UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2020~~2021

☐ 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

59-2260678

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

815 COLORADO AVENUE,

STUART

34994

(Address of Principal Executive Offices)

(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

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. Yes ☒ No☐

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). Yes ☒ No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.


Large accelerated filer	☒	Accelerated filer	☐
Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No☒

Common Stock, $0.10 Par Value – ~~55,168,617~~55,436,036 shares as of ~~September~~June 30, ~~2020~~2021

INDEX

SEACOAST BANKING CORPORATION OF FLORIDA


		PAGE #
Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed consolidated statements of income – Three and ~~nine~~six months ended ~~September~~June 30, 2021 ~~30, 2020~~ and ~~2019~~2020	3

	Condensed consolidated statements of comprehensive income – Three and ~~nine~~six months ended ~~September~~June 30, 2021 ~~30, 2020~~ and ~~2019~~2020	4

	Condensed consolidated balance sheets - ~~September~~June 30, 2021 ~~30, 2020~~ and December 31, ~~2019~~2020	5

	Consolidated statements of cash flows – ~~Nine~~Six months ended ~~September~~June 30, 2021 ~~30, 2020~~ and ~~2019~~2020	6

	Consolidated statements of shareholders' equity - Three and ~~nine~~six months ended ~~September~~June 30, 2021 ~~30, 2020~~ and ~~2019~~2020	8

	Notes to condensed consolidated financial statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6764

Item 4.	Controls and Procedures	6865

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	6865

Item 1A.	Risk Factors	6865

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7166

Item 3.	Defaults upon Senior Securities	7166

Item 4.	Mine Safety Disclosures	7266

Item 5.	Other Information	7266

Item 6.	Exhibits	7267

SIGNATURES		7369

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	(In thousands, except per share data)	2020		2019		2020		2019		(In thousands, except per share data)	2021		2020		2021		2020
Interest and fees on loans	Interest and fees on loans	$	60,487	$	63,092	$	188,771	$	187,667	Interest and fees on loans	$	60,348	$	64,844	$	122,646	$	128,284

Interest and dividends on securities	Interest and dividends on securities	7,097		8,933		23,609		27,279		Interest and dividends on securities	6,706		7,694		13,152		16,512

Interest on interest bearing deposits and other investments	Interest on interest bearing deposits and other investments	556		800		1,974		2,591		Interest on interest bearing deposits and other investments	709		684		1,295		1,418

Total Interest Income	Total Interest Income	68,140		72,825		214,354		217,537		Total Interest Income	67,763		73,222		137,093		146,214

Interest on deposits	Interest on deposits	1,299		4,334		5,692		13,032		Interest on deposits	980		1,203		2,045		4,393

Interest on time certificates	Interest on time certificates	2,673		6,009		11,261		16,692		Interest on time certificates	524		3,820		1,711		8,588

Interest on borrowed money	Interest on borrowed money	665		1,534		3,449		5,955		Interest on borrowed money	457		927		925		2,784

Total Interest Expense	Total Interest Expense	4,637		11,877		20,402		35,679		Total Interest Expense	1,961		5,950		4,681		15,765

Net Interest Income	Net Interest Income	63,503		60,948		193,952		181,858		Net Interest Income	65,802		67,272		132,412		130,449

Provision for credit losses	Provision for credit losses	(845)		2,251		36,279		6,199		Provision for credit losses	(4,855)		7,611		(10,570)		37,124

Net Interest Income after Provision for Credit Losses	Net Interest Income after Provision for Credit Losses	64,348		58,697		157,673		175,659		Net Interest Income after Provision for Credit Losses	70,657		59,661		142,982		93,325

Noninterest income	Noninterest income									Noninterest income
Other income	Other income	16,942		14,790		45,387		41,678		Other income	15,377		13,776		33,162		28,445

Securities gains (losses), net		4		(847)		1,253		(1,322)
Securities (losses) gains, net										Securities (losses) gains, net	(55)		1,230		(169)		1,249

Total Noninterest Income (Note H)		16,946		13,943		46,640		40,356
Total Noninterest Income (Note I – Noninterest Income and Expense)										Total Noninterest Income (Note I – Noninterest Income and Expense)	15,322		15,006		32,993		29,694

Total Noninterest Expenses (Note H)		51,674		38,583		141,871		122,682
Total Noninterest Expenses (Note I – Noninterest Income and Expense)										Total Noninterest Expenses (Note I – Noninterest Income and Expense)	45,784		42,399		91,904		90,197

Income Before Income Taxes	Income Before Income Taxes	29,620		34,057		62,442		93,333		Income Before Income Taxes	40,195		32,268		84,071		32,822

Provision for income taxes	Provision for income taxes	6,992		8,452		14,025		21,770		Provision for income taxes	8,785		7,188		18,942		7,033

Net Income	Net Income	$	22,628	$	25,605	$	48,417	$	71,563	Net Income	$	31,410	$	25,080	$	65,129	$	25,789

Share Data	Share Data									Share Data
Net income per share of common stock	Net income per share of common stock									Net income per share of common stock
Diluted	Diluted	$	0.42	$	0.49	$	0.91	$	1.38	Diluted	$	0.56	$	0.47	$	1.17	$	0.49

Basic	Basic	0.42		0.50		0.91		1.39		Basic	0.57		0.47		1.18		0.49

Average common shares outstanding	Average common shares outstanding									Average common shares outstanding
Diluted	Diluted	54,301		51,935		53,325		51,996		Diluted	55,901		53,308		55,827		52,807

Basic	Basic	53,978		51,473		52,926		51,426		Basic	55,421		52,985		55,347		52,394

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2020 2019 2020 2019
Net Income $ 22,628 $ 25,605 $ 48,417 $ 71,563
Other comprehensive income:
Unrealized gains on securities available-for-sale 2,301 5,555 19,986 29,864
Reclassification of unrealized losses on securities transferred to available-for-sale upon adoption of new accounting pronouncement 0 0 0 (730)
Amortization of unrealized losses on securities transferred to held-to-maturity, net 55 59 173 202
Reclassification adjustment for (gains) losses included in net income (4) 895 (1,097) 1,538
Provision for income taxes (423) (1,468) (4,304) (7,503)
Total other comprehensive income 1,929 5,041 14,758 23,371
Comprehensive Income $ 24,557 $ 30,646 $ 63,175 $ 94,934


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2021		2020		2021		2020
Net Income	$	31,410	$	25,080	$	65,129	$	25,789

Other comprehensive income (loss):

Available-for-sale securities:
Unrealized gains (losses) on available-for-sale securities, net of tax expense of $0.2 million and tax benefit of $3.0 million for the three and six months ended June 30, 2021, respectively, and tax expense of $3.6 million for each of the three and six months ended June 30, 2020	$	296	$	14,004	$	(10,555)	$	14,134

Amortization of unrealized gains and losses on securities transferred to held-to-maturity, net of tax expense of $5 thousand and $11 thousand for the three and six months ended June 30, 2021, respectively, and tax expense of $12 thousand and $25 thousand for the three and six months ended June 30, 2020, respectively	20		47		44		94
Reclassification adjustment for losses (gains) included in net income, net of tax benefit of $19 thousand for each of the three and six months ended June 30, 2021, and tax expense of $0.3 million for each of the three and six months ended June 30, 2020	91		(1,516)		91		(1,399)
Available-for-sale securities, net of tax	$	407	$	12,535	$	(10,420)	$	12,829

Unrealized losses on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax benefit of $4 thousand and $51 thousand for the three and six months ended June 30, 2021, respectively	$	(11)	$	0	(149)		0

Total other comprehensive income (loss)	$	396	$	12,535	$	(10,569)	$	12,829

Comprehensive Income	$	31,806	$	37,615	$	54,560	$	38,618

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


		September 30,		December 31,			June 30,		December 31,
(In thousands, except share data)	(In thousands, except share data)	2020		2019		(In thousands, except share data)	2021		2020
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	81,692	$	89,843	Cash and due from banks	$	97,468	$	86,630
Interest bearing deposits with other banks	Interest bearing deposits with other banks	227,876		34,688		Interest bearing deposits with other banks	1,351,377		317,458
Total cash and cash equivalents	Total cash and cash equivalents	309,568		124,531		Total cash and cash equivalents	1,448,845		404,088

Time deposits with other banks	Time deposits with other banks	2,247		3,742		Time deposits with other banks	750		750

Debt securities:	Debt securities:					Debt securities:
Securities available-for-sale (at fair value)	Securities available-for-sale (at fair value)	1,286,858		946,855		Securities available-for-sale (at fair value)	1,322,776		1,398,157
Securities held-to-maturity (fair value $216,000 at September 30, 2020 and $262,213 at December 31, 2019)		207,376		261,369
Securities held-to-maturity (fair value $489.3 million at June 30, 2021 and $192.2 million at December 31, 2020)						Securities held-to-maturity (fair value $489.3 million at June 30, 2021 and $192.2 million at December 31, 2020)	493,467		184,484
Total debt securities	Total debt securities	1,494,234		1,208,224		Total debt securities	1,816,243		1,582,641

Loans held for sale (at fair value)	Loans held for sale (at fair value)	73,046		20,029		Loans held for sale (at fair value)	42,793		68,890

Loans	Loans	5,858,029		5,198,404		Loans	5,437,049		5,735,349
Less: Allowance for credit losses	Less: Allowance for credit losses	(94,013)		(35,154)		Less: Allowance for credit losses	(81,127)		(92,733)
Loans, net of allowance for credit losses	Loans, net of allowance for credit losses	5,764,016		5,163,250		Loans, net of allowance for credit losses	5,355,922		5,642,616

Bank premises and equipment, net	Bank premises and equipment, net	76,393		66,615		Bank premises and equipment, net	69,392		75,117
Other real estate owned	Other real estate owned	15,890		12,390		Other real estate owned	12,804		12,750
Goodwill	Goodwill	221,176		205,286		Goodwill	221,176		221,176
Other intangible assets, net	Other intangible assets, net	18,163		20,066		Other intangible assets, net	14,106		16,745
Bank owned life insurance	Bank owned life insurance	130,887		126,181		Bank owned life insurance	158,506		131,776
Net deferred tax assets	Net deferred tax assets	25,503		16,457		Net deferred tax assets	21,839		23,629
Other assets	Other assets	156,717		141,740		Other assets	154,457		162,214
Total Assets	Total Assets	$	8,287,840	$	7,108,511	Total Assets	$	9,316,833	$	8,342,392

Liabilities	Liabilities					Liabilities
Deposits	Deposits	$	6,914,843	$	5,584,753	Deposits	$	7,836,436	$	6,932,561
Securities sold under agreements to repurchase, maturing within 30 days	Securities sold under agreements to repurchase, maturing within 30 days	89,508		86,121		Securities sold under agreements to repurchase, maturing within 30 days	119,973		119,609
Federal Home Loan Bank (FHLB) borrowings		35,000		315,000

Subordinated debt	Subordinated debt	71,295		71,085		Subordinated debt	71,506		71,365
Other liabilities	Other liabilities	78,853		65,913		Other liabilities	106,571		88,455
Total Liabilities	Total Liabilities	7,189,499		6,122,872		Total Liabilities	8,134,486		7,211,990

Shareholders' Equity	Shareholders' Equity					Shareholders' Equity
Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 55,499,401 and outstanding 55,168,617 at September 30, 2020, and authorized 120,000,000, issued 51,760,617 and outstanding 51,513,733 shares at December 31, 2019		5,517		5,151
Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 55,830,068 and outstanding 55,436,036 at June 30, 2021, and authorized 120,000,000, issued 55,584,979 and outstanding 55,243,226 shares at December 31, 2020						Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 55,830,068 and outstanding 55,436,036 at June 30, 2021, and authorized 120,000,000, issued 55,584,979 and outstanding 55,243,226 shares at December 31, 2020	5,544		5,524
Other shareholders' equity	Other shareholders' equity	1,092,824		980,488		Other shareholders' equity	1,176,803		1,124,878
Total Shareholders' Equity	Total Shareholders' Equity	1,098,341		985,639		Total Shareholders' Equity	1,182,347		1,130,402
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	8,287,840	$	7,108,511	Total Liabilities and Shareholders' Equity	$	9,316,833	$	8,342,392

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net income	Net income	$	48,417	$	71,563	Net income	$	65,129	$	25,789
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	Depreciation	4,531		4,899		Depreciation	2,792		3,031
Amortization of premiums and discounts on securities, net	Amortization of premiums and discounts on securities, net	2,890		1,876		Amortization of premiums and discounts on securities, net	4,012		1,746
Amortization of operating lease right-of-use assets	Amortization of operating lease right-of-use assets	3,274		3,068		Amortization of operating lease right-of-use assets	2,127		2,363
Other amortization and accretion, net	Other amortization and accretion, net	(4,402)		(1,914)		Other amortization and accretion, net	(7,307)		(366)
Stock based compensation	Stock based compensation	5,471		5,773		Stock based compensation	4,262		3,524
Origination of loans designated for sale	Origination of loans designated for sale	(378,069)		(234,130)		Origination of loans designated for sale	(283,001)		(203,935)
Sale of loans designated for sale	Sale of loans designated for sale	335,882		227,711		Sale of loans designated for sale	318,479		174,450
Provision for credit losses	Provision for credit losses	36,279		6,199		Provision for credit losses	(10,570)		37,124
Deferred income taxes	Deferred income taxes	(6,257)		4,442		Deferred income taxes	4,833		(3,328)
(Gains) losses on sale of securities		(1,102)		1,538
Losses (gains) on sale of securities						Losses (gains) on sale of securities	73		(1,092)
Gains on sale of loans	Gains on sale of loans	(10,585)		(6,683)		Gains on sale of loans	(9,411)		(5,303)
Gains on sale and write-downs of other real estate owned	Gains on sale and write-downs of other real estate owned	(278)		(279)		Gains on sale and write-downs of other real estate owned	(380)		(485)
Losses on disposition of fixed assets		790		506
Bank owned life insurance death benefits		0		(956)
Losses on disposition of fixed assets and write-downs upon transfer of bank premises to other real estate owned						Losses on disposition of fixed assets and write-downs upon transfer of bank premises to other real estate owned	316		220

Changes in operating assets and liabilities, net of effects from acquired companies:	Changes in operating assets and liabilities, net of effects from acquired companies:					Changes in operating assets and liabilities, net of effects from acquired companies:
Net increase in other assets		(27,735)		(1,585)
Net increase (decrease) in other liabilities		9,174		(6,721)
Net decrease (increase) in other assets						Net decrease (increase) in other assets	1,086		(22,451)
Net (decrease) increase in other liabilities						Net (decrease) increase in other liabilities	(10,726)		19,139
Net cash provided by operating activities	Net cash provided by operating activities	18,280		75,307		Net cash provided by operating activities	81,714		30,426

Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Maturities and repayments of debt securities available-for-sale	Maturities and repayments of debt securities available-for-sale	211,798		67,951		Maturities and repayments of debt securities available-for-sale	288,171		134,488
Maturities and repayments of debt securities held-to-maturity	Maturities and repayments of debt securities held-to-maturity	53,409		30,382		Maturities and repayments of debt securities held-to-maturity	73,697		33,969
Proceeds from sale of debt securities available-for-sale	Proceeds from sale of debt securities available-for-sale	96,733		122,906		Proceeds from sale of debt securities available-for-sale	56,217		92,314
Purchases of debt securities available-for-sale	Purchases of debt securities available-for-sale	(626,731)		(164,451)		Purchases of debt securities available-for-sale	(468,430)		(239,160)
Purchases of debt securities held-to-maturity						Purchases of debt securities held-to-maturity	(172,004)		0
Maturities of time deposits with other banks	Maturities of time deposits with other banks	1,495		3,664		Maturities of time deposits with other banks	0		1,246
Net new loans and principal repayments	Net new loans and principal repayments	(204,282)		(48,600)		Net new loans and principal repayments	346,173		(431,182)
Purchases of loans held for investment	Purchases of loans held for investment	0		(117,853)		Purchases of loans held for investment	(38,822)		0
Proceeds from sale of other real estate owned	Proceeds from sale of other real estate owned	6,174		5,153		Proceeds from sale of other real estate owned	4,954		4,503
Additions to other real estate owned	Additions to other real estate owned	(2,004)		0		Additions to other real estate owned	(1,310)		0
Proceeds from sale of FHLB and Federal Reserve Bank Stock	Proceeds from sale of FHLB and Federal Reserve Bank Stock	37,697		46,283		Proceeds from sale of FHLB and Federal Reserve Bank Stock	2,704		33,448
Purchase of FHLB and Federal Reserve Bank Stock	Purchase of FHLB and Federal Reserve Bank Stock	(26,976)		(36,093)		Purchase of FHLB and Federal Reserve Bank Stock	(59)		(26,227)

Net cash from bank acquisitions		71,965		0
Proceeds from bank owned life insurance		0		14,218
Net cash from bank acquisition						Net cash from bank acquisition	0		33,883
Purchase of bank owned life insurance						Purchase of bank owned life insurance	(25,000)		0
Additions to bank premises and equipment	Additions to bank premises and equipment	(1,373)		(2,254)		Additions to bank premises and equipment	(701)		(880)
Net cash used in investing activities		(382,095)		(78,694)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	65,590		(363,598)

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020
Cash Flows from Financing Activities	Cash Flows from Financing Activities					Cash Flows from Financing Activities
Net increase in deposits	Net increase in deposits	$	826,686	$	495,901	Net increase in deposits	$	903,875	$	908,288
Net increase (decrease) in federal funds purchased and repurchase agreements		3,387		(143,909)
Net increase in repurchase agreements						Net increase in repurchase agreements	364		6,004
Net decrease in FHLB borrowings with original maturities of three months or less	Net decrease in FHLB borrowings with original maturities of three months or less	(235,000)		(267,000)		Net decrease in FHLB borrowings with original maturities of three months or less	0		(315,000)
Repayments of FHLB borrowings with original maturities of more than three months		(80,000)		(63,000)

Proceeds from FHLB borrowings with original maturities of more than three months	Proceeds from FHLB borrowings with original maturities of more than three months	35,000		0		Proceeds from FHLB borrowings with original maturities of more than three months	0		135,000

Stock based employee benefit plans	Stock based employee benefit plans	(1,221)		(2,296)		Stock based employee benefit plans	369		(1,331)
Dividends paid	Dividends paid	0		0		Dividends paid	(7,155)		0
Net cash provided by financing activities	Net cash provided by financing activities	548,852		19,696		Net cash provided by financing activities	897,453		732,961
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	185,037		16,309		Net increase in cash and cash equivalents	1,044,757		399,789
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	124,531		115,951		Cash and cash equivalents at beginning of period	404,088		124,531
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	309,568	$	132,260	Cash and cash equivalents at end of period	$	1,448,845	$	524,320

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid during the period for interest	Cash paid during the period for interest	$	19,834	$	35,255	Cash paid during the period for interest	$	6,462	$	15,756
Cash paid during the period for taxes	Cash paid during the period for taxes	21,712		13,500		Cash paid during the period for taxes	17,700		3,492
Recognition of operating lease right-of-use assets	Recognition of operating lease right-of-use assets	1,887		29,430		Recognition of operating lease right-of-use assets	35		52
Recognition of operating lease liabilities	Recognition of operating lease liabilities	1,887		33,756		Recognition of operating lease liabilities	35		52

Supplemental disclosure of non-cash investing activities:	Supplemental disclosure of non-cash investing activities:					Supplemental disclosure of non-cash investing activities:
Transfer of debt securities from held-to-maturity to available-for-sale		$	0	$	52,796
Transfer of debt securities from available-for-sale to held-to-maturity						Transfer of debt securities from available-for-sale to held-to-maturity	$	210,805	$	0
Unsettled purchases of debt securities available-for-sale						Unsettled purchases of debt securities available-for-sale	28,750		0
Transfers from loans to other real estate owned	Transfers from loans to other real estate owned	5,552		5,665		Transfers from loans to other real estate owned	0		6,186
Transfers from bank premises to other real estate owned	Transfers from bank premises to other real estate owned	1,289		0		Transfers from bank premises to other real estate owned	3,318		1,289

See notes to unaudited condensed consolidated financial statements.

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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)


															Accumulated
															Other																															Accumulated Other Comprehensive Income (Loss)
		Common Stock			Paid-in			Retained			Treasury			Comprehensive							Common Stock					Paid-in Capital						Retained Earnings					Treasury Stock						Accumulated Other Comprehensive Income (Loss)
(In thousands)	(In thousands)	Shares	Amount			Capital			Earnings			Stock			Income (Loss)		Total			(In thousands)			Shares		Amount		Paid-in Capital						Retained Earnings						Treasury Stock									Total			Accumulated Other Comprehensive Income (Loss)
Balance at June 30, 2020		52,991	$	5,299		$	811,321		$	204,726		$	(8,037)		$	17,294	$	1,030,603
Balance at March 31, 2021																			Balance at March 31, 2021			55,294		$	5,529				$	858,688							$	290,420					$	(8,693)				$	9,405
Comprehensive income	Comprehensive income	—	—			—			22,628			—			1,929		24,557			Comprehensive income			—		—						—					31,410						—					396					31,806
Stock based compensation expense	Stock based compensation expense	39	—			1,948			—			—			—		1,948			Stock based compensation expense			—		—				2,503						—						—					—					2,503
Common stock transactions related to stock based employee benefit plans	Common stock transactions related to stock based employee benefit plans	18	6			(6)			—			96			—		96			Common stock transactions related to stock based employee benefit plans			94		10				(18)						—						(1,487)					—					(1,495)
Common stock issued for stock options	Common stock issued for stock options	1	—			16			—			—			—		16			Common stock issued for stock options			48		5				1,425						—						—					—					1,430
Issuance of common stock, pursuant to acquisition		2,120	212			40,909			—			—			—		41,121
Three months ended September 30, 2020		2,178	218			42,867			22,628			96			1,929		67,738
Balance at September 30, 2020		55,169	$	5,517		$	854,188		$	227,354		$	(7,941)		$	19,223	$	1,098,341

Dividends on common stock ($0.13 per share)																			Dividends on common stock ($0.13 per share)			—		—				—						(7,246)						—					—					(7,246)
Three months ended June 30, 2021																			Three months ended June 30, 2021			142		15				3,910						24,164						(1,487)					396					26,998
Balance at June 30, 2021																			Balance at June 30, 2021			55,436		$	5,544			$	862,598					$	314,584					$	(10,180)				$	9,801				$	1,182,347


																															Accumulated Other Comprehensive Income (Loss)
																			Common Stock			Paid-in Capital			Retained Earnings			Treasury Stock
(In thousands)																		(In thousands)	Shares	Amount													Total		Accumulated Other Comprehensive Income (Loss)
Balance at March 31, 2020																		Balance at March 31, 2020	52,709	$	5,271		$	809,533		$	179,646		$	(7,422)			$	4,759
Comprehensive income																		Comprehensive income	—	—			—			25,080			—		12,535
Stock based compensation expense																		Stock based compensation expense	—	—			1,523			—			—		—					1,523
Common stock transactions related to stock based employee benefit plans																		Common stock transactions related to stock based employee benefit plans	262	26			(15)			—			(615)		—					(604)
Common stock issued for stock options																		Common stock issued for stock options	20	2			280			—			—		—					282

Three months ended June 30, 2020																		Three months ended June 30, 2020	282	28			1,788			25,080			(615)		12,535					38,816
Balance at June 30, 2020																		Balance at June 30, 2020	52,991	$	5,299		$	811,321		$	204,726		$	(8,037)	$	17,294				$	1,030,603

														Accumulated
														Other
	Common Stock			Paid-in			Retained			Treasury			Comprehensive
(In thousands)	Shares	Amount			Capital			Earnings			Stock			Income (Loss)		Total
Balance at June 30, 2019	51,461	$	5,146		$	782,928		$	143,032		$	(6,137)		$	5,270	$	930,239
Comprehensive income	—	—			—			25,605			—			5,041		30,646

Stock based compensation expense	30	—			1,745			—			—			—		1,745
Common stock transactions related to stock based employee benefit plans	(9)	2			(12)			—			58			—		48

Three months ended September 30, 2019	21	2			1,733			25,605			58			5,041		32,439
Balance at September 30, 2019	51,482	$	5,148		$	784,661		$	168,637		$	(6,079)		$	10,311	$	962,678


																															Accumulated Other Comprehensive Income (Loss)
																			Common Stock			Paid-in Capital			Retained Earnings			Treasury Stock
(In thousands)																		(In thousands)	Shares	Amount													Total		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2020																		Balance at December 31, 2020	55,243	$	5,524		$	856,092		$	256,701		$	(8,285)			$	20,370
Comprehensive income																		Comprehensive income	—	—			—			65,129			—		(10,569)
Stock based compensation expense																		Stock based compensation expense	—	—			4,262			—			—		—					4,262
Common stock transactions related to stock based employee benefit plans																		Common stock transactions related to stock based employee benefit plans	114	12			(18)			—			(1,895)		—					(1,901)
Common stock issued for stock options																		Common stock issued for stock options	79	8			2,262			—			—		—					2,270

Dividends on common stock ($0.13 per share)																		Dividends on common stock ($0.13 per share)	—	—			—			(7,246)			—		—					(7,246)
Six months ended June 30, 2021																		Six months ended June 30, 2021	193	20			6,506			57,883			(1,895)		(10,569)					51,945
Balance at June 30, 2021																		Balance at June 30, 2021	55,436	$	5,544		$	862,598		$	314,584		$	(10,180)	$	9,801				$	1,182,347

														Accumulated
														Other
	Common Stock			Paid-in			Retained			Treasury			Comprehensive
(In thousands)	Shares	Amount			Capital			Earnings			Stock			Income (Loss)		Total
Balance at December 31, 2019	51,514	$	5,151		$	786,242		$	195,813		$	(6,032)		$	4,465	$	985,639
Comprehensive income	—	—			—			48,417			—			14,758		63,175
Stock based compensation expense	39	—			5,471			—			—			—		5,471
Common stock transactions related to stock based employee benefit plans	395	44			(53)			—			(1,909)			—		(1,918)
Common stock issued for stock options	58	6			692			—			—			—		698
Cumulative change in accounting principle upon adoption of new accounting pronouncement (See Note A - Basis of Presentation)	—	—			—			(16,876)			—			—		(16,876)
Issuance of common stock, pursuant to acquisition	3,163	316			61,836			—			—			—		62,152
Nine months ended September 30, 2020	3,655	366			67,946			31,541			(1,909)			14,758		112,702
Balance at September 30, 2020	55,169	$	5,517		$	854,188		$	227,354		$	(7,941)		$	19,223	$	1,098,341


																															Accumulated Other Comprehensive Income (Loss)
																			Common Stock			Paid-in Capital			Retained Earnings			Treasury Stock
(In thousands)																		(In thousands)	Shares	Amount													Total		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2019																		Balance at December 31, 2019	51,514	$	5,151		$	786,242		$	195,813		$	(6,032)			$	4,465
Comprehensive income																		Comprehensive income	—	—			—			25,789			—		12,829
Stock based compensation expense																		Stock based compensation expense	—	—			3,523			—			—		—					3,523
Common stock transactions related to stock based employee benefit plans																		Common stock transactions related to stock based employee benefit plans	377	38			(47)			—			(2,005)		—					(2,014)
Common stock issued for stock options																		Common stock issued for stock options	57	6			676			—			—		—					682
Cumulative change in accounting principle upon adoption of new accounting pronouncement																		Cumulative change in accounting principle upon adoption of new accounting pronouncement	—	—			—			(16,876)			—		—					(16,876)
Issuance of common stock, pursuant to acquisition																		Issuance of common stock, pursuant to acquisition	1,043	104			20,927			—			—		—					21,031
Six months ended June 30, 2020																		Six months ended June 30, 2020	1,477	148			25,079			8,913			(2,005)		12,829					44,964
Balance at June 30, 2020																		Balance at June 30, 2020	52,991	$	5,299		$	811,321		$	204,726		$	(8,037)	$	17,294				$	1,030,603

														Accumulated
														Other
	Common Stock			Paid-in			Retained			Treasury			Comprehensive
(In thousands)	Shares	Amount			Capital			Earnings			Stock			Income (Loss)		Total
Balance at December 31, 2018	51,361	$	5,136		$	778,501		$	97,074		$	(3,384)		$	(13,060)	$	864,267
Comprehensive income	—	—			—			71,563			—			23,371		94,934
Stock based compensation expense	30	—			5,773			—			—			—		5,773
Common stock transactions related to stock based employee benefit plans	62	9			(38)			—			(2,695)			—		(2,724)
Common stock issued for stock options	29	3			425			—			—			—		428
Nine months ended September 30, 2019	121	12			6,160			71,563			(2,695)			23,371		98,411
Balance at September 30, 2019	51,482	$	5,148		$	784,661		$	168,637		$	(6,079)		$	10,311	$	962,678

See notes to unaudited condensed consolidated financial statements.

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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A – Basis of Presentation

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements of Seacoast Banking Corporation of Florida and its subsidiaries (the "Company") have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current period presentation.

Operating results for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020~~2021 or any other period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Use of Estimates: The preparation of these condensed 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. 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 ~~adjustments, income taxes and realization of deferred tax assets~~measurements and contingent liabilities.

~~Adoption of new accounting pronouncements:~~

~~On January 1, 2020, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 326~~ ~~Financial Instruments - Credit Losses~~ ~~("ASC Topic 326")~~which replaces 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 period amounts continue to be reported in accordance with previously applicable GAAP. The following table reflects the cumulative effect of adoption:

(in thousands) December 31, 2019 CECL adoption impact January 1, 2020
Loans $ 5,198,404 $ (706) $ 5,197,698
Allowance for credit losses 35,154 21,226 56,380
Reserve for unfunded commitments 140 1,837 1,977
Deferred tax assets 16,457 (5,481) 10,976
Retained earnings 195,813 (16,876) 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 impaired ("PCI") to PCD, and increased the allowance by $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.

~~Table of Contents~~

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 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 ("TDR") will be executed with an individual borrower, or the extension or renewal options are explicitly stated in the contract and are not unconditionally under the control of 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 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 on 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. Loans evaluated individually are collateral dependent and primarily secured by real estate. 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.

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. See Note E - Loans for information on loan modifications offered by the Company under this guidance. 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.

The Company estimates a reserve for 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.

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 0 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

~~Table of Contents~~

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.

~~In March 2020, the FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848)~~. The guidance provides accounting relief to contract modifications that replace an interest rate impacted by reference rate reform (e.g. London Inter-Bank Offered Rate ("LIBOR")) with a new alternative reference rate. The guidance is applicable to investment securities, receivables, loans, debt, leases, derivatives and hedge accounting elections, and other contractual arrangements. The Company applied the guidance prospectively beginning April 1, 2020, with no material impact on its financial position, results of operations or cash flows.

Note B – Recently Issued Accounting Standards, Not Yet Adopted

None applicable this period.

Table of Contents

Note C – 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 period.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, 0 options to purchase ~~508,000~~ shares of the Company's common stock were anti-dilutive, compared to 508,000 and ~~accordingly,~~489,000 shares that were excluded in the computation of diluted earnings per share ~~compared to 492,000 shares~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020, respectively.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2020		2019		2020		2019		(Dollars in thousands, except per share data)	2021		2020		2021		2020
Basic earnings per share	Basic earnings per share									Basic earnings per share
Net income	Net income	$	22,628	$	25,605	$	48,417	$	71,563	Net income	$	31,410	$	25,080	$	65,129	$	25,789
Average common shares outstanding	Average common shares outstanding	53,978		51,473		52,926		51,426		Average common shares outstanding	55,421		52,985		55,347		52,394
Net income per share	Net income per share	$	0.42	$	0.50	$	0.91	$	1.39	Net income per share	$	0.57	$	0.47	$	1.18	$	0.49

Diluted earnings per share	Diluted earnings per share									Diluted earnings per share
Net income	Net income	$	22,628	$	25,605	$	48,417	$	71,563	Net income	$	31,410	$	25,080	$	65,129	$	25,789
Average common shares outstanding	Average common shares outstanding	53,978		51,473		52,926		51,426		Average common shares outstanding	55,421		52,985		55,347		52,394
Add: Dilutive effect of employee restricted stock and stock options	Add: Dilutive effect of employee restricted stock and stock options	323		462		399		570		Add: Dilutive effect of employee restricted stock and stock options	480		323		480		413
Average diluted shares outstanding	Average diluted shares outstanding	54,301		51,935		53,325		51,996		Average diluted shares outstanding	55,901		53,308		55,827		52,807
Net income per share	Net income per share	$	0.42	$	0.49	$	0.91	$	1.38	Net income per share	$	0.56	$	0.47	$	1.17	$	0.49
Net income has not been allocated to unvested restricted stock awards that are participating securities because the amounts that would be allocated are not material to net income per share of common stock. Unvested restricted stock awards that are participating securities represent less than one percent of all of the outstanding shares of common stock for each of the periods presented.										Net income has not been allocated to unvested restricted stock awards that are participating securities because the amounts that would be allocated are not material to net income per share of common stock. Unvested restricted stock awards that are participating securities represent less than one percent of all of the outstanding shares of common stock for each of the periods presented.

~~Table of Contents~~

Note D – Securities

The amortized cost, gross unrealized gains and losses and fair value of securities available-for-sale and held-to-maturity at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 are summarized as follows:

September 30, 2020
(In thousands) Amortized
Cost Gross
Unrealized
Gains Gross Unrealized
Losses Fair
Value
Debt securities available-for-sale
U.S. Treasury securities and obligations of U.S. government agencies $ 8,518 $ 534 $ (1) $ 9,051
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 916,231 23,676 (646) 939,261
Private mortgage-backed securities and collateralized mortgage obligations 98,984 2,099 (298) 100,785
Collateralized loan obligations 203,834 157 (2,613) 201,378
Obligations of state and political subdivisions 34,312 2,168 (97) 36,383
Totals $ 1,261,879 $ 28,634 $ (3,655) $ 1,286,858
Debt securities held-to-maturity
Mortgage-backed securities of U.S. government-sponsored entities $ 207,376 $ 8,642 $ (18) $ 216,000
Totals $ 207,376 $ 8,642 $ (18) $ 216,000

December 31, 2019
(In thousands) Amortized
Cost Gross Unrealized
Gains Gross Unrealized
Losses Fair
Value
Debt securities available-for-sale
U.S. Treasury securities and obligations of U.S. government agencies $ 9,914 $ 204 $ (4) $ 10,114
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 604,934 5,784 (1,511) 609,207
Private mortgage-backed securities and collateralized mortgage obligations 56,005 1,561 (5) 57,561
Collateralized loan obligations 239,364 7 (1,153) 238,218
Obligations of state and political subdivisions 30,548 1,208 (1) 31,755
Totals $ 940,765 $ 8,764 $ (2,674) $ 946,855
Debt securities held-to-maturity
Mortgage-backed securities of U.S. government-sponsored entities 261,369 2,717 (1,873) 262,213
Totals $ 261,369 $ 2,717 $ (1,873) $ 262,213

Proceeds from sales of securities during the three months ended September 30, 2020 were $4.4 million. During this period, the Company recorded 0minal gross gains and 0 gross losses. For the three months ended September 30, 2019, proceeds from sales of securities were $49.6 million, which resulted in gross losses of $0.9 million on available-for-sale debt securities and an increase of $0.1 million in the value of an investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities are included in "Securities gains (losses), net".

