Seacoast Reports First Quarter 2023 Results

Well-Positioned $15 Billion Balance Sheet with Strong Capital and Liquidity

Strong Deposit Franchise with Granular, Longstanding Customer Base

Completes Acquisition of Professional Holding Corp.

STUART, Fla., April 27, 2023 (GLOBE NEWSWIRE) -- Seacoast Banking Corporation of Florida ("Seacoast" or the "Company") (NASDAQ: SBCF) today reported net income in the first quarter of 2023 of $11.8 million, or $0.15 per diluted share, including $17.5 million in combined merger-related costs for the acquisitions of both Drummond Banking Company (“Drummond”) and Professional Holding Corp. (“Professional”). Adjusted net income¹ for the first quarter of 2023 was $29.2 million, or $0.36 per diluted share. The first quarter results included recording a day-1 provision for credit losses of $26.6 million upon the acquisition of Professional Holding Corp.

Pre-tax pre-provision earnings¹ were $46.3 million in the first quarter of 2023, an increase of 1% compared to the fourth quarter of 2022 and an increase of 40% compared to the first quarter of 2022. Adjusted pre-tax pre-provision earnings¹ were $71.1 million in the first quarter of 2023, an increase of 7% compared to the fourth quarter of 2022 and an increase of 70% compared to the first quarter of 2022.

Charles M. Shaffer, Seacoast's Chairman and CEO said, "Seacoast delivered another quarter of strong financial performance, with continued solid growth in pre-tax pre-provision earnings. We closed on our acquisition of Professional, increasing Seacoast’s market share in the attractive and fast-growing South Florida market.”

Shaffer added, “Recent events in the banking industry nationally emphasize the importance of Seacoast’s strong deposit franchise, disciplined credit and conservative balance sheet principles. Over our 96-year history, Seacoast has focused on executing a balanced growth strategy that emphasizes a relationship-driven approach to customer acquisition. This, in turn, has produced a granular and diverse loan portfolio and a broadly diversified and stable funding base. We today serve more than 270,000 customers in a wide variety of segments and industries, including consumers, small businesses, middle market operating companies, municipalities, and other governmental entities.”

"We have never chased transactional business and have instead, carefully constructed our balance sheet by building strong customer relationships and avoiding lending or deposit concentrations. Our relationship-focused strategy is supported by a robust balance sheet. Our common equity tier 1 ratio was 12.80% at March 31, 2023, and the ratio of tangible common equity to tangible assets was 8.4%. Even after adjusting all held-to-maturity securities to fair value, our tangible common equity to tangible assets ratio is a very strong 7.8%. Our liquidity position is also strong with a loan-to-deposit ratio of 82%, allowing balance sheet flexibility as we move forward."

"Seacoast will maintain its commitment to our fortress balance sheet, demonstrating resilience while continuing to serve our customers and generating value for our shareholders over the long term," Shaffer concluded.

Acquisitions Update

On January 31, 2023, the Company acquired Professional, the sixth largest bank headquartered in South Florida. Direct merger-related costs totaled $8.1 million, the day-1 provision for credit losses on loans was $26.6 million, and the day-1 provision for credit losses on unfunded commitments was $1.0 million. Full integration and system conversion activities are expected to be completed late in the second quarter of 2023, and merger-related expense synergies are expected to be realized starting in the third quarter of 2023.

In February 2023, we successfully completed the integration of Drummond, which was acquired in October 2022, incurring conversion-related costs of $9.5 million in the first quarter of 2023.

