UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from _______ to _________
Commission File No. 0-13660
Seacoast Banking Corporation of Florida
(Exact Name of Registrant as Specified in its Charter)
Florida
(State or Other Jurisdiction of
Incorporation or Organization)
815 Colorado Avenue,
Stuart
FL
(Address of Principal Executive Offices)
59-2260678
(I.R.S. Employer
Identification No.)
34994
(Zip Code)
(772) 287-4000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
SBCF
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
☒ Yes ☐ No
☐ Yes ☒ No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ Yes ☐ No
☒ Yes ☐ No
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the
effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).☐ Yes ☒ No
The aggregate market value of Seacoast Banking Corporation of Florida common stock, par value $0.10 per share, held by non-
affiliates, computed by reference to the price at which the stock was last sold on June 30, 2020, as reported on the NASDAQ
Global Select Market, was $1,081,009,362. The number of shares outstanding of Seacoast Banking Corporation of Florida
common stock, par value $0.10 per share, as of January 31, 2021, was 55,249,870.
☒ Yes ☐ No
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s Proxy Statement for the 2021 Annual Meeting of Shareholders (the “2021 Proxy Statement”)
are incorporated by reference into Part III, Items 10 through 14 of this report. Other than those portions of the 2021 Proxy
Statement specifically incorporated by reference herein pursuant to Items 10 through 14, no other portions of the 2021 Proxy
Statement shall be deemed so incorporated.
Part I
Part II
Part III
Part IV
TABLE OF CONTENTS
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
Item 5.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Item 15.
Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary
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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 any
of which may be impacted by the COVID-19 pandemic and related effects on the U.S. economy, 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,”
“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:
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the effects of future economic and market conditions, including seasonality;
the adverse effects of COVID-19 (economic and otherwise) on the Company and its customers, counterparties,
employees, and third-party service providers, and the adverse impacts to our business, financial position, results of
operations, and prospects;
government or regulatory responses to the COVID-19 pandemic;
governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal
Reserve (“Federal Reserve”), as well as legislative, tax and regulatory changes;
changes in accounting policies, rules and practices, including the impact of the adoption of the current expected credit
losses (“CECL”) methodology;
our participation in the Paycheck Protection Program (“PPP”);
the risks of changes in interest rates on the level and composition of 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; uncertainty related to the impact of LIBOR
calculations on securities, loans and debt;
changes in borrower credit risks and payment behaviors, including as a result of the financial impact of COVID-19;
changes in retail distribution strategies, customer preferences and behavior;
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 ability to
comply with any regulatory requirements;
the effects of problems encountered by other financial institutions that adversely affect Seacoast or the banking
industry;
Seacoast's concentration in commercial real estate loans and in real estate collateral in the state of Florida;
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;
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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 and successfully acquire and integrate desirable financial institutions;
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 as a result of employees working
remotely;
inability of Seacoast's risk management framework to manage risks associated with the 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 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, 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 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 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; 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.
Given the many unknowns and risks being heavily weighted to the downside, our forward-looking statements are subject to the
risk that economic conditions will be substantially different in the future. If efforts to contain COVID-19 are delayed and
restrictions on movement last into the second half of 2021 and beyond, the recession could be longer and more severe.
Ineffective fiscal stimulus, or an extended delay in implementing it, are also major downside risks. The deeper the recession is,
and the longer it lasts, the more it will damage consumer fundamentals and sentiment. This could both prolong the recession,
and/or make any recovery weaker. Similarly, the recession could damage business fundamentals. COVID-19 and its related
economic impact, including the impact of measures to manage it, have had and are likely to continue to have an adverse effect,
possibly materially, on Seacoast's business and financial performance by adversely affecting, possibly materially, the demand
and profitability of the Company's products and services, the valuation of assets and its ability to meet the needs of its
customers.
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. 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.
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Item 1. Business
General
Part I
Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) is a financial holding company, incorporated in
Florida in 1983, and registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). Its principal
subsidiary is Seacoast National Bank, a wholly-owned national banking association (“Seacoast Bank”), which commenced its
operations in 1933.
As of December 31, 2020, the Company’s legal structure also included seven trusts formed for the purpose of issuing trust
preferred securities. Seacoast Bank has three wholly-owned subsidiaries. Through one of these subsidiaries, Seacoast Bank has
a controlling interest in a real estate investment trust (“REIT”). Unrelated investors own a noncontrolling interest in the
preferred stock of the REIT. Seacoast Bank also provides brokerage and annuity services. Seacoast Bank personnel managing
the sale of these services are dual employees with LPL Financial, the company through which Seacoast Bank presently
conducts brokerage and annuity services. In 2018, the Company established Seacoast Insurance Services, Inc., providing
customers with access to a range of insurance products.
As of December 31, 2020, Seacoast had total consolidated assets of $8.3 billion, total deposits of $6.9 billion, total consolidated
liabilities, including deposits, of $7.2 billion and consolidated shareholders’ equity of $1.1 billion. Operations are discussed in
more detail under “Item 7. Management’s Discussion and Analysis of Consolidated Financial Condition and Results of
Operations.”
Seacoast has grown to be one of the largest community banks headquartered in Florida. This growth has been achieved through
a balanced strategy consisting of organic growth and acquisitions in the state's most attractive markets. The Company provides
integrated financial services including commercial and retail banking, wealth management and mortgage services to customers
through advanced banking solutions and Seacoast Bank's network of 51 traditional branches and stand-alone commercial
banking centers. Seacoast operates primarily in Florida, with concentrations in the state's fastest growing markets, each with
unique characteristics and opportunities that support the Company's strategy of organic growth and attractive acquisitions.
Seacoast Bank customers can also access their account information and perform transactions online, through mobile
applications, or through Seacoast Bank's telephone customer support center, which offers extended hours. These options,
combined with a traditional branch footprint, meet a broad range of customer needs.
Available Information
The Company's principal offices are located at 815 Colorado Avenue, Stuart, Florida 34994, and the telephone number at that
address is (772) 287-4000. The Company and Seacoast Bank maintain Internet websites at www.seacoastbanking.com and
www.seacoastbank.com, respectively. The information on these websites is not part of this report and neither of these websites
nor the information appearing on these websites is included or incorporated in this report.
Seacoast makes available, free of charge on its corporate website, its Annual Report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
Expansion of Market and Competition
Seacoast has in recent years sought to complement organic growth with the acquisition of financial institutions that support the
Company's strategy and expand its ability to serve customers in Florida's key markets. Since 2014, Seacoast has acquired ten
institutions that have enhanced the Company's presence in the strongest and fastest growing MSAs in Florida, including two
acquisitions in 2020; First Bank of the Palm Beaches (“FBPB”) in March 2020 and Fourth Street Banking Company (“Fourth
Street”) and Fourth Street’s wholly owned subsidiary bank, Freedom Bank, in August 2020. FBPB and Freedom Bank operated
two branches in the Palm Beach market and two branches in the St. Petersburg market, respectively. The Company expects
these acquisitions to enhance its presence in those markets, expand its customer base, leverage operating costs through
economies of scale, and positively affect the Company’s operating results.
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In 2020, the Company added business bankers across key markets, invested in technology to improve banker productivity in
both office and remote environments, and enhanced customer self-service. Seacoast has continued to expand digital offerings to
provide an improved customer experience and lower the cost to serve, as well as to meet the ever-changing needs of its
customer base during the COVID-19 pandemic, which has influenced how customers interact with Seacoast and accelerated the
shift to digital banking for many customer segments.
Seacoast operates in a highly competitive market. Competitors range in both size and geographic footprint. Seacoast operates
throughout Florida from the southeast, including Fort Lauderdale, Boca Raton and Palm Beach, north along the east coast to the
Daytona area, into Orlando and Central Florida and the adjacent Tampa market, and west to Okeechobee and surrounding
counties. Seacoast Bank's competition includes not only other banks of comparable or larger size in the same markets, but also
various other nonbank financial institutions, including savings and loan associations, credit unions, mortgage companies,
personal and commercial financial companies, peer to peer lending businesses, investment brokerage and financial advisory
firms and mutual fund companies. Seacoast Bank competes for deposits, commercial, fiduciary and investment services and
various types of loans and other financial services. Seacoast Bank also competes for interest-bearing funds with a number of
other financial intermediaries, including brokerage and insurance firms, as well as investment alternatives, including mutual
funds, governmental and corporate bonds, and other securities. Continued consolidation and rapid technological changes within
the financial services industry will likely change the nature and intensity of competition, but should also create opportunities for
the Company to demonstrate and leverage its competitive advantages.
Competitors include not only financial institutions based in Florida, but also a number of large out-of-state and foreign banks,
bank holding companies and other financial institutions that have an established market presence in Florida or that offer
internet-based products. Many of the Company's competitors are engaged in local, regional, national and international
operations and have greater assets, personnel and other resources. Some of these competitors are subject to less regulation and/
or more favorable tax treatment. Many of these institutions have greater resources, broader geographic markets and higher
lending limits, and may offer services that the Company does not offer. In addition, these institutions may be able to better
afford and make broader use of media advertising, support services, and electronic and other technology. To offset these
potential competitive disadvantages, the Company depends on its reputation for superior service, ability to make credit and
other business decisions quickly, and the delivery of an integrated distribution of traditional branches and bankers, with digital
technology.
Human Capital
As of December 31, 2020, the Company and its subsidiaries employed 965 full time-equivalent employees. Any discussion of
the past year must be framed within the context of the COVID-19 pandemic and its impact on our employees and communities.
Our priority in addressing the pandemic thus far has been to carefully adjust our physical operations to protect the health and
welfare of our associates and customers while providing continuous access to banking services. We shifted branch operations to
remain open by drive-thru or lobby appointment only for part of 2020, implemented enhanced cleaning and protection
protocols, and our operational teams continue to work remotely or in staggered shifts. Recognizing the challenges that the
pandemic has brought to all of our personal and professional lives, and the related impact on our team, we have implemented
various programs to support our associates’ well-being. These include bonuses for retail and lending associates, who have kept
critical functions operating at full capacity, and an employee assistance program that provides short-term counseling and other
wellness resources.
Seacoast invests in its employees for the long term. To empower associates to achieve their potential and enable their success,
we provide a variety of professional development programs, opportunities, and resources. Among these is the Seacoast
Manager Excellence Program, which was recently recognized by American Banker when they named Seacoast one of 2020’s
Best Banks to Work For. This program supports associates as they progress from individual contributor to manager, focusing on
creating purpose, driving results, developing talent, and leading change.
Seacoast believes that a culture of inclusion and diversity enhances its entire workforce. Seacoast strives to make inclusion a
hallmark of our culture, engaging associates in our Associate Resource Group (“ARG”) programs led by and comprised of
associates who have diverse backgrounds and experiences, and who share a common interest in professional development,
improving corporate culture, and building stronger communities. Currently, Seacoast ARGs include Black Associates and
Allies Network (“BAAN”), LGBTQ+, Veterans, and Women Mean Business. Each is sponsored and supported by senior
leaders across the enterprise. The Company also commits to having a diverse talent pipeline by partnering with its business
units in their efforts to recruit diverse talent across all leadership and skill areas.
The Company considers employee relations to be favorable, and has no collective bargaining agreements with any employees.
We believe our ability to attract and retain employees is a key to our success. Accordingly, we implemented, in July 2018, a
$15 per hour minimum pay rate company-wide. We continue to strive to offer competitive salaries and employee benefits
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including, among others, paid vacation time, medical, dental and vision insurance benefits, 401(k) plan with company match,
tuition assistance, and an employee stock purchase plan.
Supervision and Regulation
The Company is extensively regulated under federal and state law. The following is a brief summary that does not purport to be
a complete description of all regulations that affect the Company or all aspects of those regulations. This discussion is qualified
in its entirety by reference to the particular statutory and regulatory provisions described below and is not intended to be an
exhaustive description of the statutes or regulations applicable to the Company’s and Seacoast Bank’s business. In addition,
proposals to change the laws and regulations governing the banking industry are frequently raised at both the state and federal
levels. The likelihood and timing of any changes in these laws and regulations, and the impact such changes may have on the
Company and Seacoast Bank, are difficult to predict. In addition, bank regulatory agencies may issue enforcement actions,
policy statements, interpretive letters and similar written guidance applicable to the Company or Seacoast Bank. Changes in
applicable laws, regulations or regulatory guidance, or their interpretation by regulatory agencies or courts may have a material
adverse effect on the Company and Seacoast Bank’s business, operations, and earnings. Supervision and regulation of banks,
their holding companies and affiliates is intended primarily for the protection of depositors and customers, the Deposit
Insurance Fund (“DIF”) of the Federal Deposit Insurance Corporation (“FDIC”), and the U.S. banking and financial system
rather than holders of the Company's capital stock.
Regulation of the Company: The Company is registered as a bank holding company with the Federal Reserve under the Bank
Holding Company Act of 1956, as amended (the “BHC Act”) and has elected to be a financial holding company. As such, the
Company is subject to comprehensive supervision and regulation by the Federal Reserve and to its regulatory reporting
requirements. Federal law subjects financial holding companies, such as Seacoast, to particular restrictions on the types of
activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory
enforcement actions for violations of laws and regulations. Violations of laws and regulations, or other unsafe and unsound
practices, may result in regulatory agencies imposing fines or penalties, cease and desist orders, or taking other enforcement
actions. Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees
and other parties participating in the affairs of a bank or bank holding company.
If we become subject to and are unable to comply with the terms of any future regulatory actions or directives, supervisory
agreements, or orders, then we could become subject to additional, heightened supervisory actions and orders, possibly
including consent orders, prompt corrective action restrictions and/or other regulatory actions, including prohibitions on the
payment of dividends on our common and preferred stock. If our regulators were to take such additional supervisory actions,
then we could, among other things, become subject to significant restrictions on our ability to develop any new business, as
well as restrictions on our existing business, and we could be required to raise additional capital, dispose of certain assets and
liabilities within a prescribed period of time, or both. The terms of any such supervisory action could have a material negative
effect on our business, reputation, operating flexibility, financial condition, and the value of our common stock.
Activity Limitations: As a financial holding company, Seacoast is permitted to engage directly or indirectly in a broader range
of activities than those permitted for a bank holding company. Bank holding companies are generally restricted to engaging in
the business of banking, managing or controlling banks and certain other activities determined by the Federal Reserve to be
closely related to banking. Financial holding companies may also engage in activities that are considered to be financial in
nature, as well as those incidental or, if so determined by the Federal Reserve, complementary to financial activities. The
Company and Seacoast Bank must each remain “well-capitalized” and “well-managed” and Seacoast Bank must receive a
Community Reinvestment Act (“CRA”) rating of at least “Satisfactory” at its most recent examination in order for the
Company to maintain its status as a financial holding company. In addition, the Federal Reserve has the power to order a
financial holding company or its subsidiaries to terminate any nonbanking activity or terminate its ownership or control of any
nonbank subsidiary, when it has reasonable cause to believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that financial holding
company. As further described below, each of the Company and Seacoast Bank is well-capitalized as of December 31, 2020,
and Seacoast Bank has a rating of “Outstanding” in its most recent CRA evaluation.
Source of Strength Obligations: As a bank holding company, we are required to act as a source of financial and managerial
strength to Seacoast Bank and to maintain resources adequate to support it. The term “source of financial strength” means the
ability to provide financial assistance in the event of financial distress. As regulator of Seacoast Bank, the Office of the
Comptroller of the Currency (the “OCC”) may require reports from the Company to assess its ability to serve as a source of
strength and to enforce compliance with the source of strength requirements and require the Company to provide financial
assistance to Seacoast Bank in the event of financial distress.
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Acquisitions: The BHC Act permits acquisitions of banks by bank holding companies, such that Seacoast and any other bank
holding company, whether located in Florida or elsewhere, may acquire a bank located in any other state, subject to certain
deposit-percentages, age of bank charter requirements, and other restrictions. The BHC Act requires that a bank holding
company obtain the prior approval of the Federal Reserve before (i) acquiring direct or indirect ownership or control of more
than 5% of the voting shares of any additional bank or bank holding company, (ii) taking any action that causes an additional
bank or bank holding company to become a subsidiary of the bank holding company, or (iii) merging or consolidating with any
other bank holding company. The Federal Reserve may not approve any such transaction that would result in a monopoly or
would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in
any section of the United States, or the effect of which may be substantially to lessen competition or to tend to create a
monopoly in any section of the country, or that in any other manner would be in restraint of trade, unless the anticompetitive
effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction meeting
the convenience and needs of the community to be served. The Federal Reserve is also required to consider: (1) the financial
and managerial resources of the companies involved, including pro forma capital ratios; (2) the risk to the stability of the United
States banking or financial system; (3) the convenience and needs of the communities to be served, including performance
under the CRA; and (4) the effectiveness of the companies in combating money laundering.
Change in Control: Federal law restricts the amount of voting stock of a bank holding company or a bank that a person may
acquire without the prior approval of banking regulators. Under the Change in Bank Control Act and the regulations thereunder,
a person or group must give advance notice to the Federal Reserve before acquiring control of any bank holding company, such
as Seacoast, and the OCC before acquiring control of any national bank, such as Seacoast Bank. Upon receipt of such notice,
the bank regulatory agencies may approve or disapprove the acquisition. The Change in Bank Control Act creates a rebuttable
presumption of control if a person or group acquires the power to vote 10% or more of the Company's outstanding common
stock. The overall effect of such laws is to make it more difficult to acquire a bank holding company and a bank by tender offer
or similar means than it might be to acquire control of another type of corporation. Consequently, shareholders of the Company
may be less likely to benefit from the rapid increases in stock prices that may result from tender offers or similar efforts to
acquire control of other companies. Investors should be aware of these requirements when acquiring shares of the Company's
stock.
Governance and Financial Reporting Obligations: Seacoast is required to comply with various corporate governance and
financial reporting requirements under the Sarbanes-Oxley Act of 2002, as well as rules and regulations adopted by the
Securities and Exchange Commission (the “SEC”), the Public Company Accounting Oversight Board (the “PCAOB”), and the
NASDAQ Global Select Market (“NASDAQ”) stock exchange. In particular, the Company is required to include management
and independent registered public accounting firm reports on internal controls as part of its Annual Report on Form 10-K in
order to comply with Section 404 of the Sarbanes-Oxley Act. The Company has evaluated its controls, including compliance
with the SEC rules on internal controls, and has and expects to continue to spend significant amounts of time and money on
compliance with these rules. Failure to comply with these internal control rules may materially adversely affect the Company's
reputation, its ability to obtain the necessary certifications to financial statements, and the value of the Company's securities.
The assessments of the Company's financial reporting controls as of December 31, 2020 are included in this report under “Item
9A. Controls and Procedures.”
Corporate Governance: The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) addressed
many investor protection, corporate governance, and executive compensation matters that affect most U.S. publicly traded
companies. The Dodd-Frank Act: (1) granted shareholders of U.S. publicly traded companies an advisory vote on executive
compensation; (2) enhanced independence requirements for Compensation Committee members; and (3) required companies
listed on national securities exchanges to adopt incentive-based compensation claw-back policies for executive officers.
Incentive Compensation: The Dodd-Frank Act required the banking agencies and the SEC to establish joint rules or guidelines
for financial institutions with more than $1 billion in assets, which prohibit incentive compensation arrangements that the
agencies determine to encourage inappropriate risks by the institution. The federal banking agencies issued proposed rules in
2011 and issued guidance on sound incentive compensation policies. In 2016, the federal banking agencies also proposed rules
that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would
require enhanced oversight and recordkeeping. As of December 31, 2020, these rules have not been implemented. The
Company and Seacoast Bank have undertaken efforts to ensure that their incentive compensation plans do not encourage
inappropriate risks, consistent with three key principles: that incentive compensation arrangements should appropriately balance
risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate
governance.
Shareholder Say-On-Pay Votes: The Dodd-Frank Act requires public companies to provide shareholders with an advisory vote
on executive compensation (known as say-on-pay votes), the frequency of a say-on-pay vote, and the golden parachutes
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available to executives in connection with change-in-control transactions. Public companies must give shareholders the
opportunity to vote on say-on-pay proposals at least every three years and the opportunity to vote on the frequency of say-on-
pay votes at least every six years, indicating whether the say-on-pay vote should be held annually, biennially, or triennially. The
Company has annually included in the proxy statement a separate advisory vote on the compensation paid to executives. The
say-on-pay, the say-on-parachute and the say-on-frequency votes are advisory and explicitly nonbinding and cannot override a
decision of the Company's board of directors.
Volcker Rule: Section 13 of the BHC Act, commonly referred to as the “Volcker Rule,” generally prohibits banking
organizations with greater than $10 billion in assets from (i) engaging in certain proprietary trading, and (ii) acquiring or
retaining an ownership interest in or sponsoring a “covered fund,” all subject to certain exceptions. The Volcker Rule also
specifies certain limited activities in which bank holding companies and their subsidiaries may continue to engage and requires
banking organizations to implement compliance programs. In 2020, amendments to the proprietary trading and covered funds
regulations issued by the federal banking agencies, the SEC, and the CFTC took effect, simplifying compliance and providing
additional exclusions and exemptions. The Company and the Bank were not subject to the Volcker Rule in 2020, but may
become so in the future.
Other Regulatory Matters: The Company and its subsidiaries are subject to oversight by the SEC, the Financial Industry
Regulatory Authority, (“FINRA”), the PCAOB, the NASDAQ stock exchange and various state securities regulators. The
Company and its subsidiaries have from time to time received requests for information from regulatory authorities in various
states, including state attorneys general, securities regulators and other regulatory authorities, concerning business practices.
Such requests are considered incidental to the normal conduct of business.
Capital Requirements: The Company and Seacoast Bank are required under federal law to maintain certain minimum capital
levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and
the Federal Reserve and OCC may determine that a banking organization, based on its size, complexity or risk profile, must
maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and
the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its
capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be
taken into account in assessing an institution’s overall capital adequacy. The following is a brief description of the relevant
provisions of these capital rules and their potential impact on the Company's and Seacoast Bank's capital levels.
The Company and Seacoast Bank are subject to the following risk-based capital ratios: a common equity Tier 1 (“CET1”) risk-
based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based
capital ratio, which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments
and related surplus net of treasury stock, plus retained earnings, and certain qualifying minority interests, less certain
adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets and deferred tax
assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual
preferred stock, tier 1 minority interests and grandfathered trust preferred securities. Tier 2 capital consists of instruments
disqualified from Tier 1 capital, including qualifying subordinated debt, other preferred stock and certain hybrid capital
instruments, and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain
eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the
risk-weighted asset components of the risk-based capital rules, including, for example, “high volatility” commercial real estate,
past due assets, structured securities and equity holdings.
The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average total
consolidated assets net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum
leverage ratio for all banks and bank holding companies is 4%.
In addition, effective January 1, 2019, the capital rules require a capital conservation buffer of 2.5% above each of the
minimum risk-based capital ratio requirements (CET1, Tier 1 and total risk-based capital), which is designed to absorb losses
during periods of economic stress. These buffer requirements must be met for a bank or bank holding company to be able to
pay dividends, engage in share buybacks or make discretionary bonus payments to executive management without restriction.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal
bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital
requirements. FDICIA establishes five regulatory capital tiers: “well capitalized”, “adequately capitalized”, “undercapitalized”,
“significantly undercapitalized”, and “critically undercapitalized”. A depository institution’s capital tier will depend upon how
its capital levels compare to various relevant capital measures and certain other factors, as established by regulation. FDICIA
imposes progressively more restrictive restraints on operations, management and capital distributions, depending on the
category in which an institution is classified. FDICIA generally prohibits a depository institution from making any capital
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distribution (including payment of a dividend) or paying any management fee to its holding company if the depository
institution would thereafter be undercapitalized.
To be well-capitalized, Seacoast Bank must maintain at least the following capital ratios:
•
•
•
•
10.0% Total capital to risk-weighted assets
8.0% Tier 1 capital to risk-weighted asset
6.5% CET1 to risk-weighted assets; and
5.0% leverage ratio.
The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital
requirements imposed under the current capital rules. For purposes of the Federal Reserve’s Regulation Y, including
determining whether a bank holding company meets the requirements to be a financial holding company, bank holding
companies, such as the Company, must maintain a Tier 1 risk-based capital ratio of 6.0% or greater and a total risk-based
capital ratio of 10.0% or greater to be well-capitalized. If the Federal Reserve were to apply the same or a similar well-
capitalized standard to bank holding companies as that applicable to Seacoast Bank, the Company’s capital ratios as of
December 31, 2020 would exceed such revised well-capitalized standard. Also, the Federal Reserve may require bank holding
companies, including the Company, to maintain capital ratios substantially in excess of mandated minimum levels, depending
upon general economic conditions and a bank holding company’s particular condition, risk profile and growth plans.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible
additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on the operations or
financial condition of the Company or Seacoast Bank. Failure to meet minimum capital requirements could also result in
restrictions on the Company’s or Seacoast Bank’s ability to pay dividends or otherwise distribute capital or to receive
regulatory approval of applications or other restrictions on growth.
In 2020, the Company’s and Seacoast Bank’s regulatory capital ratios were above the well-capitalized standards and met capital
conservation buffer as of December 31, 2020. Based on current estimates, we believe that the Company and Seacoast Bank will
continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in
2021. As of December 31, 2020 the consolidated capital ratios of Seacoast and Seacoast Bank were as follows:
Total Risk-Based Capital Ratio
Tier 1 Capital Ratio
Common Equity Tier 1 Capital Ratio (CET1)
Leverage Ratio
1For subsidiary bank only
Seacoast
(Consolidated)
18.51%
17.46
16.17
11.92
Seacoast
Bank
17.21%
16.15
16.15
11.03
Minimum to be
Well-Capitalized1
10.00%
8.00
6.50
5.00
Payment of Dividends: The Company is a legal entity separate and distinct from Seacoast Bank and its other subsidiaries. The
Company's primary source of cash, other than securities offerings, is dividends from Seacoast Bank. The prior approval of the
OCC is required if the total of all dividends declared by a national bank (such as Seacoast Bank) in any calendar year will
exceed the sum of such bank’s net profits for that year and its retained net profits for the preceding two calendar years, less any
required transfers to surplus. Federal law also prohibits any national bank from paying dividends that would be greater than
such bank’s undivided profits after deducting statutory bad debts in excess of such bank’s allowance for possible loan losses.
In addition, 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 OCC and the Federal Reserve have indicated that paying dividends that deplete a bank’s
capital base to an inadequate level would be an unsound and unsafe banking practice. The OCC and the Federal Reserve have
each indicated that depository institutions and their holding companies should generally pay dividends only out of current
operating earnings.
Under a Federal Reserve policy adopted in 2009, the board of directors of a bank holding company must consider different
factors to ensure that its dividend level is prudent relative to maintaining a strong financial position, and is not based on overly
optimistic earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong
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financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company
should consult with the Federal Reserve and eliminate, defer or significantly reduce the bank holding company’s dividends if:
•
•
•
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;
its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective
financial condition; or
it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.
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 year ended December 31, 2020, Seacoast Bank distributed
$20.2 million to the Company. During the year ended December 31, 2019, Seacoast Bank distributed $18.1 million to the
Company. Prior approval by the OCC is required if the total of all dividends declared by a national bank in any calendar year
exceeds the bank’s profits for that year combined with its retained net profits for the preceding two calendar years. Under this
restriction Seacoast Bank is eligible to distribute dividends up to $213.4 million to the Company, without prior OCC approval,
as of December 31, 2020.
No dividends on the Company's common stock were declared or paid in 2020, 2019, and 2018.
Regulation of the Bank: As a national bank, Seacoast Bank is subject to comprehensive supervision and regulation by the OCC
and is subject to its regulatory reporting requirements. The deposits of Seacoast Bank are insured by the FDIC up to the
applicable limits, and, accordingly, the bank is also subject to certain FDIC regulations and the FDIC has backup
examination authority and certain enforcement powers over Seacoast Bank. Seacoast Bank also is subject to certain Federal
Reserve regulations. As the Company and the Bank each had less than $10 billion in consolidated assets in 2020, they are not
subject to the routine supervision of the CFPB, but this may change in the future as the Company and the Bank grow.
In addition, as discussed in more detail below, Seacoast Bank and any of the Company's other subsidiaries that offer consumer
financial products and services are subject to regulation and potential supervision by the Consumer Financial Protection Bureau
(“CFPB”). Authority to supervise and examine the Company and Seacoast Bank for compliance with federal consumer laws
remains largely with the Federal Reserve and the OCC, respectively. However, the CFPB may participate in examinations on a
“sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators. The CFPB
also may participate in examinations of the Company's other direct or indirect subsidiaries that offer consumer financial
products or services. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are
stricter than those regulations promulgated by the CFPB, and state attorneys general are permitted to enforce certain federal
consumer financial protection law.
Broadly, regulations applicable to Seacoast Bank include limitations on loans to a single borrower and to its directors, officers
and employees; restrictions on the opening and closing of branch offices; the maintenance of required capital
ratios; the granting of credit under equal and fair conditions; the disclosure of the costs and terms of such credit; requirements
to maintain reserves against deposits and loans; limitations on the types of investments that may be made by Seacoast Bank;
and requirements governing risk management practices. Seacoast Bank is permitted under federal law to open a branch on a de
novo basis across state lines where the laws of that state would permit a bank chartered by that state to open a de novo branch.
Transactions with Affiliates and Insiders: Seacoast Bank is subject to restrictions on extensions of credit and certain other
transactions between Seacoast Bank and the Company or any nonbank affiliate. Generally, these covered transactions with
either the Company or any affiliate are limited to 10% of Seacoast Bank’s capital and surplus, and all such transactions between
Seacoast Bank and the Company and all of its nonbank affiliates combined are limited to 20% of Seacoast Bank’s capital and
surplus. Loans and other extensions of credit from Seacoast Bank to the Company or any affiliate generally are required to be
secured by eligible collateral in specified amounts. In addition, any transaction between Seacoast Bank and the Company or any
affiliate are required to be on an arm’s length basis. Federal banking laws also place similar restrictions on certain extensions of
credit by insured banks, such as Seacoast Bank, to their directors, executive officers and principal shareholders.
Reserves: Federal Reserve rules require depository institutions, such as Seacoast Bank, to maintain reserves against their
transaction accounts, primarily interest bearing and non-interest bearing checking accounts. Effective March 26, 2020, reserve
requirement ratios were reduced to zero percent. These reserve requirements are subject to annual adjustment by the Federal
Reserve.
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FDIC Insurance Assessments and Depositor Preference: Seacoast Bank’s deposits are insured by the FDIC’s DIF up to the
limits under applicable law, which currently are set at $250,000 per depositor, per insured bank, for each account ownership
category. Seacoast Bank is subject to FDIC assessments for its deposit insurance. The FDIC calculates quarterly deposit
insurance assessments based on an institution’s average total consolidated assets less its average tangible equity, and applies
one of four risk categories determined by reference to its capital levels, supervisory ratings, and certain other factors. The
assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits.
Deposit insurance may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order
or condition imposed by a bank’s federal regulatory agency. In addition, the Federal Deposit Insurance Act provides that, in the
event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution,
including the claims of the FDIC on behalf of insured depositors, and certain claims for administrative expenses of the FDIC as
a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank
holding company.
Standards for Safety and Soundness: The Federal Deposit Insurance Act requires the federal bank regulatory agencies to
prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (1)
internal controls; (2) information systems and audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate
risk exposure; and (6) asset quality. The federal banking agencies have adopted regulations and Interagency Guidelines
Establishing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety
and soundness standards used to identify and address problems at insured depository institutions before capital becomes
impaired. Under the regulations, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines,
the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the
submission and review of such safety and soundness compliance plans.
Anti-Money Laundering: A continued focus of governmental policy relating to financial institutions in recent years has been
combating money laundering and terrorist financing. The Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) broadened the application of anti-money
laundering regulations to apply to additional types of financial institutions such as broker-dealers, investment advisors and
insurance companies, and strengthened the ability of the U.S. Government to help prevent, detect and prosecute international
money laundering and the financing of terrorism. The principal provisions of Title III of the USA PATRIOT Act require that
regulated financial institutions, including state member banks: (i) establish an anti-money laundering program that includes
training and audit components; (ii) comply with regulations regarding the verification of the identity of any person seeking to
open an account; (iii) take additional required precautions with non-U.S. owned accounts; and (iv) perform certain verification
and certification of money laundering risk for their foreign correspondent banking relationships. Failure of a financial
institution to comply with the USA PATRIOT Act’s requirements could have serious legal and reputational consequences for
the institution. Seacoast National Bank has augmented its systems and procedures to meet the requirements of these regulations
and will continue to revise and update its policies, procedures and controls to reflect changes required by law.
FinCEN has adopted rules that require financial institutions to obtain beneficial ownership information with respect to legal
entities with which such institutions conduct business, subject to certain exclusions and exemptions. Bank regulators are
focusing their examinations on anti-money laundering compliance, and we continue to monitor and augment, where necessary,
our anti-money laundering compliance
In addition, FinCEN issued rules that became effective on May 11, 2018, that require, subject to certain exclusions and
exemptions, covered financial institutions to identify and verify the identity of beneficial owners of legal entity customers.
Banking regulators will consider compliance with the Act’s money laundering provisions in acting upon acquisition and merger
proposals. Bank regulators routinely examine institutions for compliance with these obligations and have been active in
imposing cease and desist and other regulatory orders and money penalty sanctions against institutions found to be violating
these obligations. Sanctions for violations of the Act can be imposed in an amount equal to twice the sum involved in the
violating transaction, up to $1 million. On January 1, 2021, Congress passed federal legislation that made sweeping changes to
federal anti-money laundering laws, including changes that will be implemented in 2021 and subsequent years.
Economic Sanctions: The Office of Foreign Assets Control (“OFAC”) is responsible for helping to ensure that U.S. entities do
not engage in transactions with certain prohibited parties, as defined by various Executive Orders and acts of Congress. OFAC
publishes, and routinely updates, lists of names of persons and organizations suspected of aiding, harboring or engaging in
terrorist acts, including the Specially Designated Nationals and Blocked Persons List. If the Company finds a name on any
transaction, account or wire transfer that is on an OFAC list, it must undertake certain specified activities, which could include
blocking or freezing the account or transaction requested, and it must notify the appropriate authorities.
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Concentrations in Lending: In 2006, the federal bank regulatory agencies released guidance on “Concentrations in Commercial
Real Estate Lending” (the “Guidance”) and advised financial institutions of the risks posed by commercial real estate (“CRE”)
lending concentrations. The Guidance requires that appropriate processes be in place to identify, monitor and control risks
associated with real estate lending concentrations. Higher allowances for loan losses and capital levels may also be required.
The Guidance is triggered when CRE loan concentrations exceed either:
•
•
Total reported loans for construction, land development, and other land of 100% or more of a bank’s total risk based
capital; or
Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land
development, and other land of 300% or more of a bank’s total risk based capital.
The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by
a particular property type. Seacoast Bank has exposures to loans secured by commercial real estate due to the nature of its
markets and the loan needs of both our retail and commercial customers. Seacoast Bank believes that its long term experience in
CRE lending, underwriting policies, internal controls, and other policies currently in place, as well as its loan and credit
monitoring and administration procedures, are generally appropriate to managing our concentrations as required under the
Guidance. At December 31, 2020, Seacoast Bank had outstanding $157.4 million in commercial construction and residential
land development loans and $87.7 million in residential construction loans to individuals, which represents approximately 26%
of total risk-based capital at December 31, 2020, well below the Guidance’s threshold. At December 31, 2020, the total CRE
exposure for Seacoast Bank represents approximately 169% of total risk based capital, also below the Guidance’s threshold. On
a consolidated basis, construction and land development and commercial real estate loans represent 24% and 157%,
respectively, of total consolidated risk-based capital.
Debit Interchange Fees: Interchange fees, or “swipe” fees, are fees that merchants pay to card companies and card-issuing
banks such as Seacoast Bank for processing electronic payment transactions on their behalf. The “Durbin Amendment” in the
Dodd-Frank Act provides limits on the amount of debit card interchange that may be received or charged by the debit card
issuer, for insured depository institutions with $10 billion or more in assets (inclusive of its affiliates) as of the end of the
calendar year. Subject to certain exemptions and potential adjustments, the Durbin Amendment limits debit card interchange
received or charged by the issuer to $0.21 plus 5 basis points multiplied by the value of the transaction. Upon crossing the $10
billion asset threshold in a calendar year, the rules require compliance with these limits by no later than July 1 of the succeeding
year. Seacoast Bank did not exceed the $10 billion asset threshold in 2020.
Community Reinvestment Act: Seacoast Bank is subject to the provisions of the Community Reinvestment Act (“CRA”), which
imposes a continuing and affirmative obligation, consistent with safe and sound operation, to help meet the credit needs of
entire communities where the bank accepts deposits, including low- and moderate-income neighborhoods. The OCC’s
assessment of Seacoast Bank’s CRA record is made available to the public. Following the enactment of the Gramm-Leach-
Bliley Act (“GLBA”), CRA agreements with private parties must be disclosed and annual CRA reports must be made to a
bank’s primary federal regulator. A bank holding company is not permitted to become or remain a financial holding company
and no new activities authorized under GLBA may be commenced by a holding company or by a bank financial subsidiary if
any of its bank subsidiaries receive less than a “satisfactory” CRA rating in its latest CRA examination. Federal CRA
regulations require, among other things, that evidence of discrimination against applicants on a prohibited basis, and illegal or
abusive lending practices be considered in the CRA evaluation. In June 2020, the OCC issued final rules to modernize the
CRA, but those rules have not yet been fully implemented and may change. Seacoast Bank has a rating of “Outstanding” in its
most recent CRA evaluation.
Privacy and Data Security: The GLBA generally prohibits disclosure of consumer information to non-affiliated third parties
unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are
further required to disclose their privacy policies to customers annually. Financial institutions, however, will be required to
comply with state law if it is more protective of consumer privacy than the GLBA. The GLBA also directs federal regulators,
including the FDIC and the OCC, to prescribe standards for the security of consumer information. Seacoast Bank is subject to
such standards, as well as standards for notifying customers in the event of a security breach. Seacoast Bank is similarly
required to have an information security program to safeguard the confidentiality and security of customer information and to
ensure proper disposal. Customers must be notified when unauthorized disclosure involves sensitive customer information that
may be misused. On December 18, 2020, federal banking agencies proposed a new rule that would require banks to notify their
regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident”.
Consumer Regulation: Activities of Seacoast Bank are subject to a variety of statutes and regulations designed to protect
consumers. These laws and regulations include, among numerous other things, provisions that:
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•
•
•
•
•
•
limit the interest and other charges collected or contracted for by Seacoast Bank, including new rules respecting the
terms of credit cards and of debit card overdrafts;
govern Seacoast Bank’s disclosures of credit terms to consumer borrowers;
require Seacoast Bank to provide information to enable the public and public officials to determine whether it is
fulfilling its obligation to help meet the housing needs of the community it serves;
prohibit Seacoast Bank from discriminating on the basis of race, creed or other prohibited factors when it makes
decisions to extend credit;
govern the manner in which Seacoast Bank may collect consumer debts; and
prohibit unfair, deceptive or abusive acts or practices in the provision of consumer financial products and services.
Mortgage Regulation: The CFPB adopted a rule that implements the ability-to-repay and qualified mortgage provisions of the
Dodd-Frank Act (the “ATR/QM rule”), which requires lenders to consider, among other things, income, employment status,
assets, payment amounts, and credit history before approving a mortgage, and provides a compliance “safe harbor” for lenders
that issue certain “qualified mortgages.” The ATR/QM rule defines a “qualified mortgage” to have certain specified
characteristics, and generally prohibits loans with negative amortization, interest-only payments, balloon payments, or terms
exceeding 30 years from being qualified mortgages. The rule also establishes general underwriting criteria for qualified
mortgages, including that monthly payments be calculated based on the highest payment that will apply in the first five years of
the loan and that the borrower have a total debt-to-income ratio that is less than or equal to 43%. While “qualified mortgages”
will generally be afforded safe harbor status, a rebuttable presumption of compliance with the ability-to-repay requirements will
attach to “qualified mortgages” that are “higher priced mortgages” (which are generally subprime loans). In addition, the
securitizer of asset-backed securities must retain not less than five percent of the credit risk of the assets collateralizing the
asset-backed securities, unless subject to an exemption for asset-backed securities that are collateralized exclusively by
residential mortgages that qualify as “qualified residential mortgages.”
The CFPB has also issued rules to implement requirements of the Dodd-Frank Act pertaining to mortgage loan origination
(including with respect to loan originator compensation and loan originator qualifications) as well as integrated mortgage
disclosure rules. In addition, the CFPB has issued rules that require servicers to comply with certain standards and practices
with regard to: error correction; information disclosure; force-placement of insurance; information management policies and
procedures; requiring information about mortgage loss mitigation options be provided to delinquent borrowers; providing
delinquent borrowers access to servicer personnel with continuity of contact about the borrower’s mortgage loan account; and
evaluating borrowers’ applications for available loss mitigation options. These rules also address initial rate adjustment notices
for adjustable-rate mortgages (ARMs), periodic statements for residential mortgage loans, and prompt crediting of mortgage
payments and response to requests for payoff amounts.
In 2020, the CARES Act granted certain forbearance rights and protection against foreclosure to borrowers with a “federally
backed mortgage loan,” including certain first or subordinate lien loans designed principally for the occupancy of one to four
families. These consumer protections continue during the COVID-19 pandemic emergency.
Non-Discrimination Policies: Seacoast Bank is also subject to, among other things, the provisions of the Equal Credit
Opportunity Act (the “ECOA”) and the Fair Housing Act (the “FHA”), both of which prohibit discrimination based on race or
color, religion, national origin, sex, and familial status in any aspect of a consumer or commercial credit or residential real
estate transaction. The Department of Justice (the “DOJ”), and the federal bank regulatory agencies have issued an Interagency
Policy Statement on Discrimination in Lending that provides guidance to financial institutions in determining whether
discrimination exists, how the agencies will respond to lending discrimination, and what steps lenders might take to prevent
discriminatory lending practices. The DOJ has increased its efforts to prosecute what it regards as violations of the ECOA and
FHA.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should consider the factors described below, as well as the risk
factors and uncertainties discussed in our other public filings with the SEC under the caption “Risk Factors” in evaluating us
and our business and making or continuing an investment in our stock. The material risks and uncertainties that management
believes affect us are described below. The risks contained in this Form 10-K are not the only risks facing the Company.
Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially
14
adversely affect our business, financial condition or future results. The trading price of our securities could decline due to the
materialization of any of these risks, and our shareholders may lose all or part of their investment. This Form 10-K also
contains forward-looking statements that may not be realized as a result of certain factors, including, but not limited to, the
risks described herein and in our other public filings with the SEC. Please refer to the section in this Form 10-K entitled
“Special Cautionary Notice Regarding Forward-Looking Statements” for additional information regarding forward-looking
statements.
COVID-19 Pandemic-Related Risks
The COVID-19 pandemic has and will continue to adversely impact our business and financial results, and the ultimate impact
will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of
the pandemic and actions taken by governmental authorities in response to the pandemic.
The COVID-19 pandemic is and is likely to continue creating extensive disruptions to the global economy and to the lives of
individuals throughout the world. Governments, businesses, and the public are taking unprecedented actions to contain the
spread of the COVID-19 pandemic and to mitigate its effects, including quarantines, travel bans, shelter-in-place orders,
closures of businesses and schools, fiscal stimulus, and legislation designed to deliver monetary aid and other relief. While the
scope, duration, and full effects of the COVID-19 pandemic are rapidly evolving and not fully known, the COVID-19 pandemic
and related efforts to contain it have disrupted economic activity, adversely affected the functioning of financial markets,
impacted interest rates, increased economic and market uncertainty, and disrupted trade and supply chains. If these effects
continue for a prolonged period or result in sustained economic stress, recession or depression, they could have a material
adverse impact on us in a number of ways related to credit, collateral, customer demand, funding, operations, interest rate risk,
and human capital, as described in more detail below.
Credit Risk. Our risks of timely loan repayment and the value of collateral supporting the loans are affected by the strength of
our borrowers' businesses. Concern about the spread of the COVID-19 pandemic has caused and is likely to continue to cause
business shutdowns, limitations on commercial activity and financial transactions, labor shortages, supply chain interruptions,
increased unemployment and commercial property vacancies, reduced profitability and ability for property owners to make
mortgage payments, and overall economic and financial market instability, all of which may cause our customers to be unable
to make scheduled loan payments. If the effects of the COVID-19 pandemic result in widespread and sustained repayment
shortfalls on loans in our portfolio, we could incur significant delinquencies, foreclosures and credit losses, particularly if the
available collateral is insufficient to cover our exposure. The future effects of the COVID-19 pandemic on economic activity
could negatively affect the collateral values associated with our existing loans, the ability to liquidate the real estate collateral
securing our residential and commercial real estate loans, our ability to maintain loan origination volume and to obtain
additional financing, the future demand for or profitability of our lending and services, and the financial condition and credit
risk of our customers. Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may
slow or prevent us from making our business decisions or may result in a delay in our taking certain remediation actions, such
as foreclosure.
In an effort to support our communities during the COVID-19 pandemic, we participated in the Paycheck Protection Program
(“PPP”) under the CARES Act whereby loans to small businesses are originated. These loans require forbearance of loan
payments for a specified time and also limit our ability to pursue all available remedies in the event of a loan default. If the
borrower under the PPP loan fails to qualify for loan forgiveness, if the terms of the program change, or if the SBA determines
there is a deficiency in the manner in which any PPP loans were originated, funded or serviced by the Company, we may be
subject to repayment risk as well as the heightened risk of holding these loans at unfavorable interest rates as compared to loans
to customers that we would have otherwise extended credit.
Beginning in the first quarter of 2020, under the guidance of the CARES Act and banking regulators, we offered deferrals of
principal and interest payments to certain borrowers financially affected by the COVID-19 pandemic. Some of these borrowers
may not be able to return to regular payments at the end of the deferral period, and we may arrange additional deferrals or other
types of modifications with these borrowers to accommodate their economic hardship. This may result in higher delinquencies
and greater charge-offs in future periods, which would adversely affect our financial condition, including capital and liquidity,
or results of operations. In the event our allowance for credit losses is insufficient to cover such losses, our earnings, capital and
liquidity could be adversely affected.
Strategic Risk. Our financial condition and results of operations may be affected by a variety of external factors that may affect
the price or marketability of our products and services, changes in interest rates that may increase our funding costs, reduced
demand for our financial products due to economic conditions and the various responses of governmental and nongovernmental
authorities to economic instability. The COVID-19 pandemic has significantly increased economic and demand uncertainty,
which may impact our ability to effect our strategic priorities, including strategies relating to organic growth and bank
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acquisitions, and has led to severe disruptions and volatility in the global capital markets. Furthermore, many of the
governmental actions in response to the COVID-19 pandemic have been directed toward curtailing household and business
activity to contain the COVID-19 pandemic. These actions have been rapidly changing. For example, in many of our markets,
local governments acted to temporarily close or restrict the operations of most businesses, and these restrictions could recur if
there are future increases in the spread of the virus.
Operational Risk. Current and future restrictions on our workforce’s access to our facilities could limit our ability to meet
customer servicing expectations and have a material adverse effect on our operations. We rely on business processes and branch
activity that largely depend on people and technology, including access to information technology systems as well as
information, applications, payment systems and other services provided by third parties. In response to the COVID-19
pandemic, we have modified our business practices with a portion of our employees working remotely to ensure that our
operations continue uninterrupted as much as possible. Nonetheless, technology in employees’ homes may not be as robust as
in our offices and could cause the networks, information systems, applications, and other tools available to employees to be
more limited or less reliable than in our offices. The continuation of these work-from-home measures also introduces additional
operational risk, including increased cybersecurity risk. These cyber risks include greater phishing, malware, and other
cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems
for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the
systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of
valuable information, and potential impairment of our ability to perform critical functions, including wiring funds, all of which
could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the
operations of any impacted customers.
Interest Rate Risk. Our net interest income, lending activities, deposits and profitability are and are likely to continue to be
negatively affected by volatility in interest rates caused by uncertainties stemming from the COVID-19 pandemic. In March
2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent, citing concerns
about the impact of the COVID-19 pandemic on markets and stress in the energy sector. A prolonged period of extremely
volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation
strategies. Higher income volatility from changes in interest rates and spreads to benchmark indices will likely cause a loss of
future net interest income and a decrease in current fair market values of our assets. Fluctuations in interest rates, or a prolonged
period of low interest rates will impact both the level of income and expense recorded on most of our assets and liabilities and
the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect
on our net income, operating results, or financial condition.
