UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 30, 2018~~March 31, 2019

¨ 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 FL		34994
(Address of Principal Executive Offices)		(Zip Code)

(772) 287-4000

(Registrant’s Telephone Number, Including Area Code)

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 ý 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 ~~and post~~ such files).

Yes ý 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	Accelerated	Non-Accelerated	Small Reporting
Filer x	Filer ¨	Filer ¨	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 ý

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

Common Stock, $0.10 Par Value – ~~47,269,692~~51,413,988 shares as of ~~September 30, 2018~~March 31, 2019

INDEX

SEACOAST BANKING CORPORATION OF FLORIDA



		PAGE #
Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed consolidated ~~balance sheets - September 30, 2018 and December 31, 2017~~	3

	~~Condensed consolidated~~ statements of income – Three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	43

	Condensed consolidated statements of comprehensive income – Three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018	4

	Condensed consolidated balance sheets - March 31, 2019 and ~~2017~~December 31, 2018	5

	Consolidated statements of cash flows – ~~Nine~~Three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	6

	Consolidated statements of shareholders' equity - Three months ended March 31, 2019 and 2018	8

	Notes to condensed consolidated financial statements	8-259

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32-5730

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5756

Item 4.	Controls and Procedures	5857

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	5857

Item 1A.	Risk Factors	5857

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 3.	Defaults upon Senior Securities	5958

Item 4.	Mine Safety Disclosures	5958

Item 5.	Other Information	5958

Item 6.	Exhibits	6260

SIGNATURES		6260

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF INCOME (Unaudited)

~~Seacoast Banking Corporation of Florida and Subsidiaries~~

(In thousands, except share data) September 30, 2018 December 31, 2017
ASSETS

Cash and due from banks $ 101,920
$ 104,039
Interest bearing deposits with other banks 3,174
5,465
Total cash and cash equivalents 105,094
109,504

Time deposits with other banks 9,813
12,553

Debt securities:
Available for sale (at fair value) 923,206
949,460
Held to maturity (fair value: $353,919 at September 30, 2018 and $414,470 at December 31, 2017) 367,387
416,863
Total debt securities 1,290,593
1,366,323

Loans held for sale (at fair value) 16,172
24,306

Loans 4,059,323
3,817,377
Less: Allowance for loan losses (33,865 ) (27,122 )
Loans, net of allowance for loan losses 4,025,458
3,790,255

Bank premises and equipment, net 63,531
66,883
Other real estate owned 4,715
7,640
Goodwill 148,555
147,578
Other intangible assets, net 16,508
19,099
Bank owned life insurance 122,561
123,981
Net deferred tax assets 25,822
25,417
Other assets 102,112
116,590
TOTAL ASSETS $ 5,930,934
$ 5,810,129

LIABILITIES
Deposits $ 4,643,510
$ 4,592,720
Securities sold under agreements to repurchase 189,035
216,094
Federal Home Loan Bank (FHLB) borrowings 261,000
211,000
Subordinated debt 70,734
70,521
Other liabilities 33,824
30,130
TOTAL LIABILITIES 5,198,103
5,120,465

SHAREHOLDERS' EQUITY
Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 47,402,935 and outstanding 47,269,692 shares at September 30, 2018, and authorized 60,000,000, issued 47,032,259 and outstanding 46,917,735 shares at December 31, 2017 4,727
4,693
Other shareholders' equity 728,104
684,971
TOTAL SHAREHOLDERS' EQUITY 732,831
689,664
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,930,934
$ 5,810,129



	Three Months Ended March 31,
(In thousands, except per share data)	2019			2018
Interest and fees on loans	$	62,287		$	45,257
Interest and dividends on securities	9,270			9,604
Interest on interest bearing deposits and other investments	918			616
Total Interest Income	72,475			55,477

Interest on deposits	3,873			1,538
Interest on time certificates	4,959			2,179
Interest on borrowed money	2,869			1,998
Total Interest Expense	11,701			5,715

Net Interest Income	60,774			49,762

Provision for loan losses	1,397			1,085

Net Interest Income after Provision for Loan Losses	59,377			48,677

Noninterest income
Other income	12,845			12,398
Securities losses, net	(9		)	(102		)
Total Noninterest Income (Note I)	12,836			12,296

Total Noninterest Expenses (Note I)	43,099			37,164
Income Before Income Taxes	29,114			23,809

Provision for income taxes	6,409			5,782
Net Income	$	22,705		$	18,027

Share Data
Net income per share of common stock
Diluted	$	0.44		$	0.38
Basic	0.44			0.38
Average common shares outstanding
Diluted	52,039			47,688
Basic	51,359			46,952

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)

~~Seacoast Banking Corporation of Florida and Subsidiaries~~

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except share data) 2018 2017 2018 2017
Interest and fees on loans $ 48,713
$ 40,403
$ 140,489
$ 110,503
Interest and dividends on securities 9,807
9,012
29,016
25,971
Interest on interest bearing deposits and other investments 634
664
1,835
1,778
TOTAL INTEREST INCOME 59,154
50,079
171,340
138,252

Interest on deposits 2,097
930
5,623
2,408
Interest on time certificates 2,975
1,266
7,783
2,646
Interest on borrowed money 2,520
2,134
6,403
5,128
TOTAL INTEREST EXPENSE 7,592
4,330
19,809
10,182

NET INTEREST INCOME 51,562
45,749
151,531
128,070

Provision for loan losses 5,774
680
9,388
3,385

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 45,788
45,069
142,143
124,685

Noninterest income
Other income 12,339
11,481
37,506
31,853
Securities losses, net (48 ) (47 ) (198 ) (26 )
TOTAL NONINTEREST INCOME (Note H) 12,291
11,434
37,308
31,827

TOTAL NONINTEREST EXPENSES (Note H) 37,399
34,361
112,809
110,732
INCOME BEFORE INCOME TAXES 20,680
22,142
66,642
45,780

Provision for income taxes 4,358
7,926
15,329
15,962
NET INCOME $ 16,322
$ 14,216
$ 51,313
$ 29,818

SHARE DATA
Net income per share - diluted 0.34
0.32
1.07
0.70
Net income per share - basic 0.35
0.33
1.09
0.72
Cash dividends declared —
—
—
—
Average shares outstanding - diluted 48,029,330
43,792,108
47,903,093
42,298,136
Average shares outstanding - basic 47,205,383
43,151,248
47,108,302
41,626,356



	Three Months Ended March 31,
(In thousands)	2019			2018
Net Income	$	22,705		$	18,027
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale	12,676			(11,022		)
Reclassification of unrealized losses on securities transferred to available for sale upon adoption of new accounting pronouncement	(730		)	—
Amortization of unrealized losses on securities transferred to held to maturity, net	71			115
Reclassification adjustment for losses included in net income	87			—
(Provision) benefit for income taxes	(3,261		)	2,898
Total other comprehensive income (loss)	8,843			(8,009		)
Comprehensive Income	$	31,548		$	10,018

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORTATION OF FLORIDA AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS OF COMPREHENSIVE INCOME~~BALANCE SHEETS (Unaudited)

~~Seacoast Banking Corporation of Florida and Subsidiaries~~

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2018 2017 2018 2017
NET INCOME $ 16,322
$ 14,216
$ 51,313
$ 29,818
Other comprehensive income (loss):
Unrealized (losses) gains on securities available for sale (3,548 ) 1,149
(20,564 ) 9,920
Amortization of unrealized losses on securities transferred to held to maturity, net 108
122
442
365
Reclassification adjustment for gains included in net income —
47
—
26
Income tax effect on other comprehensive (loss) income 919
(503 ) 5,358
(3,964 )
Total other comprehensive (loss) income (2,521 ) 815
(14,764 ) 6,347
COMPREHENSIVE INCOME $ 13,801

$ 15,031
$ 36,549
$ 36,165



(In thousands, except share data)	March 31, 2019			December 31, 2018
Assets
Cash and due from banks	$	98,270		$	92,242
Interest bearing deposits with other banks	105,741			23,709
Total cash and cash equivalents	204,011			115,951

Time deposits with other banks	8,174			8,243

Debt securities:
Securities available for sale (at fair value)	877,549			865,831
Securities held to maturity (fair value $291,340 at March 31, 2019 and $349,895 at December 31, 2018)	295,485			357,949
Total debt securities	1,173,034			1,223,780

Loans held for sale (at fair value)	13,900			11,873

Loans	4,828,441			4,825,214
Less: Allowance for loan losses	(32,822		)	(32,423		)
Loans, net of allowance for loan losses	4,795,619			4,792,791

