (229) 176 (185) 69 BOLI benefits on death (included in other income) — — — — (2,117) Total adjustments to noninterest income 44 (229) 176 (185) (2,048) Total adjusted noninterest income $ 22,228 $ 20,268 $ 21,752 $ 42,496 $ 41,973 Total noninterest expense $ 82,537 $ 90,371 $ 107,865 $ 172,908 $ 215,340 Merger related charges: Salaries and wages — — (1,573) — (5,813) Outsourced data processing — — (10,904) — (17,455) Legal and professional fees — — (1,664) — (6,453) Other — — (1,507) — (3,459) Total merger related charges — — (15,648) — (33,180) Branch reductions and other expense initiatives 1 : Salaries and wages — (2,073) (462) (2,073) (1,081) Outsourced data processing — (4,089) — (4,089) — Occupancy — (771) — (771) (774) Other — (161) (109) (161) (7) Total branch reductions and other expense initiatives 1 — (7,094) (571) (7,094) (1,862) Adjustments to noninterest expense — (7,094) (16,219) (7,094) (35,042) Adjusted noninterest expense 2 $ 82,537 $ 83,277 $ 91,646 $ 165,814 $ 180,298 Income taxes $ 8,909 $ 7,830 $ 10,189 $ 16,739 $ 12,886 Tax effect of adjustments 11 1,739 4,155 1,751 8,362 Adjusted income taxes 8,920 9,569 14,344 18,490 21,248 Adjusted net income 2 $ 30,277 $ 31,132 $ 43,489 $ 61,408 $ 67,708 Earnings per diluted share, as reported $ 0.36 $ 0.31 $ 0.37 $ 0.66 $ 0.52 Adjusted earnings per diluted share 0.36 0.37 0.51 0.72 0.81 Average diluted shares outstanding 84,816 85,270 85,536 84,799 83,260 Adjusted noninterest expense $ 82,537 $ 83,277 $ 91,646 $ 165,814 $ 180,298 Provision for credit losses on unfunded commitments (251) (250) — (501) (1,239) Other real estate owned expense and net gain (loss) on sale 109 26 57 135 (138) Amortization of intangibles (6,003) (6,292) (7,654) (12,295) (14,381) Net adjusted noninterest expense $ 76,392 $ 76,761 $ 84,049 $ 153,153 $ 164,540 Net adjusted noninterest expense $ 76,392 $ 76,761 $ 84,049 $ 153,153 $ 165,540 Average tangible assets $ 14,020,793 $ 13,865,245 $ 14,044,301 $ 13,943,019 $ 13,623,131 Net adjusted noninterest expense to average tangible assets 2.19 % 2.23 % 2.40 % 2.21 % 2.44 % 41 Table of Contents Second First Second Six Months Ended Quarter Quarter Quarter June 30, (Amounts in thousands, except per share data) 2024 2024 2023 2024 2023 Net revenue $ 126,608 $ 125,575 $ 148,539 $ 252,183 $ 302,136 Total adjustments to net revenue 44 (229) 176 (185) (2,048) Impact of FTE adjustment 233 220 190 452 389 Adjusted net revenue on a fully taxable equivalent basis $ 126,885 $ 125,566 $ 148,905 $ 252,450 $ 300,477 Adjusted efficiency ratio 60.21 % 61.13 % 56.44 % 60.67 % 54.76 % Net interest income $ 104,424 $ 105,078 $ 126,963 $ 209,502 $ 258,115 Impact of FTE adjustment 233 220 190 452 389 Net interest income including FTE adjustment 104,657 105,298 127,153 209,954 258,504 Total noninterest income 22,184 20,497 21,576 42,681 44,021 Total noninterest expense less provision for credit losses on unfunded commitments 82,286 90,121 107,865 172,407 214,101 Pre-tax pre-provision earnings 44,555 35,674 40,864 80,228 88,424 Total adjustments to noninterest income 44 (229) 176 (185) (2,048) Total adjustments to noninterest expense including other real estate owned expense and net (gain) loss on sale (109) 7,068 16,162 6,959 35,180 Adjusted pre-tax pre-provision earnings 2 $ 44,490 $ 42,513 $ 57,202 $ 87,002 $ 121,556 Average assets $ 14,839,707 $ 14,690,776 $ 14,887,289 $ 14,765,241 $ 14,420,227 Less average goodwill and intangible assets (818,914) (825,531) (842,988) (822,222) (797,096) Average tangible assets $ 14,020,793 $ 13,865,245 $ 14,044,301 $ 13,943,019 $ 13,623,131 Return on average assets (ROA) 0.82 % 0.71 % 0.84 % 0.77 % 0.60 % Impact of removing average intangible assets and related amortization 0.18 0.18 0.22 0.17 0.20 Return on average tangible assets (ROTA) 1.00 0.89 1.06 0.94 0.80 Impact of other adjustments for adjusted net income — 0.15 0.35 0.08 0.36 Adjusted return on average tangible assets 1.00 % 1.04 % 1.41 % 1.02 % 1.16 % Pre-tax pre-provision return on average tangible assets 1.45 % 1.22 % 1.39 % 1.33 % 1.52 % Impact of adjustments on pre-tax pre-provision earnings — 0.20 0.46 0.10 0.49 Adjusted pre-tax pre-provision return on average tangible assets 2 1.45 % 1.42 % 1.85 % 1.43 % 2.01 % Average shareholders’ equity $ 2,117,628 $ 2,118,381 $ 2,070,529 $ 2,118,005 $ 1,984,264 Less average