We typically continue to recognize interest income on loans with payment accommodations. If it is later determined that the
borrower will be unable to make all payments due, the loan may be classified as nonaccrual, and interest accrued but not
collected will be reversed against interest income, which would negatively affect net interest income in the period of reversal.
Because there have been no comparable recent global pandemics that resulted in similar global impact, we do not yet know the
full extent and long-term impact of the COVID-19 pandemic’s effects on our business, operations, or the global economy as a
whole. Any future developments will be highly uncertain and cannot be predicted, including the scope and duration of the
COVID-19 pandemic, the effectiveness of our work from home arrangements, third party providers’ ability to support our
operation, and any actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic.
The uncertain future development of this crisis has and could continue to materially and adversely affect our business,
operations, operating results, financial condition, liquidity or capital levels.
Regulatory and Litigation Risk. Federal, state and local governments have mandated or encouraged financial services
companies to make accommodations to borrowers and other customers financially affected by the COVID-19 pandemic. Legal
and regulatory responses to concerns about the COVID-19 pandemic could result in additional regulation or restrictions
affecting the conduct of our business in the future. Furthermore, since the inception of the PPP, several banks have been subject
to litigation regarding the process and procedures that such banks used in processing applications for the PPP and claims related
to agent fees. In addition, some banks have received negative media attention associated with PPP loans. The Company and the
Bank are exposed to similar litigation risk and negative media attention risk, from both customers and non-customers that
approached the Bank regarding PPP loans, regarding its process and procedures used in processing applications for the PPP, or
litigation from agents with respect to agent fees. If any such litigation is filed against the Company or the Bank and is not
resolved in a manner favorable to the Company or the Bank, it may result in significant financial liability or adversely affect the
Company’s reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or
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reputational damage caused by PPP-related litigation or negative media attention could have a material adverse impact on our
business, financial condition and results of operations.
The PPP has also attracted interest from federal and state enforcement authorities, oversight agencies, regulators and
Congressional committees. State Attorneys General and other federal and state agencies may assert that they are not subject to
the provisions of the CARES Act and the PPP regulations entitling the Bank to rely on borrower certifications, and they may
take more aggressive actions against the Bank for alleged violations of the provisions governing the Bank’s participation in the
PPP. Federal and state regulators can impose or request that we consent to substantial sanctions, restrictions and requirements if
they determine there are violations of laws, rules or regulations or weaknesses or failures with respect to general standards of
safety and soundness, which could adversely affect our business, reputation, results of operation and financial condition.
Credit Risk
Lending goals may not be attainable.
Future demand for additional lending is unclear and uncertain, and opportunities to make loans may be more limited and/or
involve risks or terms that we likely would not find acceptable or in our shareholders’ best interest. A failure to meet our
lending goals could adversely affect our results of operations, and financial condition, liquidity and capital.
Deterioration in the real estate markets, including the secondary market for residential mortgage loans, can adversely affect
us.
A correction in residential real estate market prices or reduced levels of home sales, could result in lower single family home
values, adversely affecting the liquidity and value of collateral securing commercial loans for residential land acquisition,
construction and development, as well as residential mortgage loans and residential property collateral securing loans that we
hold, mortgage loan originations and gains on the sale of mortgage loans. Declining real estate prices cause higher
delinquencies and losses on certain mortgage loans, generally, and particularly on second lien mortgages and home equity lines
of credit. Significant ongoing disruptions in the secondary market for residential mortgage loans can limit the market for and
liquidity of most residential mortgage loans other than conforming Fannie Mae and Freddie Mac loans. Deteriorating trends
could occur, including declines in real estate values, home sales volumes, financial stress on borrowers as a result of job losses
or other factors. These could have adverse effects on borrowers that result in higher delinquencies and greater charge-offs in
future periods, which would adversely affect our financial condition, including capital and liquidity, or results of operations. In
the event our allowance for credit losses on loans is insufficient to cover such losses, our earnings, capital and liquidity could be
adversely affected.
Our real estate portfolios are exposed if weakness in the Florida housing market or general economy arises.
Florida has historically experienced deeper recessions and more dramatic slowdowns in economic activity than other states and
a decline in real estate values in Florida can be significantly larger than the national average. Declines in home prices and the
volume of home sales in Florida, along with the reduced availability of certain types of mortgage credit, can result in increases
in delinquencies and losses in our portfolios of home equity lines and loans, and commercial loans related to residential real
estate acquisition, construction and development. Declines in home prices coupled with high or increased unemployment levels
or increased interest rates can cause losses which adversely affect our earnings and financial condition, including our capital
and liquidity.
We are subject to lending concentration risk.
Our loan portfolio contains several industry and collateral concentrations including, but not limited to, commercial and
residential real estate. Due to the exposure in these concentrations, disruptions in markets, economic conditions, including those
resulting from the global response to the COVID-19 pandemic, changes in laws or regulations or other events could cause a
significant impact on the ability of borrowers to repay and may have a material adverse effect on our business, financial
condition and results of operations.
A substantial portion of our loan portfolio is secured by real estate. In weak economies, or in areas where real estate market
conditions are distressed, we may experience a higher than normal level of nonperforming real estate loans. The collateral value
of the portfolio and the revenue stream from those loans could come under stress, and additional provisions for the allowance
for credit losses could be necessitated. Our ability to dispose of foreclosed real estate at prices at or above the respective
carrying values could also be impaired, causing additional losses.
Commercial real estate (“CRE”) is cyclical and poses risks of loss to us due to our concentration levels and risk of the asset,
especially during a difficult economy, including the current stressed economy. As of December 31, 2020, 45% of our loan
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portfolio was comprised of CRE loans. The banking regulators continue to give CRE lending greater scrutiny, and banks with
higher levels of CRE loans are expected to implement improved underwriting, internal controls, risk management policies and
portfolio stress testing, as well as higher levels of allowances for possible losses and capital levels as a result of CRE lending
growth and exposures.
Seacoast Bank has a CRE concentration risk management program and monitors its exposure to CRE; however, there can be no
assurance that the program will be effective in managing our concentration in CRE.
Nonperforming assets could result in an increase in our provision for credit losses on loans, which could adversely affect our
results of operations and financial condition.
At December 31, 2020, our nonaccrual loans totaled $36.1 million, or 0.6% of the loan portfolio and our nonperforming assets
(which includes nonaccrual loans) were $48.9 million, or 0.6%, of assets. In addition, we had approximately $10.1 million in
accruing loans that were 30 days or more delinquent at December 31, 2020. Our nonperforming assets adversely affect our net
income in various ways. We generally do not record interest income on nonaccrual loans or OREO, thereby adversely affecting
our income, and increasing our loan administration costs. When the only source of repayment expected is the underlying
collateral, we are required to mark the related loan to the then fair market value of the collateral, if less than the recorded
amount of our investment, which may result in a loss. These loans and OREO also increase our risk profile and the capital our
regulators believe is appropriate in light of such risks. We may incur additional losses relating to an increase in nonperforming
loans. If economic conditions and market factors negatively and/or disproportionately affect some of our larger loans, then we
could see a sharp increase in our total net charge-offs and our provision for credit losses on loans. Any increase in our
nonperforming assets and related increases in our provision for losses on loans could negatively affect our business and could
have a material adverse effect on our capital, financial condition and results of operations.
Decreases in the value of these assets, or the underlying collateral, or in these borrowers’ performance or financial conditions,
whether or not due to economic and market conditions beyond our control, could adversely affect our business, results of
operations and financial condition. In addition, the resolution of nonperforming assets requires significant commitments of time
from management and our personnel, which can be detrimental to the performance of their other responsibilities. There can be
no assurance that we will not experience increases in nonperforming loans in the future, or that nonperforming assets will not
result in losses in the future.
Our allowance for credit losses on loans may prove inadequate or we may be adversely affected by credit risk exposures.
Our business depends on the creditworthiness of our customers. We review our allowance for credit losses on loans for
adequacy, at a minimum quarterly, considering economic conditions and trends, reasonable and supportable forecasts, collateral
values and credit quality indicators, including past charge-off experience and levels of past due loans and nonperforming assets.
The determination of the appropriate level of the allowance for credit losses involves a high degree of subjectivity and judgment
and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material
changes. We cannot be certain that our allowance will be adequate over time to cover credit losses in our portfolio because of
unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or
markets, or borrowers repaying their loans. Generally speaking, the credit quality of our borrowers can deteriorate as a result of
economic downturns in our markets. If the credit quality of our customer base or their debt service behavior materially
decreases, if the risk profile of a market, industry or group of customers declines or weakness in the real estate markets and
other economics were to arise, or if our allowance for credit losses on loans is not adequate, our business, financial condition,
including our liquidity and capital, and results of operations could be materially adversely affected. In addition, bank regulatory
agencies periodically review our allowance and may require an increase in the provision for credit losses or the recognition of
loan charge-offs, based on judgments different than those of management. If charge-offs in future periods exceed the allowance
for credit losses on loans, we will need additional provisions to increase the allowance, which would result in a decrease in net
income and capital, and could have a material adverse effect on our financial condition and results of operations.
Interest Rate Risk
We must effectively manage our interest rate risk. The impact of changing interest rates on our results is difficult to predict and
changes in interest rates may impact our performance in ways we cannot predict.
Our profitability is largely dependent on our net interest income, which is the difference between the interest income paid to us
on our loans and investments and the interest we pay to third parties such as our depositors, lenders and debt holders. Changes
in interest rates can impact our profits and the fair values of certain of our assets and liabilities. Prolonged periods of unusually
low interest rates may have an incrementally adverse effect on our earnings by reducing yields on loans and other earning assets
over time. Increases in market interest rates may reduce our customers’ desire to borrow money from us or adversely affect
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their ability to repay their outstanding loans by increasing their debt service obligations through the periodic reset of adjustable
interest rate loans. If our borrowers’ ability to pay their loans is impaired by increasing interest payment obligations, our level
of nonperforming assets would increase, producing an adverse effect on operating results. Increases in interest rates can have a
material impact on the volume of mortgage originations and re-financings, adversely affecting the profitability of our mortgage
finance business. Interest rate risk can also result from mismatches between the dollar amounts of re-pricing or maturing assets
and liabilities and from mismatches in the timing and rates at which our assets and liabilities re-price. We actively monitor and
manage the balances of our maturing and re-pricing assets and liabilities to reduce the adverse impact of changes in interest
rates, but there can be no assurance that we will be able to avoid material adverse effects on our net interest margin in all market
conditions.
There can be no assurance that we will not be materially adversely affected in the future if economic activity increases and
interest rates rise, which may result in our interest expense increasing, and our net interest margin decreasing, if we must offer
interest on commercial demand deposits to attract or retain customer deposits.
The Federal Reserve has implemented significant economic strategies that have impacted interest rates, inflation, asset values,
and the shape of the yield curve, over which the Company has no control and which the Company may not be able to
adequately anticipate.
In recent years, in response to the recession in 2008 and the following uneven recovery, the Federal Reserve implemented a
series of domestic monetary initiatives. Several of these have emphasized so-called quantitative easing strategies, the most
recent of which ended during 2014. Since then the Federal Reserve raised rates nine times during 2015-2018, and reduced rates
five times during 2019-2020. Further rate changes reportedly are dependent on the Federal Reserve’s assessment of economic
data as it becomes available. The Company cannot predict the nature or timing of future changes in monetary, economic, or
other policies or the effect that they may have on the Company's business activities, financial condition and results of
operations.
Our cost of funds may increase as a result of general economic conditions, FDIC insurance assessments, interest rates and
competitive pressures.
We have traditionally obtained funds through local deposits and thus we have a base of lower cost transaction deposits.
Generally, we believe local deposits are a cheaper and more stable source of funds than other borrowings because interest rates
paid for local deposits are typically lower than interest rates charged for borrowings from other institutional lenders and reflect
a mix of transaction and time deposits, whereas brokered deposits typically are higher cost time deposits. Our costs of funds and
our profitability and liquidity are likely to be adversely affected if, and to the extent, we have to rely upon higher cost
borrowings from other institutional lenders or brokers to fund loan demand or liquidity needs, and changes in our deposit mix
and growth could adversely affect our profitability and the ability to expand our loan portfolio.
The expected discontinuation of the London Interbank Offered Rate (“LIBOR”), and the identification and use of alternative
replacement reference rates, could adversely affect our revenue, expenses, and the value of the Company's financial
instruments, and may subject the Company to litigation risk.
In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop
persuading or compelling banks to submit LIBOR rates after 2021. On November 30, 2020, the Intercontinental Exchange
Benchmark Administration, which is the administrator of LIBOR, announced its intention to cease the publication of most U.S.
dollar (“USD”) LIBOR settings immediately following the LIBOR publication on June 30, 2023, extending the previously
indicated timeline for the discontinuation of the widely used one-month, three-month, and other USD LIBOR benchmarks.
In the United States, the Alternative Reference Rate Committee (“ARRC”), a group of market participants including large U.S.
financial institutions, assembled by the Federal Reserve Board and the Federal Reserve Bank of New York, was tasked with
identifying alternative reference interest rates to replace LIBOR. The Secured Overnight Finance Rate (“SOFR”) has emerged
as the ARRC's preferred alternative rate for LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight
collateralized by Treasury securities in the repurchase agreement market. At this time, it is not possible to predict how markets
will respond to SOFR or other alternative reference rates as the transition away from LIBOR is anticipated to be gradual over
the coming years. The consequences of these developments with respect to LIBOR cannot be entirely predicted, and these
reforms may cause benchmark rates to perform differently than in the past or have other consequences, which could adversely
affect the value of our floating rate obligations, loans, derivatives, and other financial instruments tied to LIBOR rates.
The Company has formed a LIBOR transition steering committee that is responsible for overseeing the execution of the
Company's enterprise-wide LIBOR transition program, and for evaluating and mitigating the risks associated with the transition
from LIBOR. The LIBOR transition program includes a comprehensive review of the financial products, agreements, contracts
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and business processes that may use LIBOR as a reference rate, and the development and execution of a strategy to transition
away from LIBOR, with appropriate consideration of the potential financial, customer, counterparty, regulatory and legal
impacts.
As of December 31, 2020, the Company has identified approximately $400 million in loans for which the repricing index is tied
to LIBOR. The Company's swap agreements and other derivatives are governed by the International Swap Dealers Association
(“ISDA”). ISDA has developed fallback language for swap agreements and has established a protocol to allow counterparties to
modify legacy trades to include the new fallback language. The Company also invests in securities and has issued subordinated
debt tied to LIBOR. The Company continues to monitor regulatory and legislative activity with regard to these products to
identify any necessary actions and facilitate the transition to alternative reference rates.
The market transition away from LIBOR to an alternative reference rate is complex. We may incur significant expense in
effecting the transition and we may be subject to disputes or litigation with our borrowers or counterparties over the
appropriateness or comparability to LIBOR of the replacement reference rates. The replacement reference rates could also result
in a reduction in our interest income. We may also receive inquiries and other actions from regulators about the Company's
preparation and readiness for the replacement of LIBOR with alternative reference rates.
Liquidity Risk
Liquidity risks could affect operations and jeopardize our financial condition.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other
sources could have a substantial negative effect on our liquidity. Our funding sources include customer deposits, federal funds
purchases, securities sold under repurchase agreements, and short- and long-term debt. We are also members of the Federal
Home Loan Bank of Atlanta (the “FHLB”) and the Federal Reserve Bank of Atlanta, where we can obtain advances
collateralized with eligible assets. We maintain a portfolio of securities that can be used as a secondary source of liquidity.
Other sources of liquidity available to us or Seacoast Bank include the acquisition of additional deposits, the issuance and sale
of debt securities, and the issuance and sale of preferred or common securities in public or private transactions.
Our access to funding sources in amounts adequate or on terms which are acceptable to us could be impaired by other factors
that affect us specifically or the financial services industry or economy in general. Factors that could detrimentally impact our
access to liquidity sources include a downturn in the markets in which our loans are concentrated or adverse regulatory action
against us. In addition, our access to deposits may be affected by the liquidity and/or cash flow needs of depositors. Although
we have historically been able to replace maturing deposits and FHLB advances as necessary, we might not be able to replace
such funds in the future and can lose a relatively inexpensive source of funds and increase our funding costs if, among other
things, customers move funds out of bank deposits and into alternative investments, such as the stock market, that may be
perceived as providing superior expected returns. We may be required to seek additional regulatory capital through capital
raises at terms that may be very dilutive to existing shareholders.
Our ability to borrow could also be impaired by factors that are not specific to us, such as disruptions in the financial markets or
negative views and expectations about the prospects for the financial services industry.
Our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay interest on our trust preferred
securities or reinstate dividends.
We are a legal entity separate and distinct from Seacoast Bank and our other subsidiaries. Our primary source of cash, other
than securities offerings, is dividends from Seacoast Bank. These dividends are the principal source of funds to pay dividends
on our common stock, interest on our trust preferred securities and interest and principal on our debt. Various laws and
regulations limit the amount of dividends that Seacoast Bank may pay us, as further described in “Supervision and Regulation -
Payment of Dividends.” Also, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization
is subject to the prior claims of the subsidiary’s creditors. Limitations on our ability to receive dividends from our subsidiaries
could have a material adverse effect on our liquidity and on our ability to pay dividends on common stock. Additionally, if our
subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, we may not
be able to make payments on our trust preferred securities or reinstate dividend payments to our common shareholders.
Business and Strategic Risks
Our future success is dependent on our ability to compete effectively in highly competitive markets.
We operate in markets throughout the State of Florida, each with unique characteristics and opportunities. Our future growth
and success will depend on our ability to compete effectively in these and other potential markets. We compete for loans,
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deposits and other financial services in geographic markets with other local, regional and national commercial banks, thrifts,
credit unions, mortgage lenders, and securities and insurance brokerage firms. Many of our competitors offer products and
services different from us, and have substantially greater resources, name recognition and market presence than we do, which
benefits them in attracting business. Larger competitors may be able to price loans and deposits more aggressively than we can,
and have broader customer and geographic bases to draw upon.
Consumers may decide not to use banks to complete their financial transactions, which could adversely affect our net income.
Technology and other changes now allow parties to complete financial transactions without banks. For example, consumers can
pay bills, transfer funds directly and obtain loans without banks. This process could result in the loss of interest and fee income,
as well as the loss of customer deposits and the income generated from those deposits.
Non-bank financial technology providers invest substantial resources in developing and designing new technology, particularly
digital and mobile technology, and are beginning to offer more traditional banking products either directly or through bank
partnerships. Further, clients may choose to conduct business with other market participants who engage in business or offer
products in areas we deem speculative or risky, such as cryptocurrencies. Increased competition may negatively affect our
earnings by creating pressure to lower prices or credit standards on our products and services requiring additional investment to
improve the quality and delivery of our technology and/or reducing our market share, or affecting the willingness of our clients
to do business with us.
In addition, the widespread adoption of new technologies, including internet banking services, mobile banking services,
cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and
services as we grow and develop our internet banking and mobile banking channel strategies in addition to remote connectivity
solutions. We might not be successful in developing or introducing new products and services, integrating new products or
services into our existing offerings, responding or adapting to changes in consumer behavior, preferences, spending, investing
and/or saving habits, achieving market acceptance of our products and services, reducing costs in response to pressures to
deliver products and services at lower prices or sufficiently developing and maintaining loyal customers.
Further, we may experience a decrease in customer deposits if customers perceive alternative investments, such as the stock
market, as providing superior expected returns. When customers move money out of bank deposits in favor of alternative
investments, we may lose a relatively inexpensive source of funds, and be forced to rely more heavily on borrowings and other
sources of funding to fund our business and meet withdrawal demands, thereby increasing our funding costs and adversely
affecting our net interest margin.
Hurricanes or other adverse weather events, as well as climate change, could negatively affect our local economies or disrupt
our operations, which would have an adverse effect on our business and results of operations.
Our market areas in Florida are susceptible to hurricanes, tropical storms and related flooding and wind damage. Such weather
events can disrupt operations, result in damage to properties and negatively affect the local economies in the markets where we
operate. We cannot predict whether or to what extent damage that may be caused by future hurricanes will affect our operations
or the economies in our current or future market areas, but such weather events could result in a decline in loan originations, a
decline in the value or destruction of properties securing our loans and an increase in delinquencies, foreclosures or loan losses.
Our business and results of operations may be adversely affected by these and other negative effects of future hurricanes,
tropical storms, related flooding and wind damage and other similar weather events. As a result of the potential for such
weather events, many of our customers have incurred significantly higher property and casualty insurance premiums on their
properties located in our markets, which may adversely affect real estate sales and values in our markets. Climate change may
be increasing the nature, severity, and frequency of adverse weather conditions, making the impact from these types of natural
disasters on us or customers worse.
Further, concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts
around the world to mitigate those impacts. Investors, consumers and businesses also may change their behavior on their own
as a result of these concerns. The state of Florida could be disproportionately impacted by long-term climate changes. We and
our customers may face cost increases, asset value reductions (which could impact customer creditworthiness), operating
process changes, changes in demand for products and services, and the like resulting from new laws, regulations, and changing
consumer and investor preferences regarding our, or other companies', response to climate change. Our efforts to take these
risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies,
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may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business
behavior.
Changes in accounting rules applicable to banks could adversely affect our financial condition and results of operations.
From time to time, the Financial Accounting Standards Board (the “FASB”) and the SEC change the financial accounting and
reporting standards that govern the preparation of our financial statements. These changes can be hard to predict and can
materially impact how we record and report our financial condition and results of operations. In some cases, we could be
required to apply a new or revised standard retroactively, resulting in a restatement of our prior period financial statements.
On January 1, 2020, we implemented FASB’s Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments -
Credit Losses. This guidance replaced the existing “incurred loss” methodology for financial assets measured at amortized cost,
and introduced requirements to estimate current expected credit losses (“CECL”). Under the incurred loss methodology, credit
losses were recognized only when the losses were probable or had been incurred; under CECL, companies are required to
recognize the full amount of expected credit losses for the lifetime of the financial assets, based on historical experience, current
conditions and reasonable and supportable forecasts. This change requires earlier recognition of credit losses that are deemed
expected but not yet probable, and we expect will result in higher reserves for credit losses and higher volatility in the quarterly
provision for credit losses.
The CECL model also impacts the accounting for bank acquisition activity by requiring the recognition of expected credit
losses on acquired loans at the date of acquisition, in addition to the purchase discount, if any. With the exception of purchased
loans with credit deterioration (“PCD”), this day-one recognition of the allowance for credit losses is recorded with an offset to
net income. For PCD loans, the initial estimate of expected credit losses is recognized as an adjustment to the amortized cost
basis of the loan at acquisition (i.e., a balance sheet gross-up).
The anti-takeover provisions in our Articles of Incorporation and under Florida law may make it more difficult for takeover
attempts that have not been approved by our board of directors.
Florida law and our Articles of Incorporation include anti-takeover provisions, such as provisions that encourage persons
seeking to acquire control of us to consult with our board of directors, and which enable the board of directors to negotiate and
give consideration on behalf of us and our shareholders and other constituencies to the merits of any offer made. Such
provisions, as well as super-majority voting and quorum requirements, and a staggered board of directors, may make any
takeover attempts and other acquisitions of interests in us, by means of a tender offer, open market purchase, a proxy fight or
otherwise, that have not been approved by our board of directors more difficult and more expensive. These provisions may
discourage possible business combinations that a majority of our shareholders may believe to be desirable and beneficial. As a
result, our board of directors may decide not to pursue transactions that would otherwise be in the best interests of holders of
our common stock.
Operational Risk
The implementation of other new lines of business or new products and services may subject us to additional risk.
We continuously evaluate our service offerings and may implement new lines of business or offer new products and services
within existing lines of business in the future. There are substantial risks and uncertainties associated with these efforts. In
developing and marketing new lines of business and/or new products and services, we undergo a process to assess the risks of
the initiative, and invest significant time and resources to build internal controls, policies and procedures to mitigate those risks,
including hiring experienced management to oversee the implementation of the initiative. Initial timetables for the introduction
and development of new lines of business and/or new products or services may not be achieved and price and profitability
targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting
market preferences, may also impact the successful implementation of a new line of business and/or a new product or service.
Furthermore, any new line of business and/or new product or service could require the establishment of new key and other
controls and have a significant impact on our existing system of internal controls. Failure to successfully manage these risks in
the development and implementation of new lines of business and/or new products or services could have a material adverse
effect on our business and, in turn, our financial condition and results of operations.
Employee misconduct could expose us to significant legal liability and reputational harm.
We are vulnerable to reputational harm because we operate in an industry in which integrity and the confidence of our
customers are of critical importance. Our employees could engage in fraudulent, illegal, wrongful or suspicious activities, and/
or activities resulting in consumer harm that adversely affects our customers and/or our business. The precautions we take to
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detect and prevent such misconduct may not always be effective, such misconduct may result in regulatory sanctions and/or
penalties, serious harm to our reputation, financial condition, customer relationships or the ability to attract new customers. In
addition, improper use or disclosure of confidential information by our employees, even if inadvertent, could result in serious
harm to our reputation, financial condition and current and future business relationships. The precautions we take to detect and
prevent such misconduct may not always be effective.
We are subject to losses due to fraudulent and negligent acts on the part of loan applicants, mortgage brokers, other vendors
and our employees.
When we originate loans, we rely heavily upon information supplied by loan applicants and third parties, including the
information contained in the loan application, property appraisal, title information and employment and income documentation
provided by third parties. If any of this information is misrepresented and such misrepresentation is not detected prior to loan
funding, we generally bear the risk of loss associated with the misrepresentation.
If we fail to maintain an effective system of disclosure controls and procedures, including internal control over financial
reporting, we may not be able to accurately report our financial results or prevent fraud, which could have a material adverse
effect on our business, results of operations and financial condition. In addition, current and potential shareholders could lose
confidence in our financial reporting, which could harm the trading price of our common stock.
Management regularly monitors, reviews and updates our disclosure controls and procedures, including our internal control
over financial reporting. Any system of controls, however well designed and operated, is based in part on certain assumptions
and can provide only reasonable assurances that the controls will be effective. Any failure or circumvention of our controls and
procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our
business, results of operations and financial condition.
Failure to achieve and maintain an effective internal control environment could prevent us from accurately reporting our
financial results, preventing or detecting fraud or providing timely and reliable financial information pursuant to our reporting
obligations, which could result in a material weakness in our internal controls over financial reporting and the restatement of
previously filed financial statements and could have a material adverse effect on our business, financial condition and results of
operations. Further, ineffective internal controls could cause our investors to lose confidence in our financial information,
which could affect the trading price of our common stock.
Our operations rely on external vendors.
We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations,
particularly in the areas of operations, treasury management systems, information technology and security, exposing us to the
risk that these vendors will not perform as required by our agreements. An external vendor’s failure to perform in accordance
with our agreement could be disruptive to our operations, which could have a material adverse impact on our business, financial
condition and results of operations. Our regulators also impose requirements on us with respect to monitoring and implementing
adequate controls and procedures in connection with our third party vendors.
From time to time, we may decide to retain new vendors for new or existing products and services. Transition to these new
vendors may not proceed as anticipated and could negatively impact our customers or our ability to conduct business, which, in
turn, could have an adverse effect on our business, results of operations and financial condition. To mitigate this risk, the
Company has an established process to oversee vendor relationships.
We must effectively manage our information systems risk.
We rely heavily on our communications and information systems to conduct our business. The financial services industry is
undergoing rapid technological changes with frequent introductions of new technology-driven products, services and methods
of delivery. Our ability to compete successfully depends in part upon our ability to use technology to provide products and
services that will satisfy customer demands. We have and will continue to make technology investments to achieve process
improvements and increase efficiency. Many of the Company’s competitors invest substantially greater resources in
technological improvements than we do. We may not be able to effectively select, develop or implement new technology-driven
products and services or be successful in marketing these products and services to our customers, which may negatively affect
our business, results of operations or financial condition.
Disruptions to our information systems or security breaches could adversely affect our business and reputation.
Our communications and information systems remain vulnerable to unexpected disruptions and failures. Any failure or
interruption of these systems could impair our ability to serve our customers and to operate our business and could damage our
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reputation, result in a loss of business, subject us to additional regulatory scrutiny or enforcement or expose us to civil litigation
and possible financial liability. While we have developed extensive recovery plans, we cannot assure that those plans will be
effective to prevent adverse effects upon us and our customers resulting from system failures. While we maintain an insurance
policy which we believe provides sufficient coverage at a manageable expense for an institution of our size and scope with
similar technological systems, we cannot assure that this policy would be sufficient to cover all related financial losses and
damages should we experience any one or more of our or a third party’s systems failing or experiencing a cyber-attack.
We collect and store sensitive data, including personally identifiable information of our customers and employees as well as
sensitive information related to our operations. Our collection of such Company and customer data is subject to extensive
regulation and oversight. Computer break-ins of our systems or our customers’ systems, thefts of data and other breaches and
criminal activity may result in significant costs to respond, liability for customer losses if we are at fault, damage to our
customer relationships, regulatory scrutiny and enforcement and loss of future business opportunities due to reputational
damage. Although we, with the help of third-party service providers, will continue to implement security technology and
establish operational procedures to protect sensitive data, there can be no assurance that these measures will be effective. We
advise and provide training to our customers regarding protection of their systems, but there is no assurance that our advice and
training will be appropriately acted upon by our customers or effective to prevent losses. In some cases we may elect to
contribute to the cost of responding to cybercrime against our customers, even when we are not at fault, in order to maintain
valuable customer relationships.
In our ordinary course of business, we rely on electronic communications and information systems to conduct our businesses
and to store sensitive data, including financial information regarding our customers. The integrity of information systems of
financial institutions are under significant threat from cyber-attacks by third parties, including through coordinated attacks
sponsored by foreign nations and criminal organizations to disrupt business operations and other compromises to data and
systems for political or criminal purposes. We employ an in-depth, layered, lines of defense approach that leverages people,
processes and technology to manage and maintain cyber security and other information security controls.
Notwithstanding the strength of our defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and
attackers respond rapidly to changes in defensive measures, and there is no assurance that our response to any cyber-attack or
system interruption, breach or failure will be fully effective to mitigate and remediate the issues resulting from such an event,
including the costs, reputational harm and litigation challenges that we may face as a result. Cyber security risks may also occur
with our third-party service providers, and may interfere with their ability to fulfill their contractual obligations to us, with
attendant potential for financial loss or liability that could adversely affect our financial condition or results of operations. We
offer our clients the ability to bank remotely and provide other technology based products and services, which services include
the secure transmission of confidential information over the Internet and other remote channels. To the extent that our clients'
systems are not secure or are otherwise compromised, our network could be vulnerable to unauthorized access, malicious
software, phishing schemes and other security breaches. To the extent that our activities or the activities of our clients or third-
party service providers involve the storage and transmission of confidential information, security breaches and malicious
software could expose us to claims, regulatory scrutiny, litigation and other possible liabilities. While to date we have not
experienced a significant compromise, significant data loss or material financial losses related to cyber security attacks, our
systems and those of our clients and third-party service providers are under constant threat and it is possible that we could
experience a significant event in the future. We may suffer material financial losses related to these risks in the future or we
may be subject to liability for compromises to our client or third-party service provider systems. Any such losses or liabilities
could adversely affect our financial condition or results of operations, and could expose us to reputation risk, the loss of client
business, increased operational costs, as well as additional regulatory scrutiny, possible litigation, and related financial liability.
These risks also include possible business interruption, including the inability to access critical information and systems. In
addition, as the domestic and foreign regulatory environment related to information security, data collection and use, and
privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance
with those requirements could also result in additional costs.
Compliance Risk
We operate in a heavily regulated environment. Regulatory compliance burdens and associated costs can affect our business,
including our reputation, the value of our securities, and the results of our operations..
We and our subsidiaries are regulated by several regulators, including, but not limited to, the Federal Reserve, the OCC, the
FDIC, the CFPB, the Small Business Administration, the SEC and NASDAQ. Our success is affected by state and federal
regulations affecting banks and bank holding companies, the securities markets and banking, securities and insurance
regulators. Banking regulations are primarily intended to protect consumers and depositors, not shareholders. The financial
services industry also is subject to frequent legislative and regulatory changes and proposed changes, the effects of which
cannot be predicted. These changes, if adopted, could require us to maintain more capital, liquidity and risk controls which
24
could adversely affect our growth, profitability and financial condition. Any such changes in law can impact the profitability of
our business activities, require changes to our operating policies and procedures, or otherwise adversely impact our business.
Further, we expect to continue to spend significant amounts of time and money on compliance with various corporate
governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002, as well as rules and regulations
adopted by the SEC, the Public Accounting Oversight Board and NASDAQ. Our failure to track and comply with the various
rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the
value of our securities.
Additionally, the CFPB has issued mortgage-related rules required under the Dodd-Frank Act addressing borrower ability-to-
repay and qualified mortgage standards. The CFPB has also issued rules for loan originators related to compensation, licensing
requirements, administration capabilities and restrictions on pursuance of delinquent borrowers. These rules could have a
negative effect on the financial performance of Seacoast Bank's mortgage lending operations such as limiting the volume of
mortgage originations and sales into the secondary market, increased compliance burden and impairing Seacoast Bank's ability
to proceed against certain delinquent borrowers with timely and effective collection efforts.
Pursuant to Section 165 of the Dodd-Frank Act, banks with greater than $10 billion in total consolidated assets are subject to
certain additional regulatory requirements, including limits on the debit card interchange fees that such banks may collect,
changes in the manner in which assessments for FDIC deposit insurance are calculated, and providing the authority to the CFPB
to supervise and examine such banks. If Seacoast Bank grows to exceed $10 billion in total assets, we would be subject to
additional federal regulations, which could materially and adversely affect our business. Additionally, compliance with the
Dodd-Frank Act's requirements may necessitate that we hire to contract with additional compliance or other personnel, design
and implement additional internal controls, or incur other significant expenses, any of which could have a material adverse
effect on our business, financial condition or results of operations.
We are required to maintain capital to meet regulatory requirements, and if we fail to maintain sufficient capital, whether due
to losses, growth opportunities, or an inability to raise additional capital or otherwise, our financial condition, liquidity and
results of operations, as well as our compliance with regulatory requirements, would be adversely affected.
Both we and Seacoast Bank must meet regulatory capital requirements and maintain sufficient liquidity and our regulators may
modify and adjust such requirements in the future. Our ability to raise additional capital, when and if needed in the future, will
depend on conditions in the capital markets, general economic conditions and a number of other factors, including investor
perceptions regarding the banking industry and the market, governmental activities, many of which are outside our control, and
on our financial condition and performance. Accordingly, we cannot assure you that we will be able to raise additional capital if
needed or on terms acceptable to us. If we fail to meet these capital and other regulatory requirements, our financial condition,
liquidity and results of operations would be materially and adversely affected.
Although the Company currently complies with all capital requirements, we may be subject to more stringent regulatory capital
ratio requirements in the future and we may need additional capital in order to meet those requirements. Our failure to remain
“well capitalized” for bank regulatory purposes could affect customer confidence, our ability to grow, our costs of funds and
FDIC insurance costs, our ability to pay dividends on common stock, make distributions on our trust preferred securities, our
ability to make acquisitions, and our business, results of operations and financial condition, generally. Under FDIC rules, if
Seacoast Bank ceases to be a “well capitalized” institution for bank regulatory purposes, its ability to accept brokered deposits
and the interest rates that it pays may both be restricted.
Federal banking agencies periodically conduct examinations of our business, including for compliance with laws and
regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such
examinations may adversely affect us.
The Federal Reserve and the OCC periodically conduct examinations of our business and Seacoast Bank’s business, including
for compliance with laws and regulations, and Seacoast Bank also may be subject to future regulatory examinations by the
CFPB as discussed in the “Supervision and Regulation” section above. If, as a result of an examination, the Federal Reserve,
the OCC and/or the CFPB were to determine that the financial condition, capital resources, asset quality, asset concentrations,
earnings prospects, management, liquidity, sensitivity to market risk, or other aspects of any of our or Seacoast Bank’s
operations had become unsatisfactory, or that we or our management were in violation of any law, regulation or guideline in
effect from time to time, the regulators may take a number of different remedial actions as they deem appropriate. These actions
include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting
from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our
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capital, to restrict our growth, to change the composition of our concentrations in portfolio or balance sheet assets, to assess
civil monetary penalties against our officers or directors or to remove officers and directors.
Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.
FDIC insurance premiums we pay may change and be significantly higher in the future. Market developments may significantly
deplete the insurance fund of the FDIC and reduce the ratio of reserves to insured deposits, thereby making it requisite upon the
FDIC to charge higher premiums prospectively. Additionally, if we grow to more than $10 billion in total assets, the method
that the FDIC uses to determine the amount of our deposit insurance premium will change. Any increases in our assessment
rate, future special assessments, or required prepayments in FDIC insurance premiums could reduce our profitability or limit
our ability to pursue certain business opportunities, which could have a material adverse effect on our assets, business, cash
flow, condition (financial or otherwise), liquidity, prospects or results of operations.
Tax law changes and interpretations may have a negative impact on our earnings.
The enactment of the Tax Reform Act, has had, and is expected to continue to have, far reaching and significant effects on us,
our customers and the U.S. economy. Further, U.S. tax authorities may at any time clarify and/or modify legislation,
administration or judicial changes or interpretations the income tax treatment of corporations. Such changes could adversely
affect us, either directly or as a result of the effects on our customers. While lower income tax rates should result in improved
net income performance over prospective periods, the extent of the benefit will be influenced by the competitive environment
and other factors.
As of December 31, 2020, we had net deferred tax assets (“DTAs”) of $23.6 million, based on management’s estimation of the
likelihood of those DTAs being realized. These and future DTAs may be reduced in the future if our estimates of future taxable
income from our operations and tax planning strategies do not support the amounts recorded.
Management expects to realize the $23.6 million in net DTAs well in advance of the statutory carryforward period, based on its
forecast of future taxable income. We consider positive and negative evidence, including the impact of reversals of existing
taxable temporary differences, tax planning strategies and projected earnings within the statutory tax loss carryover period. This
process requires significant judgment by management about matters that are by nature uncertain. If we were to conclude that
significant portions of our DTAs were not more likely than not to be realized (due to operating results or other factors), a
requirement to establish a valuation allowance could adversely affect our financial position and results of operations.
The amount of net operating loss carry-forwards and certain other tax attributes realizable annually for income tax purposes
may be reduced by an offering and/or other sales of our capital securities, including transactions in the open market by five
percent or greater shareholders, if an ownership change is deemed to occur under Section 382 of the Internal Revenue Code
(“Section 382”). The determination of whether an ownership change has occurred under Section 382 is highly fact-specific and
can occur through one or more acquisitions of capital stock (including open market trading) if the result of such acquisitions is
that the percentage of our outstanding common stock held by shareholders or groups of shareholders owning at least 5% of our
common stock at the time of such acquisition, as determined under Section 382, is more than 50 percentage points higher than
the lowest percentage of our outstanding common stock owned by such shareholders or groups of shareholders within the prior
26
three-year period. Management does not believe any stock offerings, issuances, or reverse stock split have had any negative
implications for the Company under Section 382 to date.
Merger-Related Risks
Future acquisition and expansion activities may disrupt our business, dilute existing shareholders and adversely affect our
operating results.
We periodically evaluate potential acquisitions and expansion opportunities. To the extent we grow through acquisition, we
cannot assure you that we will be able to adequately or profitably manage this growth. Acquiring other banks, branches or
businesses, as well as other geographic and product expansion activities, involve various risks including:
•
•
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•
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risks of unknown or contingent liabilities;
unanticipated costs and delays;
risks that acquired new businesses do not perform consistent with our growth and profitability expectations;
risks of entering new market or product areas where we have limited experience;
risks that growth will strain our infrastructure, staff, internal controls and management, which may require additional
personnel, time and expenditures;
exposure to potential asset quality issues with acquired institutions;
difficulties, expenses and delays of integrating the operations and personnel of acquired institutions, and start-up
delays and costs of other expansion activities;
potential disruptions to our business;
possible loss of key employees and customers of acquired institutions;
potential short-term decrease in profitability;
inaccurate estimates of value assigned to acquired assets; and
diversion of our management’s time and attention from our existing operations and businesses.
Attractive acquisition opportunities may not be available to us in the future.
While we seek continued organic growth, we anticipate continuing to evaluate merger and acquisition opportunities presented
to us in our core markets and beyond. The number of financial institutions headquartered in Florida, the Southeastern United
States, and across the country continues to decline through merger and other activity. We expect that other banking and
financial companies, many of which have significantly greater resources, will compete with us to acquire financial services
businesses. This competition, as the number of appropriate merger targets decreases, could increase prices for potential
acquisitions which could reduce our potential returns, and reduce the attractiveness of these opportunities to us. Also,
acquisitions are subject to various regulatory approvals. If we fail to receive the appropriate regulatory approvals, we will not be
able to consummate an acquisition that we believe is in our best interests. Among other things, our regulators consider our
capital, liquidity, profitability, regulatory compliance, including with respect to anti-money laundering (“AML”) obligations,
consumer protection laws and CRA obligations and levels of goodwill and intangibles when considering acquisition and
expansion proposals. Any acquisition could be dilutive to our earnings and shareholders’ equity per share of our common stock.
Our business strategy includes significant growth plans, and our financial condition and results of operations could be
negatively affected if we fail to grow or fail to manage our growth effectively, or if we fail to successfully integrate our
acquisitions or to realize the anticipated benefits of them.
We intend to continue to pursue an organic growth strategy for our business while also regularly evaluating potential
acquisitions and expansion opportunities. If appropriate opportunities present themselves, we expect to engage in selected
acquisitions of financial institutions, branch acquisitions and other business growth initiatives or undertakings. There can be no
assurance that we will successfully identify appropriate opportunities, that we will be able to negotiate or finance such activities
or that such activities, if undertaken, will be successful. While we have substantial experience in successfully integrating
institutions we have acquired, we may encounter difficulties during integration, such as the loss of key employees, the
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disruption of operations and businesses, loan and deposit attrition, customer loss and revenue loss, possible inconsistencies in
standards, control procedures and policies, and unexpected issues with expected branch closures costs, operations, personnel,
technology and credit, all of which could divert resources from regular banking operations. Achieving the anticipated benefits
of these mergers is subject to a number of uncertainties, including whether we integrate these institutions in an efficient and
effective manner, governmental actions affecting the financial industry generally, and general competitive factors in the
marketplace. Failure to achieve these anticipated benefits could result in a reduction in the price of our shares as well as in
increased costs, decreases in the amount of expected revenues and diversion of management's time an energy and could
materially and adversely affect our business, financial condition and results of operations.
There are risks associated with our growth strategy. To the extent that we grow through acquisitions, there can be no assurance
that we will be able to adequately or profitably manage this growth. Acquiring other banks, branches or other assets, as well as
other expansion activities, involves various risks including the risks of incorrectly assessing the credit quality of acquired
assets, encountering greater than expected costs of integrating acquired banks or branches into us, the risk of loss of customers
and/or employees of the acquired institution or branch, executing cost savings measures, not achieving revenue enhancements
and otherwise not realizing the transaction’s anticipated benefits. Our ability to address these matters successfully cannot be
assured. In addition, our strategic efforts may divert resources or management’s attention from ongoing business operations,
may require investment in integration and in development and enhancement of additional operational and reporting processes
and controls and may subject us to additional regulatory scrutiny.
Our growth initiatives may also require us to recruit and retain experienced personnel to assist in such initiatives. Accordingly,
the failure to identify and retain such personnel would place significant limitations on our ability to successfully execute our
growth strategy. In addition, to the extent we expand our lending beyond our current market areas, we could incur additional
risks related to those new market areas. We may not be able to expand our market presence in our existing market areas or
successfully enter new markets.
If we do not successfully execute our acquisition growth plan, it could adversely affect our business, financial condition, results
of operations, reputation and growth prospects. In addition, if we were to conclude that the value of an acquired business had
decreased, that conclusion may result in an impairment charge to goodwill or other tangible or intangible assets, which would
adversely affect our results of operations. While we believe we have the executive management resources and internal systems
in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or that we
will successfully manage our growth.
Additionally, we may pursue divestitures of non-strategic branches or other assets. Such divestitures involve various risks,
including the risks of not being able to timely or fully replace liquidity previously provided by deposits which may be
transferred as part of a divestiture, which could adversely affect our financial condition and results of operations.
General Risk Factors
Shares of our common stock are not insured deposits and may lose value.
Shares of our common stock are not savings accounts, deposits or other obligations of any depository institution and are not
insured or guaranteed by the FDIC or any other governmental agency or instrumentality, any other deposit insurance fund or by
any other public or private entity, and are subject to investment risk, including the possible loss of principal.
Any future economic downturn could have a material adverse effect on our capital, financial condition, results of operations,
and future growth.
Management continually monitors market conditions and economic factors throughout our footprint. If conditions were to
worsen nationally, regionally or locally, then we could see a sharp increase in our total net charge-offs and also be required to
significantly increase our allowance for credit losses. Furthermore, the demand for loans and our other products and services
could decline. An increase in our non-performing assets and related increases in our provision for credit losses, coupled with a
potential decrease in the demand for loans and our other products and services, could negatively affect our business and could
have a material adverse effect on our capital, financial condition, results of operations and future growth. Our customers may
also be adversely impacted by changes in regulatory, trade (including tariffs) and tax policies and laws, all of which could
reduce demand for loans and adversely impact our borrowers' ability to repay our loans. In addition, international economic
uncertainty could also impact the U.S. financial markets by potentially suppressing stock prices, including ours, and adding it to
overall market volatility, which could adversely affect our business. The effects of any economic downturn could continue for
many years after the downturn is considered to have ended.
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A reduction in consumer confidence could negatively impact our results of operations and financial condition.
Significant market volatility driven in part by concerns relating to, among other things, actions by the U.S. Congress or imposed
through Executive Order by the President of the United States, as well as global political actions or events, including natural
disasters, health emergencies or pandemics, could adversely affect the U.S. or global economies, with direct or indirect impacts
on the Company and our business. Results could include reduced consumer and business confidence, credit deterioration,
diminished capital markets activity, and actions by the Federal Reserve Board impacting interest rates or other U.S. monetary
policy.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Seacoast maintains its corporate headquarters in a 68,000 square foot, three story building at 815 Colorado Avenue in Stuart,
Florida. The building is owned by Seacoast Bank.
Seacoast Bank owns or leases all of the buildings in which its business operates. At December 31, 2020, Seacoast Bank had 51
branch offices, stand-alone commercial lending offices, and its main office located in Florida. For additional information
regarding properties, please refer to Notes H and L of the Notes to Consolidated Financial Statements.
Item 3. Legal Proceedings
The Company and its subsidiaries are subject, in the ordinary course, to litigation incidental to the businesses in which they are
engaged. Management presently believes that none of the legal proceedings to which they are a party are likely to have a
material effect on the Company's consolidated financial position, operating results or cash flows, although no assurance can be
given with respect to the ultimate outcome of any such claim or litigation.
Item 4. Mine Safety Disclosures
Not applicable.
Part II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Holders of the Company's common stock are entitled to one vote per share on all matters presented to shareholders for their
vote, as provided in our Articles of Incorporation, as amended.
The Company's common stock is traded under the symbol “SBCF” on the NASDAQ Global Select Market (“NASDAQ”). As
of January 31, 2021, there were 55,249,870 shares of the Company's common stock outstanding, held by approximately 2,350
record holders.
Dividends from Seacoast Bank are the Company's primary source of funds to pay dividends to its shareholders. Under the
National Bank Act, national banks may in any calendar year, without the approval of the OCC, pay dividends to the extent of
net profits for that year, plus retained net profits for the preceding two years (less any required transfers to surplus). The need
for Seacoast Bank to maintain adequate capital also limits dividends that may be paid to the Company.
Additional information regarding restrictions on the ability of Seacoast Bank to pay dividends to the Company is contained in
Note C of the Notes to Consolidated Financial Statements. See “Item 1. Business- Payment of Dividends” of this Form 10-K for
information with respect to the regulatory restrictions on dividends.
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Securities Authorized for Issuance Under Equity Compensation Plans
See the information included under Part III, Item 12, which is incorporated in response to this item by reference.