Bank premises and equipment, net	70,412			71,024
Other real estate owned	11,921			12,802
Goodwill	205,260			204,753
Other intangible assets, net	23,959			25,977
Bank owned life insurance	124,306			123,394
Net deferred tax assets	24,647			28,954
Other assets	128,146			128,117
Total Assets	$	6,783,389		$	6,747,659

Liabilities
Deposits	$	5,605,578		$	5,177,240
Securities sold under agreements to repurchase, maturing within 30 days	148,005			214,323
Federal Home Loan Bank (FHLB) borrowings	3,000			380,000
Subordinated debt	70,874			70,804
Other liabilities	59,508			41,025
Total Liabilities	5,886,965			5,883,392

Shareholders' Equity
Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 51,621,160 and outstanding 51,413,988 shares at March 31, 2019, and authorized 120,000,000, issued 51,514,734 and outstanding 51,361,079 shares at December 31, 2018	5,141			5,136
Other shareholders' equity	891,283			859,131
Total Shareholders' Equity	896,424			864,267
Total Liabilities and Shareholders' Equity	$	6,783,389		$	6,747,659

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

~~Seacoast Banking Corporation of Florida and Subsidiaries~~


	Nine Months Ended September 30,						Three Months Ended March 31,
(In thousands)	2018			2017			2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Flows from Operating Activities
Net income	$	51,313		$	29,818		$	22,705		$	18,027
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	4,691			3,961			1,669			1,568
Amortization of premiums and discounts on securities, net	2,567			2,864			625			742
Amortization of operating lease right-of-use assets							1,025			—
Other amortization and accretion, net	185			(346		)	(810		)	(406		)
Stock based compensation	5,603			3,787			2,129			1,454
Origination of loans designated for sale	(225,929		)	(164,878		)	(54,034		)	(78,156		)
Sale of loans designated for sale	239,316			161,587			54,813			83,459
Provision for loan losses	9,388			3,385			1,397			1,085
Deferred income taxes	5,675			15,077			1,216			4,707
Losses on sale of securities	—			26			87			—
Gains on sale of loans	(7,752		)	(5,160		)	(1,819		)	(1,884		)
Gains on sale and write-downs of other real estate owned	(12		)	(657		)	(187		)	1
Losses on disposition of fixed assets	216			1,973			(208		)	(4		)
Changes in operating assets and liabilities, net of effects from acquired companies:
Net decrease (increase) in other assets	17,281			(419		)
Net increase (decrease) in other liabilities	3,644			(2,575		)
Net decrease in other assets							2,069			2,234
Net decrease in other liabilities							(10,594		)	(273		)
Net cash provided by operating activities	106,186			48,443			20,083			32,554

CASH FLOWS FROM INVESTING ACTIVITIES
Cash Flows from Investing Activities
Maturities and repayments of debt securities available for sale	107,728			176,978			18,261			27,296
Maturities and repayments of debt securities held to maturity	48,945			64,984			8,830			16,085
Proceeds from sale of debt securities available for sale	—			7,525			35,048			—
Purchases of debt securities available for sale	(104,650		)	(223,805		)	—			(72,311		)
Purchases of debt securities held to maturity	—			(67,563		)
Maturities of time deposits with other banks	2,740			2,682			69			—
Net new loans and principal repayments	(225,570		)	(277,142		)	(3,141		)	(84,063		)
Purchase of loans held for investment	(19,541		)	(55,352		)
Proceeds from the sale of portfolio loans	—			74,211
Proceeds from the sale of other real estate owned	9,260			5,123
Proceeds from sale of other real estate owned							1,572			3,300
Proceeds from sale of FHLB and Federal Reserve Bank Stock	28,751			29,984			22,057			10,540
Purchase of FHLB and Federal Reserve Bank Stock	(33,681		)	(32,398		)	(9,749		)	(13,027		)
Purchase of VISA Class B stock	—			(6,180		)
Proceeds from sale of Visa Class B stock							—			21,333
Redemption of bank owned life insurance	4,232			—			12,378			4,232
Purchase of bank owned life insurance	—			(30,000		)
Net cash from bank acquisition	—			30,225
Additions to bank premises and equipment	(3,557		)	(4,247		)	(849		)	(1,288		)
Net cash used in investing activities	(185,343		)	(304,975		)
Net cash provided by (used in) investing activities							84,476			(87,903		)

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

~~Seacoast Banking Corporation of Florida and Subsidiaries~~


	Nine Months Ended September 30,						Three Months Ended March 31,
(In thousands)	2018			2017			2019			2018
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Flows from Financing Activities
Net increase in deposits	$	50,790		$	304,005		$	428,338		$	126,823
Net decrease in federal funds purchased and repurchase agreements	(27,059		)	(62,049		)	(66,318		)	(42,845		)
Net increase (decrease) in FHLB borrowings	50,000			(26,000		)
Issuance of common stock, net of related expense	—			55,641
Net decrease in FHLB borrowings							(377,000		)	(3,000		)
Stock based employee benefit plans	1,016			569			(1,519		)	726
Dividends paid	—			—			—			—
Net cash provided by financing activities	74,747			272,166
Net increase (decrease) in cash and cash equivalents	(4,410		)	15,634
Net cash (used in) provided by financing activities							(16,499		)	81,704
Net increase in cash and cash equivalents							88,060			26,355
Cash and cash equivalents at beginning of period	109,504			109,644			115,951			109,504
Cash and cash equivalents at end of period	$	105,094		$	125,278		$	204,011		$	135,859

Supplemental disclosure of cash flow information:
Cash paid during the period for interest							$	11,422		$	5,533
Cash paid during the period for taxes							—			1,200
Initial recognition of operating lease right-of-use assets							29,077			—
Initial recognition of operating lease liabilities							33,403			—

Supplemental disclosure of non cash investing activities:
Transfer of debt securities from held to maturity to available for sale							$	52,796		$	—
Transfers from loans to other real estate owned	4,271			448			430			3,919
Transfers from bank premises to other real estate owned	2,052			1,212			—			2,030
Transfers from loans held for investment to loans held for sale	—			5,664

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)



													Accumulated Other
	Common Stock			Paid-in			Retained			Treasury			Comprehensive
(In thousands)	Shares	Amount		Capital			Earnings			Stock			Income (Loss), Net			Total
Balance at December 31, 2017	46,918	$	4,693	$	661,632		$	29,913		$	(2,359	)	$	(4,216	)	$	689,663
Comprehensive income	—	—		—			18,027			—			(8,009		)	10,018
Reclassification of unrealized losses on equity investment upon adoption of new accounting pronouncement	—	—		—			(115		)	—			115			—
Stock based compensation expense	—	—		1,455			—			—			—			1,455
Common stock issued for stock based employee benefit plans	3	—		(2		)	—			80			—			78
Common stock issued for stock options	62	5		642			—			—			—			647
Three months ended March 31, 2018	65	5		2,095			17,912			80			(7,894		)	12,198
Balance at March 31, 2018	46,983	$	4,698	$	663,727		$	47,825		$	(2,279	)	$	(12,110	)	$	701,861



												Accumulated Other
	Common Stock			Paid-in			Retained		Treasury			Comprehensive
(In thousands)	Shares	Amount		Capital			Earnings		Stock			Income (Loss), Net			Total
Balance at December 31, 2018	51,361	$	5,136	$	778,501		$	97,074	$	(3,384	)	$	(13,060	)	$	864,267
Comprehensive income	—	—		—			22,705		—			8,843			31,548
Stock based compensation expense	—	—		2,129			—		—			—			2,129
Common stock issued for stock based employee benefit plans	49	5		(14		)	—		(1,575		)	—			(1,584		)
Common stock issued for stock options	4	—		64			—		—			—			64
Three months ended March 31, 2019	53	5		2,179			22,705		(1,575		)	8,843			32,157
Balance at March 31, 2019	51,414	$	5,141	$	780,680		$	119,779	$	(4,959	)	$	(4,217	)	$	896,424

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Seacoast Banking Corporation of Florida and Subsidiaries~~

Note A – Basis of Presentation

Basis of ~~Presentation~~

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 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. generally accepted accounting principles 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 months ended ~~September 30, 2018~~March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2018~~2019 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, ~~2017. Certain prior period amounts have been reclassified to conform to the current period presentation.~~2018.