Financial Results

Income Statement

• Net income was $11.8 million, or $0.15 per diluted share, for the first quarter of 2023 compared to net income of $23.9 million, or $0.34 per diluted share, for the prior quarter, and $20.6 million, or $0.33 per diluted share, for the prior year quarter. The first quarter 2023 results included $26.6 million in provision for credit losses on loans acquired in the Professional acquisition. Adjusted net income¹ for the first quarter of 2023 was $29.2 million, or $0.36 per diluted share, compared to $39.9 million, or $0.56 per diluted share, for the prior quarter, and $27.1 million, or $0.44 per diluted share, for the prior year quarter.
• Net revenues were $153.6 million in the first quarter of 2023, an increase of $16.2 million, or 12%, compared to the prior quarter, and an increase of $61.7 million, or 67%, compared to the prior year quarter. Adjusted revenues¹ were $151.4 million in the first quarter of 2023, an increase of $14.0 million, or 10%, compared to the prior quarter, and an increase of $59.0 million, or 64%, compared to the prior year quarter.
• On an adjusted basis, pre-tax pre-provision earnings¹ were $71.1 million, an increase of 7% compared to the fourth quarter of 2022 and an increase of 70% compared to the first quarter of 2022.
• Net interest income totaled $131.2 million in the first quarter of 2023, an increase of $11.4 million, or 10%, from the fourth quarter of 2022 and an increase of $54.6 million, or 71%, compared to the first quarter of 2022.
• Net interest margin decreased only five basis points to 4.31% in the first quarter of 2023 compared to 4.36% in the fourth quarter of 2022. The decline in the net interest margin from the prior quarter was driven by the continued effect of an inverted yield curve, and additional excess liquidity added to the balance sheet late in the quarter. Securities yields increased eight basis points to 2.85%, and loan yields increased 57 basis points to 5.86%. The cost of deposits increased to 77 basis points for the first quarter of 2023 compared to 21 basis points in the prior quarter. The effect on net interest margin of accretion on purchase discounts on acquired loans in the first quarter of 2023 was 53 basis points, compared to 35 basis points in the fourth quarter of 2022.
• Noninterest income totaled $22.4 million in the first quarter of 2023, an increase of $4.8 million, or 27%, compared to the prior quarter, and an increase of $7.1 million, or 46%, compared to the prior year quarter. Results for the first quarter of 2023 included the following:
  • Service charges on deposits increased $0.2 million, or 6%, compared to the prior quarter and $1.4 million, or 51%, year over year, reflecting the benefit of an expanded deposit base including from acquisitions.
  • The wealth management division continues to demonstrate notable success in building relationships, and during the first quarter of 2023, income increased $0.2 million, or 6%, compared to the prior quarter and $0.4 million, or 15%, compared to the prior year quarter. The group added another $123 million in assets under management in the first quarter of 2023, bringing overall total assets under management to $1.5 billion, up 24% from the prior year.
  • Insurance agency income increased $0.3 million, or 37% compared to the prior quarter. 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.
  • Other income increased by $3.3 million compared to the prior quarter, including $2.1 million in bank owned life insurance (“BOLI”) death benefits, an increase of $0.4 million in SBIC income, and an increase of $0.3 million in loan swap-related income. The BOLI death benefits were removed from the presentation of adjusted results.
• The provision for credit losses was $31.6 million in the first quarter of 2023, compared to $14.1 million in the fourth quarter of 2022 and $6.6 million in the first quarter of 2022. Contributing to the provision in each quarter was an increase related to loans acquired through bank acquisitions, representing $26.6 million, $15.0 million, and $5.1 million, respectively. The provision for credit losses in the first quarter of 2023 on the Professional acquisition is in line with the allowance coverage rate expected at the announcement of the transaction.