Repurchase of Common Stock
On December 17, 2020, the Company's Board of Directors authorized the Company to repurchase up to $100 million of its
shares of outstanding common stock. Under the share repurchase program, which will expire on December 31, 2021,
repurchases will be made, if at all, in accordance with applicable securities laws and may be made from time to time in the open
market, by block purchase or by negotiated transactions. The amount and timing of repurchases, if any, will be based on a
variety of factors, including share acquisition price, regulatory limitations, market conditions and other factors. The program
does not obligate the Company to purchase any of its shares, and may be terminated or amended by the Board of Directors at
any time prior to its expiration date. As of December 31, 2020, no shares of the Company's common stock had been
repurchased under the program.
Item 6. Selected Financial Data
Five years of selected financial data of the Company is set forth commencing on page 79.
Item 7. 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 years ended December 31, 2020 and 2019. Additional information about the
Company’s financial condition and results of operations in 2018 and changes in the Company’s financial condition and results
of operations from 2018 to 2019 may be found in the Company’s Annual Report on Form 10-K for the year ended December
31, 2019.
This discussion and analysis contains 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 “Special
Cautionary Notice Regarding Forward-Looking Statements” 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.
Overview – Strategy and Results
Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”), a financial holding company, registered under the
Bank Holding Company Act of 1956, as amended (the “BHC Act”), is one of the largest community banks in Florida, with $8.3
billion in assets and $6.9 billion in deposits as of December 31, 2020. Its principal subsidiary is Seacoast National Bank
(“Seacoast Bank”), a wholly owned national banking association. The Company provides integrated financial services including
commercial and retail banking, wealth management, and mortgage services to customers through advanced banking solutions,
and Seacoast Bank's network of 51 traditional branches and commercial banking centers. Seacoast operates primarily in Florida,
with concentrations in the state's fastest growing markets, each with unique characteristics and opportunities. The Company's
offices stretch from the southeast, including Fort Lauderdale, Boca Raton and Palm Beach, north along the east coast to the
Daytona area, into Orlando and Central Florida and the adjacent Tampa market, and west to Okeechobee and surrounding
counties.
The Company delivers integrated banking services, combining traditional retail locations with online and mobile technology
and a convenient telephone banking center. Seacoast has built a fully integrated distribution platform across all channels to
provide customers with the ability to choose their path of convenience to satisfy their banking needs, allowing the Company an
opportunity to reach customers through a variety of sales channels. The Company believes its digital delivery and products are
contributing to the franchise's growth.
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Seacoast is executing a balanced growth strategy, combining organic growth with strategic acquisitions in Florida's most
attractive growing markets. In Orlando, Seacoast is now the largest Florida-based bank and a top-10 bank in the Orlando market
overall. In other key markets, including Palm Beach County, Fort Lauderdale, and Tampa, the Company has enhanced its
footprint with ten acquisitions since 2014, generating continued expansion and strengthening market share, increasing the
customer base and lowering operating costs through economies of scale.
The Company's acquisition strategy has not only increased customer households and been accretive to earnings, but has also
opened markets and Seacoast's customer base. The table below summarizes acquisition activity in recent years:
(In millions)
Freedom Bank/ Fourth Street Banking
Company
First Bank of the Palm Beaches
First Green Bank/ First Green Bancorp, Inc.
Palm Beach Community Bank
NorthStar Bank/ NorthStar Banking
Corporation, Inc.
Primary Market(s)
Tampa- St. Petersburg
West Palm Beach
Orlando and Fort
Lauderdale
West Palm Beach
Tampa- St. Petersburg
GulfShore Bank/ GulfShore BancShares, Inc.
Tampa- St. Petersburg
Orlando banking operations of BMO Harris
Bank, N.A.
Floridian Bank/ Floridian Financial Group,
Inc.
Grand Bank & Trust of Florida/ Grand
Bankshares, Inc.
BankFirst/ The BANKshares, Inc.
Orlando
Orlando
West Palm Beach
Orlando
2020 Acquisitions
Year of
Acquisition
Acquired
Loans
Acquired
Deposits
2020
2020
2018
2017
2017
2017
2016
2016
2015
2014
$
303 $
147
631
270
137
251
63
266
111
365
330
174
624
269
182
285
314
337
188
516
In March 2020, Seacoast acquired First Bank of the Palm Beaches (“FBPB”), which increased the Company’s market share in
the attractive Palm Beach market. FBPB operated two branches, which were converted to Seacoast branches, with deposits of
$174 million and loans of $147 million at the time of acquisition.
In August 2020, Seacoast completed the acquisition of Fourth Street Banking Company (“Fourth Street”) and its wholly-owned
subsidiary Freedom Bank, which added $303 million in loans and $330 million in deposits. The acquisition supports Seacoast’s
growing presence in the attractive St. Petersburg, Florida market. Freedom Bank operated two branches in St. Petersburg, which
were converted to Seacoast branches.
Impact of COVID-19, the CARES Act and the Paycheck Protection Program on Comparability Among Periods
Early in 2020, the global economy began experiencing a downturn resulting from the COVID-19 pandemic. Seacoast reacted
quickly at the onset to make adjustments to operations intended to protect the health and welfare of our associates and
customers. The Company's range of digital banking products combined with continued access to branches through drive-thrus
and lobby appointments has allowed the Company to continue to meet customer needs. A robust and well-tested business
continuity program has allowed the Company to maintain productivity levels with a majority of associates working remotely.
The spread of COVID-19 has created a global public health crisis that has resulted in unprecedented uncertainty, volatility and
disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally,
including the markets that we serve. Governmental responses to the pandemic have included orders to close businesses not
deemed essential and directing individuals to restrict their movements, observe social distancing and shelter in place. These
actions, together with responses to the pandemic by businesses and individuals, have resulted in rapid decreases in commercial
and consumer activity, temporary, and some permanent, closures of many businesses that have led to a loss of revenues and a
rapid increase in unemployment, material decreases in business valuations, disrupted global supply chains, market downturns
and volatility, changes in consumer behavior related to pandemic fears (including a decline in demand for banking products or
services, including loans and deposits which could impact our future financial condition, results of operations and liquidity),
related emergency response legislation and an expectation that Federal Reserve policy will maintain a low interest rate
environment for the foreseeable future. Although financial markets have rebounded from significant declines that occurred
31
earlier in the pandemic and global economic conditions showed signs of improvement beginning during the second quarter of
2020, many of the effects that arose or became more pronounced after the onset of the COVID-19 pandemic have persisted
through the end of the year. These changes have had and are likely to continue to have a significant adverse effect on the
markets in which we conduct our business and the demand for our products and services.
Our business and consumer customers are experiencing varying degrees of financial distress, which is expected to continue into
the first quarter of 2021 and beyond, especially if COVID-19 infections increase and new economic restrictions are mandated.
Our borrowing base includes customers in industries such as hotel/lodging, restaurants, and retail, all of which have been and
are likely to continue to be significantly impacted by the COVID-19 pandemic. We recognize that these industries may take
longer to recover as consumers may be hesitant to return to full social interaction or may change their spending habits on a
more permanent basis as a result of the pandemic. We continue to monitor these customers closely.
Future economic conditions are subject to significant uncertainty. We have taken deliberate actions to ensure that we have the
balance sheet strength to serve our clients and communities, including increases in liquidity and managing our assets and
liabilities in order to maintain a strong capital position. Current economic pressures and their effects on our customers, coupled
with the implementation of the CECL expected loss methodology for determining our allowance for credit losses, have
contributed to a substantially increased provision for credit losses in 2020.
We continue to monitor closely the impact of the COVID-19 pandemic on our customers, as well as the effects of the CARES
Act. Uncertainties associated with the pandemic include the duration of the outbreak (including the impact of new variants of
the virus that may be resistant to the various vaccines available), the impact to our customers, employees and vendors and the
impact to the economy as a whole. COVID-19 has had, and is expected to continue to have, a significant adverse impact on our
business, financial position and operating results. The extent to which the COVID-19 pandemic will impact our operations and
financial results in 2021 cannot be fully estimated at this time.
In March 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. The CARES Act
includes provisions for the Paycheck Protection Program (“PPP”) offered through the U.S. Small Business Administration
(“SBA”). Loans originated under this program have a contractual rate of interest of 1% with principal and interest that may be
forgiven provided that the borrower uses the funds in a manner consistent with PPP guidelines. Seacoast assisted borrowers in
2020 with more than 5,500 loans originated through the PPP and, when combined with PPP loans acquired from Freedom
Bank, outstanding balances totaled $567.0 million at December 31, 2020. The SBA established a fee structure based on loan
size. Fees received by Seacoast, net of related costs, totaled $17.2 million, and are deferred and recognized as an adjustment to
yield over time.
Seacoast recognized net fees of $7.8 million and contractual interest of $4.2 million on PPP loans in 2020. The remaining $9.5
million in deferred PPP loan fees at December 31, 2020 will be recognized over the loans' remaining contractual maturity or
sooner, as loans are forgiven.
In January 2021, the Company began accepting applications for the re-opening of the PPP lending program on our fully digital
origination platform. As of February 18, 2021, the Company had originated approximately 1,800 loans totaling $180 million
under the latest round of PPP.
Loan Modifications
The CARES Act, as amended by the Consolidated Appropriations Act on December 27, 2020, provides financial institutions
the option to exclude from troubled debt restructuring (“TDR”) consideration certain loan modifications that might otherwise be
categorized as TDRs under ASC 310-40 in order to assist borrowers financially impacted by COVID-19. This option is
available for modifications that are deemed to be COVID-related, where the borrower was not more than 30 days past due on
December 31, 2019, and the modification is executed between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60
days after the end of the COVID-19 national emergency. Federal banking regulators issued similar guidance that also allows
lenders to conclude that short-term modifications for borrowers financially affected by the pandemic should not be considered
TDRs if the borrower was current at the time of modification. Seacoast began offering payment accommodations to eligible
borrowers in March 2020 and, at December 31, 2020, $74.1 million of loans, or 1% of total loans, had active payment
accommodations, down 93% from a peak of $1.1 billion in the second quarter of 2020. None of these loans have been classified
as TDRs. During the payment accommodation period, Seacoast typically continues to recognize interest income.
Adoption of New Accounting for Credit Losses
On January 1, 2020, the Company adopted ASC Topic 326 - Financial Instruments - Credit Losses, which replaced the incurred
loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”)
methodology. The adoption resulted in an increase to the allowance for credit losses on loans of $21.2 million and an addition
to the reserve for unfunded lending-related commitments of $1.8 million.
32
2020 Financial Performance Highlights
•
•
•
•
•
•
•
Steady build of shareholder value through consistent growth in tangible book value per share, which ended the period
at $16.16, an increase of 15% during the fourth quarter on an annualized basis.
The tangible common equity ratio of 11% supports Seacoast's ability to deploy capital for organic growth and
opportunistic acquisitions.
Record net income of $29.3 million in the fourth quarter, increasing 30% quarter-over-quarter.
Record levels of mortgage banking fees and wealth management income in 2020, reflecting increases of 126% and
18%, respectively, from 2019.
The successful acquisitions of First Bank of the Palm Beaches and Freedom Bank added experienced bankers while
expanding the Company's presence in attractive growth markets, which we believe will further support sustainable,
profitable growth.
Total deposits per banking center were $135.9 million at December 31, 2020, an increase of 17% from $116.3 million
one year earlier.
Continued discipline around expenses, primarily achieved through focus on reducing overhead and streamlining
business and cost savings processes, achieving a fourth quarter 2020 efficiency ratio below 50%.
Results of Operations
Earnings Summary
For the year ended December 31, 2020, net income totaled $77.8 million, or $1.44 per diluted share, compared to $98.7 million,
or $1.90 per diluted share, for the year ended December 31, 2019. Return on average assets (“ROA”) was 0.99% and return on
average equity (“ROE”) was 7.44% in 2020 compared to 1.45% and 10.63%, respectively, in 2019.
Adjusted net income1 for the year ended December 31, 2020 totaled $89.0 million, or $1.65 per diluted share, compared to
$104.6 million, or $2.01 per diluted share, in 2019.
Return on average tangible assets
Return on average tangible shareholders' equity
Efficiency ratio
Quarter
First
2020
0.11%
Second
2020
1.37%
Third
2020
1.20%
Fourth
2020
1.49%
Total
2020
1.08%
2019
1.56%
0.95
59.85
13.47
50.11
11.35
61.65
13.87
48.23
10.10
54.84
14.72
51.71
Adjusted return on average tangible assets1
Adjusted return on average tangible shareholders' equity1
Adjusted efficiency ratio1
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.
1.38%
1.17%
0.32%
1.33%
1.50%
13.06
54.82
10.93
53.55
2.86
51.63
13.09
48.75
49.60
14.00
14.93
50.90
1.58%
On both a GAAP and adjusted basis, return on average tangible assets and return on average tangible shareholders' equity
decreased in 2020 when compared to the prior year. The change reflects the impact on net income of increased provisioning for
credit losses in 2020 attributed to the adoption of CECL on January 1, 2020, and the financial impact of the COVID-19
pandemic, as well as growth in the balance sheet resulting from PPP loans, acquisitions, and higher deposit balances.
In 2020, the Company's efficiency ratio, defined as noninterest expense less foreclosed property expense and amortization of
intangibles divided by net operating revenue (net interest income on a fully tax equivalent basis plus noninterest income
excluding securities gains and losses), was 54.84%, compared to 51.71% for 2019. Changes from the prior year reflect higher
2020 expenses, including acquisition-related costs, partially offset by lower funding costs and increases in noninterest income.
The adjusted efficiency ratio1 in 2020 was 51.63% compared to 50.90% in 2019. The Company expects to maintain an adjusted
efficiency ratio in the low 50s for the full year 2021.
33
Net Interest Income and Margin
Net interest income for the year ended December 31, 2020 totaled $262.7 million, increasing $19.1 million, or 8%, compared to
the year ended December 31, 2019. Net interest income (on a fully taxable equivalent basis)1 for the year ended December 31,
2020 was $263.2 million, increasing $19.3 million, or 8%, compared to the year ended December 31, 2019. In 2020 and 2019,
net interest margin was 3.65% and 3.92%, respectively.
In 2020, net interest income and the net interest margin reflect the impact of interest rate cuts by the Federal Reserve in the first
quarter of 2020 in response to the COVID-19 pandemic. Loans and security yields contracted by 59 and 67 basis points,
respectively, offset by a decline in the cost of deposits by 37 basis points. The impact on net interest margin from accretion of
purchase discounts on acquired loans was 21 basis points in 2020, compared to 25 basis points in 2019. PPP loans decreased net
interest margin by three basis points in 2020.
Table 2 presents the Company’s average balance sheets, interest income and expenses, and yields and rates, for the past three
years.
The following table details the trend for net interest income and margin results (on a fully taxable equivalent basis)1, yield on
earning assets and rate on interest bearing liabilities.
Net Interest
Income1
Net Interest
Margin1
Yield on
Earning Assets1
$
(In thousands, except percentages)
Fourth quarter 2019
First quarter 2020
Second quarter 2020
Third quarter 2020
Fourth quarter 2020
1On a fully taxable equivalent basis - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to
GAAP.
61,846
63,291
67,388
63,621
68,903
0.98%
0.90
0.51
0.40
0.33
4.49%
4.54
4.03
3.65
3.80
3.84%
3.93
3.70
3.40
3.59
Rate on Interest
Bearing
Liabilities
Total average loans increased $745.3 million, or 15%, during 2020 compared to 2019 with growth attributed primarily to loans
originated in the PPP, and the two bank acquisitions completed in 2020. Average investment securities balances increased $99.6
million, or 8%, during 2020 compared to 2019.
Average loans (the highest yielding component of earning assets) as a percentage of average earning assets totaled 79% in 2020
and 2019. The mix of loans has remained stable, with volumes related to commercial real estate representing 52% of total loans,
excluding PPP loans, at December 31, 2020, compared to 49% at December 31, 2019. Residential loan balances with
individuals (including home equity loans and lines and personal construction loans) represented 28% of total loans, excluding
PPP loans, at December 31, 2020 compared to 32% at December 31, 2019. (see “Loan Portfolio”).
1 Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.
34
Loan production is detailed in the following table for the periods specified:
(In thousands)
Commercial/commercial real estate loan pipeline at year-end
Commercial/commercial real estate loans closed
Residential pipeline - saleable at period end
Residential loan - sold
Residential pipeline - portfolio at period end
Residential loans - retained
Consumer pipeline at period end
Consumer originations
PPP originations
For the Year Ended December 31,
2020
166,735 $
655,821
92,017 $
509,420
25,083 $
129,183
18,207 $
219,294
2019
277,788
1,053,809
18,995
236,528
19,107
287,025
23,311
214,548
598,994 $
—
$
$
$
$
$
Commercial and commercial real estate loan production in 2020 totaled $655.8 million, compared to $1.1 billion in 2019.
During 2019, the Company acquired $72.4 million in fixed-rate commercial real estate loans from the wholesale market. No
purchases were made in the wholesale market during 2020.
Residential loan production totaled $638.6 million in 2020 compared to $523.6 million in 2019. 2019 includes purchases of
residential loans from the wholesale market totaling $134.7 million. No purchases were made in the wholesale market during
2020.
Consumer originations totaled $219.3 million during 2020 compared to $214.5 million during 2019.
Seacoast originated more than 5,500 loans to borrowers through the PPP program for $599.0 million in 2020, and acquired
$55.0 million in PPP loans from Freedom Bank. Under the terms of the SBA's program, principal and interest on PPP loans
may be forgiven provided the borrower uses the funds in a manner consistent with the program's guidelines. As of December
31, 2020, $71.8 million in PPP loans had been forgiven.
Average debt securities increased $99.6 million, or 8%, from 2019. Securities comprised 18% and 19% of average earning
assets in 2020 and 2019, respectively. Yields on securities decreased from 3.00% in 2019 to 2.33% in 2020.
In 2020, the cost of average interest-bearing liabilities decreased 57 basis points to 0.53% from 2019, reflecting the impact of
interest rate reductions in 2019 and 2020. The low overall cost of our funding reflects the Company’s successful core deposit
focus that produced strong growth in customer relationships over the past several years. Noninterest bearing demand deposits at
December 31, 2020 represent 33% of total deposits, compared to 28% at December 31, 2019. The cost of average total deposits
(including noninterest bearing demand deposits) in 2020 was 0.32%, compared to 0.69% in 2019.
35
The following table details the Company's customer relationship funding as of:
(In thousands, except percentages)
Noninterest demand
Interest-bearing demand
Money market
Savings
Time certificates of deposit
Total deposits
Customer sweep accounts
Noninterest demand deposit mix
$
$
$
December 31,
2020
2,289,787
1,566,069
1,556,370
689,179
831,156
6,932,561
119,609
$
$
$
2019
1,590,493
1,181,732
1,108,363
519,152
1,185,013
5,584,753
86,121
33%
28%
The Company’s focus on convenience, with high-quality customer service, expanded digital offerings and distribution channels
provides stable, low-cost core deposit funding. Over the past several years, the Company has strengthened its retail deposit
franchise using new strategies and product offerings, while maintaining a focus on growing customer relationships. Seacoast
believes that digital product offerings are central to core deposit growth and have proved to be of meaningful value to its
customers in this environment. Seacoast's call center and retail associates continue to lead the market in availability and
customer service standards, with the call center out-performing large bank call center wait times and service level standards.
The impact of PPP originations and individual stimulus payments, as well as the acquisition of FBPB in the first quarter of 2020
and Freedom Bank in the third quarter of 2020, have all contributed to higher deposit balances. The Company has also seen a
continued shift toward mobile banking use as customers recognize the ease of access and security features of such engagement.
At December 31, 2020, registered mobile devices had increased 16% compared to December 31, 2019, while online users
increased 13% in the same time period. Growth in mobile banking use represents both consumer and business customers
utilizing the convenience of mobile and online channels. During 2020, average transaction deposits (noninterest and interest
bearing demand) increased $676.3 million, or 25%, compared to 2019. Along with new relationships, deposit programs and
digital sales have improved the Company's market share and deepened relationships with existing customers.
Growth in core deposits has also provided low funding costs. The Company’s deposit mix remains favorable, with 83% of
average deposit balances comprised of savings, money market, and demand deposits in 2020.
Sweep repurchase agreements with customers increased $33.5 million, or 39%, to $119.6 million at December 31, 2020
compared to $86.1 million at December 31, 2019. The average rate on customer repurchase accounts was 0.33% in 2020
compared to 1.35% in 2019. No federal funds purchased were utilized at December 31, 2020 or 2019.
The Company had no FHLB borrowings outstanding at December 31, 2020 compared to $315.0 million at December 31, 2019.
FHLB borrowings averaged $139.4 million at an average rate of 1.10% for the full year 2020, compared to $131.9 million at an
average rate of 2.28% for the full year 2019 (see “Note J - Borrowings” to the Company’s consolidated financial statements).
In 2020, average subordinated debt of $71.2 million related to trust preferred securities issued by subsidiary trusts of the
Company carried an average cost of 3.07%, down from 4.75% in 2019, reflecting the impact of lower interest rates as the
subordinated debt cost is based on LIBOR plus a spread (see “Note J - Borrowings”).
Provision for Credit Losses
The provision for credit losses was $38.2 million for the full year 2020 compared to $11.0 million for the full year 2019. On
January 1, 2020, the Company adopted ASC Topic 326 - Financial Instruments - Credit Losses. Under the CECL approach, the
Company reserves for the full amount of expected credit losses over the life of the loans. The estimate is based on current
conditions and reasonable and supportable forecasts. This use of CECL requires earlier recognition, when compared with the
previous accounting guidance, of credit losses that are deemed expected but not yet probable. The expectation of higher future
losses due to the ongoing impact of COVID-19 on the current and forecasted economic environment resulted in the increase in
provisioning during 2020.
36
Noninterest Income
Noninterest income (excluding securities gains and losses) totaled $60.3 million in 2020, an increase of $4.8 million, or 9%,
compared to 2019. Noninterest income accounted for 19% of total revenue in 2020 and 2019 (net interest income plus
noninterest income, excluding securities gains and losses).
Service charges on deposits for the year ended December 31, 2020 compared to the year ended December 31, 2019 decreased
$2.1 million, or 18%, to $9.4 million. This decrease reflects the impact of the COVID-19 pandemic on service charges,
including the waiver of certain account charges during the second quarter of 2020, as well as higher average deposit balances
resulting in lower overdraft fees in 2020. Overdraft fees represented 44% of total service charges on deposits in 2020 compared
to 55% in 2019.
Interchange revenue totaled $13.7 million in 2020, an increase of 2% from $13.4 million in 2019. Growth in business customers
and marketing targeted at increasing debit card utilization across all customers resulted in record interchange revenue for the
year.
Wealth management revenues, including brokerage commissions and fees and trust income, increased $1.2 million, or 18%, to
$7.5 million for the year ended December 31, 2020. A determined and consistent focus on building new relationships and
providing exceptional services resulted in considerable growth during 2020, with assets under management (“AUM”)
increasing 33% year-over-year to $870 million as of December 31, 2020.
Mortgage banking fees increased by $8.2 million, or 126%, to $14.7 million for the year ended December 31, 2020 compared to
2019. In 2020, Seacoast continued to capitalize on the robust residential refinance market and a vibrant Florida housing market,
resulting in record results for the year.
Marine finance fees were $0.7 million in 2020, a decrease of $0.4 million, or 34%, compared to fees of $1.1 million in 2019.
Gains on sale of the guaranteed portion of SBA loans totaled $0.7 million for the year ended December 31, 2020, a decrease of
$1.8 million compared to 2019. A shift toward PPP production beginning in the second quarter of 2020 in response to the
COVID-19 pandemic resulted in lower production of saleable SBA loans for 2020.
Bank owned life insurance (“BOLI”) income totaled $3.6 million in 2020, a decrease of $0.1 million, or 3%, compared to the
prior year.
Other income decreased $0.5 million, or 5%, year-over-year. 2020 results reflect higher swap fees, which are more than offset
by a $1.0 million BOLI death benefit recognized in 2019.
Securities gains in 2020 totaled $1.2 million, resulting from the sale of $96.7 million of debt securities, and a $0.1 million
increase in the value of the CRA-qualified mutual fund investment. Securities gains in 2019 totaled $1.2 million, resulting from
the sale of $202.7 million of debt securities, and a $0.2 million increase in the value of the CRA-qualified mutual fund
investment.
Noninterest Expense
The Company has demonstrated its commitment to efficiency through disciplined, proactive management of its cost structure.
Noninterest expenses in 2020 totaled $185.6 million and included acquisition-related expenses of $9.1 million, expenses related
to branch consolidation of $0.8 million, and $0.3 million in bonuses to retail associates for keeping critical functions operating
at full capacity through the initial stages of the Company's response to the COVID-19 pandemic. In 2019, noninterest expenses
totaled $160.7 million, including $1.0 million in acquisition-related expenses, $1.8 million in expenses related to branch
consolidation, and $0.1 million in business continuity expenses relating to a hurricane event. Adjusted noninterest expense1 in
2020 totaled $169.5 million, an increase of 12% from 2019, reflecting overall growth of the organization. Changes in the
categories of noninterest expense for the year ended 2020 compared to 2019 are further described below.
Seacoast has expanded its footprint while decreasing its reliance on branches through successful bank acquisitions and the
repositioning of the banking center network in strategic growth markets to meet the evolving needs of its customers. At
December 31, 2020, deposits per banking center were $135.9 million, up 17% from $116.3 million at December 31, 2019. The
Company consolidated one banking center location in 2020 and three in 2019. The Company plans to further consolidate three
banking center locations in the first quarter of 2021.
Salaries and wages totaled $88.5 million in 2020, an increase of $14.7 million, or 20%, compared to 2019. Results in 2020
include $2.8 million in bank acquisition-related charges. Record levels of saleable mortgage production resulted in higher
37
commissions, and bonuses were paid to retail associates for keeping critical functions operating at full capacity through the
initial stages of the Company's response to the COVID-19 pandemic. Higher headcount is attributed to the recruitment of
seasoned bankers in key markets, to the FBPB and Freedom Bank acquisitions, and the addition of staff to support the PPP.
Higher loan originations in 2020 relating to the PPP resulted in higher deferrals of related salary costs.
During 2020, employee benefit costs, which include group health insurance, 401(k) plan contributions, payroll taxes, and
unemployment compensation, increased $1.8 million, or 13%, compared to 2019. The increase is attributed to higher headcount
and higher health insurance costs.
The Company utilizes third parties for core data processing systems. The data processing costs associated with these third
parties fluctuate based on the number of transactions processed and the negotiated rates associated with those transactions.
Outsourced data processing costs totaled $19.1 million and $15.1 million in 2020 and 2019, respectively. Of the $4.0 million, or
26%, increase in 2020, $2.7 million is the result of acquisition-related costs incurred in 2020. The Company continues to
improve and enhance mobile and other digital products and services through key third parties. Outsourced data processing costs
may increase in the future as customers adopt improved products and as business volumes grow.
Telephone and data line expenses, including electronic communications with customers, between branch locations and
personnel, and with third party data processors, remained flat year-over-year at $3.0 million. The Company continues to
manage expenses for this category, which has benefited from branch consolidation, while continuing to grow alternative service
channels including the Customer Support Center and digital applications.
Total occupancy, furniture and equipment expenses in 2020 totaled $20.0 million, a decrease of $0.5 million, or 2%, compared
to 2019. The decrease reflects the benefit of recent branch consolidations. The Company continues to strategically manage its
branch footprint to balance customer needs for access to physical branches with the ability to provide services through
telephone-based and digital channels. Branch consolidations will continue for the Company and the banking industry in general
as the customer service dynamic continues to evolve.
In 2020 and 2019, marketing expenses totaled $4.8 million and $4.2 million, respectively. The Company continues to carefully
manage the use of marketing campaigns to target potential high value customers in a cost effective manner through a mix of
digital communications, direct mail, event sponsorships and donations.
Legal and professional fees increased by $0.6 million in 2020, or 7%, to $9.2 million, which includes $2.7 million in merger-
related expenses in 2020, compared to $0.4 million in 2019.
FDIC assessments were $1.3 million in 2020, compared to $0.9 million in 2019. In the third quarter of 2019, the FDIC
announced the achievement of the target deposit insurance reserve ratio, resulting in the Company's ability to apply previously
awarded credits to its deposit insurance assessment. The Company used these credits to offset $0.9 million of expenses during
2019 and $0.7 million during 2020. The credits were fully utilized by the second quarter of 2020.
For the year ended December 31, 2020, foreclosed property expense and net loss on sale was $2.3 million, compared to $0.1
million in 2019. Results in 2020 primarily reflect the write-downs of two properties in the fourth quarter upon the receipt of
updated valuations.
Other expense totaled $15.8 million and $15.2 million in 2020 and 2019, respectively. The increase of $0.6 million, or 4%,
includes higher recruiting fees and higher mortgage production-related expenses.
Income Taxes
In 2020, the provision for income taxes totaled $22.8 million, compared to $29.9 million in 2019. In 2019, a reduction in the
State of Florida corporate income tax rate resulted in the write-down of certain deferred tax assets, resulting in additional
income tax expense of $1.1 million. In 2020, changes under the CARES Act provided for the carryback of net operating losses
that resulted in an income tax benefit of $0.4 million. Discrete tax benefits related to share-based compensation were $0.1
million and $0.8 million in 2020 and 2019, respectively.
Fourth Quarter Review
Net income totaled $29.3 million in the fourth quarter of 2020, an increase of $6.7 million, or 30%, from the third quarter of
2020, and an increase of $2.2 million, or 8%, compared to the fourth quarter of 2019. Adjusted net income1 totaled $30.7
million, an increase of $3.4 million, or 12%, from the third quarter of 2020, and an increase of $3.9 million, or 14%, compared
38
to the fourth quarter of 2019. Diluted earnings per common share (“EPS”) was $0.53 and adjusted diluted EPS12was $0.55 in
the fourth quarter of 2020, compared to diluted EPS of $0.42 and adjusted diluted EPS1 of $0.50 in the third quarter of 2020 and
compared to diluted EPS of $0.52 and adjusted diluted EPS1 of $0.52 in the fourth quarter of 2019.
Revenues increased $3.3 million, or 4%, from the third quarter of 2020 and increased $5.6 million, or 7%, from the fourth
quarter of 2019. Net interest income increased $5.3 million, or 8%, compared to the third quarter of 2020 and increased $7.0
million, or 11%, compared to the fourth quarter of 2019.
Net interest income (on a tax-equivalent basis), for the fourth quarter of 2020 totaled $68.9 million, an increase of $5.3 million,
or 8%, from the third quarter of 2020, and an increase of $7.1 million, or 11%, from the fourth quarter 2019. Net interest
margin (on a tax-equivalent basis), increased 19 basis points to 3.59% from the third quarter of 2020, and contracted 25 basis
points from the fourth quarter of 2019. During the fourth quarter of 2020, net interest income included $5.2 million in interest
and fees earned on PPP loans compared to $1.7 million in the third quarter of 2020. Lower PPP loan fees in the third quarter
resulted from a calculation change to align fee recognition with the contractual maturity of the loans. Loan forgiveness began in
the fourth quarter of 2020, resulting in accelerated recognition of $1.5 million in PPP loan fees.
Noninterest income, excluding securities gains and losses, totaled $14.9 million for the fourth quarter of 2020, a decrease of
$2.0 million, or 12%, from the third quarter of 2020 and an increase of $1.1 million, or 8%, from the fourth quarter of 2019.
Mortgage banking gains decreased by $1.6 million to $3.6 million in the fourth quarter of 2020, compared to record results in
the prior quarter. The low interest rate environment continued to result in heightened refinance demand, though at lower levels
than in the third quarter.
Noninterest expenses for the fourth quarter of 2020 totaled $43.7 million, a decrease of $8.0 million, or 15% from the prior
quarter and an increase of $5.6 million, or 15%, from the fourth quarter of 2019. Compared to the third quarter of 2020, salaries
and wages decreased by $1.6 million to $21.5 million, primarily reflecting the effect of higher expense deferrals associated with
accelerated commercial loan originations in the fourth quarter. Other decreases compared to the third quarter of 2020 are
primarily attributed to merger-related expenses.
A provision for loan losses of $1.9 million was recorded in the fourth quarter of 2020 compared to a reversal of $0.8 million in
the previous quarter. The ratio of allowance for credit losses to total loans was 1.62% at December 31, 2020, compared to
1.60% at September 30, 2020. Excluding PPP loans, the ratio was 1.79% at December 31, 2020, compared to 1.80% at
September 30, 2020.
12Non-GAAP measure, see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.
39
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.
The following tables provide reconciliation between GAAP and adjusted (non-GAAP) financial measures.
(In thousands except per share data)
Net income
Total noninterest income
Securities losses (gains), net
Total Adjustments to Noninterest Income
Total Adjusted Noninterest Income
Total noninterest expense
Merger-related charges
Amortization of intangibles
Business continuity expenses
Branch reductions and other expense initiatives
Quarters
Fourth
2020
Third
2020
Second
2020
First
2020
Total
Year
$ 29,347
$ 22,628
$ 25,080
$
709
$ 77,764
$ 14,930
$ 16,946
$ 15,006
$ 14,688
$ 61,570
18
18
(4)
(4)
(1,230)
(1,230)
(19)
(19)
(1,235)
(1,235)
$ 14,948
$ 16,942
$ 13,776
$ 14,669
$ 60,335
$ 43,681
$ 51,674
$ 42,399
$ 47,798
$ 185,552
—
(1,421)
—
(354)
(4,281)
(1,497)
—
(464)
(240)
(1,483)
—
—
(4,553)
(1,456)
(307)
—
(9,074)
(5,857)
(307)
(818)
Total Adjustments to Noninterest Expense
(1,775)
(6,242)
(1,723)
(6,316)
(16,056)
Total Adjusted Noninterest Expense
$ 41,906
$ 45,432
$ 40,676
$ 41,482
$ 169,496
Income Taxes
Tax effect of adjustments
Total Adjustments to Income Taxes
Adjusted Income Taxes
Adjusted Net Income
Earnings per diluted share, as reported
Adjusted Earnings per Diluted Share
Adjusted diluted shares outstanding
$ 8,793
$ 6,992
$ 7,188
$
(155)
$ 22,818
440
440
9,233
1,530
1,530
8,522
121
121
7,309
1,544
1,544
1,389
3,635
3,635
26,453
$ 30,700
$ 27,336
$ 25,452
$ 5,462
$ 88,950
$
0.53
0.55
$
0.42
0.50
$
0.47
0.48
$
0.01
0.10
$
1.44
1.65
55,739
54,301
53,308
52,284
53,930
Adjusted Noninterest Expense
$ 41,906
$ 45,432
$ 40,676
$ 41,482
$ 169,496
Provision for credit losses on unfunded commitments
Foreclosed property expense and net (loss) gain on sale
795
(1,821)
(756)
(512)
(178)
(245)
(46)
315
(185)
(2,263)
Net Adjusted Noninterest Expense
$ 40,880
$ 44,164
$ 40,253
$ 41,751
$ 167,048
40
(In thousands except per share data)
Revenue
Total Adjustments to Revenue
Impact of FTE adjustment
Quarters
Fourth
2020
Third
2020
Second
2020
First
2020
Total
Year
$ 83,721
$ 80,449
$ 82,278
$ 77,865
$ 324,313
18
112
(4)
118
(1,230)
116
(19)
114
(1,235)
460
Adjusted revenue on a fully tax equivalent basis
$ 83,851
$ 80,563
$ 81,164
$ 77,960
$ 323,538
Adjusted Efficiency Ratio
Net Interest Income
Impact of FTE Adjustment
48.75%
54.82%
49.60%
53.55%
51.63%
$ 68,791
$ 63,503
$ 67,272
$ 63,177
$ 262,743
112
118
116
114
460
Net interest income including FTE adjustment
68,903
63,621
67,388
63,291
263,203
Total noninterest income
Total noninterest expense
Pre-Tax Pre-Provision Earnings
Total Adjustments to Noninterest Income
Total Adjustments to Noninterest Expense
14,930
16,946
15,006
14,688
61,570
43,681
51,674
42,399
47,798
185,552
40,152
28,893
39,995
30,181
139,221
18
(4)
(2,801)
(7,510)
(1,230)
(2,146)
(19)
(1,235)
(6,047)
(18,504)
Adjusted Pre-Tax Pre-Provision Earnings
$ 42,971
$ 36,399
$ 40,911
$ 36,209
$ 156,490
Average Assets
$ 8,376,396
$ 8,086,890
$ 7,913,002
$ 7,055,543
$ 7,860,000
Less average goodwill and intangible assets
(238,631)
(228,801)
(230,871)
(226,712)
(231,267)
Average Tangible Assets
$ 8,137,765
$ 7,858,089
$ 7,682,131
$ 6,828,831
$ 7,628,733
Return on Average Assets (ROA)
1.39%
1.11%
1.27%
0.04%
0.99%
Impact of removing average intangible assets and related
amortization
Return on Average Tangible Assets (ROTA)
Impact of other adjustments for Adjusted Net Income
0.10
1.49
0.01
0.09
1.20
0.18
Adjusted Return on Average Tangible Assets
1.50%
1.38%
0.10
1.37
(0.04)
1.33%
0.07
0.11
0.21
0.09
1.08
0.09
0.32%
1.17%
Average Shareholders' Equity
$ 1,111,073
$ 1,061,807
$ 1,013,095
$ 993,993
$ 1,045,219
Less average goodwill and intangible assets
(238,631)
(228,801)
(230,871)
(226,712)
(231,267)
Average Tangible Equity
$ 872,442
$ 833,006
$ 782,224
$ 767,281
$ 813,952
Return on Average Shareholders' Equity
10.51 %
8.48 %
9.96 %
0.29 %
7.44 %
Impact of removing average intangible assets and related
amortization
Return on Average Tangible Common Equity (ROTCE)
Impact of other adjustments for Adjusted Net Income
3.36
13.87
0.13
2.87
11.35
1.71
3.51
13.47
(0.38)
0.66
0.95
1.91
2.66
10.10
0.83
Adjusted Return on Average Tangible Common Equity
14.00%
13.06%
13.09%
2.86%
10.93%
Loan interest income1
Accretion on acquired loans
Interest and fees on PPP loans
$ 65,684
$ 60,573
$ 64,929
$ 63,524
$ 254,710
(4,448)
(5,187)
(3,254)
(1,719)
(2,988)
(5,068)
(4,287)
(14,977)
—
(11,974)
Loan interest income excluding PPP and accretion on acquired
loans
$ 56,049
$ 55,600
$ 56,873
$ 59,237
$ 227,759
Yield on loans1
Impact of accretion on acquired loans
Impact of PPP
4.42%
4.11%
4.56%
(0.30)
0.11
(0.22)
0.33
(0.21)
(0.04)
4.90%
(0.33)
—
4.49%
(0.27)
0.11
Yield on loans excluding PPP and accretion on acquired loans
4.23%
4.22%
4.31%
4.57%
4.33%
41
(In thousands except per share data)
Net interest income1
Accretion on acquired loans
Interest and fees on PPP
Net interest income excluding PPP and accretion on acquired
loans
Quarters
Fourth
2020
Third
2020
Second
2020
First
2020
Total
Year
$ 68,903
$ 63,621
$ 67,388
$ 63,291
$ 263,203
(4,448)
(5,187)
(3,254)
(1,719)
(2,988)
(5,068)
(4,287)
(14,977)
—
(11,974)
$ 59,268
$ 58,648
$ 59,332
$ 59,004
$ 236,252
Net interest margin
Impact of accretion on acquired loans
Impact of PPP
Net interest margin excluding PPP and accretion on acquired
loans
3.59%
3.40%
3.70%
(0.23)
0.01
(0.17)
0.19
(0.16)
(0.08)
3.93%
(0.27)
—
3.65%
(0.21)
0.03
3.37%
3.42%
3.46%
3.66%
3.47%
Security interest income1
Tax equivalent adjustment to securities
$ 6,586
$ 7,129
$ 7,725
$ 8,848
$ 30,288
(23)
(32)
(31)
(30)
(116)
Securities interest income excluding tax equivalent adjustment
$ 6,563
$ 7,097
$ 7,694
$ 8,818
$ 30,172
Loan interest income1
Tax equivalent adjustment to loans
$ 65,684
$ 60,573
$ 64,929
$ 63,524
$ 254,710
(89)
(86)
(85)
(84)
(344)
Loan interest income excluding tax equivalent adjustment
$ 65,595
$ 60,487
$ 64,844
$ 63,440
$ 254,366
Net Interest Income1
Tax equivalent adjustment to securities
Tax equivalent adjustment to loans
$ 68,903
$ 63,621
$ 67,388
$ 63,291
$ 263,203
(23)
(89)
(32)
(86)
(31)
(85)
(30)
(84)
(116)
(344)
Net interest income excluding tax equivalent adjustments
$ 68,791
$ 63,503
$ 67,272
$ 63,177
$ 262,743
1On a fully taxable equivalent basis. All yields and rates have been computed using amortized cost.
(In thousands except per share data)
Net income
Quarters
Fourth
2019
Third
2019
Second
2019
First
2019
Total
Year
$ 27,176
$ 25,605
$ 23,253
$ 22,705
$ 98,739
Total noninterest income
Securities (gains) losses, net
BOLI benefits on death (included in other income)
Total Adjustments to Noninterest Income
$ 16,376
$ 13,943
$ 13,577
$ 12,836
$ 56,732
(2,539)
—
(2,539)
847
(956)
(109)
466
—
466
9
—
9
(1,217)
(956)
(2,173)
Total Adjusted Noninterest Income
$ 13,837
$ 13,834
$ 14,043
$ 12,845
$ 54,559
Total noninterest expense
Merger-related charges
Amortization of intangibles
Business continuity expenses
Branch reductions and other expense initiatives
$ 38,057
$ 38,583
$ 41,000
$ 43,099
$ 160,739
(634)
(1,456)
—
—
—
—
(1,456)
(1,456)
(95)
(121)
—
(1,517)
(2,973)
(335)
(1,458)
—
(208)
(2,001)
(969)
(5,826)
(95)
(1,846)
(8,736)
Total Adjustments to Noninterest Expense
(2,090)
(1,672)
Total Adjusted Noninterest Expense
$ 35,967
$ 36,911
$ 38,027
$ 41,098
$ 152,003
42
(In thousands except per share data)
Income Taxes
Tax effect of adjustments
Effect of change in corporate tax rate on deferred tax assets
Total Adjustments to Income Taxes
Adjusted Income Taxes
Adjusted Net Income
Earnings per diluted share, as reported
Adjusted diluted earnings per share
Average diluted shares outstanding
Quarters
Fourth
2019
Third
2019
Second
2019
First
2019
Total
Year
$
8,103
$
8,452
$
6,909
$
6,409
$ 29,873
(110)
—
(110)
7,993
572
(1,135)
(563)
7,889
874
—
874
510
—
510
7,783
6,919
1,846
(1,135)
711
30,584
$ 26,837
$ 27,731
$ 25,818
$ 24,205
$ 104,591
$
$
0.52
0.52
$
$
0.49
0.53
$
$
0.45
0.50
$
$
0.44
0.47
$
$
1.90
2.01
52,081
51,935
51,952
52,039
52,029
Adjusted Noninterest Expense
$ 35,967
$ 36,911
$ 38,027
$ 41,098
$ 152,003
Foreclosed property expense and net (loss)/gain on sale
(3)
(262)
174
40
(51)
Total Adjusted Noninterest Expense
$ 35,964
$ 36,649
$ 38,201
$ 41,138
$ 151,952
Revenue
Total Adjustments to Revenue
Impact of FTE adjustment
$ 78,136
$ 74,891
$ 73,713
$ 73,610
$ 300,350
(2,539)
86
(109)
79
466
83
9
87
(2,173)
335
Adjusted Revenue on a fully taxable equivalent basis
$ 75,683
$ 74,861
$ 74,262
$ 73,706
$ 298,512
Adjusted Efficiency Ratio
Net Interest Income
Impact of FTE adjustment
Net Interest Income including FTE adjustment
Total noninterest income
Total noninterest expense
Pre-Tax Pre-Provision Earnings
Total Adjustments to Noninterest Income
Total Adjustments to Noninterest Expense
47.52%
48.96%
51.44%
55.81%
50.90%
$ 61,760
$ 60,948
$ 60,136
$ 60,774
$ 243,618
86
61,846
16,376
38,057
40,165
(2,539)
(2,093)
79
61,027
13,943
38,583
36,387
(109)
(1,934)
83
60,219
13,577
41,000
32,796
466
87
335
60,861
243,953
12,836
56,732
43,099
160,739
30,598
139,946
(2,799)
(1,961)
9
(2,173)
(8,787)
Adjusted Pre-Tax Pre-Provision Earnings
$ 39,719
$ 38,212
$ 36,061
$ 32,568
$ 146,560
Average Assets
$ 6,996,214
$ 6,820,576
$ 6,734,994
$ 6,770,978
$ 6,831,280
Less average goodwill and intangible assets
(226,060)
(227,389)
(228,706)
(230,066)
(228,042)
Average Tangible Assets
$ 6,770,154
$ 6,593,187
$ 6,506,288
$ 6,540,912
$ 6,603,238
Return on Average Assets (“ROA”)
1.54%
1.49%
1.38%
1.36%
1.45%
Impact of removing average intangible assets and related
amortization
Return on Average Tangible Assets (“ROTA”)
Impact of other adjustments for Adjusted Net Income
Adjusted Return on Average Tangible Assets
0.12
1.66
(0.09)
1.57%
0.12
1.61
0.06
0.12
1.50
0.09
0.12
1.48
0.02
0.11
1.56
0.02
1.67%
1.59%
1.50%
1.58%
Average Shareholders' Equity
$ 976,200
$ 946,670
$ 911,479
$ 879,564
$ 928,793
Less average goodwill and intangible assets
(226,060)
(227,389)
(228,706)
(230,066)
(228,042)
Average Tangible Equity
$ 750,140
$ 719,281
$ 682,773
$ 649,498
$ 700,751
43
(In thousands except per share data)
Return on Average Shareholders' Equity
Impact of removing average intangible assets and related
amortization
Return on Average Tangible Common Equity ROTCE)
Impact of other adjustments for Adjusted Net Income
Quarters
Fourth
2019
Third
2019
Second
2019
First
2019
Total
Year
11.04%
10.73%
10.23%
10.47%
10.63%
3.91
14.95
(0.76)
4.00
14.73
0.57
4.07
14.30
0.87
4.39
14.86
0.25
4.09
14.72
0.21
Adjusted Return on Average Tangible Common Equity
14.19%
15.30%
15.17%
15.11%
14.93%
Loan interest income1
Accretion on acquired loans
$ 62,922
$ 63,138
$ 62,335
$ 62,335
$ 250,730
(3,407)
(3,859)
(4,166)
(3,938)
(15,370)
Loan Interest Income excluding accretion on acquired loans
$ 59,515
$ 59,279
$ 58,169
$ 58,397
$ 235,360
Yield on loans1
Impact of accretion on acquired loans
Yield on Loans excluding accretion on acquired loans
4.89%
(0.26)
4.63%
5.06%
(0.30)
4.76%
5.16%
(0.34)
4.82%
5.22%
(0.33)
4.89%
5.08%
(0.31)
4.77%
Net interest income1
Accretion on acquired loans
$ 61,846
$ 61,027
$ 60,219
$ 60,861
$ 243,953
(3,407)
(3,859)
(4,166)
(3,938)
(15,370)
Net Interest Income excluding accretion on acquired loans
$ 58,439
$ 57,168
$ 56,053
$ 56,923
$ 228,583
Net interest margin
Impact of accretion on acquired loans
Net interest margin excluding accretion on acquired loans
3.84%
(0.21)
3.63%
3.89%
(0.25)
3.64%
3.94%
(0.27)
3.67%
4.02%
(0.26)
3.76%
3.92%
(0.25)
3.67%
Securities Interest Income1
Tax equivalent adjustment to securities
$
8,662
$
8,966
$
9,112
$
9,309
$ 36,049
(32)
(33)
(36)
(39)
(140)
Security interest income excluding tax equivalent adjustment
$
8,630
$
8,933
$
9,076
$
9,270
$ 35,909
Loan Interest Income1
Tax equivalent adjustment to loans
$ 62,922
$ 63,138
$ 62,335
$ 62,335
$ 250,730
(54)
(46)
(47)
(48)
(195)
Loan interest income excluding tax equivalent adjustment
$ 62,868
$ 63,092
$ 62,288
$ 62,287
$ 250,535
Net interest income1
Tax equivalent adjustment to securities
Tax equivalent adjustment to loans
$ 61,846
(32)
(54)
$ 61,027
(33)
(46)
$ 60,219
(36)
(47)
$ 60,861
(39)
(48)
$ 243,953
(140)
(195)
Net Interest Income excluding tax equivalent adjustments
$ 61,760
$ 60,948
$ 60,136
$ 60,774
$ 243,618
1On a fully taxable equivalent basis. All yields and rates have been computed using amortized cost.