Adoption of new accounting ~~pronouncements~~

pronouncements:On January 1, ~~2018, we~~2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) ~~2014-9, “Revenue from Contracts with Customers,”~~2016-02, “Leases”, and all the related amendments (collectively, “ASC 606”) using the modified retrospective approach applied to all contracts in place at that date. Adoption had no material impact on the Company’s consolidated financial statements including no change to the amount or timing of revenue recognized for contracts within the scope of the new standard. Activity in the scope of the new standard includes:

~~Service Charges on Deposits: Seacoast National Bank ("Seacoast Bank") offers~~Accounting Standards Codification “ASC” Topic 842) through a variety of deposit-related services to its customers through several delivery channels including branch offices, ATMs, telephone, mobile, and internet banking. Transaction-based fees are recognized when services, each of which represents a performance obligation, are satisfied. Service fees may be assessed monthly, quarterly, or annually; however, the account agreements to which these fees relate can be cancelled at any time by Seacoast and/or the customer. Therefore, the contract term is considered a single day (a day-to-day contract).cumulative-effect adjustment.

~~Trust Fees~~: The ~~Company earns trust fees from fiduciary services provided~~new guidance requires a lessee to ~~trust customers which include custody of~~recognize at the transition date right-of-use assets ~~recordkeeping, collection~~("ROUA") and ~~distribution of funds. Fees are earned over time and accrued monthly as~~lease liabilities for all operating leases. Upon adoption, the Company ~~provides services,~~recognized ROUAs of $29 million and lease liabilities of $33 million. Operating lease liabilities are ~~generally assessed~~measured based on the ~~market~~present value of lease payments over the ~~trust~~lease term. At the transition date, ROUA was determined by adjusting lease liabilities for the carrying balances of deferred rent under ASC Topic 840 Leases, cease-use liabilities under ASC Topic 420 Exit or Disposal Cost Obligations, and assets and liabilities recognized under ~~management at a particular date or over a particular period.~~ASC Topic 805

Business Combinations for acquired operating leases, which aggregated to $4 million.

~~Brokerage Commissions and Fees: The Company earns commissions and fees from investment brokerage services provided to its customers through~~We determine if an arrangement ~~with~~is a ~~third-party service provider. Commissions received from~~lease at the ~~third-party service provider~~inception of a lease. ROUAs represent our right to use the underlying asset and lease liabilities represent our obligation to make lease payments for the lease term. Operating lease ROUAs and liabilities are ~~recorded monthly~~recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the appropriate term and information available at commencement date in determining the present value of lease payments. The lease term may include options to extend the lease when it is reasonably certain that we will exercise that option. ROUAs and operating lease liabilities are ~~based upon customer activity. Fees are earned~~reported in Other Assets and Other Liabilities, respectively, in the Consolidated Balance Sheet. Lease expense for lease payments is recognized on a straight-line basis over ~~time and accrued monthly as services are provided. The Company acts as an agent in this arrangement and therefore presents~~ the ~~brokerage commissions and fees net of related costs.~~

lease term.

~~Interchange Income: Fees earned on card transactions depend upon the volume of activity, as well as the fees permitted~~The Company elected certain practical expedients offered by the ~~payment network. Such fees are recognized by~~FASB for all classes of leased assets. As a result, the Company ~~upon fulfilling its performance obligation~~has not reassessed whether existing contracts are or contain leases, nor has the Company reassessed the classification of existing leases. The Company elected not to ~~approve~~separate lease and non-lease components and instead accounts for them as a single lease component. The Company also elected to exclude short-term leases from the ~~card transaction.~~

recognition of right-of-use assets and lease liabilities. Therefore, if the lease term is equal to or less than twelve months (including the renewal options that we are reasonably certain to exercise) and we are not reasonably certain to exercise any available purchase options in the lease, we do not apply the new lease accounting guidance for those leases. The Company did not elect the hindsight practical expedient, which allows entities to use hindsight when determining lease term and impairment of right-of-use assets.

On January 1, ~~2018,~~2019, we adopted ASU ~~2016-1, “Financial Instruments – Overall (Subtopic 825-10)~~2017-12 “Derivatives and Hedging" (Topic 815): ~~Recognition and Measurement of Financial Assets and Financial Liabilities.”~~ Targeted Improvements to Accounting for Hedging Activities. Upon adoption, we reclassified ~~$0.1 million of accumulated unrealized loss pertaining~~certain debt securities from held to ~~an equity investment previously classified as~~maturity to available for ~~sale from Accumulated Other Comprehensive Income to Retained Earnings.~~sale. The following table summarizes the impact:

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	January 1, 2019
(In thousands)	Amortized Cost		Net Unrealized Gain (Loss) Reflected in OCI			Fair Value
Private mortgage-backed securities and collateralized mortgage obligations	$	21,526	$	147		$	21,673
Collateralized loan obligations	32,000		(877		)	31,123
Totals	$	53,526	$	(730	)	$	52,796

Use of ~~Estimates~~Estimates: The preparation of these condensed consolidated financial statements ~~required~~requires management to make judgments in the ~~use~~application of certain of its accounting policies that involve significant estimates ~~by management in determining~~and assumptions. We have 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 ~~Company’s~~reported amounts of certain assets, liabilities, revenues and ~~expenses.~~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 loan losses, ~~the valuation of investment securities available for sale,~~acquisition accounting and purchased loans, intangible assets and impairment testing, other fair value adjustments, other than temporary impairment of ~~impaired loans, contingent liabilities, fair value of other real estate owned,~~securities, income taxes and ~~the valuation~~realization of deferred tax ~~assets. Actual results could differ from those estimates.~~assets and contingent liabilities.

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Note B – Recently Issued Accounting Standards, Not Yet Adopted

The following provides a brief description of accounting standards that have been issued but are not yet adopted that could have a material effect on the Company's financial statements:



~~ASU 2016-02,~~ ~~Leases (Topic 842)~~
~~Description~~	~~In February 2016, the FASB amended existing guidance that requires lessees recognize the following for all leases at the commencement date:~~ 1. ~~A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis.~~ 2. ~~A right-of-use specified asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.~~ Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. In July 2018, the FASB issued ASU 2018-11, which provides an additional optional transition method. The additional transition method allows entities to initially apply the new lease standard at the adoption date by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease standard would continue to be in accordance with current GAAP (Topic 840), including disclosures.
~~Date of Adoption~~	~~This amendment is effective for public business entities for reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted.~~
~~Effect on the Consolidated Financial Statements~~	The Company is in the process of evaluating its existing leases, which are primarily operating leases of branch properties and equipment, to determine the amounts to be recognized as right-of-use assets and lease liabilities. The Company will adopt the new standard effective January 1, 2019. The effect of adoption on the Company’s consolidated statements of income is not expected to be material.



ASU 2016-13, Financial Instruments –Credit Losses (Topic 326)
Description	In June 2016, ~~the~~ FASB issued guidance to replace 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 exposures ~~including~~not accounted for as insurance (i.e. loan commitments, standby letters of credit, financial guarantees and other similar ~~instruments.~~ instruments).
Date of Adoption	This amendment is effective for public business entities for reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted only as of annual reporting periods after December 15, 2018, including interim reporting periods within that period.
Effect on the Consolidated Financial Statements	The ~~Company’s~~Company's transition oversight committee is in the process of ~~evaluating and implementing changes to~~validating the credit loss estimation models and related processes. Updates to business processes and the documentation of accounting policy decisions are ongoing. The Company may recognize an increase in the allowance for ~~loan~~credit losses upon adoption, recorded as a one-time ~~effect~~ cumulative adjustment to retained earnings. However, the magnitude of the impact on the Company's consolidated financial statements has not yet been determined. The Company will adopt this accounting standard effective January 1, 2020.