Proceeds from sales of securities during the nine months ended September 30, 2020 and 2019 were $96.7 million and $122.9 million, respectively. Included in "Securities gains (losses), net" are gross gains of $2.4 million and gross losses of $1.3 million for the nine months ended September 30, 2020, and gross gains of $0.3 million and gross losses of $1.8 million for the nine months ended September 30, 2019. "Securities gains (losses), net" also includes an increase of $0.2 million for each of the nine


	June 30, 2021
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities available-for-sale
U.S. Treasury securities and obligations of U.S. government agencies	$	7,412	$	439	$	(2)	$	7,849

Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	987,402		14,224		(5,906)		995,720

Private mortgage-backed securities and collateralized mortgage obligations	73,469		1,938		(218)		75,189

Collateralized loan obligations	209,835		22		(165)		209,692

Obligations of state and political subdivisions	32,288		2,038		0		34,326

Totals	$	1,310,406	$	18,661	$	(6,291)	$	1,322,776


Debt securities held-to-maturity
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	$	493,467	$	5,697	$	(9,875)	$	489,289

Totals	$	493,467	$	5,697	$	(9,875)	$	489,289

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	December 31, 2020
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities available-for-sale
U.S. Treasury securities and obligations of U.S. government agencies	$	8,250	$	528	$	(1)	$	8,777
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	1,038,437		23,457		(1,240)		1,060,654
Private mortgage-backed securities and collateralized mortgage obligations	89,284		2,131		(210)		91,205
Collateralized loan obligations	202,563		279		(647)		202,195
Obligations of state and political subdivisions	33,005		2,321		0		35,326
Totals	$	1,371,539	$	28,716	$	(2,098)	$	1,398,157

Debt securities held-to-maturity
Mortgage-backed securities of U.S. government-sponsored entities	$	184,484	$	7,818	$	(123)	$	192,179


Totals	$	184,484	$	7,818	$	(123)	$	192,179

Proceeds from sales of securities for the three and six months ended ~~September~~June 30, 2021 were $56.2 million, resulting in gross gains of $0.2 million and gross losses of $0.3 million. For the three months ended June 30, 2020, proceeds from sales of securities were $64.5 million, which resulted in gross gains of $2.3 million and ~~2019,~~gross losses of $1.1 million. For the six months ended June 30, 2020, proceeds from sales of securities were $92.3 million, which resulted in gross gains of $2.4 million and gross losses of $1.3 million.

Also included in “Securities gains (losses), net” is an increase of $18 thousand and a decrease of $0.1 million for the three and six months ended June 30, 2021, respectively, and increases of $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively, in the value of a CRA-qualified mutual fund.

During the first quarter of 2021, the Company reclassified debt securities with an ~~investment~~amortized cost of $210.8 million from available-for-sale to held-to-maturity, as it has the ability and intent to hold these securities to maturity. These securities had net unrealized gains of $0.8 million at the date of transfer, which will continue to be reported in ~~shares~~accumulated other comprehensive income, and will be amortized over the remaining life of ~~a mutual fund that invests primarily in CRA-qualified debt securities.~~the securities as an adjustment of yield. The effect on interest income of the amortization of net unrealized gains is offset by the amortization of the premium on the securities transferred.

At ~~September~~June 30, ~~2020,~~2021, debt securities with a fair value of ~~$335.9~~$388.1 million were pledged primarily as collateral for public deposits and secured borrowings.

The amortized cost and fair value of debt securities held-to-maturity and available-for-sale at ~~September~~June 30, ~~2020,~~2021, 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.

Held to Maturity Available-for-Sale
(In thousands) Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Due in less than one year $ 0 $ 0 $ 2,096 $ 2,107
Due after one year through five years 0 0 10,986 11,612
Due after five years through ten years 0 0 10,118 10,871
Due after ten years 0 0 19,630 20,844
0 0 42,830 45,434
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities 207,376 216,000 916,231 939,261
Private mortgage-backed securities and collateralized mortgage obligations 0 0 98,984 100,785
Collateralized loan obligations 0 0 203,834 201,378
Totals $ 207,376 $ 216,000 $ 1,261,879 $ 1,286,858

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	Held-to-Maturity				Available-for-Sale
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in less than one year	$	0	$	0	$	400	$	402

Due after one year through five years	0		0		12,316		13,175

Due after five years through ten years	0		0		8,505		8,923

Due after ten years	0		0		18,479		19,675

	0		0		39,700		42,175

Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	493,467		489,289		987,402		995,720

Private mortgage-backed securities and collateralized mortgage obligations	0		0		73,469		75,189

Collateralized loan obligations	0		0		209,835		209,692

Totals	$	493,467	$	489,289	$	1,310,406	$	1,322,776

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, or using observable market data. The tables below indicate ~~at September 30, 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.


		September 30, 2020													June 30, 2021
		Less Than 12 Months				12 Months or Longer				Total					Less Than 12 Months				12 Months or Longer				Total
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. government agencies	U.S. Treasury securities and obligations of U.S. government agencies	$	0	0		$	258	$	(1)	$	258	$	(1)	U.S. Treasury securities and obligations of U.S. government agencies	$	0	$	0	$	251	$	(2)	$	251	$	(2)

Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	248,463		(628)		351		(18)		248,814		(646)		Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	538,907		(5,866)		4,389		(40)		543,296		(5,906)

Private mortgage-backed securities and collateralized mortgage obligations	Private mortgage-backed securities and collateralized mortgage obligations	28,276		(298)		0		0		28,276		(298)		Private mortgage-backed securities and collateralized mortgage obligations	14,979		(195)		1,738		(23)		16,717		(218)

Collateralized loan obligations	Collateralized loan obligations	66,037		(699)		110,500		(1,914)		176,537		(2,613)		Collateralized loan obligations	82,191		(108)		9,450		(57)		91,641		(165)

Obligations of state and political subdivisions		6,782		(97)		0		0		6,782		(97)

Totals	Totals	$	349,558	$	(1,722)	$	111,109	$	(1,933)	$	460,667	$	(3,655)	Totals	$	636,077	$	(6,169)	$	15,828	$	(122)	$	651,905	$	(6,291)

~~Table of Contents~~


		December 31, 2019													December 31, 2020
		Less Than 12 Months				12 Months or Longer				Total					Less Than 12 Months				12 Months or Longer				Total
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. government agencies	U.S. Treasury securities and obligations of U.S. government agencies	$	758	$	(4)	$	0	$	0	$	758	$	(4)	U.S. Treasury securities and obligations of U.S. government agencies	$	0	$	0	$	256	$	(1)	$	256	$	(1)
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	220,057		(1,461)		104,184		(1,923)		324,241		(3,384)		Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	203,405		(1,218)		569		(22)		203,974		(1,240)
Private mortgage-backed securities and collateralized mortgage obligations	Private mortgage-backed securities and collateralized mortgage obligations	2,978		(5)		0		0		2,978		(5)		Private mortgage-backed securities and collateralized mortgage obligations	23,997		(210)		0		0		23,997		(210)
Collateralized loan obligations	Collateralized loan obligations	88,680		(570)		110,767		(583)		199,447		(1,153)		Collateralized loan obligations	104,697		(102)		72,513		(545)		177,210		(647)
Obligations of state and political subdivisions		515		(1)		0		0		515		(1)

Totals	Totals	$	312,988	$	(2,041)	$	214,951	$	(2,506)	$	527,939	$	(4,547)	Totals	$	332,099	$	(1,530)	$	73,338	$	(568)	$	405,437	$	(2,098)

At ~~September~~June 30, ~~2020,~~2021, the Company had $2.6 million in unrealized losses in uncapped 3-month LIBOR floating rate collateralized loan obligations ("CLOs") having a fair value of $176.5 million. CLOs are special purpose vehicles and those in which the Company has invested acquire nearly all first-lien, broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors. As of September 30, 2020, all positions held by the Company are in AAA and AA tranches, with average credit support of 36% and 26%, respectively. The Company evaluates the securities for potential credit losses by modeling expected loan-level defaults, recoveries, and prepayments for each CLO security. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at September 30, 2020, 0 allowance for credit losses has been recorded.

~~At September 30, 2020, the Company had $0.6~~$5.9 million of unrealized losses on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of ~~$248.8~~$543.3 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

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rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at ~~September~~June 30, ~~2020,~~2021, 0 allowance for credit losses has been recorded.

At ~~September~~June 30, ~~2020,~~2021, the Company had ~~$0.3~~$0.2 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of ~~$28.3~~$16.7 million. The collateral underlying these mortgage investments is primarily residential real estate. The securities have average credit support of ~~23%~~35%. 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 ~~September~~June 30, ~~2020,~~2021, 0 allowance for credit losses has been recorded.

At June 30, 2021, the Company had $0.2 million in unrealized losses in uncapped 3-month LIBOR floating rate collateralized loan obligations ("CLOs") having a fair value of $91.6 million. CLOs are special purpose vehicles and those in which the Company has invested acquire nearly all first-lien, broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors. As of June 30, 2021, these positions are in AAA and AA tranches, with average credit support of 34% and 23%, 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 movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at June 30, 2021, 0 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 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 ~~September~~June 30, ~~2020,~~2021, 0 allowance for credit losses has been recorded.

Included in other assets at ~~September~~June 30, ~~2020~~2021 is ~~$34.0~~$31.2 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 that may have a significant adverse effect on the fair value of these cost method investment securities. Also included in other assets is a ~~$6.5~~$6.4 million investment in a CRA-qualified mutual fund carried at fair value. Accrued interest receivable on AFS and HTM debt securities of $2.6 million and $0.8 million at June 30, 2021, respectively, and $3.2 million and ~~$0.5 million at September 30, 2020, respectively, and $3.8 million and $0.6~~$0.4 million at December 31, ~~2019,~~2020, respectively, is also included in other assets.

~~Table of Contents~~

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, and is recorded on the Company's financial records at a 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

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

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


		September 30, 2020									June 30, 2021
(In thousands)	(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total		(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total
Construction and land development	Construction and land development	$	246,312	$	30,720	$	3,578	$	280,610	Construction and land development	$	223,412	$	10,408	$	527	$	234,347
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	817,547		267,223		40,690		1,125,460		Commercial real estate - owner-occupied	889,221		203,847		34,572		1,127,640
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	1,014,993		348,085		31,386		1,394,464		Commercial real estate - non owner-occupied	1,112,290		274,772		25,377		1,412,439
Residential real estate	Residential real estate	1,182,558		201,221		9,617		1,393,396		Residential real estate	1,087,313		131,131		8,092		1,226,536
Commercial and financial	Commercial and financial	711,358		105,327		16,398		833,083		Commercial and financial	811,580		75,245		13,381		900,206
Consumer	Consumer	184,608		7,306		302		192,216		Consumer	166,806		4,949		14		171,769
Paycheck Protection Program	Paycheck Protection Program	584,577		54,223		0		638,800		Paycheck Protection Program	350,531		13,581		0		364,112
Totals	Totals	$	4,741,953	$	1,014,105	$	101,971	$	5,858,029	Totals	$	4,641,153	$	713,933	$	81,963	$	5,437,049

~~Table of Contents~~


		December 31, 2019									December 31, 2020
(In thousands)	(In thousands)	Portfolio Loans		PULs		PCI Loans		Total		(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total
Construction and land development	Construction and land development	$	281,335	$	43,618	$	160	$	325,113	Construction and land development	$	216,420	$	26,250	$	2,438	$	245,108
Commercial real estate1		1,834,811		533,943		10,217		2,378,971
Commercial real estate - owner occupied										Commercial real estate - owner occupied	854,769		247,090		39,451		1,141,310
Commercial real estate - non-owner occupied										Commercial real estate - non-owner occupied	1,043,459		323,273		29,122		1,395,854
Residential real estate	Residential real estate	1,304,305		201,848		1,710		1,507,863		Residential real estate	1,155,914		176,105		10,609		1,342,628
Commercial and financial	Commercial and financial	697,301		80,372		579		778,252		Commercial and financial	743,846		94,627		16,280		854,753
Consumer	Consumer	200,166		8,039		0		208,205		Consumer	181,797		6,660		278		188,735
Paycheck Protection Program										Paycheck Protection Program	515,532		51,429		0		566,961
Totals	Totals	$	4,317,918	$	867,820	$	12,666	$	5,198,404	Totals	$	4,711,737	$	925,434	$	98,178	$	5,735,349
1Commercial real estate includes owner-occupied balances of $1.0 billion for December 31, 2019.

The amortized cost basis of loans at ~~September~~June 30, ~~2020~~2021 included net deferred costs of ~~$21.8~~$25.2 million on non-PPP portfolio loans and net deferred fees of ~~$13.1~~$10.6 million on PPP loans. At December 31, ~~2019,~~2020, the amortized cost basis included net deferred costs of ~~$19.9 million. In the first quarter~~$22.6 million on non-PPP portfolio loans and net deferred fees of ~~2020, the Company completed the acquisition of First Bank of the Palm Beaches, adding PCD loans of $43.0~~$9.5 million and Non-PCD loans of $103.8 million. In the third quarter of 2020, the Company completed the acquisition of Fourth Street Banking Company and its wholly-owned subsidiary, Freedom Bank, adding PCD loans of $49.4 million and Non-PCD loans of $254.1 million. See additional discussion in Note L - Business Combinations.on PPP loans. At ~~September~~June 30, ~~2020,~~2021, the remaining fair value adjustments on acquired loans ~~was $34.6~~were $24.4 million, or 3.0%, of the outstanding acquired loan ~~balances. At December 31, 2019, the remaining fair value adjustments for acquired loans was $34.9~~balances, compared to $30.2 million, or ~~3.8%~~2.9%, of the acquired loan ~~balances.~~balances at December 31, 2020. 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 ~~$31.3~~$15.7 million and ~~$14.9~~$25.8 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. ~~The balance at September 30, 2020 includes $15.4 million associated with loans on short-term payment deferral, against which the Company has established a valuation allowance of $0.4 million.~~

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The following tables present the status of net loan balances as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. Loans on short-term payment deferral at the reporting date are ~~reflected~~reported as current.


		September 30, 2020													June 30, 2021
(In thousands)	(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total		(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total
Portfolio Loans	Portfolio Loans													Portfolio Loans
Construction and land development	Construction and land development	$	246,255	$	0	$	37	$	0	$	20	$	246,312	Construction and land development	$	223,348	$	0	$	0	$	0	$	64	$	223,412
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	813,825		850		450		0		2,422		817,547		Commercial real estate - owner-occupied	887,266		0		0		0		1,955		889,221
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	1,012,815		0		0		0		2,178		1,014,993		Commercial real estate - non owner-occupied	1,110,608		261		0		0		1,421		1,112,290
Residential real estate	Residential real estate	1,169,466		2,388		250		0		10,454		1,182,558		Residential real estate	1,076,165		199		50		0		10,899		1,087,313
Commercial and financial	Commercial and financial	704,308		995		148		10		5,897		711,358		Commercial and financial	804,139		2,890		0		0		4,551		811,580
Consumer	Consumer	183,944		294		9		0		361		184,608		Consumer	166,426		211		35		0		134		166,806
Paycheck Protection Program	Paycheck Protection Program	584,577		0		0		0		0		584,577		Paycheck Protection Program	350,531		0		0		0		0		350,531
Total Portfolio Loans	Total Portfolio Loans	4,715,190		4,527		894		10		21,332		4,741,953		Total Portfolio Loans	$	4,618,483	$	3,561	$	85	$	0	$	19,024	$	4,641,153

Acquired Non-PCD Loans	Acquired Non-PCD Loans													Acquired Non-PCD Loans
Construction and land development	Construction and land development	30,146		0		0		0		574		30,720		Construction and land development	$	10,408	$	0	$	0	$	0	$	0	$	10,408
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	266,656		0		0		0		567		267,223		Commercial real estate - owner-occupied	202,269		958		0		0		620		203,847
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	346,769		278		0		0		1,038		348,085		Commercial real estate - non owner-occupied	272,945		0		0		0		1,827		274,772
Residential real estate	Residential real estate	193,421		1,156		1,057		0		5,587		201,221		Residential real estate	128,579		0		71		0		2,481		131,131
Commercial and financial	Commercial and financial	104,263		0		221		0		843		105,327		Commercial and financial	71,814		423		1,998		339		671		75,245
Consumer	Consumer	7,306		0		0		0		0		7,306		Consumer	4,949		0		0		0		0		4,949
Paycheck Protection Program	Paycheck Protection Program	54,223		0		0		0		0		54,223		Paycheck Protection Program	13,581		0		0		0		0		13,581
Total Acquired Non-PCD Loans	Total Acquired Non-PCD Loans	1,002,784		1,434		1,278		0		8,609		1,014,105		Total Acquired Non-PCD Loans	$	704,545	$	1,381	$	2,069	$	339	$	5,599	$	713,933

PCD Loans	PCD Loans													PCD Loans
Construction and land development	Construction and land development	3,568		0		0		0		10		3,578		Construction and land development	$	520	$	0	$	0	$	0	$	7	$	527
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	39,064		0		1,113		0		513		40,690		Commercial real estate - owner-occupied	30,673		1,084		0		0		2,815		34,572
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	26,380		0		0		0		5,006		31,386		Commercial real estate - non owner-occupied	21,508		0		0		0		3,869		25,377
Residential real estate	Residential real estate	8,495		0		0		0		1,122		9,617		Residential real estate	6,555		71		431		0		1,035		8,092
Commercial and financial	Commercial and financial	15,774		327		0		0		297		16,398		Commercial and financial	12,642		168		0		0		571		13,381
Consumer	Consumer	261		33		0		0		8		302		Consumer	14		0		0		0		0		14
Total PCD Loans	Total PCD Loans	93,542		360		1,113		—		6,956		101,971		Total PCD Loans	$	71,912	$	1,323	$	431	$	0	$	8,297	$	81,963

Total Loans	Total Loans	$	5,811,516	$	6,321	$	3,285	$	10	$	36,897	$	5,858,029	Total Loans	$	5,394,940	$	6,265	$	2,585	$	339	$	32,920	$	5,437,049

1715

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		December 31, 2019													December 31, 2020
(In thousands)	(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total		(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total
Portfolio Loans	Portfolio Loans													Portfolio Loans
Construction and land development	Construction and land development	$	276,984	$	0	$	0	$	0	$	4,351	$	281,335	Construction and land development	$	216,262	$	0	$	0	$	0	$	158	$	216,420
Commercial real estate		1,828,629		1,606		220		0		4,356		1,834,811
Commercial real estate - owner occupied														Commercial real estate - owner occupied	851,222		1,076		0		0		2,471		854,769
Commercial real estate - non-owner occupied														Commercial real estate - non-owner occupied	1,041,306		0		0		0		2,153		1,043,459
Residential real estate	Residential real estate	1,294,778		1,564		18		0		7,945		1,304,305		Residential real estate	1,142,893		3,002		1,427		61		8,531		1,155,914
Commercial and financial	Commercial and financial	690,412		2,553		0		108		4,228		697,301		Commercial and financial	737,362		135		1,967		0		4,382		743,846
Consumer	Consumer	199,424		317		315		0		110		200,166		Consumer	180,879		203		138		2		575		181,797
Paycheck Protection Program														Paycheck Protection Program	515,532		0		0		0		0		515,532
Total Portfolio Loans	Total Portfolio Loans	4,290,227		6,040		553		108		20,990		4,317,918		Total Portfolio Loans	$	4,685,456	$	4,416	$	3,532	$	63	$	18,270	$	4,711,737

Purchased Unimpaired Loans
Acquired Non-PCD Loans														Acquired Non-PCD Loans
Construction and land development	Construction and land development	43,044		0		0		0		574		43,618		Construction and land development	$	26,250	$	0	$	0	$	0	$	0	$	26,250
Commercial real estate		531,325		942		431		0		1,245		533,943
Commercial real estate - owner occupied														Commercial real estate - owner occupied	244,486		0		0		0		2,604		247,090
Commercial real estate - non-owner occupied														Commercial real estate - non-owner occupied	322,264		0		0		0		1,009		323,273
Residential real estate	Residential real estate	201,159		277		0		0		412		201,848		Residential real estate	171,507		1,605		104		0		2,889		176,105
Commercial and financial	Commercial and financial	78,705		0		0		0		1,667		80,372		Commercial and financial	93,223		216		0		0		1,188		94,627
Consumer	Consumer	8,039		0		0		0		0		8,039		Consumer	6,640		20		0		0		0		6,660
Total PULs		862,272		1,219		431		0		3,898		867,820
Paycheck Protection Program														Paycheck Protection Program	51,429		0		0		0		0		51,429
Total Acquired Non-PCD Loans														Total Acquired Non-PCD Loans	$	915,799	$	1,841	$	104	$	0	$	7,690	$	925,434

Purchased Credit Impaired Loans
PCD Loans														PCD Loans
Construction and land development	Construction and land development	148		0		0		0		12		160		Construction and land development	$	2,429	$	0	$	0	$	0	$	9	$	2,438
Commercial real estate		9,298		0		0		0		919		10,217
Commercial real estate - owner occupied														Commercial real estate - owner occupied	36,345		0		0		0		3,106		39,451
Commercial real estate - non-owner occupied														Commercial real estate - non-owner occupied	24,200		0		0		0		4,922		29,122
Residential real estate	Residential real estate	587		0		0		0		1,123		1,710		Residential real estate	9,537		0		0		0		1,072		10,609
Commercial and financial	Commercial and financial	566		0		0		0		13		579		Commercial and financial	15,121		125		0		0		1,034		16,280
Consumer	Consumer	0		0		0		0		0		0		Consumer	271		0		0		0		7		278
Total PCI Loans		10,599		0		0		0		2,067		12,666
Total PCD Loans														Total PCD Loans	$	87,903	$	125	$	0	$	0	$	10,150	$	98,178

Total Loans	Total Loans	$	5,163,098	$	7,259	$	984	$	108	$	26,955	$	5,198,404	Total Loans	$	5,689,158	$	6,382	$	3,636	$	63	$	36,110	$	5,735,349

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 onunder the cost-recovery ~~method. 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 ~~$0.1 million in interest income on nonaccrual loans during each of the three months ended September 30, 2020 and 2019, respectively. The Company recognized $0.5~~$0.4 million and ~~$1.2~~$0.3 million in interest income on nonaccrual loans during the ~~nine~~three months ended ~~September~~June 30, 2021 and 2020, respectively. The Company recognized $0.6 million and ~~2019,~~$0.4 million in interest income on nonaccrual loans during the six months ended June 30, 2021 and 2020, respectively.

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The following tables present net balances of loans on nonaccrual status and the related allowance for credit losses, if any, as of:


		September 30, 2020									June 30, 2021
(In thousands)	(In thousands)	Nonaccrual Loans With No Related Allowance		Nonaccrual Loans With an Allowance		Total Nonaccrual Loans		Allowance for Credit Losses		(In thousands)	Nonaccrual Loans With No Related Allowance		Nonaccrual Loans With an Allowance		Total Nonaccrual Loans		Allowance for Credit Losses
Construction and land development	Construction and land development	$	585	$	19	$	604	$	9	Construction and land development	$	71	$	0	$	71	$	0
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	2,669		833		3,502		672		Commercial real estate - owner-occupied	4,340		1,050		5,390		467
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	4,821		3,401		8,222		1,829		Commercial real estate - non owner-occupied	3,248		3,869		7,117		1,708
Residential real estate	Residential real estate	14,963		2,200		17,163		1,456		Residential real estate	13,710		705		14,415		349
Commercial and financial	Commercial and financial	2,989		4,048		7,037		2,816		Commercial and financial	3,733		2,060		5,793		1,266
Consumer	Consumer	29		340		369		55		Consumer	37		97		134		97

Totals	Totals	$	26,056	$	10,841	$	36,897	$	6,837	Totals	$	25,139	$	7,781	$	32,920	$	3,887

~~Table of Contents~~


	December 31, 2020
(In thousands)	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	$	8
Commercial real estate - owner-occupied	7,893		288		8,181		287
Commercial real estate - non owner-occupied	5,666		2,418		8,084		1,640
Residential real estate	9,520		2,972		12,492		1,587
Commercial and financial	3,175		3,429		6,604		2,235
Consumer	222		360		582		75
Totals	$	26,624	$	9,486	$	36,110	$	5,832

December 31, 2019
(In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses
Construction and land development $ 4,913 $ 23 $ 4,936 $ 12
Commercial real estate 6,200 320 6,520 149
Residential real estate 8,700 780 9,480 564
Commercial and financial 3,449 2,460 5,909 1,622
Consumer 39 71 110 37
Totals $ 23,301 $ 3,654 $ 26,955 $ 2,384

~~Collateral Dependent~~Collateral-Dependent Loans

Loans are considered ~~collateral dependent~~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~~collateral-dependent loans as of:

(In thousands) September 30, 2020 December 31, 2019
Construction and land development $ 630 $ 4,926
Commercial real estate - owner-occupied 7,379 2,571
Commercial real estate - non owner-occupied 7,626 3,152
Residential real estate 22,352 11,550
Commercial and financial 11,563 4,338
Consumer 416 141
Totals $ 49,966 $ 26,678


(In thousands)	June 30, 2021		December 31, 2020
Construction and land development	$	71	$	189
Commercial real estate - owner-occupied	6,662		11,992
Commercial real estate - non owner-occupied	6,480		7,285
Residential real estate	13,907		16,652
Commercial and financial	8,565		11,198
Consumer	89		586
Totals	$	35,774	$	47,902

Loans by Risk Rating

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.

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•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~~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.

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


	June 30, 2021
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving		Total
Construction and Land Development
Risk Ratings:
Pass	$	37,114	$	55,457	$	41,969	$	26,223	$	6,326	$	23,567	$	40,656	$	231,312
Special Mention	0		0		372		2,517		0		0		0		2,889
Substandard	0		0		0		0		0		17		0		17
Substandard Impaired	0		0		0		0		37		92		0		129
Doubtful	0		0		0		0		0		0		0		0
Total	$	37,114	$	55,457	$	42,341	$	28,740	$	6,363	$	23,676	$	40,656	$	234,347
Commercial real estate - owner-occupied
Risk Ratings:
Pass	$	87,486	$	145,245	$	184,017	$	141,827	$	130,013	$	393,389	$	12,018	$	1,093,995
Special Mention	0		11,267		841		1,286		0		5,287		0		18,681
Substandard	0		0		0		0		3,805		4,356		0		8,161
Substandard Impaired	0		0		2,883		685		1,445		1,790		0		6,803
Doubtful	0		0		0		0		0		0		0		0
Total	$	87,486	$	156,512	$	187,741	$	143,798	$	135,263	$	404,822	$	12,018	$	1,127,640
Commercial real estate - non owner-occupied
Risk Ratings:
Pass	$	121,245	$	159,336	$	292,367	$	183,456	$	100,887	$	484,963	$	8,018	$	1,350,272
Special Mention	0		0		953		9,399		16,522		9,931		—		36,805
Substandard	0		0		0		9,718		0		8,528		0		18,246
Substandard Impaired	0		0		2,378		0		0		4,738		0		7,116
Doubtful	0		0		0		0		0		0		0		0
Total	$	121,245	$	159,336	$	295,698	$	202,573	$	117,409	$	508,160	$	8,018	$	1,412,439
Residential real estate
Risk Ratings:
Pass	$	129,061	$	107,121	$	105,930	$	149,520	$	153,851	$	241,216	$	320,702	$	1,207,401
Special Mention	0		0		0		30		0		218		221		469
Substandard	0		0		0		0		0		214		486		700
Substandard Impaired	0		496		741		77		4,462		9,879		2,311		17,966
Doubtful	0		0		0		0		0		0		0		0
Total	$	129,061	$	107,617	$	106,671	$	149,627	$	158,313	$	251,527	$	323,720	$	1,226,536

Table of Contents


	June 30, 2021
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving		Total
Commercial and financial
Risk Ratings:
Pass	$	148,832	$	201,500	$	120,225	$	87,159	$	48,385	$	70,755	$	194,503	$	871,359
Special Mention	0		5,795		864		891		270		33		1,130		8,983
Substandard	0		411		0		2,480		1,369		3,512		26		7,798
Substandard Impaired	0		0		5,478		3,258		1,427		1,811		92		12,066
Doubtful	0		0		0		0		0		0		0		0
Total	$	148,832	$	207,706	$	126,567	$	93,788	$	51,451	$	76,111	$	195,751	$	900,206
Consumer
Risk Ratings:
Pass	$	23,549	$	38,229	$	33,441	$	22,421	$	13,837	$	23,735	$	13,959	$	169,171
Special Mention	0		58		46		15		62		30		1,330		1,541
Substandard	0		0		0		35		14		0		655		704
Substandard Impaired	0		0		64		26		80		183		0		353
Doubtful	0		0		0		0		0		0		0		0
Total	$	23,549	$	38,287	$	33,551	$	22,497	$	13,993	$	23,948	$	15,944	$	171,769
Paycheck Protection Program
Risk Ratings:
Pass	$	246,107	$	118,005	$	0	$	0	$	0	$	0	$	0	$	364,112


Total	$	246,107	$	118,005	$	0	$	0	$	0	$	0	$	0	$	364,112
Consolidated
Risk Ratings:
Pass	$	793,394	$	824,893	$	777,949	$	610,606	$	453,299	$	1,237,625	$	589,856	$	5,287,622
Special Mention	0		17,120		3,076		14,138		16,854		15,499		2,681		69,368
Substandard	0		411		0		12,233		5,188		16,627		1,167		35,626
Substandard Impaired	0		496		11,544		4,046		7,451		18,493		2,403		44,433
Doubtful	0		0		0		0		0		0		0		0
Total	$	793,394	$	842,920	$	792,569	$	641,023	$	482,792	$	1,288,244	$	596,107	$	5,437,049


	December 31, 2020
(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving		Total
Construction and Land Development
Risk Ratings:
Pass	$	62,107	$	52,384	$	46,067	$	15,873	$	7,335	$	17,873	$	35,324	$	236,963
Special Mention	206		245		5,918		0		0		1,449		0		7,818
Substandard	0		0		0		0		0		51		0		51
Substandard Impaired	0		0		0		37		0		239		0		276
Doubtful	0		0		0		0		0		0		0		0
Total	$	62,313	$	52,629	$	51,985	$	15,910	$	7,335	$	19,612	$	35,324	$	245,108
Commercial real estate - owner-occupied
Risk Ratings:
Pass	$	155,953	$	198,559	$	156,276	$	138,341	$	148,389	$	287,772	$	14,255	$	1,099,545
Special Mention	5,773		1,858		3,305		0		4,471		4,050		2		19,459
Substandard	0		0		0		4,709		1,955		5,508		0		12,172
Substandard Impaired	0		3,151		747		1,362		0		4,874		0		10,134
Doubtful	0		0		0		0		0		0		0		0
Total	$	161,726	$	203,568	$	160,328	$	144,412	$	154,815	$	302,204	$	14,257	$	1,141,310

Table of Contents

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


	December 31, 2020
(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving		Total
Commercial real estate - non owner-occupied
Risk Ratings:
Pass	$	159,299	$	313,287	$	201,112	$	123,357	$	175,623	$	356,943	$	8,596	$	1,338,217
Special Mention	0		431		9,487		7,580		10,240		114		0		27,852
Substandard	0		0		9,709		0		8,311		3,682		0		21,702
Substandard Impaired	0		2,418		0		0		125		5,540		0		8,083
Doubtful	0		0		0		0		0		0		0		0
Total	$	159,299	$	316,136	$	220,308	$	130,937	$	194,299	$	366,279	$	8,596	$	1,395,854
Residential real estate
Risk Ratings:
Pass	$	96,819	$	144,329	$	204,077	$	205,046	$	160,612	$	159,742	$	350,502	$	1,321,127
Special Mention	0		0		33		720		0		966		479		2,198
Substandard	350		0		0		896		0		1,452		100		2,798
Substandard Impaired	109		726		1,520		1,762		715		9,671		2,002		16,505
Doubtful	0		0		0		0		0		0		0		0
Total	$	97,278	$	145,055	$	205,630	$	208,424	$	161,327	$	171,831	$	353,083	$	1,342,628
Commercial and financial
Risk Ratings:
Pass	$	214,774	$	146,511	$	103,769	$	60,782	$	39,692	$	53,758	$	204,304	$	823,590
Special Mention	71		946		965		5,612		67		635		209		8,505
Substandard	154		41		3,016		1,609		553		3,239		764		9,376
Substandard Impaired	317		4,595		3,199		2,292		2,074		704		81		13,262
Doubtful1	0		0		0		0		0		0		20		20
Total	$	215,316	$	152,093	$	110,949	$	70,295	$	42,386	$	58,336	$	205,378	$	854,753
Consumer
Risk Ratings:
Pass	$	46,476	$	43,143	$	30,433	$	18,937	$	21,880	$	9,488	$	15,089	$	185,446
Special Mention	58		27		14		41		42		21		1,854		2,057
Substandard	0		0		0		42		4		151		228		425
Substandard Impaired	7		50		193		24		329		183		21		807
Doubtful	0		0		0		0		0		0		0		0
Total	$	46,541	$	43,220	$	30,640	$	19,044	$	22,255	$	9,843	$	17,192	$	188,735
Paycheck Protection Program
Risk Ratings:
Pass	$	566,961	$	0	$	0	$	0	$	0	$	0	$	0	$	566,961


Total	$	566,961	$	0	$	0	$	0	$	0	$	0	$	0	$	566,961
Consolidated
Risk Ratings:
Pass	$	1,302,389	$	898,213	$	741,734	$	562,336	$	553,531	$	885,576	$	628,070	$	5,571,849
Special Mention	6,108		3,507		19,722		13,953		14,820		7,235		2,544		67,889
Substandard	504		41		12,725		7,256		10,823		14,083		1,092		46,524
Substandard Impaired	433		10,940		5,659		5,477		3,243		21,211		2,104		49,067
Doubtful1	0		0		0		0		0		0		20		20
Total	$	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 at December 31, 2020.