44
Financial Condition
Total assets increased $1.2 billion, or 17% year-over-year to $8.3 billion at December 31, 2020, reflecting the impact of PPP
loan originations and the completion of two acquisitions during the year.
Securities
Information related to yields, maturities, carrying values and fair value of the Company’s securities is set forth in Tables 13-16
and “Note D - Securities” of the Company’s consolidated financial statements.
At December 31, 2020, the Company had $1.4 billion in securities available-for-sale, and $184.5 million in securities held-to-
maturity. The Company's total debt securities portfolio increased $374.4 million, or 31% from December 31, 2019. During the
year ended December 31, 2020, there were $830.3 million of debt security purchases and $379.9 million in paydowns and
maturities over the same period. For the year ended December 31, 2020, proceeds from the sale of securities totaled $96.7
million, with net gains of $1.1 million. During the year ended December 31, 2019, there were $309.5 million of debt security
purchases and $144.2 million in paydowns and maturities over the same period. For the year ended December 31, 2019,
proceeds from the sale of securities totaled $202.7 million, with net losses of $1.0 million.
Debt securities generally return principal and interest monthly. The modified duration of the investment portfolio at December
31, 2020 was 3.8 years, compared to 3.5 years at December 31, 2019.
At December 31, 2020, available-for-sale securities had gross unrealized losses of $2.1 million and gross unrealized gains of
$28.7 million, compared to gross unrealized losses of $2.7 million and gross unrealized gains of $8.8 million at December 31,
2019. The Company assesses securities in an unrealized loss position on a quarterly basis. As of December 31, 2020, the
Company expected to recover the entire amortized cost basis of these securities and therefore no allowance for credit losses was
recorded.
The credit quality of the Company’s securities holdings are primarily investment grade. As of December 31, 2020, the
Company’s investment securities, except for $35.3 million of securities issued by states and their political subdivisions,
generally are traded in liquid markets. U.S. Treasury and U.S. government agencies and obligations of U.S. government-
sponsored entities totaled $1.3 billion, or 79%, of the total portfolio. The portfolio also includes $91.2 million in private label
securities, most secured by residential real estate collateral, with low loan to values and average credit support of 22%. The
Company also has invested $202.2 million in uncapped 3-month LIBOR floating rate collateralized loan obligations.
Collateralized loan obligations are special purpose vehicles that purchase first lien broadly syndicated corporate loans while
providing support to senior tranche investors. As of December 31, 2020, all of the Company's collateralized loan obligations
were in AAA/AA tranches with average credit support of 30%. The Company performs routine stress testing on these securities
to assess both structure and collateral.
Loan Portfolio
Loans, net of unearned income and excluding the allowance for credit losses, were $5.6 billion at December 31, 2020, an
increase of $479.4 million, or 9%, compared to December 31, 2019. In the second quarter of 2020, the Company began
originating Paycheck Protection Program (“PPP”) loans established by the Coronavirus Aid, Relief and Economic Security
(“CARES”) Act. At December 31, 2020, the Company had $567 million in PPP loans outstanding. Excluding PPP loans, loans
outstanding decreased year-over-year by $30 million to $5.2 billion. The Company adhered to its conservative underwriting
guidelines through 2020 in response to the impact of the COVID-19 pandemic on the economic environment. For the year
ended December 31, 2020, non-PPP commercial loan originations, including small business and SBA loans, were $655.8
million, compared to $1.1 billion for the year ended December 31, 2019, a decrease of 38%. The loan pipeline for commercial
loans totaled $166.7 million at December 31, 2020.
Residential loans originated for sale in the secondary market were $509.4 million for the year ended December 31, 2020,
compared to $236.5 million for the year ended December 31, 2019. A vibrant refinance market and a strong Florida housing
market, combined with the residential lending team's focus on high-quality service levels to homebuyers, refinance customers
and local real estate professionals, resulted in record originations for the year. Originations of residential loans retained were
$129.2 million in 2020, compared to $287.0 million in December 31, 2019. The saleable residential mortgage pipeline at
December 31, 2020 totaled $92.0 million while the retained pipeline was $25.1 million.
During 2020, the Company successfully completed two bank acquisitions, resulting in loans acquired of $146.8 million in the
FBPB acquisition and $303.4 million in the Freedom Bank acquisition.
45
During 2019, the Company purchased $201.1 million in loans, with an average loan size of $297 thousand and an average yield
of 3.92%. The Company made no loan purchases during 2020.
The Company has maintained a conservative approach to underwriting and has intentionally slowed loan growth since the onset
of the pandemic in light of increased economic uncertainty. Assuming the economic recovery commences in the second half of
2021, the resumption of growth will be accompanied by defined risk management procedures. 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 below regulatory limits (see
“Loan Concentrations”).
The following table details loan portfolio composition at December 31, 2020 for portfolio loans, purchased credit deteriorated
loans (“PCD”) and loans purchased which are not considered credit deteriorated (“Non-PCD”) as defined in “Note E - Loans”;
and at December 31, 2019 for portfolio loans, purchased unimpaired loans (“PUL”) and purchased credit impaired loans
(“PCI”). With the adoption of ASC Topic 326 - Financial Instruments - Credit Losses on January 1, 2020, the Company re-
evaluated the aggregation of loans into segments, and separated Commercial Real Estate - Owner Occupied from Commercial
Real Estate - Non Owner Occupied. In prior years, all Commercial Real Estate loans were considered a single segment.
(In thousands)
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Residential real estate
Commercial and financial
Consumer
Paycheck Protection Program
Totals
$
Portfolio Loans
$
216,420 $
854,769
1,043,459
1,155,914
743,846
181,797
515,532
4,711,737 $
December 31, 2020
Acquired
Non-PCD
Loans
PCD Loans
Total
26,250 $
247,090
323,273
176,105
94,627
6,660
51,429
925,434 $
2,438 $
39,451
29,122
10,609
16,280
278
—
98,178 $
245,108
1,141,310
1,395,854
1,342,628
854,753
188,735
566,961
5,735,349
(In thousands)
Construction and land development
Commercial real estate1
Residential real estate
Commercial and financial
Consumer
Totals
Portfolio Loans
$
281,335 $
1,834,811
1,304,305
697,301
200,166
4,317,918 $
$
December 31, 2019
PULs
PCI Loans
Total
43,618 $
533,943
201,848
80,372
8,039
867,820 $
160 $
10,217
1,710
579
—
12,666 $
325,113
2,378,971
1,507,863
778,252
208,205
5,198,404
1Commercial real estate includes owner-occupied balances of $1.0 billion at December 31, 2019.
Commercial real estate loans, inclusive of owner-occupied commercial real estate, increased $158.2 million, or 7%, totaling
$2.5 billion at December 31, 2020, compared to December 31, 2019. Owner-occupied loans represent $1.1 billion, or 45%, of
the commercial real estate portfolio. Office building loans of $761.1 million, or 27%, of commercial real estate mortgages,
comprise our largest concentration with a substantial portion owner-occupied.
Fixed-rate and adjustable-rate loans secured by commercial real estate, excluding construction loans, totaled approximately $2.1
billion and $453.7 million, respectively, at December 31, 2020, compared to $2.0 billion and $418.8 million, respectively, at
December 31, 2019.
At December 31, 2020, Seacoast had $74.1 million of loans with payment accommodations to borrowers financially impacted
by the COVID-19 pandemic, none of which have been classified as a TDR. If economic conditions deteriorate further, these
borrowers may be unable to resume scheduled payments, which may result in reversal of accrued interest, further modification
of terms and additional necessary provisions for credit losses. At December 31, 2020, of loans that were provided with payment
assistance during 2020, 94% are in current status or have paid off the balance entirely, less than 1% are 30 or more days past
due, and 5% have been provided with an additional accommodation, including additional payment deferrals or interest only
payment arrangements. Interest and fees have typically continued to accrue on these loans throughout their accommodation
period.
46
The following table presents loans with accommodations, excluding PPP loans, at December 31, 2020:
(In thousands)
Loans with Payment
Accommodations
Total Loans including
Loans with Payment
Accommodations
% of Loans with
Payment
Accommodations
Construction and land development
$
1,032 $
Commercial real estate - owner-occupied
Commercial real estate - non owner-occupied
Residential real estate
Commercial and financial
Consumer
Totals
14,248
32,549
12,839
11,915
1,479
$
74,062 $
245,108
1,141,310
1,395,854
1,342,628
854,753
188,735
5,168,388
— %
1
2
1
1
1
1%
The following table details commercial real estate and construction and land development loans outstanding by collateral type
at December 31, 2020:
($ in thousands)
Office Building
Retail
Industrial & Warehouse
Other Commercial Property
Healthcare
Apartment Building / Condominium
Hotel / Motel
Vacant Lot
Convenience Store
Restaurant
1-4 Family Residence - Individual Borrowers
Church
School/ Education
1-4 Family Residence - Spec Home
Agriculture
Manufacturing Building
1-4 Family Residence - Builder Lines
Recreational Property
Other Properties
Total
OOCRE, CRE &
ADC
$
761,118
454,863
385,875
261,875
219,736
171,141
130,743
75,480
56,474
49,636
48,472
29,155
28,133
23,846
19,832
18,106
16,280
14,976
16,531
% of Total Loans
13%
With Payment
Accommodations
6,416
$
8
7
5
4
3
2
1
1
1
1
1
—
—
—
—
—
—
—
4,505
661
2,688
777
555
25,169
66
734
5,691
301
266
—
—
—
—
—
—
—
$
2,782,272
49%
$
47,829
The largest collateral type in the CRE and construction portfolios, when aggregated, is office buildings, representing 13% of the
portfolio. The average loan size in the office building category is $600 thousand, the average loan to value (“LTV”) is 57%, and
56% of this category is classified as owner-occupied. This primarily includes medical, accounting, engineering, health care,
veterinarians and other similar professionals.
The second-largest category is retail, representing 8% of total loans. The average loan size in the retail category is $1.3 million
and the average LTV is 58%. Loans collateralized by hotels/motels represent $130.7 million with an average loan size of
$2.9 million and an average LTV of 54%. Restaurant exposure is limited at $49.6 million in loans, and is distributed among
quick serve and full-service restaurants, with an average loan size of $788 thousand and LTV of 57%.
47
The following table details the commercial and financial loans outstanding by industry type at December 31, 2020:
% of Total Loans With Payment
Accommodations
—
$
4%
($ in thousands)
Management Companies1
Professional, Scientific, Technical & Other Services
Commercial and
Financial
$
202,442
101,661
Real Estate Rental & Leasing
Healthcare & Social Assistance
Finance & Insurance
Construction
Manufacturing
Transportation & Warehousing
Wholesale Trade
Retail Trade
Education
Accommodation & Food Services
Administrative Support
Public Administration
Agriculture
Other Industries
79,759
74,158
72,771
67,098
52,700
46,803
36,969
24,896
22,204
16,830
13,675
12,056
11,151
19,580
2
1
1
1
1
1
1
1
—
—
—
—
—
—
—
991
241
403
—
972
1,777
5,786
—
951
—
351
89
—
8
346
11,915
Total
1Primarily corporate aircraft and marine vessels associated with high net worth individuals.
$
854,753
14%
$
Commercial and financial loans outstanding increased $76.5 million, or 10%, year-over year to $854.8 million as of December
31, 2020. The Company's primary customers for commercial and financial loans are small- to medium-sized professional firms,
retail and wholesale outlets, and light industrial and manufacturing companies. Such businesses are smaller and subject to the
risks of lending to small- to medium-sized businesses, including, but not limited to, the effects of a downturn in the local
economy, possible business failure, and insufficient cash flows.
Residential mortgage loans decreased $165.2 million, or 11%, year-over-year to $1.3 billion as of December 31, 2020.
Substantially all residential originations have been underwritten to conventional loan agency standards, including loans having
balances that exceed agency value limitations. At December 31, 2020, approximately $436.3 million, or 32%, of the
Company’s residential mortgage balances were adjustable 1-4 family mortgage loans (including hybrid adjustable rate
mortgages). Fixed rate mortgages totaled $499.0 million, or 37%, of the residential mortgage portfolio at December 31, 2020,
of which 15- and 30-year mortgages totaled $38.4 million and $362.9 million, respectively. Remaining fixed rate balances were
comprised of home improvement loans totaling $163.5 million, most with maturities of 10 years or less. Home equity lines of
credit, primarily floating rates, totaled $341.6 million at December 31, 2020. In comparison, fixed-rate loans secured by
residential properties totaled $590.0 million at December 31, 2019, with 15- and 30-year fixed-rate residential mortgages
totaling $43.5 million and $372.0 million, respectively, and home equity mortgages and lines of credit totaled $243.8 million
and $292.1 million, respectively.
The Company also provides consumer loans, which includes installment loans, auto loans, marine loans and other consumer
loans, which decreased $19.5 million, or 9%, year-over-year to a total of $188.7 million at December 31, 2020, compared to
$208.2 million at December 31, 2019. Of the $19.5 million decrease, automobile loans and other consumer loans decreased
$20.6 million and $5.3 million, respectively, while marine loans increased $6.4 million.
At December 31, 2020, the Company had unfunded commitments to make loans of $1.5 billion, compared to $1.0 billion at
December 31, 2019 (see “Note Q - Contingent Liabilities and Commitments with Off-Balance Sheet Risk” to the Company’s
consolidated financial statements).
48
Loan Concentrations
The Company has developed guardrails to manage loan types that are most impacted by stressed market conditions in order to
achieve lower levels of credit loss volatility in the future. Outstanding balances for commercial and commercial real estate
(“CRE”) loan relationships greater than $10 million totaled $753.7 million, representing 13% of the total portfolio, at December
31, 2020, compared to $680.2 million, or 13%, at December 31, 2019.
The Company’s ten largest commercial and commercial real estate funded and unfunded loan relationships at December 31,
2020 aggregated to $254.3 million, of which $188.0 million was funded, compared to $268.9 million at December 31, 2019, of
which $179.0 million was funded. The Company had 135 commercial and commercial real estate relationships in excess of $5
million totaling $1.3 billion, of which $1.2 billion was funded at December 31, 2020, compared to 120 relationships totaling
$1.2 billion at December 31, 2019, of which $1.0 billion was funded.
Concentrations in total construction and land development loans and total CRE loans are maintained well below regulatory
limits. Construction and land development and CRE loan concentrations as a percentage of total risk based capital, declined to
26% and 169%, respectively, at December 31, 2020, compared to 40% and 204% as of December 31, 2019. Regulatory
guidance suggests limits of 100% and 300%, respectively. On a consolidated basis, construction and land development and
commercial real estate loans represent 24% and 157%, respectively, of total consolidated risk based capital. To determine these
ratios, the Company defines CRE in accordance with the guidance on “Concentrations in Commercial Real Estate Lending”
issued by the federal bank regulatory agencies in 2006 (and reinforced in 2015), which defines CRE loans as exposures secured
by land development and construction, including 1-4 family residential construction, multifamily property, and non-farm
nonresidential property where the primary or a significant source of repayment is derived from rental income associated with
the property (i.e. 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 on owner occupied CRE are
generally excluded.
Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality
Table 12 provides certain information concerning nonperforming assets for the years indicated.
Nonperforming assets (“NPAs”) at December 31, 2020 totaled $48.9 million, an increase of $9.5 million, or 24%, compared to
2019, and were comprised of $36.1 million of nonaccrual loans, $10.2 million of other real estate owned (“OREO”) and $2.6
million of branches taken out of service. Compared to December 31, 2019, nonaccrual loans increased by $9.2 million, or 34%,
and non-branch OREO decreased $4.3 million, or 62%, the result of property sales. Approximately 80% of nonaccrual loans
were secured with real estate at December 31, 2020. Nonaccrual loans have been written down by approximately $8.4 million,
or 12%, of the original loan balance (including specific impairment reserves). See the tables below for details about nonaccrual
loans.
Nonperforming loans to total loans outstanding at December 31, 2020 increased to 0.63% from 0.52% at December 31, 2019.
Nonperforming assets to total assets at December 31, 2020 increased to 0.59% from 0.55% at December 31, 2019.
The Company’s asset mitigation staff handles all foreclosure actions together with outside legal counsel.
Beginning in March 2020, in response to the economic downturn resulting from the COVID-19 pandemic, the Company has
offered payment accommodations to affected borrowers. As of December 31, 2020, pandemic-related accommodations totaled
$74.1 million and are not considered troubled debt restructurings (“TDRs”). If economic conditions deteriorate further, these
borrowers may be unable to resume scheduled payments, which may result in further modification of terms and the potential for
classification as a TDR in future periods.
In addition to pandemic-related accommodations, the Company pursues loan restructurings in selected cases where it expects to
realize better values than may be expected through traditional collection activities. The Company has worked with retail
mortgage customers, when possible, to achieve lower payment structures in an effort to avoid foreclosure. TDRs have been a
part of the Company’s loss mitigation activities and can include rate reductions, payment extensions and principal deferrals.
Company policy requires TDRs that are classified as nonaccrual loans after restructuring remain on nonaccrual until
performance can be verified, which usually requires six months of performance under the restructured loan terms. Accruing
restructured loans totaled $4.2 million at December 31, 2020, compared to $11.1 million at December 31, 2019. Accruing
TDRs are excluded from nonperforming asset ratios. The tables below set forth details related to nonaccrual and accruing
restructured loans.
49
(In thousands)
Construction & land development
Residential
Commercial
Individuals
Residential real estate mortgages
Commercial real estate mortgages - owner occupied
Commercial real estate mortgages - non-owner occupied
Real estate loans
Commercial and financial
Consumer
Total loans
(In thousands)
Construction & land development
Residential
Commercial
Individuals
Residential real estate mortgages
Commercial real estate mortgages
Real estate loans
Commercial and financial
Consumer
Total loans
December 31, 2020
Nonaccrual Loans
Non-Current
Current
Total
Accruing
Restructured
Loans
$
— $
— $
— $
—
37
37
4,074
5,682
2,030
11,823
3,777
543
101
28
129
8,418
2,500
6,053
17,100
2,827
40
101
65
166
12,492
8,182
8,083
28,923
6,604
583
109
—
—
109
3,740
109
—
3,958
—
224
$
16,143 $
19,967 $
36,110 $
4,182
December 31, 2019
Nonaccrual Loans
Non-Current
Current
Total
Accruing
Restructured
Loans
$
— $
— $
— $
4,902
—
4,902
2,552
3,802
11,256
4,674
38
15,968 $
$
—
35
35
6,927
2,718
9,680
1,235
72
10,987 $
4,902
35
4,937
9,479
6,520
20,936
5,909
110
26,955 $
—
—
131
131
6,027
4,666
10,824
26
250
11,100
At December 31, 2020 and December 31, 2019, total TDRs (performing and nonperforming) were comprised of the following
loans by type of modification:
(Dollars in thousands)
Maturity extended
Rate reduction
Chapter 7 bankruptcies
Not elsewhere classified
Total loans
December 31, 2020
December 31, 2019
Number
Amount
Number
Amount
51 $
37
13
5
5,438
4,275
417
160
42 $
52
18
8
3,781
12,048
1,920
620
106 $
10,290
120 $
18,369
During the year ended December 31, 2020, ten loans totaling $0.7 million were modified to a TDR, compared to nine loans
totaling $4.7 million for the year ended December 31, 2019. Loan modifications are not reported in calendar years after
modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and
the loans are performing based on the terms of the restructuring agreements. There were no defaults on loans that had been
50
modified in TDRs within the twelve months preceding December 31, 2020 and four defaults totaling $3.2 million within the
twelve months preceding December 31, 2019. A restructured loan is considered in default when it becomes 90 days or more
past due under the modified terms, has been transferred to nonaccrual status, or has been transferred to OREO.
In accordance with regulatory reporting requirements, loans are placed on nonaccrual following the Retail Classification of
Loan interagency guidance. The accrual of interest is generally discontinued on loans, except consumer loans, that become 90
days past due as to principal or interest unless collection of both principal and interest is assured by way of collateralization,
guarantees or other security. Consumer loans that become 120 days past due are generally charged off. The loan carrying value
is analyzed and any changes are appropriately made as described above quarterly.
Allowance for Credit Losses on Loans
On January 1, 2020, the Company adopted ASC Topic 326 - Financial Instruments - Credit Losses. The new guidance replaced
the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model.
The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including
loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposure such as loan
commitments, standby letters of credit, financial guarantees and other similar instruments.
Management estimates the allowance using relevant available information, from both internal and external sources, relating to
past events, current conditions, and reasonable and supportable forecasts. Historical credit losses provide the basis for
estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific
risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value ratios,
borrower credit characteristics, loan seasoning or term as well as for changes in environmental conditions, such as changes in
unemployment rates, property values, occupancy rates, and other macroeconomic metrics.
Upon adoption of the new model, the initial adjustment to the allowance for credit losses was an increase of $21.2 million,
bringing the ratio of allowance to total loans from 0.68% at December 31, 2019 to 1.08% at January 1, 2020. The increase was
attributed to the new requirement to estimate losses over the full remaining expected life of the loans and to the impact of the
new guidance on the Company's acquired loan portfolio. The economic forecast scenario as of January 1, 2020 projected a
stable macroeconomic environment over the three year forecast period. In addition to the $21.2 million impact of the initial
adoption of ASC Topic 326, increases in the allowance during 2020 reflected the deterioration of the current and forecasted
macroeconomic environment with the onset and continuation of the COVID-19 pandemic.
No allowance has been assigned to PPP loans, which are guaranteed by the U.S. government. Net charge-offs for 2020 were
$7.6 million, or 0.14% of average loans, excluding PPP loans, compared to $8.1 million, or 0.16%, for 2019. Excluding PPP
loans, the ratio of allowance to total loans increased to 1.79% at December 31, 2020 from 0.68% at December 31, 2019 and
1.08% at January 1, 2020. Uncertainty related to market conditions and the economic outlook will likely continue as the
ongoing effects of the pandemic and the impact of additional government assistance programs remain unknown.
Activity in the allowance for credit losses is summarized as follows:
December 31, 2020
(In thousands)
Beginning
Balance
Impact of
Adoption
of ASC 326
Initial
Allowance
on PCD
Loans
Acquired
During the
Period
Provision
for Credit
Losses1
Charge-
Offs
Recoveries
TDR
Allowance
Adjustments
Ending
Balance
Construction and land development
$
1,842 $
1,479 $
87 $
1,399 $
— $
114 $
(1) $
4,920
Commercial real estate - owner-
occupied
Commercial real estate - non owner-
occupied
Residential real estate
Commercial and financial
Consumer
Paycheck Protection Program
5,361
80
1,161
3,632
(310)
7,863
9,341
2,236
18,966
(177)
7,667
9,716
2,705
—
5,787
3,677
862
—
124
2,643
28
—
3,840
8,329
1,613
—
(240)
(7,091)
(2,024)
—
18
37
350
1,416
316
—
(74)
9,868
—
38,266
(28)
—
(11)
—
17,500
18,690
3,489
—
Totals
$
35,154 $
21,226 $
6,279 $
37,779 $ (9,842) $
2,251 $
(114) $ 92,733
1Excludes $0.4 million provision for credit losses on accrued interest receivable
51
Concentrations of credit risk, discussed under the caption “Loan Portfolio” of this discussion and analysis, can affect the level
of the allowance and may involve loans to one borrower, an affiliated group of borrowers, borrowers engaged in or dependent
upon the same industry, or a group of borrowers whose loans are predicated on the same type of collateral. At December 31,
2020, the Company's largest concentrations of credit risk were $2.5 billion in loans secured by commercial real estate and $1.3
billion in loans secured by residential real estate, representing 45% and 23% of total loans outstanding, respectively. In
addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.
With the emergence of the COVID-19 pandemic in 2020 leading to significant market changes, high levels of unemployment
and increasing degrees of uncertainty in the U.S. economy, the impact on expected losses on loans is difficult to estimate with
precision, and it is possible that additional provisions for credit losses could be needed in future periods.
LIBOR Transition
The Company, along with the entire financial services industry, is preparing for the expected phase-out of the benchmark
London Interbank Offered Rate (“LIBOR”). In preparing for the transition from LIBOR, the Company has formed a LIBOR
transition steering committee which is responsible for overseeing the execution of the Company's enterprise-wide LIBOR
transition program, and for evaluating and mitigating the risks associated with the transition from LIBOR. The LIBOR
transition program includes a comprehensive review of the financial products, agreements, contracts and business processes that
may use LIBOR as a reference rate, and the development and execution of a strategy to transition away from LIBOR, with
appropriate consideration of the potential financial, customer, counterparty, regulatory and legal impacts.
As of December 31, 2020, the Company has identified approximately $400 million in loans for which the repricing index is tied
to LIBOR. The Company also invests in securities and has issued subordinated debt tied to LIBOR. The Company’s back-to-
back swap agreements with customers and other derivatives are governed by the International Swap Dealers Association
(“ISDA”). ISDA has developed fallback language for swap agreements and has established a protocol to allow counterparties to
modify legacy trades to include the new fallback language. The Company continues to monitor regulatory and legislative
activity with regard to LIBOR-based products to identify all necessary actions and facilitate the transition to alternative
reference rates.
The Company has adopted Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform: Facilitation of the Effects
of Reference Rate Reform on Financial Reporting, and the subsequent amendment, which provide optional expedients and
exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions
affected by reference rate reform (e.g., discontinuation of LIBOR) if certain criteria are met. The Company will apply the
accounting relief as relevant contract and hedge accounting relationship modifications are made during the reference rate
reform transition period, and does not expect the standard to have a material impact on the consolidated financial statements.
Cash and Cash Equivalents, Liquidity Risk Management and Contractual Commitments
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 include primarily customer-based deposits, collateral-backed borrowings, brokered deposits, cash flows from
operations, cash flows from our loan and investment portfolios and asset sales, primarily secondary marketing for residential
real estate mortgages and marine loans. 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.
The Company does not rely on and is not dependent on off-balance sheet financing or significant amounts of wholesale
funding. Brokered certificates of deposit (“CDs”) at December 31, 2020 totaled $233.8 million, compared to $472.9 million at
December 31, 2019. All of the brokered CDs outstanding at December 31, 2020 have maturities of 12 months or less.
Deposits are a primary source of liquidity. The stability of this funding source is affected by numerous factors, including returns
available to customers on alternative investments, the quality of customer service levels, perception of safety and competitive
forces. The Company routinely uses debt securities and loans as collateral for secured borrowings. In the event of severe market
disruptions, the Company has access to secured borrowings through the FHLB and the Federal Reserve Bank of Atlanta under
its borrower-in-custody program.
Cash and cash equivalents, including interest bearing deposits, totaled $404.1 million on a consolidated basis at December 31,
2020, compared to $124.5 million at December 31, 2019. Higher cash and cash equivalent balances at December 31, 2020
52
reflect the Company's decision to maintain prudent higher levels of liquidity in the current economic environment, as well as
higher customer deposit balances.
Contractual maturities for assets and liabilities are reviewed to meet current and expected future liquidity requirements. Sources
of liquidity, both anticipated and unanticipated, are maintained through a portfolio of high-quality marketable assets, such as
residential mortgage loans, available-for-sale debt securities and interest-bearing deposits. The Company is also able to provide
short-term financing of its activities by selling, under an agreement to repurchase, United States Treasury and government
agency debt securities not pledged to secure public deposits or trust funds. At December 31, 2020, the Company had available
unsecured lines of $135.0 million and lines of credit under current lendable collateral value, which are subject to change, of
$1.8 billion. In addition, the Company had $1.2 billion of debt securities and $733.3 million in residential and commercial real
estate loans available as collateral. In comparison, at December 31, 2019, the Company had available unsecured lines of $130.0
million and lines of credit of $1.1 billion, and $924.2 million of debt securities and $830.0 million in residential and
commercial real estate loans available as collateral.
The Company has traditionally relied upon dividends from Seacoast Bank and securities offerings to provide funds to pay the
Company’s expenses and to service the Company’s debt. During 2020, Seacoast Bank distributed $20.2 million to the Company
and, at December 31, 2020, is eligible to distribute dividends to the Company of approximately $213.4 million without prior
approval. Seacoast Bank distributed $18.1 million to the Company during 2019. At December 31, 2020, the Company had cash
and cash equivalents at the parent of approximately $70.1 million compared to $53.0 million at December 31, 2019.
The following table presents contractual obligations. All deposits presented in the table with indeterminate maturities such as
interest bearing and noninterest bearing demand deposits, savings accounts and money market accounts are presented as having
a maturity of one year or less. The Company considers these low cost deposits to be its largest, most stable funding source,
despite no contracted maturity.
(In thousands)
Deposit maturities
Securities sold under agreements to
repurchase
Subordinated debt
Operating leases1
Total
Total
One Year
or Less
December 31, 2020
Over One
Year
Through
Three Years
Over Three
Years
Through
Five Years
Over Five
Years
$ 6,932,561 $ 6,861,463 $
53,788 $
16,657
119,609
119,609
—
—
71,365
34,189
—
5,865
$ 7,157,724 $ 6,986,937 $
—
12,724
66,512 $
—
6,347
23,004 $
653
—
71,365
9,253
81,271
1Of the $34.2 million, approximately $3.9 million is related to offices taken out of service (closed).
Deposits and Borrowings
The Company’s balance sheet continues to be primarily funded by core deposits.
Total deposits increased $1.3 billion, or 24%, to $6.9 billion at December 31, 2020 compared to December 31, 2019. The FBPB
and Freedom Bank acquisitions added deposits of $173.7 million and $329.7 million, respectively, in 2020.
Since December 31, 2019, interest bearing deposits, which includes interest bearing demand, savings and money markets
deposits, increased $1.0 billion, or 36%, to $3.8 billion at December 31, 2020, noninterest bearing demand deposits increased
$699.3 million, or 44%, to $2.3 billion, and CDs decreased $353.9 million, or 30%, to $831.2 million. Noninterest demand
deposits represented 33% of deposits at December 31, 2020 and 28% at December 31, 2019. Overall, customer balances
increased on a year-over-year basis
Customer repurchase agreements totaled $119.6 million at December 31, 2020, increasing $33.5 million, or 39%, from
December 31, 2019. Repurchase agreements are offered by Seacoast to select customers who wish to sweep excess balances on
a daily basis for investment purposes. The increase reflects a shift in customer balances from interest bearing deposits in 2020
as rates declined in 2020. Public funds comprise a significant amount of the outstanding balance.
The Company participates in programs with third party deposit networks as part of its cash management strategy. Through
these programs, the Company can offer its customers access to FDIC insurance on large balances, and the Company can retain
or sell, on an overnight basis, the underlying deposits. At December 31, 2020, the Company had sold, on an overnight basis,
$112.7 million in deposits. These deposits are not included in the Consolidated Balance Sheet.
53
No unsecured federal funds purchased were outstanding at December 31, 2020 or December 31, 2019.
Borrowings were comprised of subordinated debt related to trust preferred securities issued by trusts organized or acquired by
the Company of $71.4 million and $71.1 million at December 31, 2020 and December 31, 2019, respectively, and borrowings
from the FHLB of zero and $315.0 million, respectively. Secured FHLB borrowings are an integral tool in liquidity
management for the Company.
The Company issued subordinated debt in conjunction with its wholly owned trust subsidiaries in connection with bank
acquisitions in previous years. The acquired junior subordinated debentures (in accordance with ASC Topic 805 Business
Combinations) were recorded at fair value, which collectively is $3.9 million lower than face value at December 31, 2020. This
amount is being amortized into interest expense over the acquired subordinated debts’ remaining term to maturity. All trust
preferred securities are guaranteed by the Company on a junior subordinated basis.
Under Basel III and Federal Reserve rules, qualified trust preferred securities and other restricted capital elements can be
included as Tier 1 capital, within limitations. The Company believes that its trust preferred securities qualify under these capital
rules. The weighted average interest rate of our outstanding subordinated debt related to trust preferred securities was 3.07% for
the year ended December 31, 2020, compared to 4.75% in 2019.
Go to “Note J - Borrowings” to the Company's consolidated financial statements for more detailed information pertaining to
borrowings.
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 our 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 are generally lines of credit secured by residential property. These instruments are not recorded on the
balance sheet until funds are advanced under the commitment. Loan commitments were $1.5 billion at December 31, 2020, and
$1.0 billion at December 31, 2019 (see “Note Q - Contingent Liabilities and Commitments with Off-Balance Sheet Risk” to the
Company’s consolidated financial statements).
Capital Resources and Management
Table 6 summarizes the Company’s capital position and selected ratios.
The Company's equity capital at December 31, 2020 increased $144.8 million, or 15%, from December 31, 2019, to $1.1
billion.
The ratio of shareholders’ equity to period end total assets was 13.55% and 13.87% at December 31, 2020 and December 31,
2019, respectively. The ratio of tangible shareholders’ equity to tangible assets was 11.01% and 11.05% at December 31, 2020
and December 31, 2019, respectively. Equity has increased as a result of earnings retained by the Company, the issuance of
common stock in conjunction with bank acquisitions, and as a result of increases in accumulated other comprehensive income
(“AOCI”) during the year ended December 31, 2020, primarily reflecting the impact of lower interest rates on available-for-sale
securities.
Activity in shareholders’ equity for the year ended December 31, 2020 and December 31, 2019 follows:
54
(In thousands)
Beginning balance at January 1, 2020 and 2019
Net income
Cumulative change in accounting principle upon adoption of new accounting pronouncement
Issuance of stock, pursuant to acquisitions
Stock compensation (net of Treasury shares acquired)
Change in other comprehensive income
Other
Ending balance at December 31, 2020 and 2019
For the Year Ended
December 31,
$
2020
985,639 $
77,764
(16,876)
62,152
5,818
15,905
—
$ 1,130,402 $
2019
864,267
98,739
—
—
5,004
17,525
104
985,639
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
measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company. The
capital measures are not necessarily comparable to similar capital measures that may be presented by other companies and
Seacoast does not nor should investors consider such non-GAAP financial measures in isolation from, or as a substitute for
GAAP financial information (see “Table 6 - Capital Resources” and “Note O - Shareholders’ Equity”).
Total Risk-Based Capital Ratio
Tier 1 Capital Ratio
Common Equity Tier 1 Ratio (CET1)
Leverage Ratio
1For subsidiary bank only
Seacoast
(Consolidated)
18.51%
17.46
16.17
11.92
Seacoast
Bank
17.21%
16.15
16.15
11.03
Minimum to be
Well-Capitalized1
10.00%
8.00
6.50
5.00
The Company’s total risk-based capital ratio was 18.51% at December 31, 2020, an increase from 15.71% at December 31,
2019. Higher earnings have been a primary contributor to this increase. As of December 31, 2020, the Bank’s leverage ratio
(Tier 1 capital to adjusted total assets) was 11.03%, compared to 11.38% at December 31, 2019.
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 up to $213.4
million of dividends to the Company (see “Part I. Item 1. Business”).
The OCC and the Federal Reserve have policies that encourage banks and bank holding companies to pay dividends from
current earnings, and have the general authority to limit the dividends paid by national banks and bank holding companies,
respectively, if such payment may be deemed to constitute an unsafe or unsound practice. If, in the particular circumstances,
either of these federal regulators determined that the payment of dividends would constitute an unsafe or unsound banking
practice, either the OCC or the Federal Reserve may, among other things, issue a cease and desist order prohibiting the payment
of dividends by Seacoast Bank or the Company, respectively. Under a recently adopted Federal Reserve policy, the board of
directors of a bank holding company must consider different factors to ensure that its dividend level is prudent relative to the
organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may
occur before the payment date that could affect its ability to pay, while still maintaining a strong financial position. As a general
matter, the Federal Reserve has indicated that the board of directors of a bank holding company, such as Seacoast, should
consult with the Federal Reserve and eliminate, defer, or significantly reduce the bank holding company’s dividends if: (i) its
net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not
sufficient to fully fund the dividends; (ii) its prospective rate of earnings retention is not consistent with its capital needs and
overall current and prospective financial condition; or (iii) it will not meet, or is in danger of not meeting, its minimum
regulatory capital adequacy ratios.
The Company has seven wholly owned trust subsidiaries that issued trust preferred securities, all of which are guaranteed by the
Company on a junior subordinated basis. The Federal Reserve’s rules permit qualified trust preferred securities and other
55
restricted capital elements to be included under Basel III capital guidelines, with limitations, and net of goodwill and
intangibles. The Company believes that its trust preferred securities qualify under these revised regulatory capital rules and
believes that it will be able to treat all $71.4 million of 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 consolidated financial statements are prepared in accordance with U.S. generally accepted accounting
principles, (“GAAP”), including prevailing practices within the financial services industry. The preparation of consolidated
financial statements requires management to make judgments in the application of certain of its accounting policies that involve
significant estimates and assumptions. The Company has established policies and control procedures that are intended to ensure
valuation methods are well controlled and applied consistently from period to period. These estimates and assumptions, which
may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information
available as of the date of the financial statements, and changes in this information over time and the use of revised estimates
and assumptions could materially affect amounts reported in subsequent financial statements. Management, after consultation
with the Company’s Audit Committee, believes the most critical accounting estimates and assumptions that involve the most
difficult, subjective and complex assessments are:
•
the allowance and the provision for credit losses;
• acquisition accounting and purchased loans;
•
intangible assets and impairment testing;
• other fair value measurements;
•
impairment of debt securities, and;
• contingent liabilities.
The following is a discussion of the critical accounting policies intended to facilitate a reader’s understanding of the judgments,
estimates and assumptions underlying these accounting policies and the possible or likely events or uncertainties known to the
Company that could have a material effect on reported financial information. For more information regarding management’s
judgments relating to significant accounting policies and recent accounting pronouncements, see “Note A-Significant
Accounting Policies” to the Company’s consolidated financial statements.
Allowance for Credit Losses – Critical Accounting Policies and Estimates
On January 1, 2020, the Company adopted ASC Topic 326 - Financial Instruments - Credit Losses, which replaced the incurred
loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”)
methodology.
For loans, management estimates the allowance for credit losses using relevant available information, from both internal and
external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit losses
provide the basis for estimation of expected credit losses. Adjustments to historical loss information are made for differences in
current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to
value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in environmental conditions, such as
changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.
The allowance for credit losses is measured on a collective basis when similar risk characteristics exist. The Company has
developed an allowance model based on an analysis of probability of default (“PD”) and loss given default (“LGD”) to
determine an expected loss by loan segment. PDs and LGDs are developed by analyzing the average historical loss migration of
loans to default.
The allowance estimation process also applies an economic forecast scenario over a three year forecast period. The forecast
may utilize one scenario or a composite of scenarios based on management's judgment and expectations around the current and
future macroeconomic outlook. Expected credit losses are estimated over the contractual term of the loans, adjusted for
expected prepayments when appropriate. For portfolio segments with a weighted average life longer than three years, the
Company reverts to longer-term historical loss experience, adjusted for prepayments, to estimate losses over the remaining life
of the loans within each segment.
56
Adjustments may be made to baseline reserves for some of the loan pools based on an assessment of internal and external
influences on credit quality not fully reflected in the quantitative components of the allowance model. These influences may
include elements such as changes in concentration, macroeconomic conditions, recent observable asset quality trends, staff
turnover, regional market conditions, employment levels and loan growth. Based upon management's assessments of these
factors, the Company may apply qualitative adjustments to the allowance.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also
included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are
based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
The contractual term of a loan excludes expected extensions, renewals, and modification unless either of the following applies:
management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an
individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date
and not unconditionally cancellable by the Company.
The allowance for credit losses on troubled debt restructurings (“TDRs”) is measured using the same method as all other loans
held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash
flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit
losses is determining by discounting the expected future cash flows at the original interest rate of the loan.
It is the Company's practice to ensure that the charge-off policy meets or exceeds regulatory requirements. Losses on unsecured
consumer loans are recognized at 90 days past due, compared to the regulatory loss criteria of 120 days. In compliance with
Federal Financial Institution Examination Council guidelines, secured consumer loans, including residential real estate, are
typically charged off or charged down between 120 and 180 days past due, depending on the collateral type. Commercial loans
and real estate loans are typically placed on nonaccrual status when principal or interest is past due for 90 days or more, unless
the loan is both secured by collateral having realizable value sufficient to discharge the debt in-full and the loan is in process of
collection. Loans provided with short-term payment deferrals under the CARES Act or interagency guidance are not considered
past due if in compliance with the terms of their deferral. Secured loans may be charged down to the estimated value of the
collateral with previously accrued unpaid interest reversed against interest income. Subsequent charge-offs may be required as a
result of changes in the market value of collateral or other repayment prospects. Initial charge-off amounts are based on
valuation estimates derived from appraisals, broker price opinions, or other market information. Generally, new appraisals are
not received until the foreclosure process is completed; however, collateral values are evaluated periodically based on market
information and incremental charge-offs are recorded if it is determined that collateral values have declined from their initial
estimates.
Note F to the financial statements (titled “Allowance for Credit Losses”) summarizes the Company’s allocation of the
allowance for credit losses on loans by loan segment and provides detail regarding charge-offs and recoveries for each loan
segment and the composition of the loan portfolio at December 31, 2020 and 2019.
Acquisition Accounting and Purchased Loans – Critical Accounting Policies and Estimates
The Company accounts for acquisitions under ASC Topic 805, Business Combinations, which requires the use of the
acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. All loans acquired
are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820, Fair Value
Measurement. The fair value estimates associated with the loans include estimates related to expected prepayments and the
amount and timing of expected principal, interest and other cash flows. Loans are identified as purchased credit deteriorated
(“PCD”) when they have experienced more-than-insignificant deterioration in credit quality since origination. An allowance for
expected credit losses on PCD loans is recorded at the date of acquisition through an adjustment to the loans’ amortized cost
basis. In contrast, expected credit losses on loans not considered PCD are recognized in net income at the date of acquisition.
Fair value estimates for acquired assets and assumed liabilities are based on the information available, and are subject to change
for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes
available.
Intangible Assets and Impairment Testing – Critical Accounting Policies and Estimates
Intangible assets consist of goodwill, core deposit intangibles and loan servicing rights. Goodwill represents the excess
purchase price over the fair value of net assets acquired in business acquisitions. The core deposit intangible represents the
excess intangible value of acquired deposit customer relationships as determined by valuation specialists. Core deposit
intangibles are amortized on a straight-line basis, and are evaluated for indications of potential impairment at least annually.
57
Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis. We performed an annual
impairment test of goodwill as required by ASC Topic 350, Intangibles—Goodwill and Other, in the fourth quarter of 2020
with the assistance of third-party valuation specialists, and concluded that no impairment existed.
Fair value estimates for acquired assets and assumed liabilities are based on the information available, and are subject to change
for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes
available.
Other Fair Value Measurements – Critical Accounting Policies and Estimates
The fair value of collateral-dependent loans, OREO and repossessed assets is typically based on current appraisals, which are
reviewed quarterly to determine if fair value adjustments are necessary based on known changes in the market and/or the
project assumptions. When necessary, the appraised value may be adjusted based on more recent appraisal assumptions
received by the Company on other similar properties, the tax assessed market value, comparative sales and/or an internal
valuation. Collateral-dependent loans are loans where repayment is solely dependent on the liquidation of the collateral or
operation of the collateral for repayment.
The Company also holds 11,330 shares of Visa Class B stock which, following resolution of Visa’s litigation, will be converted
to Visa Class A shares. Under the current conversion rate that became effective September 27, 2019, the Company expects to
receive 1.6228 shares of Class A stock for each share of Class B stock, for a total of 18,386 shares of Visa Class A stock. The
Company's ownership is related to prior ownership in Visa’s network while Visa operated as a cooperative. This ownership is
recorded on the Company's financial records at a zero basis.
Impairment of Debt Securities – Critical Accounting Policies and Estimates
On January 1, 2020, the Company adopted ASC Topic 326 – Financial Instruments – Credit Losses, which requires expected
credit losses on both held-to-maturity (“HTM”) and available-for-sale (“AFS”) securities to be recognized through a valuation
allowance instead of as a direct write-down to the amortized cost basis of the security. For HTM securities, the guidance
requires management to estimate expected credit losses over the remaining expected life and recognize this estimate as an
allowance for credit losses. An AFS security is considered impaired if the fair value is less than amortized cost basis. For AFS
securities, if any portion of the decline in fair value is related to credit, the amount of allowance is determined as the portion
related to credit, limited to the difference between the amortized cost basis and the fair value of the security. If the fair value of
the security increases in subsequent periods, or changes in factors used within the credit loss assessment result in a change in
the estimated credit loss, the Company would reflect the change by decreasing the allowance. If the Company has the intent to
sell or believes it is more likely than not that it will be required to sell an impaired AFS security before recovery of the
amortized cost basis, the credit loss is recorded as a direct write-down of the amortized cost basis. Declines in the fair value of
AFS securities that are not considered credit related are recognized in Accumulated Other Comprehensive Income on the
Company’s Consolidated Balance Sheet.
Seacoast analyzes AFS debt securities quarterly for credit losses. The analysis is performed on an individual security basis for
all securities where fair value has declined below amortized cost. Fair value is based upon pricing obtained from third party
pricing services. Based on internal review procedures and the fair values provided by the pricing services, the Company
believes that the fair values provided by the pricing services are consistent with the principles of ASC Topic 820, Fair Value
Measurement. However, on occasion pricing provided by the pricing services may not be consistent with other observed prices
in the market for similar securities. Using observable market factors, including interest rate and yield curves, volatilities,
prepayment speeds, loss severities and default rates, the Company may at times validate the observed prices using a discounted
cash flow model and using the observed prices for similar securities to determine the fair value of its securities.
The Company utilizes both quantitative and qualitative assessments to determine if a security has a credit loss. Quantitative
assessments are based on a discounted cash flow method. Qualitative assessments consider a range of factors including: percent
decline in fair value, rating downgrades, subordination, duration, amortized loan-to-value, and the ability of the issuers to pay
all amounts due in accordance with the contractual terms.
58
Contingent Liabilities – Critical Accounting Policies and Estimates
Seacoast is subject to contingent liabilities, including judicial, regulatory and arbitration proceedings, and tax and other claims
arising from the conduct of the Company's business activities. These proceedings include actions brought against the Company
and/or its subsidiaries with respect to transactions in which the Company and/or its subsidiaries acted as a lender, a financial
adviser, a broker or acted in a related activity. Accruals are established for legal and other claims when it becomes probable that
the Company will incur an expense and the amount can be reasonably estimated. Company management, together with
attorneys, consultants and other professionals, assesses the probability and estimated amounts involved in a contingency.
Throughout the life of a contingency, the Company or its advisers may learn of additional information that can affect the
assessments about probability or about the estimates of amounts involved. Changes in these assessments can lead to changes in
recorded reserves. In addition, the actual costs of resolving these claims may be substantially higher or lower than the amounts
reserved for the claims. At December 31, 2020 and 2019, the Company had no significant accruals for contingent liabilities and
had no known pending matters that could potentially be significant.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
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 minimize 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 of 100
basis point and 200 basis point increases and a 100 basis point decrease on net interest income and is monitored on a quarterly
basis.
The following table presents the ALCO simulation model's projected impact of a change in interest rates on the projected
baseline net interest income for the 12 and 24 month periods beginning on January 1, 2021, holding all other changes in 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.
% Change in Projected Baseline Net Interest Income
2020
2019
Changes in Interest Rates
1-12 months
13-24 months
1-12 months
13-24 months
+2.00%
+1.00%
Current
-1.00%
7.6%
3.9
—
(4.5)
14.0%
7.4
—
(10.1)
3.6%
1.6
—
(1.5)
6.7%
2.8
—
(5.4)
The Company had a positive gap position based on contractual and prepayment assumptions for the next 12 months, with a
positive cumulative interest rate sensitivity gap as a percentage of total earning assets of 26.3% as of December 31, 2020. This
result includes assumptions for core deposit re-pricing validated for the Company by an independent third party consulting
group.
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. Derivative financial instruments, such as interest rate swaps, options, caps, floors,
futures and forward contracts may be utilized as components of the Company’s risk management profile.
59
Market Risk
Market risk refers to potential losses arising from changes in interest rates, and other relevant market rates or prices.