~~Table of Contents~~



ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Description	In January 2017, the FASB amended the existing guidance to simplify the goodwill impairment measurement test by eliminating Step 2. The amendment requires the Company to perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value. Additionally, an entity should consider the tax effects from any tax deductible goodwill on the carrying amount when measuring the impairment loss.
Date of Adoption	This amendment is effective for public business entities for reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted on annual goodwill impairment tests performed after January 1, 2017.
Effect on the Consolidated Financial Statements	The impact to the ~~Company's consolidated financial statements from the adoption of this pronouncement is not expected to be material.~~



~~ASU 2017-08,~~ ~~Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased callable Debt Securities~~
~~Description~~	In March 2017, the FASB issued guidance which requires entities to amortize premiums on certain purchased callable debt securities to their earliest call date. The accounting for purchased callable debt securities held at a discount did not change. Amortizing the premium to the earliest call date generally aligns interest income recognition with the economics of instruments. This guidance requires a modified retrospective approach under which a cumulative adjustment will be made to retained earnings as of the beginning of the period in which it is adopted.
~~Date of Adoption~~	~~The amendments are effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those periods.~~
~~Effect on the Consolidated Financial Statements~~	~~The impact to the Company's consolidated financial statements from the adoption of this pronouncement is not expected to be material.~~



~~ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~
~~Description~~	In August 2017, the FASB provided guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments also simplify the application of the hedge accounting guidance.
~~Date of Adoption~~	~~The amendments are effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those periods.~~
~~Effect on the Consolidated Financial Statements~~	~~The impact to the Company's consolidated financial statements from the adoption of this pronouncement is not expected to be material.~~



~~ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement~~
~~Description~~	On August 28, 2018, the FASB issued ASU 2018-13, which changes the disclosure requirements on fair value measurements in Topic 820. The amendments in this ASU are the result of a broader disclosure project called FASB Concepts Statement, Conceptual Framework for Financial Reporting - Chapter 8: Notes to Financial Statements. The ASU modifies or removes certain existing disclosures, and adds certain new disclosures.
~~Date of Adoption~~	The amendments are effective for public business entities for annual periods beginning after December 15, 2019, including interim periods within those periods. Early adoption is permitted for any eliminated or modified disclosure upon issuance of the ASU.
~~Effect on the Consolidated Financial Statements~~	~~The impact to the Company's~~ consolidated financial statements from the adoption of this pronouncement is not expected to be material.

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~~ months ended ~~September 30, 2018,~~March 31, 2019, options to purchase ~~481,000 and 412,000~~487,000 shares ~~respectively,~~ were antidilutive and ~~not included~~accordingly were excluded in the computation of diluted earnings per share, compared to 274,000 ~~and 191,000, respectively,~~shares for the three ~~and nine~~ months ended ~~September 30, 2017. The dilutive impact of restricted stock and stock options is calculated under the treasury method.~~March 31, 2018.



	Three Months Ended March 31,
(Dollars in thousands, except per share data)	2019		2018
Basic earnings per share
Net income	$	22,705	$	18,027
Average common shares outstanding	51,359		46,952
Net income per share	$	0.44	$	0.38

Diluted earnings per share
Net income	$	22,705	$	18,027
Average common shares outstanding	51,359		46,952
Add: Dilutive effect of employee restricted stock and stock options	680		736
Average diluted shares outstanding	52,039		47,688
Net income per share	$	0.44	$	0.38

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Three Months Ended September 30, Nine Months Ended
September 30,
(Dollars in thousands, except per share data) 2018 2017 2018 2017
Basic earnings per share
Net income $ 16,322
$ 14,216
$ 51,313
$ 29,818
Average common stock outstanding 47,205,383
43,151,248
47,108,302
41,626,356
Net income per share $ 0.35
$ 0.33
$ 1.09
$ 0.72

Diluted earnings per share
Net income $ 16,322
$ 14,216
$ 51,313
$ 29,818
Average common stock outstanding 47,205,383
43,151,248
47,108,302
41,626,356
Add: Dilutive effect of employee restricted stock and stock options 823,947
640,860
794,791
671,780
Average diluted stock outstanding 48,029,330
43,792,108
47,903,093
42,298,136
Net income per share $ 0.34
$ 0.32
$ 1.07
$ 0.70

On February 21, 2017, the Company completed a public offering of 2,702,500 shares of common stock, generating net proceeds to the Company of $55.7 million. In addition, CapGen Capital Group III LP (“CapGen”), in conjunction with the Company’s offering, sold 6,210,000 shares of the Company’s common stock, with no net proceeds to the Company.

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 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018⁽¹⁾are summarized as follows:


	September 30, 2018									March 31, 2019
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		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 Entities	$	7,486	$	114	$	(57	)	$	7,543
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities										$	6,296	$	105	$	(4	)	$	6,397
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	597,689		153		(24,660		)	573,182		528,404		1,777		(6,228		)	523,953
Private mortgage-backed securities and collateralized mortgage obligations	75,485		925		(318		)	76,092		67,206		968		(239		)	67,935
Collateralized loan obligations	223,419		137		(566		)	222,990		243,546		2		(1,809		)	241,739
Obligations of state and political subdivisions	43,951		261		(813		)	43,399		37,105		621		(201		)	37,525
Totals	$	948,030	$	1,590	$	(26,414	)	$	923,206	$	882,557	$	3,473	$	(8,481	)	$	877,549

Debt securities held to maturity
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	$	313,667	$	—	$	(13,557	)	$	300,110
Private mortgage-backed securities and collateralized mortgage obligations	21,720		181		(131		)	21,770
Collateralized loan obligations	32,000		58		(19		)	32,039
Mortgage-backed securities of U.S. Government Sponsored Entities										$	295,485	$	356	$	(4,501	)	$	291,340
Totals	$	367,387	$	239	$	(13,707	)	$	353,919	$	295,485	$	356	$	(4,501	)	$	291,340



	December 31, 2018
(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 Sponsored Entities	$	7,200	$	106	$	(6	)	$	7,300
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	567,753		300		(14,047		)	554,006
Private mortgage-backed securities and collateralized mortgage obligations	55,569		560		(401		)	55,728
Collateralized loan obligations	212,807		1		(3,442		)	209,366
Obligations of state and political subdivisions	39,543		339		(451		)	39,431
Totals	$	882,872	$	1,306	$	(18,347	)	$	865,831

Debt securities held to maturity
Mortgage-backed securities of U.S. Government Sponsored Entities	$	304,423	$	—	$	(7,324	)	$	297,099
Private mortgage-backed securities and collateralized mortgage obligations	21,526		277		(130		)	21,673
Collateralized loan obligations	32,000		—		(877		)	31,123
Totals	$	357,949	$	277	$	(8,331	)	$	349,895

Proceeds from sales of securities during the three months ended March 31, 2019 were $35.0 million, with gross gains of $0.2 million and gross losses of $0.3 million, which are included in "Securities losses, net" for the three months ended March 31, 2019.

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December 31, 2017
(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 Entities $ 9,475
$ 274
$ (5 ) $ 9,744
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities 560,396
1,163
(8,034 ) 553,525
Private mortgage-backed securities and collateralized mortgage obligations 75,152
1,154
(285 ) 76,021
Collateralized loan obligations 263,579
798
(68 ) 264,309
Obligations of state and political subdivisions 45,118
813
(70 ) 45,861
Totals $ 953,720
$ 4,202
$ (8,462 ) $ 949,460

Debt securities held to maturity
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities $ 353,541
$ 802
$ (4,159 ) $ 350,184
Private mortgage-backed securities and collateralized mortgage obligations 22,799
714
(53 ) 23,460
Collateralized loan obligations 40,523
303
—
40,826
Totals $ 416,863
$ 1,819
$ (4,212 ) $ 414,470

~~(1) December 31, 2017 balances in the tables above reflect certain reclassifications between categories.~~

There were no sales of securities during the three and nine month periods ended September 30, 2018. Proceeds from sales of securities during the three month period ended September 30, 2017 were $3.7 million, with gross gains of $15,000 and gross losses of $62,000. Proceeds from sales of securities during the nine month period ended September 30, 2017 were $7.5 million with gross gains of $36,000 and gross losses of $62,000. IncludedAlso included in “Securities ~~(losses)/gains,~~losses, net” for the three ~~and nine month periods~~months ended ~~September 30, 2018,~~March 31, 2019 is an increase of $0.1 million, ~~and~~ ~~$0.2 million,respectively,~~ representing the ~~decline~~change in the value of an investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities.

There were no sales of securities during the three month period ended March 31, 2018. Included in “Securities losses, net” for the three month period ended March 31, 2018, is a $0.1 million decline in the value of the CRA-qualified mutual fund investment.

On January 1, 2019, the Company adopted ASU 2017-12 and subsequently transferred held to maturity debt securities with an amortized cost basis of $53.5 million to available for sale. Those securities had unrealized losses of $0.7 million that was recorded in other comprehensive income on the date of transfer.

At ~~September 30, 2018,~~March 31, 2019, debt securities with a fair value of $~~162.4~~122.3 million were pledged as collateral for United States Treasury deposits, other public deposits and trust deposits. Debt securities with a fair value of $~~189.0~~148.0 million were pledged as collateral for repurchase agreements.