goodwill and intangible assets (818,914) (825,531) (842,988) (822,222) (797,096) Average tangible equity $ 1,298,714 $ 1,292,850 $ 1,227,541 $ 1,295,783 $ 1,187,168 Return on average shareholders’ equity 5.74 % 4.94 % 6.05 % 5.34 % 4.38 % Impact of removing average intangible assets and related amortization 5.01 4.61 6.03 4.81 4.76 Return on average tangible common equity (ROTCE) 10.75 9.55 12.08 10.15 9.14 Impact of other adjustments for adjusted net income 0.01 1.60 4.00 0.80 4.18 Adjusted return on average tangible common equity 10.76 % 11.15 % 16.08 % 10.95 % 13.32 % 42 Table of Contents Second First Second Six Months Ended Quarter Quarter Quarter June 30, (Amounts in thousands, except per share data) 2024 2024 2023 2024 2023 Loan interest income 3 $ 147,518 $ 147,308 $ 148,432 $ 294,826 $ 283,773 Accretion on acquired loans (10,178) (10,595) (14,580) (20,773) (30,522) Loan interest income excluding accretion on acquired loans 3 $ 137,340 $ 136,713 $ 133,852 $ 274,053 $ 253,251 Yield on loans 3 5.93 % 5.90 % 5.89 % 5.92 % 5.88 % Impact of accretion on acquired loans (0.41) (0.42) (0.58) (0.42) (0.64) Yield on loans excluding accretion on acquired loans 3 5.52 % 5.48 % 5.31 % 5.50 % 5.24 % Net interest income 3 $ 104,657 $ 105,298 $ 127,153 $ 209,954 $ 258,504 Accretion on acquired loans (10,178) (10,595) (14,580) (20,773) (30,522) Net interest income excluding accretion on acquired loans 3 $ 94,479 $ 94,703 $ 112,573 $ 189,181 $ 227,982 Net interest margin 3 3.18 % 3.24 % 3.86 % 3.21 % 4.09 % Impact of accretion on acquired loans (0.30) (0.33) (0.44) (0.31) (0.49) Net interest margin excluding accretion on acquired loans 3 2.87 % 2.91 % 3.42 % 2.89 % 3.60 % Securities interest income 3 $ 24,195 $ 22,434 $ 21,018 $ 46,629 $ 40,393 Fully taxable equivalent adjustment to securities (7) (7) (23) (14) (49) Securities interest income excluding fully taxable equivalent adjustment $ 24,188 $ 22,427 $ 20,995 $ 46,615 $ 40,344 Loan interest income 3 $ 147,518 $ 147,308 $ 148,432 $ 294,825 $ 283,773 Fully taxable equivalent adjustment to loans (226) (213) (167) (438) (340) Loan interest income excluding fully taxable equivalent adjustment $ 147,292 $ 147,095 $ 148,265 $ 294,387 $ 283,433 Net interest income 3 $ 104,657 $ 105,298 $ 127,153 $ 209,954 $ 258,504 Fully taxable equivalent adjustments to securities (7) (7) (23) (14) (49) Fully taxable equivalent adjustments to loans (226) (213) (167) (438) (340) Net interest income excluding fully taxable equivalent adjustments $ 104,424 $ 105,078 $ 126,963 $ 209,502 $ 258,115 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. All yields and rates have been computed using amortized cost. Financial Condition Total assets as of June 30, 2024 were $15.0 billion, an increase of $372.4 million, or 3%, from December 31, 2023. Securities 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 June 30, 2024, the Company had $2.0 billion in AFS securities and $658.1 million in HTM securities. The Company’s total debt securities portfolio increased $108.9 million from December 31, 2023. During the first quarter of 2024, the Company recognized a $4.1 million gain on the opportunistic sale of its Visa Class B shares. The gain was offset by a partial repositioning 43 Table of Contents of the securities portfolio, in which $86.8 million of securities were sold, with $3.8 million in realized losses. During the six months ended June 30, 2024, there were $376.7 million of debt securities purchased and $167.2 million in paydowns and maturities over the same period. Debt securities generally return principal and interest monthly. The modified duration of the AFS securities portfolio and the total portfolio was 4.5 and 4.8, respectively, at June 30, 2024 compared to 4.5 and 4.9, respectively, at December 31, 2023. At June 30, 2024, AFS securities had gross unrealized losses of $228.1 million and gross unrealized gains of $3.3 million, compared to gross unrealized losses of $217.7 million and gross unrealized gains of $4.4 million at December 31, 2023. The credit quality of the Company’s securities holdings is primarily investment grade. U.S. Treasury securities, obligations of U.S. government agencies, and obligations of U.S. government sponsored entities totaled $2.2 billion, or 85%, of the total portfolio. The portfolio includes $131.3 million, with a fair value of $120.7 million, in private label residential and commercial mortgage-backed securities and collateralized mortgage obligations. Included are $121.6 million, with a fair value of $111.4 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 22%. The collateral underlying these mortgages are primarily pooled multifamily loans. The Company also has invested $267.8 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 June 30, 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. 