Interest rate risk, defined as the exposure of net interest income and Economic Value of Equity (“EVE”) to adverse movements
in interest rates, is the Company’s primary market risk, and mainly arises from the structure of the balance sheet (non-trading
activities). The Company is also exposed to market risk in its investing activities. The ALCO meets regularly and is responsible
for reviewing the interest rate sensitivity position of the Company and establishing policies to monitor and limit exposure to
interest rate risk. The policies established by the ALCO are reviewed and approved by the Company’s board of directors. The
primary goal of interest rate risk management is to control exposure to interest rate risk, within policy limits approved by the
board of directors. These limits reflect the Company’s tolerance for interest rate risk over short-term and long-term horizons.
The Company also performs valuation analyses, which are used for evaluating levels of risk present in the balance sheet that
might not be taken into account in the net interest income simulation analyses. Whereas net interest income simulation
highlights exposures over a relatively short time horizon, valuation analysis incorporates all cash flows over the estimated
remaining life of all balance sheet positions. The valuation of the balance sheet, at a point in time, is defined as the discounted
present value of asset cash flows minus the discounted value of liability cash flows, the net result of which is the EVE. The
sensitivity of EVE to changes in the level of interest rates is a measure of the longer-term re-pricing risks and options risks
embedded in the balance sheet. In contrast to the net interest income simulation, which assumes interest rates will change over a
period of time, EVE uses instantaneous changes in rates.
EVE values only the current balance sheet, and does not incorporate the growth assumptions that are used in the net interest
income simulation model. As with the net interest income simulation model, assumptions about the timing and variability of
balance sheet cash flows are critical in the EVE analysis. Particularly important are the assumptions driving prepayments and
the expected changes in balances and pricing of the indeterminate life deposit portfolios. Core deposits are a more significant
funding source for the Company, making the lives attached to core deposits more important to the accuracy of our modeling of
EVE. The Company periodically reassesses its assumptions regarding the indeterminate lives of core deposits utilizing an
independent third party resource to assist. With lower interest rates over a prolonged period, the average lives of core deposits
have trended higher and favorably impacted our model estimates of EVE for higher rates.
The following table presents the projected impact of a change in interest rates on the balance sheet. 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.
Changes in Interest Rates
+2.00%
+1.00%
Current
-1.00%
% Change in Economic Value of Equity
2020
23.7%
13.3
—
(19.2)
2019
13.2%
7.1
—
(16.4)
While an instantaneous and severe shift in interest rates is used in this analysis to provide an estimate of exposure under an
extremely adverse scenario, a gradual shift in interest rates would have a much more modest impact. Since EVE measures the
discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to
the degree that earnings would be impacted over a shorter time horizon, i.e., the next fiscal year. Further, EVE does not take
into account factors such as future balance sheet growth, changes in product mix, change in yield curve relationships, and
changing product spreads that could mitigate the adverse impact of changes in interest rates.
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
60
originations and re-financings tend 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.
61
Table 1 - Components of Return on Average Assets1
(In thousands)
Net interest income
Provision for credit losses on loans
Noninterest income
Securities gains (losses), net
Other
Noninterest expense
Income before income taxes
Provision for income taxes including tax equivalent adjustment
Net income
1On a fully taxable equivalent basis. Balances presented as a percentage of average assets.
For the Year Ended December 31,
2018
2019
2020
3.50%
3.57%
3.35%
0.19
0.16
0.49
0.02
0.77
2.36
1.29
0.30
0.99%
0.02
0.81
2.35
1.89
0.44
1.45%
(0.01)
0.83
2.68
1.45
0.34
1.11%
62
Table 2 – Three Year Summary
Average Balances, Interest Income and Expenses, Yields and Rates1
(In thousands, except percentages)
2020
Interest
Average
Balance
Yield/
Rate
Average
Balance
2019
Interest
Yield/
Rate
Average
Balance
2018
Interest
Yield/
Rate
For the Year Ended December 31,
Assets
Earning Assets:
Securities
Taxable
$ 1,277,441 $ 29,718
2.33% $ 1,176,842 $ 35,354
3.00% $ 1,299,089 $ 37,860
2.91%
Nontaxable
Total Securities
22,164
570
1,299,605
30,288
2.57
2.33
23,122
695
1,199,964
36,049
3.01
3.00
31,331
1,115
1,330,420
38,975
3.56
2.93
Federal funds sold and other investments
239,494
2,497
1.04
88,045
3,379
3.84
61,048
2,670
4.37
Loan excluding PPP loans
5,259,653
242,736
PPP loans
Total Loans
Total Earning Assets
419,154
11,974
5,678,807
254,710
7,217,906
287,495
4.62
2.86
4.49
3.98
4,933,518
250,730
5.08
4,112,009
200,194
4.87
—
—
4,933,518
250,730
6,221,527
290,158
—
5.08
4.66
—
—
4,112,009
200,194
5,503,477
241,839
—
4.87
4.39
Provision for credit losses on loans
Cash and due from banks
Bank premises and equipment, net
Intangible assets
Bank owned life insurance
Other assets
Total Assets
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
(81,858)
142,314
71,846
231,267
128,569
149,956
$ 7,860,000
(33,465)
94,643
69,142
228,042
124,803
126,588
$ 6,831,280
(29,972)
114,936
67,332
178,287
124,452
98,823
$ 6,057,335
Interest-bearing demand
$ 1,324,433
1,710
0.13% $ 1,114,334
Savings deposits
Money market
Time deposits
610,015
1,294,629
849
4,361
1,101,321
13,365
0.14
0.34
1.21
516,526
1,164,938
1,092,516
4,025
2,015
10,581
21,776
0.36% $ 978,030
1,883
0.19%
0.39
0.91
1.99
457,542
1,049,900
811
6,069
811,741
11,684
0.18
0.58
1.44
Securities sold under agreements to
repurchase
Federal Home Loan Bank borrowings
Other borrowings
84,514
283
0.33
106,142
1,431
1.35
200,839
1,804
0.90
139,439
71,220
1,540
2,184
1.10
3.07
0.53
131,921
70,939
3,010
3,367
4,197,316
46,205
2.28
4.75
1.10
224,982
70,658
4,468
3,164
3,793,692
29,883
1.99
4.48
0.79
Total Interest-Bearing Liabilities
4,625,571
24,292
Noninterest demand
Other liabilities
Total Liabilities
Shareholders' equity
Total Liabilities & Shareholders'
Equity
Cost of deposits
Interest expense as % of earning assets
2,107,931
81,279
6,814,781
1,045,219
$ 7,860,000
1,641,766
63,405
5,902,487
928,793
$ 6,831,280
0.32%
0.34%
Net interest income/yield on earning assets
1On a fully taxable equivalent basis. All yields and rates have been computed using amortized costs.
$ 263,203
3.65%
1,492,451
30,621
5,316,764
740,571
$ 6,057,335
0.69%
0.74%
3.92%
$ 243,953
0.43%
0.54%
3.85%
$ 211,956
Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.
63
Table 3 - Rate/Volume Analysis1
(In thousands)
Earning Assets:
Securities
Taxable
Nontaxable
Total Securities
2020 vs 2019
Due to Change in:
Rate
Volume
Total
2019 vs 2018
Due to Change in:
Rate
Volume
Total
Amount of increase (decrease)
$
2,681 $
(27)
2,654
(8,317) $
(98)
(8,415)
(5,636) $
(125)
(5,761)
(3,618) $
(269)
(3,887)
1,112 $
(151)
961
(2,506)
(420)
(2,926)
Federal funds sold and other investments
Loans, net
Total Earning Assets
3,696
35,653
42,003
(4,578)
(31,673)
(44,666)
(882)
3,980
(2,663)
1,108
40,873
38,094
(399)
9,663
10,225
709
50,536
48,319
Interest-Bearing Liabilities:
Interest-bearing demand
Savings deposits
Money market accounts
Time deposits
Total Deposits
515
247
807
141
1,710
(2,830)
(1,413)
(7,027)
(8,552)
(19,822)
(2,315)
(1,166)
(6,220)
(8,411)
(18,112)
377
167
855
4,819
6,218
1,765
1,037
3,657
5,273
11,732
2,142
1,204
4,512
10,092
17,950
Securities sold under agreements to repurchase
(182)
(966)
(1,148)
(1,064)
691
(373)
Federal Home Loan Bank borrowings
Other borrowings
Total Interest Bearing Liabilities
127
11
1,666
(1,597)
(1,194)
(23,579)
(1,470)
(1,183)
(21,913)
(1,986)
13
3,181
Net Interest Income
$ 40,337 $ (21,087) $ 19,250 $ 34,913 $
(1,458)
528
203
190
13,141
16,322
(2,916) $ 31,997
1On a fully taxable equivalent basis. All yields and rates have been computed using amortized costs.
Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.
Changes attributable to rate/volume (mix) are allocated to rate and volume on an equal basis.
64
Table 4 – Noninterest Income
(In thousands, except percentages)
Service charges on deposit accounts
Interchange income
Wealth management income
Mortgage banking fees
Marine finance fees
SBA gains
BOLI income
Other income
Securities gains (losses), net
Total Noninterest Income
Table 5 - Noninterest Expense
(In thousands, except percentages)
Salaries and wages
Employee benefits
Outsourced data processing costs
Telephone and data lines
Occupancy
Furniture and equipment
Marketing
Legal and professional fees
FDIC assessments
Amortization of intangibles
Foreclosed property expense and net loss on
sale
Provision for credit losses on unfunded
commitments
Other
Total Noninterest Expense
n/m = not meaningful
% Change
20/19
(18%)
2
18
126
(35)
(72)
(3)
(5)
9
1
9%
19/18
3%
9
7
39
(25)
—
(14)
26
10
(295)
13%
% Change
20/19
20%
13
26
1
(1)
(6)
16
7
44
1
n/m
4
15%
461
4,337
19/18
4%
6
(8)
19
7
(7)
(18)
(14)
(60)
35
(89)
n/m
(12)
(1%)
$
$
$
For the Year Ended December 31,
2019
2018
2020
9,429 $
13,711
7,507
14,696
690
685
3,561
10,056
60,335
1,235
61,570 $
11,529 $
13,399
6,352
6,490
1,054
2,472
3,674
10,545
55,515
1,217
56,732 $
11,198
12,335
5,915
4,682
1,398
2,474
4,291
8,352
50,645
(623)
50,022
For the Year Ended December 31,
2018
2019
2020
88,539 $
15,544
19,053
2,984
14,150
5,874
4,833
9,167
1,268
5,857
2,263
185
73,829 $
13,697
15,077
2,958
14,284
6,245
4,161
8,553
881
5,826
51
—
71,111
12,945
16,374
2,481
13,394
6,744
5,085
9,961
2,195
4,300
—
15,835
185,552 $
15,177
160,739 $
17,222
162,273
$
65
Table 6 - Capital Resources
(In thousands, except percentages)
Tier 1 Capital
Common stock
Additional paid in capital
Retained earnings
Treasury stock
Goodwill
Intangibles
Other1
Common Equity Tier 1 Capital
Qualifying trust preferred securities
Other
Total Tier 1 Capital
Tier 2 Capital
Allowance for credit losses on loans1, as limited
Total Tier 2 Capital
Total Risk-Based Capital
Risk weighted assets
Common equity Tier 1 ratio (CET1)
Regulatory minimum2
Tier 1 capital ratio
Regulatory minimum2
Total capital ratio
Regulatory minimum2
Tier 1 capital to adjusted total assets
Regulatory minimum
2020
December 31,
2019
2018
$
5,524
856,092
256,701
(8,285)
(221,176)
(14,577)
24,946
899,225
$
5,151
786,242
195,813
(6,032)
(205,286)
(18,305)
(3,028)
754,555
71,365
4
970,594
71,085
—
825,640
$
5,136
778,501
97,074
(3,384)
(204,753)
(24,808)
(6,426)
641,340
70,804
—
712,144
58,861
58,861
$ 1,029,455
$ 5,560,489
35,294
35,294
$ 860,934
$ 5,481,325
32,543
32,543
$ 744,687
$ 5,159,431
16.17%
4.50
17.46
6.00
18.51
8.00
11.92
4.00
13.77%
4.50
15.06
6.00
15.71
8.00
12.20
4.00
12.43%
4.50
13.80
6.00
14.43
8.00
11.16
4.00
Shareholders' equity to assets
Average shareholders' equity to average total assets
Tangible shareholders' equity to tangible assets
1In 2020, the Company elected, in accordance with interagency guidance, to delay the estimated impact on regulatory capital resulting from the
implementation of CECL. The guidance provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the
incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The adjustment to Tier 1
Capital was $24.7 million and the adjustment to Tier 2 Capital was $30.2 million.
2Excludes the Basel III capital conservation buffer of 2.5% for 2020 and 2019, and 1.875% for 2018, which if not exceeded may constrain dividends, equity
repurchases and compensation.
12.81
12.23
9.72
13.55
13.30
11.01
13.87
13.60
11.05
66
Table 7 - Loans Outstanding
(In thousands)
Construction and land development
Residential
Commercial
Individuals
Commercial real estate
Owner-occupied
Non owner-occupied
Residential real estate
Adjustable
Fixed rate
Home equity mortgages
Home equity lines
2020
2019
December 31,
2018
2017
2016
$
64,385 $
93,033
157,418
87,690
245,108
94,641 $
86,658
181,299
143,814
325,113
123,326 $
128,175
251,501
192,067
443,568
97,725 $
91,043
188,768
154,357
343,125
29,693
57,856
87,549
72,567
160,116
1,141,310
1,395,854
2,537,164
1,034,963
1,344,008
2,378,971
970,181
1,161,885
2,132,066
791,400
848,592
1,639,992
623,800
733,792
1,357,592
436,262
499,050
65,717
341,599
1,342,628
556,453
589,960
69,394
292,056
1,507,863
618,123
370,224
74,127
261,903
1,324,377
487,231
246,884
71,367
233,328
1,038,810
418,276
210,365
44,484
163,662
836,787
Commercial and financial
854,753
778,252
722,322
606,014
370,589
PPP Loans
566,961
—
—
—
—
Installment loans to individuals
Automobiles and trucks
Marine loans
Other
17,697
97,404
72,364
187,465
22,939
91,025
93,274
207,238
20,482
83,606
97,606
201,694
19,006
78,855
90,851
188,712
19,234
78,993
55,718
153,945
Other loans
1,270
967
1,187
724
507
Total Loans
$ 5,735,349 $ 5,198,404 $ 4,825,214 $ 3,817,377 $ 2,879,536
67
Table 8 - Loan Maturity Distribution
(In thousands)
In one year or less
After one year but within five years:
Interest rates are floating or adjustable
Interest rates are fixed
In five years or more:
Interest rates are floating or adjustable
Interest rates are fixed
Total
Commercial
and
Financial
December 31, 2020
Construction
and Land
Development
Total
$
263,932 $
116,718 $
380,650
88,833
241,401
51,313
8,690
140,146
250,091
85,664
174,923
854,753 $
16,226
52,161
245,108 $
101,890
227,084
1,099,861
$
Table 9 - Maturity of Certificates of Deposit of $100,000 or More
Maturity of Certificates of Deposit of $100,000 through $250,000
(In thousands, except percentages)
Maturity Group:
Under 3 Months
3 to 6 Months
6 to 12 Months
Over 12 Months
Total Time Deposits
Maturity of Certificates of Deposit of more than $250,000
(In thousands, except percentages)
Maturity Group:
Under 3 Months
3 to 6 Months
6 to 12 Months
Over 12 Months
Total Time Deposits
December 31,
2020
$
$
96,635
61,486
50,999
22,930
232,050
December 31,
2020
$
$
65,627
50,430
35,580
19,826
171,463
% of
Total
42%
26
22
10
100%
% of
Total
38%
29
21
12
100%
December 31,
2019
$
$
110,724
78,190
53,702
25,832
268,448
December 31,
2019
$
$
95,351
58,930
34,925
18,113
207,319
% of
Total
41%
29
20
10
100%
% of
Total
46%
28
17
9
100%
68
Table 10 - Summary of Allowance for Credit Losses on Loans1
(In thousands, except percentages)
2020
2019
2018
2017
2016
Beginning balance
$ 35,154
$ 32,423
$ 27,122
$ 23,400
$ 19,128
For the Year Ended December 31,
Impact of adoption of ASC 326
Initial allowance for PCD loans acquired
21,226
6,279
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Provision for credit losses on loans
37,779
10,999
11,730
5,648
2,411
Charge-Offs:
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Total Charge-Offs
Recoveries:
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Total Recoveries
Net loan charge-offs (recoveries)
TDR valuation adjustments
—
310
177
n/a
240
7,091
2,024
9,842
114
18
37
—
n/a
n/a
248
152
7,550
2,609
10,559
—
n/a
n/a
3,139
80
3,396
1,411
8,026
—
n/a
n/a
407
569
1,869
1,257
4,102
—
n/a
n/a
256
205
439
244
1,144
31
n/a
n/a
27
n/a
n/a
896
226
n/a
n/a
n/a
n/a
n/a
350
1,416
316
2,251
7,591
114
744
338
712
595
2,420
8,139
129
292
816
325
329
1,789
6,237
192
747
336
226
290
2,495
306
786
1,809
109
3,236
1,607
(2,092)
319
231
Total Allowance for Credit Losses on Loans $ 92,733
$ 35,154
$ 32,423
$ 27,122
$ 23,400
$ 5,198,404
$ 5,735,349
Loans outstanding at end of year2
Ratio of allowance for credit losses on loans to
loans outstanding at end of year
Daily average loans outstanding2
Ratio of net charge-offs (recoveries) to average
loans outstanding
1With the adoption of ASC Topic 326 -Financial Instruments - Credit Losses on January 1, 2020, the Company re-evaluated the aggregation of loans into
segments, and separated Commercial Real Estate - Owner Occupied from Commercial Real Estate - Non Owner Occupied. In prior years, all Commercial Real
Estate loans were considered a single segment.
2Net of unearned income.
$ 4,112,009
$ 3,817,377
$ 2,584,389
$ 5,678,807
$ 4,933,518
$ 2,879,536
$ 4,825,214
$ 3,323,403
0.05%
0.15%
0.67%
0.16%
0.13%
0.68%
1.62%
0.71%
0.81%
(0.08%)
69
Table 11 - Allowance for Credit Losses on Loans1
(In thousands, except percentages)
Allocation by Loan Type
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Total Allowance for Credit Losses on Loans
Year End Loan Types as a Percent of Total Loans
2020
2019
December 31,
2018
2017
2016
$ 4,920
9,868
38,266
$ 1,842
$ 2,233
$ 1,642
$ 1,219
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a 13,224
7,667
9,716
2,705
$ 35,154
17,500
18,690
3,489
$ 92,733
11,112
7,775
8,585
2,718
$ 32,423
9,285
7,131
7,297
1,767
$ 27,122
9,273
7,483
3,636
1,789
$ 23,400
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Residential real estate
Commercial and financial
Consumer
Paycheck Protection Program
6%
22
25
29
13
5
—
100%
1With the adoption of ASC Topic 326 -Financial Instruments - Credit Losses on January 1, 2020, the Company re-evaluated the aggregation of loans into
segments, and separated Commercial Real Estate - Owner Occupied from Commercial Real Estate - Non Owner Occupied. In prior years, all Commercial
Real Estate loans were considered a single segment.
9%
20
24
28
15
4
—
100%
9%
21
22
27
16
5
—
100%
4%
20
25
23
15
3
10
100%
6%
20
26
29
15
4
—
100%
Total
70
Table 12 - Nonperforming Assets1
(In thousands, except percentages)
Nonaccrual loans2,3
2020
2019
December 31,
2018
2017
2016
Construction and land development
$
167
$
4,937
$
44
$
238
$
470
Commercial real estate loans - owner occupied
Commercial real estate loans - non-owner
occupied
Commercial real estate
8,181
8,084
n/a
Residential real estate loans
Commercial and financial loans
Consumer loans
Total Nonaccrual Loans
Other real estate owned
Construction and land development
Commercial real estate loans - owner occupied
Commercial real estate loans - non-owner
occupied
Commercial real estate
Residential real estate loans
Bank branches closed
Total Other Real Estate Owned
12,492
6,604
582
36,110
6,715
—
5,963
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
6,520
9,479
5,909
110
26,955
9,220
13,708
3,321
183
26,476
2,833
13,856
2,499
98
19,524
7,341
9,844
246
170
18,071
197
1,543
1,268
1,203
n/a
n/a
n/a
n/a
n/a
5,111
72
—
12,750
241
6,842
12,391
1,566
297
9,396
12,802
n/a
n/a
2,550
60
3,762
7,640
n/a
n/a
3,041
—
5,705
9,949
Total Nonperforming Assets
$ 48,860
$ 39,346
$ 39,278
$ 27,164
$ 28,020
Amount of loans outstanding at end of year3
Ratio of total nonperforming assets to loans
outstanding and other real estate owned at end of
period
$ 5,735,349
$ 5,198,404
$ 4,825,214
$ 3,817,377
$ 2,879,536
0.85%
0.76%
0.81%
0.71%
0.97%
$
$
$
63
108
4,182
Accruing loans past due 90 days or more
Loans restructured and in compliance with
modified terms4
1With the adoption of ASC Topic 326 -Financial Instruments - Credit Losses on January 1, 2020, the Company re-evaluated the aggregation of loans into
segments, and separated Commercial Real Estate - Owner Occupied from Commercial Real Estate - Non Owner Occupied. In prior years, all Commercial Real
Estate loans were considered a single segment.
2Interest income that could have been recorded during 2020, 2019, 2018, 2017, and 2016 related to nonaccrual loans was $1.1 million, $0.4 million, $1.0
million, $0.7 million, and $0.7 million, respectively, none of which was included in interest income or net income.
3Net of unearned income.
4Interest income that would have been recorded based on original contractual terms was $0.2 million, $0.4 million, $0.5 million, $0.7 million, and $1.1 million
respectively, for 2020, 2019, 2018, 2017, and 2016. The amount included in interest income under the modified terms for 2020, 2019, 2018, 2017, and 2016 was
$0.3 million, $0.6 million, $0.7 million, $0.7 million, and $0.8 million, respectively.
11,100
15,559
13,346
17,711
526
—
—
$
$
71
Table 13 - Available-For-Sale Debt Securities
(In thousands)
U.S. Treasury securities and obligations of U.S. government
agencies
2020
2019
2018
Mortgage-backed securities and collateralized mortgage
obligations of U.S. government-sponsored entities
December 31,
Gross
Amortized
Cost
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$
8,250 $
8,777 $
528 $
9,914
7,200
10,114
7,300
204
106
(1)
(4)
(6)
2020
2019
2018
1,038,437
1,060,654
604,934
567,753
609,207
554,006
23,457
5,784
300
(1,240)
(1,511)
(14,047)
Private mortgage-backed securities and collateralized
mortgage obligations
2020
2019
2018
Collateralized loan obligations
2020
2019
2018
Obligations of state and political subdivisions
2020
2019
2018
Total Available-For-Sale Debt Securities
2020
2019
2018
89,284
56,005
55,569
91,205
57,561
55,728
202,563
239,364
212,807
202,195
238,218
209,366
33,005
30,548
39,543
35,326
31,755
39,431
2,131
1,561
560
279
7
1
2,321
1,208
339
(210)
(5)
(401)
(647)
(1,153)
(3,442)
—
(1)
(451)
$ 1,371,539 $ 1,398,157 $
28,716 $
(2,098)
940,765
882,872
946,855
865,831
8,764
1,306
(2,674)
(18,347)
72
Table 14 - Held-to-Maturity Debt Securities
(In thousands)
Mortgage-backed securities of U.S. government-sponsored
entities
2020
2019
2018
Private mortgage-backed securities and collateralized
mortgage obligations
2020
2019
2018
Collateralized loan obligations
2020
2019
2018
Total Held-to-Maturity Debt Securities
2020
2019
2018
December 31,
Gross
Amortized
Cost
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$
184,484 $
192,179 $
7,818 $
261,369
304,423
262,213
297,099
2,717
—
—
—
—
—
21,526
21,673
—
—
—
—
32,000
31,123
—
—
277
—
—
—
$
184,484 $
192,179 $
7,818 $
261,369
357,949
262,213
349,895
2,717
277
(123)
(1,873)
(7,324)
—
—
(130)
—
—
(877)
(123)
(1,873)
(8,331)
73
Table 15 - Maturity Distribution of Available-For-Sale Debt Securities
(In thousands)
Amortized Cost
U.S. Treasury securities and obligations of U.S.
government agencies
Mortgage-backed securities and collateralized
mortgage obligations of U.S. government-sponsored
entities
Private mortgage-backed securities and collateralized
mortgage obligations
Collateralized loan obligations
Obligations of state and political subdivisions
Total Available-For-Sale Debt Securities
$
Fair Value
U.S. Treasury securities and obligations of U.S.
government agencies
Mortgage-backed securities and collateralized
mortgage obligations of U.S. government-sponsored
entities
Private mortgage-backed securities and collateralized
mortgage obligations
Collateralized loan obligations
Obligations of state and political subdivisions
Total Available-For-Sale Debt Securities
$
Weighted Average Yield1
U.S. Treasury securities and obligations of U.S.
government agencies
Mortgage-backed securities and collateralized
mortgage obligations of U.S. government-sponsored
entities
Private mortgage-backed securities and collateralized
mortgage obligations
Collateralized loan obligations
Obligations of state and political subdivisions
Total Available-For-Sale Debt Securities
1All yields and rates have been computed using amortized costs.
December 31, 2020
1 Year
Or Less
1-5
Years
5-10
Years
After 10
Years
Total
$ —
$ 2,029
$
563
$
5,658
$
8,250
—
26,271
109,954
902,212
1,038,437
—
—
335
335
4,963
3,720
820
193,243
11,011
6,524
80,601
8,500
15,135
89,284
202,563
33,005
$ 45,094
$ 314,004
$ 1,012,106
$ 1,371,539
$ —
$ 2,078
$
569
$
6,130
$
8,777
—
27,606
118,116
914,932
1,060,654
—
—
336
336
5,114
3,686
820
192,962
12,014
6,838
82,405
8,413
16,138
91,205
202,195
35,326
$ 47,632
$ 322,171
$ 1,028,018
$ 1,398,157
—%
3.03%
4.95%
3.64%
3.58%
—
—
—
4.73
2.44%
2.98
2.58
1.72
1.84
4.06
1.70
2.00
3.08
3.11%
1.75
2.38
2.06%
2.80
1.57
2.35
1.82%
2.82
1.74
2.63
1.92%
74
Table 16 - Maturity Distribution of Held-to-Maturity Debt Securities
(In thousands)
Amortized Cost
December 31, 2020
1 Year
Or Less
1-5
Years
5-10
Years
After 10
Years
Total
Mortgage-backed securities of U.S. government-sponsored
entities
Total Held-to-Maturity Debt Securities
$ —
$ 43,634
$ 31,067
$ 109,783
$ 184,484
$ —
$ 43,634
$ 31,067
$ 109,783
$ 184,484
Fair Value
Mortgage-backed securities of U.S. government-sponsored
entities
Total Held-to-Maturity Debt Securities
$ —
$ 44,927
$ 35,065
$ 112,187
$ 192,179
$ —
$ 44,927
$ 35,065
$ 112,187
$ 192,179
Weighted Average Yield1
Mortgage-backed securities of U.S. government-sponsored
entities
Total Held-to-Maturity Debt Securities
—%
—%
2.62%
3.34%
1.78%
2.24%
2.62%
3.34%
1.78%
2.24%
1All yields and rates have been computed using amortized costs.
Table 17 - Interest Rate Sensitivity Analysis1
(In thousands)
Federal funds sold and interest bearing
deposits
Debt securities2
Loans, net3
Other assets4
Earning assets
Savings deposits
Time deposits
Borrowings
Interest bearing liabilities
Interest sensitivity gap
Cumulative gap
December 31, 2020
0-3
Months
4-12
Months
1-5
Years
Over
5 Years
Total
$ 318,207
$
—
$
—
$
—
$
318,207
412,560
206,534
541,121
2,058,050
1,061,253
2,131,649
13,406
27,959
—
422,426
553,287
—
1,582,641
5,804,239
41,365
$ 2,802,223
$ 1,295,746
$ 2,672,770
$
975,713
$ 7,746,452
239,651
121,945
1,076,649
369,745
190,974
$ 800,370
390,395
—
$ 512,340
70,363
—
$ 1,147,012
$ 2,001,853
$ 783,406
$ 1,525,758
$ 2,001,853
$ 2,785,259
$ 4,311,017
2,373,373
653
—
2,374,026
3,811,618
831,156
190,974
$ 4,833,748
(1,398,313)
$ 2,912,704
2,912,704
$
$
$
26%
Cumulative gap to total earning assets
Earning assets to interest bearing
liabilities
1The repricing dates may differ from contractual maturity dates for certain assets due to prepayment assumptions.
2Securities are stated at carrying value.
3Includes loans available-for-sale.
4“0-3 Months” includes FHLB stock for which interest resets quarterly and a mutual fund that invests in CRA qualified debt securities which reprices daily and
“4-12 Months” includes Federal Reserve Bank stock for which interest resets semiannually.
(18%)
56%
36%
350
253
233
41
75
Stock Performance Graph
The line graph below compares the cumulative total stockholder return on Seacoast common stock with the cumulative total
return of the NASDAQ Composite Index and the SNL Southeast Bank Index for the same period. The graph and table assume
that $100 was invested on December 31, 2015 (the last day of trading for the year ended December 31, 2015) in each of
Seacoast common stock, the NASDAQ Composite Index and the SNL Southeast Bank Index. The cumulative total return
represents the change in stock price and the amount of dividends received over the period, assuming all dividends were
reinvested.
Index
Seacoast Banking Corporation
of Florida
NASDAQ Composite Index
SNL Southeast Bank Index
Source: S&P Global Market Intelligence © 2020
December 31,
2015
December 31,
2016
December 31,
2017
December 31,
2018
December 31,
2019
December 31,
2020
Period ending
100.00
100.00
100.00
147.26
108.87
132.75
168.29
141.13
164.21
173.70
137.12
135.67
204.07
187.44
191.06
196.60
271.64
172.07
76
Period EndingIndex ValueTotal Return PerformanceSeacoast Banking Corporation of FloridaNASDAQ CompositeSNL Southeast Bank IndexDecember 31,2015December 31,2016December 31,2017December 31,2018December 31,2019December 31,202050100150200250300
SELECTED QUARTERLY INFORMATION
QUARTERLY CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
(In thousands, except per share
data)
Net interest income:
2020 Quarters
2019 Quarters
Fourth
Third
Second
First
Fourth
Third
Second
First
Interest income
Interest expense
$ 72,681 $ 68,140 $ 73,222 $ 72,992 $ 72,286 $ 72,825 $ 72,237 $ 72,475
3,890
4,637
5,950
9,815
10,526
11,877
12,101
11,701
Net interest income
68,791
63,503
67,272
63,177
61,760
60,948
60,136
60,774
Provision for credit losses
1,900
(845)
7,611
29,513
4,800
2,251
2,551
1,397
Net interest income after
provision for credit losses on
loans
Noninterest income:
Service charges on deposit
accounts
Interchange income
Wealth management income
Mortgage banking fees
Marine finance fees
SBA gains
BOLI income
Other income
Securities (losses) gains, net
66,891
64,348
59,661
33,664
56,960
58,697
57,585
59,377
2,423
2,242
1,939
2,825
2,960
2,978
2,894
2,697
3,596
1,949
3,646
145
113
889
3,682
1,972
5,283
242
252
899
2,187
2,370
(18)
4
3,187
1,719
3,559
157
181
887
2,147
1,230
3,246
1,867
2,208
146
139
886
3,352
19
3,387
1,579
1,514
338
576
904
2,579
2,539
3,206
1,632
2,127
153
569
928
3,405
1,688
1,734
201
691
927
3,401
1,453
1,115
362
636
915
3,197
2,503
2,266
(847)
(466)
(9)
Total noninterest income
14,930
16,946
15,006
14,688
16,376
13,943
13,577
12,836
Noninterest expenses:
Salaries and wages
Employee benefits
Outsourced data processing costs
Telephone and data lines
Occupancy
Furniture and equipment
Marketing
Legal and professional fees
FDIC assessments
Amortization of intangibles
Foreclosed property expense and
net loss (gain) on sale
Provision for credit losses on
unfunded commitments
Other
21,490
23,125
20,226
23,698
17,263
18,640
19,420
18,506
3,915
4,233
774
3,554
1,317
1,045
509
528
1,421
1,821
3,995
6,128
705
3,858
1,576
1,513
3,018
474
1,497
3,379
4,059
791
3,385
1,358
997
2,277
266
1,483
4,255
4,633
714
3,353
1,623
1,278
3,363
—
1,456
512
245
(315)
(795)
756
178
46
3,323
3,645
651
3,368
1,416
885
2,025
—
1,456
3
—
2,973
3,711
603
3,368
1,528
933
1,648
56
1,456
3,195
3,876
893
3,741
1,544
1,211
2,033
337
1,456
4,206
3,845
811
3,807
1,757
1,132
2,847
488
1,458
262
(174)
(40)
—
—
—
3,869
4,517
3,755
3,694
4,022
3,405
3,468
4,282
Total noninterest expenses
43,681
51,674
42,399
47,798
38,057
38,583
41,000
43,099
Income before income taxes
Income taxes
Net income
38,140
8,793
29,620
6,992
32,268
7,188
554
(155)
35,279
8,103
34,057
8,452
30,162
6,909
29,114
6,409
$ 29,347 $ 22,628 $ 25,080 $
709 $ 27,176 $ 25,605 $ 23,253 $ 22,705
77
(In thousands, except per share
data)
Per Common Share Data
Net income diluted
Net income basic
Cash dividends declared:
Common stock
Market price common stock:
Low close
High close
Bid price at end of period
2020 Quarters
2019 Quarters
Fourth
Third
Second
First
Fourth
Third
Second
First
$
0.53 $
0.42 $
0.47 $
0.01 $
0.52 $
0.49 $
0.45 $
0.53
0.42
0.47
0.01
0.53
0.50
0.45
0.44
0.44
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
18.01
29.60
29.45
17.44
21.40
18.03
16.35
25.00
20.40
14.64
30.55
18.31
24.21
31.02
30.57
22.54
27.36
25.31
23.19
28.54
25.44
25.49
29.57
26.35
78
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
2020
2019
2018
2017
2016
Net interest income
$ 262,743
$ 243,618
$ 211,515
$ 176,296
$ 139,588
For the Year Ended and at December 31,
Provision for credit losses
38,179
10,999
11,730
5,648
2,411
Noninterest income:
Other
60,335
55,515
50,645
43,230
37,427
Securities gains (losses), net
1,235
1,217
(623)
86
Gain on sale of VISA stock
—
—
—
15,153
368
—
Noninterest expenses
185,552
160,739
162,273
149,916
130,881
Income before income taxes
100,582
128,612
87,534
79,201
44,091
Income taxes
Net income
Per Share Data
Net income available to common
shareholders:
Diluted
Basic
Cash dividends declared
Book value per share common
Tangible book value per share
Assets
Debt securities
Net loans
Deposits
FHLB borrowings
Subordinated debt
22,818
29,873
20,259
36,336
14,889
$ 77,764
$ 98,739
$ 67,275
$ 42,865
$ 29,202
$
1.44
$
1.90
$
1.38
$
0.99
$
0.78
1.45
0.00
20.46
16.16
1.92
0.00
19.13
14.76
1.40
0.00
16.83
12.33
1.01
0.00
14.70
11.15
0.79
0.00
11.45
9.37
$ 8,342,392
$ 7,108,511
$ 6,747,659
$ 5,810,129
$ 4,680,932
1,582,641
1,208,224
1,223,780
1,372,667
1,323,001
5,642,616
5,163,250
4,792,791
3,790,255
2,856,136
6,932,561
5,584,753
5,177,240
4,592,720
3,523,245
—
315,000
380,000
211,000
415,000
71,365
71,085
70,804
70,521
70,241
Shareholders' equity
1,130,402
985,639
864,267
689,664
435,397
79
(In thousands, except per share data)
2020
2019
2018
2017
2016
For the Year Ended and at December 31,
Performance ratios:
Return on average assets
0.99%
1.45%
1.11%
0.82%
0.69%
Return on average equity
Net interest margin1
7.44
3.65
10.63
3.92
9.08
3.85
7.51
3.73
Average equity to average assets
13.30
13.60
12.23
10.96
Return on tangible assets
1.08
1.56
1.20
Return on tangible common equity
1On a fully taxable equivalent basis, a non-GAAP measure.
10.10
14.72
12.54
0.88
9.90
7.06
3.63
9.85
0.75
8.87
80
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of Seacoast Banking Corporation of Florida
Stuart, Florida
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Seacoast Banking Corporation of Florida (the “Company”)
as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’
equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes
(collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial
reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework: (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework: (2013) issued by
COSO.
Change in Accounting Principle
As discussed in Note A to the financial statements, the Company has changed its method of accounting for credit losses
effective January 1, 2020 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification No.
326, Financial Instruments – Credit Losses (ASC 326). The Company adopted the new credit loss standard using the modified
retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously
applicable generally accepted accounting principles. The adoption of the new credit loss standard and its subsequent application
is also communicated as a critical audit matter below.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
81
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on
the accounts or disclosures to which it relates.
Allowance for Credit Losses on Loans and Provision Expense
In accordance with Accounting Standards Update (the “ASU”) 2016-13, Financial Instruments —Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments, the Company adopted Accounting Standards Codification (“ASC”)
326 as of January 1, 2020 as described in Notes A and F of the consolidated financial statements using the modified
retrospective method. See also the explanatory paragraph above for the change in accounting principle. The allowance for credit
losses (the “ACL”) is an accounting estimate of expected credit losses over the contractual life of financial assets carried at
amortized cost and off-balance-sheet credit exposures. The ASU requires a financial asset (or a group of financial assets),
including the Company's loan portfolio, measured at amortized cost to be presented at the net amount expected to be collected.
Estimates of expected credit losses for loans are based on historical experience, current conditions and reasonable and
supportable forecasts over the expected life of the loans. In order to estimate the expected credit losses, the Company
implemented a new loss estimation model. The Company disclosed the impact of adoption of this standard on January 1, 2020
with a $21.2 million increase to the allowance for credit losses, a $1.8 million increase for unfunded loan commitments and a
$16.9 million decrease to retained earnings for the cumulative effect adjustment recorded upon adoption. Provision expense for
loans for the year ending December 31, 2020 was $37.8 million and the allowance for credit losses on loans at December 31,
2020 was $92.7 million.
The Company estimates expected credit losses for loans using a methodology based on the probability of default (“PD”) and
loss given default (“LGD”), which is defined as credit loss incurred when an obligor of the bank defaults. PDs and LGDs are
developed by analyzing the average historical loss migration of loans to default. The ACL estimation process for loans also
applies an economic forecast scenario over a three-year forecast period. The forecast may use a single scenario or a composite
of scenarios. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments. For
portfolio segments with a weighted average life longer than three years, the Company reverts to longer-term historical loss
experience, adjusted for prepayments, to estimate losses over the remaining life of the loans within each segment.
Qualitative adjustments are applied to the quantitative component to adjust for factors such as current conditions and the
possibility that the characteristics of the economic downturn could be sustained over a more extended period of time.
Adjustments may be made to baseline reserves based on an assessment of internal and external influences on credit quality not
fully reflected in the quantitative components of the allowance model. These influences may include elements such as changes
in concentration, macroeconomic conditions, recent observable asset quality trends, staff turnover, regional market conditions,
employment levels and loan growth. These qualitative adjustments are based upon management's assessments of the factors.
We determined that auditing the allowance for credit losses on loans was a critical audit matter because of the extent of auditor
judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by
82
management throughout the initial adoption and subsequent application processes, including the need to involve our valuation
services specialists. The principal considerations resulting in our determination included the following:
•
•
•
•
Significant auditor judgment and audit effort to evaluate the appropriateness of selection of the loss estimation models,
appropriateness of loan segmentation, and the reasonableness of PD and LGD assumptions
Significant auditor judgment in evaluating the selection and application of the reasonable and supportable forecast of
economic variables
Significant auditor judgment and effort were used in evaluating the qualitative adjustments used in the calculation
Significant audit effort related to the completeness and accuracy of the high volume of data used to develop
assumptions and in the model computation
The primary procedures performed to address the critical audit matter included:
•
•
•
Testing the effectiveness of management’s internal controls over the Company’s significant model assumptions and
judgments, loan segmentation, reasonable and supportable forecasts, qualitative adjustments, information systems and
model validation
Testing the effectiveness of controls over the completeness and accuracy of historical inputs used in the development
of the PD models and LGD assumptions, data imputation, use of third-party data, and loan data used in the
computation
Testing the effectiveness of controls over the Company’s preparation and review of the allowance for credit loss
calculation, including data used as the basis for adjustments related to the qualitative adjustments and the development
and reasonableness of qualitative adjustments and mathematical accuracy and appropriateness of the overall
calculation
• With the assistance of our valuation specialists, evaluating the reasonableness of assumptions and judgments related to
the PD, LGD and loan segmentation, the conceptual design of the credit loss estimation models, model assumption
sensitivity analysis and the adequacy of the independent model validation
•
•
•
Evaluating management’s judgments in the selection and application of reasonable and supportable forecast of
economic variables
Substantively testing management’s process for developing the qualitative factors and assessing reasonableness,
relevance and reliability of data used to develop factors, including evaluating management’s judgments and
assumptions for reasonableness
Substantively testing the mathematical accuracy of the PD and LGD model on a pooled loan level with the assistance
of valuation specialists, including the completeness and accuracy of loan data used in the model
/s/ Crowe LLP
Crowe LLP
We have served as the Company's auditor since 2014.
Fort Lauderdale, Florida
February 26, 2021
83
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Interest Income
Interest and dividends on securities
Taxable
Nontaxable
Interest and fees on loans
Interest on interest bearing deposits and other investments
Total Interest Income
Interest Expense
Interest on deposits
Interest on time certificates
Interest on securities sold under agreement to repurchase
Interest on Federal Home Loan Bank (“FHLB”) borrowings
Interest on subordinated debt
Total Interest Expense
Net Interest Income
Provision for credit losses
Net Interest Income After Provision for Credit Losses
Noninterest Income (see “Note N - Noninterest Income and Expenses”)
Securities gains (losses), net (includes net gains of $0.2 million for
2020, net gains of $6.2 million for 2019 and net losses of $0.1 million
for 2018 in other comprehensive income reclassifications)
Other
Total Noninterest Income
For the Year Ended December 31,
2020
2019
2018
$
29,718 $
35,354 $
37,860
454
254,366
2,497
287,035
6,920
13,365
283
1,540
2,184
24,292
262,743
38,179
224,564
555
250,535
3,379
289,823
16,621
21,776
1,431
3,010
3,367
46,205
243,618
10,999
232,619
884
199,984
2,670
241,398
8,763
11,684
1,804
4,468
3,164
29,883
211,515
11,730
199,785
1,235
1,217
(623)
60,335
61,570
55,515
56,732
50,645
50,022
Noninterest Expense (See “Note N - Noninterest Income and
Expenses”)
185,552
160,739
162,273
Income Before Income Taxes
Income taxes
Net Income
Share Data
Net income per share of common stock
Diluted
Basic
Average common shares outstanding
Diluted
Basic
$
$
100,582
22,818
77,764 $
128,612
29,873
98,739 $
87,534
20,259
67,275
1.44 $
1.45
1.90 $
1.92
53,930
53,502
52,029
51,449
1.38
1.40
48,748
47,969
See notes to consolidated financial statements.
84
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net Income
Other comprehensive income (loss):
Available-for-sale securities:
For the Year Ended December 31,
2018
2019
2020
$
77,764 $
98,739 $
67,275
Unrealized gains (losses) on available-for-sale securities, net of tax
expense of $5.0 million in 2020, tax expense of $5.9 million in 2019 and
tax benefit of $3.5 million in 2018
Reclassification of unrealized losses on securities transferred to
available-for-sale upon adoption of new accounting pronouncement, net
of tax benefit of $154 thousand in 2019
Amortization of unrealized losses on securities transferred to held-to-
maturity, net of tax expense of $40 thousand, $87 thousand, and $142
thousand, respectively
Reclassification adjustment for (gains) losses included in net income, net
of tax expense of $314 thousand in 2020, tax expense of $95 thousand in
2019 and tax benefit of $37 thousand in 2018
Available-for-sale securities, net of tax
Unrealized losses on derivatives designated as cash flow hedges, net of
reclassifications to income, net of tax expense of $42 thousand
Total other comprehensive income (loss)
Comprehensive Income
$
16,628 $
19,016 $
(9,815)
—
(730)
—
184
175
408
(782)
(936)
448
16,030 $
17,525 $
(8,959)
(125) $
— $
—
15,905 $
17,525 $
(8,959)
93,669 $
116,264 $
58,316
$
$
$
$
See notes to consolidated financial statements.
85
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
Assets
Cash and due from banks
Interest bearing deposits with other banks
Total cash and cash equivalents
Time deposits with other banks
Debt securities:
Securities available-for-sale (at fair value)
Securities held-to-maturity (fair value $192.2 million in 2020 and $262.2 million in
2019)
Total debt securities
Loans held for sale (at fair value)
Loans
Less: Allowance for credit losses
Loans, net of allowance for credit losses
Bank premises and equipment, net
Other real estate owned
Goodwill
Other intangible assets, net
Bank owned life insurance
Net deferred tax assets
Other assets
Total Assets
Liabilities
Deposits
Noninterest demand
Interest-bearing demand
Savings
Money market
Other time deposits
Brokered time certificates
Time certificates of more than $250,000
Total Deposits
Securities sold under agreements to repurchase, maturing within 30 days
Federal Home Loan Bank (“FHLB”) borrowings
Subordinated debt
Other liabilities
Total Liabilities
86
December 31,
2020
2019
$
86,630 $
317,458
404,088
89,843
34,688
124,531
750
3,742
1,398,157
184,484
946,855
261,369
1,582,641
1,208,224
68,890
20,029
5,735,349
5,198,404
(92,733)
(35,154)
5,642,616
5,163,250
75,117
12,750
221,176
16,745
131,776
23,629
162,214
66,615
12,390
205,286
20,066
126,181
16,457
141,740
$
8,342,392 $
7,108,511
$
2,289,787 $
1,566,069
689,179
1,556,370
425,878
233,815
171,463
1,590,493
1,181,732
519,152
1,108,363
504,837
472,857
207,319
6,932,561
5,584,753
119,609
—
71,365
88,455
86,121
315,000
71,085
65,913
7,211,990
6,122,872
(In thousands, except share data)
Commitments and Contingencies (See “Note J - Borrowings and “Note Q -
Contingent Liabilities and Commitments with Off-Balance Sheet Risk”)
December 31,
2020
2019
Shareholders' Equity
Common stock, par value $0.10 per share authorized 120,000,000 shares, issued
55,584,979 and outstanding 55,243,226 shares in 2020 and authorized 120,000,000
shares, issued 51,760,617 and outstanding 51,513,733 shares in 2019
Additional paid-in capital
Retained earnings
5,524
5,151
856,092
256,701
786,242
195,813
Less: Treasury stock (341,753 shares in 2020 and 246,884 shares in 2019), at cost
(8,285)
(6,032)
Accumulated other comprehensive income, net
Total Shareholders' Equity
Total Liabilities & Shareholders' Equity
See notes to consolidated financial statements.