September 30, 2020
(In thousands) 2020 2019 2018 2017 2016 Prior Revolving Total
Construction and Land Development
Risk Ratings:
Pass $ 48,020 $ 78,737 $ 59,752 $ 17,830 $ 9,586 $ 18,206 $ 31,633 $ 263,764
Special Mention 398 503 1,378 12,311 0 1,478 0 16,068
Substandard 0 0 0 0 0 55 0 55
Substandard Impaired 0 0 0 0 574 149 0 723
Doubtful 0 0 0 0 0 0 0 0
Total 48,418 79,240 61,130 30,141 10,160 19,888 31,633 280,610
Commercial real estate - owner-occupied
Risk Ratings:
Pass 93,407 202,179 164,622 151,893 156,433 313,205 14,792 1,096,531
Special Mention 196 1,596 389 1,010 4,471 3,338 0 11,000
Substandard 0 0 204 4,742 1,970 5,531 0 12,447
Substandard Impaired 0 337 878 1,056 0 2,890 0 5,161
Doubtful1
0 0 0 0 321 0 0 321
Total 93,603 204,112 166,093 158,701 163,195 324,964 14,792 1,125,460
Commercial real estate - non owner-occupied
Risk Ratings:
Pass 98,658 322,048 200,813 131,590 186,063 372,215 5,317 1,316,704
Special Mention 0 103 28,710 1,674 14,266 114 0 44,867
Substandard 0 0 9,694 0 8,319 5,072 1,350 24,435
Substandard Impaired 0 2,418 0 0 126 5,914 0 8,458
Doubtful 0 0 0 0 0 0 0 0
Total 98,658 324,569 239,217 133,264 208,774 383,315 6,667 1,394,464
Residential real estate
Risk Ratings:
Pass 53,171 151,107 233,660 235,119 178,988 180,156 334,622 1,366,823
Special Mention 0 0 98 0 0 562 391 1,051
Substandard 0 0 0 0 0 1,677 1,443 3,120
Substandard Impaired 112 681 1,334 4,162 2,528 10,790 2,768 22,375
Doubtful1
0 0 0 0 0 27 0 27
Total 53,283 151,788 235,092 239,281 181,516 193,212 339,224 1,393,396
Commercial and financial
Risk Ratings:
Pass 162,696 158,468 111,812 70,868 44,846 59,387 194,344 802,421
Special Mention 0 234 14 5,732 81 1,773 304 8,138
Substandard 153 145 3,306 198 407 2,270 2,261 8,740
Substandard Impaired 319 4,440 2,742 1,667 2,340 1,079 1,197 13,784
Doubtful 0 0 0 0 0 0 0 0
Total 163,168 163,287 117,874 78,465 47,674 64,509 198,106 833,083

~~Table of Contents~~

September 30, 2020
(In thousands) 2020 2019 2018 2017 2016 Prior Revolving Total
Consumer
Risk Ratings:
Pass 36,295 48,610 34,541 21,993 24,259 10,996 12,381 189,075
Special Mention 0 70 30 72 65 7 1,856 2,100
Substandard 0 0 0 27 22 38 339 426
Substandard Impaired 48 51 10 0 316 190 0 615
Doubtful 0 0 0 — 0 0 0 0
Total 36,343 48,731 34,581 22,092 24,662 11,231 14,576 192,216
Paycheck Protection Program
Risk Ratings:
Pass 638,800 0 0 0 0 0 0 638,800
Total 638,800 0 0 0 0 0 0 638,800
Consolidated
Risk Ratings:
Pass 1,131,047 961,149 805,200 629,293 600,175 954,165 593,089 5,674,118
Special Mention 594 2,506 30,619 20,799 18,883 7,272 2,551 83,224
Substandard 153 145 13,204 4,967 10,718 14,643 5,393 49,223
Substandard Impaired 479 7,927 4,964 6,885 5,884 21,012 3,965 51,116
Doubtful1
0 0 0 0 321 27 0 348
Total $ 1,132,273 $ 971,727 $ 853,987 $ 661,944 $ 635,981 $ 997,119 $ 604,998 $ 5,858,029
1Loans classified as doubtful are fully reserved as of September 30, 2020.

~~The following table presents the risk rating of loans as of:~~

December 31, 2019
(In thousands) Pass Special
Mention Substandard
Doubtful1
Total
Construction and land development $ 317,765 $ 2,235 $ 5,113 $ 0 $ 325,113
Commercial real estate 2,331,725 26,827 20,098 321 2,378,971
Residential real estate 1,482,278 7,364 18,221 0 1,507,863
Commercial and financial 755,957 11,925 9,496 874 778,252
Consumer 203,966 3,209 1,030 0 208,205
Totals $ 5,091,691 $ 51,560 $ 53,958 $ 1,195 $ 5,198,404
1Loans classified as doubtful are fully reserved as of December 31, 2019.

~~Troubled Debt Restructured Loans~~

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.

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

~~Table of Contents~~

December 31, 2019, and the modification is executed between March 1, 2020 and the earlier of (i) ~~December 31, 2020~~January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency.

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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 ~~began offering short-term~~has provided financially impacted borrowers with loan accommodations, primarily consisting of payment deferrals of up to six ~~months to eligible borrowers in March 2020 and, at September~~months. At its peak on June 30, 2020, ~~had $702.7 million~~loans on deferral represented $1.1 billion, or 21%, of total non-PPP loans. In the second half of 2020, the large majority of these borrowers successfully resumed making contractual payments, and the level of loans onwith accommodations has decreased to $6.8 million, or 0.1%, of total non-PPP loans as of June 30, 2021. Types of outstanding accommodations at June 30, 2021 included a combination of one or more of the following: full payment deferral, ~~none~~partial payment deferral, reduction of ~~which have been classified as TDRs.~~

interest rate, extension of the original maturity date, or re-amortization of the facility.

The following table presents the balance of loans onwith active payment ~~deferral,~~accommodations at the specified dates, excluding PPP loans:


(In thousands)	June 30, 2021		December 31, 2020
Construction and land development	$	0	$	1,032
Commercial real estate - owner-occupied	1,612		14,248
Commercial real estate - non owner-occupied	2,257		32,549
Residential real estate	1,702		12,839
Commercial and financial	811		11,915
Consumer	399		1,479

Totals	$	6,781	$	74,062

Troubled Debt Restructured Loans

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 aswere modified at an interest rate equal to the yields of ~~September 30, 2020:~~

(In thousands) Loans Outstanding % on Payment Deferral
Construction and land development $ 9,359 3%
Commercial real estate - owner-occupied 204,710 18
Commercial real estate - non owner-occupied 344,573 25
Residential real estate 75,885 5
Commercial and financial 61,308 7
Consumer 6,815 4
Totals $ 702,650 13%
new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements.

The following table presents loans that were modified in a troubled debt restructuring during the three and ~~nine~~six months ended:


		Three Months Ended September 30,											Three Months Ended June 30,
		2020					2019						2021					2020
(In thousands)	(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Construction and land development	Construction and land development	0	$	0	$	0	0	$	0	$	0	Construction and land development	0	$	0	$	0	1	$	12	$	12
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	0	0		0		0	0		0		Commercial real estate - owner-occupied	0	0		0		0	0		0
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	0	0		0		0	0		0		Commercial real estate - non owner-occupied	0	0		0		0	0		0
Residential real estate	Residential real estate	0	0		0		2	519		519		Residential real estate	2	52		52		0	0		0
Commercial and financial	Commercial and financial	0	0		0		1	1,120		1,120		Commercial and financial	1	142		142		0	0		0
Consumer	Consumer	1	41		41		0	0		0		Consumer	0	0		0		2	47		47
Totals	Totals	1	$	41	$	41	3	$	1,639	$	1,639	Totals	3	$	194	$	194	3	$	59	$	59

2221

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		Nine Months Ended September 30,											Six Months Ended June 30,
		2020					2019						2021					2020
(In thousands)	(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Construction and land development	Construction and land development	0	$	0	$	0	0	$	0	$	0	Construction and land development	0	$	0	$	0	1	$	12	$	12
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	0	0		0		2	2,166		2,166		Commercial real estate - owner-occupied	0	0		0		0	0		0
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	0	0		0		0	0		0		Commercial real estate - non owner-occupied	0	0		0		0	0		0
Residential real estate	Residential real estate	1	45		45		2	519		519		Residential real estate	3	79		79		1	45		45
Commercial and financial	Commercial and financial	4	437		437		2	1,299		1,299		Commercial and financial	1	142		142		4	437		437
Consumer	Consumer	3	88		88		1	19		19		Consumer	0	0		0		2	47		47
Totals	Totals	8	$	570	$	570	7	$	4,003	$	4,003	Totals	4	$	221	$	221	8	$	541	$	541

The TDRs described above resulted in a specific allowance for credit losses of $0.2 million as of ~~September~~June 30, ~~2020,~~2021 and ~~0 specific allowance for credit losses~~$0.4 million as of ~~September~~June 30, ~~2019.~~2020. During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, there were 42 defaults totaling ~~$1.4~~$0.1 million onof loans that had been modified in TDRs within the preceding twelve months. During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, there were 3 defaults totaling ~~$2.1~~$1.4 million of loans to a single borrower that had been modified to a TDR 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, ~~$19,000~~$6,000 and ~~$40,000~~$21,000 for the three months ended ~~September~~June 30, ~~2020,~~2021, and ~~2019,~~2020, respectively, and ~~$65,000~~$11,000 and ~~$102,000~~$46,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~2019,~~2020, respectively, was included in interest income and represents the change in present value attributable to the passage of time.

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Note F – Allowance for Credit Losses

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


		Three Months Ended September 30, 2020												Three Months Ended June 30, 2021
(In thousands)	(In thousands)	Beginning Balance		Initial Allowance on PCD Loans Acquired During the Period		Provision for Credit Losses1		Charge- Offs		Recoveries		TDR Allowance Adjustments			Ending Balance		(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	Construction and land development	$	7,161	$	39	$	475	$	0	$	26	$	0		$	7,701	Construction and land development	$	4,428	$	(469)	$	0	$	96	$	(2)	$	4,053
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	5,562		954		689		0		26		(12)			7,219		Commercial real estate - owner-occupied	9,792		(1,116)		0		0		0		8,676
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	38,992		2,096		(7,050)		(25)		5		0			34,018		Commercial real estate - non owner-occupied	36,229		(1,423)		0		1		0		34,807
Residential real estate	Residential real estate	20,453		27		(3,196)		(19)		65		(5)			17,325		Residential real estate	14,353		(2,407)		(21)		621		(3)		12,543
Commercial and financial	Commercial and financial	15,514		2,632		8,081		(1,776)		203		0			24,654		Commercial and financial	18,916		399		(1,564)		265		0		18,016
Consumer	Consumer	3,568		15		(244)		(355)		114		(2)			3,096		Consumer	2,925		161		(199)		146		(1)		3,032
Paycheck Protection Program	Paycheck Protection Program	0		0		0		0		0		0			0		Paycheck Protection Program	0		0		0		0		0		0
Totals	Totals	$	91,250	$	5,763	$	(1,245)	$	(2,175)	$	439	$	(19)		$	94,013	Totals	$	86,643	$	(4,855)	$	(1,784)	$	1,129	$	(6)	$	81,127
1In addition to a reversal of provision for credit losses on loans of $1.2 million in the third quarter of 2020, the Company also recorded a $0.4 million provision to establish a valuation allowance on accrued interest receivable.


		Three Months Ended September 30, 2019													Three Months Ended June 30, 2020
(In thousands)	(In thousands)	Beginning Balance		Provision for Loan Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance		(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	Construction and land development	$	2,243	$	(395)	$	0	$	6	$	0	$	1,854	Construction and land development	$	4,646	$	2,478	$	0	$	37	$	0	$	7,161
Commercial real estate		11,870		1,368		(232)		10		(19)		12,997
Commercial real estate - owner occupied														Commercial real estate - owner occupied	5,327		229		0		18		(12)		5,562
Commercial real estate - non-owner occupied														Commercial real estate - non-owner occupied	35,643		3,345		0		4		0		38,992
Residential real estate	Residential real estate	7,508		87		(38)		52		(20)		7,589		Residential real estate	19,899		574		(113)		101		(8)		20,453
Commercial and financial	Commercial and financial	8,912		769		(1,625)		295		0		8,351		Commercial and financial	15,470		1,319		(1,768)		493		0		15,514
Consumer	Consumer	2,972		422		(697)		118		(1)		2,814		Consumer	4,426		(334)		(614)		91		(1)		3,568

Paycheck Protection Program														Paycheck Protection Program	0		0		0		0		0		0
Totals	Totals	$	33,505	$	2,251	$	(2,592)	$	481	$	(40)	$	33,605	Totals	$	85,411	$	7,611	$	(2,495)	$	744	$	(21)	$	91,250


		Nine Months Ended September 30, 2020																	Six Months Ended June 30, 2021
(In thousands)	(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		(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	Construction and land development	$	1,842	$	1,479	$	87	$	4,202	$	0	$	92	$	(1)	$	7,701	Construction and land development	$	4,920	$	(979)	$	0	$	114	$	(2)	$	4,053
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	5,361		80		1,161		655		(45)		44		(37)		7,219		Commercial real estate - owner-occupied	9,868		(1,192)		0		0		0		8,676
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	7,863		9,341		2,236		14,578		(37)		37		0		34,018		Commercial real estate - non owner-occupied	38,266		(3,461)		0		2		0		34,807
Residential real estate	Residential real estate	7,667		5,787		124		3,638		(150)		283		(24)		17,325		Residential real estate	17,500		(5,779)		(21)		850		(7)		12,543
Commercial and financial	Commercial and financial	9,716		3,677		2,643		12,144		(4,642)		1,116		0		24,654		Commercial and financial	18,690		1,174		(2,320)		472		0		18,016
Consumer	Consumer	2,705		862		28		662		(1,442)		284		(3)		3,096		Consumer	3,489		(333)		(384)		262		(2)		3,032
Paycheck Protection Program	Paycheck Protection Program	0		0		0		0		0		0		0		0		Paycheck Protection Program	0		0		0		0		0		0
Totals	Totals	$	35,154	$	21,226	$	6,279	$	35,879	$	(6,316)	$	1,856	$	(65)	$	94,013	Totals	$	92,733	$	(10,570)	$	(2,725)	$	1,700	$	(11)	$	81,127
1In addition to a reversal of provision for credit losses on loans of $1.2 million in the third quarter of 2020, the Company also recorded a $0.4 million provision to establish a valuation allowance on accrued interest receivable.

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Nine Months Ended September 30, 2019
(In thousands) Beginning Balance Provision for Loan Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance
Construction and land development $ 2,233 $ (391) $ 0 $ 13 $ (1) $ 1,854
Commercial real estate 11,112 1,560 (248) 622 (49) 12,997
Residential real estate 7,775 (276) (102) 242 (50) 7,589
Commercial and financial 8,585 3,736 (4,450) 480 0 8,351
Consumer 2,718 1,570 (1,915) 443 (2) 2,814
Totals $ 32,423 $ 6,199 $ (6,715) $ 1,800 $ (102) $ 33,605



	Six Months Ended June 30, 2020
(In thousands)	Beginning Balance		Impact of Adoption of ASC 326		Initial Allowance on PCD Loans Acquired During the Period		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	$	1,842	$	1,479	$	48	$	3,727	$	0	$	66	$	(1)	$	7,161
Commercial real estate - owner occupied	5,361		80		207		(34)		(45)		18		(25)		5,562
Commercial real estate - non-owner occupied	7,863		9,341		140		21,628		(12)		32		0		38,992
Residential real estate	7,667		5,787		97		6,834		(131)		218		(19)		20,453
Commercial and financial	9,716		3,677		11		4,063		(2,866)		913		0		15,514
Consumer	2,705		862		13		906		(1,087)		170		(1)		3,568
Paycheck Protection Program	0		0		0		0		0		0		0		0
Totals	$	35,154	$	21,226	$	516	$	37,124	$	(4,141)	$	1,417	$	(46)	$	91,250

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.

As of ~~September~~June 30, ~~2020,~~2021, 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~~for increasing COVID-19 infections, ~~in Florida and other states,~~including from variants, and the resulting potential ~~decline~~erosion in consumer ~~spending~~confidence, and ~~financial implications for businesses. The Company also considered~~ the ~~amount and availability of fiscal~~risk that government stimulus ~~including~~ programs ~~offered under the CARES Act and other potential future government programs and actions.~~are less effective than expected. Outcomes in any or all of these factors could differ from the Baseline scenario, and the Company incorporated qualitative considerations reflecting the risk of uncertain ~~and possibly further deteriorating,~~ economic conditions, and for additional dimensions of risk not captured in the quantitative model.

In the Construction and Land Development segment, the ~~increase~~decrease in reserves during the quarter ~~was affected by both the outlook for commercial real estate valuations, and qualitative adjustments~~reflects improved economic variables relating to ~~the uncertainty of economic conditions.~~residential real estate. 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~~decrease in reserves ~~reflects both~~is primarily the ~~impact~~result of ~~higher loan balances and an~~ improved ~~outlook for unemployment, partially offset by lower forecasted commercial real estate valuations.~~economic variables relating to unemployment. 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 decrease in reserves reflects lower ~~estimated unemployment~~loan balances and an improved ~~outlook for corporate profits over the~~economic forecast ~~period.~~variables including lower unemployment. 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 decrease in reserves reflects anlower loan balances and improved ~~outlook for unemployment, and continued strength in the Florida housing market.~~economic forecast variables including lower unemployment. 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~~decrease in reserves ~~reflects an increased proportion~~is primarily attributed to improvement in economic forecast

Table of ~~working capital lines compared to loans secured~~Contents

variables including unemployment, partially offset by ~~business assets.~~higher loan balances. Industry, collateral type, estimated collateral values and loan seasoning are among the relevant factors in assessing expected losses.

~~Table of Contents~~

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~~Nominal changes in the reserve ~~is attributed to lower loan balances and an improved outlook for unemployment.~~

during the quarter reflect changes in underlying economic variables.

Balances outstanding under the Paycheck Protection Program are guaranteed by the U.S. government and have not been assigned a reserve.

The allowance for credit losses is 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 ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 is shown in the following tables:


		September 30, 2020													June 30, 2021
		Individually Evaluated				Collectively Evaluated				Total					Individually Evaluated				Collectively Evaluated				Total
(In thousands)	(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction and land development	Construction and land development	$	723	$	13	$	279,887	$	7,688	$	280,610	$	7,701	Construction and land development	$	129	$	3	$	234,218	$	4,050	$	234,347	$	4,053
Commercial real estate - owner-occupied		5,590		788		1,119,870		6,431		1,125,460		7,219
Commercial real estate - owner occupied														Commercial real estate - owner occupied	7,209		503		1,120,431		8,173		1,127,640		8,676
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	12,902		1,863		1,381,562		32,155		1,394,464		34,018		Commercial real estate - non owner-occupied	7,217		1,708		1,405,222		33,099		1,412,439		34,807
Residential real estate	Residential real estate	22,966		2,019		1,370,430		15,306		1,393,396		17,325		Residential real estate	18,651		504		1,207,885		12,039		1,226,536		12,543
Commercial and financial	Commercial and financial	13,824		3,488		819,259		21,166		833,083		24,654		Commercial and financial	12,632		2,142		887,574		15,874		900,206		18,016
Consumer	Consumer	615		116		191,601		2,980		192,216		3,096		Consumer	352		122		171,417		2,910		171,769		3,032
Paycheck Protection Program	Paycheck Protection Program	0		0		638,800		0		638,800		0		Paycheck Protection Program	0		0		364,112		0		364,112		0
Totals	Totals	$	56,620	$	8,287	$	5,801,409	$	85,726	$	5,858,029	$	94,013	Totals	$	46,190	$	4,982	$	5,390,859	$	76,145	$	5,437,049	$	81,127


		December 31, 2019													December 31, 2020
		Individually Evaluated				Collectively Evaluated				Total					Individually Evaluated				Collectively Evaluated				Total
(In thousands)	(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction and land development	Construction and land development	$	5,217	$	14	$	319,896	$	1,828	$	325,113	$	1,842	Construction and land development	$	276	$	13	$	244,832	$	4,907	$	245,108	$	4,920
Commercial real estate		20,484		220		2,358,487		13,004		2,378,971		13,224
Commercial real estate - owner occupied														Commercial real estate - owner occupied	10,243		402		1,131,067		9,466		1,141,310		9,868
Commercial real estate - non owner-occupied														Commercial real estate - non owner-occupied	8,083		1,640		1,387,771		36,626		1,395,854		38,266
Residential real estate	Residential real estate	16,093		834		1,491,770		6,833		1,507,863		7,667		Residential real estate	16,506		2,064		1,326,122		15,436		1,342,628		17,500
Commercial and financial	Commercial and financial	6,631		1,731		771,621		7,985		778,252		9,716		Commercial and financial	13,281		3,498		841,472		15,192		854,753		18,690
Consumer	Consumer	337		59		207,868		2,646		208,205		2,705		Consumer	807		91		187,928		3,398		188,735		3,489
Paycheck Protection Program														Paycheck Protection Program	0		0		566,961		0		566,961		0
Totals	Totals	$	48,762	$	2,858	$	5,149,642	$	32,296	$	5,198,404	$	35,154	Totals	$	49,196	$	7,708	$	5,686,153	$	85,025	$	5,735,349	$	92,733

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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 June 30, 2021, the interest rate swaps had an aggregate notional value of $182.1 million, with a fair value of $9.5 million recorded in other assets and other liabilities. 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 was 7.2 years at June 30, 2021 and 7.5 years at December 31, 2020.

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 2 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. For the three and six months ended June 30, 2021, the Company recognized a loss through other comprehensive income of $0.1 million and $0.3 million, respectively, and reclassified $57 thousand and $100 thousand, respectively, out of accumulated other comprehensive income and into interest income. As of June 30, 2021 and December 31, 2020, the interest rate floors had a fair value of $0.7 million and $1.0 million, respectively, recorded in other assets in the consolidated balance sheet. Over the next twelve months the Company expects to reclassify $0.3 million from accumulated other comprehensive income into interest income related to these agreements.


(In thousands)	Notional Amount		Fair Value		Balance Sheet Category
At June 30, 2021
Back-to-back swaps	$	182,058	$	9,497	Other Assets and Other Liabilities
Interest rate floors	300,000		705		Other Assets

At December 31, 2020
Back-to-back swaps	$	182,379	$	13,339	Other Assets and Other Liabilities
Interest rate floors	300,000		1,004		Other Assets

Note GH – Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are accounted for as secured borrowings. For securities sold under agreements to repurchase, the Company is required to pledge collateral with value sufficient to fully collateralized borrowings. Company securities pledged were as follows by collateral type and maturity as of:

(In thousands)

September 30, 2020

December 31, 2019

(In thousands)

June 30, 2021

December 31, 2020

Fair value of pledged securities - overnight and continuous:

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

99,887

94,354

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

136,619

137,268

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Note HI – Noninterest Income and Expense

Details of noninterest income and expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 are as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2020 2019 2020 2019
Noninterest income
Service charges on deposit accounts $ 2,242 $ 2,978 $ 7,006 $ 8,569
Interchange income 3,682 3,206 10,115 10,012
Wealth management income 1,972 1,632 5,558 4,773
Mortgage banking fees 5,283 2,127 11,050 4,976
Marine finance fees 242 152 545 715
SBA gains 252 569 572 1,896
BOLI income 899 928 2,672 2,770
Other income 2,370 3,198 7,869 7,967
16,942 14,790 45,387 41,678
Securities gains (losses), net 4 (847) 1,253 (1,322)
Total $ 16,946 $ 13,943 $ 46,640 $ 40,356
Noninterest expense
Salaries and wages $ 23,125 $ 18,640 $ 67,049 $ 56,566
Employee benefits 3,995 2,973 11,629 10,374
Outsourced data processing costs 6,128 3,711 14,820 11,432
Telephone/data lines 705 603 2,210 2,307
Occupancy 3,858 3,368 10,596 10,916
Furniture and equipment 1,576 1,528 4,557 4,829
Marketing 1,513 933 3,788 3,276
Legal and professional fees 3,018 1,648 8,658 6,528
FDIC assessments 474 56 740 881
Amortization of intangibles 1,497 1,456 4,436 4,370
Foreclosed property expense and net loss on sale 512 262 442 48
Provision for credit losses on unfunded commitments 756 0 980 0
Other 4,517 3,405 11,966 11,155
Total $ 51,674 $ 38,583 $ 141,871 $ 122,682


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2021		2020		2021		2020
Noninterest income
Service charges on deposit accounts	$	2,338	$	1,939	$	4,676	$	4,764
Interchange income	4,145		3,187		7,965		6,433
Wealth management income	2,387		1,719		4,710		3,586
Mortgage banking fees	2,977		3,559		7,202		5,767
Marine finance fees	177		157		366		303
SBA gains	232		181		519		320
BOLI income	872		887		1,731		1,773
Other income	2,249		2,147		5,993		5,499
	15,377		13,776		33,162		28,445
Securities (losses) gains, net	(55)		1,230		(169)		1,249
Total	$	15,322	$	15,006	$	32,993	$	29,694

Noninterest expense
Salaries and wages	$	22,966	$	20,226	$	44,359	$	43,924
Employee benefits	3,953		3,379		8,933		7,634
Outsourced data processing costs	4,676		4,059		9,144		8,692
Telephone/data lines	838		791		1,623		1,505
Occupancy	3,310		3,385		7,099		6,738
Furniture and equipment	1,166		1,358		2,420		2,981
Marketing	1,002		997		2,170		2,275
Legal and professional fees	2,182		2,277		4,764		5,640
FDIC assessments	515		266		1,041		266
Amortization of intangibles	1,212		1,483		2,423		2,939
Foreclosed property expense and net (gain) loss on sale	(90)		245		(155)		(70)
Provision for credit losses on unfunded commitments	0		178		0		224
Other	4,054		3,755		8,083		7,449
Total	$	45,784	$	42,399	$	91,904	$	90,197

Note IJ – Equity Capital

The Company is well capitalized and at ~~September~~June 30, ~~2020,~~2021, the Company and the Company’s principal banking subsidiary, Seacoast Bank, exceeded the common equity Tier 1 (CET1) capital ratio regulatory threshold of 6.5% for well-capitalized institutions under the Basel III standardized transition approach, as well as risk-based and leverage ratio requirements for well capitalized banks under the regulatory framework for prompt corrective action.

Note JK – Contingent Liabilities

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, operating results or cash flows.

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Note KL – Fair Value

Under ASC Topic 820, fair value measurements for items measured at fair value on a recurring and nonrecurring basis at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 included:


(In thousands)	(In thousands)	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(In thousands)	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2020
Available for sale debt securities1		$	1,286,858	$	101	$	1,286,757	$	0
At June 30, 2021										At June 30, 2021
Financial Assets										Financial Assets
Available-for-sale debt securities1										Available-for-sale debt securities1	$	1,322,776	$	199	$	1,322,577	$	0
Derivative financial instruments2										Derivative financial instruments2	10,202		0		10,202		0
Loans held for sale2	Loans held for sale2	73,046		0		73,046		0		Loans held for sale2	42,793		0		42,793		0
Loans3	Loans3	11,235		0		1,261		9,974		Loans3	10,212		0		1,073		9,139
Other real estate owned4	Other real estate owned4	15,890		0		875		15,015		Other real estate owned4	12,804		0		390		12,414
Equity securities5	Equity securities5	6,548		6,548		0		0		Equity securities5	6,434		6,434		0		0
Financial Liabilities										Financial Liabilities
Derivative financial instruments2										Derivative financial instruments2	$	9,497	$	0	$	9,497	$	0

December 31, 2019
Available for sale debt securities1		$	946,855	$	100	$	946,755	$	0
At December 31, 2020										At December 31, 2020
Financial Assets										Financial Assets
Available-for-sale debt securities1										Available-for-sale debt securities1	$	1,398,157	$	101	$	1,398,056	$	0
Derivative financial instruments2										Derivative financial instruments2	14,343		0		14,343		0
Loans held for sale2	Loans held for sale2	20,029		0		20,029		0		Loans held for sale2	68,890		0		68,890		0
Loans3	Loans3	5,123		0		1,419		3,704		Loans3	8,806		0		1,900		6,906
Other real estate owned4	Other real estate owned4	12,390		0		241		12,149		Other real estate owned4	12,750		0		72		12,678
Equity securities5	Equity securities5	6,392		6,392		0		0		Equity securities5	6,530		6,530		0		0
1See Note D for further detail of fair value of individual investment categories.
Financial Liabilities										Financial Liabilities
Derivative financial instruments2										Derivative financial instruments2	$	13,339	$	0	$	13,339	$	0
1See “Note D – Securities” for further detail of fair value of individual investment categories.										1See “Note D – Securities” for further detail of fair value of individual investment categories.
2Recurring fair value basis determined using observable market data.	2Recurring fair value basis determined using observable market data.									2Recurring fair value basis determined using observable market data.
3See Note E. Nonrecurring fair value adjustments to loans identified as impaired reflect full or partial write-downs that are based on the loan’s observable market price or current appraised value of the collateral in accordance with ASC Topic 310.
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.										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.	4Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360.									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.	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.									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~~Available-for-sale debt securities: Level 1 securities consist of U.S. Treasury ~~securities are reported at fair value utilizing Level 1 inputs.~~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

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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 creditworthiness of the 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 that 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 the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of the loans were 90 days or more past due or on ~~non accrual~~nonaccrual as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~ 2020.

The aggregate fair value and contractual balance of loans held for sale as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 is as follows:

(In thousands) September 30, 2020 December 31, 2019
Aggregate fair value $ 73,046 $ 20,029
Contractual balance 71,102 19,445
Excess 1,944 584

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(In thousands)	June 30, 2021		December 31, 2020
Aggregate fair value	$	42,793	$	68,890
Contractual balance	41,629		66,415
Excess	1,164		2,475

Loans: ~~Level 2 loans~~Loans carried at fair value consist of ~~impaired~~collateral-dependent real estate ~~loans which are collateral dependent.~~loans. Fair value is based on recent real estate appraisals less estimated costs of sale. For residential real estate impaired loans, appraised values or internal evaluations are based on the comparative sales approach. Level 3 loans consist of commercial and commercial real estate impaired loans. For these loansThese 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 ~~September~~June 30, ~~2020, the~~2021 capitalization rates utilized to determine fair value of the underlying collateral averaged approximately ~~7.3%~~7.2%. 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 ~~impaired~~ loans is considered ~~Level~~level 3 in the fair value hierarchy. ~~Impaired~~Collateral-dependent loans measured at fair value totaled ~~$11.2~~$14.3 million with a specific reserve of ~~$8.3~~$4.1 million at ~~September~~June 30, ~~2020,~~2021, compared to ~~$5.1~~$16.5 million with a specific reserve of ~~$2.9~~$7.7 million at December 31, ~~2019.~~2020.

For loans classified as Level 3, changes included loan additions of ~~$10.4~~$3.7 million offset by $1.5 million in paydowns and charge-offs ~~of $4.2 million~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

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 a Level 2 input. 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.

For OREO classified as Level 3 at June 30, 2021, changes during the ~~nine~~six months ended ~~September 30, 2020, changes~~ included additions of ~~one multifamily construction property for $6.5~~$1.3 million offset by sales and writedowns of ~~$3.9~~$1.6 million.

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-end~~quarterly valuation process. There were no such transfers ~~for loans and OREO classified as Level 3~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

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The carrying amount and fair value of the Company’s other financial instruments that were not disclosed previously in the balance sheet and for which carrying amount is not fair value as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 is as follows:

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(In thousands)	(In thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(In thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2020
June 30, 2021										June 30, 2021
Financial Assets	Financial Assets									Financial Assets
Debt securities held-to-maturity1	Debt securities held-to-maturity1	$	207,376	$	0	$	216,000	$	0	Debt securities held-to-maturity1	$	493,467	$	0	$	489,289	$	0
Time deposits with other banks	Time deposits with other banks	2,247		0		0		2,274		Time deposits with other banks	750		0		759		0
Loans, net	Loans, net	5,752,781		0		0		5,882,185		Loans, net	5,345,710		0		0		5,367,748
Financial Liabilities	Financial Liabilities									Financial Liabilities
Deposit liabilities	Deposit liabilities	6,914,843		0		0		6,920,231		Deposit liabilities	7,836,436		0		0		7,838,507
Federal Home Loan Bank (FHLB) borrowings		35,000		0		0		34,897

Subordinated debt	Subordinated debt	71,295		0		64,206		0		Subordinated debt	71,506		0		58,342		0

December 31, 2019
December 31, 2020										December 31, 2020
Financial Assets	Financial Assets									Financial Assets
Debt securities held-to-maturity1	Debt securities held-to-maturity1	$	261,369	$	0	$	262,213	$	0	Debt securities held-to-maturity1	$	184,484	$	0	$	192,179	$	0
Time deposits with other banks	Time deposits with other banks	3,742		0		0		3,744		Time deposits with other banks	750		0		762		0
Loans, net	Loans, net	5,158,127		0		0		5,139,491		Loans, net	5,633,810		0		0		5,686,019
Financial Liabilities	Financial Liabilities									Financial Liabilities
Deposit liabilities	Deposit liabilities	5,584,753		0		0		5,584,621		Deposit liabilities	6,932,561		0		0		6,936,097
Federal Home Loan Bank (FHLB) borrowings		315,000		0		0		314,995

Subordinated debt	Subordinated debt	71,085		0		64,017		0		Subordinated debt	71,365		0		58,227		0
1See Note D for further detail of individual investment categories.
1See “Note D – Securities” for further detail of individual investment categories.										1See “Note D – Securities” for further detail 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 agreements to repurchase, maturing within 30 days.

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 ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

~~Held to maturity~~Held-to-maturity debt securities: These debt 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. 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.

Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial or mortgage. Each loan category is further segmented into fixed and adjustable-rate interest terms as well as 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.

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Note LM – Business Combinations

Proposed Acquisition of Legacy Bank of Florida

On March 23, 2021, the Company announced that it had entered into an agreement and plan of merger with Legacy Bank of Florida (“Legacy”). Pursuant to the terms of the merger agreement, Legacy, headquartered in Boca Raton, FL, will be merged with and into Seacoast Bank. Legacy operates 5 branches in Broward and Palm Beach counties in Florida’s largest metropolitan statistical area with $476.0 million in loans and $485.6 million in deposits as of June 30, 2021. All regulatory and shareholder approvals have been received and the acquisition is expected to close in August 2021.

Acquisition of Fourth Street Banking Company

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 2 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)	August 21, 2020
Number of Fourth Street common shares outstanding	11,220
Shares issued upon conversion of convertible debt	5,405
Per share exchange ratio	0.1275
Number of shares of common stock issued	2,120
Multiplied by common stock price per share on August 21, 2020	$	19.40
Value of common stock issued	41,121
Cash paid for Fourth Street vested stock options	596
Total purchase price	$	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.