The amortized cost and fair value of debt securities held to maturity and available for sale ~~and held to maturity~~ at ~~September 30, 2018,~~March 31, 2019, 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				Held to Maturity				Available for Sale
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in less than one year	$	—	$	—	$	13,832	$	13,781	$	—	$	—	$	11,288	$	11,268
Due after one year through five years	—		—		79,637		79,582		—		—		102,835		102,588
Due after five years through ten years	32,000		32,039		177,911		177,196		—		—		169,369		168,212
Due after ten years	—		—		3,476		3,373		—		—		3,455		3,593
	32,000		32,039		274,856		273,932		—		—		286,947		285,661
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	313,667		300,110		597,689		573,182		295,485		291,340		528,404		523,953
Private mortgage-backed securities and collateralized mortgage obligations	21,720		21,770		75,485		76,092		—		—		67,206		67,935
Totals	$	367,387	$	353,919	$	948,030	$	923,206	$	295,485	$	291,340	$	882,557	$	877,549

~~Table of Contents~~

The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, using observable market data where available. The tables below indicate the fair value of debt securities with unrealized losses and the period of time for which these losses were outstanding at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.


	September 30, 2018															March 31, 2019
	Less than 12 months					12 months or longer					Total					Less Than 12 Months					12 Months or Longer					Total
(In thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. Government Entities	$	7,543	$	(57	)	$	—	$	—		$	7,543	$	(57	)
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities																$	—	—			$	545	$	(4	)	$	545	$	(4	)
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	456,356		(15,703		)	416,936		(22,514		)	873,292		(38,217		)	80,889		(512		)	496,722		(10,217		)	577,611		(10,729		)
Private mortgage-backed securities and collateralized mortgage obligations	84,026		(251		)	13,836		(197		)	97,862		(448		)	20,061		(230		)	2,038		(9		)	22,099		(239		)
Collateralized loan obligations	255,030		(585		)	—		—			255,030		(585		)	238,777		(1,809		)	—		—			238,777		(1,809		)
Obligations of state and political subdivisions	40,136		(672		)	3,262		(142		)	43,398		(814		)	—		—			12,966		(201		)	12,966		(201		)
Totals	$	843,091	$	(17,268	)	$	434,034	$	(22,853	)	$	1,277,125	$	(40,121	)	$	339,727	$	(2,551	)	$	512,271	$	(10,431	)	$	851,998	$	(12,982	)

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	December 31, 2017															December 31, 2018
	Less than 12 months					12 months or longer					Total					Less Than 12 Months					12 Months or Longer					Total
(In thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. Government Entities	$	1,107	$	(5	)	$	—	$	—		$	1,107	$	(5	)
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities																$	99	$	(1	)	$	642	$	(5	)	$	741	$	(6	)
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	304,723		(2,047		)	413,725		(10,146		)	718,448		(12,193		)	200,184		(2,235		)	623,420		(19,136		)	823,604		(21,371		)
Private mortgage-backed securities and collateralized mortgage obligations	—		—			20,744		(338		)	20,744		(338		)	20,071		(344		)	12,739		(187		)	32,810		(531		)
Collateralized loan obligations	14,933		(68		)	—		—			14,933		(68		)	238,894		(4,319		)	—		—			238,894		(4,319		)
Obligations of state and political subdivisions	5,414		(14		)	5,864		(56		)	11,278		(70		)	19,175		(241		)	9,553		(210		)	28,728		(451		)
Totals	$	326,177	$	(2,134	)	$	440,333	$	(10,540	)	$	766,510	$	(12,674	)	$	478,423	$	(7,140	)	$	646,354	$	(19,538	)	$	1,124,777	$	(26,678	)

The two tables above include debt securities held to maturity that were transferred from available for sale into held to maturity during 2014. Those securities had unrealized losses of $3.1 million at the date of transfer, and at ~~September 30, 2018,~~March 31, 2019, the unamortized balance was ~~$0.8~~$0.6 million. The fair value of those securities in an unrealized loss position for less than twelve months at September 30, 2018 and December 31, 2017 was $53.6 million and $22.9 million, respectively, with unrealized losses of $1.5 million and $0.2 million, respectively. The fair value of those securities in an unrealized loss position for 12 months or more at September 30, 2018 and December 31, 2017 was $14.7 million and $15.3 million, respectively, with unrealized losses of $0.9 million and $0.4 million, respectively.

At ~~September 30, 2018,~~March 31, 2019, the Company had ~~$38.2~~$10.7 million of unrealized losses on mortgage-backed securities and collateralized mortgage obligations of government sponsored entities having a fair value of ~~$873.3~~$577.6 million that were attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for these ~~debt~~ securities are guaranteed by U.S. government agencies and U.S. government-sponsored ~~entities.~~enterprises. Based on ~~our~~the assessment of these mitigating factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

At ~~September 30, 2018, $0.4 million of~~March 31, 2019, the Company had unrealized losses ~~pertained to private label debt securities secured by seasoned collateral~~of $1.8 million on collateralized loan obligations with a fair value of ~~$97.9~~$238.8 million. ~~Management attributes the loss to a combination of factors, including relative changes in interest rates since the time of purchase.~~ The collateral ~~underlying~~for these ~~mortgage investments are 30- and 15-year fixed and adjustable rate mortgage loans with low loan to values, improving subordination, and historically have had minimal foreclosures and losses.~~

~~Table of Contents~~

Based on its assessment of these factors, management believes that the unrealized losses on these holdings are a function of changes in investment spreads and interest rate movements and not changes insecurities is first lien senior secured corporate debt. The Company holds senior tranches rated credit ~~quality.~~A or higher. Management expects to recover the entire amortized cost basis of these securities.

At September 30, 2018, the Company had unrealized losses of $0.6 million on collateralized loan obligations with a fair value of $255.0 million. Management expects to recover the entire amortized cost basis of these securities.

At September 30, 2018, the Company had unrealized losses of $0.8 million on obligations of state and political subdivisions with a fair value of $43.4 million. Management expects to recover the entire amortized cost basis of these securities.

~~As of September 30, 2018,~~March 31, 2019, the Company does not intend to sell debt securities that are in an unrealized loss position and it is not more than likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis. Therefore, management does not consider any investment to be other-than-temporarily impaired at ~~September 30, 2018.~~March 31, 2019.

Included in other assets at March 31, 2019 is $30.9 million of Federal Home Loan Bank and Federal Reserve Bank stock ~~which~~stated at par value. The Company has ~~a par value as of September 30, 2018 and December 31, 2017 of $37.5 million and $32.5 million, respectively. At September 30, 2018, the Company had~~ not identified events or changes in circumstances which may have a significant adverse effect on the fair value of these ~~investments.~~cost method investment securities. Also included in other assets is a ~~$6.1~~$6.3 million investment in a mutual fund carried at fair value.

The Company holds 11,330 shares of Visa Class B stock, which following resolution of ~~pending~~Visa litigation will be converted to Visa Class A shares. Under the current conversion ratio that became effective June 28, 2018, the Company ~~expects to~~would receive 1.6298 shares of Class A stock for each share of Class B stock for a total of ~~18,465~~18,466 shares of Visa Class A stock. Our ownership of ~~these shares~~Visa stock is related to prior ownership in ~~Visa’s~~Visa's network, while Visa operated as a cooperative. ~~The shares are~~This ownership is recorded on our financial records at zero basis.