1,110,032
20,370
1,130,402
981,174
4,465
985,639
$
8,342,392 $
7,108,511
87
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Cash Flows From Operating Activities
Net Income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation
Amortization of premiums and discounts on securities, net
Amortization of operating lease right-of-use assets
Other amortization and accretion, net
Stock based compensation
Origination of loans designated for sale
Sale of loans designated for sale
Provision for credit losses
Deferred income taxes
(Gains) losses on sale of securities
Gains on sale of loans
Losses (gains) on sale and write-downs of other real estate owned
Losses on disposition of fixed assets
Bank owned life insurance death benefits
Changes in operating assets and liabilities, net of effects from acquired
companies:
Net (increase) decrease in other assets
Net (decrease) increase in other liabilities
Net Cash Provided by Operating Activities
Cash Flows From Investing Activities
Maturities and repayments of available-for-sale debt securities
Maturities and repayments of held-to-maturity debt securities
Proceeds from sale of available-for-sale debt securities
Purchases of available-for-sale debt securities
Maturities of time deposits with other banks
Net new loans and principal repayments
Purchases of loans held for investment
Proceeds from the sale of other real estate owned
Additions to other real estate owned
Proceeds from sale of FHLB and Federal Reserve Bank Stock
For the Year Ended December 31,
2020
2019
2018
$
77,764 $
98,739 $
67,275
6,020
5,019
4,362
6,421
2,548
4,117
(8,667)
(2,005)
7,304
7,243
6,353
3,196
—
(1,158)
7,823
(511,706)
(329,177)
(303,928)
477,178
38,179
(4,926)
(1,096)
(13,930)
1,139
791
—
333,591
10,999
6,791
(1,031)
(9,794)
(432)
511
(956)
326,328
11,730
459
485
(8,961)
(107)
1,235
(280)
(35,555)
18,776
60,652
(5,614)
(4,206)
10,331
8,827
117,745
129,608
304,064
75,861
96,732
101,674
42,495
202,724
141,223
58,315
64,366
(830,300)
2,992
(309,461)
4,501
(104,650)
4,310
(79,100)
(109,614)
(365,816)
—
8,521
(2,557)
39,185
(270,791)
(19,541)
6,509
—
74,120
10,072
—
44,731
Purchase of FHLB and Federal Reserve Bank Stock
(28,278)
(75,193)
(51,505)
Proceeds from sale of Visa Class B stock
Redemption of bank owned life insurance
Net cash from bank acquisitions
Additions to bank premises and equipment
Net Cash Used in Investing Activities
—
—
71,965
—
14,218
—
21,333
4,232
22,349
(1,587)
(2,523)
(4,019)
(342,502)
(321,341)
(174,600)
88
(In thousands)
Cash Flows From Financing Activities
Net increase (decrease) in deposits
Net increase (decrease) in repurchase agreements
Net (decrease) increase in FHLB borrowings with original maturities of
three months or less
Repayments of FHLB borrowings with original maturities of more than
three months
Proceeds from FHLB borrowings with original maturities of more than
three months
Stock based employee benefit plans
Dividends paid
Net Cash Provided by Financing Activities
Net increase in cash and cash equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
Supplemental disclosure of cash flow information:
Cash paid during the period for interest
Cash paid during the period for taxes
Recognition of operating lease right-of-use assets
Recognition of operating lease liabilities
For the Year Ended December 31,
2020
2019
2018
844,405
33,488
407,513
(128,202)
(39,769)
(1,771)
(235,000)
(67,000)
32,000
(115,000)
(63,000)
—
35,000
65,000
60,000
(1,486)
(2,135)
—
561,407
279,557
124,531
—
212,176
8,580
115,951
979
—
51,439
6,447
109,504
$
404,088 $
124,531 $
115,951
$
23,548 $
46,130 $
27,712
2,095
2,095
16,000
30,301
34,627
Supplemental disclosure of non-cash investing activities:
Transfer of debt securities from held-to-maturity to available-for-sale
$
— $
52,796 $
Transfer from loans to other real estate owned
Transfer from bank premises to other real estate owned
Transfer from loans held for investment to loans held for sale
5,624
1,289
—
5,665
—
801
See notes to consolidated financial statements.
89
28,301
13,200
—
—
—
5,549
9,168
—
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
Other
(Dollars and shares in thousands)
Shares
Amount
Capital
Earnings
Stock
Income (Loss), Net
Total
Balance at December 31, 2017
46,918
$ 4,693
$ 661,632
$
29,914
$ (2,359) $
(4,216) $ 689,664
Common Stock
Paid-in
Retained
Treasury
Comprehensive
Comprehensive income
Reclassification of disproportionate tax effects
upon adoption of new accounting pronouncement
Stock based compensation expense
Common stock issued for stock based employee
benefit plans
Common stock issued for stock options
—
—
32
43
368
—
—
—
—
43
—
—
7,823
(6)
1,966
Issuance of common stock, pursuant to acquisition
4,000
400
107,086
67,275
(115)
—
—
—
—
—
—
—
(1,025)
—
—
(8,959)
58,316
115
—
—
—
—
—
7,823
(1,031)
2,009
107,486
Balance at December 31, 2018
51,361
$ 5,136
$ 778,501
$
97,074
$ (3,384) $
(13,060) $ 864,267
Comprehensive income
—
Stock based compensation expense
Common stock issued for stock based employee
benefit plans
Common stock issued for stock options
Other
30
94
29
—
—
—
12
3
—
—
7,244
(32)
425
104
98,739
—
—
—
—
—
—
(2,648)
—
—
17,525
116,264
—
—
—
—
7,244
(2,668)
428
104
Balance at December 31, 2019
51,514
$ 5,151
$ 786,242
$
195,813
$ (6,032) $
4,465 $ 985,639
Comprehensive income
Stock based compensation expense
Common stock issued for stock based employee
benefit plans
Common stock issued for stock options
Cumulative change in accounting principle upon
adoption of new accounting pronouncement (See
Note A - Basis of Presentation)
Issuance of common stock, pursuant to acquisitions
—
39
465
62
—
—
51
6
—
7,304
(50)
760
77,764
—
—
—
—
—
(2,253)
—
—
3,163
—
316
—
61,836
(16,876)
—
—
—
15,905
—
—
—
—
—
93,669
7,304
(2,252)
766
(16,876)
62,152
Balance at December 31, 2020
55,243
$ 5,524
$ 856,092
$
256,701
$ (8,285) $
20,370 $ 1,130,402
See notes to consolidated financial statements.
90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Seacoast Banking Corporation of Florida and Subsidiaries
Note A - Significant Accounting Policies
General: Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) is a single segment financial holding
company with one operating subsidiary bank, Seacoast National Bank (“Seacoast Bank”). The Company provides integrated
financial services including commercial and retail banking, wealth management, and mortgage services to customers through
advanced banking solutions and a network of traditional branch offices and commercial banking centers operated by Seacoast
Bank. Seacoast operates primarily in Florida, with concentrations in the state's fastest growing markets, each with unique
characteristics and opportunities. Offices stretch from the southeast, including Fort Lauderdale, Boca Raton and Palm Beach,
north along the east coast to the Daytona area, into Orlando and Central Florida and the adjacent Tampa market, and west to
Okeechobee and surrounding counties.
The consolidated financial statements include the accounts of Seacoast and all its majority-owned subsidiaries but exclude
trusts created for the issuance of trust preferred securities. In consolidation, all significant intercompany accounts and
transactions are eliminated.
The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the
United States of America, and they conform to general practices within the applicable industries. Certain prior period amounts
have been reclassified to conform to the current period presentation.
Use of Estimates: The preparation of consolidated financial statements requires management to make judgments in the
application of certain accounting policies that involve significant estimates and assumptions. The Company has established
policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from
period to period. These estimates and assumptions, which may materially affect the reported amounts of certain assets,
liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in
this information over time and the use of revised estimates and assumptions could materially affect amounts reported in
subsequent financial statements. Specific areas, among others, requiring the application of management’s estimates include
determination of the allowance for credit losses, acquisition accounting and purchased loans, intangible assets and impairment
testing, other fair value measurements, and contingent liabilities.
Recently Adopted Accounting Pronouncements: On January 1, 2020, the Company adopted ASC Topic 326 - Financial
Instruments - Credit Losses, which replaced the incurred loss methodology with an expected loss methodology that is referred
to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL
methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity
(“HTM”) debt securities. It also applies to off-balance sheet credit exposure such as loan commitments, standby letters of credit,
financial guarantees and other similar instruments. In addition, ASC Topic 326 changed the accounting for impairment of
available-for-sale (“AFS”) debt securities.
The Company adopted ASC Topic 326 using the modified retrospective method for all financial assets measured at amortized
cost and off-balance sheet credit exposures. Results for the reporting period beginning after January 1, 2020 are presented under
ASC Topic 326, while prior amounts continue to be reported in accordance with previously applicable GAAP. The following
table reflects the cumulative effect of adoption:
(in thousands)
Loans
Allowance for credit losses
Reserve for unfunded commitments
Deferred tax assets
Retained earnings
December 31, 2019
CECL adoption
impact
January 1, 2020
$
5,198,404 $
(706) $
5,197,698
35,154
140
16,457
195,813
21,226
1,837
(5,481)
(16,876)
56,380
1,977
10,976
178,937
ASC Topic 326 introduced new definitions and criteria for categorizing purchased loans. Loans that, as of the date of
acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination are classified as
purchased credit deteriorated (“PCD”). Acquired loans which do not meet the definition of PCD are classified by the Company
as acquired Non-PCD. At the date of adoption, the Company reclassified all loans previously classified as purchased credit
91
impaired (“PCI”) to PCD, and increased the allowance $0.7 million with a corresponding adjustment to these loans' amortized
cost basis. The remaining noncredit discount on loans previously classified as PCI was $0.9 million, which will be accreted into
interest income over the remaining life of the loans.
Under CECL, the Company estimates the allowance using relevant available information, from both internal and external
sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit losses provide the
basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current
loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value
ratios, borrower credit characteristics, loan seasoning or term as well as for changes in environmental conditions, such as
changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.
For loans analyzed on a collective basis, the Company has developed an allowance model based on an analysis of the
probability of default (“PD”) and loss given default (“LGD”) to determine an expected loss by loan segment. PDs and LGDs
are developed by analyzing the average historical loss migration of loans to default. The Company excludes accrued interest on
loans from its determination of allowance.
The allowance estimation process also applies an economic forecast scenario over a three year forecast period. The forecast
may utilize one scenario or a composite of scenarios based on management's judgment and expectations around the current and
future macroeconomic outlook. Expected credit losses are estimated over the contractual term of the loans, adjusted for
expected prepayments when appropriate. The contractual term of a loan excludes expected extensions, renewals, and
modification unless either of the following applies: management has a reasonable expectation at the reporting date that a
troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the
original or modified contract at the reporting date and not unconditionally cancellable by the Company. For portfolio segments
with a weighted average life longer than three years, the Company reverts to longer term historical loss experience, adjusted for
prepayments, to estimate losses over the remaining life of the loans within each segment.
Adjustments may be made to baseline reserves for some of the loan pools based on an assessment of internal and external
influences on credit quality not fully reflected in the quantitative components of the allowance model. These influences may
include elements such as changes in concentration, macroeconomic conditions, recent observable asset quality trends, staff
turnover, regional market conditions, employment levels and loan growth. Based upon management's assessments of these
factors, the Company may apply qualitative adjustments to the allowance.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also
included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are
based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
All HTM debt securities are issued by government-sponsored entities, which are either explicitly or implicitly guaranteed by the
U.S. government and have a long history of no credit losses. In addition, the credit rating on all the Company's HTM debt
securities as of the date of adoption is AA+. There is no history of the government withholding or limiting support to these
agencies, nor is there any indication of a change to that historical support. While the potential for default on these securities
may be something greater than zero, the long history with no credit losses, the implied government guarantee of principal and
interest payments and the high credit rating of the HTM portfolio provide sufficient basis for the current expectation that there
is zero risk of loss if default were to occur. As a result, the Company recorded no allowance for HTM debt securities with fair
value less than amortized cost basis at the date of adoption.
ASC Topic 326 amended the existing other-than-temporary-impairment guidance for AFS securities, requiring credit losses to
be recorded as an allowance rather than through a permanent write-down. When evaluating AFS debt securities under ASC
Topic 326, the Company has evaluated whether the decline in fair value is attributed to credit losses or other factors using both
quantitative and qualitative analyses, including cash flow analysis, review of credit ratings, remaining payment terms,
prepayment speeds and analysis of macro-economic conditions. At the date of adoption, collateralized loan obligations had
unrealized losses of $1.2 million. The collateral for these securities is first lien senior secured corporate debt, and the Company
holds senior tranches rated A or higher. Based on this analysis, the Company believes that the unrealized loss position for AFS
debt securities at the time of adoption was the result of both broad investment type spreads and the current rate environment.
Each investment is expected to recover its price depreciation over its holding period as it moves to maturity and the Company
has the intent and ability to hold these securities to maturity if necessary. As a result of this evaluation, the Company concluded
that no allowance was appropriate at the date of adoption.
Cash and Cash Equivalents: Cash and cash equivalents include cash and due from banks and interest-bearing bank balances.
Cash equivalents have original maturities of three months or less, and accordingly, the carrying amount of these instruments is
deemed to be a reasonable estimate of fair value.
92
Time Deposits with Other Banks: Time deposits with other banks consist of certificates of deposit with original maturities
greater than three months and are carried at cost.
Securities Purchased and Sold Agreements: Securities purchased under resale agreements and securities sold under repurchase
agreements are generally accounted for as collateralized financing transactions and are recorded at the amount at which the
securities were acquired or sold plus accrued interest. It is the Company’s policy to take possession of securities purchased
under resale agreements, which are primarily U.S. government and government agency securities. The fair value of securities
purchased and sold is monitored and collateral is obtained from or returned to the counterparty when appropriate.
Securities: Debt securities are classified at date of purchase as available-for-sale or held-to-maturity. Debt securities that may
be sold as part of the Company's asset/liability management or in response to, or in anticipation of, changes in interest rates and
resulting prepayment risk, or for other factors are stated at fair value with unrealized gains or losses reflected as a component of
shareholders' equity net of tax or included in noninterest income as appropriate. Debt securities that the Company has the ability
and intent to hold to maturity are carried at amortized cost. Equity securities are stated at fair value with unrealized gains or
losses included in noninterest income as securities gains or losses.
The estimated fair value of a security is determined based on market quotations when available or, if not available, by using
quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data
where available.
Realized gains and losses are included in noninterest income as investment securities gains (losses). Interest and dividends on
securities, including amortization of premiums and accretion of discounts on debt securities, is recognized in interest income on
an accrual basis using the interest method. The Company anticipates prepayments of principal in the calculation of the effective
yield for collateralized mortgage obligations and mortgage backed securities by obtaining estimates of prepayments from
independent third parties. The adjusted cost of each specific security sold is used to compute realized gains or losses on the sale
of securities on a trade date basis.
Seacoast Bank is a member of the Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) systems. Members
are required to own a certain amount of FHLB and FRB stock based on the level of borrowings and other factors, and may
invest in additional amounts. Both cash and stock dividends are reported as income.
Loans Held for Sale: The Company has elected to account for residential mortgage loans originated as held for sale at fair
value. Changes in fair value are measured and recorded in Mortgage Banking Fees in noninterest income each period. The
Company designates other loans as held for sale when it has the intent to sell them. Such loans are transferred to held for sale at
the lower of cost or estimated fair value less cost to sell. At the time of transfer, write-downs on the loans are recorded as
charge-offs, establishing a new cost basis upon transfer.
Loans Held for Investment: Loans that management has the intent and ability to hold for the foreseeable future or until maturity
or payoff are considered held for investment. Loans originated by Seacoast and held for investment are recognized at the
principal amount outstanding, net of unearned income and amounts charged off. Unearned income includes discounts,
premiums and deferred loan origination fees reduced by loan origination costs. Unearned income on loans is amortized to
interest income over the life of the related loan using the effective interest rate method. Interest income is recognized on an
accrual basis.
As a part of business acquisitions, the Company acquires loans that are recorded at fair value on the acquisition date.
Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date. Any
losses after acquisition are recognized through the allowance for credit losses. Loans that, as of the date of acquisition, have
experienced a more-than-insignificant deterioration in credit quality since origination are classified as purchased credit
deteriorated (“PCD”). Acquired loans that do not meet the definition of PCD are classified by the Company as acquired Non-
PCD. An allowance for expected credit losses on PCD loans is recorded at the date of acquisition through an adjustment to the
loans' amortized cost basis. In contrast, expected credit losses on loans not considered PCD are recognized through the
provision for credit losses in net income at the date of acquisition.
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.
When interest accruals are discontinued, unpaid interest is reversed against interest income. Consumer loans that become 120
days past due are generally charged off. When borrowers demonstrate over an extended period the ability to repay a loan in
accordance with the contractual terms of a loan classified as nonaccrual, the loan is returned to accrual status. Interest income
on nonaccrual loans is either recorded using the cash basis method of accounting or recognized after the principal has been
reduced to zero, depending on the type of loan.
93
In response to the COVID-19 pandemic beginning in early 2020, rules defined in the Coronavirus Aid, Relief and Economic
Security (“CARES”) Act and a joint statement issued by federal regulators in consultation with FASB provide financial
institutions with the option not to apply troubled debt restructure (“TDR”) accounting to eligible loan modifications provided to
borrowers affected by the economic impact of the COVID-19 pandemic. Outside of this guidance, a loan for which the terms
have been modified resulting in a concession, and for which the borrower is experiencing financial difficulty, is considered to
be a TDR. The allowance for credit losses on a TDR is measured using the same method as all other loans held for investment,
except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When
the value of a concession is measured using the discounted cash flow method, the allowance for credit losses is determined by
discounting the expected future cash flows at the original interest rate of the loan.
It is the Company's practice to ensure that the charge-off policy meets or exceeds regulatory minimums. Losses on unsecured
consumer loans are recognized at 90 days past due, compared to the regulatory loss criteria of 120 days. In compliance with
Federal Financial Institution Examination Council guidelines, secured consumer loans, including residential real estate, are
typically charged-off or charged down between 120 and 180 days past due, depending on the collateral type. Commercial loans
and real estate loans are typically placed on nonaccrual status when principal or interest is past due for 90 days or more, unless
the loan is both secured by collateral having realizable value sufficient to discharge the debt in-full and the loan is in process of
collection. Secured loans may be charged-down to the estimated value of the collateral with previously accrued unpaid interest
reversed against interest income. Subsequent charge-offs may be required as a result of changes in the market value of collateral
or other repayment prospects. Initial charge-off amounts are based on valuation estimates derived from appraisals, broker price
opinions, or other market information. Generally, new appraisals are not received until the foreclosure process is completed;
however, collateral values are evaluated periodically based on market information and incremental charge-offs are recorded if it
is determined that collateral values have declined from their initial estimates.
Derivative Instruments and Hedging Activities: The Company enters into derivative contracts, including swaps and floors, to
meet the needs of customers who request such services and to manage the Company's exposure to interest rate fluctuations.
Derivative contracts are carried at fair value and recorded in the consolidated balance sheet within other assets or other
liabilities. The gain or loss resulting from changes in the fair value of interest rate swaps designated and qualifying as cash flow
hedging instruments is initially reported as a component of other comprehensive income and subsequently reclassified into
earnings through interest income in the same period in which the hedged transaction affects earnings.
The Company discontinues hedge accounting prospectively when it is determined that the derivative contract is no longer
effective in offsetting changes in the cash flows of the hedged item, the derivative expires or is terminated, management
determines that the designation of the derivative as a hedging instrument is no longer appropriate or, for a cash flow hedge, the
occurrence of the forecasted transaction is no longer probable. When hedge accounting on a cash flow hedge is discontinued,
any subsequent changes in fair value of the derivative are recognized in earnings. The cumulative unrealized gain or loss related
to a discontinuing cash flow hedge continues to be reported in AOCI and is subsequently reclassified into earnings in the same
period in which the hedged transactions affects earnings, unless it is probable that the forecasted transaction will not occur by
the end of the originally specified time period, in which case the cumulative unrealized gain or loss in AOCI is reclassified into
earnings immediately.
Cash flows resulting from derivative financial instruments that are accounted for as hedges are classified in the cash flow
statement in the same category as the cash flows from the hedged items.
See additional disclosures related to derivative instruments and hedging activities in “Note G – Derivatives”.
Loan Commitments and Letters of Credit: Loan commitments and letters of credit are an off-balance sheet item and represent
commitments to make loans or lines of credit available to borrowers. The face amount of these commitments represents an
exposure to loss, before considering customer collateral or ability to repay. Such commitments are recognized as loans when
funded. The Company estimates a reserve for potential losses on unfunded commitments, which is reported separately from the
allowance for credit losses within other liabilities. The reserve is based upon the same quantitative and qualitative factors
applied to the collectively evaluated loan portfolio.
Fees received for providing loan commitments and letters of credit that may result in loans are typically deferred and amortized
to interest income over the life of the related loan, beginning with the initial borrowing. Fees on commitments and letters of
credit are amortized to noninterest income as banking fees and commissions on a straight-line basis over the commitment
period when funding is not expected.
Fair Value Measurements: The Company measures or monitors the fair value of many of its assets and liabilities. Certain assets
are measured on a recurring basis, including available-for-sale securities and loans held for sale. These assets are carried at fair
value on the Company’s balance sheets. Additionally, fair value is measured on a non-recurring basis to evaluate assets or
94
liabilities for impairment or for disclosure purposes. Examples include collateral-dependent loans, OREO, loan servicing rights,
goodwill, and long-lived assets.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Depending on the nature of the asset or liability, the Company uses
various valuation techniques and assumptions when estimating fair value.
The Company applies the following fair value hierarchy:
Level 1 – Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments
or futures contracts.
Level 2 – Assets and liabilities valued based on observable market data for similar instruments.
Level 3 – Assets and liabilities for which significant valuation assumptions are not readily observable in the market;
instruments valued based on the best available data, some of which is internally-developed, and considers risk premiums that a
market participant would require.
When determining the fair value measurements for assets and liabilities required or permitted to be recorded at and/or marked
to fair value, the Company considers the principal market in which it would transact and considers assumptions that market
participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets
to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to
market observable data for similar assets and liabilities. Nevertheless, certain assets and liabilities are not actively traded in
observable markets and the Company must use alternative valuation techniques to derive a fair value measurement.
Bank Premises and Equipment: Bank premises and equipment are stated at cost, less accumulated depreciation and
amortization. Premises and equipment include certain costs associated with the acquisition of leasehold improvements.
Depreciation and amortization are recognized principally by the straight-line method, over the estimated useful lives as follows:
buildings - 25-40 years, leasehold improvements 5-25 years, furniture and equipment - 3-12 years. Leasehold improvements
typically amortize over the shorter of lease terms or estimated useful life. Premises and equipment and other long-term assets
are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash
flows. If impaired, the assets are written down to fair value with a corresponding impact to noninterest expense
Other Real Estate Owned: Other real estate owned (“OREO”) consists primarily of real estate acquired in lieu of unpaid loan
balances. These assets are carried at an amount equal to the loan balance prior to foreclosure plus costs incurred for
improvements to the property, but no more than the estimated fair value of the property less estimated selling costs. Any
valuation adjustments required at the date of transfer are charged to the allowance for credit losses. Subsequently, unrealized
losses and realized gains and losses are included in other noninterest expense. Operating results from OREO are recorded in
other noninterest expense.
OREO may also include bank premises no longer utilized in the course of the Company's business (closed branches) that are
initially recorded at the lower of carrying value or fair value, less costs to sell. If fair value of the premises is less than
amortized book value, a write down is recorded through noninterest expense. Costs to maintain the facility are expensed.
Intangible assets. The Company’s intangible assets consist of goodwill, core deposit intangibles (CDIs) and mortgage servicing
rights. Goodwill results from business combinations and represents the difference between the purchase price and the fair value
of net assets acquired. Goodwill may be adjusted for up to one year from the acquisition date in the event new information is
obtained which, if known at the date of acquisitions would have impacted the fair value of the acquired assets and liabilities.
Goodwill is considered to have an indefinite useful life and is not amortized, but rather tested for impairment annually in the
fourth quarter, or more often if circumstances arise that may indicate risk of impairment. If impaired, goodwill is written down
with a corresponding impact to noninterest expense.
The Company recognizes CDIs that result from either whole bank acquisitions or branch acquisitions. They are initially
measured at fair value and then amortized over periods ranging from six to eight years on a straight line basis. The Company
evaluates CDIs for impairment annually, or more often if circumstances arise that may indicate risk of impairment. If impaired,
the CDI is written down with a corresponding impact to noninterest expense.
Bank owned life insurance (BOLI): The Company, through its subsidiary bank, has purchased or acquired through bank
acquisitions, life insurance policies on certain key executives. BOLI is recorded at the amount that can be realized under the
insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due
that are probable at settlement.
95
Leases: Arrangements are analyzed at inception to determine the existence of a lease. Right-of-use assets (ROUAs) represent
the right to use the underlying asset and lease liabilities represent the obligation to make lease payments for the lease term.
Operating lease ROUAs and liabilities are recognized at commencement date based on the present value of lease payments over
the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing
rate based on the appropriate term and information available at commencement date in determining the present value of lease
payments. The lease term may include options to extend the lease when it is reasonably certain that the option will be exercised.
ROUAs and operating lease liabilities are reported in Other Assets and Other Liabilities, respectively, in the Consolidated
Balance Sheet. Lease expense for lease payments is recognized on a straight-line basis over the lease term and is classified as
Occupancy or Furniture and Equipment expense based on the subject asset.
Revenue Recognition: Revenue recognized reflects the consideration to which the Company expects to be entitled in exchange
for the services provided and is recognized when the promised services (performance obligations) are transferred to a customer,
requiring the application of the following five-steps: (i) identify the contract(s) with a customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations
in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
Relevant activity includes:
•
Service Charges on Deposits: Seacoast Bank offers a variety of deposit-related services to its customers through
several delivery channels including branch offices, ATMs, telephone, mobile, and internet banking. Transaction-based
fees are recognized when services, each of which represents a performance obligation, are satisfied. Service fees may
be assessed monthly, quarterly, or annually; however, the account agreements to which these fees relate can be
canceled at any time by Seacoast and/or the customer. Therefore, the contract term is considered a single day (a day-
to-day contract).
• Wealth Management Income: The Company earns trust fees from fiduciary services provided to trust customers, which
include custody of assets, recordkeeping, collection and distribution of funds. Fees are earned over time and accrued
monthly as the Company provides services, and are generally assessed based on the market value of the trust assets
under management at a particular date or over a particular period. The Company also earns commissions and fees from
investment brokerage services provided to its customers through an arrangement with a third-party service provider.
Commissions received from the third-party service provider are recorded monthly and are based upon customer
activity. Fees are earned over time and accrued monthly as services are provided. The Company acts as an agent in this
arrangement and therefore presents the brokerage commissions and fees net of related costs.
•
Interchange Income: Fees earned on card transactions depend upon the volume of activity, as well as the fees permitted
by the payment network. Such fees are recognized by the Company upon fulfilling its performance obligation to
approve the card transaction.
Treasury Stock: The Company's repurchase of shares of its common stock are recorded at cost as treasury stock and result in a
reduction of shareholders' equity. Activity in treasury stock represents shares traded to offset employee payroll taxes on vested
shares. Shares held in treasury are used for employee share purchases through the Company's stock purchase plan.
Stock-Based Compensation: The stock option plans are accounted for under ASC Topic 718 - Compensation - Stock
Compensation and the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing
model with market assumptions. This amount is amortized on a straight-line basis over the vesting period, generally 5 years.
For restricted stock awards, which generally vest based on continued service with the Company, the deferred compensation is
measured as the fair value of the shares on the date of grant, and the deferred compensation is amortized as salaries and
employee benefits in accordance with the applicable vesting schedule, generally straight-line over three years. Some shares vest
based upon the Company achieving certain performance goals and salary amortization expense is based on an estimate of the
most likely results on a straight line basis. The Company accounts for forfeitures as they occur.
Income Taxes: The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and
liabilities are determined based on temporary differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and their related tax bases and are measured using the enacted tax rates and laws that are in
effect. A valuation allowance is recognized for a deferred tax asset if, based on the weight of available evidence, it is more
likely than not that some portion or all of the deferred tax asset will not be realized. The effect on deferred tax assets and
liabilities of a change in rates is recognized as income or expense in the period in which the change occurs.
Earnings per Share: Basic earnings per share are computed by dividing net income available to common shareholders by the
weighted-average number of common shares outstanding during each period. Diluted earnings per share are based on the
96
weighted-average number of common shares outstanding during each period, plus common share equivalents calculated for
stock options and performance restricted stock outstanding using the treasury stock method.
Note B - Recently Issued Accounting Standards, Not Adopted at December 31, 2020
None this period.
Note C - Cash, Dividend and Loan Restrictions
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 Federal Reserve Bank. There was no reserve requirement
at December 31, 2020. The reserve requirement at December 31, 2019 was $38.7 million. The average amount of the reserve
requirement in 2020 was $4.8 million compared to $7.9 million in 2019.
Under Federal Reserve regulation, Seacoast Bank is limited as to the amount it may loan to its affiliates, including the
Company, unless such loans are collateralized by specified obligations. At December 31, 2020, the maximum amount available
for transfer from Seacoast Bank to the Company in the form of loans approximated $90.1 million, if the Company has sufficient
acceptable collateral. There were no loans made to affiliates during the periods ending December 31, 2020 and 2019.
97
Note D - Securities
The amortized cost, gross unrealized gains and losses and fair value of available-for-sale and held-to-maturity securities at
December 31, 2020 and December 31, 2019 are summarized as follows:
(In thousands)
Available-for-Sale Debt Securities
Amortized
Cost
December 31, 2020
Gross
Gross
Unrealized
Unrealized
Losses
Gains
Fair
Value
U.S. Treasury securities and obligations of U.S.
government agencies
Mortgage-backed securities and collateralized mortgage
obligations of U.S. government-sponsored entities
Private mortgage-backed securities and collateralized
mortgage obligations
Collateralized loan obligations
Obligations of state and political subdivisions
$
8,250 $
528 $
(1) $
8,777
1,038,437
23,457
(1,240)
1,060,654
89,284
202,563
33,005
2,131
279
2,321
(210)
91,205
(647)
202,195
—
35,326
Totals
$ 1,371,539 $
28,716 $
(2,098) $ 1,398,157
Held-to-Maturity Debt Securities
Mortgage-backed securities of U.S. government-
sponsored entities
Totals
$
$
184,484 $
7,818 $
(123) $
192,179
184,484 $
7,818 $
(123) $
192,179
(In thousands)
Available-for-Sale Debt Securities
U.S. Treasury securities and obligations of U.S.
government agencies
Mortgage-backed securities and collateralized mortgage
obligations of U.S. government-sponsored entities
Private mortgage-backed securities and collateralized
mortgage obligations
Collateralized loan obligations
Obligations of state and political subdivisions
Totals
Held-to-Maturity Debt Securities
Mortgage-backed securities of U.S. government-
sponsored entities
Totals
Amortized
Cost
December 31, 2019
Gross
Gross
Unrealized
Unrealized
Losses
Gains
Fair
Value
$
9,914 $
204 $
(4) $
10,114
604,934
5,784
(1,511)
609,207
56,005
1,561
(5)
57,561
239,364
30,548
940,765 $
7
1,208
8,764 $
(1,153)
(1)
(2,674) $
238,218
31,755
946,855
261,369 $
2,717 $
(1,873) $
262,213
261,369 $
2,717 $
(1,873) $
262,213
$
$
$
Proceeds from sales of debt securities during 2020 were $96.7 million, with gross gains of $2.4 million and gross losses of $1.3
million. Proceeds from sales of debt securities during 2019 were $202.7 million with gross gains of $2.9 million and gross
losses of $1.8 million. Proceeds from sales of debt securities during 2018 were $64.4 million with gross gains of $0.2 million
and gross losses of $0.7 million. Also included in “Securities gains (losses) net” are increases of $0.1 million and $0.2 million
in 2020 and 2019, respectively, and a decrease of $0.1 million in 2018, in the value of an investment in shares of a mutual fund
that invests in CRA-qualified debt securities.
At December 31, 2020, debt securities with a fair value of $425.1 million were pledged primarily as collateral for public
deposits and secured borrowings.
98
The amortized cost and fair value of securities at December 31, 2020, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because prepayments of the underlying collateral for these securities may
occur, due to the right to call or repay obligations with or without call or prepayment penalties. Securities not due at a single
maturity date are shown separately.
(In thousands)
Due in less than one year
Due after one year through five years
Due after five years through ten years
Due after ten years
Held-to-Maturity
Fair
Value
Amortized
Cost
Available-for-Sale
Fair
Value
Amortized
Cost
$
— $
— $
35 $
—
—
—
—
—
—
—
—
11,305
8,590
21,325
41,255
35
11,929
9,323
22,816
44,103
Mortgage-backed securities of U.S. government-sponsored
entities
Private mortgage-backed securities and collateralized
mortgage obligations
Collateralized loan obligations
184,484
192,179
1,038,437
1,060,654
—
—
—
—
89,284
91,205
202,563
202,195
Totals
$
184,484 $
192,179 $ 1,371,539 $ 1,398,157
The estimated fair value of a security is determined based on market quotations when available or, if not available, by using
quoted market prices for similar securities, pricing models or discounted cash flows analyses, using observable market data
where available. The tables below indicate, at December 31, 2020, the fair value of available-for-sale debt securities with
unrealized losses for which no allowance for credit losses has been recorded, and at December 31, 2019, the fair value of
available-for-sale and held-to-maturity debt securities with unrealized losses for which no allowance has been recorded.
(In thousands)
U.S. Treasury securities and obligations
of U.S. government agencies
Mortgage-backed securities and
collateralized mortgage obligations of
U.S. government-sponsored entities
Private mortgage-backed securities and
collateralized mortgage obligations
Collateralized loan obligations
Less than 12 months
Fair
Value
Unrealized
Losses
December 31, 2020
12 months or longer
Fair
Value
Unrealized
Losses
Total
Fair
Value
Unrealized
Losses
$
— $
— $
256 $
(1) $
256 $
(1)
203,405
(1,218)
569
(22)
203,974
(1,240)
23,997
(210)
—
—
23,997
104,697
(102)
72,513
(545)
177,210
(210)
(647)
Totals
$ 332,099 $
(1,530) $
73,338 $
(568) $ 405,437 $
(2,098)
99
(In thousands)
U.S. Treasury securities and obligations
of U.S. government agencies
Mortgage-backed securities and
collateralized mortgage obligations of
U.S. government-sponsored entities
Private mortgage-backed securities and
collateralized mortgage obligations
Collateralized loan obligations
Obligations of state and political
subdivisions
Totals
Less than 12 months
Fair
Value
Unrealized
Losses
December 31, 2019
12 months or longer
Fair
Value
Unrealized
Losses
Total
Fair
Value
Unrealized
Losses
$
758 $
(4) $
— $
— $
758 $
(4)
220,057
(1,461)
104,184
(1,923)
324,241
(3,384)
2,978
88,680
515
(5)
—
—
2,978
(5)
(570)
110,767
(583)
199,447
(1,153)
(1)
—
—
515
(1)
$ 312,988 $
(2,041) $ 214,951 $
(2,506) $ 527,939 $
(4,547)
At December 31, 2020, the Company had unrealized losses of $1.2 million on mortgage-backed securities and collateralized
mortgage obligations issued by government-sponsored entities having a fair value of $204.0 million. These securities are either
explicitly or implicitly guaranteed by the U.S. Government and have a long history of no credit losses. The implied government
guarantee of principal and interest payments and the high credit rating of the portfolio provide sufficient basis for the current
expectation that there is no risk of loss if default were to occur. Based on the assessment of all relevant factors, the Company
believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest
rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities.
Therefore, at December 31, 2020, no allowance for credit losses has been recorded.
At December 31, 2020, the Company had $0.6 million of unrealized losses in uncapped 3-month LIBOR floating rate
collateralized loan obligations (“CLOs”) having a fair value of $177.2 million. CLOs are special purpose vehicles and those in
which the Company has acquired nearly all first-lien, broadly syndicated corporate loans across a diversified band of industries
while providing support to senior tranche investors. As of December 31, 2020, all positions held by the Company are in AAA
and AA tranches, with average credit support of 35% and 25%, respectively. The Company evaluates the securities for potential
credit losses by modeling expected loan-level defaults, recoveries, and prepayments for each CLO security. Based on the
assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function
of changes in investment spreads and interest rate movement and not changes in credit quality, and expects to recover the entire
amortized cost basis of these securities. Therefore, at December 31, 2020, no allowance for credit losses has been recorded.
At December 31, 2020, the Company had $0.2 million of unrealized losses on private label residential and commercial
mortgage-backed securities and collateralized mortgage obligations having a fair value of $24.0 million. The collateral
underlying these mortgage investments is primarily residential real estate. The securities have average credit support of 22%.
Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities
are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to
recover the entire amortized cost basis of these securities. Therefore, at December 31, 2020, no allowance for credit losses has
been recorded.
All HTM debt securities are issued by government-sponsored entities, which are either explicitly or implicitly guaranteed by the
U.S. government and have a long history of no credit losses. While the potential for default on these securities may be
something greater than zero, the long history with no credit losses, the implied government guarantee of principal and interest
payments and the high credit rating of the HTM portfolio provide sufficient basis for the current expectation that there is no risk
of loss if default were to occur. Despite the emergence of significant market changes and increasing degrees of uncertainty that
occurred in the U.S. economy in 2020, there has to date been no specific impact on the agencies or changes in the nature or
quality of the guarantee they provide. As a result, as of December 31, 2020, no allowance for credit losses has been recorded.
Included in other assets at December 31, 2020 is $33.9 million of Federal Home Loan Bank and Federal Reserve Bank stock
stated at par value. The Company has not identified events or changes in circumstances which may have a significant adverse
effect on the fair value of these cost method investment securities. Accrued interest receivable on AFS and HTM debt securities
of $3.2 million and $0.4 million at December 31, 2020, respectively, and $3.8 million and $0.6 million at December 31, 2019,
respectively, is included in other assets. Also included in other assets is a $6.5 million investment in a mutual fund carried at
fair value.
100
The Company holds 11,330 shares of Visa Class B stock which, following resolution of Visa litigation, will be converted to
Visa Class A shares. Under the current conversion ratio that became effective September 27, 2019, the Company would receive
1.6228 shares of Class A stock for each share of Class B stock for a total of 18,386 shares of Visa Class A stock. The ownership
of Visa stock is related to prior ownership in Visa's network, while Visa operated as a cooperative. This ownership is recorded
on the Company's financial records at zero basis.
Note E - Loans
Loans held for investment are categorized into the following segments:
•
•
•
•
•
•
•
Construction and land development: Loans are extended to both commercial and consumer customers which are
collateralized by and for the purpose of funding land development and construction projects, including 1-4 family
residential construction, multi-family property and non-farm residential property where the primary source of
repayment is from proceeds of the sale, refinancing or permanent financing of the property.
Commercial real estate - owner-occupied: Loans are extended to commercial customers for the purpose of acquiring
real estate to be occupied by the borrower's business. These loans are collateralized by the subject property and the
repayment of these loans is largely dependent on the performance of the company occupying the property.
Commercial real estate - non owner-occupied: Loans are extended to commercial customers for the purpose of
acquiring commercial property where occupancy by the borrower is not their primary intent. These loans are viewed
primarily as cash flow loans, collateralized by the subject property, and the repayment of these loans is largely
dependent on rental income from the successful operation of the property.
Residential real estate: Loans are extended to consumer customers and collateralized primarily by 1-4 family
residential properties and include fixed and variable rate mortgages, home equity mortgages, and home equity lines of
credit. Loans are primarily written based on conventional loan agency guidelines, including loans that exceed agency
value limitations. Sources of repayment may be from the occupant of the residential property or from cash flows on
rental income from the successful operation of the property.
Commercial and financial: Loans are extended to commercial customers. The purpose of the loans can be working
capital, physical asset expansion, asset acquisition or other business purposes. Loans may be collateralized by assets
owned by the borrower or the borrower's business. Commercial loans are based primarily on the historical and
projected cash flow of the borrower's business and secondarily on the capacity of credit enhancements, guarantees and
underlying collateral provided by the borrower.
Consumer: Loans are extended to consumer customers. The segment includes both installment loans and lines of credit
which may be collateralized or non-collateralized.
Paycheck Protection Program (“PPP”): Loans originated under a temporary program established by the CARES Act.
Under the terms of the program, balances may be forgiven if the borrower uses the funds in a manner consistent with
the program guidelines, and repayment is guaranteed by the U.S. government.
With the adoption of ASC Topic 326 -Financial Instruments - Credit Losses on January 1, 2020, the Company re-evaluated the
aggregation of loans into segments, and separated Commercial Real Estate - Owner Occupied from Commercial Real Estate -
Non Owner Occupied. In prior years, all Commercial Real Estate loans were considered a single segment. The following tables
present net loan balances by segment as of:
(In thousands)
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Residential real estate
Commercial and financial
Consumer
Paycheck Protection Program
Totals
December 31, 2020
Portfolio
Loans
Acquired
Non-PCD
Loans
PCD Loans
Total
$
216,420 $
854,769
1,043,459
1,155,914
743,846
181,797
515,532
$ 4,711,737 $
26,250 $
247,090
323,273
176,105
94,627
6,660
51,429
925,434 $
2,438 $
39,451
29,122
10,609
16,280
278
—
245,108
1,141,310
1,395,854
1,342,628
854,753
188,735
566,961
98,178 $ 5,735,349
101
Portfolio
Loans
(In thousands)
Construction and land development
Commercial real estate1
Residential real estate
Commercial and financial
Consumer
Totals
1Commerical real estate includes owner-occupied balances of $1 billion for December 31, 2019.
1,834,811
1,304,305
697,301
200,166
$ 4,317,918 $
281,335 $
$
December 31, 2019
PULs
PCI Loans
Total
43,618 $
533,943
201,848
80,372
8,039
867,820 $
160 $
325,113
2,378,971
1,507,863
778,252
208,205
12,666 $ 5,198,404
10,217
1,710
579
—
The amortized cost basis of loans at December 31, 2020 included net deferred costs of $22.6 million on non-PPP portfolio loans
and net deferred fees of $9.5 million on PPP loans. At December 31, 2019, the amortized cost basis included net deferred costs
of $19.9 million. At December 31, 2020, the remaining fair value adjustments on acquired loans was $30.2 million, or 2.86% of
the outstanding acquired loan balances. At December 31, 2019, the remaining fair value adjustments on acquired loans was
$34.9 million, or 3.8% of the acquired loan balances. These amounts are accreted into interest income over the remaining lives
of the related loans on a level yield basis.
Accrued interest receivable is included within Other Assets and was $25.8 million and $14.9 million at December 31, 2020 and
December 31, 2019, respectively.
Loans to directors and executive officers totaled $1.1 million and $1.7 million at December 31, 2020 and 2019, respectively. No
new loans were originated to directors or officers in 2020.
102
The following table presents the status of net loan balances as of December 31, 2020 and December 31, 2019. Loans on short-
term payment deferral at the reporting date are reported as current.
December 31, 2020
Accruing
30-59 Days
Past Due
Accruing
60-89 Days
Past Due
Current
Accruing
Greater
Than 90
Days
Nonaccrual
Total
$ 216,262 $
— $
— $
— $
158 $
216,420
851,222
1,076
(In thousands)
Portfolio Loans
Construction and land development
Commercial real estate - owner
occupied
Commercial real estate - non-owner
occupied
Residential real estate
Commercial and financial
Consumer
Paycheck Protection Program
1,041,306
1,142,893
737,362
180,879
515,532
Total Portfolio Loans
4,685,456
Acquired Non-PCD Loans
Construction and land development
Commercial real estate - owner
occupied
Commercial real estate - non-owner
occupied
Residential real estate
Commercial and financial
Consumer
Paycheck Protection Program
26,250
244,486
322,264
171,507
93,223
6,640
51,429
Total Acquired Non-PCD Loans
915,799
PCD Loans
Construction and land development
Commercial real estate - owner
occupied
Commercial real estate - non-owner
occupied
Residential real estate
Commercial and financial
Consumer
Total PCD Loans
2,429
36,345
24,200
9,537
15,121
271
87,903
—
—
1,427
1,967
138
—
3,532
—
—
—
104
—
—
—
104
—
—
—
—
—
—
—
—
—
61
—
2
—
63
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,471
854,769
2,153
1,043,459
8,531
4,382
575
—
18,270
1,155,914
743,846
181,797
515,532
4,711,737
—
26,250
2,604
247,090
1,009
2,889
1,188
—
—
7,690
323,273
176,105
94,627
6,660
51,429
925,434
9
2,438
3,106
39,451
4,922
1,072
1,034
7
10,150
29,122
10,609
16,280
278
98,178
—
3,002
135
203
—
4,416
—
—
—
1,605
216
20
—
1,841
—
—
—
—
125
—
125
Total Loans
$ 5,689,158 $
6,382 $
3,636 $
63 $
36,110 $ 5,735,349
103
Accruing
30-59 Days
Past Due
Current
December 31, 2019
Accruing
Greater
Than 90
Days
Accruing
60-89 Days
Past Due
Nonaccrual
Total
(In thousands)
Portfolio Loans
Construction and land development
$ 276,984 $
— $
— $
— $
4,351 $
281,335
Commercial real estate
Residential real estate
Commercial and financial
Consumer
1,828,629
1,294,778
690,412
199,424
Total Portfolio Loans
4,290,227
Purchased Unimpaired Loans
Construction and land development
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Total PULs
PCI Loans
Construction and land development
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Total PCI Loans
43,044
531,325
201,159
78,705
8,039
862,272
148
9,298
587
566
—
10,599
1,606
1,564
2,553
317
6,040
—
942
277
—
—
1,219
—
—
—
—
—
—
220
18
—
315
553
—
431
—
—
—
431
—
—
—
—
—
—
—
—
108
—
108
—
—
—
—
—
—
—
—
—
—
—
—
4,356
7,945
4,228
110
1,834,811
1,304,305
697,301
200,166
20,990
4,317,918
574
1,245
412
1,667
—
3,898
12
919
1,123
13
—
43,618
533,943
201,848
80,372
8,039
867,820
160
10,217
1,710
579
—
2,067
12,666
Total Loans
$ 5,163,098 $
7,259 $
984 $
108 $
26,955 $ 5,198,404
All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest subsequently
received on such loans is accounted for under the cost-recovery method, whereby interest income is not recognized until the
loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually
due are brought current, and future payments are reasonably assured. The Company recognized $0.9 million, $1.3 million, and
$0.4 million in interest income on nonaccrual loans during the years ended December 31, 2020, 2019, and 2018, respectively.
The following tables present net balances of loans on nonaccrual status and the related allowance for credit losses, if any, as of:
(In thousands)
December 31, 2020
Nonaccrual
Loans With
No Related
Allowance
Nonaccrual
Loans With
an Allowance
Total
Nonaccrual
Loans
Allowance for
Credit Losses
Construction and land development
$
148 $
19 $
167 $
Commercial real estate - owner-occupied
Commercial real estate - non-owner occupied
Residential real estate
Commercial and financial
Consumer
Totals
7,893
5,666
9,520
3,175
222
288
2,418
2,972
3,429
360
8,181
8,084
12,492
6,604
582
$
26,624 $
9,486 $
36,110 $
8
287
1,640
1,587
2,235
75
5,832
104
(In thousands)
December 31, 2019
Nonaccrual
Loans With
No Related
Allowance
Nonaccrual
Loans With
an Allowance
Total
Nonaccrual
Loans
Allowance for
Credit Losses
Construction and land development
$
4,914 $
23 $
4,937 $
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Totals
Collateral-Dependent Loans
6,200
8,700
3,448
39
320
780
2,460
71
6,520
9,480
5,908
110
$
23,301 $
3,654 $
26,955 $
12
149
564
1,622
37
2,384
Loans are considered collateral-dependent when the repayment, based on the Company's assessment as of the reporting date, is
expected to be provided substantially through the operation or sale of the underlying collateral and there are no other available
and reliable sources of repayment. The following table presents collateral-dependent loans as of:
(In thousands)
Construction and land development
Commercial real estate - owner-occupied
Commercial real estate - non-owner occupied
Residential real estate
Commercial and financial
Consumer
Totals
Loans by Risk Rating
December 31, 2020 December 31, 2019
$
189 $
11,992
7,285
16,652
11,198
586
$
47,902 $
4,926
2,571
3,152
11,550
4,338
141
26,678
The Company utilizes an internal asset classification system as a means of identifying problem and potential problem loans.
The following classifications are used to categorize loans under the internal classification system:
• Pass: Loans that are not problem loans or potential problem loans are considered to be pass-rated.
• Special Mention: Loans that do not currently expose the Company to sufficient risk to warrant classification in the
Substandard or Doubtful categories, but possess weaknesses that deserve management’s close attention are deemed
to be Special Mention.
• Substandard: Loans with the distinct possibility that the Company will sustain some loss if the deficiencies are not
corrected.
• Substandard Impaired: Loans typically placed on nonaccrual and considered to be collateral-dependent or accruing
TDRs.