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(In thousands)	Initially Measured August 21, 2020
Assets:
Cash	$	38,082
Investment securities	3,498
Loans	303,434
Bank premises and equipment	9,480
Core deposit intangibles	1,310
Goodwill	9,030
Other assets	7,088
Total assets	$	371,922
Liabilities:
Deposits	$	329,662
Other liabilities	543
Total liabilities	$	330,205

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


	August 21, 2020
(In thousands)	Book Balance		Fair Value
Loans:
Construction and land development	$	9,197	$	8,851
Commercial real estate - owner-occupied	77,936		75,215
Commercial real estate - non owner-occupied	76,014		71,171
Residential real estate	23,548		23,227
Commercial and financial	72,745		68,096
Consumer	2,748		2,694
PPP loans	55,005		54,180
Total acquired loans	$	317,193	$	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)	August 21, 2020
Book balance of loans at acquisition	$	59,455
Allowance for credit losses at acquisition	(5,763)
Non-credit related discount	(4,319)
Total PCD loans acquired	$	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 2 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.


~~(In thousands, except per share data)~~	~~March 13, 2020~~
~~Number of FBPB common shares outstanding~~	~~5,213~~
~~Per share exchange ratio~~	~~0.2000~~
~~Number of shares of common stock issued~~	~~1,043~~
~~Multiplied by common stock price per share on March 13, 2020~~	$	~~20.17~~
~~Value of common stock issued~~	~~21,031~~
~~Cash paid for FBPB vested stock options~~	~~866~~
~~Total purchase price~~	$	~~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) Initially Measured
March 13, 2020 Measurement Period Adjustments As Adjusted March 13, 2020
Assets:
Cash $ 34,749 $ 0 $ 34,749
Investment securities 447 0 447
Loans 146,839 (62) 146,777
Bank premises and equipment 6,086 0 6,086
Core deposit intangibles 819 0 819
Goodwill 6,799 62 6,861
Other assets 1,285 20 1,305
Total assets $ 197,024 $ 20 $ 197,044
Liabilities:
Deposits $ 173,741 $ 0 $ 173,741
Other liabilities 1,386 20 1,406
Total liabilities $ 175,127 $ 20 $ 175,147

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

March 13, 2020
(In thousands) Book Balance Fair Value
Loans:
Construction and land development $ 9,493 $ 9,012
Commercial real estate - owner-occupied 46,221 45,171
Commercial real estate - non owner-occupied 36,268 35,079
Residential real estate 47,569 47,043
Commercial and financial 9,659 9,388
Consumer 1,132 1,084
Total acquired loans $ 150,342 $ 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)~~	~~March 13, 2020~~
~~Book balance of loans at acquisition~~	$	~~43,682~~
~~Allowance for credit losses at acquisition~~	~~(516)~~
~~Non-credit related discount~~	~~(128)~~
~~Total PCD loans acquired~~	$	~~43,038~~

Acquisition of Fourth Street Banking Company


(In thousands, except per share data)	August 21, 2020
Number of Fourth Street common shares outstanding	11,220
Shares issued upon conversion of convertible debt	5,405
Per share exchange ratio	0.1275
Number of shares of common stock issued	2,120
Multiplied by common stock price per share on August 21, 2020	$	19.40
Value of common stock issued	41,121
Cash paid for Fourth Street vested stock options	596
Total purchase price	$	41,717

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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.

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(In thousands)	Initially Measured August 21, 2020
Assets:
Cash	$	38,082
Investment securities	3,498
Loans	303,434
Bank premises and equipment	9,480
Core deposit intangibles	1,310
Goodwill	9,030
Other assets	7,088
Total assets	$	371,922
Liabilities:
Deposits	$	329,662
Other liabilities	543
Total liabilities	$	330,205

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


	August 21, 2020
(In thousands)	Book Balance		Fair Value
Loans:
Construction and land development	$	9,197	$	8,851
Commercial real estate - owner-occupied	77,936		75,215
Commercial real estate - non owner-occupied	76,014		71,171
Residential real estate	23,548		23,227
Commercial and financial	72,745		68,096
Consumer	2,748		2,694
PPP loans	55,005		54,180
Total acquired loans	$	317,193	$	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)	August 21, 2020
Book balance of loans at acquisition	$	59,455
Allowance for credit losses at acquisition	(5,763)
Non-credit related discount	(4,319)
Total PCD loans acquired	$	49,373

~~Pro-Forma Information~~

~~Pro-forma data for the three and nine months ended September 30, 2020 presents information as if the acquisition of FBPB and Fourth Street occurred at the beginning of 2019, as follows:~~

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Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
(In thousands, except per share amounts) 2020 2019 2020 2019
Net interest income1
$ 65,825 $ 67,090 $ 205,641 $ 198,748
Net income 28,238 27,557 58,824 73,238
EPS - basic $ 0.51 $ 0.50 $ 1.08 $ 1.34
EPS - diluted 0.51 0.50 1.07 1.33
1The provision for credit losses of $1.8 million recorded under CECL at the time of the FBPB acquisition and the $4.6 million recorded under CECL at the time of the Freedom Bank acquisition have been excluded from the pro forma information above, which presents information as if the acquisition had occurred on January 1, 2019, prior to the Company's adoption of CECL.

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~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

The purpose of this discussion and analysis is to aid in understanding significant changes in the financial condition of Seacoast Banking Corporation of Florida and its subsidiaries ("Seacoast" or the “Company”) and their results of operations. Nearly all of the Company’s operations are contained in its banking subsidiary, Seacoast National Bank (“Seacoast Bank” or the “Bank”). Such discussion and analysis should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related notes included in this report.

The emphasis of this discussion will be on the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of September 30, 2020 compared to 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 following section for additional information regarding forward-looking statements.

For purposes of the following discussion, the words “Seacoast" or the "Company” refer to the combined entities of Seacoast Banking Corporation of Florida and its direct and indirect wholly owned subsidiaries.

~~Special Cautionary Notice Regarding Forward-Looking Statements~~

Certain statements made or incorporated by reference herein which are not statements of historical fact, including those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are “forward-looking statements” within the meaning, and protections, of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, and intentions about future performance, and involve known and unknown risks, uncertainties and other factors, 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 or its wholly-owned banking subsidiary, 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:

•~~the effects of future economic and market conditions, including seasonality;~~

•adverse effects (economic and otherwise) due to the COVID-19 pandemic 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 CECL;~~

•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 the ability for borrowers under deferred payment programs to return to making full payments; 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;~~

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•~~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;~~

•~~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;~~

•~~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 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 data security breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation, including heightened cyber risk as a result of increased remote working by our associates;

•~~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 its participation in the PPP program;~~

•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;~~

•the risks relating to the recently completed mergers including, without limitation: unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues being lower than expected;

•~~the risk of deposit and customer attrition;~~

•~~any changes in deposit mix;~~

•~~unexpected operating and other costs, which may differ or change from expectations;~~

•~~the risks of customer and employee loss and business disruptions, including, without limitation, the results of difficulties in maintaining relationships with employees;~~

•~~the inability to grow the customer and employee base;~~

•~~increased competitive pressures and solicitations of customers by competitors;~~

•~~the difficulties and risks inherent with entering new markets; and~~

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

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

~~Third Quarter 2020~~

Acquisition of Fourth Street Banking Company

InOn August 21, 2020, ~~Seacoast~~the Company completed ~~the~~its acquisition of Fourth Street Banking Company (“Fourth Street”). Simultaneously, upon completion of the merger of Fourth Street and ~~its wholly-owned~~the Company, Fourth Street's wholly owned subsidiary bank, Freedom Bank, ~~which added $303 million in loans~~was merged with and ~~$330 million in deposits. The~~into Seacoast Bank. Prior to the acquisition, ~~supports Seacoast’s growing presence in the attractive St. Petersburg, Florida market.~~ Freedom Bank operated ~~two~~2 branches in St. Petersburg, ~~which have been converted to Seacoast branches. Consolidation activities and related expenses are mostly complete.~~Florida.

~~Impact of Paycheck Protection Program Loans on Comparability Amongst Periods~~

Fees earned by Seacoast to originate Paycheck Protection Program ("PPP") loans, net of loan-specific costs, totaled $17.2 million, and are deferred and recognized as an adjustment to yield over time. At the end of the second quarter of 2020, Seacoast expected that the PPP forgiveness process would begin quickly, with a significant proportion of loans forgiven within nine months of origination. By the end of the third quarter of 2020, the U.S. Small Business Administration (“SBA”) had not processed any forgiveness applications, changes to various procedures and forms continued, and additional changes to the program are still being considered by Congress. As a result of this acquisition, the ~~SBA loan forgiveness delays~~Company expects to enhance its presence in St. Petersburg, expand its customer base and ~~increased uncertainty~~leverage operating cost through economies of scale, and positively affect the Company’s operating results.

The Company acquired 100% of the ~~timing~~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)	August 21, 2020
Number of Fourth Street common shares outstanding	11,220
Shares issued upon conversion of convertible debt	5,405
Per share exchange ratio	0.1275
Number of shares of common stock issued	2,120
Multiplied by common stock price per share on August 21, 2020	$	19.40
Value of common stock issued	41,121
Cash paid for Fourth Street vested stock options	596
Total purchase price	$	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 ~~forgiveness,~~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.

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(In thousands)	Initially Measured August 21, 2020
Assets:
Cash	$	38,082
Investment securities	3,498
Loans	303,434
Bank premises and equipment	9,480
Core deposit intangibles	1,310
Goodwill	9,030
Other assets	7,088
Total assets	$	371,922
Liabilities:
Deposits	$	329,662
Other liabilities	543
Total liabilities	$	330,205

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


	August 21, 2020
(In thousands)	Book Balance		Fair Value
Loans:
Construction and land development	$	9,197	$	8,851
Commercial real estate - owner-occupied	77,936		75,215
Commercial real estate - non owner-occupied	76,014		71,171
Residential real estate	23,548		23,227
Commercial and financial	72,745		68,096
Consumer	2,748		2,694
PPP loans	55,005		54,180
Total acquired loans	$	317,193	$	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)	August 21, 2020
Book balance of loans at acquisition	$	59,455
Allowance for credit losses at acquisition	(5,763)
Non-credit related discount	(4,319)
Total PCD loans acquired	$	49,373

Acquisition of First Bank of the Palm Beaches

On March 13, 2020, the Company ~~changed~~completed its acquisition of First Bank of the Palm Beaches (“FBPB”). FBPB was merged with and into Seacoast Bank. FBPB operated 2 branches in the Palm Beach market.

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(In thousands, except per share data)	March 13, 2020
Number of FBPB common shares outstanding	5,213
Per share exchange ratio	0.2000
Number of shares of common stock issued	1,043
Multiplied by common stock price per share on March 13, 2020	$	20.17
Value of common stock issued	21,031
Cash paid for FBPB vested stock options	866
Total purchase price	$	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 adjustment reflected in the table below are the result of information obtained subsequent to the initial measurement.


(In thousands)	Initially Measured March 13, 2020		Measurement Period Adjustments		As Adjusted March 13, 2020
Assets:
Cash	$	34,749	$	0	$	34,749
Investment securities	447		0		447
Loans	146,839		(62)		146,777
Bank premises and equipment	6,086		0		6,086
Core deposit intangibles	819		0		819
Goodwill	6,799		62		6,861
Other assets	1,285		20		1,305
Total assets	$	197,024	$	20	$	197,044
Liabilities:
Deposits	$	173,741	$	0	$	173,741
Other liabilities	1,386		20		1,406
Total liabilities	$	175,127	$	20	$	175,147

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


	March 13, 2020
(In thousands)	Book Balance		Fair Value
Loans:
Construction and land development	$	9,493	$	9,012
Commercial real estate - owner-occupied	46,221		45,171
Commercial real estate - non owner-occupied	36,268		35,079
Residential real estate	47,569		47,043
Commercial and financial	9,659		9,388
Consumer	1,132		1,084
Total acquired loans	$	150,342	$	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:

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(In thousands)	March 13, 2020
Book balance of loans at acquisition	$	43,682
Allowance for credit losses at acquisition	(516)
Non-credit related discount	(128)
Total PCD loans acquired	$	43,038

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The emphasis of this discussion will be on the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 2021 compared to December 31, 2020.

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.

•the effects of future economic and market conditions, including seasonality;

•the adverse impact of COVID-19 and variants thereof (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, including the ongoing potential to adversely affect Seacoast’s revenues and values of its assets and liabilities, lead to a tightening of credit, and increase stock price volatility;

•government or regulatory responses to the COVID-19 pandemic, including the risk of inflation and interest rate increases resulting from monetary and fiscal stimulus response, which may have unanticipated adverse effects on our customers, and our financial condition and results of operations;

•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”);

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•interest rate risks, sensitivities and the shape of the yield curve; uncertainty related to the impact of LIBOR calculations on securities, loans and debt;

•governmental actions to stimulate the economy and provide support for small businesses have resulted in material increases to the Company’s liquidity position, adversely affecting the net interest margin. The duration of this liquidity remaining on the balance sheet is uncertain;

•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 ~~accelerated fee recognition schedule used~~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;

•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 ~~second quarter~~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;

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

•the risks relating to the Legacy Bank of Florida proposed merger including, without limitation: the timing to consummate the proposed merger; the risk that a condition to closing of the proposed merger may not be satisfied; the risk that the merger may not be completed at all; the diversion of management time on issues related to the proposed merger; unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following the merger being lower than expected; the risk of deposit and customer attrition; any changes in deposit mix; unexpected operating and other costs, which may differ or change from expectation; the risk of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees; increased competitive pressures on solicitations of customers by competitors; as well as difficulties and risks inherent with entering new markets; 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.

Business Developments

Impact of COVID-19 Pandemic

The COVID-19 pandemic and related restrictive measures taken by governments, businesses and individuals have caused 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. As the restrictive measures have been eased during 2020 and ~~began recognizing fees on a schedule aligned~~into 2021, the U.S. economy has begun to recover and with the ~~full contractual maturity~~availability and distribution of multiple COVID-19 vaccines, we anticipate continued improvements in commercial and consumer activity and the U.S. economy. While the overall outlook has improved based on the availability of the ~~loans~~vaccine to all adults and older children, there has been a recent rise in hospitalization and infection rates in the ~~third quarter~~country, but especially in our footprint, caused by the Delta variant, a rapidly spreading strain of ~~2020. This resulted in only $0.2 million in PPP fees recognized in~~coronavirus. Therefore, the ~~third quarter~~risk of ~~2020 compared~~further resurgence and possible reimplementation of restrictions remains.

While indications of recovery exist, we recognize that our business and consumer customers are experiencing varying degrees of financial distress, which is expected to ~~$4.0 million in~~continue into the second ~~quarter~~half of ~~2020. The uncertainty in~~2021, especially if new COVID-19 variant infections increase (or are not adequately contained) and new economic restrictions are mandated. Changing consumer behavior and the ~~SBA's forgiveness process~~impact of government support programs including the PPP have contributed to higher customer deposit balances, which may adversely affect our net interest income and net interest margin. Commercial activity has improved, but has not returned to the levels existing prior to the outbreak of the pandemic, which may result in ~~significant variability~~our customers’ inability to meet their loan obligations to us. In addition, the economic pressures and uncertainties related to the COVID-19 pandemic have resulted in changes in consumer spending behaviors, which may negatively impact the demand for loans and other services we offer. Our borrowers include customers in industries such as hotel/lodging, restaurants and retail and commercial real estate, all of ~~fee recognition~~which have been significantly impacted by the COVID-19 pandemic, or remain at heightened risk of future negative economic impact, which may be caused or exacerbated by increased COVID-19 variant infections, vaccine hesitancy, or new economic restrictions in ~~future periods. This is solely~~our footprint. 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 ~~timing issue and does not affect the $17.2 million total fee income Seacoast will recognize~~more permanent basis as ~~these loans are forgiven or mature. If the contractual term, rather than an accelerated term, had been used to recognize fees since the inception~~a result of the ~~PPP program, PPP fee income~~pandemic. We continue to monitor these customers closely.

We have taken deliberate actions to maintain our balance sheet strength to serve our clients and communities, including maintaining higher levels of liquidity and managing our assets and liabilities in ~~each~~order to maintain a strong capital position and support business growth and acquisition opportunities; however, future economic conditions are subject to significant uncertainty. Uncertainties associated with the pandemic include the duration of the ~~second~~COVID-19 outbreak and ~~third quarters~~any related variant infections, the availability, acceptance, and effectiveness of ~~2020 would have been $2.1 million. The Company expects~~COVID-19 vaccines, the impact to ~~recognize approximately $2.1 million in each~~our customers, employees and vendors and the impact to the economy as a whole. We continuously seek to monitor and anticipate developments, but cannot predict all of the ~~next six quarters if no early forgiveness occurs, although actual early forgiveness events may create variability in timing.~~

~~Third Quarter 2020 Results~~

~~For the third quarter~~various adverse effects COVID-19 will have on our business, financial condition, liquidity or results of 2020, the Company reported net income of $22.6 million, or $0.42 per average diluted share, compared to $25.1 million, or $0.47, for the second quarter of 2020 and $25.6 million, or $0.49, for the third quarter of 2019. For the nine months ended September 30, 2020, net income totaled $48.4 million, or $0.91 per average diluted share, compared to $71.6 million, or $1.38 for the nine months ended September 30, 2019. Adjusted net income1 for the third quarter of 2020 totaled $27.3 million, or $0.50 per average diluted share, compared to $25.5 million, or $0.48, for the second quarter of 2020 and $27.7 million, or $0.53, for the third quarter of 2019. For the nine months ended September 30, 2020, adjusted net income1 ~~totaled $58.3 million, or $1.09 per average diluted share, compared to $77.8 million, or $1.50, for the nine months ended September 30, 2019.~~

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

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Third Second Third Nine Months Ended
Quarter Quarter Quarter September 30,
2020 2020 2019 2020 2019
Return on average tangible assets 1.20 % 1.37 % 1.61 % 0.93 % 1.53 %
Return on average tangible shareholders' equity 11.35 13.47 14.73 8.71 14.63
Efficiency ratio 61.65 50.11 48.62 57.15 52.85
Adjusted return on average tangible assets1
1.38 % 1.33 % 1.67 % 1.04 % 1.59 %
Adjusted return on average tangible shareholders' equity1
13.06 13.09 15.30 9.80 15.20
Adjusted efficiency ratio1
54.82 49.60 48.96 52.64 52.05
1Non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.

Results of Operations

For the three months ended September 30, 2020, the Company's results reflect the impact of $4.3 million in merger-related expenses primarily related to the acquisition of Freedom Bank, and $0.5 million in costs relating to the simultaneous consolidation of a legacy branch in St. Petersburg. Results for the three months ended September 30, 2020 were also affected by the change in the timing of recognition of PPP loan fees. The second quarter of ~~2020 benefited from higher loan production driven by~~2021, the ~~PPP program, which resulted in higher deferrals~~Company reported net income of ~~related salary expenses. During~~$31.4 million, or $0.56 per average diluted share, compared to $33.7 million, or $0.60, for the ~~nine~~first quarter of 2021 and $25.1 million, or $0.47, for the second quarter of 2020. For the six months ended ~~September~~June 30, ~~2020, merger related charges~~2021, net income totaled ~~$9.1~~$65.1 million ~~including costs~~or $1.17 per average diluted share, an increase of $39.3 million, or 153%, compared to ~~acquire both First Bank~~the six months ended June 30, 2020. Adjusted net income1 for the second quarter of 2021 totaled $33.3 million, or $0.59 per average diluted share, compared to $35.5 million, or $0.63, for the ~~Palm Beaches ("FBPB") in March 2020~~first quarter of 2021 and ~~Freedom Bank in August~~$25.5 million, or $0.48, for the second quarter of 2020. For the six months ended June 30, 2021, adjusted net income1 totaled $68.7 million, or $1.23 per average diluted share, compared to $30.9 million, or $0.59 per average diluted share for the six months ended June 30, 2020.


	Second		First		Second		Six Months Ended
	Quarter		Quarter		Quarter		June 30,
	2021		2021		2020		2021		2020
Return on average tangible assets	1.48	%	1.70	%	1.37	%	1.58	%	0.78	%
Return on average tangible shareholders' equity	13.88		15.62		13.47		14.73		7.27
Efficiency ratio	54.93		53.21		50.11		54.05		54.88

Adjusted return on average tangible assets1	1.52	%	1.75	%	1.33	%	1.63	%	0.86	%
Adjusted return on average tangible shareholders' equity1	14.27		16.01		13.09		15.12		8.02
Adjusted efficiency ratio1	53.49		51.99		49.60		52.72		51.53
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

Net Interest Income and Margin

Net interest income ~~(on a fully taxable equivalent basis)~~2for the ~~third~~second quarter of ~~2020~~2021 totaled ~~$63.6~~$65.8 million, decreasing ~~$3.8~~$0.8 million, or 6%1%, compared to the first quarter of 2021, and decreasing $1.5 million, or 2%, compared to the second quarter of ~~2020, and increasing $2.6~~2020. For the six months ended June 30, 2021, net interest income totaled $132.4 million, an increase of $2.0 million, or 4%2%, compared to the ~~third~~six months ended June 30, 2020. The decrease quarter-over-quarter reflects lower income on Paycheck Protection Program (“PPP”) loans, partially offset by lower interest expense on deposits, while the decrease from the second quarter of ~~2019. For~~2020 reflects the ~~nine months ended September 30, 2020, net~~impact of the lower interest ~~income~~rate environment. Net interest margin (on a fully tax equivalent basis)1 ~~totaled $194.3 million, an increase~~was 3.23% in the second quarter of ~~$12.2 million, or 7%,~~2021, compared to ~~the nine months ended September 30, 2019. Net interest margin was 3.40%~~3.51% in the ~~third~~first quarter ~~2020, compared to~~of 2021 and 3.70% in the second quarter ~~2020 and 3.89% in~~of 2020. The decrease during the ~~third~~second quarter of ~~2019. The decrease in the third quarter of 2020~~2021 was largely the result of ~~the decrease~~significant growth in ~~fees recognized on PPP loans. Excluding the impact of PPP loans~~transaction account deposit balances. This increase in funding occurred across our customer base at near-zero rates, as new clients were onboarded and ~~accretion of purchase discount on acquired loans,~~existing clients continue to see expansion in cash balances. The resulting increase in liquidity negatively impacted net interest margin ~~decreased four~~by 23 basis points in the ~~third~~second quarter of 2021. Excluding this increase in liquidity, the remaining decline in net interest margin compared to the first quarter of 2021 is attributed to lower PPP interest and fees as a result of declining balances as PPP loans are forgiven. Compared to the first quarter of 2021, securities yields declined by only two basis points to 1.63% and non-PPP loan yields declined by only one basis point to 4.36% during the second quarter of 2021. Offsetting and favorable was the decline in the cost of deposits from 13 basis points in the first quarter of 2021 to eight basis points in the second quarter of 2021. The effect on net interest margin of purchase discounts on acquired loans was an increase of 14 basis points in the second quarter of 2021 compared to an increase of 15 basis points in the first quarter of 2021 and an increase of 16 basis points in the second quarter of 2020. ~~Contributing to the four basis point decline, the yield~~The effect of interest and fees on PPP loans ~~declined nine~~was an increase of six basis points ~~reflecting higher paydowns~~in the second quarter of 2021, an increase of 11 basis points in the first quarter of 2021 and ~~refinancings, and~~an increase of eight basis points in the second quarter of 2020. For the six months ended June 30, 2021, net interest margin (on a fully tax equivalent basis)1 was 3.37%, compared to 3.81% for the six months ended June 30, 2020. The yield on securities declined ~~56 basis points, affected by~~from 2.85% for the six months ended June 30, 2020 to 1.64% for the six months ended June 30, 2021, reflecting the impact of a lower interest rate ~~resets~~environment including the payoff of higher yielding securities being replaced with lower yields on new purchases. The yield on non-PPP loans declined from 4.72% for the six months ended June 30, 2020 to 4.36% for the six months ended June 30, 2021, reflecting the impact of the lower interest rate environment. Offsetting and ~~faster prepayments, as well as additional investments of excess liquidity into securities. These declines were partially offset by lower~~favorable was the decline in the cost of deposits ~~which decreased seven~~from 43 basis points for the six months ended June 30, 2020 to 2410 basis points ~~during~~for the ~~quarter,~~six months ended June 30, 2021.

The effect on net interest margin of purchase discounts on acquired loans was an increase of 15 basis points for the six months ended June 30, 2021 compared to an increase of 21 basis points for the six months ended June 30, 2020. The effect of interest

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

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and fees on PPP loans was an increase of eight basis points for the six months ended June 30, 2021,compared to an increase of four basis points for the six months ended June 30, 2020.

The cost of deposits declined to eight basis points in the second quarter of 2021, compared to 13 basis points in the first quarter of 2021 and 31 basis points in the second quarter of ~~2020 and 73 basis points in the third quarter of 2019.~~2020. Lower cost of deposits reflects lower market rates, and a favorable shift in product mix to include a higher proportion of noninterest bearing demand deposits to total deposits. ~~We expect~~For the six months ended June 30, 2021, the cost of deposits ~~to further decline in the fourth quarter of 2020.~~

~~For the nine months ended September 30, 2020, net interest margin~~ was ~~3.67%,~~ten basis points, a decrease of 2833 basis points compared to the ~~nine~~six months ended ~~September~~June 30, 2019. For the nine months ended September 30, 2020, the cost of deposits was 36 basis points, compared to 72 basis points for the nine months ended September 30, 2019. Decreases in net interest margin and the cost of deposits reflect the impact of the 150 basis point decrease in the fed funds rate in March 2020, which has since driven contractions in both the yields on interest-bearing assets and the cost of interest-bearing liabilities. In addition, PPP loan balances have yielded an average 2.60% during the nine months ended September 30, 2020, which has negatively affected the total loan yield.

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

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2020.

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

(In thousands, except ratios)
Net Interest
Income1
Net Interest
Margin1
Yield on
Earning Assets1
Rate on Interest
Bearing Liabilities
Third quarter 2020 $ 63,621 3.40 % 3.65 % 0.40 %
Second quarter 2020 67,388 3.70 % 4.03 % 0.51 %
Third quarter 2019 61,027 3.89 % 4.65 % 1.13 %
Nine Months Ended September 30, 2020 194,300 3.67 % 4.05 % 0.59 %
Nine Months Ended September 30, 2019 182,107 3.95 % 4.72 % 1.14 %
1On tax equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.


(In thousands, except ratios)	Net Interest Income1		Net Interest Margin1		Yield on Earning Assets1		Rate on Interest Bearing Liabilities
Second quarter 2021	$	65,933	3.23	%	3.33	%	0.16	%
First quarter 2021	66,741		3.51	%	3.65	%	0.23	%
Second quarter 2020	67,388		3.70	%	4.03	%	0.51	%

Six months ended June 30, 2021	132,674		3.37	%	3.49	%	0.19	%
Six months ended June 30, 2020	130,679		3.81	%	4.27	%	0.70	%
1On tax equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.

Total average loans ~~increased $132.3~~decreased $161.1 million, or 3%, for the second quarter of 2021 compared to the first quarter of 2021, and decreased $130.3 million, or 2%, ~~for the third quarter of 2020 compared to~~from the second quarter of ~~2020, and increased $914.9 million, or 18%, from the third quarter of 2019.~~2020. The ~~increase~~decrease from the prior quarter ~~includes~~reflects a net decrease in PPP loans as a result of loan forgiveness. The decrease from the ~~impact~~prior year reflects PPP loan forgiveness and a conservative slowdown in originations of ~~$303.4 million in~~commercial and consumer loans, partially offset by loans acquired from ~~Freedom Bank in the third quarter of 2020. The increase from prior year reflects the Company's participation in the PPP program and the impact of the acquisitions of FBPB and~~ Freedom Bank.

Average loans as a percentage of average earning assets totaled ~~79%~~68% for the ~~third~~second quarter of ~~2020,~~2021, 75% for the first quarter of 2021 and 78% for the second quarter of ~~2020 and 79% for the third quarter~~2020.

Table of ~~2019.~~Contents

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


		Third		Second		Third		Nine Months Ended					Second		First		Second		Six Months Ended
		Quarter		Quarter		Quarter		September 30,					Quarter		Quarter		Quarter		June 30,
(In thousands)	(In thousands)	2020		2020		2019		2020		2019		(In thousands)	2021		2021		2020		2021		2020
Commercial pipeline at period end	Commercial pipeline at period end	$	256,191	$	117,042	$	396,422	$	256,191	$	396,422	Commercial pipeline at period end	$	322,014	$	240,871	$	117,042	$	322,014	$	117,042
Commercial loan originations	Commercial loan originations	88,245		106,857		325,407		378,432		749,467		Commercial loan originations	193,028		204,253		106,857		397,281		290,187

Residential pipeline - saleable at period end	Residential pipeline - saleable at period end	149,896		94,666		35,136		149,896		35,136		Residential pipeline - saleable at period end	60,585		92,141		94,666		60,585		94,666
Residential loans-sold		162,468		122,459		80,758		347,792		174,707
Residential loans - sold												Residential loans - sold	120,099		138,337		122,459		258,436		185,324

Residential pipeline - portfolio at period end	Residential pipeline - portfolio at period end	33,374		13,199		43,378		33,374		43,378		Residential pipeline - portfolio at period end	54,132		72,448		13,199		54,132		13,199
Residential loans-retained		25,404		23,539		22,365		74,719		123,765
Residential loans - retained												Residential loans - retained	118,126		46,620		23,539		164,746		49,315

Consumer pipeline at period end	Consumer pipeline at period end	17,094		30,647		29,635		17,094		29,635		Consumer pipeline at period end	31,748		28,127		30,647		31,748		30,647
Consumer originations	Consumer originations	62,293		57,956		59,933		171,765		156,889		Consumer originations	63,702		46,745		57,956		110,447		109,472

PPP originations	PPP originations	8,276		590,718		—		598,994		—		PPP originations	23,529		232,478		590,718		256,007		590,718

Commercial originations during the ~~third~~second quarter of ~~2020~~2021 were ~~$88.2~~$193.0 million, a decrease of ~~$18.6~~$11.2 million, or ~~17%~~5%, compared to the first quarter of 2021, and an increase of $86.2 million, or 81%, compared to the second quarter of 2020 and a decrease of $237.2 million, or 73%, compared to the third quarter of 2019. Commercial loan origination activity in the third quarter of 2020 reflects the continued adherence to underwriting guidelines in the current economic environment, lesser pipeline-building activities during the periods of government imposed shutdowns earlier in 2020, and lower demand for credit facilities from business customers.2020.

The commercial pipeline increased ~~$139.1~~$81.1 million, or ~~119%~~34%, to ~~$256.2~~$322.0 million at ~~September~~June 30, ~~2020~~2021, compared to March 31, 2021, and increased $205.0 million, or 175%, compared to June 30, 2020. The ~~Company has continued to maintain its disciplined credit culture, focusing only on relationships~~increases reflect increasing demand in line with ~~strong balance sheets that can support significant stress.~~Florida’s expanding economy and the addition of new commercial bankers.

The Company originates residential mortgage loans identified for sale to investors in the secondary market. The Company uses rate locks with investors at the time of application, thereby eliminating interest rate risk. ~~Saleable loan production has continued to increase, reflecting a robust residential refinance market and strength in the Florida housing market.~~ Residential loans

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originated for sale in the secondary market ~~were $162.5~~totaled $120.1 million in the ~~third~~second quarter of ~~2020,~~2021, compared to $138.3 million in the first quarter of 2021 and $122.5 million in the second quarter of 2020, a decrease of 13% and ~~$80.8 million~~a decrease of 2%, respectively. Refinance activity has slowed from the peaks seen in the ~~third quarter of 2019, an increase of 33%~~last several quarters, and 101%, respectively. The residential lending team has adapted quickly to heightened demand and has increased service levels to homebuyers, refinance customers, and local real estate professionals to generate substantial growth.housing inventory is low. Residential saleable pipelines were ~~$149.9~~$60.6 million as of ~~September~~June 30, ~~2020,~~2021, compared to $92.1 million as of March 31, 2021 and $94.7 million as of June 30, ~~2020, an increase of 58%.~~2020.

Residential loan production retained in the portfolio for the ~~third~~second quarter of ~~2020~~2021 was ~~$25.4~~$118.1 million compared to $46.6 million in the first quarter of 2021 and $23.5 million in the second quarter of 2020, ~~and $22.4 million in the third quarter of 2019,~~ an increase of 8%153% and ~~13%~~an increase of 402%, respectively. The pipeline of residential loans intended to be retained in the portfolio was ~~$33.4~~$54.1 million as of ~~September~~June 30, ~~2020,~~2021, compared to $72.4 million as of March 31, 2021, and $13.2 million as of June 30, ~~2020, an increase~~2020. Residential loans retained in the second quarter of ~~153%.~~2021 includes a $38.4 million purchased pool consisting of 30-year fixed rate jumbo residential loans.

Consumer originations totaled ~~$62.3~~$63.7 million during the ~~third~~second quarter of ~~2020,~~2021, an increase of ~~$4.3~~$17.0 million, or 7%36%, from the first quarter of 2021 and an increase of $5.7 million, or 10%, from the second quarter of ~~2020 and an increase of $2.4 million, or 4%, from the third quarter of 2019.~~2020. The consumer pipeline was ~~$17.1 million as of September 30, 2020, compared to $30.6~~$31.7 million as of June 30, 2021, compared to $28.1 million as of March 31, 2021 and $30.6 million at June 30, 2020.

In March 2020, ~~a decrease of 44%.~~the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. The ~~decrease was primarily~~CARES Act includes provisions for the ~~result of lower demand for home equity lines of credit, as customers are using first mortgage refinancing as an economically beneficial alternative.~~

~~Seacoast has assisted borrowers with more than 5,500 loans originated~~Paycheck Protection Program (“PPP”) offered through the ~~PPP~~U.S. Small Business Administration (“SBA”). Loans originated under this program ~~and, when combined~~have a contractual rate of interest of 1% with ~~PPP loans acquired from Freedom Bank, outstanding balances totaled $638.8 million at September 30, 2020. Under the terms of the SBA's program,~~ principal and interest ~~on PPP loans~~that may be forgiven, provided that the borrower uses the funds in a manner consistent with PPP guidelines. Seacoast has assisted more than 8,000 borrowers through the ~~program's guidelines. As of September~~PPP since inception, $529.7 million in PPP loan balances have been forgiven, and remaining outstanding balances total $364.1 million at June 30, 2020, the SBA had not processed any forgiveness applications. Significant uncertainty remains about when and if borrowers will seek and qualify for forgiveness, and therefore uncertainty remains about the life of these loans.2021.

Average debt securities increased ~~$190.7~~$78.6 million, or ~~16.5%~~5%, ~~for~~during the ~~third~~second quarter ~~2020~~of 2021 compared to the first quarter of 2021, and were $499.9 million, or 43%, higher compared to the second quarter ~~2020, and were $153.1 million, or 13%, higher compared to the third quarter~~ of ~~2019.~~2020. Increases ~~from the second quarter of 2020~~ reflect the ~~impact~~investment of ~~purchases of $387.6 million,~~excess liquidity, partially offset by ~~maturities of $96.7 million. Purchases in the third quarter 2020 were primarily government-sponsored mortgage-backed securities, with an average yield of 1.31%.~~paydowns and maturities.