Note E – Loans

Information pertaining to portfolio loans, purchased credit impaired (“PCI”) loans, and purchased unimpaired loans (“PUL”) is as follows:

September 30, 2018
(In thousands) Portfolio Loans PCI Loans PULs Total
Construction and land development $ 289,449
$ 129
$ 86,679
$ 376,257
Commercial real estate 1,357,721
10,838
358,140
1,726,699
Residential real estate 994,575
1,356
156,709
1,152,640
Commercial and financial 554,627
728
55,600
610,955
Consumer 187,199
—
5,573
192,772
Totals ⁽¹⁾
$ 3,383,571
$ 13,051
$ 662,701
$ 4,059,323

December 31, 2017
(In thousands) Portfolio Loans PCI Loans PULs Total
Construction and land development $ 215,315
$ 1,121
$ 126,689
$ 343,125
Commercial real estate 1,170,618
9,776
459,598
1,639,992
Residential real estate 845,420
5,626
187,764
1,038,810
Commercial and financial 512,430
894
92,690
606,014
Consumer 178,826
—
10,610
189,436
Totals ⁽¹⁾
$ 2,922,609
$ 17,417
$ 877,351
$ 3,817,377

~~(1)~~ ~~Net loan balances as of September 30, 2018 and December 31, 2017 include deferred costs of $15.9 million and $12.9 million for each period, respectively.~~

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	March 31, 2019
(In thousands)	Portfolio Loans		PCI Loans		PULs		Total
Construction and land development	$	308,846	$	153	$	108,566	$	417,565
Commercial real estate	1,478,955		10,393		673,069		2,162,417
Residential real estate	1,077,523		2,575		249,068		1,329,166
Commercial and financial	606,179		667		106,033		712,879
Consumer	195,719		—		10,695		206,414
Totals¹	$	3,667,222	$	13,788	$	1,147,431	$	4,828,441



	December 31, 2018
(In thousands)	Portfolio Loans		PCI Loans		PULs		Total
Construction and land development	$	301,473	$	151	$	141,944	$	443,568
Commercial real estate	1,437,989		10,828		683,249		2,132,066
Residential real estate	1,055,525		2,718		266,134		1,324,377
Commercial and financial	603,057		737		118,528		722,322
Consumer	190,207		—		12,674		202,881
Totals¹	$	3,588,251	$	14,434	$	1,222,529	$	4,825,214

¹Net loan balances as of March 31, 2019 and December 31, 2018 include deferred costs of $17.8 million and $16.9 million for each period, respectively.

The following tables present the contractual delinquency of the recorded investment by class of loans as of:

September 30, 2018
(In thousands) Current
Accruing
30-59 Days
Past Due

Accruing
60-89 Days
Past Due

Accruing
Greater
Than
90 Days
Nonaccrual
Total
Financing
Receivables
Portfolio Loans

Construction and land development $ 289,234
$ —
$ —
$ —
$ 215
$ 289,449
Commercial real estate 1,345,174
3,173
—
—
9,374
1,357,721
Residential real estate 984,874
1,202
104
—
8,395
994,575
Commercial and financial 548,861
2,050
2,521
359
836
554,627
Consumer 185,902
1,119
—
—
178
187,199
Totals 3,354,045
7,544
2,625
359
18,998
3,383,571

Purchased Unimpaired Loans
Construction and land development 86,679
—
—
—
—
86,679
Commercial real estate 355,541
1,181
—
696
722
358,140
Residential real estate 151,125
1,705
124
—
3,755
156,709
Commercial and financial 50,427
4,011
733
—
429
55,600
Consumer 5,568
5
—
—
—
5,573
Totals 649,340
6,902
857
696
4,906
662,701

Purchased Credit Impaired Loans
Construction and land development 129
—
—
—
—
129
Commercial real estate 9,427
—
—
—
1,411
10,838
Residential real estate 552
—
—
—
804
1,356
Commercial and financial 707
—
—
—
21
728
Consumer —
—
—
—
—
—
Totals 10,815
—
—
—
2,236
13,051

Totals $ 4,014,200
$ 14,446
$ 3,482
$ 1,055
$ 26,140
$ 4,059,323

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	December 31, 2017												March 31, 2019
(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total Financing Receivables		Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total Financing Receivables
Portfolio Loans
Construction and land development	$	215,077	$	—	$	—	$	—	$	238	$	215,315	$	308,819	$	—	$	—	$	—	$	27	$	308,846
Commercial real estate	1,165,738		2,605		585		—		1,690		1,170,618		1,471,607		1,016		709		255		5,368		1,478,955
Residential real estate	836,117		812		75		—		8,416		845,420		1,068,869		612		65		—		7,977		1,077,523
Commercial and financial	507,501		2,776		26		—		2,127		512,430		599,068		3,724		1,350		81		1,956		606,179
Consumer	178,676		52		—		—		98		178,826		194,672		529		423		—		95		195,719
Totals	2,903,109		6,245		686		—		12,569		2,922,609
Total Portfolio Loans													3,643,035		5,881		2,547		336		15,423		3,667,222

Purchased Unimpaired Loans
Construction and land development	126,655		34		—		—		—		126,689		108,566		—		—		—		—		108,566
Commercial real estate	457,899		979		—		—		720		459,598		671,195		536		—		—		1,338		673,069
Residential real estate	186,549		128		87		—		1,000		187,764		246,583		1,288		—		428		769		249,068
Commercial and financial	92,315		54		—		—		321		92,690		104,229		—		—		—		1,804		106,033
Consumer	10,610		—		—		—		—		10,610		10,664		—		—		—		31		10,695
Totals	874,028		1,195		87		—		2,041		877,351
Total PULs													1,141,237		1,824		—		428		3,942		1,147,431

Purchased Credit Impaired Loans
Construction and land development	1,121		—		—		—		—		1,121		138		—		—		—		15		153
Commercial real estate	9,352		—		—		—		424		9,776		9,395		—		—		—		998		10,393
Residential real estate	544		642		—		—		4,440		5,626		558		—		—		—		2,017		2,575
Commercial and financial	844		—		—		—		50		894		649		—		—		—		18		667
Consumer	—		—		—		—		—		—		—		—		—		—		—		—
Totals	11,861		642		—		—		4,914		17,417
Total PCI Loans													10,740		—		—		—		3,048		13,788

Totals	$	3,788,998	$	8,082	$	773	$	—	$	19,524	$	3,817,377
Total Loans													$	4,795,012	$	7,705	$	2,547	$	764	$	22,413	$	4,828,441

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	December 31, 2018
(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total Financing Receivables
Portfolio Loans
Construction and land development	$	301,348	$	97	$	—	$	—	$	28	$	301,473
Commercial real estate	1,427,413		3,852		97		141		6,486		1,437,989
Residential real estate	1,044,375		2,524		525		295		7,806		1,055,525
Commercial and financial	594,930		5,186		1,661		—		1,280		603,057
Consumer	189,061		637		326		—		183		190,207
Total Portfolio Loans	3,557,127		12,296		2,609		436		15,783		3,588,251

Purchased Unimpaired Loans
Construction and land development	140,013		1,931		—		—		—		141,944
Commercial real estate	680,060		1,846		—		—		1,343		683,249
Residential real estate	260,781		1,523		—		90		3,740		266,134
Commercial and financial	116,173		342		—		—		2,013		118,528
Consumer	12,643		—		31		—		—		12,674
Total PULs	1,209,670		5,642		31		90		7,096		1,222,529

Purchased Credit Impaired Loans
Construction and land development	135		—		—		—		16		151
Commercial real estate	8,403		1,034		—		—		1,391		10,828
Residential real estate	556		—		—		—		2,162		2,718
Commercial and financial	74		635		—		—		28		737
Consumer	—		—		—		—		—		—
Total PCI Loans	9,168		1,669		—		—		3,597		14,434

Total Loans	$	4,775,965	$	19,607	$	2,640	$	526	$	26,476	$	4,825,214

The ~~Company~~Company's Credit Risk Management also utilizes an internal asset classification system as a means of ~~reporting~~identifying problem and potential problem loans. ~~Under~~The following classifications are used to categorize loans under the ~~Company’s risk rating system, the Company classifies~~internal classification system:

Pass: Loans that are not problem ~~and~~loans or potential problem loans ~~as “Special Mention,” “Substandard,” and “Doubtful” and these loans~~ are ~~monitored on an ongoing basis.~~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~~management's close attention are deemed to be Special Mention. ~~Substandard loans include those characterized by~~

Substandard: Loans with the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans ~~classified as Substandard may require a specific allowance. Loans classified as Doubtful~~that have all the weaknesses inherent in those classified Substandard with the added characteristic that the ~~weaknesses~~weakness present ~~make~~makes collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal onbalance of loans classified as ~~Doubtful is generally~~doubtful are likely to be charged off.