• Doubtful: Loans that have all the weaknesses inherent in those classified Substandard with the added characteristic
that the weakness present makes collection or liquidation in full, on the basis of currently existing facts, conditions
and values, highly questionable and improbable. The principal balance of loans classified as doubtful are likely to
be charged off.
105
The following tables present the risk rating of loans by year of origination as of:
(In thousands)
2020
2019
2018
2017
2016
Prior
Revolving
Total
December 31, 2020
Construction and Land Development
Risk Ratings:
Pass
Special Mention
Substandard
Substandard Impaired
Doubtful
Total
Commercial real estate - owner
occupied
Risk Ratings:
Pass
Special Mention
Substandard
Substandard Impaired
Doubtful
Total
Commercial real estate - non-owner
occupied
Risk Ratings:
Pass
Special Mention
Substandard
Substandard Impaired
Doubtful
Total
Residential real estate
Risk Ratings:
Pass
Special Mention
Substandard
Substandard Impaired
Doubtful
Total
Commercial and financial
Risk Ratings:
Pass
Special Mention
Substandard
Substandard Impaired
Doubtful1
Total
$
62,107 $
52,384 $
46,067 $
15,873 $
7,335 $
17,873 $
35,324 $
236,963
206
—
—
—
245
5,918
—
—
—
—
—
—
—
—
37
—
—
—
—
—
1,449
51
239
—
—
—
—
—
7,818
51
276
—
62,313
52,629
51,985
15,910
7,335
19,612
35,324
245,108
155,953
198,559
156,276
138,341
148,389
287,772
14,255
1,099,545
5,773
1,858
3,305
—
—
—
3,151
—
—
747
—
—
4,709
1,362
—
4,471
1,955
—
—
4,050
5,508
4,874
—
2
—
—
—
19,459
12,172
10,134
—
161,726
203,568
160,328
144,412
154,815
302,204
14,257
1,141,310
159,299
313,287
201,112
123,357
175,623
356,943
8,596
1,338,217
—
—
—
—
431
—
2,418
—
9,487
9,709
—
—
7,580
10,240
—
—
—
8,311
125
—
114
3,682
5,540
—
—
—
—
—
27,852
21,702
8,083
—
159,299
316,136
220,308
130,937
194,299
366,279
8,596
1,395,854
96,819
144,329
204,077
205,046
160,612
159,742
350,502
1,321,127
—
350
109
—
—
—
726
—
33
—
1,520
—
720
896
1,762
—
—
—
715
—
966
1,452
9,671
—
479
100
2,198
2,798
2,002
16,505
—
—
97,278
145,055
205,630
208,424
161,327
171,831
353,083
1,342,628
214,774
146,511
103,769
60,782
39,692
53,758
204,304
823,590
71
154
317
—
946
41
4,595
—
965
3,016
3,199
—
5,612
1,609
2,292
—
67
553
2,074
—
635
3,239
704
—
209
764
81
20
8,505
9,376
13,262
20
215,316
152,093
110,949
70,295
42,386
58,336
205,378
854,753
106
(In thousands)
Consumer
Risk Ratings:
Pass
Special Mention
Substandard
Substandard Impaired
Doubtful
Total
Paycheck Protection Program
Risk Ratings:
Pass
Total
Consolidated
Risk Ratings:
Pass
Special Mention
Substandard
Substandard Impaired
Doubtful1
Total
2020
2019
2018
2017
2016
Prior
Revolving
Total
December 31, 2020
46,476
43,143
30,433
18,937
21,880
9,488
15,089
185,446
58
—
7
—
27
—
50
—
14
—
193
—
41
42
24
—
42
4
329
—
21
151
183
—
1,854
228
21
—
2,057
425
807
—
46,541
43,220
30,640
19,044
22,255
9,843
17,192
188,735
566,961
566,961
—
—
—
—
—
—
—
—
—
—
—
—
566,961
566,961
1,302,389
898,213
741,734
562,336
553,531
885,576
628,070
5,571,849
6,108
504
433
—
3,507
41
10,940
—
19,722
12,725
5,659
—
13,953
7,256
5,477
—
14,820
10,823
3,243
—
7,235
14,083
21,211
—
2,544
1,092
2,104
20
67,889
46,524
49,067
20
$ 1,309,434 $
912,701 $
779,840 $
589,022 $
582,417 $
928,105 $
633,830 $ 5,735,349
1Loans classified as doubtful are fully reserved as of December 31, 2020.
The following table presents the risk rating of loans as of:
December 31, 2019
(In thousands)
Construction and land development
Pass
317,765 $
$
Special
Mention
Substandard
Doubtful1
Total
2,235 $
5,113 $
— $
325,113
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Totals
2,331,725
1,482,278
755,957
26,827
7,364
11,925
20,098
18,221
9,496
321
—
874
2,378,971
1,507,863
778,252
203,966
$ 5,091,691 $
3,209
51,560 $
1,030
53,958 $
—
208,205
1,195 $ 5,198,404
1Loans classified as doubtful are fully reserved as of December 31, 2019.
Loans Modified in Connection with COVID-19 Pandemic
The CARES Act, which was signed into law on March 27, 2020 and amended by the Consolidated Appropriations Act on
December 27, 2020, encourages financial institutions to practice prudent efforts to work with borrowers financially impacted by
the COVID-19 pandemic by providing an option to exclude from TDR consideration certain loan modifications that might
otherwise be categorized as TDRs under ASC 310-40. This option is available for modifications that are deemed to be COVID-
related, where the borrower was not more than 30 days past due on December 31, 2019, and the modification is executed
between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency.
Federal banking regulators issued similar guidance that also allows lenders to conclude that short-term modifications for
borrowers affected by the pandemic should not be considered TDRs if the borrower was current at the time of modification.
Seacoast provided financially impacted borrowers with loan accommodations, primarily consisting of payment deferrals of up
to six months. At its peak, loans on deferral represented $1.1 billion, or 21% of total non-PPP loans. As the year progressed, the
large majority of these borrowers successfully resumed making contractual payments, and the level of loans with
accommodations dropped to $74.1 million, or 1% of total non-PPP loans, at December 31, 2020. Types of outstanding
107
accommodations at December 31, 2020 included a combination of one or more of the following: full payment deferral, partial
payment deferral, reduction of interest rate, extension of the original maturity date, or re-amortization of the facility. The
following table presents the balance of loans with active payment accommodations at the specified dates, excluding PPP loans:
(In thousands)
Construction and land development
Commercial real estate - owner-occupied
Commercial real estate - non-owner occupied
Residential real estate
Commercial and financial
Consumer
Totals
Troubled Debt Restructured Loans
December 31,
2020
September 30,
2020
June 30,
2020
$
1,032 $
9,359 $
14,248
32,549
12,839
11,915
1,479
$
74,062 $
204,710
344,573
75,885
61,308
6,815
702,650 $
14,488
320,406
445,311
148,035
130,877
17,926
1,077,043
The Company’s TDR concessions granted to certain borrowers generally do not include forgiveness of principal balances, but
may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a
limited period of time. Loan modifications are not reported in calendar years after modification if the loans were modified at an
interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms
of the restructuring agreements.
108
The following table presents loans that were modified in a troubled debt restructuring during the years ended:
(In thousands)
At December 31, 2020:
Construction and land development
Commercial real estate - owner-occupied
Commercial real estate - non owner-occupied
Residential real estate
Commercial and financial
Consumer
Totals
At December 31, 2019:
Construction and land development
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Totals
At December 31, 2018:
Construction and land development
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Totals
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Number of
Contracts
— $
— $
—
—
2
4
4
—
—
150
437
112
10 $
699 $
— $
— $
2
3
3
1
2,166
1,193
1,326
19
9 $
4,704 $
— $
—
—
1
3
4 $
— $
—
—
98
61
159 $
—
—
—
150
437
112
699
—
2,166
1,193
1,326
19
4,704
—
—
—
98
61
159
The TDRs described above resulted in a specific allowance for credit losses of $0.2 million as of December 31, 2020, no
specific allowance for credit losses as of December 31, 2019, and $0.5 million in specific allowance for credit losses as of
December 31, 2018. During the year ended December 31, 2020, there were no defaults on loans that had been modified in
TDRs within the preceding twelve months. There were four defaults totaling $3.2 million of loans modified in TDRs within the
twelve months preceding December 31, 2019. During the twelve months ended December 31, 2018, there were no defaults on
loans modified in TDRs within the preceding twelve months. The Company considers a loan to have defaulted when it becomes
90 days or more delinquent under the modified terms, has been transferred to nonaccrual status, is charged off or has been
transferred to other real estate owned. For loans measured based on the present value of expected future cash flows, $0.1
million, $0.1 million, and $0.2 million for the years ended December 31, 2020, 2019, and 2018, respectively, was included in
interest income and represents the change in present value attributable to the passage of time.
109
Note F - Allowance for Credit Losses
Activity in the allowance for credit losses is summarized as follows:
December 31, 2020
Impact of
Adoption
of ASC
326
Beginning
Balance
Initial
Allowance
on PCD
Loans
Acquired
During the
Period
(In thousands)
Provision
for Credit
Losses1
Charge-
Offs
Recoveries
TDR
Allowance
Adjustments
Ending
Balance
Construction and land development
$
1,842 $
1,479 $
87 $
1,399 $
— $
114 $
(1) $ 4,920
Commercial real estate - owner
occupied
Commercial real estate - non-owner
occupied
Residential real estate
Commercial and financial
Consumer
Paycheck Protection Program
5,361
7,863
7,667
9,716
2,705
—
80
1,161
3,632
(310)
9,341
5,787
3,677
862
—
2,236
18,966
124
2,643
28
—
3,840
8,329
1,613
—
(177)
(240)
(7,091)
(2,024)
—
18
37
350
1,416
316
—
(74)
9,868
—
38,266
(28)
17,500
—
18,690
(11)
—
3,489
—
Total
$
35,154 $ 21,226 $
6,279 $
37,779 $ (9,842) $
2,251 $
(114) $ 92,733
1In addition, the Company recorded a $0.4 million provision to establish a valuation allowance on accrued interest receivable.
(In thousands)
December 31, 2019
Construction and land development
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Total
December 31, 2018
Construction and land development
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Total
Beginning
Balance
Provision
for Loan
Losses
Charge-
Offs
Recoveries
TDR
Allowance
Adjustments
Ending
Balance
$
$
$
$
2,233 $
(421) $
— $
1,677
(248)
(231)
(152)
7,969
(7,550)
(2,609)
2,005
32,423 $ 10,999 $ (10,559) $
11,112
7,775
8,585
2,718
564 $
1,642 $
9,285
7,131
7,297
1,767
— $
(3,139)
4,736
(80)
29
(3,396)
4,359
(1,411)
2,042
27,122 $ 11,730 $ (8,026) $
31 $
744
338
712
595
2,420 $
27
292
816
325
329
1,789 $
(1) $ 1,842
(61) 13,224
7,667
(63)
9,716
—
2,705
(4)
(129) $ 35,154
— $ 2,233
(62) 11,112
7,775
(121)
8,585
—
2,718
(9)
(192) $ 32,423
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 to project losses over a three-year forecast period.
Forecast data is sourced primarily from Moody’s Analytics, a firm widely recognized for its research, analysis, and economic
forecasts. For portfolio segments with a weighted average life longer than three years, the Company reverts to longer-term
historical loss experience to estimate losses over the remaining life of the loans within each segment.
Historical credit losses provide the basis for the estimation of expected credit losses. Adjustments to historical loss information
are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio
mix, delinquency level, loan to value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in
current and forecasted environmental conditions, such as changes in unemployment rates, property values, occupancy rates, and
other macroeconomic metrics.
110
As of December 31, 2020, the Company utilized Moody’s most recent “U.S. Macroeconomic Outlook Baseline” scenario and
considered the significant uncertainty associated with the assumptions in the Baseline scenario, including the potential
resurgence of virus infections in Florida and other states, and the resulting potential decline in consumer spending and financial
implications for businesses. The Company also considered the amount and availability of fiscal stimulus, including programs
offered under the CARES Act and other potential future government programs and actions. Outcomes in any or all of these
factors could differ from the Baseline scenario, and the Company incorporated qualitative considerations reflecting uncertainty
of economic conditions, the possibility that the characteristics of the economic downturn could be sustained over a more
extended period, and for additional dimensions of risk not captured in the quantitative model.
After the adoption of ASC Topic 326 on January 1, 2020, changes in the allowance for credit losses during the year were
largely the result of deterioration in economic conditions due to the COVID-19 pandemic, including higher unemployment and
losses of business revenue, and expectations as to the severity and duration of the economic recession.
In the Construction and Land Development segment, the increase in reserves during the year was affected by both the outlook
for commercial real estate valuations, and qualitative adjustments relating to the uncertainty of economic conditions. In this
segment, the primary source of repayment is typically from proceeds of the sale, refinancing, or permanent financing of the
underlying property; therefore, industry and collateral type and estimated collateral values are among the relevant factors in
assessing expected losses.
In the Commercial Real Estate - Owner-Occupied segment, the increase in reserves reflects both the impact of higher loan
balances, higher unemployment levels, and lower forecasted commercial real estate valuations. Risk characteristics include but
are not limited to, collateral type, loan seasoning, and lien position.
In the Commercial Real Estate - Non Owner-Occupied segment, the increase in reserves reflects higher unemployment levels
and deterioration in corporate profits over the forecast period. Repayment is often dependent upon rental income from the
successful operation of the underlying property. Loan performance may be adversely affected by general economic conditions
or conditions specific to the real estate market, including property types. Collateral type, loan seasoning, and lien position are
among the risk characteristics analyzed for this segment.
The Residential Real Estate segment includes first mortgages secured by residential property, and home equity lines of credit.
The increase in reserves reflects higher unemployment, partially offset by lower loan balances and continued strength in the
Florida housing market. Risk characteristics considered for this segment include, but are not limited to, collateral type, lien
position, loan to value ratios, and loan seasoning.
In the Commercial and Financial segment, borrowers are primarily small to medium sized professional firms and other
businesses, and loans are generally supported by projected cash flows of the business, collateralized by business assets, and/or
guaranteed by the business owners. The increase in reserves reflects an increased proportion of working capital lines compared
to loans secured by business assets, higher overall balances, and recessionary conditions. Industry, collateral type, estimated
collateral values and loan seasoning are among the relevant factors in assessing expected losses.
Consumer loans include installment and revolving lines, loans for automobiles, boats, and other personal or family purposes.
Risk characteristics considered for this segment include, but are not limited to, collateral type, loan to value ratios, loan
seasoning and FICO score. A decrease in the reserve is attributed to lower loan balances, partially offset by higher
unemployment and recessionary conditions.
Balances outstanding under the Paycheck Protection Program are guaranteed by the U.S. government and have not been
assigned a reserve.
111
The allowance for credit losses is composed of specific allowances for loans individually evaluated and general allowances for
loans grouped into loan pools based on similar characteristics, which are collectively evaluated. The Company’s loan portfolio
and related allowance at December 31, 2020 and 2019 is shown in the following tables.
December 31, 2020
(In thousands)
Construction and land development
Commercial real estate - owner
occupied
Commercial real estate - non-owner
occupied
Residential real estate
Commercial and financial
Consumer
Paycheck Protection Program
Individually Evaluated
Associated
Recorded
Allowance
Investment
$
Collectively Evaluated
Associated
Recorded
Allowance
Investment
13 $ 244,832 $
276 $
Total
Recorded
Investment
Associated
Allowance
4,920
4,907 $ 245,108 $
10,243
402
1,131,067
9,466
1,141,310
9,868
8,083
16,506
13,281
807
—
1,640
1,387,771
36,626
1,395,854
2,064
1,326,122
15,436
1,342,628
3,498
91
—
841,472
187,928
566,961
15,192
3,398
—
854,753
188,735
566,961
38,266
17,500
18,690
3,489
—
Total
$
49,196 $
7,708 $ 5,686,153 $
85,025 $ 5,735,349 $
92,733
December 31, 2019
Individually Evaluated
Associated
Recorded
Investment
Allowance
$
Collectively Evaluated
Associated
Recorded
Investment
Allowance
14 $ 319,896 $
5,217 $
Total
Recorded
Investment
Associated
Allowance
1,842
1,828 $ 325,113 $
20,484
16,093
6,631
337
220
2,358,487
13,004
2,378,971
13,224
834
1,491,770
6,833
1,507,863
1,731
59
771,621
207,868
7,985
2,646
778,252
208,205
7,667
9,716
2,705
$
48,762 $
2,858 $ 5,149,642 $
32,296 $ 5,198,404 $
35,154
(In thousands)
Construction and land development
Commercial real estate
Residential real estate
Commercial and financial
Consumer
Total
Note G – Derivatives
Back-to-Back Swaps
The Company offers interest rate swaps when requested by customers to allow them to hedge the risk of rising interest rates on
their variable rate loans. Upon entering into these swaps, the Company enters into offsetting positions with counterparties in
order to minimize the interest rate risk. These back-to-back swaps qualify as freestanding financial derivatives with the fair
values reported in other assets and other liabilities. The Company is party to master netting arrangements with its financial
institution counterparties; however, the Company does not offset assets and liabilities under the arrangements for financial
statement presentation purposes. Gains and losses on these back-to-back swaps, which offset, are recorded through noninterest
income. No net gains or losses have been recognized to date on these instruments. As of December 31, 2020, the interest rate
swaps had an aggregate notional value of $182.4 million, with a fair value of $13.3 million recorded in other assets and other
liabilities. The weighted average maturity is 7.5 years.
Interest Rate Floors Designated as Cash Flow Hedges
The Company has entered into interest rate floor contracts to mitigate exposure to the variability of future cash flows due to
changes in interest rates on certain segments of its variable-rate loans. During 2020, the Company entered into two interest rate
floor contracts, each with a notional amount of $150.0 million, maturing in October 2023 and November 2023. The Company
considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest
rates and has designated them as cash flow hedges. Therefore, changes in the fair value of these derivative instruments are
recognized in other comprehensive income. Amortization of the premium paid on cash flow hedges is recognized in earnings
over the term of the hedge in the same caption as the hedged item. As of December 31, 2020, the interest rate floors have a fair
value of $1.0 million and are recorded in other assets in the consolidated balance sheet. Over the next twelve months the
112
Company expects to reclassify $0.2 million from accumulated other comprehensive income into interest income related to these
agreements.
(In thousands)
December 31, 2020
Notional
Amount
Fair
Value
Balance Sheet
Category
Loss
Recognized
in OCI
Reclassification
from AOCI into
Income
Location
Back-to-back swaps
$ 182,379 $ 13,339
Other Assets and
Other Liabilities
$
— $
Interest rate floors
300,000
1,004
Other Assets
(185)
—
18
Noninterest
Income
Loan Interest
Income
December 31, 2019
Back-to-back swaps
$ 124,606 $ 4,817
Other Assets and
Other Liabilities
$
— $
—
Noninterest
Income
Note H - Bank Premises and Equipment
Bank premises and equipment consisted of the following:
(In thousands)
December 31, 2020
Premises (including land of $22,586)
Furniture and equipment
Total
December 31, 2019
Premises (including land of $18,546)
Furniture and equipment
Total
Accumulated
Depreciation &
Amortization
Net
Carrying
Value
Cost
95,852 $
38,375
134,227 $
(28,999) $
(30,111)
(59,110) $
66,853
8,264
75,117
83,020 $
37,364
120,384 $
(26,180) $
(27,589)
(53,769) $
56,840
9,775
66,615
$
$
$
$
Note I - Goodwill and Acquired Intangible Assets
The following table presents changes in the carrying amount of goodwill:
(In thousands)
Beginning of year
Changes from business combinations
Total
For the Year Ended December 31,
2018
2019
2020
147,578
204,753 $
205,286 $
$
15,890
533
57,175
$
221,176 $
205,286 $
204,753
The Company performs an analysis for goodwill impairment on an annual basis in the fourth quarter. Based on the analysis
performed, the Company has concluded goodwill was not impaired during the periods presented.
113
Acquired intangible assets consist of core deposit intangibles (“CDI”), which are intangible assets arising from the purchase of
deposits separately or from bank acquisitions. The change in balance for CDI is as follows:
(In thousands)
Beginning of year
Acquired CDI, including measurement period adjustments
Amortization expense
End of year
(In months)
For the Year Ended December 31,
2020
2019
2018
$
18,305 $
24,807 $
2,129
(676)
18,937
10,170
(5,857)
(5,826)
(4,300)
$
14,577 $
18,305 $
24,807
Remaining average amortization period for CDI
44
47
58
The gross carrying amount and accumulated amortization of the Company's CDI subject to amortization as of:
(In thousands)
Core deposit intangible
December 31, 2020
December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
$
38,144 $
(23,567) $
36,015 $
(17,710)
The annual amortization expense for the Company's CDI determined using the straight line method for each of the five years
subsequent to December 31, 2020 is $4.8 million, $4.3 million, $3.5 million, $0.9 million and $0.5 million, respectively.
The carrying value of servicing rights retained from the sale of the guaranteed portion of Small Business Administration
(“SBA”) loans totaled $2.2 million and $1.8 million at December 31, 2020 and December 31, 2019, respectively.
Note J - Borrowings
A significant portion of the Company's short-term borrowings were comprised of securities sold under agreements to
repurchase with overnight maturities:
(In thousands)
Maximum amount outstanding at any month end
Weighted average interest rate at end of year
Average amount outstanding
Weighted average interest rate during the year
For the Year Ended December 31,
2018
2019
2020
$ 341,213
$ 193,388
$ 119,609
0.16%
1.17%
1.14%
$ 84,514
$ 106,142
$ 200,839
0.33%
1.35%
0.90%
Securities sold under agreements to repurchase are accounted for as secured borrowings. For securities sold under agreements
to repurchase, the Company would be obligated to provide additional collateral in the event of a significant decline in fair value
of collateral pledged. Company securities pledged were as follows by collateral type and maturity as of:
(In thousands)
Fair value of pledged securities - overnight and continuous:
December 31,
2019
2020
2018
Mortgage-backed securities and collateralized mortgage obligations of U.S.
government-sponsored entities
$ 137,268 $
94,354 $ 246,829
Seacoast Bank had secured lines of credit of $1.8 billion, none of which was outstanding at December 31, 2020. During 2020,
the average interest rate on Federal Home Loan Bank (“FHLB”) borrowings was 1.10%.
114
Interest
Rate at
December
31, 2020
2.00%
1.55%
1.57%
3.50%
3.02%
1.60%
2.20%
3 month
LIBOR
+175bps
3 month
LIBOR
+133bps
3 month
LIBOR
+135bps
3 month
LIBOR
+325bps
3 month
LIBOR
+279bps
3 month
LIBOR
+139bps
3 month
LIBOR
+198bps
619
372
155
124
155
217
The following table summarizes the Company's junior subordinated debentures and related trust preferred and common equity
securities as of December 31, 2020:
(In thousands)
Description
Issuance
Date
Acquisition
Date1
Maturity
Date
Junior
Subordinated
Debt
Trust
Preferred
Securities
Common
Equity
Securities
Contractual
Interest Rate
SBCF Capital Trust I
3/31/2005
SBCF Statutory Trust
II
12/16/2005
SBCF Statutory Trust
III
6/29/2007
n/a
n/a
n/a
3/31/2035
$
20,619 $
20,000
$
619
12/16/2035
20,619
20,000
6/15/2037
12,372
12,000
BANKshares, Inc.
Statutory Trust I
BANKshares, Inc.
Statutory Trust II
BANKshares, Inc.
Capital Trust I
Grand Bank Capital
Trust I
12/19/2002
10/1/2014
12/26/2032
5,155
5,000
3/17/2004
10/1/2014
3/17/2034
4,124
4,000
12/15/2005
10/1/2014
12/15/2035
5,155
5,000
10/29/2004
7/17/2015
10/29/2034
7,217
7,000
1Acquired junior subordinated debentures were recorded at their acquisition date fair values, which collectively was $5.6 million lower than face value; this
amount is being amortized into interest expense over the remaining term to maturity.
$
75,261 $
73,000
$
2,261
Interest on the trust preferred securities is calculated on the basis of 3-month LIBOR plus spread and is re-set quarterly. The
trust preferred securities may be redeemed without penalty, upon approval of the Federal Reserve or upon occurrence of certain
events affecting their tax or regulatory capital treatment. Distributions on the trust preferred securities are payable quarterly in
March, June, September, and December of each year. The proceeds of the offering of trust preferred securities and common
equity securities were used by SBCF Capital Trust I and SBCF Statutory Trust II to purchase the $41.2 million junior
subordinated deferrable interest notes issued by the Company, and by SBCF Statutory Trust III to purchase the $12.4 million
junior subordinated deferrable interest notes issued by the Company, all of which have terms substantially similar to the trust
preferred securities.
The Company has the right to defer payments of interest on the notes at any time or from time to time at the Company's
election. Interest can be deferred for a period not longer than five years. If the Company elects to defer interest, it may not, with
certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital
stock. As of December 31, 2020, 2019 and 2018, all interest payments on trust preferred securities were current.
The Company has entered into agreements to guarantee the payments of distributions on the trust preferred securities and
payments of redemption of the trust preferred securities. Under these agreements, the Company also agrees, on a subordinated
basis, to pay expenses and liabilities of the Trusts other than those arising under the trust preferred securities. The obligations of
the Company under the junior subordinated notes, the trust agreement establishing the Trusts, the guarantees and agreements as
to expenses and liabilities, in aggregate, constitute a full and conditional guarantee by the Company of the Trusts' obligations
under the trust preferred securities.
Note K - Employee Benefits and Stock Compensation
The Company’s defined contribution plan covers substantially all employees after one year of service and includes a matching
benefit for employees who can elect to defer a portion of their compensation. In addition, amounts of compensation contributed
by employees are matched on a percentage basis under the plan. The Company's contributions to this plan charged to operations
were $2.8 million in 2020, $2.4 million in 2019, and $2.1 million in 2018.
The Company, through its Compensation and Governance Committee of the board of directors (the “Compensation
Committee”), offers equity compensation to employees and non-employee directors of Seacoast and Seacoast Bank in the form
115
of various share-based awards, including stock options, restricted stock awards (“RSAs”), or restricted stock units (“RSUs”).
The awards may vest over time, have certain performance based criteria, or both.
Stock options are granted with an exercise price at least equal to the market price of the Company’s stock at the date of grant.
The fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model. Compensation
cost is amortized on a straight-line basis over the vesting period. Vesting is determined by the Compensation Committee at the
time of grant, generally over five years. The options have a maximum term of ten years.
The fair value of RSAs and RSUs are estimated based on the price of the Company’s common stock on the date of grant.
Compensation cost is measured straight-line for RSAs and ratably for RSUs over the vesting period of the awards and reversed
for awards which are forfeited due to unfulfilled service or performance criteria. To the extent the Company has treasury shares
available, stock options exercised or stock grants awarded may be issued from treasury shares. If treasury shares are
insufficient, the Company can issue new shares.
Vesting of share-based awards is immediately accelerated on death or disability of the recipient. The Compensation Committee
may, at its discretion, accelerate vesting upon retirement (including a voluntary termination of employment at age 55) for those
employees with five or more years of service with the Company, or upon the event of a change-in-control.
Awards are currently granted under the Seacoast 2013 Incentive Plan (“2013 Plan”), which shareholders approved on May 23,
2013 and has been twice amended to increase the number of authorized shares for issuance thereunder to 4,250,000. The 2013
Plan expires on May 26, 2025. Approximately 535,000 shares remain available for issuance as of December 31, 2020.
The impact of share-based compensation on the Company’s financial results is presented below:
(In thousands)
Share-based compensation expense
Income tax benefit
For the Year Ended December 31,
2018
2019
2020
$
7,304 $
7,244 $
(1,737)
(1,723)
7,823
(1,911)
The total unrecognized compensation cost and the weighted-average period over which unrecognized compensation cost is
expected to be recognized related to non-vested share-based compensation arrangements at December 31, 2020 is presented
below:
(In thousands)
Restricted stock awards
Restricted stock units
Stock options
Total
Restricted Stock Awards
Unrecognized
Compensation
Cost
Weighted-Average
Period Remaining
(Years)
$
$
5,987
3,153
96
9,236
2.06
1.93
0.25
2.00
RSAs are granted to various employees and vest over time, generally three years. Compensation cost of RSAs is based on the
market value of the Company’s common stock at the date of grant and is recognized over the required service period on a
straight-line basis. The Company’s accounting policy is to recognize forfeitures as they occur.
A summary of the status of the Company’s non-vested RSAs as of December 31, 2020, and changes during the year then ended,
is presented below:
Non-vested at January 1, 2020
Granted
Forfeited/Canceled
Vested
Non-vested at December 31, 2020
116
Restricted
Award
Shares
Weighted-Average
Grant-Date Fair
Value
213,951 $
379,869
(11,064)
(157,602)
425,154 $
26.07
18.36
22.19
23.76
20.03
Information regarding restricted stock awards during each of the following years is presented below:
Shares granted
Weighted-average grant date fair value
Fair value of awards vested1
1Based on grant date fair value, in thousands
Restricted Stock Units
For the Year Ended December 31,
2020
2019
2018
379,869
157,861
242,613
$
$
18.36 $
3,745 $
26.86 $
4,128 $
26.48
2,515
RSUs granted in 2020 and 2019 allow the grantee to earn 0%-225% while RSUs granted in 2018 and 2017 allow the grantee to
earn 0%-200% of the target award all based on the Company's adjusted earnings per share growth or its adjusted return on
average tangible equity, each measured over a three year period beginning with the year of grant.
A summary of the status of the Company’s non-vested RSUs as of December 31, 2020, and changes during the year then ended,
is presented below:
Non-vested at January 1, 2020
Granted
Forfeited/Canceled
Vested
Non-vested at December 31, 2020
Restricted
Award
Shares
Weighted-Average
Grant-Date Fair
Value
381,930 $
171,287
(12,597)
(231,023)
309,597 $
23.86
17.29
21.55
19.54
23.54
Information regarding restricted stock units during each of the following years is presented below:
Shares granted
Weighted-average grant date fair value
Fair value of awards vested1
1Based on grant date fair value, in thousands
Stock Options
$
$
For the Year Ended December 31,
2018
2019
2020
173,193
171,287
24.02
1,095
75,002
30.02 $
2,864 $
17.29 $
2,962 $
The Company issued no stock options in 2020. In 2019 and 2018, the estimated the fair value of each option grant on the date
of grant using the Black-Scholes options-pricing model with the following weighted-average assumptions:
Risk-free interest rates
Expected dividend yield
Expected volatility
Expected lives (years)
For the Year Ended December 31,
2019
2018
2.53%
—%
34.50%
5.0
2.56%
—%
26.60%
5.0
A summary of the Company’s stock options as of December 31, 2020, and changes during the year then ended, is presented
below:
117
Outstanding at January 1, 2020
Granted
Exercised
Forfeited
Outstanding at December 31, 2020
Exercisable at December 31, 2020
Options
Weighted-
Average
Exercise Price
903,779 $
—
(62,206)
(1,689)
839,884 $
770,615 $
22.22
—
12.31
29.30
22.94
22.20
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
(000s)
5.29 $
5.12
5,822
5,822
Information related to stock options during each of the following years:
Options granted
Weighted-average grant date fair value
Intrinsic value of stock options exercised, in thousands
$
For the Year Ended December 31,
2018
2019
2020
219,118
5.65
3,045
3,438
28.42 $
277
—
— $
830
The following table summarizes information related to stock options as of December 31, 2020:
Range of Exercise Prices
$10.54 to $14.82
$15.99 to $28.69
$31.15 to $31.15
Total
Employee Stock Purchase Plan
Options
Outstanding
311,658
320,388
207,838
839,884
Remaining
Contractual
Life (Years)
Options
Exercisable
Weighted
Average
Exercise
Price
3.1
6.1
7.3
5.3
311,658 $
320,388
138,569
770,615 $
12.77
27.51
31.15
22.20
The Employee Stock Purchase Plan (“ESPP”), as amended, was approved by shareholders on April 25, 1989, and additional
shares were authorized for issuance by shareholders on June 18, 2009 and May 2, 2013. Under the ESPP, the Company is
authorized to issue up to 300,000 common shares of the Company’s common stock to eligible employees of the Company.
These shares may be purchased by employees at a price equal to 95% of the fair market value of the shares on the purchase
date. Purchases under the ESPP are made monthly. Employee contributions to the ESPP are made through payroll deductions.
ESPP shares purchased
Weighted-average employee purchase price
2020
2019
2018
19,713
20.68 $
16,320
25.39 $
15,225
26.85
$
118
Note L - Lease Commitments
The Company is the lessee in various noncancellable operating leases for land, buildings, and equipment. Certain leases contain
provisions for variable lease payments that are linked to the consumer price index. Lease cost for the year ended December 31,
2020 consists of:
(In thousands)
Operating lease cost
Variable lease cost
Short-term lease cost
Sublease income
Total lease cost
For the Year Ended December 31,
2020
2019
$
$
5,738 $
1,325
497
(684)
6,876 $
5,570
1,211
715
(618)
6,878
The following table provides supplemental information related to leases as of and for the year ended December 31, 2020:
(In thousands, except for weighted average data)
Operating lease right-of-use assets
Operating lease liabilities
Cash paid for amounts included in the measurement of operating lease liabilities
Right-of-use assets obtained in exchange for new operating lease obligations
Right-of-use assets obtained through bank acquisition
Weighted average remaining lease term for operating leases
Weighted average discount rate for operating leases
As of and For the Year Ended
December 31,
2020
2019
$
$
25,538
28,959
6,035
2,095
2,343
8.5 years
4.62%
26,165
30,098
5,936
1,224
—
8.5 years
4.70%
The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If, at lease inception,
the Company considers the exercising of a renewal option to be reasonably certain, the Company includes the extended term in
the calculation of the lease liability. Maturities of lease liabilities as of December 31, 2020 are as follows:
For the Year Ended December 31, 2020
2021
2022
2023
2024
2025
Thereafter
Total undiscounted cash flows
Less: Net present value adjustment
Total
(In thousands)
$
$
5,865
5,020
3,849
3,855
3,525
12,075
34,189
(5,230)
28,959
119
Note M - Income Taxes
The provision for income taxes is as follows:
(In thousands)
Current
Federal
State
Deferred
Federal
State
For the Year Ended December 31,
2019
2018
2020
$
$
21,688 $
4,471
20,954 $
1,932
9,078
—
(2,697)
(644)
22,818 $
2,808
4,179
29,873 $
7,018
4,163
20,259
The difference between the total expected tax expense (computed by applying the U.S. Federal tax rate of 21% to pretax income
and the reported income tax provision relating to income before income taxes is as follows:
For the Year Ended December 31,
2019
2018
2020
$
21,122 $
27,008 $
18,381
(375)
199
(1,110)
(804)
(72)
(111)
142
18,991
3,827
22,818 $
—
125
(1,282)
(1,283)
(72)
(698)
(36)
23,762
6,111
29,873 $
—
207
(667)
(874)
(33)
(918)
—
16,096
4,163
20,259
$
(In thousands)
Tax rate applied to income before income taxes
Increase (decrease) resulting from the effects of:
Tax law change
Nondeductible acquisition costs
Tax exempt interest on loans, obligations of states and political
subdivisions and bank owned life insurance
State income taxes
Tax credit investments
Stock compensation
Other
Federal tax provision
State tax provision
Total income tax provision
120
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant
components of the Company's deferred tax assets and liabilities as of:
(In thousands)
Allowance for credit losses
Other real estate owned
Accrued stock compensation
Federal tax loss carryforward
State tax loss carryforward
Alternative minimum tax credit carryforward
Lease liabilities
Deferred compensation
Accrued interest and fee income
Other
Gross deferred tax assets
Less: Valuation allowance
Deferred tax assets net of valuation allowance
Core deposit base intangible
Net unrealized securities gains
Premises and equipment
Right of use assets
Other
Gross deferred tax liabilities
Net deferred tax assets
December 31,
2020
2019
$
$
24,158 $
422
1,973
2,857
1,333
—
7,101
2,565
995
38
41,442
—
41,442
(3,234)
(5,890)
(534)
(6,262)
(1,893)
(17,813)
23,629 $
8,949
8
2,406
3,601
1,110
530
7,381
2,458
3,106
378
29,927
—
29,927
(4,005)
(1,210)
(114)
(6,416)
(1,725)
(13,470)
16,457
Included in the table above is the effect of temporary differences associated with the Company's investments in debt securities
accounted for under ASC Topic 320, for which no deferred tax expense or benefit was recognized. These items are recorded as
Accumulated Other Comprehensive Income in the shareholders' equity section of the consolidated balance sheet. In 2020,
unrealized gains of $26.3 million resulted in a deferred tax liability of $5.9 million. In 2019, unrealized gains of $5.7 million
resulted in a deferred tax liability of $1.2 million.
At December 31, 2020, the Company's net deferred tax assets (“DTAs”) of $23.6 million consisted of approximately $18.0
million of net U.S. federal DTAs and $5.6 million of net state DTAs.
Management assesses the necessity of a valuation allowance recorded against DTAs at each reporting period. The determination
of whether a valuation allowance for net DTAs is appropriate is subject to considerable judgment and requires an evaluation of
all positive and negative evidence. Based on an assessment of all of the evidence, including favorable trending in asset quality
and certainty regarding the amount of future taxable income that the Company forecasts, management concluded that it was
more likely than not that its net DTAs will be realized based upon future taxable income. Management's confidence in the
realization of projected future taxable income is based upon analysis of the Company's risk profile and its trending financial
performance, including credit quality. The Company believes it can reasonably predict future results of operations that result in
taxable income at sufficient levels over the future period of time that the Company has available to realize its net DTA.
A valuation allowance could be required in future periods based on the assessment of positive and negative evidence.
Management's conclusion at December 31, 2020 that it is more likely than not that the net DTAs of $23.6 million will be
realized is based upon estimates of future taxable income that are supported by internal projections which consider historical
performance, various internal estimates and assumptions, as well as certain external data, all of which management believes to
be reasonable although inherently subject to judgment. If actual results differ significantly from the current estimates of future
taxable income, even if caused by adverse macro-economic conditions, a valuation allowance may need to be recorded for some
or all of the Company's DTAs. The establishment of a DTA valuation allowance could have a material adverse effect on the
Company's financial condition and results of operations.
121
Management expects to realize the $23.6 million in net DTAs well in advance of the statutory carryforward period. At
December 31, 2020, approximately $2.9 million of DTAs relate to federal net operating losses which will expire in annual
installments beginning in 2029 through 2032. Additionally, $1.3 million of the DTAs relate to state net operating losses which
will expire in annual installments beginning in 2029 through 2034. Remaining DTAs are not related to net operating losses or
credits and therefore, have no expiration date.
The Company recognizes interest and penalties, as appropriate, as part of the provisioning for income taxes. No interest or
penalties were accrued at December 31, 2020.
In accordance with ASC Topic 718, Compensation – Stock Compensation, the Company recognized $0.1 million, $0.8 million
and $1.1 million in 2020, 2019, and 2018, respectively, of discrete tax benefits related to share-based compensation.
In accordance with ASC Topic 323, Investments-Equity Method and Joint Ventures, amortization of the Company's low-income
housing credit investments of $0.9 million, $0.9 million and $1.0 million has been reflected as income tax expense for the years
ended December 31, 2020, 2019, and 2018, respectively. The amount of affordable housing tax credits, amortization and tax
benefits recorded as income tax expense for the year ended December 31, 2020 were $0.8 million, $0.9 million, and $0.2
million, respectively. The amount of affordable housing tax credits, amortization and tax benefits recorded as income tax
expense for the year ended December 31, 2019 were $0.8 million, $0.9 million and $0.2 million, respectively. The amount of
affordable housing tax credits, amortization and tax benefits recorded as income tax expense for the year ended December 31,
2018 were $0.8 million, $1.0 million and $0.2 million, respectively. The carrying value of the investments in affordable housing
credits is $16.4 million and $7.4 million at December 31, 2020 and 2019, respectively, of which $9.9 million and $0.5 million,
respectively, is unfunded.
The Company has no unrecognized income tax benefits or provisions due to uncertain income tax positions. No federal or state
income tax return examinations are currently in process. The Company does not expect to record or realize any material
unrecognized tax benefits during 2021. The following are the major tax jurisdictions in which the Company operates and the
earliest tax year, exclusive of the impact of the net operating loss carryforwards, subject to examination:
Jurisdiction
United States of America
Florida
Tax Year
2017
2017
In September 2019, the State of Florida announced a reduction in the corporate income tax rate from 5.5% to 4.458% for the
years 2019, 2020 and 2021. This change resulted in additional income tax expense of $1.1 million upon the write down in the
third quarter of 2019 of deferred tax assets affected by the change, offset by a $0.4 million benefit upon adjusting the year-to-
date provision to the new statutory tax rate.
As a result of the adoption of ASC 326 - Credit Losses on January 1, 2020, the tax impact relating to the incremental allowance
for expected credit losses on loans held at amortized cost has been reflected as a credit to retained earnings to reflect the tax
impact of increased credit reserves. Accordingly, $5.5 million of such impact has been reflected as an income tax credit and
deferred tax asset on the Company's Consolidated Statements of Financial Condition.
On March 27, 2020, the CARES Act was enacted, and Section 2303(b) of this act provided the Company with an opportunity to
carry back net operating losses arising from 2018, 2019 and 2020 to the prior five tax years. Such NOLs were previously valued
at the current federal corporate income tax rate of 21%. However, the provisions of the CARES Act provide for NOL carryback
claims to be calculated based on a rate of 35%, which was the federal corporate tax rate in effect for many of the carryback
years. Consequently, for the year ended December 31, 2020, the Company filed amended tax returns and has recorded the
resulting benefit reflecting taxes recoverable at the 35% tax rate. This resulted in the recognition of an additional $0.4 million
income tax benefit on the Company's Consolidated Statements of Income.
122
For the Year Ended December 31,
2019
2018
2020
$
$
$
9,429 $
13,711
7,507
14,696
690
685
3,561
10,056
60,335
1,235
61,570 $
88,539
15,544
19,053
2,984
14,150
5,874
4,833
9,167
1,268
5,857
2,263
185
15,835
185,552 $
11,529 $
13,399
6,352
6,490
1,054
2,472
3,674
10,545
55,515
1,217
56,732 $
73,829
13,697
15,077
2,958
14,284
6,245
4,161
8,553
881
5,826
51
—
15,177
160,739 $
11,198
12,335
5,915
4,682
1,398
2,474
4,291
8,352
50,645
(623)
50,022
71,111
12,945
16,374
2,481
13,394
6,744
5,085
9,961
2,195
4,300
461
—
17,222
162,273
Note N - Noninterest Income and Expenses
Details of noninterest income and expense are as follows:
(In thousands)
Noninterest Income
Service charges on deposit accounts
Interchange income
Wealth management income
Mortgage banking fees
Marine finance fees
SBA gains
BOLI income
Other income
Securities gains (losses), net
Total Noninterest Income
Noninterest Expenses
Salaries and wages
Employee benefits
Outsourced data processing costs
Telephone and data lines
Occupancy
Furniture and equipment
Marketing
Legal and professional fees
FDIC assessments
Amortization of intangibles
Foreclosed property expense and net loss on sale
Provision for credit losses on unfunded commitments
Other
Total Noninterest Expenses
123
Note O - Shareholders’ Equity
Required Regulatory Capital
The Company is subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to
meet the minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by the
regulators, which could have a direct material impact on the financial statements. These requirements involve quantitative
measures of assets, liabilities and certain off-balance sheet items calculated pursuant to regulatory guidance. The Company's
capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings
and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts
and ratios of total, Tier 1 capital and common equity Tier 1 capital to risk-weighted assets and of Tier 1 capital to average
assets, all as defined in the regulations.
At December 31, 2020 and 2019, the Company and Seacoast Bank, its wholly-owned banking subsidiary, were both considered
“well capitalized” based on the applicable U.S. regulatory capital ratio requirements as reflected in the table below:
(Dollars in thousands)
Seacoast Banking Corporation of Florida
(Consolidated)
At December 31, 2020:
Minimum to meet
“Well Capitalized”
Requirements
Minimum for Capital
Adequacy
Purpose1
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total Risk-Based Capital Ratio (to risk-weighted assets)
$ 1,029,455
18.51%
Tier 1 Capital Ratio (to risk-weighted assets)
Common Equity Tier 1 Capital Ratio (to risk-weighted assets)
Leverage Ratio (to adjusted average assets)
970,594
17.46
899,225
16.17
970,594
11.92
At December 31, 2019:
Total Risk-Based Capital Ratio (to risk-weighted assets)
$ 860,934
15.71%
Tier 1 Capital Ratio (to risk-weighted assets)
Common Equity Tier 1 Capital Ratio (to risk-weighted assets)
Leverage Ratio (to adjusted average assets)
825,640
15.06
754,555
13.77
825,640
12.20
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a $ 444,839 ≥
8.00%
n/a
n/a
n/a
333,629 ≥
250,222 ≥
325,690 ≥
6.00
4.50
4.00
n/a $ 438,506 ≥
8.00%
n/a
n/a
n/a
328,880 ≥
246,660 ≥
270,788 ≥
6.00
4.50
4.00
Seacoast National Bank
(A Wholly Owned Bank Subsidiary)
At December 31, 2020:
Total Risk-Based Capital Ratio (to risk-weighted assets)
$ 956,592
17.21% $ 555,772
≥ 10.00% $ 444,617 ≥
8.00%
Tier 1 Capital Ratio (to risk-weighted assets)
Common Equity Tier 1 Capital Ratio (to risk-weighted assets)
Leverage Ratio (to adjusted average assets)
897,731
16.15
897,727
16.15
897,731
11.03
444,617
361,252
406,904
≥
≥
≥
8.00
6.50
5.00
333,463 ≥
250,097 ≥
325,523 ≥
6.00
4.50
4.00
At December 31, 2019:
Total Risk-Based Capital Ratio (to risk-weighted assets)
$ 804,058
14.68% $ 547,440
≥ 10.00% $ 437,952 ≥
8.00%
Tier 1 Capital Ratio (to risk-weighted assets)
Common Equity Tier 1 Capital Ratio (to risk-weighted assets)
768,764
14.04
768,764
14.04
437,952
355,836
≥
≥
8.00
6.50
328,464 ≥
246,348 ≥
Leverage Ratio (to adjusted average assets)
270,230 ≥
1Excludes the Basel III capital conservation buffer of 2.5%, which if not exceeded may constrain dividends, equity repurchases and compensation.
768,764
337,787
11.38
5.00
≥
6.00
4.50
4.00
n/a - not applicable
Common Stock
The Company has reserved 300,000 common shares for issuance in connection with an employee stock purchase plan and
1,000,000 common shares for issuance in connection with an employee profit sharing plan.
Holders of common stock are entitled to one vote per share on all matters presented to shareholders as provided in the
Company’s Articles of Incorporation. The Company implemented a dividend reinvestment plan during 2007, and issued no
shares from treasury stock under this plan during 2020 or 2019.
124
In December, 2020, the Company's Board of Directors authorized the Company to repurchase up to $100 million of its shares of
outstanding common stock. The amount and timing of repurchases, if any, will be based on a variety of factors, including share
acquisition price, regulatory limitations, market conditions and other factors. The Company has made no repurchases under the
program.