The cost of average interest-bearing liabilities contracted 11in the second quarter of 2021 to 16 basis points infrom 23 basis points for the ~~three months ended September 30, 2020 to 40 basis points~~first quarter of 2021, and from 51 basis points ~~reflecting~~for the ~~impact of higher deposit balances and decreases in underlying market rates. The Company continues to benefit from a low-cost deposit franchise. During the third~~second quarter of 2020, the Company acquired $330 million in deposits from Freedom Bank, including $141.3 million in noninterest bearing demand deposits. Noninterest bearing demand deposits at September 30, 2020 represented 35% of total deposits compared to 34% at June 30, 2020. The cost of average total deposits (including noninterest bearing demand deposits) in the ~~third quarter of 2020 was 0.24% compared to 0.31% in the~~ second quarter of ~~2020 and 0.73%~~2021 was 8 basis points compared to 13 basis points in ~~the third quarter of 2019.~~

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

Customer Relationship Funding
September 30, June 30, March 31, December 31, September 30,
(In thousands, except ratios) 2020 2020 2020 2019 2019
Noninterest demand $ 2,400,744 $ 2,267,435 $ 1,703,628 $ 1,590,493 $ 1,652,927
Interest-bearing demand 1,385,445 1,368,146 1,234,193 1,181,732 1,115,455
Money market 1,457,078 1,232,892 1,124,378 1,108,363 1,158,862
Savings 655,072 619,251 554,836 519,152 528,214
Time certificates of deposit 1,016,504 1,179,059 1,270,464 1,185,013 1,217,683
Total deposits $ 6,914,843 $ 6,666,783 $ 5,887,499 $ 5,584,753 $ 5,673,141
Customer sweep accounts $ 89,508 $ 92,125 $ 64,723 $ 86,121 $ 70,414
Noninterest demand deposits as % of total deposits 35 % 34 % 29 % 28 % 29 %

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 far out-performing large bank call center wait times and service level standards. The impacts of PPP and individual stimulus payments, as well as the acquisition of FBPB in the first quarter of ~~2020~~2021 and ~~Freedom Bank~~31 basis points in the ~~third~~second quarter of 2020, ~~have all contributed to higher deposit balances. The Company has also seen a~~reflecting continued ~~shift toward mobile engagement as customers recognize the ease~~repricing downward of ~~access~~interest-bearing deposits and ~~security features of mobile engagement. At September 30, 2020, registered mobile devices had increased 14% compared to September 30, 2019, while online users increased 13% in the same~~ time ~~period. Growth is coming from both consumer and business customers utilizing the convenience of mobile and online channels.~~ deposits.

During the ~~third~~second quarter of ~~2020,~~2021, average transaction deposits (noninterest and interest bearing demand) increased ~~$248.9~~$459.3 million, or 7%11%, compared to the first quarter of 2021 and increased $1.1 billion, or 32%, compared to the second quarter of 2020, reflecting the inflow of new customers and ~~increased $901.8 million, or 33%, compared to the third quarter of 2019. Along with new and acquired relationships,~~higher deposit ~~programs and digital sales have improved the Company's market share and deepened relationships with~~balances for existing customers.

The Company’s deposit mix remains favorable, with ~~84%~~93% of average deposit balances comprised of savings, money market, and demand deposits for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Seacoast's average cost of deposits, including noninterest bearing demand deposits, decreased to ~~0.36%~~10 basis points for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~0.72%~~43 basis points for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, reflecting the lower ~~rates after the Federal Reserve actions beginning in the third quarter of 2019~~interest rate environment and shifts in deposit mix with a higher proportion of low cost deposits. Brokered CDs totaled ~~$381.0~~$20.0 million at ~~September~~June 30, ~~2020,~~2021, with ana weighted average rate of ~~1.09%~~0.32%. ~~CD maturities are laddered, with $147.2 million maturing in the fourth quarter of 2020.~~

~~Short-term borrowings, principally comprised of sweep~~Sweep repurchase agreements with customers ~~decreased $38.3~~increased $41.3 million, or ~~33%~~57%, ~~to an~~year-over-year. For the six months ended June 30, 2021, the average balance ~~of $78.8~~was $114.2 million ~~for the nine months ended September 30, 2020~~ compared to an average balance of ~~$117.1~~$72.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019. The decrease reflects a shift into interest-bearing deposits attributed to an expansion of deposit product offerings with similar characteristics to sweep repurchase products.~~2020. The average rate on customer sweep repurchase accounts was ~~0.41%~~0.13% for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~1.38%~~0.55% for the ~~same period during 2019.~~six months ended June 30, 2020. No federal funds purchased were utilized at ~~September~~June 30, ~~2020 or September~~2021 nor June 30, ~~2019.~~2020.

The Company had no FHLB borrowings ~~averaged $180.9 million for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2020, increasing $65.6 million, or 57%,~~2021 compared to the same period in 2019. The average rate on FHLB borrowings for the nine months ended September 30, 2020 was 1.08% compared to 2.51% for the nine months ended September 30, 2019. FHLB borrowings outstanding were $35.0$224.9 million ~~at September 30, 2020,~~ with an average rate of ~~0.72%, maturing in 2023.~~1.14% for the six months ended June 30, 2020. The decrease reflects the impact of higher average deposit balances that were sufficient to fund the Company’s liquidity needs during 2021.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, subordinated debt averaged ~~$71.2 million, an increase of $0.3~~$71.4 million, compared to $71.1 million for the ~~same period during 2019.~~six months ended June 30, 2020. The average rate on subordinated debt for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~3.28%~~2.40%, compared to ~~4.87%~~3.69% for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The subordinated debt relates to trust preferred securities issued by subsidiary trusts of the Company.

Table of Contents

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


Average Balances, Interest Income and Expenses, Yields and Rates1	Average Balances, Interest Income and Expenses, Yields and Rates1																			Average Balances, Interest Income and Expenses, Yields and Rates1

		2020												2019							2021												2020
		Third Quarter						Second Quarter						Third Quarter							Second Quarter						First Quarter						Second Quarter
		Average				Yield/		Average				Yield/		Average				Yield/			Average				Yield/		Average				Yield/		Average				Yield/
(In thousands, except ratios)	(In thousands, except ratios)	Balance		Interest		Rate		Balance		Interest		Rate		Balance		Interest		Rate		(In thousands, except ratios)	Balance		Interest		Rate		Balance		Interest		Rate		Balance		Interest		Rate
Assets	Assets																			Assets
Earning assets:	Earning assets:																			Earning assets:
Securities:	Securities:																			Securities:
Taxable	Taxable	$	1,322,160	$	6,972	2.11	%	$	1,135,698	$	7,573	2.67	%	$	1,171,393	$	8,802	3.01	%	Taxable	$	1,629,410	$	6,559	1.61	%	$	1,550,457	$	6,298	1.62	%	$	1,135,698	$	7,573	2.67	%
Nontaxable	Nontaxable	23,570		157		2.67		19,347		152		3.14		21,194		164		3.09		Nontaxable	25,581		186		2.90		25,932		187		2.89		19,347		152		3.14
Total Securities	Total Securities	1,345,730		7,129		2.12		1,155,045		7,725		2.68		1,192,587		8,966		3.01		Total Securities	1,654,991		6,745		1.63		1,576,389		6,485		1.65		1,155,045		7,725		2.68

Federal funds sold and other investments	Federal funds sold and other investments	239,511		556		0.92		433,626		684		0.63		84,705		800		3.75		Federal funds sold and other investments	925,323		709		0.31		377,344		586		0.63		433,626		684		0.63

Loans excluding PPP loans	Loans excluding PPP loans	5,242,776		58,854		4.47		5,304,381		59,861		4.54		4,945,953		63,138		5.06		Loans excluding PPP loans	5,092,897		55,313		4.36		5,149,642		55,504		4.37		5,304,381		59,861		4.54
PPP Loans	PPP Loans	618,088		1,719		1.11		424,171		5,068		4.81		—		—		—		PPP Loans	505,339		5,127		4.07		609,733		6,886		4.58		424,171		5,068		4.81
Total Loans	Total Loans	5,860,864		60,573		4.11		5,728,552		64,929		4.56		4,945,953		63,138		5.06		Total Loans	5,598,236		60,440		4.33		5,759,375		62,390		4.39		5,728,552		64,929		4.56

Total Earning Assets	Total Earning Assets	7,446,105		68,258		3.65		7,317,223		73,338		4.03		6,223,245		72,904		4.65		Total Earning Assets	8,178,550		67,894		3.33		7,713,108		69,461		3.65		7,317,223		73,338		4.03

Allowance for loan losses	Allowance for loan losses	(92,151)						(84,965)						(33,997)						Allowance for loan losses	(86,042)						(91,735)						(84,965)
Cash and due from banks	Cash and due from banks	138,749						103,919						88,539						Cash and due from banks	327,171						255,685						103,919
Premises and equipment	Premises and equipment	72,572						71,173						68,301						Premises and equipment	70,033						74,272						71,173
Intangible assets	Intangible assets	228,801						230,871						227,389						Intangible assets	235,964						237,323						230,871
Bank owned life insurance	Bank owned life insurance	129,156						127,386						125,249						Bank owned life insurance	133,484						132,079						127,386
Other assets	Other assets	163,658						147,395						121,850						Other assets	166,686						164,622						147,395
Total Assets	Total Assets	$	8,086,890					$	7,913,002					$	6,820,576					Total Assets	$	9,025,846					$	8,485,354					$	7,913,002

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity																			Liabilities and Shareholders' Equity
Interest-bearing liabilities:	Interest-bearing liabilities:																			Interest-bearing liabilities:
Interest-bearing demand	Interest-bearing demand	$	1,364,947	$	330	0.10	%	$	1,298,639	$	297	0.09	%	$	1,116,434	$	1,053	0.37	%	Interest-bearing demand	$	1,692,178	$	235	0.06	%	$	1,600,490	$	258	0.07	%	$	1,298,639	$	297	0.09	%
Savings	Savings	648,319		170		0.10		591,040		165		0.11		522,831		531		0.40		Savings	790,734		118		0.06		722,274		137		0.08		591,040		165		0.11
Money market	Money market	1,328,931		799		0.24		1,193,969		741		0.25		1,173,042		2,750		0.93		Money market	1,736,481		627		0.14		1,609,938		670		0.17		1,193,969		741		0.25
Time deposits	Time deposits	1,051,316		2,673		1.01		1,293,766		3,820		1.19		1,159,272		6,009		2.06		Time deposits	533,350		524		0.39		711,320		1,187		0.68		1,293,766		3,820		1.19
Short term borrowings		90,357		40		0.18		74,717		34		0.18		75,785		300		1.57
Federal funds purchased and Federal Home Loan Bank borrowings		93,913		181		0.77		199,698		312		0.63		68,804		414		2.39
Securities sold under agreements to repurchase																				Securities sold under agreements to repurchase	115,512		35		0.12		112,834		41		0.15		74,717		34		0.18
Federal Home Loan Bank borrowings																				Federal Home Loan Bank borrowings	—		—		—		—		—		—		199,698		312		0.63
Other borrowings	Other borrowings	71,258		444		2.48		71,185		581		3.28		70,969		820		4.58		Other borrowings	71,460		422		2.37		71,390		427		2.43		71,185		581		3.28
Total Interest-Bearing Liabilities	Total Interest-Bearing Liabilities	4,649,041		4,637		0.40		4,723,014		5,950		0.51		4,187,137		11,877		1.13		Total Interest-Bearing Liabilities	4,939,715		1,961		0.16		4,828,246		2,720		0.23		4,723,014		5,950		0.51
Noninterest demand	Noninterest demand	2,279,584						2,097,038						1,626,269						Noninterest demand	2,799,643						2,432,038						2,097,038
Other liabilities	Other liabilities	96,457						79,855						60,500						Other liabilities	116,093						88,654						79,855
Total Liabilities	Total Liabilities	7,025,082						6,899,907						5,873,906						Total Liabilities	7,855,451						7,348,938						6,899,907

Shareholders' equity	Shareholders' equity	1,061,807						1,013,095						946,670						Shareholders' equity	1,170,395						1,136,416						1,013,095

Total Liabilities & Equity	Total Liabilities & Equity	$	8,086,890					$	7,913,002					$	6,820,576					Total Liabilities & Equity	$	9,025,846					$	8,485,354					$	7,913,002

Cost of deposits	Cost of deposits					0.24	%					0.31	%					0.73	%	Cost of deposits					0.08	%					0.13	%					0.31	%
Interest expense as a % of earning assets	Interest expense as a % of earning assets					0.25	%					0.33	%					0.76	%	Interest expense as a % of earning assets					0.10	%					0.14	%					0.33	%
Net interest income as a % of earning assets	Net interest income as a % of earning assets			$	63,621	3.40	%			$	67,388	3.70	%			$	61,027	3.89	%	Net interest income as a % of earning assets			$	65,933	3.23	%			$	66,741	3.51	%			$	67,388	3.70	%

1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.	1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.																			1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.

Table of Contents


Average Balances, Interest Income and Expenses, Yields and Rates1	Average Balances, Interest Income and Expenses, Yields and Rates1													Average Balances, Interest Income and Expenses, Yields and Rates1

		2020						2019							2021						2020
		Year to Date						Year to Date							Year to Date						Year to Date
		Average				Yield/		Average				Yield/			Average				Yield/		Average				Yield/
(In thousands, except ratios)	(In thousands, except ratios)	Balance		Interest		Rate		Balance		Interest		Rate		(In thousands, except ratios)	Balance		Interest		Rate		Balance		Interest		Rate
Assets	Assets													Assets
Earning assets:	Earning assets:													Earning assets:
Securities:	Securities:													Securities:
Taxable	Taxable	$	1,203,877	$	23,241	2.57	%	$	1,175,831	$	26,854	3.05	%	Taxable	$	1,590,152	$	12,857	1.62	%	$	1,144,086	$	16,269	2.84	%
Nontaxable	Nontaxable	20,895		461		2.94		23,935		533		2.97		Nontaxable	25,756		373		2.90		19,544		304		3.11
Total Securities	Total Securities	1,224,772		23,702		2.58		1,199,766		27,387		3.04		Total Securities	1,615,908		13,230		1.64		1,163,630		16,573		2.85

Federal funds sold and other investments	Federal funds sold and other investments	253,635		1,974		1.04		89,084		2,591		3.89		Federal funds sold and other investments	652,847		1,295		0.40		260,775		1,418		1.09

Loans excluding PPP loans	Loans excluding PPP loans	5,254,089		182,239		4.63		4,875,975		187,808		5.15		Loans excluding PPP loans	5,121,114		110,817		4.36		5,259,808		123,385		4.72
PPP Loans	PPP Loans	348,407		6,787		2.60		—		—		—		PPP Loans	557,247		12,013		4.35		212,085		5,068		4.81
Total Loans	Total Loans	5,602,496		189,026		4.51		4,875,975		187,808		5.15		Total Loans	5,678,361		122,830		4.36		5,471,893		128,453		4.72

Total Earning Assets	Total Earning Assets	7,080,903		214,702		4.05		6,164,825		217,786		4.72		Total Earning Assets	7,947,116		137,355		3.49		6,896,298		146,444		4.27

Allowance for loan losses	Allowance for loan losses	(78,067)						(33,260)						Allowance for loan losses	(88,873)						(70,948)
Cash and due from banks	Cash and due from banks	111,019						93,171						Cash and due from banks	291,626						97,002
Premises and equipment	Premises and equipment	70,451						69,700						Premises and equipment	72,141						69,379
Intangible assets	Intangible assets	228,795						228,710						Intangible assets	236,640						228,791
Bank owned life insurance	Bank owned life insurance	127,683						124,535						Bank owned life insurance	132,785						126,939
Other assets	Other assets	145,827						128,016						Other assets	165,658						136,811
Total Assets	Total Assets	$	7,686,611					$	6,775,697					Total Assets	$	8,757,093					$	7,484,272

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity													Liabilities and Shareholders' Equity
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Interest-bearing demand	Interest-bearing demand	$	1,279,485	$	1,461	0.15	%	$	1,088,605	$	3,042	0.37	%	Interest-bearing demand	$	1,646,587	$	493	0.06	%	$	1,236,285	$	1,131	0.18	%
Savings	Savings	588,913		683		0.15		512,399		1,593		0.42		Savings	756,693		255		0.07		558,883		513		0.18
Money market	Money market	1,217,627		3,548		0.39		1,170,494		8,397		0.96		Money market	1,673,559		1,297		0.16		1,161,363		2,749		0.48
Time deposits	Time deposits	1,165,194		11,261		1.29		1,097,308		16,692		2.03		Time deposits	621,844		1,711		0.55		1,222,758		8,588		1.41
Short term borrowings		78,755		241		0.41		117,077		1,206		1.38
Federal funds purchased and Federal Home Loan Bank borrowings		180,893		1,460		1.08		115,337		2,164		2.51
Securities sold under agreements to repurchase														Securities sold under agreements to repurchase	114,181		76		0.13		72,891		201		0.55
Federal Home Loan Bank borrowings														Federal Home Loan Bank borrowings	—		—		—		224,860		1,279		1.14
Other borrowings	Other borrowings	71,186		1,748		3.28		70,903		2,585		4.87		Other borrowings	71,425		849		2.40		71,149		1,304		3.69
Total Interest-Bearing Liabilities	Total Interest-Bearing Liabilities	4,582,053		20,402		0.59		4,172,123		35,679		1.14		Total Interest-Bearing Liabilities	4,884,289		4,681		0.19		4,548,189		15,765		0.70
Noninterest demand	Noninterest demand	2,001,630						1,628,634						Noninterest demand	2,616,856						1,861,126
Other liabilities	Other liabilities	79,821						62,123						Other liabilities	102,450						71,413
Total Liabilities	Total Liabilities	6,663,504						5,862,880						Total Liabilities	7,603,595						6,480,728

Shareholders' equity	Shareholders' equity	1,023,107						912,817						Shareholders' equity	1,153,498						1,003,544

Total Liabilities & Equity	Total Liabilities & Equity	$	7,686,611					$	6,775,697					Total Liabilities & Equity	$	8,757,093					$	7,484,272

Cost of deposits	Cost of deposits					0.36	%					0.72	%	Cost of deposits					0.10	%					0.43	%
Interest expense as a % of earning assets	Interest expense as a % of earning assets					0.38	%					0.77	%	Interest expense as a % of earning assets					0.12	%					0.46	%
Net interest income as a % of earning assets	Net interest income as a % of earning assets			$	194,300	3.67	%			$	182,107	3.95	%	Net interest income as a % of earning assets			$	132,674	3.37	%			$	130,679	3.81	%

1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.	1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.													1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.

Table of Contents

Noninterest Income

Noninterest income totaled ~~$16.9~~$15.3 million for the ~~third~~second quarter of ~~2020, an increase~~2021, a decrease of ~~$1.9~~$2.3 million, or 13%, compared to the ~~second~~first quarter of ~~2020~~2021 and an increase of ~~$3.0~~$0.3 million, or ~~22%~~2%, from the ~~third~~second quarter of ~~2019.~~2020. Noninterest income totaled ~~$46.6~~$33.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, an increase of ~~6.3~~$3.3 million, or ~~16%~~11%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Noninterest income is detailed as follows:


		Third		Second		Third		Nine Months Ended					Second		First		Second		Six Months Ended
		Quarter		Quarter		Quarter		September 30,					Quarter		Quarter		Quarter		June 30,
(In thousands)	(In thousands)	2020		2020		2019		2020		2019		(In thousands)	2021		2021		2020		2021		2020
Service charges on deposit accounts	Service charges on deposit accounts	$	2,242	$	1,939	$	2,978	$	7,006	$	8,569	Service charges on deposit accounts	$	2,338	$	2,338	$	1,939	$	4,676	$	4,764
Interchange income	Interchange income	3,682		3,187		3,206		10,115		10,012		Interchange income	4,145		3,820		3,187		7,965		6,433
Wealth management income	Wealth management income	1,972		1,719		1,632		5,558		4,773		Wealth management income	2,387		2,323		1,719		4,710		3,586
Mortgage banking fees	Mortgage banking fees	5,283		3,559		2,127		11,050		4,976		Mortgage banking fees	2,977		4,225		3,559		7,202		5,767
Marine finance fees	Marine finance fees	242		157		152		545		715		Marine finance fees	177		189		157		366		303
SBA gains	SBA gains	252		181		569		572		1,896		SBA gains	232		287		181		519		320
BOLI income	BOLI income	899		887		928		2,672		2,770		BOLI income	872		859		887		1,731		1,773
Other income	Other income	2,370		2,147		3,198		7,869		7,967		Other income	2,249		3,744		2,147		5,993		5,499
		16,942		13,776		14,790		45,387		41,678			15,377		17,785		13,776		33,162		28,445
Securities gains (losses), net		4		1,230		(847)		1,253		(1,322)
Securities (losses) gains, net												Securities (losses) gains, net	(55)		(114)		1,230		(169)		1,249
Total	Total	$	16,946	$	15,006	$	13,943	$	46,640	$	40,356	Total	$	15,322	$	17,671	$	15,006	$	32,993	$	29,694

Service charges on deposits were ~~$2.2~~$2.3 million in ~~the third quarter of 2020, an increase of $0.3 million, or 16%, compared to~~ the second quarter of ~~2020 and a decrease of $0.7~~2021, $2.3 million ~~or 25%, compared to~~in the ~~third~~first quarter of ~~2019.~~2021 and $1.9 million in the second quarter of 2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, service charges on deposits totaled ~~$7.0~~$4.7 million, a decrease of ~~$1.6~~$0.1 million, or ~~18%~~2%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019. Government actions~~2020. The decrease in ~~response to~~service charges for the ~~pandemic, particularly in~~six-month period reflects the ~~second quarter~~impact on overdraft fees of ~~2020, including the PPP program and individual stimulus payments, combined with lower overall consumer spending levels, have resulted in~~ higher average deposit balances ~~for both business and consumer customers. Higher average account balances have resulted in lower service charges~~ in the ~~second and third quarters of 2020 compared to 2019.~~2021 period. Overdraft fees represent ~~44%~~39% of total service charges on deposits for the ~~nine~~six months ended ~~September~~June 30, 2021 and 46% for the six months ended June 30, 2020.

Interchange income ~~totaled $3.7~~reached a record $4.1 million for the three months ended ~~September~~June 30, ~~2020,~~2021, an increase of ~~$0.5~~$0.3 million, or ~~16%~~9%, compared to the three months ended March 31, 2021, and an increase of $1.0 million, or 30%, compared to the three months ended June 30, ~~2020, and~~2020. For the six months ended June 30, 2021, interchange income totaled $8.0 million, an increase of ~~$0.5~~$1.5 million, or ~~15%~~24%, compared to the ~~three~~six months ended ~~September~~June 30, ~~2019. For~~2020. The 2021 periods reflect higher transactional volume and higher per-card spending with the ~~nine months ended September 30, 2020, interchange income totaled $10.1 million, an increase of $0.1 million, or 1%, compared to the nine months ended September 30, 2019. The third quarter~~first half of 2020 ~~benefited from recent growth in business banking customers and targeted marketing efforts.~~negatively impacted by the effect of COVID-19-related shutdowns on consumer consumption.

Wealth management income, including trust fees and brokerage commissions and fees, was a record ~~$2.0~~$2.4 million in ~~the third quarter of 2020, increasing $0.3 million, or 15%, from~~ the second quarter of ~~2020~~2021, increasing $0.1 million, or 3%, from the first quarter of 2021 and increasing ~~$0.3~~$0.7 million, or ~~21%~~39%, compared to the ~~third~~second quarter of ~~2019.~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, wealth management income totaled ~~$5.6~~$4.7 million, an increase of ~~$0.8~~$1.1 million, or 31%, compared to the six months ended June 30, 2020. Assets under management have grown significantly as the team continues to deliver strong growth through the addition of new relationships. Assets under management have increased $451 million from June 30, 2020 to exceed $1.2 billion at June 30, 2021.

Mortgage banking fees decreased by $1.2 million, or 30%, to $3.0 million in the second quarter of 2021 compared to the first quarter of 2021, and decreased $0.6 million, or 16%, compared to the ~~nine~~second quarter of 2020, reflecting the impact of slowing refinance activity and low housing inventory levels. For the six months ended ~~September~~June 30, ~~2019. Increases reflect the strategic focus of growing the wealth management business. Assets under management reached $793~~2021, mortgage banking fees totaled $7.2 million, ~~at September 30, 2020,~~ an increase of ~~31%~~$1.4 million, or 25%, compared to the ~~prior year. As~~six months ended June 30, 2020.

SBA gains totaled $0.2 million, a ~~result, the Company expects wealth management income to continue to grow in future periods.~~

~~Mortgage banking fees increased by $1.7~~decrease of $0.1 million, or ~~48%~~19%, compared to ~~$5.3 million in~~ the ~~third~~first quarter of ~~2020~~2021 and an increase of $0.1 million, or 28%, compared to the second quarter of ~~2020, and increased $3.2~~2020. For the six months ended June 30, 2021, SBA gains totaled $0.5 million, an increase of $0.2 million, or ~~148%~~62%, compared to the ~~third~~six months ended June 30, 2020.

Bank owned life insurance (“BOLI”) income totaled $0.9 million for the second quarter of ~~2019. For~~2021, in line with comparative periods. BOLI income totaled $1.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020, mortgage banking fees totaled $11.1~~2021 and $1.8 million ~~an increase of $6.1 million, or 122%, compared to~~for the ~~nine~~six months ended September 30, 2019 as Seacoast continues to capitalize on the robust residential refinance market and strength in the Florida housing market. Seacoast's mortgage team has adapted quickly to the heightened demand by increasing customer service level standards with realtors, refinance customers, and new home buyers, resulting in stronger performance than competitors.

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~~Marine finance fees were $0.2~~June 30, 2020. The Company purchased $25.0 million ~~an increase~~ of ~~$0.1 million, or 54%, compared to~~BOLI late in the second quarter of ~~2020~~2021 with a tax equivalent first year yield of 4.50% that will positively impact future periods.

Other income was $2.2 million in the second quarter of 2021, a decrease of $1.5 million, or 40%, quarter-over-quarter and an increase of $0.1 million, or ~~59%~~5%, year-over-year. For the six months ended June 30, 2021, other income totaled $6.0 million, an increase of $0.5 million, or 9%, compared to the ~~prior year quarter. For the nine~~six months ended ~~September~~June 30, ~~2020, marine finance fees totaled $0.5 million, a decrease of $0.2 million, or 24%, compared to the nine months ended September 30, 2019.~~

SBA income totaled $0.3 million, an increase of $0.1 million, or 39%, compared to the second quarter of 2020 and a decrease of $0.3 million, or 56%, compared to the third quarter of 2019. For the nine months ended September 30, 2020, SBA income totaled $0.6 million, a decrease of $1.3 million, or 70%, compared to the nine months ended September 30, 2019. The decrease for the nine months ended September 30, 2020 reflects lower production of saleable SBA loans outside of the PPP program.

~~Bank owned life insurance ("BOLI") income totaled $0.9 million for the third quarter of 2020,~~2020. Included in line with the second quarter of 2020 and prior year results. For the nine months ended September 30, 2020, BOLI income totaled $2.7 million, a decrease of $0.1 million, or 4%, compared to the nine months ended September 30, 2019.

Other income was $2.4 million in the third quarter of 2020, an increase of $0.2 million, or 10%, quarter-over-quarter and a decrease of $0.8 million, or 26%, year-over-year. The increase from the prior quarter reflects higher income on SBIC investments, partially offset by lower loan swap fees. The decrease from the prior year quarter reflects a $1.0 million BOLI death benefit recorded in the third quarter of 2019, offset by higher SBIC investmentother income in the ~~third~~first quarter of 2020. For the nine months ended September 30, 2020, other income totaled $7.9 million, a decrease of $0.1 million, or 1%, compared to the nine months ended September 30, 2019. Higher income from SBIC investments in the nine months ended September 30, 20202021 was ~~more than offset by the BOLI death benefit recorded in the comparable 2019 period.~~

~~Securities gains in the~~ ~~third quarter of 2020 were nominal compared to gains of $1.2~~$1.7 million in income associated with the ~~second quarter~~resolution of ~~2020 and losses~~contingencies on ~~securities sales of $0.8 million~~two loans acquired in ~~the third quarter of 2019. Securities gains during the nine months ended September 30, 2020 totaled $1.3 million, compared to losses of $1.3 million~~2017. Similar activity is not expected in ~~the nine months ended September 30, 2019.~~subsequent periods.

Noninterest Expenses

The Company has demonstrated its commitment to efficiency through disciplined, proactive management of its cost structure. Noninterest expenses in the third quarter of 2020 included acquisition-related expenses of $4.3 million and expenses related to branch consolidation of $0.5 million. The second quarter of 2020 benefited from the impact of higher loan production driven by the PPP program, resulting in higher deferrals of salary-related expenses. These factors contributed to an overall increase in noninterest expense in the third quarter of 2020 compared toFor the second quarter of 2020. Seacoast has reduced its branch count by 20% since 2017 through successful bank acquisitions and the repositioning of the banking center network in strategic growth markets to meet the evolving needs of its customers. Further consolidation activity is expected in 2021. At September 30, 2020, deposits per banking center were $135.6 million, up from $118.2 million at September 30, 2019. Adjusted noninterest expense3 as a percent of average tangible assets was 2.24% for the third quarter of 2020 compared to 2.11% for the second quarter of 2020 and 2.21% for the third quarter of 2019. For the nine months ended September 30, 2020, adjusted noninterest expense1 ~~as a percent of average tangible assets was 2.26% compared to 2.37% for the nine months ended September 30, 2019.~~

~~For the third quarter of 2020,~~2021, the efficiency ratio, defined as noninterest expense less amortization of intangibles and gains, losses, and expenses on foreclosed properties divided by net operating revenue (net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses), was ~~61.65%~~54.93% compared to 53.21% for the first quarter of 2021 and 50.11% for the second quarter of ~~2020~~2020. The increase in the efficiency ratio quarter-over-quarter primarily reflects lower PPP income and ~~48.62% for~~lower mortgage banking gains from slowing refinance activity and low housing inventory levels, partially offset by lower cost of deposits and lower noninterest expense. The increase in the ~~third~~efficiency ratio when compared to the prior year quarter reflects higher noninterest expense primarily associated with lower deferrals of ~~2019. The efficiency ratio~~salary costs attributed to lower PPP loan production in the second quarter of ~~2020 benefited from the impact of higher PPP fee accretion~~2021, and the impact of ~~higher loan production driven~~the lower rate environment on interest income, partially offset by ~~the PPP program, resulting in higher deferrals~~lower cost of salary-related expenses. Additionally, the provision for unfunded lending-related commitments totaled $0.8 million in the third quarter of 2020, compared to $0.2 million in the second quarter of 2020 and none in the third quarter of 2019.deposits. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the efficiency ratio was ~~57.15%~~54.05% compared to ~~52.85%~~54.88% for the ~~nine~~six months ended ~~September~~June 30, 2019. The increase in efficiency ratio for the nine months ended September 30, 2020 reflects the impact of an increase in merger-related expenses of $8.7 million and an increase of $1.0 million in provision for unfunded lending-related commitments, partially offset by lower branch reduction expenses of $1.4 million.2020.

The adjusted efficiency ratio1 ~~increased from~~was 53.49% in the second quarter of 2021, compared to 51.99% in the first quarter of 2021 and 49.60% in the second quarter of ~~2020 to 54.82% in the third quarter of~~ 2020. The increase isin the ~~result~~adjusted efficiency ratio quarter-over-quarter primarily reflects lower PPP income, and lower mortgage banking gains from slowing refinance activity and low housing inventory levels, partially offset by lower cost of ~~lower net interest income from~~deposits. The increase in the ~~change in PPP accretion and~~efficiency ratio when compared to the prior year quarter reflects higher ~~expenses~~noninterest expense primarily associated with lower deferrals of salary costs attributed to lower PPP ~~salary deferrals~~loan production in the second quarter of ~~2020,~~2021, and the impact of the lower rate environment on interest income, partially offset by ~~higher~~lower cost of deposits. At June 30, 2021, adjusted noninterest ~~income.~~expense1 as a percent of average tangible assets was 1.98% for the second quarter of 2021 compared to 2.16% for the first quarter of 2021 and 2.11% for the second quarter of 2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021 the adjusted efficiency ratio1 ~~increased~~was 52.72% compared to ~~52.64% from 52.05%~~51.53% for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~

3~~Non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.~~2020.

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		Third			Second			Third			Nine Months Ended							Second			First			Second			Six Months Ended
		Quarter			Quarter			Quarter			September 30,							Quarter			Quarter			Quarter			June 30,
(In thousands, except ratios)	(In thousands, except ratios)	2020			2020			2019			2020			2019			(In thousands, except ratios)	2021			2021			2020			2021			2020
Noninterest expense, as reported	Noninterest expense, as reported	$	51,674		$	42,399		$	38,583		$	141,871		$	122,682		Noninterest expense, as reported	$	45,784		$	46,120		$	42,399		$	91,904		$	90,197

Merger related charges		(4,281)			(240)			—			(9,074)			(335)
Merger-related charges																	Merger-related charges	(509)			(581)			(240)			(1,090)			(4,793)
Amortization of intangibles	Amortization of intangibles	(1,497)			(1,483)			(1,456)			(4,436)			(4,370)			Amortization of intangibles	(1,212)			(1,211)			(1,483)			(2,423)			(2,939)
Business continuity expenses	Business continuity expenses	—			—			(95)			(307)			(95)			Business continuity expenses	—			—			—			—			(307)
Branch reductions and other expense initiatives	Branch reductions and other expense initiatives	(464)			—			(121)			(464)			(1,846)			Branch reductions and other expense initiatives	(663)			(449)			—			(1,112)			—
Adjusted noninterest expense1	Adjusted noninterest expense1	$	45,432		$	40,676		$	36,911		$	127,590		$	116,036		Adjusted noninterest expense1	$	43,400		$	43,879		$	40,676		$	87,279		$	82,158

Foreclosed property expense and net (loss)/gain on sale	Foreclosed property expense and net (loss)/gain on sale	(512)			(245)			(262)			(442)			(48)			Foreclosed property expense and net (loss)/gain on sale	90			65			(245)			155			70
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	(756)			(178)			—			(980)			—			Provision for credit losses on unfunded commitments	—			—			(178)			—			(224)

Net adjusted noninterest expense1	Net adjusted noninterest expense1	$	44,164		$	40,253		$	36,649		$	126,168		$	115,988		Net adjusted noninterest expense1	$	43,490		$	43,944		$	40,253		$	87,434		$	82,004

Efficiency ratio	Efficiency ratio	61.65		%	50.11		%	48.62		%	57.15		%	52.85		%	Efficiency ratio	54.93		%	53.21		%	50.11		%	54.05		%	54.88		%
Adjusted efficiency ratio1,2	Adjusted efficiency ratio1,2	54.82			49.60			48.96			52.64			52.05			Adjusted efficiency ratio1,2	53.49			51.99			49.60			52.72			51.53
Adjusted noninterest expense as a percent of average tangible assets1,2	Adjusted noninterest expense as a percent of average tangible assets1,2	2.24			2.11			2.21			2.26			2.37			Adjusted noninterest expense as a percent of average tangible assets1,2	1.98			2.16			2.11			2.07			2.28
1Non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.																	1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.
2Adjusted efficiency ratio is defined as noninterest expense, including adjustments to noninterest expense divided by aggregated tax equivalent net interest income and noninterest income, including adjustments to revenue.	2Adjusted efficiency ratio is defined as noninterest expense, including adjustments to noninterest expense divided by aggregated tax equivalent net interest income and noninterest income, including adjustments to revenue.																2Adjusted efficiency ratio is defined as noninterest expense, including adjustments to noninterest expense divided by aggregated tax equivalent net interest income and noninterest income, including adjustments to revenue.