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 June 30, 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 June 30, 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 June 30, 2024, a $24.4 million, or 0.2%, 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 and continues to be an important element of the Company’s lending strategy. The average loan size is only $345 thousand, and the average commercial loan size is only $758 thousand at June 30, 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”). 44 Table of Contents The following tables detail loan portfolio composition at June 30, 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”. June 30, 2024 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 465,950 $ 127,049 $ 535 $ 593,534 Commercial real estate - owner occupied 1,103,074 518,502 34,815 1,656,391 Commercial real estate - non-owner occupied 2,023,683 1,262,412 137,171 3,423,266 Residential real estate 1,787,664 748,736 18,920 2,555,320 Commercial and financial 1,294,592 249,604 38,094 1,582,290 Consumer 159,096 68,229 382 227,707 Totals $ 6,834,059 $ 2,974,532 $ 229,917 $ 10,038,508 December 31, 2023 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 519,426 $ 247,654 $ 542 $ 767,622 Commercial real estate - owner occupied 1,079,633 552,627 38,021 1,670,281 Commercial real estate - non-owner occupied 1,844,588 1,323,222 152,080 3,319,890 Residential real estate 1,714,748 710,129 20,815 2,445,692 Commercial and financial 1,237,090 318,683 52,115 1,607,888 Consumer 175,969 74,854 744 251,567 Totals $ 6,571,454 $ 3,227,169 $ 264,317 $ 10,062,940 The amortized cost basis of loans included net deferred costs of $45.5 million at June 30, 2024 and $43.1 million at December 31, 2023. At June 30, 2024, the remaining fair value adjustments on acquired loans were $151.4 million, or 4.5%, 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. Collateral types and characteristics of non-owner occupied commercial real estate (“CRE”) loans as of June 30, 2024 were as follows: June 30, 2024 (In thousands) Balance Balance % of Total Loans Average Loan Size 30+ Days Past Due-Accruing Non Accrual Weighted Avg LTV 1 Retail $ 1,132,190 11.3 % $ 2,190 $ — $ 2,273 50 % Office 535,178 5.3 1,538 — 2,916 54 Multifamily 5+ 408,909 4.1 2,076 — — 51 Hotel/Motel 369,211 3.7 3,692 1,641 — 49 Industrial/Warehouse 380,289 3.8 1,901 568 814 53 Other 597,489 6.0 1,043 946 6,069 51 Total $ 3,423,266 34.1 % $ 1,769 $ 3,155 $ 12,072 51 % 1 Loan-to-value is calculated based on the real estate value at the time of origination, renewal, or update, whichever is more recent. Non-owner occupied CRE loans increased by $103.4 million in the six months ended June 30, 2024, totaling $3.4 billion at June 30, 2024 compared to $3.3 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 $1.1 billion at June 30, 2024. This segment 45 Table of Contents 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 50% and an average loan size of $2.2 million. The second-largest segment in the non-owner occupied CRE portfolio is office properties, which totaled $535.2 million at June 30, 2024. This segment targets low to mid-rise suburban offices and is broadly diversified across many types of professional services. There is limited exposure to central business districts. Loans in this segment have a weighted average loan to value of 54% and an average loan size of $1.5 million. Owner-occupied CRE loans decreased by $13.9 million in the six months ended June 30, 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 decreased $25.6 million, or 2%, from December 31, 2023, totaling $1.6 billion at June 30, 2024. Residential mortgage loans increased $109.6 million to $2.6 billion during the six months ended June 30, 2024. Included in the balance as of June 30, 2024, were $984.6 million of fixed rate mortgages, $973.9 million of adjustable rate mortgages and $596.9 million in home equity loans and home equity lines of credit (“HELOCs”), compared to $1.0 billion, $865.2 million and $488.2 million, respectively, at December 31, 2023. 