Note P - Seacoast Banking Corporation of Florida (Parent Company Only) Financial Information
Balance Sheets
(In thousands)
Assets
Cash
Securities purchased under agreement to resell with subsidiary bank, maturing within 30
days
Investment in subsidiaries
Other assets
December 31,
2020
2019
$
70 $
70
70,074
52,979
1,134,536
1,005,756
659
1,515
$ 1,205,339 $ 1,060,320
$
71,365 $
71,085
3,676
1,130,298
3,700
985,535
$ 1,205,339 $ 1,060,320
Year Ended December 31,
2020
2019
2018
$
270 $
679 $
—
270
2,236
838
3,074
—
679
3,368
651
4,019
484
—
484
3,165
879
4,044
Liabilities and Shareholders' Equity
Subordinated debt
Other liabilities
Shareholders' equity
Statements of Income
(In thousands)
Income
Interest/other
Dividends from subsidiary Bank
Total income
Interest expense
Other expenses
Total expenses
Loss before income taxes and equity in undistributed income of
subsidiaries
Income tax benefit
(2,804)
(3,340)
(3,560)
(589)
(702)
(747)
Loss before equity in undistributed income of subsidiaries
(2,215)
(2,638)
(2,813)
Equity in undistributed income of subsidiaries
Net income
79,979
101,377
$
77,764 $
98,739 $
70,088
67,275
125
Statements of Cash Flows
(In thousands)
Cash flows from operating activities
Adjustments to reconcile net income to net cash provided
by operating activities:
Net Income
Equity in undistributed income of subsidiaries
Net (increase) decrease in other assets
Net increase (decrease) in other liabilities
Net cash used in operating activities
Cash flows from investing activities
Net cash paid for bank acquisition
Investment in unconsolidated subsidiary
Proceeds from sale of Visa Class B stock
Dividends from bank subsidiary
Increase in securities purchased under agreement to resell, maturing within
30 days, net
Net cash provided by investment activities
Cash flows from financing activities
Stock based employment benefit plans
Net cash (used in) provided by financing activities
Net change in cash
Cash at beginning of year
Cash at end of year
Supplemental disclosure of cash flow information:
Cash paid during the period for interest
Year Ended December 31,
2020
2019
2018
$
77,764 $
98,739 $
67,275
(79,979)
(101,377)
1,772
256
(738)
265
(70,088)
(10,045)
(3,431)
(187)
(3,111)
(16,289)
(1,462)
—
—
—
(10)
—
20,230
18,082
(6,558)
—
21,333
—
(17,095)
(12,849)
(421)
1,673
5,223
14,354
(1,486)
(1,486)
(2,239)
(2,239)
—
70
(127)
197
70 $
70 $
978
978
(957)
1,154
197
1,992 $
3,186 $
2,936
$
$
Note Q - Contingent Liabilities and Commitments with Off-Balance Sheet Risk
The Company and its subsidiaries, because of the nature of their business, are at all times subject to numerous legal actions,
threatened or filed. Management presently believes that none of the legal proceedings to which it is a party are likely to have a
materially adverse effect on the Company’s consolidated financial condition, or operating results or cash flows.
The Company's subsidiary bank is party to financial instruments with off balance sheet risk in the normal course of business to
meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of
credit, and limited partner equity commitments.
The subsidiary bank’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those
instruments. The subsidiary bank uses the same credit policies in making commitments and standby letters of credit as they do
for on balance sheet instruments.
126
Unfunded commitments for the Company as of:
(In thousands)
Contract or Notional Amount
December 31,
2020
2019
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit
$ 1,548,482 $ 1,018,020
Standby letters of credit and financial guarantees written:
Secured
Unsecured
Unfunded limited partner equity commitment
11,167
1,197
13,073
663
21,390
6,011
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a
fee. Commitments include home equity lines, commercial and consumer lines of credit and construction loans. Since many of
the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. The subsidiary bank evaluates each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the bank upon extension of credit, is based on management's credit evaluation of
the counterparty. Collateral held varies but may include accounts receivable, inventory, equipment, and commercial and
residential real estate.
Standby letters of credit are conditional commitments issued by the subsidiary bank to guarantee the performance of a customer
to a third party. These instruments have fixed termination dates and most end without being drawn; therefore, they do not
represent a significant liquidity risk. Those guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loan facilities to customers. The subsidiary bank holds collateral
supporting these commitments for which collateral is deemed necessary. Collateral held for secured standby letters of credit at
December 31, 2020 and 2019 totaled $12.4 million and $13.2 million, respectively.
Unfunded limited partner equity commitments at December 31, 2020 totaled $21.4 million that the Company has committed to
small business investment companies under the SBIC Act to be used to provide capital to small businesses and entities that
provide low income housing tax credits.
127
—
—
—
6,906
12,678
—
—
—
—
3,704
12,149
—
Note R - Fair Value
Under ASC Topic 820, fair value measurements for items measured at fair value on a recurring and nonrecurring basis at
December 31, 2020 and December 31, 2019 included:
Fair Value
Measurements
Quoted Prices in
Active Markets for
Identical Assets
Level 1
Significant Other
Observable
Inputs
Level 2
Significant Other
Unobservable
Inputs
Level 3
(In thousands)
At December 31, 2020
Financial Assets
Available-for-sale debt securities1
Derivative financial instruments2
Loans held for sale2
Loans3
Other real estate owned4
Equity securities5
Financial Liabilities
$
1,398,157 $
101 $
1,398,056 $
14,343
68,890
8,806
12,750
6,530
—
—
—
—
6,530
14,343
68,890
1,900
72
—
Derivative financial instruments2
$
13,339 $
— $
13,339 $
At December 31, 2019
Financial Assets
Available-for-sale debt securities1
Loans held for sale2
Loans3
Other real estate owned4
Equity securities5
$
946,855 $
100 $
946,755 $
20,029
5,123
12,390
6,392
—
—
—
6,392
20,029
1,419
241
—
1See “Note D - Securities” for further detail of fair value of individual investment categories.
2Recurring fair value basis determined using observable market data.
3See “Note E - Loans”. Nonrecurring fair value adjustments to collateral-dependent loans reflect full or partial write-downs that are based on current
appraised values of the collateral in accordance with ASC Topic 310.
4Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360.
5An investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities, reported at fair value in Other Assets. Recurring fair value
basis is determined using market quotations.
Available-for-sale debt securities: Level 1 securities consist of U.S. Treasury securities. Other securities are reported at fair
value utilizing Level 2 inputs. The estimated fair value of a security is determined based on market quotations when available
or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using
observable market data where available.
The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies,
for reasonableness and to ensure such prices are aligned with traditional pricing matrices. The fair value of collateralized loan
obligations is determined from broker quotes. From time to time, the Company will validate, on a sample basis, prices supplied
by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using
internal models.
Derivative financial instruments: The Company offers interest rate swaps to certain loan customers to allow them to hedge the
risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable-
to-fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank.
These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while
providing a contract for fixed interest payments for the customer. The fair value of these derivatives is based on a discounted
cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the
valuation of interest rate swaps is classified as Level 2. Other derivatives consist of interest rate floors designated as cash flow
hedges. The fair values of these instruments are based upon the estimated amount the Company would receive or pay to
terminate the instruments, taking into account current interest rates and, when appropriate, the current credit worthiness of the
128
counterparties. Interest rate floors designated as cash flow hedges are classified within Level 2.
Loans held for sale: Fair values are based upon estimated values to be received from independent third party purchasers. These
loans are intended for sale and the Company believes the fair value is the best indicator of the resolution of these loans. Fair
market value changes occur due to changes in interest rates, the borrower’s credit, the secondary loan market and the market for
a borrower’s debt. Interest income is recorded based on contractual terms of the loan in accordance with Company policy on
loans held for investment. None of the loans are 90 days or more past due or on nonaccrual as of December 31, 2020 and 2019.
The aggregate fair value and contractual balance of loans held for sale as of December 31, 2020 and 2019 is as follows:
(In thousands)
Aggregate fair value
Contractual balance
Excess
December 31,
2020
2019
$
68,890 $
66,415
2,475
20,029
19,445
584
Loans: Loans carried at fair value consist of collateral-dependent real estate loans. Fair value is based on recent real estate
appraisals less estimated costs of sale. For these loans evaluations may use either a single valuation approach or a combination
of approaches, such as comparative sales, cost and/or income approach. A significant unobservable input in the income
approach is the estimated capitalization rate for a given piece of collateral. At December 31, 2020 the range of capitalization
rates utilized to determine fair value of the underlying collateral averaged approximately 7.3%. Adjustments to comparable
sales may be made by an appraiser to reflect local market conditions or other economic factors and may result in changes in the
fair value of an asset over time. As such, the fair value of these loans is considered level 3 in the fair value hierarchy. Collateral-
dependent loans measured at fair value totaled $8.8 million with a specific reserve of $7.7 million at December 31, 2020,
compared to $5.1 million with a specific reserve of $2.9 million at December 31, 2019.
For loans classified as level 3, the changes included additions of $11.9 million offset by $8.7 million in paydowns and charge-
offs during the twelve months ended December 31, 2020.
Other real estate owned: When appraisals are used to determine fair value and the appraisals are based on a market approach,
the fair value of other real estate owned (“OREO”) is classified as level 2. When the fair value of OREO is based on appraisals
which require significant adjustments to market-based valuation inputs or apply an income approach based on unobservable
cash flows, the fair value of OREO is classified as Level 3.
Loans of $4.5 million migrated to OREO during the twelve months ended December 31, 2020 and were classified as level 3.
Other changes in 2020 to OREO loans classified as level 3 include sales of $4.9 million and charge-offs of $1.6 million, offset
by additions of $2.6 million during the twelve months ended December 31, 2020.
Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused
the transfer, which generally coincides with the Company's monthly and/or quarter valuation process. There were no such
transfers during the twelve months ended December 31, 2020 and 2019.
129
The carrying amount and fair value of the Company's other significant financial instruments that were not disclosed previously
in the balance sheet and for which carrying amount is not fair value as of December 31, 2020 and December 31, 2019 is as
follows:
(In thousands)
At December 31, 2020
Financial Assets
Quoted Prices in
Active Markets for
Identical Assets
Level 1
Significant Other
Observable
Inputs
Level 2
Significant Other
Unobservable
Inputs
Level 3
Carrying
Amount
Held-to-maturity debt securities1
$ 184,484 $
— $
192,179 $
Time deposits with other banks
Loans, net
Financial Liabilities
Deposits
Subordinated debt
At December 31, 2019
Financial Assets
750
5,633,810
6,932,561
71,365
—
—
—
—
762
—
—
58,227
Held-to-maturity debt securities1
$ 261,369 $
— $
262,213 $
Time deposits with other banks
Loans, net
Financial Liabilities
Deposits
Federal Home Loan Bank (“FHLB”)
borrowings
Subordinated debt
3,742
5,158,127
5,584,753
315,000
71,085
—
—
—
—
—
—
—
—
—
64,017
—
—
5,686,019
6,936,097
—
—
3,744
5,139,491
5,584,621
314,995
—
1See “Note D - Securities” for further detail of recurring fair value basis of individual investment categories.
The short maturity of Seacoast’s assets and liabilities results in having a significant number of financial instruments whose fair
value equals or closely approximates carrying value. Such financial instruments are reported in the following balance sheet
captions: cash and due from banks, interest bearing deposits with other banks, FHLB borrowings and securities sold under
agreement to repurchase.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is
practicable to estimate that value at December 31, 2020 and December 31, 2019:
Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such
as commercial, mortgage, etc. Each loan category is further segmented into fixed and adjustable rate interest terms and by
performing and nonperforming categories. The fair value of loans is calculated by discounting scheduled cash flows through the
estimated life including prepayment considerations, using estimated market discount rates that reflect the risks inherent in the
loan. The fair value approach considers market-driven variables including credit related factors and reflects an “exit price” as
defined in ASC Topic 820.
Deposit Liabilities: The fair value of demand deposits, savings accounts and money market deposits is the amount payable at
the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for
funding of similar remaining maturities.
Note S - Earnings Per Share
Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted
average number of shares of common stock outstanding during the year.
In 2020, 2019, and 2018, options to purchase 508,000, 491,000, and 483,000 shares, respectively, were antidilutive and
accordingly were excluded in determining diluted earnings per share.
130
(In thousands, except per share data)
Basic earnings per share
Net Income
Total weighted average common stock outstanding
Net income per share
Diluted earnings per share
Net Income
Total weighted average common stock outstanding
Add: Dilutive effect of employee restricted stock and stock options (See
“Note K - Employee Benefits and Stock Compensation”)
Total weighted average diluted stock outstanding
Net income per share
Note T - Business Combinations
Acquisition of Fourth Street Banking Company
For the Year Ended December 31
2018
2019
2020
$
$
77,764 $
98,739 $
53,502
51,449
1.45 $
1.92 $
67,275
47,969
1.40
$
77,764 $
98,739 $
67,275
53,502
51,449
47,969
428
580
53,930
52,029
$
1.44 $
1.90 $
779
48,748
1.38
On August 21, 2020, the Company completed its acquisition of Fourth Street Banking Company (“Fourth Street”).
Simultaneously, upon completion of the merger of Fourth Street and the Company, Fourth Street's wholly owned subsidiary
bank, Freedom Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Freedom Bank operated two branches
in St. Petersburg, Florida.
As a result of this acquisition, the Company expects to enhance its presence in St. Petersburg, expand its customer base and
leverage operating cost through economies of scale, and positively affect the Company’s operating results.
The Company acquired 100% of the outstanding common stock of Fourth Street. Under the terms of the definitive agreement,
each share of Fourth Street common stock was converted into the right to receive 0.1275 share of Seacoast common stock.
(In thousands, except per share data)
Number of Fourth Street common shares outstanding
Shares issued upon conversion of convertible debt
Per share exchange ratio
Number of shares of common stock issued
Multiplied by common stock price per share on August 21, 2020
Value of common stock issued
Cash paid for Fourth Street vested stock options
Total purchase price
August 21, 2020
11,220
5,405
0.1275
2,120
19.40
41,121
596
41,717
$
$
The acquisition of Fourth Street was accounted for under the acquisition method in accordance with ASC Topic 805, Business
Combinations. The Company recognized goodwill of $9.0 million for this acquisition that is nondeductible for tax purposes.
Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a
complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.
The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year
after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes
known.
131
(In thousands)
Assets:
Cash
Investment securities
Loans
Bank premises and equipment
Core deposit intangibles
Goodwill
Other assets
Total assets
Liabilities:
Deposits
Other liabilities
Total liabilities
Initially Measured
August 21, 2020
$
$
$
$
38,082
3,498
303,434
9,480
1,310
9,030
7,088
371,922
329,662
543
330,205
The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the
acquisition date.
(In thousands)
Construction and land development
Commercial real estate - owner-occupied
Commercial real estate - non owner-occupied
Residential real estate
Commercial and financial
Consumer
PPP loans
Total acquired loans
August 21, 2020
Book Balance
Fair Value
$
$
9,197 $
77,936
76,014
23,548
72,745
2,748
55,005
317,193 $
8,851
75,215
71,171
23,227
68,096
2,694
54,180
303,434
The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than
insignificant deterioration of credit quality since origination:
(In thousands)
Book balance of loans at acquisition
Allowance for credit losses at acquisition
Non-credit related discount
Total PCD loans acquired
August 21, 2020
$
$
59,455
(5,763)
(4,319)
49,373
The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount,
deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.
Acquisition of First Bank of the Palm Beaches
On March 13, 2020, the Company completed its acquisition of First Bank of the Palm Beaches (“FBPB”). FBPB was merged
with and into Seacoast Bank. FBPB operated two branches in the Palm Beach market.
As a result of this acquisition, the Company expects to enhance its presence in the Palm Beach market, expand its customer
base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.
The Company acquired 100% of the outstanding common stock of FBPB. Under the terms of the definitive agreement, each
share of FBPB common stock was converted into the right to receive 0.2000 share of Seacoast common stock.
132
(In thousands, except per share data)
Number of FBPB common shares outstanding
Per share exchange ratio
Number of shares of common stock issued
Multiplied by common stock price per share on March 13, 2020
Value of common stock issued
Cash paid for FBPB vested stock options
Total purchase price
March 13, 2020
5,213
0.2000
1,043
20.17
21,031
866
21,897
$
$
The acquisition of FBPB was accounted for under the acquisition method in accordance with ASC Topic 805, Business
Combinations. The Company recognized goodwill of $6.9 million for this acquisition that is nondeductible for tax purposes.
Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a
complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.
The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year
after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes
known.
(In thousands)
Assets:
Cash
Investment securities
Loans
Bank premises and equipment
Core deposit intangibles
Goodwill
Other assets
Total assets
Liabilities:
Deposits
Other liabilities
Total liabilities
Initially Measured
March 13, 2020
Measurement
Period
Adjustments
As Adjusted
March 13, 2020
$
34,749 $
447
146,839
6,086
819
6,799
1,285
— $
—
(62)
—
—
62
20
34,749
447
146,777
6,086
819
6,861
1,305
$
$
$
197,024 $
20 $
197,044
173,741 $
1,386
175,127 $
— $
20
20 $
173,741
1,406
175,147
133
The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the
acquisition date.
(In thousands)
Construction and land development
Commercial real estate - owner-occupied
Commercial real estate - non owner-occupied
Residential real estate
Commercial and financial
Consumer
Total acquired loans
March 13, 2020
Book Balance
Fair Value
$
$
9,493 $
46,221
36,268
47,569
9,659
1,132
150,342 $
9,012
45,171
35,079
47,043
9,388
1,084
146,777
The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than
insignificant deterioration of credit quality since origination:
(In thousands)
Book balance of loans at acquisition
Allowance for credit losses at acquisition
Non-credit related discount
Total PCD loans acquired
March 13, 2020
$
$
43,682
(516)
(128)
43,038
The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount,
deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.
Acquisition of First Green Bancorp, Inc.
On October 19, 2018, the Company completed its acquisition of First Green Bancorp, Inc (“First Green”). Simultaneously,
upon completion of the merger of First Green and the Company, First Green's wholly owned subsidiary bank, First Green Bank,
was merged with and into Seacoast Bank. Prior to the acquisition, First Green operated seven branches in the Orlando, Daytona,
and Fort Lauderdale markets.
As a result of this acquisition, the Company enhanced its presence in the Orlando, Daytona and Fort Lauderdale, Florida
markets, expanded its customer base and leverage operating cost through economies of scale, and positively affected the
Company’s operating results to the extent the Company earns more from interest earning assets than it pays in interest on its
interest bearing liabilities.
The Company acquired 100% of the outstanding common stock of First Green. Under the terms of the definitive agreement,
each share of First Green common stock was converted into the right to receive 0.7324 shares of Seacoast common stock.
(In thousands, except per share data)
Number of First Green common shares outstanding
Per share exchange ratio
Number of shares of common stock issued
Multiplied by common stock price per share on October 19, 2018
Value of common stock issued
Cash paid for First Green vested stock options
Total purchase price
October 19, 2018
5,462
0.7324
4,000
26.87
107,486
6,558
114,044
$
$
The acquisition of First Green was accounted for under the acquisition method in accordance with ASC Topic 805, Business
Combinations. The Company recognized goodwill of $56.7 million for this acquisition that is nondeductible for tax purposes.
Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a
complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.
The adjustments reflected in the table below are the result of information obtained subsequent to the initial measurement.
134
(In thousands)
Assets:
Cash
Investment securities
Loans, net
Fixed assets
Other real estate owned
Core deposit intangibles
Goodwill
Other assets
Total assets
Liabilities:
Deposits
Other liabilities
Total liabilities
Initially Measured
October 19, 2018
Measurement
Period
Adjustments
As Adjusted
October 19, 2018
$
$
$
$
29,434 $
32,145
631,497
16,828
410
10,170
56,198
40,669
817,351 $
624,289 $
79,018
703,307 $
— $
—
—
—
—
(676)
533
178
35 $
— $
35
35 $
29,434
32,145
631,497
16,828
410
9,494
56,731
40,847
817,386
624,289
79,053
703,342
The table below presents information with respect to the fair value of acquired loans, as well as their unpaid principal balance
(“Book Balance”) at acquisition date.
(In thousands)
Single family residential real estate
Commercial real estate
Construction/development/land
Commercial loans
Consumer and other loans
Purchased credit-impaired
Total acquired loans
October 19, 2018
Book Balance
Fair Value
$
101,674 $
437,767
61,195
56,288
9,156
2,136
101,119
406,613
58,385
54,973
8,942
1,465
$
668,216 $
631,497
For the loans acquired we first segregated all acquired loans with specifically identified credit deficiency factor(s). The factors
we considered to identify loans as PCI loans were all acquired loans that were nonaccrual, 60 days or more past due, designated
as TDR, graded “special mention” or “substandard.” These loans were then evaluated to determine estimated fair values as of
the acquisition date. As required by generally accepted accounting principles, the Company accounted for these loans pursuant
to ASC Topic 310-30 at the time of acquisition and until the adoption of ASC Topic 326 on January 1, 2020. The table below
summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash
payments and fair value of the loans as of October 19, 2018 for purchased credit-impaired loans. Contractually required
principal and interest payments have been adjusted for estimated prepayments.
(In thousands)
Contractually required principal and interest
Non-accretable difference
Cash flows expected to be collected
Accretable yield
Total purchased credit-impaired loans acquired
October 19, 2018
$
$
2,136
(671)
1,465
—
1,465
Loans without specifically identified credit deficiency factors were referred to as PULs for disclosure purposes. These loans
were then evaluated to determine estimated fair values as of the acquisition date. Although no specific credit deficiencies were
identifiable, we believe there is an element of risk as to whether all contractual cash flows will be eventually received. Factors
that were considered included the economic environment both nationally and locally as well as the real estate market
particularly in Florida.
135
The Company believes the deposits assumed from the acquisition have an intangible value. In determining the valuation
amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit
relationships.
Acquisition Costs
Acquisition costs included in the Company’s income statement for the years ended December 31, 2020, 2019 and 2018 are $9.1
million, $1.0 million, and $9.7 million, respectively.
Pro-Forma Information
Pro-forma data as of 2020 and 2019 present information as if the acquisitions of FBPB and Fourth Street occurred at the
beginning of 2019:
(In thousands, except per share data)
Net interest income1
Net income available to common shareholders
EPS - basic
Twelve Months Ended
December 31,
2020
2019
$
$
274,432 $
82,179
1.60 $
266,033
100,718
1.88
EPS - diluted
1.86
1Provisions for credit losses of $1.8 million for FBPB and $4.6 million for Freedom Bank, recorded under CECL at the dates of acquisition, have been
excluded from the pro forma information above, which presents information as if the acquisitions had occurred on January 1, 2019, prior to the Company's
adoption of CECL.
1.59 $
$
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be
disclosed in the reports under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including
the Company's Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating disclosure controls and procedures, as defined in SEC Rule 13a-15
under the Exchange Act, management recognized that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control objectives.
In connection with the preparation of this Annual Report on Form 10-K, as of the end of the period covered by this report, an
evaluation was performed, with the participation of the CEO and CFO, of the effectiveness of the Company's disclosure
controls and procedures, as required by Rule 13a-15 of the Exchange Act. Based upon that evaluation, the CEO and CFO
concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.
(b) Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.
Our internal control system was designed to provide reasonable assurance to management and the board of directors regarding
the reliability of financial reporting and the preparation of financial statements for external purposes.
Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31,
2020. This assessment was based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control—Integrated Framework 2013. Based on this assessment, management believes that, as of
December 31, 2020, the Company's internal control over financial reporting was effective.
136
The Company's independent registered public accounting firm, Crowe LLP, has issued an audit report on our internal control
over financial reporting which is included herein.
(c) Change in Internal Control Over Financial Reporting
During the three months ended December 31, 2020, there were no changes in the internal control over financial reporting that
occurred or that have materially affected, or are reasonably likely to materially affect, the internal control over financial
reporting.
Item 9B. Other Information.
None.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Information concerning our directors and executive officers is set forth under the headings “Proposal 1 - Election of Directors,”
“Corporate Governance,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Certain Transactions and Business
Relationships” in the 2021 Proxy Statement, incorporated herein by reference.
Item 11. Executive Compensation
Information regarding the compensation paid by us to our directors and executive officers is set forth under the headings
“Executive Compensation”, “Compensation Discussion & Analysis”, “Compensation and Governance Committee Report” and
“2020 Director Compensation” in the 2021 Proxy Statement which are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information about the Company's common stock that may be issued under all of its existing
compensation plans as of December 31, 2020.
Equity Compensation Plan Information
(a)
Number of
securities
to be issued upon
exercise of
outstanding
options, warrants
and rights
Weighted
average
exercise price of
outstanding
options, warrants
and rights
Number of
securities
remaining
available
for future
issuance
under equity
compensation
plans
(excluding
securities
represented
in column (a))
839,884 $
—
22.94
—
534,682
33,401
Equity compensation plans approved by shareholders:
Plan Category
2013 Plan1
Employee Stock Purchase Plan2
Totals
568,083
1Seacoast Banking Corporation of Florida 2013 Long-Term Incentive Plan. Shares reserved under this plan are available for issuance pursuant to the
exercise of stock options and stock appreciation rights granted under the plan, and may be granted as awards of restricted stock, performance shares, or
other stock-based awards, prospectively.
2Seacoast Banking Corporation of Florida Employee Stock Purchase Plan, as amended.
839,884 $
22.94
137
Additional information regarding the ownership of the Company's common stock is set forth under the headings “Proposal 1 -
Election of Directors” and “Director, Executive Officers and Certain Beneficial Stock Ownership” in the 2021 Proxy Statement,
and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding certain relationships and transactions between the Company and its officers, directors and significant
shareholders is set forth under the heading “Certain Transactions and Business Relationships” and “Corporate Governance” in
the 2021 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Information concerning the Company's principal accounting fees and services is set forth under the heading “Relationship with
Independent Registered Public Accounting Firm; Audit and Non- Audit Fees” in the 2021 Proxy Statement, and is incorporated
herein by reference.
Item 15. Exhibits, Financial Statement Schedules
Part IV
(a)(1)
The Consolidated Financial Statements and the report of the Independent Registered Public Accounting
Firm thereon listed in Item 8 are set forth commencing on page 81.
(a)(2)
List of financial statement schedules
All schedules normally required by Form 10-K are omitted, since either they are not applicable or the required information is
shown in the financial statements or the notes thereto.
(a)(3)
Listing of exhibits
PLEASE NOTE: It is inappropriate for readers to assume the accuracy of, or rely upon any covenants, representations or
warranties that may be contained in agreements or other documents filed as Exhibits to, or incorporated by reference in, this
report. Any such covenants, representations or warranties may have been qualified or superseded by disclosures contained in
separate schedules or exhibits not filed with or incorporated by reference in this report, may reflect the parties’ negotiated risk
allocation in the particular transaction, may be qualified by materiality standards that differ from those applicable for securities
law purposes, may not be true as of the date of this report or any other date, and may be subject to waivers by any or all of the
parties. Where exhibits and schedules to agreements filed or incorporated by reference as Exhibits hereto are not included in
these Exhibits, such exhibits and schedules to agreements are not included or incorporated by reference herein.
The following Exhibits are attached hereto or incorporated by reference herein (unless indicated otherwise, all documents
referenced below were filed pursuant to the Exchange Act by Seacoast Banking Corporation of Florida, Commission File No.
0-13660):
Exhibit 2.1 Agreement and Plan of Merger
Dated June 11, 2018 by and among the Company, Seacoast Bank, First Green Bancorp, Inc. and First Green Bank
incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed June 15, 2018.
Exhibit 2.2 Agreement and Plan of Merger
Dated November 19, 2019 by and among the Company, Seacoast Bank and First Bank of the Palm Beaches
incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed November 22, 2019.
Exhibit 2.3 Agreement and Plan of Merger
Dated January 23, 2020 by and among the Company, Seacoast Bank, Fourth Street Banking Company and Freedom
Bank incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed January 29, 2020.
138
Exhibit 3.1.1 Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, filed May 10,
2006.
Exhibit 3.1.2 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed December 23, 2008.
Exhibit 3.1.3 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.4 to the Company’s Form S-1, filed June 22, 2009.
Exhibit 3.1.4 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed July 20, 2009.
Exhibit 3.1.5 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed December 3, 2009.
Exhibit 3.1.6 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K/A, filed July 14, 2010.
Exhibit 3.1.7 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed June 25, 2010.
Exhibit 3.1.8 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed June 1, 2011.
Exhibit 3.1.9 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed December 13, 2013.
Exhibit 3.1.10 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed May 30, 2018.
Exhibit 3.2 Amended and Restated By-laws of the Company
Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed October 26, 2020.
Exhibit 4.1 Description of Securities
Incorporated herein by reference from Exhibit 4.1 to the Company’s Form 10-K, filed on February 26, 2021.
Exhibit 4.2 Specimen Common Stock Certificate
Incorporated herein by reference from Exhibit 4.1 to the Company’s Form 10-K, filed on March 17, 2014.
Exhibit 4.3 Junior Subordinated Indenture
Dated as of March 31, 2005, between the Company and Wilmington Trust Company, as Trustee (including the form of
the Floating Rate Junior Subordinated Note, which appears in Section 2.1 thereof), incorporated herein by reference
from Exhibit 10.1 to the Company’s Form 8-K filed April 5, 2005.
Exhibit 4.4 Guarantee Agreement
Dated as of March 31, 2005 between the Company, as Guarantor, and Wilmington Trust Company, as Guarantee
Trustee, incorporated herein by reference from Exhibit 10.2 to the Company’s Form 8-K filed April 5, 2005.
Exhibit 4.5 Amended and Restated Trust Agreement
Dated as of March 31, 2005, among the Company, as Depositor, Wilmington Trust Company, as Property Trustee,
Wilmington Trust Company, as Delaware Trustee and the Administrative Trustees named therein, as Administrative
Trustees (including exhibits containing the related forms of the SBCF Capital Trust I Common Securities Certificate
and the Preferred Securities Certificate), incorporated herein by reference from Exhibit 10.3 to the Company’s Form 8-
K filed April 5, 2005.
139
Exhibit 4.6 Indenture
Dated as of December 16, 2005, between the Company and U.S. Bank National Association, as Trustee (including the
form of the Junior Subordinated Debt Security, which appears as Exhibit A to the Indenture), incorporated herein by
reference from Exhibit 10.1 to the Company’s Form 8-K filed December 21, 2005.
Exhibit 4.7 Guarantee Agreement
Dated as of December 16, 2005, between the Company, as Guarantor, and U.S. Bank National Association, as
Guarantee Trustee, incorporated herein by reference from Exhibit 10.2 to the Company’s Form 8-K filed
December 21, 2005.
Exhibit 4.8 Amended and Restated Declaration of Trust
Dated as of December 16, 2005, among the Company, as Sponsor, Dennis S. Hudson, III and William R. Hahl, as
Administrators, and U.S. Bank National Association, as Institutional Trustee (including exhibits containing the related
forms of the SBCF Statutory Trust II Common Securities Certificate and the Capital Securities Certificate),
incorporated herein by reference from Exhibit 10.3 to the Company’s Form 8-K filed December 21, 2005.
Exhibit 4.9 Indenture
Dated June 29, 2007, between the Company and LaSalle Bank, as Trustee (including the form of the Junior
Subordinated Debt Security, which appears as Exhibit A to the Indenture), incorporated herein by reference from
Exhibit 10.1 to the Company’s Form 8-K filed July 3, 2007.
Exhibit 4.10 Guarantee Agreement
Dated June 29, 2007, between the Company, as Guarantor, and LaSalle Bank, as Guarantee Trustee, incorporated
herein by reference from Exhibit 10.2 to the Company’s Form 8-K filed July 3, 2007.
Exhibit 4.11 Amended and Restated Declaration of Trust
Dated June 29, 2007, among the Company, as Sponsor, Dennis S. Hudson, III and William R. Hahl, as Administrators,
and LaSalle Bank, as Institutional Trustee (including exhibits containing the related forms of the SBCF Statutory Trust
III Common Securities Certificate and the Capital Securities Certificate), incorporated herein by reference from
Exhibit 10.3 to the Company’s Form 8-K filed July 3, 2007.
Exhibit 10.1 Amended and Restated Retirement Savings Plan*
Incorporated herein by reference from Exhibit 10.1 to the Company’s Annual Report on Form 10-K, filed March 15,
2011.
Exhibit 10.2 Amended and Restated Employee Stock Purchase Plan*
Incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement on DEF 14A, filed with the
Commission on April 27, 2009.
Exhibit 10.3 Dividend Reinvestment and Stock Purchase Plan
Incorporated by reference to the Company’s Form S-3 File No. 333-221822, filed on November 30, 2017.
Exhibit 10.4 Executive Deferred Compensation Plan*
Incorporated herein by reference from Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed March 30,
2001.
Exhibit 10.5 Amended and Restated Directors Deferred Compensation Plan*
Incorporated herein by reference from Exhibit 10.7 to the Company's Annual Report on Form 10-K, filed March 14,
2016.
Exhibit 10.6 2013 Incentive Plan
Incorporated herein by reference from Appendix A to the Company’s Proxy Statement on Form DEF 14A, filed April
9, 2013.
Exhibit 10.7 Form of Change of Control Employment Agreement with Charles Cross, David Houdeshell and Charles
Shaffer*
Incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed November 3, 2014.
140
Exhibit 10.8 Employment Agreement*
Dated December 18, 2014 between Dennis S. Hudson, III and the Company, incorporated herein by reference from
Exhibit 10.1 to the Company’s Form 8-K, filed December 19, 2014.
Exhibit 10.9 Amendment to Employment Agreement with Dennis S. Hudson, III
Incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K, filed June 27, 2017.
Exhibit 10.10 Amendment to Employment with Dennis S. Hudson, III
Incorporated herein by reference from Exhibit 10.1 to the Company's Form 8-K, filed June 19, 2020.
Exhibit 10.11 Form of Change of Control Employment Agreement with Charles Cross, David Houdeshell and Charles
Shaffer
Incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed September 23, 2016.
Exhibit 10.12 Employment Agreement with Charles Shaffer*
Dated December 31, 2020 by and between the Company and Charles Shaffer, incorporated herein by reference from
Exhibit 10.1 to the Company's Form 8-K, filed January 4, 2021.
Exhibit 21 Subsidiaries of Registrant
Exhibit 23.1 Consent of Independent Registered Public Accounting Firm
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1** Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and Section 111 the Emergency Economic Stability Act, as amended
Exhibit 32.2** Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
Section 111 the Emergency Economic Stability Act, as amended
Exhibit 101 The following materials from Seacoast Banking Corporation of Florida’s Quarterly Report on Form 10-K
for the year ended December 31, 2020 formatted in Inline XBRL: (i) the Consolidated Statements of Income, (ii) the
Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated
Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity and (vi) the Notes to the
Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
Exhibit 104 The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2020,
formatted in Inline XBRL.
* Management contract or compensatory plan or arrangement.
** The certifications attached as Exhibits 32.1 and 32.2 accompany this Annual Report on Form 10-K and are “furnished” to
the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be
deemed “filed” by the Company for purposes of Section 18 of the Exchange Act.
(b)
Exhibits
The response to this portion of Item 15 is submitted under item (a)(3) above.
(c)
Financial Statement Schedules
None.
Item 16. Form 10-K Summary
Not applicable.
141
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
SEACOAST BANKING CORPORATION OF FLORIDA
(Registrant)
By:
/s/ Charles M. Shaffer
Charles M. Shaffer
President and Chief Executive Officer
Date: February 26, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Charles M. Shaffer
Charles M. Shaffer, President and Chief Executive Officer
(principal executive officer)
Date
February 26, 2021
/s/ Tracey L. Dexter
February 26, 2021
Tracey L. Dexter, Executive Vice President and Chief Financial Officer
(principal financial and accounting officer)
/s/ Dennis S. Hudson, III
Dennis S. Hudson, III, Executive Chairman of the Board
/s/ Dennis J. Arczynski
Dennis J. Arczynski, Director
/s/ Jacqueline L. Bradley
Jacqueline L. Bradley, Director
/s/ H. Gilbert Culbreth, Jr.
H. Gilbert Culbreth, Jr, Director
/s/ Julie H. Daum
Julie H. Daum, Director
/s/ Christopher E. Fogal
Christopher E. Fogal, Director
/s/ Maryann B. Goebel
Maryann B. Goebel, Director
142
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
/s/ Robert J. Lipstein
Robert J. Lipstein, Director
/s/ Thomas E. Rossin
Thomas E. Rossin, Director
Date
February 26, 2021
February 26, 2021
143
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF
THE SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.1
Seacoast Banking Corporation of Florida (“Seacoast,” “we,” “our,” or “us”) has one class of securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended, our common stock.
DESCRIPTION OF CAPITAL STOCK
The following descriptions are summaries of the material terms of our amended and restated articles of incorporation and
amended and restated bylaws and include all material information with respect to our capital stock. Reference is made to the
more detailed provisions of the amended and restated articles of incorporation and amended and restated bylaws, which are
filed as exhibits to this Annual Report on Form 10-K and are incorporated by reference herein.
Common Stock
General
The following description of shares of Seacoast’s common stock, par value $0.10 per share, is a summary only and is subject to
applicable provisions of the Florida Business Corporation Act, as amended, or the FBCA, and to Seacoast’s amended and
restated articles of incorporation, as amended, and its amended and restated bylaws. Seacoast’s articles of incorporation provide
that it may issue up to 120 million shares of common stock, par value of $0.10 per share. Seacoast common stock is listed on
the NASDAQ Global Select Market under the symbol “SBCF.”
Voting Rights
Each outstanding share of Seacoast’s common stock entitles the holder to one vote on all matters submitted to a vote of
shareholders, including the election of directors. The holders of Seacoast common stock possess exclusive voting power, except
as otherwise provided by law or by articles of amendment establishing any series of Seacoast preferred stock.
There is no cumulative voting in the election of directors, which means that the holders of a plurality of Seacoast’s outstanding
shares of common stock can elect all of the directors then standing for election. When a quorum is present at any meeting,
questions brought before the meeting will be decided by the vote of the holders of a majority of the shares present and voting on
such matter, whether in person or by proxy, except when the meeting concerns matters requiring the vote of the holders of a
majority of all outstanding shares under applicable Florida law. Seacoast’s articles of incorporation provide certain anti-
takeover provisions that require super-majority votes, which may limit shareholders’ rights to effect a change in control as
described under the section below entitled “Anti-Takeover Effects of Certain articles of incorporation Provisions.”
Dividends, Liquidation and Other Rights
Holders of shares of common stock are entitled to receive dividends only when, as and if approved by Seacoast’s board of
directors from funds legally available for the payment of dividends. Seacoast’s shareholders are entitled to share ratably in its
assets legally available for distribution to its shareholders in the event of Seacoast’s liquidation, dissolution or winding up,
voluntarily or involuntarily, after payment of, or adequate provision for, all of our known debts and liabilities and of any
preferences of any series of our preferred stock that may be outstanding in the future. These rights are subject to the preferential
rights of any series of Seacoast’s preferred stock that may then be outstanding.
Holders of shares of Seacoast common stock have no preference, conversion, exchange, sinking fund or redemption rights and
have no preemptive rights to subscribe for any of our securities. Seacoast’s board of directors, under its articles of
incorporation, may issue additional shares of its common stock or rights to purchase shares of its common stock without
shareholder approval.
Restrictions on Ownership
The Bank Holding Company Act requires any “bank holding company,” as defined in the Bank Holding Company Act, to
obtain the approval of the Federal Reserve prior to the acquisition of 5% or more of our common shares. Any person, other than
a bank holding company, is required to obtain prior approval of the Federal Reserve to acquire 10% or more of our common
shares under the Change in Bank Control Act. Any holder of 25% or more of our common shares, or a holder of 5% or more if
such holder otherwise exercises a “controlling influence” over us, is subject to regulation as a bank holding company under the
Bank Holding Company Act.
Certain provisions included in our amended and restated articles of incorporation and bylaws, as described further below, as
well as certain provisions of the Florida Business Corporation Act and federal law, may discourage, delay or prevent potential
acquisitions of control of us, particularly when attempted in a transaction that is not negotiated directly with, and approved by,
our board of directors, despite possible benefits to our shareholders.
Transfer Agent and Registrar
The transfer agent and registrar for Seacoast common stock is Continental Stock Transfer and Trust Company.
Anti-Takeover Effects of Certain Articles of Incorporation Provisions
Seacoast’s articles of incorporation contain certain provisions that make it more difficult to acquire control of it by means of a
tender offer, open market purchase, a proxy fight or otherwise. These provisions are designed to encourage persons seeking to
acquire control of Seacoast to negotiate with its directors. Seacoast believes that, as a general rule, the interests of its
shareholders would be best served if any change in control results from negotiations with its directors.
Seacoast’s articles of incorporation provide for a classified board to which approximately one-third of its board of directors is
elected each year at its annual meeting of shareholders. Accordingly, Seacoast’s directors serve three-year terms rather
than one-year terms. The classification of Seacoast’s board of directors has the effect of making it more difficult for
shareholders to change the composition of its board of directors. At least two annual meetings of shareholders, instead of one,
will generally be required to effect a change in a majority of Seacoast’s board of directors. Such a delay may help ensure that its
directors, if confronted by a shareholder attempting to force a proxy contest, a tender or exchange offer, or an extraordinary
corporate transaction, would have sufficient time to review the proposal as well as any available alternatives to the proposal and
to act in what they believe to be the best interests of Seacoast’s shareholders. The classification provisions apply to every
election of directors, however, regardless of whether a change in the composition of Seacoast’s board of directors would be
beneficial to Seacoast and its shareholders and whether or not a majority of its shareholders believe that such a change would be
desirable.
The classification of Seacoast’s board of directors could also have the effect of discouraging a third party from initiating a
proxy contest, making a tender offer or otherwise attempting to obtain control of Seacoast, even though such an attempt might
be beneficial to Seacoast and its shareholders. The classification of Seacoast’s board of directors could thus increase the
likelihood that incumbent directors will retain their positions. In addition, because the classification of Seacoast’s board of
directors may discourage accumulations of large blocks of its stock by purchasers whose objective is to take control of Seacoast
and remove a majority of its board of directors, the classification of its board of directors could tend to reduce the likelihood of
fluctuations in the market price of its common stock that might result from accumulations of large blocks of its common stock
for such a purpose. Accordingly, Seacoast’s shareholders could be deprived of certain opportunities to sell their shares at a
higher market price than might otherwise be the case.
Seacoast’s articles of incorporation require the affirmative vote of the holders of not less than two-thirds of all the shares of its
stock outstanding and entitled to vote generally in the election of directors in addition to the votes required by law or elsewhere
in the articles of incorporation, the bylaws or otherwise, to approve: (a) any sale, lease, transfer, purchase and assumption of all
or substantially all of its consolidated assets and/or liabilities, (b) any merger, consolidation, share exchange or similar
transaction, or any merger of any significant subsidiary, into or with another person, or (c) any reclassification of securities,
recapitalization or similar transaction that has the effect of increasing other than pro rata with the other shareholders, the
proportionate amount of shares that is beneficially owned by an Affiliate (as defined in Seacoast’s articles of incorporation).
Any business combination described above may instead be approved by the affirmative vote of a majority of all the votes
entitled to be cast on the plan of merger if such business combination is approved and recommended to the shareholders by
(x) the affirmative vote of two-thirds of Seacoast’s board of directors, and (y) a majority of the Continuing Directors (as defined
in Seacoast’s articles of incorporation).
Seacoast’s articles of incorporation also contain additional provisions that may make takeover attempts and other acquisitions
of interests in it more difficult where the takeover attempt or other acquisition has not been approved by its board of directors.
These provisions include:
•
•
•
•
A requirement that any change to Seacoast’s articles of incorporation relating to the structure of its board of directors,
certain anti-takeover provisions and shareholder proposals must be approved by the affirmative vote of holders of two-
thirds of the shares outstanding and entitled to vote;
A requirement that any change to Seacoast’s bylaws, including any change relating to the number of directors, must be
approved by the affirmative vote of either (a) (i) two-thirds of its board of directors, and (ii) a majority of the
continuing directors (as defined in Seacoast’s articles of incorporation) or (b) (i) two-thirds of the shares entitled to
vote generally in the election of directors and (ii) an Independent Majority of Shareholders. An “Independent Majority
of Shareholders” means the majority of the outstanding voting shares that are not beneficially owned or controlled,
directly or indirectly by a related party. For these purposes, a “related party” means a beneficial owner of 5% or more
of the voting shares, or any person who is an affiliate of Seacoast and at any time within five years was the beneficial
owner of 5% or more of Seacoast’s then outstanding shares; provided, however, that this provision shall not include
(i) any person who is the beneficial owner of more than 5% of Seacoast’s shares on February 28, 2003, (ii) any plan or
trust established for the benefit of Seacoast’s employees generally, or (iii) any subsidiary of Seacoast that holds shares
in a fiduciary capacity, whether or not it has the authority to vote or dispose of such securities;
A requirement that shareholders may call a meeting of shareholders on a proposed issue or issues only upon the receipt
by Seacoast from the holders of 50% of all shares entitled to vote on the proposed issue or issues of signed and dated
written demands for the meeting describing the purpose for which it is to be held; and
A requirement that a shareholder wishing to submit proposals for a shareholder vote or nominate directors for election
comply with certain procedures, including advanced notice requirements.
Seacoast’s articles of incorporation provide that, subject to the rights of any holders of its preferred stock to act by written
consent instead of a meeting, shareholder action may be taken only at an annual meeting or special meeting of the shareholders
and may not be taken by written consent. The articles of incorporation also include provisions that make it difficult to replace
directors. Specifically, directors may be removed only for cause and only upon the affirmative vote at a meeting duly called and
held for that purpose upon not less than thirty days prior written notice of (i) two-thirds of the shares entitled to vote generally
in the election of directors and (ii) an Independent Majority of Shareholders. In addition, any vacancies on the board of
directors for any reason, and any newly created directorships resulting from any increase in the number of directors, may be
filled only by the board of directors (except if no directors remain on the board, in which case the shareholders may act to fill
the vacant board).
Seacoast believes that the power of its board of directors to issue additional authorized but unissued shares of its common stock
or preferred stock without further action by its shareholders, unless required by applicable law or the rules of any stock
exchange or automated quotation system on which its securities may be listed or traded, will provide Seacoast with increased
flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise. Seacoast’s
board of directors could authorize and issue a class or series of stock that could, depending upon the terms of such class or
series, delay, defer or prevent a transaction or a change in control that might involve a premium price for holders of Seacoast’s
common stock or that its shareholders otherwise consider to be in their best interest.
The Company had the following subsidiaries as of the date of this report:
LIST OF SUBSIDIARIES
NAME
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Seacoast National Bank
South Branch Building, Inc.
TC Property Venture, LLC
SBCF Capital Trust I
SBCF Statutory Trust II
SBCF Statutory Trust III
BankFIRST (FL) Statutory Trust I
BankFIRST (FL) Statutory Trust II
The BANKshares Capital Trust I
Grand Bankshares Capital Trust I
Syracuse Holdings, Inc.
Seacoast Insurance Services, Inc.
Seacoast Real Estate Investment Trust, Inc,
EXHIBIT 21
INCORPORATED
United States
Florida
Florida
Delaware
Connecticut
Delaware
Connecticut
Delaware
Delaware
Delaware
Delaware
Florida
Florida
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23.1
We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 333-49972,
333-152931, 333-161014, 333-188290, 333-190507, 333-198682, 333-206589 and 333-226679) and Form S-3 (Nos.
333-249921 and 333-250075) of Seacoast Banking Corporation of Florida (the Company) of our report dated
February 26, 2021, with respect to the consolidated balance sheets of the Company as of December 31, 2020 and
2019, and the related consolidated statements of income, comprehensive income, cash flows, and shareholders’
equity for each of the years in the three-year period ended December 31, 2020, and the effectiveness of internal
control over financial reporting as of December 31, 2020, which report appears in the December 31, 2020 annual
report on Form 10-K of the Company.
Fort Lauderdale, Florida
February 26, 2021
/s/ Crowe LLP
Crowe LLP
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.1
I, Charles M. Shaffer, certify that:
1.
I have reviewed this annual report on Form 10-K of Seacoast Banking Corporation of Florida;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 26, 2021
/s/ Charles M. Shaffer
Charles M. Shaffer
President and Chief Executive Officer
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.2
I, Tracey L. Dexter, certify that:
1.
I have reviewed this annual report on Form 10-K of Seacoast Banking Corporation of Florida;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 26, 2021
/s/ Tracey L. Dexter
Tracey L. Dexter
Executive Vice President and Chief Financial Officer
(principal financial and accounting officer)
EXHIBIT 32.1
STATEMENT OF CHIEF EXECUTIVE OFFICER OF
SEACOAST BANKING CORPORATION OF FLORIDA
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Seacoast Banking Corporation of Florida (“Company”) for the period
ended December 31, 2020 (“Report”), I, Charles M. Shaffer, President and Chief Executive Officer of the Company, do hereby
certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of The Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 26, 2021
/s/ Charles M. Shaffer
Charles M. Shaffer
President and Chief Executive Officer
EXHIBIT 32.2
STATEMENT OF CHIEF FINANCIAL OFFICER OF
SEACOAST BANKING CORPORATION OF FLORIDA
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Seacoast Banking Corporation of Florida (“Company”) for the period
ended December 31, 2020 (“Report”), I, Tracey L. Dexter, Executive Vice President and Chief Financial Officer of the
Company, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of The Sarbanes-Oxley Act of 2002,
that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 26, 2021
/s/ Tracey L. Dexter
Tracey L. Dexter
Executive Vice President and Chief Financial Officer