Noninterest expense for the ~~third~~second quarter of ~~2020~~2021 totaled ~~$51.7~~$45.8 million, ~~an increase~~a decrease of ~~$9.3~~$0.3 million, or ~~22%~~1%, compared to the ~~second~~first quarter of ~~2020,~~2021, and an increase of ~~$13.1~~$3.4 million, or ~~34%~~8%, from the ~~third~~second quarter of ~~2019.~~2020. For the ~~nine~~six months ended September 30, 2020, noninterest expense totaled $141.9 million, an increase of $19.2 million, or 16%, compared to the nine months ended September 30, 2019. Noninterest expenses are detailed as follows:

Third Second Third Nine Months Ended
Quarter Quarter Quarter September 30,
(In thousands) 2020 2020 2019 2020 2019
Noninterest expense
Salaries and wages $ 23,125 $ 20,226 $ 18,640 $ 67,049 $ 56,566
Employee benefits 3,995 3,379 2,973 11,629 10,374
Outsourced data processing costs 6,128 4,059 3,711 14,820 11,432
Telephone/data lines 705 791 603 2,210 2,307
Occupancy 3,858 3,385 3,368 10,596 10,916
Furniture and equipment 1,576 1,358 1,528 4,557 4,829
Marketing 1,513 997 933 3,788 3,276
Legal and professional fees 3,018 2,277 1,648 8,658 6,528
FDIC assessments 474 266 56 740 881
Amortization of intangibles 1,497 1,483 1,456 4,436 4,370
Foreclosed property expense and net loss on sale 512 245 262 442 48
Provision for credit losses on unfunded commitments 756 178 — 980 —
Other 4,517 3,755 3,405 11,966 11,155
Total $ 51,674 $ 42,399 $ 38,583 $ 141,871 $ 122,682
June

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30, 2021, noninterest expenses totaled $91.9 million, an increase of $1.7 million, or 2%, compared to the six months ended June 30, 2020. Noninterest expenses are detailed as follows:


	Second		First		Second		Six Months Ended
	Quarter		Quarter		Quarter		June 30,
(In thousands)	2021		2021		2020		2021		2020

Salaries and wages	$	22,966	$	21,393	$	20,226	$	44,359	$	43,924
Employee benefits	3,953		4,980		3,379		8,933		7,634
Outsourced data processing costs	4,676		4,468		4,059		9,144		8,692
Telephone/data lines	838		785		791		1,623		1,505
Occupancy	3,310		3,789		3,385		7,099		6,738
Furniture and equipment	1,166		1,254		1,358		2,420		2,981
Marketing	1,002		1,168		997		2,170		2,275
Legal and professional fees	2,182		2,582		2,277		4,764		5,640
FDIC assessments	515		526		266		1,041		266
Amortization of intangibles	1,212		1,211		1,483		2,423		2,939
Foreclosed property expense and net (gain) loss on sale	(90)		(65)		245		(155)		(70)
Provision for credit losses on unfunded commitments	—		—		178		—		224
Other	4,054		4,029		3,755		8,083		7,449
Total	$	45,784	$	46,120	$	42,399	$	91,904	$	90,197

Salaries and wages totaled ~~$23.1~~$23.0 million for the ~~third~~second quarter of ~~2020,~~2021, $21.4 million for the first quarter of 2021, and $20.2 million for the second quarter of ~~2020, and $18.6 million for the third quarter of 2019, an increase of 14% and 24%, respectively. Expenses increased $2.9 million in the third quarter of 2020, reflecting lower expenses~~2020. Lower PPP loan production in the second quarter of ~~2020~~2021 resulted in lower deferrals of ~~$2.9 million resulting from deferral of~~related salary costs on higher PPP loan production. The third quarter of 2020 also included $0.6 million in costs associated with the Freedom Bank acquisition and higher residential commission expenses resulting from increased mortgage production volume, offset by lower temporary staffing costs associated with the customer support center.costs. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, salaries and wages totaled ~~$67.0~~$44.4 million, an increase of ~~$10.5~~$0.4 million, or ~~19%~~1%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The increase ~~includes merger-related expenses of $3.1 million in~~compared to the ~~2020 period,~~prior year reflects higher ~~residential commission expenses resulting~~salaries from ~~increased mortgage production volume, bonuses~~headcount added through acquisition and ~~incentives paid in support of PPP loan production and to branch employees, and the addition of temporary staff~~investments made to support ~~the pandemic operating environment.~~organic growth.

During the ~~third~~second quarter ~~2020,~~of 2021, employee benefit costs, which include costs associated with the Company's self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $4.0 million, a decrease of $1.0 million, or 21%, compared to the first quarter of 2021 and an increase of $0.6 million, or ~~18%~~17%, compared to the second quarter of ~~2020 and an increase of $1.0 million, or 34%, compared to the third~~2020. The first quarter of ~~2019. The increase in the third quarter of 2020 reflects~~2021 included higher ~~health insurance claims, likely the result of routine medical appointments having been postponed in the second quarter due to COVID-19 lockdowns.~~seasonal payroll taxes and 401(k) plan contributions, as well as higher healthcare-related costs. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, employee benefit costs totaled ~~$11.6~~$8.9 million, an increase of $1.3 million, or ~~12%~~17%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019. Increases for the nine months ended September 30, 2020 reflect~~2020. The increase reflects the impact of ~~additional employees~~higher health insurance related costs and payroll taxes resulting from headcount added through ~~the FBPB~~acquisition and ~~Freedom Bank acquisitions.~~investments made to support organic growth.

The Company utilizes third parties for its core data processing systems. Ongoing data processing costs are directly related to the number of transactions processed and the negotiated rates associated with those transactions. ~~The Company also incurs acquisition-related costs for data migration and contract terminations.~~ Outsourced data processing costs totaled ~~$6.1~~$4.7 million, ~~$4.1~~$4.5 million and ~~$3.7~~$4.1 million for the ~~third quarter 2020,~~ second quarter of 2021, first quarter of 2021 and second quarter of 2020, ~~and third quarter 2019,~~ respectively. ~~Of the $2.1 million increase quarter-over-quarter, $1.9 million was the result of acquisition-related costs associated with data conversion.~~ For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, outsourced data processing costs totaled ~~$14.8~~$9.1 million, an increase of ~~$3.4~~$0.5 million, or ~~30%~~5%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019. Increases in the 2020 period include $2.7 million of acquisition-related costs and higher lending-related costs to support the administration of the PPP program.~~2020. The Company continues to improve and enhance mobile and other digital products and services through key third parties. ~~This may increase outsourced~~Outsourced data processing costs may increase in the future as customers adopt ~~improvements and~~improved products and as business volumes grow.

Telephone and data line expenditures, including electronic communications with customers and between branch and customer support locations and personnel, as well as with third-party data processors, ~~were $0.7~~remained flat at $0.8 million ~~a decrease of $0.1 million, or 11%, during the third quarter of 2020 when compared to~~for the second quarter of 2021, first quarter of 2021, and second quarter of 2020, respectively. For the six months ended June 30, 2021, telephone and data line expenditures totaled $1.6 million, an increase of $0.1 million, or ~~17%, when compared to the third quarter of 2019. For the nine months ended September 30, 2020, telephone and data line expenditures totaled $2.2 million, a decrease of $0.1 million, or 4%~~8%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Total occupancy, furniture and equipment expenses ~~for the third quarter of 2020 increased $0.7~~were $4.5 million ~~or 15%, from~~for the second quarter of ~~2020, and increased $0.5~~2021, $5.0 million ~~or 11% compared to~~in the ~~third~~first quarter of ~~2019. The increases resulted from merger-related costs,~~2021, and expenses incurred in connection with the consolidation of the legacy St. Petersburg branch in the third quarter of 2020. For the nine months ended September 30, 2020, occupancy, furniture and equipment totaled $15.2 million, a decrease of $0.6 million, or 4%, compared to the nine months ended September 30, 2019. The decrease in the nine-month period reflects the benefit of consolidating three banking center locations in 2019. Seacoast has reduced its branch count by 20% since 2017 through successful bank acquisitions and the repositioning of the banking center network in strategic growth markets to meet the evolving needs of its customers. The Company believes branches are still valuable to customers for more complex transactions, but simple tasks, such as depositing and withdrawing funds, are rapidly migrating to the digital world. Management anticipates that branch consolidations will continue for the Company and the banking industry in general.

Marketing expenses for the third quarter of 2020 totaled $1.5 million, an increase of $0.5 million, or 52%, compared to the second quarter of 2020 and an increase of $0.6 million, or 62%, compared to the third quarter of 2019. For the nine months ended September 30, 2020, marketing expenses totaled $3.8 million, an increase of $0.5 million, or 16%, compared to the nine months ended September 30, 2019. Higher expenses in the third quarter of 2020 reflect increased investment to capture the opportunity presented by dissatisfied business customers affected by unsatisfactory PPP execution by national banks.

Legal and professional fees for the third quarter of 2020 were $3.0 million, an increase of $0.7 million, or 33%, compared to the second quarter of 2020 and an increase of $1.4 million, or 83%, compared to the third quarter of 2019. The Company incurred $1.3 million in acquisition-related expenses in the third quarter of 2020, compared to $0.2$4.7 million in the second quarter of 2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020, legal~~2021, total occupancy, furniture and ~~professional fees~~equipment expenses totaled ~~$8.7~~$9.5 million, an increase of ~~$2.1~~$0.2 million, or ~~33%~~2%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019, attributed to acquisition-related expenses incurred in 2020, partially offset by higher project-related expenses incurred in the first half of 2019.~~2020.

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~~The~~Marketing expenses totaled $1.0 million in the second quarter of 2021, $1.2 million in the first quarter of 2021 and $1.0 million in the second quarter of 2020. For the six months ended June 30, 2021, marketing expenses totaled $2.2 million, a decrease of $0.1 million, or 5%, compared to the six months ended June 30, 2020. Targeted marketing campaigns allow the Company ~~utilized~~to engage new and existing customers while maintaining a controlled expense base.

Legal and professional fees for the ~~remainder~~second quarter of ~~previously issued~~2021 were $2.2 million, a decrease of $0.4 million, or 15%, compared to the first quarter of 2021, and a decrease of $0.1 million, or 4%, compared to the second quarter of 2020. For the six months ended June 30, 2021, legal and professional fees totaled $4.8 million, a decrease of $0.9 million, or 16%, compared to the six months ended June 30, 2020. Acquisition-related expenses were $0.5 million in the second quarter of 2021, $0.6 million in the first quarter of 2021 and $0.2 million in the second quarter of 2020. Acquisition-related expenses were $1.1 million in the six months ended June 30, 2021 and $1.4 million for the six months ended June 30, 2020.

FDIC assessments were $0.5 million for the second quarter of 2021 and $0.5 million the first quarter of 2021, while the second quarter of 2020 benefited from FDIC small bank assessment credits to offset ~~a portion of the assessment in~~expenses. These credits were fully utilized by the second quarter of 2020. ~~Assessment expense in~~For the ~~third~~six months ended June 30, 2021, FDIC assessments totaled $1.0 million compared to $0.3 million for the six months ended June 30, 2020.

During the second quarter of ~~2020 returned~~2021, the Company recorded gains on the sale of OREO, net of other expenses of $0.1 million compared to ~~the standard level, and is expected to be $0.5~~gains of $0.1 million in the ~~fourth~~first quarter of ~~2020. For the nine months ended September 30, 2020, FDIC assessment expenses totaled $0.7 million, a decrease~~2021 and write-downs of ~~$0.1 million, or 16%, compared to the nine months ended September 30, 2019, reflecting the benefit of credits applied in the 2020 period.~~

~~During the third quarter of 2020, the Company incurred expenses related to the sale of foreclosed assets, net of gains on sales, of $0.5 million compared to~~ $0.2 million in the second quarter of 2020 (see “Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality” for more discussion). For the six months ended June 30, 2021, the Company recorded gains on the sale of OREO, net of other expenses of $0.2 million compared to gains of $0.1 million for the six months ended June 30, 2020.

~~The provision~~No adjustment to the reserve for credit losses on unfunded lending commitments ~~totaled $0.8 million~~was recorded in the ~~third~~first or second quarter of ~~2020,~~2021, compared to a $0.2 million increase in reserves in the second quarter of 2020 and none in the third quarter of 2019. Since adopting the CECL standard on January 1, 2020, the Company maintains an allowance for credit losses on lending-related commitments that are not unconditionally cancellable which reflects the company's estimate of lifetime losses. During the third quarter of 2020, the increase is primarily related to loan commitments acquired from Freedom Bank.2020.

Other expense totaled ~~$4.5~~$4.1 million, ~~$3.8~~$4.0 million and ~~$3.4~~$3.8 million for the ~~third~~second quarter of ~~2020,~~2021, the first quarter of 2021 and the second quarter of 2020, ~~and the third quarter of 2019,~~ respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, other ~~expenses~~expense totaled ~~$12.0~~$8.1 million, an increase of ~~$0.8~~$0.6 million, or 7%9%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019. Increases in 2020 included higher mortgage loan production-related expenses associated with higher volume, and costs related to the administration of the PPP program.~~2020.

Income Taxes

For the ~~third~~second quarter of ~~2020,~~2021, the Company recorded tax expense of ~~$7.0~~$8.8 million compared to tax expense of $10.2 million in the first quarter of 2021 and $7.2 million in the second quarter of ~~2020 and $8.5 million in~~2020. For the third quarter of 2019. 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 incomesix months ended June 30, 2021, tax expense totaled $18.9 million, an increase of $1.1 million in the third quarter of 2019 upon the write down 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. For the nine months ended September 30, 2020, tax expenses totaled $14.0 million, a decrease of $7.7$11.9 million, or ~~36%~~169%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019. Tax impacts~~2020. A tax benefit related to stock-based compensation ~~were nominal~~totaled $0.6 million in ~~each period.~~the second quarter of 2021, compared to a tax benefit of $0.1 million in the first quarter of 2021 and tax expense of $0.2 million in the second quarter of 2020.

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.

Reconciliation of Non-GAAP Measures


	Second		First		Second		Six Months Ended
	Quarter		Quarter		Quarter		June 30,
(In thousands, except per share data)	2021		2021		2020		2021		2020
Net income, as reported:
Net income	$	31,410	$	33,719	$	25,080	$	65,129	$	25,789

Table of Contents

~~Reconciliation of Non-GAAP Measures~~


		Third			Second			Third			Nine Months Ended							Second			First			Second			Six Months Ended
		Quarter			Quarter			Quarter			September 30,							Quarter			Quarter			Quarter			June 30,
(In thousands, except per share data)	(In thousands, except per share data)	2020			2020			2019			2020			2019			(In thousands, except per share data)	2021			2021			2020			2021			2020
Net income, as reported:
Net income		$	22,628		$	25,080		$	25,605		$	48,417		$	71,563

Diluted earnings per share	Diluted earnings per share	$	0.42		$	0.47		$	0.49		$	0.91		$	1.38		Diluted earnings per share	$	0.56		$	0.60		$	0.47		$	1.17		$	0.49

Noninterest Income	Noninterest Income	$	16,946		$	15,006		$	13,943		$	46,640		$	40,356		Noninterest Income	$	15,322		$	17,671		$	15,006		$	32,993		$	29,694
Securities (gains) losses, net	Securities (gains) losses, net	(4)			(1,230)			847			(1,253)			1,322			Securities (gains) losses, net	55			114			(1,230)			169			(1,249)
BOLI benefits on death (included in other income)		—			—			(956)			—			(956)

Total adjustments to noninterest income	Total adjustments to noninterest income	(4)			(1,230)			(109)			(1,253)			366			Total adjustments to noninterest income	55			114			(1,230)			169			(1,249)
Total Adjusted Noninterest Income	Total Adjusted Noninterest Income	$	16,942		$	13,776		$	13,834		$	45,387		$	40,722		Total Adjusted Noninterest Income	$	15,377		$	17,785		$	13,776		$	33,162		$	28,445

Noninterest Expense	Noninterest Expense	51,674			$	42,399		$	38,583		$	141,871		$	122,682		Noninterest Expense	45,784			$	46,120		$	42,399		$	91,904		$	90,197
Merger related charges		(4,281)			(240)			—			(9,074)			(335)
Merger-related charges																	Merger-related charges	(509)			(581)			(240)			(1,090)			(4,793)
Amortization of intangibles	Amortization of intangibles	(1,497)			(1,483)			(1,456)			(4,436)			(4,370)			Amortization of intangibles	(1,212)			(1,211)			(1,483)			(2,423)			(2,939)
Business continuity expenses	Business continuity expenses	—			—			(95)			(307)			(95)			Business continuity expenses	—			—			—			—			(307)
Branch reductions and other expense initiatives1	Branch reductions and other expense initiatives1	(464)			—			(121)			(464)			(1,846)			Branch reductions and other expense initiatives1	(663)			(449)			—			(1,112)			—
Total adjustments to noninterest expense	Total adjustments to noninterest expense	(6,242)			(1,723.00)			(1,672)			(14,281)			(6,646)			Total adjustments to noninterest expense	(2,384)			(2,241)			(1,723)			(4,625)			(8,039)
Total Adjusted Noninterest Expense	Total Adjusted Noninterest Expense	$	45,432		$	40,676		$	36,911		$	127,590		$	116,036		Total Adjusted Noninterest Expense	$	43,400		$	43,879		$	40,676		$	87,279		$	82,158

Income Taxes	Income Taxes	$	6,992		$	7,188		$	8,452		$	14,025		$	21,770		Income Taxes	$	8,785		$	10,157		$	7,188		$	18,942		$	7,033
Tax effect of adjustments	Tax effect of adjustments	1,530			121			572			3,195			1,956			Tax effect of adjustments	598			577			121			1,175			1,665

Effect of change in corporate tax rate on deferred tax assets		—			—			(1,135)			—			(1,135)

Total adjustments to income taxes	Total adjustments to income taxes	1,530			121			(563)			3,195			821			Total adjustments to income taxes	598			577			121			1,175			1,665
Adjusted income taxes	Adjusted income taxes	8,522			7,309			7,889			17,220			22,591			Adjusted income taxes	9,383			10,734			7,309			20,117			8,698
Adjusted net income	Adjusted net income	$	27,336		$	25,452		$	27,731		$	58,250		$	77,754		Adjusted net income	$	33,251		$	35,497		$	25,452		$	68,748		$	30,914

Earnings per diluted share, as reported	Earnings per diluted share, as reported	$	0.42		$	0.47		$	0.49		$	0.91		$	1.38		Earnings per diluted share, as reported	$	0.56		$	0.60		$	0.47		$	1.17		$	0.49
Adjusted diluted earnings per share	Adjusted diluted earnings per share	0.50			0.48			0.53			1.09			1.50			Adjusted diluted earnings per share	0.59			0.63			0.48			1.23			0.59
Average diluted shares outstanding	Average diluted shares outstanding	54,301			53,308			51,935			53,325			51,996			Average diluted shares outstanding	55,901			55,992			53,308			55,827			52,807

Adjusted Noninterest Expense	Adjusted Noninterest Expense	$	45,432		$	40,676		$	36,911		$	127,590		$	116,036		Adjusted Noninterest Expense	$	43,400		$	43,879		$	40,676		$	87,279		$	82,158
Foreclosed property expense and net (loss) gain on sale	Foreclosed property expense and net (loss) gain on sale	(512)			(245)			(262)			(442)			(48)			Foreclosed property expense and net (loss) gain on sale	90			65			(245)			155			70
Provision for unfunded commitments	Provision for unfunded commitments	(756)			(178)			—			(980)			—			Provision for unfunded commitments	—			—			(178)			—			(224)
Net Adjusted Noninterest Expense	Net Adjusted Noninterest Expense	$	44,164		$	40,253		$	36,649		$	126,168		$	115,988		Net Adjusted Noninterest Expense	$	43,490		$	43,944		$	40,253		$	87,434		$	82,004

Revenue	Revenue	$	80,449		$	82,278		$	74,891		$	240,592		$	222,214		Revenue	$	81,124		$	84,281		$	82,278		$	165,405		$	160,143
Total adjustments to revenue	Total adjustments to revenue	(4)			(1,230)			(109)			(1,253)			366			Total adjustments to revenue	55			114			(1,230)			169			(1,249)
Impact of FTE adjustment	Impact of FTE adjustment	118			116			79			348			249			Impact of FTE adjustment	131			131			116			262			230
Adjusted revenue on a fully tax equivalent basis	Adjusted revenue on a fully tax equivalent basis	$	80,563		$	81,164		$	74,861		$	239,687		$	222,829		Adjusted revenue on a fully tax equivalent basis	$	81,310		$	84,526		$	81,164		$	165,836		$	159,124
Adjusted Efficiency Ratio	Adjusted Efficiency Ratio	54.82		%	49.60		%	48.96		%	52.64		%	52.05		%	Adjusted Efficiency Ratio	53.49		%	51.99		%	49.60		%	52.72		%	51.53		%
Net Adjusted Noninterest Expense as a Percent of Average Tangible Assets2	Net Adjusted Noninterest Expense as a Percent of Average Tangible Assets2	2.24		%	2.11		%	2.21		%	2.26		%	2.37		%	Net Adjusted Noninterest Expense as a Percent of Average Tangible Assets2	1.98		%	2.16		%	2.11		%	2.07		%	2.28		%

Net Interest Income	Net Interest Income	$	63,503		$	67,272		$	60,948		$	193,952		$	181,858		Net Interest Income	$	65,802		$	66,610		$	67,272		$	132,412		$	130,449
Impact of FTE adjustment	Impact of FTE adjustment	118			116			79			348			249			Impact of FTE adjustment	131			131			116			262			230
Net interest income including FTE adjustment	Net interest income including FTE adjustment	63,621			67,388			61,027			194,300			182,107			Net interest income including FTE adjustment	65,933			66,741			67,388			132,674			130,679
Noninterest income	Noninterest income	16,946			15,006			13,943			46,640			40,356			Noninterest income	15,322			17,671			15,006			32,993			29,694
Noninterest expense																	Noninterest expense	45,784			46,120			42,399			91,904			90,197
Pre-Tax Pre-Provision Earnings																	Pre-Tax Pre-Provision Earnings	35,471			38,292			39,995			73,763			70,176
Adjustments to noninterest income																	Adjustments to noninterest income	55			114			(1,230)			169			(1,249)
Adjustments to noninterest expense																	Adjustments to noninterest expense	(2,294)			(2,176)			(2,146)			(4,470)			(8,193)
Adjusted Pre-Tax Pre-Provision Earnings																	Adjusted Pre-Tax Pre-Provision Earnings	$	37,820		$	40,582		$	40,911		$	78,402		$	77,120

Table of Contents


		Third			Second			Third			Nine Months Ended							Second			First			Second			Six Months Ended
		Quarter			Quarter			Quarter			September 30,							Quarter			Quarter			Quarter			June 30,
(In thousands, except per share data)	(In thousands, except per share data)	2020			2020			2019			2020			2019			(In thousands, except per share data)	2021			2021			2020			2021			2020
Noninterest expense		51,674			42,399			38,583			141,871			122,682
Pre-Tax Pre-Provision Earnings		28,893			39,995			36,387			99,069			99,781
Adjustments to noninterest income		(4)			(1,230)			(109)			(1,253)			366
Adjustments to noninterest expense		(7,510)			(2,146)			(1,934)			(15,703)			(6,694)
Adjusted Pre-Tax Pre-Provision Earnings		$	36,399		$	40,911		$	38,212		$	113,519		$	106,841

Average Assets	Average Assets	$	8,086,890		$	7,913,002		$	6,820,576		$	7,686,611		$	6,775,697		Average Assets	$	9,025,846		$	8,485,354		$	7,913,002		$	8,757,093		$	7,484,272
Less average goodwill and intangible assets	Less average goodwill and intangible assets	(228,801)			(230,871)			(227,389)			(228,795)			(228,710)			Less average goodwill and intangible assets	(235,964)			(237,323)			(230,871)			(236,640)			(228,791)
Average Tangible Assets	Average Tangible Assets	$	7,858,089		$	7,682,131		$	6,593,187		$	7,457,816		$	6,546,987		Average Tangible Assets	$	8,789,882		$	8,248,031		$	7,682,131		$	8,520,453		$	7,255,481

Return on Average Assets (ROA)	Return on Average Assets (ROA)	1.11		%	1.27		%	1.49		%	0.84		%	1.41		%	Return on Average Assets (ROA)	1.40		%	1.61		%	1.27		%	1.50		%	0.69		%
Impact of removing average intangible assets and related amortization	Impact of removing average intangible assets and related amortization	0.09			0.10			0.12			0.09			0.12			Impact of removing average intangible assets and related amortization	0.08			0.09			0.10			0.08			0.09
Return on Average Tangible Assets (ROTA)	Return on Average Tangible Assets (ROTA)	1.20			1.37			1.61			0.93			1.53			Return on Average Tangible Assets (ROTA)	1.48			1.70			1.37			1.58			0.78
Impact of other adjustments for Adjusted Net Income	Impact of other adjustments for Adjusted Net Income	0.18			(0.04)			0.06			0.11			0.06			Impact of other adjustments for Adjusted Net Income	0.04			0.05			(0.04)			0.05			0.08
Adjusted Return on Average Tangible Assets	Adjusted Return on Average Tangible Assets	1.38		%	1.33		%	1.67		%	1.04		%	1.59		%	Adjusted Return on Average Tangible Assets	1.52		%	1.75		%	1.33		%	1.63		%	0.86		%

Average Shareholders' Equity	Average Shareholders' Equity	$	1,061,807		$	1,013,095		$	946,670		$	1,023,107		$	912,817		Average Shareholders' Equity	$	1,170,395		$	1,136,416		$	1,013,095		$	1,153,498		$	1,003,544
Less average goodwill and intangible assets	Less average goodwill and intangible assets	(228,801)			(230,871)			(227,389)			(228,795)			(228,710)			Less average goodwill and intangible assets	(235,964)			(237,323)			(230,871)			(236,640)			(228,791)
Average Tangible Equity	Average Tangible Equity	$	833,006		$	782,224		$	719,281		$	794,312		$	684,107		Average Tangible Equity	$	934,431		$	899,093		$	782,224		$	916,858		$	774,753

Return on Average Shareholders' Equity	Return on Average Shareholders' Equity	8.48		%	9.96		%	10.73		%	6.32		%	10.48		%	Return on Average Shareholders' Equity	10.76		%	12.03		%	9.96		%	11.39		%	5.17		%
Impact of removing average intangible assets and related amortization	Impact of removing average intangible assets and related amortization	2.87			3.51			4.00			2.39			4.15			Impact of removing average intangible assets and related amortization	3.12			3.59			3.51			3.34			2.10
Return on Average Tangible Common Equity (ROTCE)	Return on Average Tangible Common Equity (ROTCE)	11.35			13.47			14.73			8.71			14.63			Return on Average Tangible Common Equity (ROTCE)	13.88			15.62			13.47			14.73			7.27
Impact of other adjustments for Adjusted Net Income	Impact of other adjustments for Adjusted Net Income	1.71			(0.38)			0.57			1.09			0.57			Impact of other adjustments for Adjusted Net Income	0.39			0.39			(0.38)			0.39			0.75
Adjusted Return on Average Tangible Common Equity	Adjusted Return on Average Tangible Common Equity	13.06		%	13.09		%	15.30		%	9.80		%	15.20		%	Adjusted Return on Average Tangible Common Equity	14.27		%	16.01		%	13.09		%	15.12		%	8.02		%

Loan Interest Income2	Loan Interest Income2	$	60,573		$	64,929		$	63,138		$	189,026		$	187,808		Loan Interest Income2	$	60,440		$	62,390		$	64,929		$	122,830		$	128,453
Accretion on acquired loans	Accretion on acquired loans	(3,254)			(2,988)			(3,859)			(10,529)			(11,963)			Accretion on acquired loans	(2,886)			(2,868)			(2,988)			(5,754)			(7,275)
Interest and fees on PPP loans	Interest and fees on PPP loans	(1,719)			(5,068)			—			(6,787)			—			Interest and fees on PPP loans	(5,127)			(6,886)			(5,068)			(12,013)			(5,068)
Loan interest income excluding PPP and accretion on acquired loans2	Loan interest income excluding PPP and accretion on acquired loans2	$	55,600		$	56,873		$	59,279		$	171,710		$	175,845		Loan interest income excluding PPP and accretion on acquired loans2	$	52,427		$	52,636		$	56,873		$	105,063		$	116,110

Yield on Loans2	Yield on Loans2	4.11		%	4.56		%	5.06		%	4.51		%	5.15		%	Yield on Loans2	4.33		%	4.39		%	4.56		%	4.36		%	4.72		%

Impact of accretion on acquired loans	Impact of accretion on acquired loans	(0.22)			(0.21)			(0.30)			(0.25)			(0.33)			Impact of accretion on acquired loans	(0.21)			(0.20)			(0.21)			(0.20)			(0.27)
Impact of PPP		0.33			(0.04)			—			0.11			—
Impact of PPP loans																	Impact of PPP loans	0.01			(0.04)			(0.04)			(0.02)			(0.01)
Yield on loans excluding PPP and accretion on acquired loans2	Yield on loans excluding PPP and accretion on acquired loans2	4.22		%	4.31		%	4.76		%	4.37		%	4.82		%	Yield on loans excluding PPP and accretion on acquired loans2	4.13		%	4.15		%	4.31		%	4.14		%	4.44		%

Net Interest Income2	Net Interest Income2	$	63,621		$	67,388		$	61,027		$	194,300		$	182,107		Net Interest Income2	$	65,933		$	66,741		$	67,388		$	132,674		$	130,679
Accretion on acquired loans	Accretion on acquired loans	(3,254)			(2,988)			(3,859)			(10,529)			(11,963)			Accretion on acquired loans	(2,886)			(2,868)			(2,988)			(5,754)			(7,275)
Interest and fees on PPP		(1,719)			(5,068)			—			(6,787)			—
Interest and fees on PPP loans																	Interest and fees on PPP loans	(5,127)			(6,886)			(5,068)			(12,013)			(5,068)
Net interest income excluding PPP and accretion on acquired loans2	Net interest income excluding PPP and accretion on acquired loans2	$	58,648		$	59,332		$	57,168		$	176,984		$	170,144		Net interest income excluding PPP and accretion on acquired loans2	$	57,920		$	56,987		$	59,332		$	114,907		$	118,336

Net Interest Margin2	Net Interest Margin2	3.40		%	3.70		%	3.89		%	3.67		%	3.95		%	Net Interest Margin2	3.23		%	3.51		%	3.70		%	3.37		%	3.81		%
Impact of accretion on acquired loans	Impact of accretion on acquired loans	(0.17)			(0.16)			(0.25)			(0.20)			(0.26)			Impact of accretion on acquired loans	(0.14)			(0.15)			(0.16)			(0.15)			(0.21)
Impact of PPP loans																	Impact of PPP loans	(0.06)			(0.11)			(0.08)			(0.08)			(0.04)
Net interest margin excluding PPP and accretion on acquired loans2																	Net interest margin excluding PPP and accretion on acquired loans2	3.03		%	3.25		%	3.46		%	3.14		%	3.56		%

Loan Interest Income2																	Loan Interest Income2	$	60,440		$	62,390		$	64,929		$	122,830		$	128,453
Tax equivalent adjustment to loans																	Tax equivalent adjustment to loans	(92)			(92)			(85)			(184)			(169)
Loan interest income excluding tax equivalent adjustment																	Loan interest income excluding tax equivalent adjustment	$	60,348		$	62,298		$	64,844		$	122,646		$	128,284

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		Third			Second			Third			Nine Months Ended							Second		First		Second		Six Months Ended
		Quarter			Quarter			Quarter			September 30,							Quarter		Quarter		Quarter		June 30,
(In thousands, except per share data)	(In thousands, except per share data)	2020			2020			2019			2020			2019			(In thousands, except per share data)	2021		2021		2020		2021		2020
Impact of PPP		0.19			(0.08)			—			0.04			—
Net interest margin excluding PPP and accretion on acquired loans2		3.42		%	3.46		%	3.64		%	3.51		%	3.69		%

Loan Interest Income2		$	60,573		$	64,929		$	63,138		$	189,026		$	187,808
Tax equivalent adjustment to loans		(86)			(85)			(46)			(255)			(141)
Loan interest income excluding tax equivalent adjustment		$	60,487		$	64,844		$	63,092		$	188,771		$	187,667

Securities Interest Income2	Securities Interest Income2	$	7,129		$	7,725		$	8,966		$	23,702		$	27,387		Securities Interest Income2	$	6,745	$	6,485	$	7,725	$	13,230	$	16,573
Tax equivalent adjustment to securities	Tax equivalent adjustment to securities	(32)			(31)			(33)			(93)			(108)			Tax equivalent adjustment to securities	(39)		(39)		(31)		(78)		(61)
Securities interest income excluding tax equivalent adjustment	Securities interest income excluding tax equivalent adjustment	$	7,097		$	7,694		$	8,933		$	23,609		$	27,279		Securities interest income excluding tax equivalent adjustment	$	6,706	$	6,446	$	7,694	$	13,152	$	16,512

Net Interest Income2	Net Interest Income2	$	63,621		$	67,388		$	61,027		$	194,300		$	182,107		Net Interest Income2	$	65,933	$	66,741	$	67,388	$	132,674	$	130,679
Tax equivalent adjustments to loans	Tax equivalent adjustments to loans	(86)			(85)			(46)			(255)			(141)			Tax equivalent adjustments to loans	(92)		(92)		(85)		(184)		(169)
Tax equivalent adjustments to securities	Tax equivalent adjustments to securities	(32)			(31)			(33)			(93)			(108)			Tax equivalent adjustments to securities	(39)		(39)		(31)		(78)		(61)
Net interest income excluding tax equivalent adjustments	Net interest income excluding tax equivalent adjustments	$	63,503		$	67,272		$	60,948		$	193,952		$	181,858		Net interest income excluding tax equivalent adjustments	$	65,802	$	66,610	$	67,272	$	132,412	$	130,449

1Includes severance, contract termination costs, disposition of branch premises and fixed assets, and other costs to effect the Company's branch consolidation and other expense reduction strategies.	1Includes severance, contract termination costs, disposition of branch premises and fixed assets, and other costs to effect the Company's branch consolidation and other expense reduction strategies.																1Includes severance, contract termination costs, disposition of branch premises and fixed assets, and other costs to effect the Company's branch consolidation and other expense reduction strategies.
2On a fully taxable equivalent basis. All yields and rates have been computed using amortized cost.	2On a fully taxable equivalent basis. All yields and rates have been computed using amortized cost.																2On a fully taxable equivalent basis. All yields and rates have been computed using amortized cost.