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 34% of the loans being in first lien position at June 30, 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 $23.9 million, or 9%, to total $227.7 million at June 30, 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. Pipelines include lines of credit at the full proposed commitment amount, which may not result in fully funded originations. Second First Second Quarter Quarter Quarter (In thousands) 2024 2024 2023 Commercial/commercial real estate loan pipeline at period end $ 743,789 $ 498,617 $ 198,984 Commercial/commercial real estate loans closed 405,957 260,032 307,430 SBA pipeline at period end 29,296 15,630 18,590 SBA originations 8,226 18,944 9,948 Residential pipeline - saleable at period end 12,095 9,279 11,492 Residential loans - sold 21,417 15,305 19,078 Residential pipeline - portfolio at period end 24,721 24,364 27,110 Residential loans - retained 42,431 51,435 85,294 Consumer pipeline at period end 24,532 25,057 28,446 Consumer originations 59,973 48,244 97,184 Commercial and commercial real estate originations during the second quarter of 2024 were $406.0 million, an increase of $145.9 million, or 56%, compared to the first quarter of 2024, and an increase of $98.5 million, or 32%, compared to the second quarter of 2023. The Company is benefiting from the investment made in recent years to attract talent from regional banks across its markets. This talent is onboarding significant new relationships, resulting in growing pipelines. Commercial and commercial real estate pipelines were $743.8 million as of June 30, 2024, an increase of 49% from $498.6 million at March 31, 2024, and an increase of 274% from $199.0 million at June 30, 2023. 46 Table of Contents SBA originations totaled $8.2 million during the second quarter of 2024, a decrease of $10.7 million compared to the first quarter of 2024, and a decrease of $1.7 million compared to the second quarter of 2023. Residential loans originated for sale in the secondary market totaled $21.4 million in the second quarter of 2024, compared to $15.3 million in the first quarter of 2024 and $19.1 million in the second quarter of 2023. Residential saleable pipelines were $12.1 million as of June 30, 2024, compared to $9.3 million as of March 31, 2024 and $11.5 million as of June 30, 2023. Residential loan production retained in the portfolio for the second quarter of 2024 was $42.4 million, compared to $51.4 million in the first quarter of 2024 and $85.3 million in the second quarter of 2023. The pipeline of residential loans intended to be retained in the portfolio was $24.7 million as of June 30, 2024, compared to $24.4 million as of March 31, 2024, and $27.1 million as of June 30, 2023. Consumer originations, which include HELOCs, totaled $60.0 million during the second quarter of 2024, compared to $48.2 million in the first quarter of 2024 and $97.2 million in the second quarter of 2023. The consumer pipeline was $24.5 million as of June 30, 2024, compared to $25.1 million as of March 31, 2024 and $28.4 million at June 30, 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 commercial real estate loan relationships greater than $10 million totaled $2.4 billion, representing 24% of the total portfolio at June 30, 2024, compared to $2.3 billion, or 23%, at December 31, 2023. The Company’s ten largest commercial and commercial real estate funded and unfunded relationships at June 30, 2024 aggregated to $546.7 million, of which $400.6 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 36% and 235%, respectively, at June 30, 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 34% and 222%, respectively, of total consolidated risk based capital as of June 30, 2024 compared to 45% and 228%, respectively, at December 31, 2023. 