Risk ratings on commercial lending facilities are ~~updated any time~~re-evaluated during the ~~situation warrants.~~

~~Loans that are not problem~~ annual review process at a minimum, based on the size of the aggregate exposure, and/or ~~potential problem loans are considered to be pass-rated loans and risk grades are recalculated at least annually by~~when there is a credit action of the ~~loan relationship manager.~~existing credit exposure. The following tables present the risk category of loans by class ~~of loans~~ based on the most recent analysis performed as ~~of September 30, 2018 and December 31, 2017:~~of:

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	September 30, 2018										March 31, 2019
(In thousands)	Pass		Special Mention		Substandard		Doubtful		Total		Pass		Special Mention		Substandard		Doubtful		Total
Construction and land development	$	364,903	$	6,036	$	5,318	$	—	$	376,257	$	406,010	$	11,262	$	293	$	—	$	417,565
Commercial real estate	1,673,457		24,328		28,914		—		1,726,699		2,080,415		57,732		24,270		—		2,162,417
Residential real estate	1,126,238		2,985		23,417		—		1,152,640		1,304,847		3,953		20,366		—		1,329,166
Commercial and financial	602,973		1,895		6,030		57		610,955		696,837		9,013		7,029		—		712,879
Consumer	189,223		2,900		649		—		192,772		202,187		3,150		1,077		—		206,414
Totals	$	3,956,794	$	38,144	$	64,328	$	57	$	4,059,323	$	4,690,296	$	85,110	$	53,035	$	—	$	4,828,441


	December 31, 2017										December 31, 2018
(In thousands)	Pass		Special Mention		Substandard		Doubtful		Total		Pass		Special Mention		Substandard		Doubtful		Total
Construction and land development	$	328,127	$	10,414	$	4,584	$	—	$	343,125	$	428,044	$	10,429	$	5,095	$	—	$	443,568
Commercial real estate	1,586,932		29,273		23,787		—		1,639,992		2,063,589		41,429		27,048		—		2,132,066
Residential real estate	1,023,925		4,621		10,203		61		1,038,810		1,296,634		3,654		24,089		—		1,324,377
Commercial and financial	593,689		3,237		8,838		250		606,014		707,663		8,387		6,247		25		722,322
Consumer	189,354		—		82		—		189,436		198,367		3,397		1,117		—		202,881
Totals	$	3,722,027	$	47,545	$	47,494	$	311	$	3,817,377	$	4,694,297	$	67,296	$	63,596	$	25	$	4,825,214

PCI Loans

PCI loans are accounted for pursuant to ASC Topic 310-30. The excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the non-accretable difference.

The table below summarizes the changes in accretable yield on PCI loans for the periods ended:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(In thousands)	2018			2017			2018			2017			2019			2018
Beginning balance	$	3,189		$	3,265		$	3,699		$	3,807		$	2,924		$	3,699
Additions	—			—			—			—			—			—
Deletions	—			—			(43		)	(10		)	—			(43		)
Accretion	(284		)	(357		)	(989		)	(1,173		)	(776		)	(443		)
Reclassification from non-accretable difference	—			407			238			691			460			339
Ending balance	$	2,905		$	3,315		$	2,905		$	3,315		$	2,608		$	3,552

Troubled Debt Restructured Loans

The Company’s Troubled Debt Restructuring (“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~~restructured agreements. Most loans prior to modification were classified as impaired and the allowance for loan losses is determined in accordance with Company policy.

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~~The following table presents loans that were modified during the~~ ~~nine~~ ~~months ended:~~

(In thousands)
Number
of
Contracts

Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment

Specific
Reserve
Recorded

Valuation
Allowance
Recorded
September 30, 2018

Commercial and financial 1
$ 98
$ —
$ —
$ —
Totals 1
$ 98
$ —
$ —
$ —
September 30, 2017
Construction and land development 1
$ 52
$ 46
$ 6
$ 6
Residential real estate 1
15
15
—
—
Totals 2
$ 67
$ 61
$ 6
$ 6

~~During the three months ended September 30, 2018, there were no payment defaults on loans modified to a TDR within the previous twelve months.~~ During the ~~nine~~three months ended ~~September 30, 2018, there was one payment default on a loan of $0.1 million that had been~~March 31, 2019, two loans were modified toin a TDR ~~within the previous twelve months, compared to none~~totaling $2.0 million. There were no loans modified in a TDR during the three months ended ~~September 30, 2017 and one~~March 31, 2018. No accruing loans that were restructured within the twelve months preceding March 31, 2019 defaulted during the ~~nine~~twelve months ended ~~September 30, 2017. The~~March 31, 2019.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,

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or has been transferred to other real estate owned. A defaulted TDR is generally placed on nonaccrual and a specific allowance for loan loss is assigned in accordance with the Company’s policy.

Impaired Loans

Loans are considered impaired if they are 90 days or more past due, in nonaccrual status, or are TDRs. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company’s recorded investment in impaired loans, excluding PCI loans, the unpaid principal balance and related valuation allowance was as follows:


	September 30, 2018						March 31, 2019
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
Impaired Loans with No Related Allowance Recorded:
Construction and land development	$	202	$	479	$	—	$	15	$	221	$	—
Commercial real estate	2,896		4,161		—		5,136		6,406		—
Residential real estate	13,698		18,313		—		10,294		14,873		—
Commercial and financial	—		—		—		2,036		3,103		—
Consumer	54		92		—		146		158		—
Impaired Loans with an Allowance Recorded:
Construction and land development	210		224		23		183		197		20
Commercial real estate	12,898		13,025		3,591		9,624		12,791		353
Residential real estate	6,106		6,252		869		5,688		5,820		577
Commercial and financial	1,629		1,608		1,483		2,024		2,020		1,329
Consumer	392		399		172		256		268		91
Total Impaired Loans
Construction and land development	412		703		23		198		418		20
Commercial real estate	15,794		17,186		3,591		14,760		19,197		353
Residential real estate	19,804		24,565		869		15,982		20,693		577
Commercial and financial	1,629		1,608		1,483		4,060		5,123		1,329
Consumer	446		491		172		402		426		91
Totals	$	38,085	$	44,553	$	6,138	$	35,402	$	45,857	$	2,370

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	December 31, 2017						December 31, 2018
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
Impaired Loans with No Related Allowance Recorded:
Construction and land development	$	223	$	510	$	—	$	15	$	229	$	—
Commercial real estate	3,475		4,873		—		3,852		5,138		—
Residential real estate	10,272		15,063		—		13,510		18,111		—
Commercial and financial	19		29		—		1,191		1,414		—
Consumer	105		180		—		280		291		—
Impaired Loans with an Allowance Recorded:
Construction and land development	251		264		23		196		211		22
Commercial real estate	4,780		4,780		195		9,786		12,967		369
Residential real estate	8,448		8,651		1,091		5,537		5,664		805
Commercial and financial	2,436		883		1,050		2,131		2,309		1,498
Consumer	282		286		43		202		211		34
Total Impaired Loans
Construction and land development	474		774		23		211		440		22
Commercial real estate	8,255		9,653		195		13,638		18,105		369
Residential real estate	18,720		23,714		1,091		19,047		23,775		805
Commercial and financial	2,455		912		1,050		3,322		3,723		1,498
Consumer	387		466		43		482		502		34
Totals	$	30,291	$	35,519	$	2,402	$	36,700	$	46,545	$	2,728

Impaired loans also include TDRs where concessions have been granted to borrowers who have experienced financial difficulty. At ~~September 30, 2018~~March 31, 2019 and at December 31, ~~2017,~~2018, accruing TDRs totaled ~~$13.8~~$14.9 million and ~~$15.6~~$13.3 million, respectively.

Average impaired loans for the ~~three months ended September 30, 2018 and 2017 were $38.1 million and $30.3 million, respectively. Average impaired loans for the~~ ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ were ~~$34.5~~$36.3 million and ~~$31.2~~$31.1 million, respectively. The impaired loans were measured for impairment based on the value of underlying collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. The valuation allowance is included in the allowance for loan losses.

Interest payments received on impaired loans are recorded as interest income unless collection of the remaining recorded investment is doubtful, at which time payments received are recorded as reductions in principal. For the three months ended ~~September 30,~~March 31, 2019, and 2018, ~~and 2017,~~ the Company recorded interest income on impaired loans of ~~$0.5~~$0.4 million and $0.4 ~~million, respectively. For the~~ ~~nine months~~ ~~ended September 30, 2018, and 2017, the Company recorded interest income on impaired loans of $1.4 million and $1.1~~ million, respectively.

For impaired loans whose impairment is measured based on the present value of expected future cash flows, interest income represents the change in present value attributable to the passage of time, and totaled ~~$36,000~~$35,000 and ~~$169,000, respectively, for the three months ended September 30, 2018 and 2017 and $157,000 and $282,000, respectively,~~$88,000, for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017.~~respectively.