Financial Condition

Total assets increased ~~$1.2~~$1.0 billion at ~~September~~June 30, ~~2020,~~2021, or ~~17%~~12%, from December 31, ~~2019,~~2020, reflecting higher cash balances due to higher customer deposit balances, as well as the ~~impact~~origination of ~~the~~ PPP loans ~~program, higher deposit balances, and~~under the ~~impact of the FBPB and Freedom Bank acquisitions completed in 2020.~~renewed program.

Securities

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

At ~~September~~June 30, ~~2020,~~2021, the Company had $1.3 billion in debt securities available-for-sale and ~~$207.4~~$493.5 million in debt securities held-to-maturity. The Company's total debt securities portfolio increased ~~$286.0~~$233.6 million, or ~~24%~~15%, from December 31, ~~2019.~~2020.

During the ~~nine~~first quarter of 2021, the Company reclassified debt securities with an amortized cost of $210.8 million from available-for-sale to held-to-maturity. These securities had net unrealized gains of $0.8 million at the date of transfer, which will continue to be reported in accumulated other comprehensive income and will be amortized over the remaining life of the securities as an adjustment of yield. The effect on interest income of the amortization of net unrealized gains is offset by the amortization of the premium on the securities transferred. The Company has the intent and ability to retain these securities until maturity.

During the six months ended ~~September~~June 30, ~~2020,~~2021, there were ~~$626.7~~$669.2 million of debt security purchases and ~~$237.1~~$361.9 million in aggregated paydowns and maturities. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company had $56.2 million in proceeds from ~~the sale~~sales of securities ~~totaled $96.7 million,~~ with net ~~gains~~losses of ~~$1.1~~$0.1 million. For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, there were ~~$164.5~~$239.2 million debt security purchases and aggregated maturities and principal paydowns totaled ~~$98.3~~$140.3 million. Proceeds from sales of securities during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 totaled ~~$122.9~~$92.3 million, with net ~~losses~~gains of ~~$1.5~~$1.1 million.

Debt securities generally return principal and interest monthly. ~~The modified duration of the investment portfolio at September~~At June 30, ~~2020 was 3.3 years, compared to 3.5 years at December 31, 2019.~~

~~At September 30, 2020,~~2021, available-for-sale debt securities had gross unrealized losses of ~~$3.7~~$6.3 million and gross unrealized gains of ~~$28.6~~$18.7 million, compared to gross unrealized losses of ~~$2.7~~$2.1 million and gross unrealized gains of ~~$8.8~~$28.7 million at December 31, ~~2019.~~2020. The modified duration of the available-for-sale portfolio at June 30, 2021 was 3.2 years, compared to 3.8 years at December 31, 2020.

The credit quality of the Company’s securities holdings ~~are~~is primarily investment grade. U.S. Treasuries, obligations of U.S. government agencies and obligations of U.S. government sponsored entities totaled ~~$1.2~~$1.5 billion, or ~~77%~~82%, of the total portfolio.

The portfolio includes ~~$100.8~~$73.5 million, with a fair value of $75.2 million, in private label residential and commercial mortgage-backed securities and collateralized mortgage obligations. Included are ~~$74.0~~$48.4 million, with a fair value of ~~$74.4~~$49.0 million, in private label mortgage-backed residential securities with weighted average credit support of ~~27%~~34%. The collateral underlying these mortgage investments

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includes both fixed-rate and adjustable-rate mortgage loans. Non-guaranteed agency commercial securities total $25.0 million, with a fair value of ~~$26.4~~$26.2 million. These securities have weighted average credit support of 11%. The collateral underlying these mortgages are primarily pooled multifamily loans.

The Company also has invested ~~$203.8~~$209.8 million, with a fair value of ~~$201.4~~$209.7 million, in uncapped 3-month LIBOR floating rate collateralized loan obligations ~~("CLOs"~~(“CLOs”). CLOs are special purpose vehicles, and the Company’s holdings purchase nearly all

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first lien broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors. As of ~~September~~June 30, ~~2020, ,~~2021, the Company held 2726 total positions, all of which were in AAA/AA tranches with average credit support of 31%. The Company utilizes credit models with assumptions of loan level defaults, recoveries, and prepayments to evaluate each security for ~~each CLO security.~~potential credit losses. The ~~results~~result of this analysis did not indicate expected credit losses.

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

At ~~September~~June 30, ~~2020,~~2021, the Company has determined that all debt securities in an unrealized loss position are the result of both broad investment type spreads and the current interest rate environment. Management believes that each investment will recover any price ~~depreciations~~depreciation over its holding period as the debt securities move to maturity, and ~~there is~~management has the intent and ability to hold these investments to maturity if necessary. Therefore, at ~~September~~June 30, ~~2020,~~2021, no allowance for credit losses has been recorded.

Loan Portfolio

Loans, net of unearned income and excluding the allowance for credit losses, were ~~$5.9~~$5.4 billion at ~~September~~June 30, ~~2020, $659.6~~2021, a $298.3 million ~~more than at~~decrease from December 31, ~~2019, an increase of 13%. The increase reflects~~2020. During the ~~additions of loans through~~six months ended June 30, 2021, the ~~acquisition of FBPB~~Company participated in the ~~first quarter~~most recent round of ~~2020 and~~the PPP, resulting in originations of ~~Freedom Bank~~$256.0 million. This was offset by $457.0 million in PPP loans that were forgiven by the SBA during the six months ended June 30, 2021. Remaining decreases in loans reflect the impact of continued paydowns, as loan growth is expected to return in the ~~third quarter~~second half of ~~2020, and loans originated under the SBA's Paycheck Protection Program.~~2021.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company originated ~~$378.4~~$397.3 million in commercial and commercial real estate loans, ~~were originated~~ compared to ~~$749.5~~$290.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019, a decrease~~2020, an increase of ~~$371.0~~$107.1 million, or ~~50%~~37%. The loan pipeline for commercial and commercial real estate loans totaled ~~$256.2~~$322.0 million at ~~September~~June 30, ~~2020. Commercial originations decreased during~~2021. Prior year’s production and pipeline reflect the ~~third quarter~~impact of ~~2020 as a result~~the onset of ~~a continued approach on new credits given an uncertain economic outlook associated with~~ the COVID-19 ~~pandemic.~~pandemic where the Company purposefully slowed originations. The ~~Company will continue~~current year activity reflects the Company’s return to ~~serve current strong relationships that meet~~its pre-pandemic credit policy and strict ~~credit~~ underwriting ~~guidelines, with liquidity and balance sheets that can support significant stress.~~guidelines.

The Company ~~closed $74.7~~originated $164.7 million in residential loans retained in the portfolio during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$123.8~~$49.3 million ~~closed~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, an increase of ~~40%~~$115.4 million, or 234%. Residential loans retained in the portfolio in the second quarter of 2021 includes a $38.4 million purchased pool consisting of 30-year fixed rate jumbo residential loans. Saleable ~~volumes were higher~~production increased for the ~~nine~~six months ended ~~September~~June 30, 2021, representing $258.4 million versus $185.3 million during the six months ended June 30, 2020, ~~representing 82%~~an increase of production versus 59% of production during the nine months ended September 30, 2019. The saleable residential mortgage pipeline at September 30, 2020 totaled $149.9 million while the retained pipeline decreased to $33.4 million as of September 30, 2020. The residential lending team has adapted quickly to heightened demand and has increased service levels to homebuyers, refinance customers, and local real estate professionals. As a result, the Company has recognized substantial growth in market share.39%.

Consumer originations totaled ~~$171.8~~$110.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020, higher by $14.9~~2021, an increase of $1.0 million, or 9%1%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019, and the pipeline for these loans at September 30, 2020 was $17.1 million.~~2020.

The Company remains committed to sound 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 well below regulatory limits (see “Loan Concentrations”).

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The following tables detail loan portfolio composition at ~~September~~June 30, 2021 and December 31, 2020 for portfolio loans, purchased credit deteriorated (“PCD”) and loans purchased which are not considered purchased credit deteriorated (“Non-PCD”) as defined in Note ~~E-Loans; and at December 31, 2019 for portfolio loans, purchased credit impaired loans ("PCI") and purchased unimpaired loans("PUL").~~E-Loans.


		September 30, 2020									June 30, 2021
(In thousands)	(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total		(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total
Construction and land development	Construction and land development	$	246,312	$	30,720	$	3,578	$	280,610	Construction and land development	$	223,412	$	10,408	$	527	$	234,347
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	817,547		267,223		40,690		1,125,460		Commercial real estate - owner-occupied	889,221		203,847		34,572		1,127,640
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	1,014,993		348,085		31,386		1,394,464		Commercial real estate - non owner-occupied	1,112,290		274,772		25,377		1,412,439
Residential real estate	Residential real estate	1,182,558		201,221		9,617		1,393,396		Residential real estate	1,087,313		131,131		8,092		1,226,536
Commercial and financial	Commercial and financial	711,358		105,327		16,398		833,083		Commercial and financial	811,580		75,245		13,381		900,206
Consumer	Consumer	184,608		7,306		302		192,216		Consumer	166,806		4,949		14		171,769
Paycheck Protection Program	Paycheck Protection Program	584,577		54,223		—		638,800		Paycheck Protection Program	350,531		13,581		—		364,112
Totals	Totals	$	4,741,953	$	1,014,105	$	101,971	$	5,858,029	Totals	$	4,641,153	$	713,933	$	81,963	$	5,437,049

December 31, 2019
(In thousands) Portfolio Loans PULs PCI Loans Total
Construction and land development $ 281,335 $ 43,618 $ 160 $ 325,113
Commercial real estate1
1,834,811 533,943 10,217 2,378,971
Residential real estate 1,304,305 201,848 1,710 1,507,863
Commercial and financial 697,301 80,372 579 778,252
Consumer 200,166 8,039 — 208,205
Totals $ 4,317,918 $ 867,820 $ 12,666 $ 5,198,404
1Commercial real estate includes owner-occupied balances of $1.0 billion for December 31, 2019.

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	December 31, 2020
(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total
Construction and land development	$	216,420	$	26,250	$	2,438	$	245,108
Commercial real estate - owner-occupied	854,769		247,090		39,451		1,141,310
Commercial real estate - non owner-occupied	1,043,459		323,273		29,122		1,395,854
Residential real estate	1,155,914		176,105		10,609		1,342,628
Commercial and financial	743,846		94,627		16,280		854,753
Consumer	181,797		6,660		278		188,735
Paycheck Protection Program	515,532		51,429		—		566,961
Totals	$	4,711,737	$	925,434	$	98,178	$	5,735,349

Commercial real estate ~~("CRE"~~(“CRE”) loans, inclusive of owner-occupied commercial real estate, increased by ~~$141.0~~$2.9 million, or 6%0.1%, in the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, totaling $2.5 billion at ~~September~~June 30, ~~2020~~2021 compared to ~~$2.4~~$2.5 billion at December 31, ~~2019.~~2020. Owner-occupied commercial real estate loans represent $1.1 billion, or ~~45%~~44%, of the commercial real estate portfolio.

Fixed-rate and adjustable-rate loans secured by commercial real estate, excluding construction loans, totaled approximately ~~$2.0~~$2.1 billion and ~~$492.1~~$421.6 million, respectively, at ~~September~~June 30, ~~2020,~~2021, compared to ~~$2.0~~$2.1 billion and ~~$418.8~~$453.7 million, respectively, at December 31, ~~2019.~~2020.

~~The CARES Act, which was signed into law on March 27, 2020, encourages financial institutions~~During the six months ended June 30, 2021, the Company participated in the most recent round of the PPP and originated more than 2,700 loans for $256.0 million. Also during the six months ended June 30, 2021, $457.0 million in PPP loans were forgiven by the SBA.

At June 30, 2021, Seacoast had $6.8 million of loans with payment accommodations to ~~practice prudent efforts to work with~~ borrowers financially impacted by the COVID-19 pandemic, by providing an option for financial institutions 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) December 31, 2020 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 COVID-19 pandemic should not be considered TDRs if the borrower was current at the time of modification.

~~At September 30, 2020, Seacoast had $702.7 million of loans on payment deferral,~~ none of which have been classified as ~~TDRs. 97% of these loans are scheduled~~TDRs, compared to ~~return to regular payments in the fourth quarter of~~$74.1 million at December 31, 2020. Interest and fees have

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continued to accrue on these loans during ~~the~~any payment deferral period. 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. As of September 30, 2020, the Company had $15.4 million in accrued interest associated with loans in short-term payment deferral status, against which the Company established a valuation allowance of $0.4 million for potentially uncollectable accrued interest.

~~The following table presents loans, excluding PPP loans, at September 30, 2020:~~

(In thousands) Loans with Deferrals Total Loans including Loans with Deferrals % of Loans with Deferrals
Construction and land development $ 9,359 $ 280,610 3%
Commercial real estate - owner-occupied 204,710 1,125,460 18
Commercial real estate - non owner-occupied 344,573 1,394,464 25
Residential real estate 75,885 1,393,396 5
Commercial and financial 61,308 833,083 7
Consumer 6,815 192,216 4
Totals $ 702,650 $ 5,219,229 13%

~~The following table details commercial real estate and construction and land development loans outstanding by collateral type at September 30, 2020:~~

($ in thousands) Commercial Real Estate Construction and Land Development Total % of Total Loans Deferred Loans % of Category Deferred
Office Building $ 727,518 $ 12,465 $ 739,983 13% $ 134,654 18%
Retail 444,395 21,093 465,488 8 147,214 32
Industrial & Warehouse 366,175 6,266 372,441 6 47,160 13
Other Commercial Property 249,619 25 249,644 4 43,211 17
Healthcare 203,546 21,321 224,867 4 27,797 12
Apartment Building / Condominium 165,855 30,164 196,019 3 15,315 8
Hotel / Motel 132,571 2,866 135,437 2 86,230 64
Vacant Lot 2,661 76,171 78,832 1 6,255 8
1-4 Family Residence - Individual Borrowers — 63,083 63,083 1 — —
Convenience Store 55,523 — 55,523 1 14,754 27
Restaurant 46,460 1,796 48,256 1 18,727 39
Church 29,720 — 29,720 1 4,771 16
1-4 Family Residence - Spec Home — 26,624 26,624 — — —
School / Education 21,749 3,093 24,842 — 6,085 24
Agriculture 20,726 — 20,726 — 321 2
Manufacturing Building 18,312 — 18,312 — 59 —
1-4 Family Residence - Builder Lines 22 15,643 15,665 — — —
Recreational Property 14,964 — 14,964 — 5,852 39
Other Properties 20,108 — 20,108 — 237 1
Total $ 2,519,924 $ 280,610 $ 2,800,534 48% $ 558,642 20%

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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 $578 thousand, the average loan to value ("LTV") is 53%, and 57% of this category is classified as owner-occupied. This primarily includes medical, accounting, engineering, health care, veterinarians and other similar professionals. 41% of the office building category is stabilized income-producing investment properties.

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 46%. Loans collateralized by hotels/motels represent $135 million with an average loan size of $3.4 million and an average LTV of 52%. Restaurant exposure is limited at $48 million in loans, and is distributed among quick serve and full-service restaurants, with an average loan size of $761 thousand and LTV of 52%.

Commercial and financial loans outstanding were $833.1 million at September 30, 2020 and $778.3 million at December 31, 2019, an increase of 7.0%. 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.

~~The following table details the commercial and financial loans outstanding by industry type at September 30, 2020:~~

($ in thousands) Commercial and Financial % of Total Loans Deferred Loans % of Category
Management Companies1
$ 186,298 3% $ 5,114 3%
Professional, Scientific, Technical & Other Services 97,176 2 3,330 3
Real Estate Rental & Leasing 83,729 1 6,359 8
Construction 76,190 1 2,556 3
Finance & Insurance 61,915 1 272 —
Healthcare & Social Assistance 61,509 1 9,651 16
Transportation & Warehousing 45,582 1 7,132 16
Manufacturing 45,565 1 3,121 7
Wholesale Trade 36,940 1 12,337 33
Retail Trade 24,256 — 2,248 9
Education 20,458 — — —
Accommodation & Food Services 17,839 — 3,329 19
Administrative Support 13,441 — 635 5
Public Administration 13,131 — — —
Agriculture 11,159 — — —
Other Industries 37,895 1 5,224 14
Total $ 833,083 14% $ 61,308 7%
1Primarily corporate aircraft and marine vessels associated with high net worth individuals.

Residential real estate loans decreased ~~$114.5~~$116.1 million, or 8%9%, to ~~$1.4~~$1.2 billion as of ~~September~~June 30, ~~2020,~~2021, compared to December 31, ~~2019.~~2020. Substantially all residential mortgage originations have been underwritten to conventional loan agency standards, including loans having balances that exceed agency value limitations. At ~~September~~June 30, ~~2020,~~2021, approximately ~~$486.6~~$343.4 million, or ~~35%~~28%, of the Company’s residential mortgage balances were adjustable 1-4 family mortgage loans, which includes hybrid adjustable-rate ~~mortgages.~~mortgages, compared to $436.3 million, or 32% at December 31, 2020. Fixed-rate mortgages totaled approximately ~~$577.0~~$567.4 million, or ~~41%~~46%, at ~~September~~June 30, ~~2020, of which 15- and 30-year mortgages totaled $41.1~~2021, compared to $499.0 million, ~~and $357.5 million, respectively. Remaining fixed-rate balances were comprised of home improvement loans totaling $178.3 million, most with maturities of 10 years~~ or ~~less.~~37% at December 31, 2020. Home equity lines of credit ("HELOCs"), primarily floating rates, totaled ~~$329.8~~$315.7 million at ~~September~~June 30, ~~2020. In comparison, loans secured by residential properties having fixed rates totaled $659.4~~2021 and $341.6 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 HELOCs totaling $243.8 million and $292.1 million, respectively.2020. Borrowers in the residential real estate portfolio have an average credit score of ~~755.~~747. Specifically for HELOCs, borrowers have an average credit score of ~~750.~~763. The average LTV of our HELOC portfolio is ~~59%~~67% with ~~46%~~43% of the portfolio being in first lien ~~position.~~

~~Table~~position at June 30, 2021, compared to 68% with 45% of ~~Contents~~

the portfolio being in the first lien position at December 31, 2020.

The Company also provides consumer loans, which include installment loans, auto loans, marine loans, and other consumer loans, which decreased ~~$16.0~~$17.0 million, or 8%9%, to total ~~$192.2~~$171.8 million compared to ~~$208.2~~$188.7 million at December 31, ~~2019.~~2020. Borrowers in the consumer portfolio have an average credit score of ~~745.~~733.

At ~~September~~June 30, ~~2020,~~2021, the Company had unfunded loan commitments of $1.6 billion compared to ~~$1.0~~$1.5 billion at December 31, ~~2019.~~2020.

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Loan Concentrations

The Company has developed prudent guardrails to manage loan types that are most impacted by stressed market conditions in order to minimize credit risk concentration to capital. Outstanding balances for commercial and CRE loan relationships greater than $10 million totaled ~~$779.0~~$834.0 million and represented ~~13%~~15% of the total portfolio at ~~September~~June 30, ~~2020~~2021 compared to ~~$680.2~~$753.7 million, or 13%, at year-end ~~2019.~~2020.

The Company’s ten largest commercial and commercial real estate funded and unfunded loan relationships at ~~September~~June 30, ~~2020~~2021 aggregated to ~~$265.6~~$279.5 million, of which ~~$193.4~~$223.8 million was funded compared to ~~$268.9~~$254.3 million at December 31, ~~2019,~~2020, of which ~~$179.0~~$188.0 million was funded. The Company had ~~140~~147 commercial and commercial real estate relationships in excess of $5 million totaling ~~$1.4~~$1.5 billion, of which $1.2 billion was funded at ~~September~~June 30, ~~2020~~2021 compared to ~~120~~135 relationships totaling ~~$1.2~~$1.3 billion at December 31, ~~2019,~~2020, of which ~~$1.0~~$1.2 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 subsidiary bank total risk based capital declined to ~~30%~~24% and ~~176%~~164%, respectively, at ~~September~~June 30, ~~2020,~~2021, compared to ~~40%~~26% and ~~204%~~169%, respectively, at December 31, ~~2019.~~2020. Regulatory guidance suggests limits of 100% and 300%, respectively. On a consolidated basis, construction and land development and commercial real estate loans represent ~~28%~~22% and ~~165%~~150%, 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” (the “Guidance”) issued by the federal bank regulatory agencies in 2006 (and reinforced in 2015), which defines CRE loans as exposures secured by land development and construction, including 1-4 family residential construction, multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property (i.e., loans for which 50 percent or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Loans to real estate investment trusts (“REITs”) and unsecured loans to developers that closely correlate to the inherent risks in CRE markets would also be considered CRE loans under the Guidance. Loans on owner-occupied CRE are generally excluded. In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.

Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality

Nonperforming assets (“NPAs”) at ~~September~~June 30, ~~2020~~2021 totaled ~~$52.8~~$45.7 million, and were comprised of ~~$36.9~~$32.9 million of nonaccrual loans, ~~$12.3~~$11.0 million of other real estate owned (“OREO”), and ~~$3.6~~$1.8 million of branches and other properties used in bank operations taken out of service. Compared to December 31, ~~2019,~~2020, nonaccrual loans ~~increased $9.9~~decreased $3.2 million, ~~spread across several loans.~~primarily the result of paydowns. The increase in OREO of ~~$6.8~~$0.8 million ~~from December 31, 2019 includes the addition~~reflects $1.3 million of ~~one multifamily construction property for $6.5~~capital expenditures, $0.1 million in sales and ~~one residential property for $0.9~~$0.4 million ~~offset by sales of $0.6 million.~~in write-downs. The decrease in OREO for bank branches of ~~$3.3~~$0.8 million reflects the addition of three branch properties totaling $3.3 million, offset by the sale of ~~a single~~four branch ~~property and a $1.3 million operations building acquired and subsequently sold in 2020.~~properties for $4.1 million. Overall, NPAs ~~increased $13.4~~decreased $3.1 million, or ~~34%~~6%, from ~~$39.3~~$48.9 million ~~recorded~~ as of December 31, ~~2019.~~2020. At ~~September~~June 30, ~~2020,~~2021, approximately ~~80%~~82% of nonaccrual loans were secured with real estate. See the tables below for details about nonaccrual loans. At ~~September~~June 30, ~~2020,~~2021, nonaccrual loans were written down by approximately ~~$9.7~~$6.7 million, or ~~14%~~10%, of the original loan balance (including ~~specific impairment reserves)~~reserves on individually evaluated loans).

Nonperforming loans to total loans outstanding at ~~September~~June 30, ~~2020 increased~~2021 decreased to ~~0.63%~~0.61% from ~~0.52%~~0.63% at December 31, ~~2019.~~2020. Nonperforming assets to total assets at ~~September~~June 30, ~~2020 increased~~2021 decreased to ~~0.64%~~0.49% from ~~0.55%~~0.59% at December 31, ~~2019.~~2020.

The Company’s asset mitigation staff handles all foreclosure actions together with outside legal counsel.

The Company pursues loan restructurings in select 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. Troubled debt restructurings ~~("TDRs"~~(“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~~TDRs totaled ~~$10.2~~$4.0 million

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at ~~September~~June 30, ~~2020~~2021 compared to ~~$11.1~~$4.2 million at December 31, ~~2019.~~2020. Accruing TDRs are excluded from the nonperforming asset ratios.

Beginning in March 2020, in response to the economic downturn resulting from the COVID-19 pandemic, the Company has offered short-term payment deferrals to affected borrowers. As of ~~September~~June 30, ~~2020,~~2021, pandemic-related deferrals totaled ~~$702.7~~$6.8 million and are not considered 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.

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The table below sets forth details related to nonaccrual and accruing restructured loans.


		September 30, 2020									June 30, 2021
		Nonaccrual Loans						Accruing Restructured Loans			Nonaccrual Loans						Accruing Restructured Loans
(In thousands)	(In thousands)	Non-Current		Performing		Total				(In thousands)	Non-Current		Current		Total
Construction and land development	Construction and land development	$	573	$	31	$	604	$	118	Construction and land development	$	64	$	7	$	71	$	58
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	1,147		2,355		3,502		109		Commercial real estate - owner-occupied	—		5,390		5,390		105
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	2,034		6,188		8,222		4,445		Commercial real estate - non owner-occupied	3,740		3,377		7,117		—
Residential real estate	Residential real estate	8,147		9,016		17,163		5,246		Residential real estate	5,958		8,457		14,415		3,525
Commercial and financial	Commercial and financial	3,903		3,134		7,037		26		Commercial and financial	3,417		2,376		5,793		131
Consumer	Consumer	340		29		369		246		Consumer	60		74		134		218
Total	Total	$	16,144	$	20,753	$	36,897	$	10,190	Total	$	13,239	$	19,681	$	32,920	$	4,037


		December 31, 2019									December 31, 2020
		Nonaccrual Loans						Accruing Restructured Loans			Nonaccrual Loans						Accruing Restructured Loans
(In thousands)	(In thousands)	Non-Current		Performing		Total				(In thousands)	Non-Current		Current		Total
Construction and land development	Construction and land development	$	4,902	$	35	$	4,937	$	131	Construction and land development	$	37	$	129	$	166	$	109
Commercial real estate		3,800		2,720		6,520		4,666
Commercial real estate - owner-occupied										Commercial real estate - owner-occupied	5,682		2,500		8,182		109
Commercial real estate - non owner-occupied										Commercial real estate - non owner-occupied	2,030		6,053		8,083		—
Residential real estate	Residential real estate	2,552		6,928		9,480		6,027		Residential real estate	4,074		8,418		12,492		3,740
Commercial and financial	Commercial and financial	4,674		1,234		5,908		27		Commercial and financial	3,777		2,827		6,604		—
Consumer	Consumer	38		72		110		249		Consumer	543		40		583		224
Total	Total	$	15,966	$	10,989	$	26,955	$	11,100	Total	$	16,143	$	19,967	$	36,110	$	4,182

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, total TDRs (performing and nonperforming) were comprised of the following loans by type of modification:


		September 30, 2020			December 31, 2019				June 30, 2021			December 31, 2020
(In thousands)	(In thousands)	Number	Amount		Number	Amount		(In thousands)	Number	Amount		Number	Amount
Maturity extended								Maturity extended	52	$	5,258	51	$	5,438
Rate reduction	Rate reduction	40	$	9,239	56	$	10,739	Rate reduction	29	3,236		37	4,275
Maturity extended with change in terms		40	4,119		48	5,083
Chapter 7 bankruptcies	Chapter 7 bankruptcies	13	437		22	1,275		Chapter 7 bankruptcies	9	323		13	417
Not elsewhere classified	Not elsewhere classified	20	2,648		11	966		Not elsewhere classified	6	175		5	160
Total	Total	113	$	16,443	137	$	18,063	Total	96	$	8,992	106	$	10,290

During the ~~three~~six months ended ~~September~~June 30, 2021, there were two defaults totaling $0.1 million of loans that had been modified in TDRs within the preceding twelve months. During the six months ended June 30, 2020, ~~one loan was~~there were three defaults totaling $1.4 million of loans that had been modified to a TDR ~~totaling $41,000, compared to three loans totaling $1.6 million for~~within the three months ended September 30, 2019. During the nine months ended September 30, 2020, eight loans totaling $0.6 million were modified to a TDR, compared to seven loans totaling $4.0 million for the nine months ended September 30, 2019.preceding twelve months. 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. During the nine months ended September 30, 2020, there were four defaults totaling $1.4 million that had been modified within the preceding twelve months. During the nine months ended September 30, 2019, there were three defaults on loans totaling $2.1 million to a single borrower that had been modified to a TDR within the

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~~preceding twelve months.~~ 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, has been charged off 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. ~~Typically~~The accrual of interest is generally discontinued on loans, except consumer loans, that become 90 days past due as to principal or ~~more~~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 reviewed for impairment, and if deemed impaired, are placed on nonaccrual. Once impaired, the current fair market value of the collateral is assessed and a specific reserve and/or charge-off taken. Quarterly thereafter, thegenerally charged off. The loan carrying value is analyzed and any changes are appropriately made as described ~~above.~~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

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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 the first and second quarters of 2020 reflected the deterioration of the current and forecasted macroeconomic environment with the onset of the COVID-19 pandemic.

During the ~~third~~second quarter of ~~2020,~~2021, the Company recorded a reversal of provision of ~~$1.2~~$4.9 million ~~resulting from the significant change~~reflecting improvement in the economic outlook and a slowing in loan origination activity. Additionally and offsetting, a provision of $0.4 million was recorded to reserve for the potential that a portion of accrued interest will not be collected. This reserve was recorded as an offset to the accrued interest receivable balance in Other Assets.forecast. No allowance has been assigned to PPP loans, which are guaranteed by the U.S. government. Net charge-offs for the ~~third~~second quarter of ~~2020~~2021 were ~~$1.7~~$0.7 million, or ~~0.12%~~0.05%, of average loans and, for the four most recent quarters, averaged ~~0.14%~~0.10% of outstanding loans. Excluding PPP loans, the ratio of allowance to total loans ~~increased~~decreased to ~~1.80% at September 30, 2020 from 1.76%~~1.60% at June 30, 2020. Uncertainty related to market conditions and the economic outlook will likely continue through the end of 2020 as the ongoing effects of the pandemic and the potential for additional government assistance programs remain unknown.

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2021 from 1.71% at March 31, 2021.

The following tables present the activity in the allowance for credit losses on loans by segment:


		Three Months Ended September 30, 2020												Three Months Ended June 30, 2021
(In thousands)	(In thousands)	Beginning Balance		Initial Impact on Allowance of PCD Loans Acquired During the Period		Provision for Credit Losses1		Charge- Offs		Recoveries		TDR Allowance Adjustments			Ending Balance		(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	Construction and land development	$	7,161	$	39	$	475	$	—	$	26	$	—		$	7,701	Construction and land development	$	4,428	$	(469)	$	—	$	96	$	(2)	$	4,053
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	5,562		954		689		—		26		(12)			7,219		Commercial real estate - owner-occupied	9,792		(1,116)		—		—		—		8,676
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	38,992		2,096		(7,050)		(25)		5		—			34,018		Commercial real estate - non owner-occupied	36,229		(1,423)		—		1		—		34,807
Residential real estate	Residential real estate	20,453		27		(3,196)		(19)		65		(5)			17,325		Residential real estate	14,353		(2,407)		(21)		621		(3)		12,543
Commercial and financial	Commercial and financial	15,514		2,632		8,081		(1,776)		203		—			24,654		Commercial and financial	18,916		399		(1,564)		265		—		18,016
Consumer	Consumer	3,568		15		(244)		(355)		114		(2)			3,096		Consumer	2,925		161		(199)		146		(1)		3,032
Paycheck Protection Program	Paycheck Protection Program	—		—		—		—		—		—			—		Paycheck Protection Program	—		—		—		—		—		—
Totals	Totals	$	91,250	$	5,763	$	(1,245)	$	(2,175)	$	439	$	(19)		$	94,013	Totals	$	86,643	$	(4,855)	$	(1,784)	$	1,129	$	(6)	$	81,127

1Excludes $0.4 million provision for credit losses on accrued interest receivable


		Nine Months Ended September 30, 2020																	Six Months Ended June 30, 2021
(In thousands)	(In thousands)	Beginning Balance		Impact of Adoption of ASC 326		Initial Impact on Allowance of PCD Loans Acquired During the Period		Provision for Credit Losses1		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance		(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	Construction and land development	$	1,842	$	1,479	$	87	$	4,202	$	—	$	92	$	(1)	$	7,701	Construction and land development	$	4,920	$	(979)	$	—	$	114	$	(2)	$	4,053
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	5,361		80		1,161		655		(45)		44		(37)		7,219		Commercial real estate - owner-occupied	9,868		(1,192)		—		—		—		8,676
Commercial real estate - non owner-occupied	Commercial real estate - non owner-occupied	7,863		9,341		2,236		14,578		(37)		37		—		34,018		Commercial real estate - non owner-occupied	38,266		(3,461)		—		2		—		34,807
Residential real estate	Residential real estate	7,667		5,787		124		3,638		(150)		283		(24)		17,325		Residential real estate	17,500		(5,779)		(21)		850		(7)		12,543
Commercial and financial	Commercial and financial	9,716		3,677		2,643		12,144		(4,642)		1,116		—		24,654		Commercial and financial	18,690		1,174		(2,320)		472		—		18,016
Consumer	Consumer	2,705		862		28		662		(1,442)		284		(3)		3,096		Consumer	3,489		(333)		(384)		262		(2)		3,032
Paycheck Protection Program	Paycheck Protection Program	—		—		—		—		—		—		—		—		Paycheck Protection Program	—		—		—		—		—		—
Totals	Totals	$	35,154	$	21,226	$	6,279	$	35,879	$	(6,316)	$	1,856	$	(65)	$	94,013	Totals	$	92,733	$	(10,570)	$	(2,725)	$	1,700	$	(11)	$	81,127

1Excludes $0.4 million provision for credit losses on accrued interest receivable

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 ~~September~~June 30, ~~2020,~~2021, the Company had ~~$1.4~~$1.2 billion in loans secured by residential real estate and $2.5 billion in loans secured by commercial real estate, representing ~~24%~~23% and ~~43%~~47% of total loans outstanding, respectively. In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.

~~With~~LIBOR Transition

The Company’s LIBOR transition steering committee is responsible for overseeing the ~~emergence~~execution of the ~~COVID-19 pandemic late in~~Company’s enterprise-wide LIBOR transition program, and for evaluating and mitigating risks associated with the ~~first quarter~~transition from LIBOR. The LIBOR transition program includes a comprehensive review of ~~2020 leading~~the financial products, agreements, contracts, and business processes that may use LIBOR as a reference rate, and the development and execution of strategy to ~~significant market changes, high levels~~transition away from LIBOR, with appropriate consideration of ~~unemployment~~the potential financial, customer, counterpart, regulatory and ~~increasing degrees of uncertainty in~~legal impacts. The Company continues to execute its LIBOR transition program, and to monitor regulatory and legislative activity to identify any necessary actions and facilitate the ~~U.S. economy, the impact on expected losses on loans is difficult~~transition to ~~estimate with precision, and it is possible that additional provisions for credit losses could be needed in future periods.~~alternative reference rates.