• Noninterest expense was $107.5 million in the first quarter of 2023, an increase of $16.0 million, or 17%, compared to the prior quarter, and an increase of $48.6 million, or 82%, compared to the prior year quarter. The first quarter of 2023 included $17.5 million of merger-related expenses, compared to $16.1 million in the prior quarter and $6.7 million in the prior year quarter. Changes compared to the fourth quarter of 2022 included:
  • Salaries and wages increased $2.2 million to $47.6 million in the first quarter of 2023. The first quarter of 2023 included $4.2 million in merger-related expenses, compared to $5.7 million in the fourth quarter of 2022. Excluding merger-related expenses, the increase in the first quarter of 2023 is the result of the net addition of branch locations and associates, as well as new bankers and operational staff associated with the acquisitions.
  • Employee benefits increased $3.3 million to $8.6 million in the first quarter of 2023, reflecting higher seasonal payroll taxes, 401(k) contributions and healthcare-related costs attributed to higher headcount.
  • Outsourced data processing costs increased $4.6 million to $14.6 million in the first quarter of 2023. The first quarter of 2023 included $6.6 million in merger-related expenses, compared to $2.6 million in the fourth quarter of 2022.
  • Occupancy, telephone and data lines, and furniture and equipment expenses collectively increased $1.7 million to $10.3 million in the first quarter of 2023, reflecting the expansion of the footprint across Florida.
  • Legal and professional fees decreased by $1.7 million to $7.5 million in the first quarter of 2023, and included $4.8 million in merger-related expenses during the first quarter of 2023 and $6.5 million in the fourth quarter of 2022.
  • Amortization of intangibles increased by $2.0 million with the addition of $48.9 million in core deposit intangible assets from the acquisition of Professional. These assets will be amortized using an accelerated amortization method.
  • Provision for credit losses on unfunded commitments includes $1.0 million associated with the acquisition of Professional.
• Seacoast recorded $2.7 million of income tax expense in the first quarter of 2023, compared to $7.8 million in the fourth quarter of 2022, and $5.8 million in the first quarter of 2022, with an effective tax rate of 18.6%, 24.6% and 22.1%, respectively. The first quarter of 2023 included a discrete benefit of $0.6 million related to the BOLI distribution which, combined with lower overall pre-tax income, resulted in a lower effective tax rate when compared to prior quarters. Tax benefits related to stock-based compensation totaled $0.2 million in the first quarter of 2023, $0.2 million in the fourth quarter of 2022, and $0.5 million in the first quarter of 2022. The presentation of adjusted results excludes the discrete benefit associated with BOLI, and applies an incremental tax rate of 25.3% on adjusted expenses. The resulting effective tax rate on adjusted net income¹ is 22.7%.
• The ratio of net adjusted noninterest expense¹ to average tangible assets was 2.47% in the first quarter of 2023, compared to 2.42% in the fourth quarter of 2022 and 1.99% in the first quarter of 2022. The increase in the ratio reflects additional costs carried prior to full integration of recent acquisitions, which will occur in the second quarter of 2023. We expect the benefit of merger-related expense synergies to be fully reflected beginning in the third quarter of 2023.
• The efficiency ratio was 65.43% in the first quarter of 2023, compared to 63.39% in the fourth quarter of 2022 and 62.33% in the prior year quarter. The adjusted efficiency ratio¹ was 53.10% in the first quarter of 2023, compared to 51.52% in the fourth quarter of 2022 and 54.86% in the prior year quarter. The Company continues to remain keenly focused on disciplined expense control and expects to benefit from merger-related expense synergies beginning in the third quarter of 2023.

Balance Sheet

• At March 31, 2023, the Company had total assets of $15.3 billion and total shareholders' equity of $2.1 billion. Book value per share was $24.24 on March 31, 2023, compared to $22.45 on December 31, 2022, and $22.15 on March 31, 2022. Tangible book value per share totaled $14.25 on March 31, 2023 compared to $14.69 on December 31, 2022 and $17.12 on March 31, 2022.

• Debt securities totaled $2.8 billion on March 31, 2023, an increase of $134.7 million, or 5%, compared to December 31, 2022. Debt securities include approximately $2.0 billion in securities held at fair value and classified as available for sale. The unrealized loss on these securities is fully reflected in the value presented on the balance sheet. The portfolio also includes $738 million in securities classified as held to maturity with a fair value of $618.8 million. Held-to-maturity securities consist solely of mortgage-backed securities and collateralized mortgage obligations guaranteed by U.S. government agencies, 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 and has the intent and ability to hold these investments to maturity.