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. Loans to real estate investment trusts (“REITs”) and unsecured loans to developers that closely correlate to the inherent risks in CRE markets would also be considered CRE loans under the Guidance. Loans on owner-occupied CRE are generally excluded. In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida. Nonperforming Loans, Troubled Borrower Modifications, Other Real Estate Owned and Credit Quality Nonperforming assets (“NPAs”) at June 30, 2024 totaled $66.8 million, and were comprised of $59.9 million of nonaccrual loans, and $6.9 million of other real estate owned (“OREO”), including $5.7 million of branches taken out of service. Overall, NPAs decreased $5.9 million, or 8%, from $72.7 million as of December 31, 2023. Nonperforming assets to total assets at June 30, 2024 decreased to 0.45% from 0.50% at December 31, 2023. Compared to December 31, 2023, nonaccrual loans decreased $5.2 million, or 8%. Approximately 58% of nonaccrual loans were secured with real estate at June 30, 2024. Nonperforming loans to total loans outstanding at June 30, 2024 decreased to 0.60% from 0.65% at December 31, 2023. See the tables below for the payment status of nonaccrual loans. 47 Table of Contents The table below sets forth details related to nonaccrual loans. June 30, 2024 Nonaccrual Loans (In thousands) Non-Current Current Total Construction & land development $ 202 $ 1,307 $ 1,509 Commercial real estate - owner occupied 4,021 4,322 8,343 Commercial real estate - non owner occupied 4,092 7,980 12,072 Residential real estate 5,613 7,127 12,740 Commercial and financial 9,098 14,689 23,787 Consumer 1,223 253 1,476 Total $ 24,249 $ 35,678 $ 59,927 December 31, 2023 Nonaccrual Loans (In thousands) Non-Current Current Total Construction and land development $ 109 $ 715 $ 824 Commercial real estate - owner occupied 5,234 4,450 9,684 Commercial real estate - non-owner occupied 4,179 4,556 8,735 Residential real estate 3,864 6,122 9,986 Commercial and financial 7,304 27,389 34,693 Consumer 779 403 1,182 Total $ 21,469 $ 43,635 $ 65,104 In accordance with regulatory reporting requirements, loans are placed on nonaccrual following the Retail Classification of Loan interagency guidance. The accrual of interest is generally discontinued on loans, except consumer loans, that become 90 days past due as to principal or interest unless collection of both principal and interest is assured by way of collateralization, guarantees or other security. Consumer loans that become 120 days past due are generally charged off. The loan carrying value is analyzed and any changes are appropriately made as described above quarterly. 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 six months ended June 30, 2024 are included in “Note 4 - Loans”. Allowance for Credit Losses on Loans Management establishes the allowance using relevant available information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The forecasts of future economic conditions are over a period that has been deemed reasonable and supportable, and in segments where it can no longer develop reasonable and supportable forecasts, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments. The Company recorded provision expense of $4.9 million and $6.3 million, respectively, for the three and six months ended June 30, 2024, compared to $0.8 million and $30.8 million, respectively, for the three and six months ended June 30, 2023. The Company recorded net charge-offs of $9.9 million and $13.6 million, respectively, in the three and six months ended June 30, 2024, compared to $0.7 million and $3.9 million, respectively, for the three and six months ended June 30, 2023. The ratio of allowance for credit losses to total loans was 1.41% at June 30, 2024, 1.48% at December 31, 2023, and 1.58% at June 30, 2023. 48 Table of Contents Cash and Cash Equivalents and Liquidity Risk Management Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liability, as well as the risk of not being able to meet unexpected cash needs. 