5956

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Cash and Cash Equivalents and Liquidity Risk Management

Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liability, as well as the risk of not being able to meet unexpected cash needs. Liquidity planning and management are necessary to ensure the ability to fund operations cost effectively and to meet current and future potential obligations such as loan commitments and unexpected deposit outflows.

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

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.

The Company does not rely on and is not dependent onupon off-balance sheet financing or significant amounts of wholesale funding. The Company strategically increased brokered deposits in the first quarter of 2020 to supplement its liquidity position, given the unknown impact of the COVID-19 pandemic on business and economic conditions. Brokered certificates of ~~deposits ("CDs"~~deposit (“CDs”) at ~~September~~June 30, ~~2020~~2021 were ~~$381.0~~$20.0 million, ~~an increase~~a decrease of ~~$91.8~~$213.8 million, or ~~19%~~91%, from December 31, ~~2019. CD maturities are laddered, with $147.2 million maturing in the fourth quarter of~~ 2020.

Cash and cash equivalents, including interest bearing deposits, totaled ~~$309.6 million~~$1.4 billion on a consolidated basis at ~~September~~June 30, ~~2020,~~2021, compared to ~~$124.5~~$404.1 million at December 31, ~~2019,~~2020, an increase of ~~149%~~259%. Higher cash and cash equivalent balances at ~~September~~June 30, ~~2020~~2021 reflect favorable deposit growth, including ~~PPP loan funds~~significant growth in transaction account deposit balances during the second quarter. This increase in funding occurred across our customer base at near-zero rates, as new clients were onboarded and ~~government stimulus payments received by our customers and generally lower consumer spending levels~~existing clients continue to see expansion in ~~2020.~~cash 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, debt securities available-for-sale and interest-bearing deposits. The Company is also able to provide ~~short term~~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 ~~September~~June 30, ~~2020,~~2021, the Company had available unsecured lines of credit of $135.0 million and secured lines of credit, which are subject to change, of $1.7 billion. In addition, the Company had ~~$1.2~~$1.5 billion of debt securities and ~~$646.1~~$688.4 million in residential and commercial real estate loans available as collateral. In comparison, at December 31, ~~2019,~~2020, the Company had available unsecured lines of ~~$130.0~~$135.0 million and secured lines of credit of ~~$1.1~~$1.8 billion, and ~~$924.2 million~~$1.2 billion of debt securities and ~~$830.0~~$733.3 million in residential and commercial real estate loans available as collateral. In April 2020, the Federal Reserve offered term funding with a fixed rate of 35 basis points on pledged Paycheck Protection Program loans. The Company initially expected to utilize this program, however, as the Bank's deposits increased significantly due to PPP loans being funded directly into bank deposit accounts and reduced spending due to the COVID-19 pandemic combined with the Bank's relatively low cost of deposits, utilization became unnecessary.

The Company has traditionally relied upon dividends from Seacoast Bank and securities offerings to provide funds to pay the Company’s expenses and to service the Company’s debt. During the ~~third~~second quarter of ~~2020,~~2021, Seacoast Bank distributed ~~$5.2~~$25.6 million to the Company and, at ~~September~~June 30, ~~2020,~~2021, is eligible to distribute dividends to the Company of approximately ~~$192.8~~$183.7 million without prior regulatory approval. ~~Total dividends of $11.0 million have been distributed to the Company in 2020.~~ At ~~September~~June 30, ~~2020,~~2021, the Company had cash and cash equivalents at the parent of approximately ~~$59.4~~$87.8 million compared to ~~$53.0~~$70.1 million at December 31, ~~2019.~~2020.

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Deposits and Borrowings

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



	June 30,			December 31,
(In thousands, except ratios)	2021			2020
Noninterest demand	$	2,952,160		$	2,289,787
Interest-bearing demand	1,763,884			1,566,069
Money market	1,807,190			1,556,370
Savings	811,516			689,179
Time certificates of deposit	501,686			831,156
Total deposits	$	7,836,436		$	6,932,561

Customer sweep accounts	$	119,973		$	119,609

Noninterest demand deposits as % of total deposits	38		%	33		%

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

Total deposits increased ~~$1.3~~$0.9 billion, or ~~24%~~13%, to $7.8 billion at June 30, 2021, compared to $6.9 billion at ~~September 30, 2020, compared to $5.6 billion at~~ December 31, ~~2019.~~2020. The ~~acquisition~~increase is largely the result of ~~FBPB~~significant growth in ~~the first quarter of 2020 added $173.7 million~~transaction account deposit balances as new clients were onboarded and existing clients continue to see expansion in deposits and the acquisition of Freedom Bank in the third quarter of 2020 added $329.7 million in deposits. The remaining increase was partially attributed to PPP borrowers' loan proceeds that remain in deposit accounts at September 30, 2020, as well as higher balances resulting from decreased customer spending due to the COVID-19 pandemic.

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cash balances.

Since December 31, ~~2019,~~2020, interest bearing deposits (interest bearing demand, savings and money market deposits) increased ~~$688.3~~$571.0 million, or ~~25%~~15%, to ~~$3.5~~$4.4 billion, and CDs (excluding brokered CDs) decreased ~~$76.7~~$115.7 million, or ~~11%~~19%, to ~~$635.5~~$481.7 million. Noninterest demand deposits were higher by ~~$810.3~~$662.4 million, or ~~51%~~29%, compared to year-end ~~2019,~~2020, totaling ~~$2.4~~$3.0 billion. Noninterest demand deposits represented ~~35%~~38% of total deposits at ~~September~~June 30, ~~2020~~2021 and ~~28%~~33% at December 31, ~~2019.~~2020.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020, $1.6 billion~~2021, $213.8 million of brokered CDs at an average rate of ~~1.36%~~1.14% matured. Brokered CDs at ~~September~~June 30, ~~2020~~2021 totaled ~~$381.0~~$20.0 million, compared to ~~$472.9~~$233.8 million at December 31, ~~2019. CD maturities are laddered, with $147.2 million maturing~~2020, and mature in the fourth quarter of ~~2020.~~2021.

Customer repurchase agreements totaled ~~$89.5~~$120.0 million at ~~September~~June 30, ~~2020,~~2021, increasing ~~$3.4~~$0.4 million ~~or 4%,~~ from December 31, ~~2019.~~2020. Repurchase agreements are offered by Seacoast to select customers who wish to sweep excess balances on a daily basis for investment purposes. 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 June 30, 2021, the Company had sold, on an overnight basis, $115.8 million in deposits, compared to $112.7 million at December 31, 2020. These deposits are not included in the Consolidated Balance Sheet.

No unsecured federal funds purchased were outstanding at ~~September~~June 30, ~~2020.~~2021.

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, borrowings were comprised of subordinated debt of ~~$71.3~~$71.5 million and ~~$71.1~~$71.4 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company, and there were no borrowings from FHLB. For the six months ended June 30, 2020, FHLB ~~of $35.0~~borrowings averaged $224.9 million ~~and $315.0 million, respectively. The~~with a weighted average rate ~~for FHLB funds during the nine months ended September 30, 2020 and 2019 was 1.08% and 2.51%, respectively, and compared to 2.28% for the year ended December 31, 2019. FHLB borrowings outstanding as~~ of ~~September 30, 2020 bear interest at 0.72% and mature in 2023. Secured FHLB borrowings are an integral tool in liquidity management for the Company.~~

The Company has 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 $4.0 million lower than face value at September 30, 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.1.14%.

The weighted average interest rate of outstanding subordinated debt related to trust preferred securities was ~~3.28%~~2.40% and ~~4.87%~~3.69% for the ~~nine~~six months ended ~~September~~June 30, 2021 and June 30, 2020, ~~and 2019, respectively, and compared to 4.75% for the year ended December 31, 2019.~~respectively.

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.

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Lending commitments include unfunded loan commitments and standby and commercial letters of credit. For loan commitments, the contractual amount of a commitment represents the maximum potential credit risk that could result if the entire commitment had been funded, the borrower had not performed according to the terms of the contract, and no collateral had been provided. A large majority of loan commitments and standby letters of credit expire without being funded, and accordingly, total contractual amounts are not representative of actual future credit exposure or liquidity requirements. Loan commitments and letters of credit expose the Company to credit risk in the event that the customer draws on the commitment and subsequently fails to perform under the terms of the lending agreement.

For commercial customers, loan commitments generally take the form of revolving credit arrangements. For retail customers, loan commitments generally are lines of credit secured by residential property. These instruments are not recorded on the balance sheet until funds are advanced under the commitment. Loan commitments were $1.6 billion at ~~September~~June 30, ~~2020~~2021 and ~~$1.0~~$1.5 billion at December 31, ~~2019.~~2020.

During the current economic uncertainty created by the COVID-19 pandemic, borrowers may be more dependent upon lending commitments than they have been in the past, and more likely to draw on the commitments, though no material increase in utilization has occurred through September 30, 2020. The Company has a reserve for potential credit losses on unfunded lending-related commitments of $3.0 million recorded in Other Liabilities.

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Capital Resources

The Company’s equity capital at ~~September~~June 30, ~~2020~~2021 increased ~~$112.7~~$51.9 million, or ~~11%~~5%, from December 31, ~~2019~~2020 to ~~$1.1~~$1.2 billion. Changes in equity included increases from net income of ~~$48.4~~$65.1 million, partially offset by the issuance of a common stock ~~pursuant to the FBPB and Freedom Bank acquisitions of $62.2~~dividend totaling $7.2 million and ~~an increase~~the decrease in accumulated other comprehensive income of ~~$14.8~~$10.6 million primarily attributed to the ~~increase~~decrease in market value of available-for-sale debt securities. ~~These increases were partially offset by a $16.9 million decrease from the adoption of CECL.~~

The ratio of shareholders’ equity to period end total assets was ~~13.25%~~12.69% and ~~13.87%~~13.55% at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The ratio of tangible shareholders’ equity to tangible assets was ~~10.67%~~10.43% and ~~11.05%~~11.01% at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The decrease was due to growth in the balance sheet, the result of bank acquisitions, PPP loans and associated liquidity.

Activity in shareholders’ equity for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 follows:


(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020
Beginning balance at December 31, 2019 and 2018		$	985,639	$	864,267
Beginning balance at December 31, 2020 and 2019						Beginning balance at December 31, 2020 and 2019	$	1,130,402	$	985,639
Net income	Net income	48,417		71,563		Net income	65,129		25,789
Cumulative change in accounting principle upon adoption of new accounting pronouncement	Cumulative change in accounting principle upon adoption of new accounting pronouncement	(16,876)		—		Cumulative change in accounting principle upon adoption of new accounting pronouncement	—		(16,876)
Issuance of stock pursuant to acquisitions		62,152		—
Issuance of stock pursuant to acquisition						Issuance of stock pursuant to acquisition	—		21,031
Stock compensation, net of Treasury shares acquired	Stock compensation, net of Treasury shares acquired	4,251		3,477		Stock compensation, net of Treasury shares acquired	4,631		2,191
Change in other comprehensive income		14,758		23,371
Ending balance at September 30, 2020 and 2019		$	1,098,341	$	962,678
Issuance of common share dividend						Issuance of common share dividend	(7,246)		—
Change in accumulated other comprehensive income						Change in accumulated other comprehensive income	(10,569)		12,829
Ending balance at June 30, 2021 and 2020						Ending balance at June 30, 2021 and 2020	$	1,182,347	$	1,030,603

Capital ratios are well above regulatory requirements for well-capitalized institutions. Seacoast management's use of risk-based capital ratios in its analysis of the Company’s capital adequacy are “non-GAAP” financial measures. Seacoast 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 (see ~~“Note I~~“Note J – Equity ~~Capital”~~Capital”).


September 30, 2020		Seacoast (Consolidated)	Seacoast Bank	Minimum to be Well- Capitalized1
June 30, 2021					June 30, 2021	Seacoast (Consolidated)	Seacoast Bank	Minimum to be Well- Capitalized1
Total Risk-Based Capital Ratio	Total Risk-Based Capital Ratio	17.98%	16.84%	10.00%	Total Risk-Based Capital Ratio	19.21%	17.60%	10.00%
Tier 1 Capital Ratio	Tier 1 Capital Ratio	16.88%	15.74%	8.00%	Tier 1 Capital Ratio	18.30	16.69	8.00
Common Equity Tier 1 Ratio (CET1)	Common Equity Tier 1 Ratio (CET1)	15.60%	15.74%	6.50%	Common Equity Tier 1 Ratio (CET1)	17.03	16.69	6.50
Leverage Ratio	Leverage Ratio	11.97%	11.16%	5.00%	Leverage Ratio	11.73	10.71	5.00
1For subsidiary bank only.	1For subsidiary bank only.				1For subsidiary bank only.

The Company’s total risk-based capital ratio was ~~17.98%~~19.21% at ~~September~~June 30, ~~2020,~~2021, an increase from December 31, ~~2019’s~~2020’s ratio of ~~15.71%~~18.51%. During the first quarter of 2020, the Company adopted interagency guidance which delays the impact of CECL adoption on capital for two years followed by a ~~three year~~three-year phase-in period. At ~~September~~June 30, ~~2020,~~2021, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was ~~11.16%~~10.71%, well above the minimum to be well capitalized under regulatory guidelines.

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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 ~~$192.8~~$183.7 million of dividends to the Company.

The OCC and the Federal Reserve have policies that encourage banks and bank holding companies to pay dividends from current earnings, and have the general authority to limit the dividends paid by national banks and bank holding companies, respectively, if such payment may be deemed to constitute an unsafe or unsound practice. If, in the particular circumstances, either of these federal regulators determined that the payment of dividends would constitute an unsafe or unsound banking

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practice, either the OCC or the Federal Reserve may, among other things, issue a cease and desist order prohibiting the payment of dividends by Seacoast Bank or us, respectively. The board of directors of a bank holding company must consider different factors to ensure that its dividend level, if any, is prudent relative to the organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may occur before the payment date that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the 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 have issued trust preferred stock. Trust preferred securities from acquisitions were recorded at fair value when acquired. All trust preferred securities are guaranteed by the Company on a junior subordinated basis. The Federal Reserve’s rules permit qualified trust preferred securities and other restricted capital elements to be included under Basel III capital guidelines, with limitations, and net of goodwill and intangibles. The Company believes that its trust preferred securities qualify under these revised regulatory capital rules and believes that it can treat all ~~$71.3~~$71.5 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 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 on loans;

•acquisition accounting and purchased loans;

•intangible assets and impairment testing;

•other fair value adjustments;

•~~credit losses on AFS~~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 and Provision for Credit Losses on Loans– Critical Accounting Policies and Estimates

~~On January 1, 2020, the Company adopted ASC Topic 326 -~~Table of Contents

~~Financial Instruments - Credit Losses,~~
~~which replaces 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.

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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.

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.

A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a troubled debt restructuring ("TDR"). The allowance for credit losses on ~~a TDR~~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 ~~minimums.~~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~~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~~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 ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

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

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(“PCD”) when they have experienced more-than-insignificant deterioration in credit quality since origination. An allowance for

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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 mortgage 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. Core deposit intangibles are amortized on a straight-line basis, and are evaluated for indications of potential impairment at least annually. Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis. The Company performed an annual impairment test of goodwill, as required by ASC Topic 350, Intangibles—Goodwill and Other, in the fourth quarter of ~~2019. Seacoast conducted the test internally, documenting the impairment test results,~~2020, and concluded that no impairment ~~occurred.~~existed.

~~As a result of recent volatility in~~Fair value estimates for acquired assets and assumed liabilities are based on the ~~financial markets~~information available, and ~~overall decline in bank stock valuations since~~are subject to change for up to one year after the ~~onset~~closing date of the ~~COVID-19 pandemic, management performed a qualitative assessment~~acquisition as additional information relative to determine whether a triggering event had occurred that would indicate goodwill impairment. At September 30, 2020, the Company determined that no triggering event had occurred which would require a full interim goodwill impairment test. In the event of a sustained decline in share price or further deterioration in the macroeconomic outlook, continued assessments of the Company's goodwill balance will likely be required in future periods. Any impairment charge would not affect the Company’s regulatory capital ratios, tangible common equity ratio or liquidity position.closing date fair values becomes available.

Other Fair Value Measurements – Critical Accounting Policies and Estimates

~~“As Is” values are used to measure~~The fair ~~market~~ value ~~on impaired~~of collateral-dependent loans, OREO and repossessed ~~assets. All impaired 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 ~~“As Is”~~ 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 impaired~~Collateral-dependent loans are loans where repayment is solely dependent on the liquidation of the collateral or operation of the collateral for repayment. ~~If an updated assessment is deemed necessary and an internal valuation cannot be made, an external “As Is” appraisal~~

The Company holds 11,330 shares of Visa Class B stock, which, following resolution of Visa litigation, will be ~~requested. Upon receipt~~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 ~~the “As Is” appraisal~~Class A stock for each share of Class B stock for a ~~charge-off~~total of 18,386 shares of Visa Class A stock. The ownership of Visa stock is ~~recognized for the difference between the loan amount and its current fair market value.~~

~~The fair value of the available-for-sale portfolio at September 30, 2020 was greater than historical amortized cost, resulting~~related to prior ownership in ~~net unrealized gains of $25.0 million that have been included in accumulated other comprehensive income~~Visa's network while Visa operated as a ~~component~~cooperative, and is recorded on the Company's financial records at a zero basis.

Impairment of shareholders’ equity (net of taxes). The Company made no change to the valuation techniques used to determine the fair values of securities during 2020 or 2019. The fair value of each security available-for-sale was obtained from independent pricing sources utilized by many financial institutions or from dealer quotes. The fair value of many state and municipal securities are not readily available through market sources, so fair value estimates are based on quoted market price or prices of similar instruments. Generally, the Company obtains one price for each security. However, actual values can only be determined in an arms-length transaction between a willing buyer and seller that can, and often do, vary from these reported values. Furthermore, significant changes in recorded values due to changes in actual and perceived economic conditions can occur rapidly, producing greater unrealized losses or gains in the available-for-sale portfolio.

~~Credit Losses on AFS~~ Debt Securities – Critical Accounting Policies and Estimates

~~As part of the adoption of ASC Topic 326, the Company replaced the other than temporary impairment model with an approach that requires~~Expected credit losses ~~to be presented~~on both held-to-maturity (“HTM”) and available-for-sale (“AFS”) securities are recognized through a valuation allowance. For HTM securities, management estimates expected credit losses over the remaining expected life and recognizes this estimate as an allowance ~~rather~~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 ~~when management does~~of the amortized cost basis. Declines in the fair value of AFS securities that are not ~~intend to sell or believes they will not be required to sell before recovery.~~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,

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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.

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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.

For AFS debt securities where a credit loss has been identified, the Company records this loss through an allowance for credit losses. This allowance is limited to the amount that the security's amortized cost exceeds its fair value. If the fair value of the security increases in subsequent periods or changes in factors used within the credit loss assessments result in a change in the estimated credit loss, the Company would reflect the change by decreasing the allowance for credit losses.

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 ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had no significant accruals for contingent liabilities and had no known pending matters that could potentially be significant.

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 their 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~~twelve-month period is subjected to instantaneous changes in market rates of 100 basis point increases up to 200 basis points of change 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 ~~October~~July 1, ~~2020,~~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			% Change in Projected Baseline Net
Change in Interest Rates	Change in Interest Rates	Interest Income		Change in Interest Rates	Interest Income
		1-12 months	13-24 months		1-12 months	13-24 months
+2.00%	+2.00%	9.25%	15.22%	+2.00%	14.0%	18.0%
+1.00%	+1.00%	4.78%	8.06%	+1.00%	6.9%	9.2%
Current	Current	0.00%	0.00%	Current	—%	—%
-1.00%	-1.00%	(6.24)%	(11.67)%	-1.00%	(1.4%)	(7.1%)

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 ~~29.2%~~31.6% at ~~September~~June 30, ~~2020.~~2021. This result includes assumptions for core deposit re-pricing validated for the Company by an independent third party consulting group.

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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.

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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 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.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Management’s discussion and analysis “Interest Rate Sensitivity.”

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, or “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 Company’s Asset/Liability Committee, or “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. 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.

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 EVE modeling. 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 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.


						% Change in
Change in Interest Rates						Economic Value of
						Equity
+2.00%						26.7%
+1.00%						14.2%
Current						—%
-1.00%						(14.4%)

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% Change in
Change in Interest Rates Economic Value of
Equity
+2.00% 30.20%
+1.00% 16.70%
Current 0.00%
-1.00% (22.90)%

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.

Item 4. CONTROLS AND PROCEDURES

The Company’s management, with the participation of its chief executive officer and chief financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of ~~September~~June 30, ~~2020~~2021 and concluded that those disclosure controls and procedures are effective.

During the quarter ended ~~September~~June 30, ~~2020,~~2021, there have been no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.There has been no significant impact to internal controls over financial reporting as a result of the COVID-19 pandemic. The Company is continually monitoring and assessing changes in processes and activities to determine any potential impact on the design and operating effectiveness of internal controls over financial reporting.

Part II OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should consider the factors discussed in “Part I, Item 1A. Risk Factors” in our report on Form 10-K for the year ended December 31, ~~2019,~~2020, which could materially affect our business, financial condition and prospective results. The risks described in this report, in our Form 10-K or our other SEC filings are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. ~~The following~~There have been no material changes with respect to the risk factors ~~have been included~~disclosed in ~~this Quarterly~~our Annual Report on ~~Form 10-Q in response to~~form 10-K for the ~~global market disruptions that have resulted from the COVID-19 pandemic.~~year ended December 31, 2020.

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

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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 global 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, many of the risk factors identified in the “Risk Factors” section included in our Annual Report on Form 10-K for the year ended December 31, 2019 could be exacerbated and such effects 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 addition, we have unfunded commitments to extend credit to customers. During a challenging economic environment like now, our customers are more dependent on our credit commitments and increased borrowings under these commitments could adversely impact our liquidity.

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 made, and those loans are subject to regulatory requirements that require forbearance of loan payments for a specified time, or that 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 of banking regulators, we have offered deferrals of principal and interest payments to certain borrowers 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 response of governmental and nongovernmental authorities. In recent months, the COVID-19 pandemic has significantly increased economic and demand uncertainty 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 have 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. The future effects of the COVID-19 pandemic on economic activity could negatively affect the future banking products we provide, including a decline in loan originations.

~~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 from their homes to have our operations uninterrupted as much as possible. Further, 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

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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.

Moreover, we rely on many third parties in our business operations, including the appraisers of real property collateral, vendors that supply essential services such as loan servicers, providers of financial information, systems and analytical tools and providers of electronic payment and settlement systems, and local and federal government agencies, offices, and courthouses. In light of the developing measures responding to the COVID-19 pandemic, many of these entities may limit the availability and access of their services. For example, loan origination could be delayed due to the limited availability of real estate appraisers for the collateral. Loan closings could be delayed related to reductions in available staff in recording offices or the closing of courthouses in certain counties, which slows the process for title work, mortgage and UCC filings in those counties. If the third-party service providers continue to have limited capacities for a prolonged period or if additional limitations or potential disruptions in these services materialize, it may negatively affect our operations.

~~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 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.

Through the third quarter of 2020, we have continued to recognize interest income for loans on deferred payment status. 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 could materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels.

~~Liquidity and Litigation Risk~~. Federal, state and local governments have mandated or encouraged financial services companies to make accommodations to borrowers and other customers 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.~~ In addition to the potential effects from negative economic conditions noted above, the Company instituted a program to help customers financially impacted by the COVID-19 pandemic. This program includes waiving certain fees and charges and offering payment deferment and other loan relief, as appropriate, for customers impacted by the COVID-19 pandemic. The Company’s liquidity could be negatively impacted if a significant number of customers apply and are approved for the deferral of payments. In addition, if these deferrals are not effective in mitigating the effect of the COVID-19 pandemic on the Company’s customers, it may adversely affect its business and results of operations more substantially over a longer period of time. In addition, a significant amount of the loan growth the Company experienced during the second quarter was a direct result of PPP loans, and such growth did not continue in the third quarter of 2020. Furthermore, since the inception of the PPP, several banks have been subject to recent 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

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costly, regardless of outcome. Any financial liability, litigation costs or 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 Attorney Generals 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.

~~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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Issuer purchases~~During the six month period ended June 30, 2021, the Company repurchased shares of ~~equity~~its common stock as indicated in the following table:


Period	Total Number of Shares Purchased1	Average Price Paid Per Share		Total Number of Shares Purchased as part of Public Announced Plan	Maximum Value of Shares that May Yet be Purchased Under the Plan (in thousands)
1/1/21 to 1/31/21	4,776	$	29.45	—	$	100,000
2/1/21 to 2/28/21	—	—		—	100,000
3/1/21 to 3/31/21	10,127	36.90		—	100,000
Total - 1st Quarter	14,903	$	34.51	—	$	100,000
4/1/21 to 4/30/21	44,152	36.52		—	100,000
5/1/21 to 5/31/21	45	37.07		—	100,000
6/1/21 to 6/30/21	—	—		—	100,000
Total - 2nd Quarter	44,197	$	36.52	—	$	100,000




Year to Date 2021	59,100	$	36.01	—	$	100,000
1Shares purchased from January 1, 2021 through June 30, 2021 represent shares surrendered to the Company to satisfy tax withholding related to the exercise of stock options and the vesting of share-based awards.

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 ~~during~~laws and may be made from time to time in the ~~first nine months~~open market, by block purchase or by negotiated transactions. The amount and timing of ~~2020, entirely related~~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 ~~equity incentive plan activity, were as follows:~~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 June 30, 2021, no shares of the Company's common stock had been repurchased under the program.

Period Total
Number of
Shares
Purchased Average Price
Paid Per Share
Total Number of
Shares Purchased
as part of Public
Announced Plan1
Maximum
Number of
Shares that May
yet be Purchased
Under the Plan
1/1/20 to 1/31/20 1,114 $ 25.79 343,340 71,660
2/1/20 to 2/29/20 1,199 23.66 344,539 70,461
3/1/20 to 3/31/20 1,735 17.39 346,274 68,726
Total - 1st Quarter 4,048 $ 21.56 346,274 68,726
4/1/20 to 4/30/20 1,509 21.35 347,783 67,217
5/1/20 to 5/31/20 1,688 20.66 349,471 65,529
6/1/20 to 6/30/20 1,812 19.38 351,283 63,717
Total - 2nd Quarter 5,009 $ 20.40 351,283 63,717
7/1/20 to 7/31/20 2,030 17.94 353,313 61,687
8/1/20 to 8/31/20 1,874 19.23 355,187 59,813
9/1/20 to 9/30/20 2,185 17.13 357,372 57,628
Total - 3rd Quarter 6,089 $ 18.05 357,372 57,628
Year to Date 2020 15,146 $ 19.77 357,372 57,628
1The plan to purchase equity securities totaling 165,000 was approved on September 18, 2001, with no expiration date. An additional 250,000 shares were added to the plan and approved on May 20, 2014.

Item 3. Defaults upon Senior Securities

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None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits


			Exhibit 2.1 Agreement and Plan of Merger Dated ~~January~~March 23, ~~2020~~2021 by and among the Company, Seacoast Bank, ~~Fourth Street Banking Company~~ and ~~Freedom~~Legacy Bank of Florida incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed ~~January 29, 2020.~~March 26, 2021.

			Exhibit 2.2 Amended and Restated Agreement and Plan of Merger Dated June 14, 2021 by and among the Company, Seacoast Bank, and Legacy Bank of Florida incorporated herein by reference from Appendix A to the Company’s Form S-4/A, filed June 14, 2021

			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 8K, filed May 30, 2018.

			Exhibit 3.2 Amended and Restated By-laws of the Company Incorporated herein by reference from Exhibit ~~3.2~~3.1 to the Company’s Form 8-K, filed ~~December 21, 2007.~~October 26, 2020.

			Exhibit 10.1 Employment AgreementDated April 19, 2021, by and between Juliette P. Kleffel, Seacoast National Bank and Seacoast Banking Corporation of Florida incorporated herein by reference from Exhibit 10.1 to the Company’s 8-K filed April 20, 2021.



			Exhibit 31.1			Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
			Exhibit 31.2			Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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			Exhibit 32.1			Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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			Exhibit 32.2			Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
			Exhibit 101			The following materials from Seacoast Banking Corporation of Florida’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2020~~2021 formatted in Inline XBRL: (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Shareholders' Equity and (vi) the Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
			Exhibit 104			The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2020,~~2021, formatted in Inline XBRL.

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SIGNATURES

Pursuant to the requirements 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.


			SEACOAST BANKING CORPORATION OF FLORIDA


~~November~~August 5, ~~2020~~2021			/s/ ~~Dennis S. Hudson, III~~Charles M. Shaffer
			~~Dennis S. Hudson, III~~Charles M. Shaffer
			~~Chairman~~President and Chief Executive Officer


~~November~~August 5, ~~2020~~2021			/s/ Tracey L. Dexter
			Tracey L. Dexter
			Executive Vice President and Chief Financial Officer


(in thousands)	December 31, 2019		CECL adoption impact		January 1, 2020
Loans	$	5,198,404	$	(706)	$	5,197,698
Allowance for credit losses	35,154		21,226		56,380
Reserve for unfunded commitments	140		1,837		1,977
Deferred tax assets	16,457		(5,481)		10,976
Retained earnings	195,813		(16,876)		178,937


	Held to Maturity				Available-for-Sale
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in less than one year	$	0	$	0	$	2,096	$	2,107

Due after one year through five years	0		0		10,986		11,612

Due after five years through ten years	0		0		10,118		10,871

Due after ten years	0		0		19,630		20,844

	0		0		42,830		45,434

Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities	207,376		216,000		916,231		939,261

Private mortgage-backed securities and collateralized mortgage obligations	0		0		98,984		100,785

Collateralized loan obligations	0		0		203,834		201,378

Totals	$	207,376	$	216,000	$	1,261,879	$	1,286,858


(In thousands)	Loans Outstanding		% on Payment Deferral
Construction and land development	$	9,359	3%
Commercial real estate - owner-occupied	204,710		18
Commercial real estate - non owner-occupied	344,573		25
Residential real estate	75,885		5
Commercial and financial	61,308		7
Consumer	6,815		4

Totals	$	702,650	13%


	Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
(In thousands, except per share amounts)	2020		2019		2020		2019
Net interest income1	$	65,825	$	67,090	$	205,641	$	198,748
Net income	28,238		27,557		58,824		73,238
EPS - basic	$	0.51	$	0.50	$	1.08	$	1.34
EPS - diluted	0.51		0.50		1.07		1.33
1The provision for credit losses of $1.8 million recorded under CECL at the time of the FBPB acquisition and the $4.6 million recorded under CECL at the time of the Freedom Bank acquisition have been excluded from the pro forma information above, which presents information as if the acquisition had occurred on January 1, 2019, prior to the Company's adoption of CECL.


Customer Relationship Funding
	September 30,			June 30,			March 31,			December 31,			September 30,
(In thousands, except ratios)	2020			2020			2020			2019			2019
Noninterest demand	$	2,400,744		$	2,267,435		$	1,703,628		$	1,590,493		$	1,652,927
Interest-bearing demand	1,385,445			1,368,146			1,234,193			1,181,732			1,115,455
Money market	1,457,078			1,232,892			1,124,378			1,108,363			1,158,862
Savings	655,072			619,251			554,836			519,152			528,214
Time certificates of deposit	1,016,504			1,179,059			1,270,464			1,185,013			1,217,683
Total deposits	$	6,914,843		$	6,666,783		$	5,887,499		$	5,584,753		$	5,673,141

Customer sweep accounts	$	89,508		$	92,125		$	64,723		$	86,121		$	70,414

Noninterest demand deposits as % of total deposits	35		%	34		%	29		%	28		%	29		%


(In thousands)	Loans with Deferrals		Total Loans including Loans with Deferrals		% of Loans with Deferrals
Construction and land development	$	9,359	$	280,610	3%
Commercial real estate - owner-occupied	204,710		1,125,460		18
Commercial real estate - non owner-occupied	344,573		1,394,464		25
Residential real estate	75,885		1,393,396		5
Commercial and financial	61,308		833,083		7
Consumer	6,815		192,216		4

Totals	$	702,650	$	5,219,229	13%


($ in thousands)	Commercial Real Estate		Construction and Land Development		Total		% of Total Loans	Deferred Loans		% of Category Deferred
Office Building	$	727,518	$	12,465	$	739,983	13%	$	134,654	18%
Retail	444,395		21,093		465,488		8	147,214		32
Industrial & Warehouse	366,175		6,266		372,441		6	47,160		13
Other Commercial Property	249,619		25		249,644		4	43,211		17
Healthcare	203,546		21,321		224,867		4	27,797		12
Apartment Building / Condominium	165,855		30,164		196,019		3	15,315		8
Hotel / Motel	132,571		2,866		135,437		2	86,230		64
Vacant Lot	2,661		76,171		78,832		1	6,255		8
1-4 Family Residence - Individual Borrowers	—		63,083		63,083		1	—		—
Convenience Store	55,523		—		55,523		1	14,754		27
Restaurant	46,460		1,796		48,256		1	18,727		39
Church	29,720		—		29,720		1	4,771		16
1-4 Family Residence - Spec Home	—		26,624		26,624		—	—		—
School / Education	21,749		3,093		24,842		—	6,085		24
Agriculture	20,726		—		20,726		—	321		2
Manufacturing Building	18,312		—		18,312		—	59		—
1-4 Family Residence - Builder Lines	22		15,643		15,665		—	—		—
Recreational Property	14,964		—		14,964		—	5,852		39
Other Properties	20,108		—		20,108		—	237		1
Total	$	2,519,924	$	280,610	$	2,800,534	48%	$	558,642	20%


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as part of Public Announced Plan1	Maximum Number of Shares that May yet be Purchased Under the Plan
1/1/20 to 1/31/20	1,114	$	25.79	343,340	71,660
2/1/20 to 2/29/20	1,199	23.66		344,539	70,461
3/1/20 to 3/31/20	1,735	17.39		346,274	68,726
Total - 1st Quarter	4,048	$	21.56	346,274	68,726
4/1/20 to 4/30/20	1,509	21.35		347,783	67,217
5/1/20 to 5/31/20	1,688	20.66		349,471	65,529
6/1/20 to 6/30/20	1,812	19.38		351,283	63,717
Total - 2nd Quarter	5,009	$	20.40	351,283	63,717
7/1/20 to 7/31/20	2,030	17.94		353,313	61,687
8/1/20 to 8/31/20	1,874	19.23		355,187	59,813
9/1/20 to 9/30/20	2,185	17.13		357,372	57,628
Total - 3rd Quarter	6,089	$	18.05	357,372	57,628
Year to Date 2020	15,146	$	19.77	357,372	57,628
1The plan to purchase equity securities totaling 165,000 was approved on September 18, 2001, with no expiration date. An additional 250,000 shares were added to the plan and approved on May 20, 2014.