• Loans totaled $10.1 billion on March 31, 2023, an increase of $2.0 billion compared to December 31, 2022. The increase includes loans acquired of $2.0 billion from Professional. The Company continues to exercise a disciplined approach to lending, carefully underwriting loans to strict underwriting guidelines. Removing the loans acquired with the Professional transaction, loans outstanding increased $13 million compared to December 31, 2022.

• Loan originations were $485.2 million in the first quarter of 2023, a decrease of 25% compared to $649.2 million in the fourth quarter of 2022.
  • Commercial originations were $321.7 million during the first quarter of 2023, compared to $489.6 million in the fourth quarter of 2022, and $373.0 million in the first quarter of 2022.
  • Consumer originations in the first quarter of 2023 were $59.5 million, compared to $74.6 million in the fourth quarter of 2022, and $79.0 million in the first quarter of 2022.
  • Residential loans originated for sale in the secondary market totaled $13.9 million in the first quarter of 2023, compared to $10.7 million in the fourth quarter of 2022, and $51.2 million in the first quarter of 2022.
  • Closed residential loans retained in the portfolio totaled $90.1 million in the first quarter of 2023, compared to $74.3 million in the fourth quarter of 2022, and $175.5 million in the first quarter of 2022.

• Pipelines (loans in underwriting and approval or approved and not yet closed) totaled $364.0 million on March 31, 2023, a decrease of 20% from December 31, 2022, and a decrease of 54% from March 31, 2022.
  • Commercial pipelines were $297.4 million as of March 31, 2023, a decrease of 25% from $395.7 million at December 31, 2022, and a decrease of 52% from $619.5 million at March 31, 2022. The decline in pipeline quarter over quarter was the result of the impact of higher rates on new production volumes and a more selective approach on new credit facilities given a cautious economic outlook.
  • Consumer pipelines were $11.6 million as of March 31, 2023, a decrease of 68% from $36.6 million at December 31, 2022, and a decrease of 81% from $61.6 million at March 31, 2022. We expect consumer demand to be lower moving forward as a result of higher rates.
  • Residential saleable pipelines were $6.6 million as of March 31, 2023, compared to $4.2 million at December 31, 2022, and $25.7 million at March 31, 2022. Retained residential pipelines were $48.4 million as of March 31, 2023, compared to $17.1 million at December 31, 2022, and $88.0 million at March 31, 2022. We have seen an increase in pipelines in residential lending during the first quarter of 2023 as a result of mortgage rates moving lower in conjunction with a declining 10-year Treasury rate.
• Total deposits were $12.3 billion as of March 31, 2023, an increase of $2.3 billion, or 23%, compared to December 31, 2022, and an increase of $3.1 billion, or 33%, compared to March 31, 2022. The increase in the first quarter of 2023 includes $2.1 billion in deposits from the acquisition of Professional.
  
  Seacoast’s granular, longstanding deposit base is a hallmark of our franchise, and in the current environment its stability serves as a significant source of strength. The Company has continued to manage deposit pricing lower than competitors, and with an average loan-to-deposit ratio of 82% during the quarter, maintains balance sheet flexibility.
  • Excluding the deposits acquired through the Professional acquisition, deposits outstanding increased $295.0 million during the quarter.
  • At March 31, 2023, transaction account balances represented 59% of overall deposits, which continues to aid the Company’s ability to maintain a consistently low cost of deposits.
  • The overall cost of deposits increased 56 basis points from the prior quarter to 77 basis points. The increase is a result of the Professional acquisition and an increasingly competitive market for deposits.
  • Noninterest bearing demand deposits represent 37% of overall deposits. This is amongst the upper quartile in the industry.
  • Average deposits per banking center were $148 million at March 31, 2023 compared to $128 million at December 31, 2022.
  • Net organic customer growth in the month of March 2023 was at the highest level since 2020.
  • Uninsured deposits represented only 36% 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 32% of total deposits. The Company has liquidity sources including cash and lines of credit with the Federal Reserve and Federal Home Loan Bank that represent 141% of uninsured deposits, and 163% of uninsured and uncollateralized deposits.
  • Consumer deposits represent 40% of overall deposit funding with an average consumer customer balance of $22 thousand. Commercial deposits represent 60% of overall deposit funding with an average business customer balance of $101 thousand.
  • During the first quarter of 2023, approximately $100 million in customer deposits migrated to customer sweep accounts.
• The Company increased borrowings to bolster its liquidity position during the quarter. Federal Home Loan Bank advances totaled $385.0 million at March 31, 2023 with a weighted average interest rate of 4.26%. Also during the first quarter of 2023, Seacoast assumed subordinated debt in the acquisition of Professional, with an outstanding principal amount of $25.0 million and estimated fair value of $21.1 million. The acquired debt carries a fixed interest rate of 3.375% until 2027, and thereafter converts to a floating rate note until maturity in 2032.
  • In the aggregate, borrowed funds, including FHLB advances, subordinated debt, and brokered deposits represent only 6.9% of total liabilities as of March 31, 2023.