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 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 $749.5 million at June 30, 2024, compared to $447.2 million at December 31, 2023. Higher cash and cash equivalent balances at June 30, 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. Total uninsured deposits were estimated to be $4.1 billion at June 30, 2024, representing 34% 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 at June 30, 2024. The Company has liquidity sources as discussed below, including cash and lines of credit with the FRB and FHLB, that represent 154% of uninsured deposits, and 181% of uninsured and uncollateralized deposits. In addition to $749.5 million in cash and cash equivalents at June 30, 2024, the Company had $5.6 billion in available borrowing capacity, including $4.3 billion in available collateralized lines of credit, $944.3 million of unpledged debt securities available as collateral for potential additional borrowings, and available unsecured lines of credit of $348.0 million. The Company may also access funding by acquiring brokered deposits. Brokered deposits at June 30, 2024 totaled $325.0 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. Sources of liquidity are maintained through a portfolio of high quality marketable assets, such as residential mortgage loans, debt securities available-for-sale and interest-bearing deposits. The Company is also able to provide short-term financing of its activities by selling, under an agreement to repurchase, United States Treasury and Government agency debt securities not pledged to secure public deposits or trust funds. 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 second quarter of 2024, Seacoast Bank distributed $13.3 million to the Company and, at June 30, 2024, is eligible to distribute dividends to the Company of approximately $156.2 million without prior regulatory approval. At June 30, 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. 49 Table of Contents Deposits and Borrowings Customer relationship funding is detailed in the following table for the periods specified: June 30, December 31, (In thousands, except ratios) 2024 2023 Noninterest demand $ 3,397,918 $ 3,544,981 Interest-bearing demand 2,622,755 2,790,210 Money market 3,707,761 3,314,288 Savings 566,052 651,454 Time deposits 1,496,627 1,353,655 Brokered deposits $ 325,005 $ 122,347 Total deposits $ 12,116,118 $ 11,776,935 Securities sold under agreements to repurchase 262,103 374,573 Total customer funding 1 $ 12,053,216 $ 12,029,161 Noninterest demand deposits as % of total deposits 28 % 30 % 1 Total deposits and securities sold under agreements to repurchase, excluding brokered deposits. Securities sold under agreements to repurchase consists of customer sweep accounts. The Company benefits from a diverse and granular deposit base that serves as a significant source of strength. Total deposits increased $339.2 million, or 2.9%, to $12.1 billion at June 30, 2024 compared to December 31, 2023. Noninterest demand deposits represented 28% and 30% of total deposits at June 30, 2024 and December 31, 2023, respectively. Customer transaction account balances (noninterest demand and interest-bearing demand) represented 50% of total deposits at June 30, 2024, compared to 54% at December 31, 2023. Customer sweep accounts totaled $262.1 million at June 30, 2024, decreasing $112.5 million, or 30%, 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 June 30, 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 June 30, 2024, the average interest rate in effect on our outstanding subordinated debt related to trust preferred securities was 7.31%, 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. In 2023, the Company acquired $25.0 million in subordinated debt through the acquisition of Professional that qualifies as Tier 2 Capital. Contractual interest is paid on a semiannual basis at a fixed interest rate of 3.375% until January 30, 2027, at which point the rate converts to a 3-month SOFR rate plus 203 basis points paid quarterly. The debt was recorded at fair value, resulting in a $3.9 million discount that is being accreted into interest expense over the remaining term to maturity. Federal Home Loan Bank advances totaled $180.0 million at June 30, 2024 with a weighted average interest rate of 4.18%, compared to $50.0 million at December 31, 2023 with an interest rate of 3.23%. 