Asset Quality

• Credit metrics remain strong with charge-offs, non-accruals, and criticized assets at historically low levels. The Company remains diligent in its monitoring of these metrics, as well as changes in the broader economic environment.
• Nonperforming loans were $50.8 million at March 31, 2023. Nonperforming loans to total loans outstanding were 0.50% at March 31, 2023, 0.35% at December 31, 2022, and 0.41% at March 31, 2022.
• Nonperforming assets to total assets increased to 0.38% at March 31, 2023, compared to 0.26% at December 31, 2022, and 0.35% at March 31, 2022. During the first quarter of 2023, $5.5 million in former branch properties were transferred into other real estate owned as a result of branch consolidation.
• The ratio of allowance for credit losses to total loans was 1.54% at March 31, 2023, 1.40% at December 31, 2022, and 1.39% at March 31, 2022. The increase in the allowance was primarily the result of the Professional acquisition and is in line with the coverage rate expected at the announcement of the transaction.

• Net charge-offs of $3.2 million for the first quarter of 2023 compared to $0.8 million in the fourth quarter of 2022 and $0.1 million in the first quarter of 2022. Net charge-offs for the four most recent quarters averaged 0.05%.
• Portfolio diversification, in terms of asset mix, industry, and loan type, has been a critical element of the Company's lending strategy. Exposure across industries and collateral types is broadly distributed. Seacoast's average loan size is $289 thousand, and the average commercial loan size is $717 thousand, reflecting an ability to maintain granularity within the overall loan portfolio.
• Construction and land development and commercial real estate loans remain well below regulatory guidance at 48% and 258% of total bank-level risk-based capital, respectively, compared to 45% and 230%, respectively, at December 31, 2022. On a consolidated basis, construction and land development and commercial real estate loans represent 44% and 236%, respectively, of total consolidated risk-based capital.
  

Capital and Liquidity

• The Company continues to operate with a fortress balance sheet, with a tier 1 capital ratio at March 31, 2023, of 13.8% compared to 14.8% at December 31, 2022, and 16.8% at March 31, 2022. The total capital ratio was 15.0%, the common equity tier 1 capital ratio was 12.8%, and the tier 1 leverage ratio was 11.7% at March 31, 2023. The Company is considered “well capitalized” based on applicable U.S. regulatory capital ratio requirements.
• In April 2023, the Company announced an increase to its common share dividend by $0.01 to $0.18 per share.
• Cash and cash equivalents at March 31, 2023 totaled $791.2 million.
• Our Board of Directors has approved a share repurchase program of up to $100 million in shares of the Company’s common stock. No shares were repurchased during the quarter, and 100% of the shares pursuant to the program remain available.
• The Company’s loan to deposit ratio was 82% at March 31, 2023, providing liquidity and flexibility moving forward.
• Tangible common equity to tangible assets was 8.36% at March 31, 2023, compared to 9.08% at December 31, 2022, and 9.89% at March 31, 2022. If all held-to-maturity securities were adjusted to fair value, the tangible common equity ratio would have been 7.77%.
• At March 31, 2023, in addition to $0.8 billion in cash, the Company had $5.6 billion in available borrowing capacity, including $4.6 billion in available collateralized lines of credit, $0.7 billion of unpledged debt securities available as collateral for potential additional borrowings, and available unsecured lines of credit of $0.3 billion. These liquidity sources as of March 31, 2023 represented 163% of uninsured and uncollateralized deposits.