50 Table of Contents Off-Balance Sheet Transactions In the normal course of business, the Company may engage in a variety of financial transactions that, under generally accepted accounting principles, either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk. Lending commitments include unfunded loan commitments and standby and commercial letters of credit. For loan commitments, the contractual amount of a commitment represents the maximum potential credit risk that could result if the entire commitment had been funded, the borrower had not performed according to the terms of the contract, and no collateral had been provided. A large majority of loan commitments and standby letters of credit expire without being funded, and accordingly, total contractual amounts are not representative of actual future credit exposure or liquidity requirements. Loan commitments and letters of credit expose the Company to credit risk in the event that the customer draws on the commitment and subsequently fails to perform under the terms of the lending agreement. For commercial customers, loan commitments generally take the form of revolving credit arrangements. For retail customers, loan commitments generally are lines of credit secured by residential property. These instruments are not recorded on the balance sheet until funds are advanced under the commitment. Unfunded commitments to extend credit were $2.7 billion at both June 30, 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 June 30, 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 June 30, 2024, the maximum amount available for transfer from Seacoast Bank to the Company in the form of loans approximated $184.5 million, if the Company has sufficient acceptable collateral. There were no loans made to affiliates during the six months ended June 30, 2024. Capital Resources The Company’s equity capital at June 30, 2024 increased $22.3 million, or 1%, from December 31, 2023 to $2.1 billion. Changes in equity included an increase from net income of $56.3 million, partially offset by the payment of common stock dividends totaling $30.8 million. The ratio of shareholders’ equity to period end total assets was 14.25% and 14.46% at June 30, 2024 and December 31, 2023, respectively. The ratio of tangible shareholders’ equity to tangible assets was 9.30% and 9.31% at June 30, 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 8.64% at June 30, 2024 and 8.68% at December 31, 2023. Activity in shareholders’ equity for the six months ended June 30, 2024 and 2023 follows: (In thousands) 2024 2023 Beginning balance at December 31, 2023 and 2022 $ 2,108,086 $ 1,607,775 Net income 56,250 43,076 Stock based compensation expense 6,105 7,096 Common stock transactions related to stock based employee benefit plans (298) 3,731 Issuance of common stock and conversion of options pursuant to acquisition — 421,042 Repurchase of common stock (880) (45) Dividends on common stock ($0.36 per share and $0.35 per share, respectively) (30,750) (29,852) Change in accumulated other comprehensive income (8,132) 1,209 Ending balance at June 30, 2024 and 2023 $ 2,130,381 $ 2,054,032 Capital ratios are well above regulatory requirements for well-capitalized institutions. Management’s use of risk-based capital ratios in its analysis of the Company’s capital adequacy are not GAAP financial measures. Seacoast’s management uses these 51 Table of Contents 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 – Regulatory Capital”). June 30, 2024 Seacoast (Consolidated) Seacoast Bank Minimum to be Well- Capitalized 1 Total Risk-Based Capital Ratio 16.20% 15.29% 10.00% Tier 1 Capital Ratio 14.79 14.08 8.00 Common Equity Tier 1 Ratio (CET1) 14.11 14.08 6.50 Leverage Ratio 11.07 10.54 5.00 1 For subsidiary bank only. 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. The appropriate federal bank regulatory authority may prohibit the payment of dividends where it has determined that the payment of dividends would be an unsafe or unsound practice. The Company is a legal entity separate and distinct from Seacoast Bank and its other subsidiaries, and the Company’s primary source of cash and liquidity, other than securities offerings and borrowings, is dividends from its bank subsidiary. Without Office of the Comptroller of the Currency (“OCC”) approval, Seacoast Bank can pay $156.2 million of dividends to the Company. The OCC and the Federal Reserve have policies that encourage banks and bank holding companies to pay dividends from current earnings, and have the general authority to limit the dividends paid by national banks and bank holding companies, respectively, if such payment may be deemed to constitute an unsafe or unsound practice. If, in the particular circumstances, either of these federal regulators determined that the payment of dividends would constitute an unsafe or unsound banking practice, either the OCC or the Federal Reserve may, among other things, issue a cease and desist order prohibiting the payment of dividends by Seacoast Bank or us, respectively. The board of directors of a bank holding company must consider different factors to ensure that its dividend level, if any, is prudent relative to the organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may occur before the payment date that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the FRB has indicated that the board of directors of a bank holding company, such as Seacoast, should consult with the FRB and eliminate, defer, or significantly reduce the bank holding company’s dividends if: (i) its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or (iii) it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. The Company has 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. The Company has seven wholly owned trust subsidiaries that have issued trust preferred stock. Trust preferred securities from acquisitions were recorded at fair value when acquired. All trust preferred securities are guaranteed by the Company on a junior subordinated basis. The FRB’s rules permit qualified trust preferred securities and other restricted capital elements to be included under Basel III capital guidelines, with limitations, and net of goodwill and intangibles. The Company believes that its trust preferred securities qualify under these revised regulatory capital rules and believes that it can treat all its trust preferred securities as Tier 1 capital. For regulatory purposes, the trust preferred securities are added to the Company’s tangible common shareholders’ equity to calculate Tier 1 capital. Critical Accounting Policies and Estimates 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 are discussed in “Note 1 – Significant Accounting Policies” in Form 10-K for the year ended December 31, 2023. Disclosures regarding the effects of new accounting pronouncements are included in “Note 1 – Basis of Presentation” in this report. There have been no changes to the Company’s critical accounting policies during 2024. 52 Table of Contents Interest Rate Sensitivity Fluctuations in interest rates may result in changes in the fair value of the Company’s financial instruments, cash flows and net interest income. This risk is managed using simulation modeling to calculate the most likely interest rate risk utilizing estimated loan and deposit growth. The objective is to optimize the Company’s financial position, liquidity, and net interest income while limiting volatility. Senior management regularly reviews the overall interest rate risk position and evaluates strategies to manage the risk. The Company's Asset and Liability Management Committee (“ALCO”) uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. 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 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 July 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 Net Interest Income June 30, 2024 Change in Interest Rates 1-12 months 13-24 months +2.00% (9.5)% (8.0)% +1.00% (4.2)% (3.3)% Current —% —% -1.00% 0.8% (0.4%) -2.00% 1.1% (2.3%) The computations of interest rate risk do not necessarily include certain actions management may undertake to manage this risk in response to changes in interest rates. Management may adjust asset or liability pricing or structure in order to manage interest rate risk through an interest rate cycle. This may include the use of investment portfolio purchases or sales or the use of derivative financial instruments, such as interest rate swaps, options, caps, floors, futures or forward contracts. Effects of Inflation and Changing Prices The condensed consolidated financial statements and related financial data presented herein have been prepared in accordance with U.S. GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money, over time, due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the general level of inflation. However, inflation affects financial institutions by increasing their cost of goods and services purchased, as well as the cost of salaries and benefits, occupancy expense, and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings, and shareholders’ equity. 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.