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

¹Non-GAAP measure, see “Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.
²The Company defines tangible assets as total assets less intangible assets, and tangible common equity as total shareholders' equity less intangible assets.
³Common shares outstanding multiplied by closing bid price on last day of each period.

OTHER INFORMATION

Conference Call Information
Seacoast will host a conference call April 28^th, 2023 at 10:00 a.m. Eastern Time, to discuss the first quarter 2023 earnings results and business trends. Investors may call in (toll-free) by dialing (800) 949-8476. Charts will be used during the conference call and may be accessed at Seacoast’s website at www.SeacoastBanking.com by selecting “Presentations” under the heading “News/Events.” Additionally, a recording of the call will be made available to individuals shortly after the conference call and can be accessed via a link at www.SeacoastBanking.com under the heading “Corporate Information.” The recording will be available for one year.

About Seacoast Banking Corporation of Florida (NASDAQ: SBCF)
Seacoast Banking Corporation of Florida (NASDAQ: SBCF) is one of the largest community banks headquartered in Florida with approximately $15.3 billion in assets and $12.3 billion in deposits as of March 31, 2023. Seacoast provides integrated financial services including commercial and consumer banking, wealth management, and mortgage services to customers at over 80 full-service branches across Florida, and through advanced mobile and online banking solutions. Seacoast National Bank is the wholly-owned subsidiary bank of Seacoast Banking Corporation of Florida. For more information about Seacoast, visit www.SeacoastBanking.com.

Tracey L. Dexter
Chief Financial Officer
Seacoast Banking Corporation of Florida
(772) 403-0461

Cautionary Notice Regarding Forward-Looking Statements

This press release contains “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”), including, without limitation, statements about future financial and operating results, cost savings, enhanced revenues, economic and seasonal conditions in the Company’s markets, and improvements to reported earnings that may be realized from cost controls, tax law changes, new initiatives and for integration of banks that the Company has acquired, including Professional Holding Corp., or expects to acquire, as well as statements with respect to Seacoast's objectives, strategic plans, expectations and intentions and other statements that are not historical facts. Actual results may differ from those set forth in the forward-looking statements.

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 future results, performance or achievements expressed or implied by such forward-looking statements. You should not expect the Company to update any 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", "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 (including the velocity of loan repayment) 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; 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 and the possibility that the U.S. could default on its debt obligations; 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; changes in accounting policies, rules and practices; changes in retail distribution strategies, customer preferences and behavior generally and as a result of economic factors; 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; 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; 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; 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; 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, 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, including as a result of the Company’s participation in the Paycheck Protection Program (“PPP”); 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 establishment of reserves for possible 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.

The risks relating to the merger with Professional Holding Corp. include, without limitation: the diversion of management's time on issues related to the merger; unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following the mergers being lower than expected; the risk of deposit and customer attrition; regulatory enforcement and litigation risk; any changes in deposit mix; unexpected operating and other costs, which may differ or change from expectations; the risks of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees; increased competitive pressures and solicitations of customers by competitors; as well as the difficulties and risks inherent with entering new markets.

All written or oral forward-looking statements attributable to us 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, 2022 under "Special Cautionary Notice Regarding Forward- Looking Statements" and "Risk Factors", and otherwise in the Company’s SEC reports and filings. Such reports are available upon request from the Company, or from the Securities and Exchange Commission, including through the SEC's Internet website at www.sec.gov.

Explanation of Certain Unaudited Non-GAAP Financial Measures

This presentation contains financial information determined by methods other than Generally Accepted Accounting Principles (“GAAP”). 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.