Note F – Allowance for Loan Losses

Activity in the allowance for loan losses for the ~~three month and~~ ~~nine~~three month periods ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ is summarized as follows:

1920

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	Three Months Ended September 30, 2018															Three Months Ended March 31, 2019
(In thousands)	Beginning Balance		Provision for Loan Losses			Charge- Offs			Recoveries		TDR Allowance Adjustments			Ending Balance		Beginning Balance		Provision for Loan Losses			Charge- Offs			Recoveries		TDR Allowance Adjustments			Ending Balance
Construction & land development	$	2,287	$	(221	)	$	—		$	3	$	—		$	2,069	$	2,233	$	83		$	—		$	4	$	—		$	2,320
Commercial real estate	9,126		4,191			(1		)	18		(16		)	13,318		11,112		625			(16		)	47		(15		)	11,753
Residential real estate	8,850		(1,279		)	(6		)	99		(19		)	7,645		7,775		(414		)	(36		)	139		(19		)	7,445
Commercial and financial	7,102		1,739			(842		)	163		—			8,162		8,585		853			(944		)	79		—			8,573
Consumer	1,559		1,344			(296		)	65		(1		)	2,671		2,718		250			(483		)	247		(1		)	2,731
Totals	$	28,924	$	5,774		$	(1,145	)	$	348	$	(36	)	$	33,865	$	32,423	$	1,397		$	(1,479	)	$	516	$	(35	)	$	32,822


	Three Months Ended September 30, 2017															Three Months Ended March 31, 2018
(In thousands)	Beginning Balance		Provision for Loan Losses			Charge- Offs			Recoveries		TDR Allowance Adjustments			Ending Balance		Beginning Balance		Provision for Loan Losses			Charge- Offs			Recoveries		TDR Allowance Adjustments			Ending Balance
Construction & land development	$	1,574	$	(690	)	$	—		$	728	$	—		$	1,612	$	1,642	$	411		$	—		$	5	$	—		$	2,058
Commercial real estate	9,923		62			(239		)	175		(15		)	9,906		9,285		(575		)	—			147		(15		)	8,842
Residential real estate	7,423		116			(296		)	39		(148		)	7,134		7,131		788			—			200		(72		)	8,047
Commercial and financial	5,460		834			(333		)	28		—			5,989		7,297		270			(198		)	24		—			7,393
Consumer	1,620		358			(442		)	61		(6		)	1,591		1,767		191			(307		)	128		(1		)	1,778
Totals	$	26,000	$	680		$	(1,310	)	$	1,031	$	(169	)	$	26,232	$	27,122	$	1,085		$	(505	)	$	504	$	(88	)	$	28,118

Nine Months Ended September 30, 2018
(In thousands) Beginning Balance Provision for Loan Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance
Construction & land development $ 1,642
$ 414
$ —
$ 13
$ —
$ 2,069
Commercial real estate 9,285
3,826
(15 ) 268
(46 ) 13,318
Residential real estate 7,131
(78 ) (33 ) 733
(108 ) 7,645
Commercial and financial 7,297
3,639
(2,985 ) 211
—
8,162
Consumer 1,767
1,587
(931 ) 251
(3 ) 2,671
Totals $ 27,122
$ 9,388
$ (3,964 ) $ 1,476
$ (157 ) $ 33,865

Nine Months Ended September 30, 2017
(In thousands) Beginning Balance Provision for Loan Losses Charge- Offs Recoveries TDR Allowance Adjustments Ending Balance
Construction & land development $ 1,219
$ (496 ) $ —
$ 891
$ (2 ) $ 1,612
Commercial real estate 9,273
410
(341 ) 613
(49 ) 9,906
Residential real estate 7,483
90
(482 ) 266
(223 ) 7,134
Commercial and financial 3,636
3,036
(837 ) 154
—
5,989
Consumer 1,789
345
(756 ) 221
(8 ) 1,591
Totals $ 23,400
$ 3,385
$ (2,416 ) $ 2,145
$ (282 ) $ 26,232

The allowance for loan losses is ~~composed~~comprised of specific allowances for certain impaired loans and general allowances grouped into loan pools based on similar characteristics. The Company’s loan portfolio, excluding PCI loans, and related allowance at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 is shown in the following tables:



	March 31, 2019
	Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Total
(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction & land development	$	197	$	20	$	417,215	$	2,300	$	417,412	$	2,320
Commercial real estate	14,760		353		2,137,264		11,400		2,152,024		11,753
Residential real estate	15,982		577		1,310,609		6,868		1,326,591		7,445
Commercial and financial	4,061		1,329		708,151		7,244		712,212		8,573
Consumer	402		91		206,012		2,640		206,414		2,731
Totals	$	35,402	$	2,370	$	4,779,251	$	30,452	$	4,814,653	$	32,822



	December 31, 2018
	Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Total
(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction & land development	$	211	$	22	$	443,206	$	2,211	$	443,417	$	2,233
Commercial real estate	13,638		369		2,107,600		10,743		2,121,238		11,112
Residential real estate	19,047		805		1,302,612		6,970		1,321,659		7,775
Commercial and financial	3,322		1,498		718,263		7,087		721,585		8,585
Consumer	482		34		202,399		2,684		202,881		2,718
Totals	$	36,700	$	2,728	$	4,774,080	$	29,695	$	4,810,780	$	32,423

2021

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September 30, 2018
Individually Evaluated for Impairment Collectively Evaluated for Impairment Total
(In thousands)
Recorded
Investment

Associated
Allowance

Recorded
Investment

Associated
Allowance

Recorded
Investment

Associated
Allowance
Construction & land development $ 412
$ 23
$ 375,716
$ 2,046
$ 376,128
$ 2,069
Commercial real estate 15,794
3,591
1,699,743
9,727
1,715,537
13,318
Residential real estate 19,804
869
1,131,519
6,776
1,151,323
7,645
Commercial and financial 1,629
1,483
608,598
6,679
610,227
8,162
Consumer 446
172
192,611
2,499
193,057
2,671
Totals $ 38,085

$ 6,138

$ 4,008,187

$ 27,727

$ 4,046,272

$ 33,865

December 31, 2017
Individually Evaluated for Impairment Collectively Evaluated for Impairment
Total
(In thousands)
Recorded
Investment

Associated
Allowance

Recorded
Investment

Associated
Allowance

Recorded
Investment

Associated
Allowance
Construction & land development $ 474
$ 23
$ 341,530
$ 1,619
$ 342,004
$ 1,642
Commercial real estate 8,255
195
1,621,960
9,090
1,630,215
9,285
Residential real estate 18,720
1,091
1,014,465
6,040
1,033,185
7,131
Commercial and financial 2,455
1,050
602,666
6,247
605,121
7,297
Consumer 387
43
189,049
1,724
189,436
1,767
Totals $ 30,291

$ 2,402

$ 3,769,670

$ 24,720

$ 3,799,961

$ 27,122

Loans collectively evaluated for impairment reported at ~~September 30, 2018~~March 31, 2019 included acquired loans that are not PCI loans. At ~~September 30,~~March 31, 2019, the remaining fair value adjustments for loans acquired was approximately $43.8 million, or approximately 3.8% of the outstanding aggregate PUL balances. At December 31, 2018, the remaining fair value adjustments for loans acquired was approximately ~~$13.4~~$47.0 million, or ~~approximately 2.0% of the outstanding aggregate PUL balances. At December 31, 2017, the remaining fair value adjustments for loans acquired was approximately $19.4 million, or 2.2%~~3.9% of the outstanding aggregate PUL balances. These amounts ~~represent the fair value discount of each PUL and~~ are accreted into interest income over the remaining lives of the related loans on a level yield basis.

The table below summarizes PCI loans that were individually evaluated for impairment based on expected cash flows at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	PCI Loans Individually Evaluated for Impairment								PCI Loans Individually Evaluated for Impairment
(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction & land development	$	129	$	—	$	1,121	$	—	$	153	$	—	$	151	$	—
Commercial real estate	10,838		—		9,776		—		10,393		—		10,828		—
Residential real estate	1,356		—		5,626		—		2,575		—		2,718		—
Commercial and financial	728		—		894		—		667		—		737		—
Consumer	—		—		—		—		—		—		—		—
Totals	$	13,051	$	—	$	17,417	$	—	$	13,788	$	—	$	14,434	$	—

Note G – 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 obligated to provide additional collateral in the event of a significant decline in fair value of collateral pledged. Company securities sold under agreements to repurchase and securities pledged were as follows by collateral type and maturity as of:



(In thousands)	March 31, 2019		December 31, 2018
Fair value of pledged securities - overnight and continuous:
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	$	148,005	$	214,323

Note H – Lease Commitments

The Company is the lessee in various noncancellable operating leases for land, buildings, and equipment. Certain leases contain provisions for variable lease payments that are linked to the consumer price index. Lease cost for the three months ended March 31, 2019 consists of:



	Three Months Ended
(In thousands)	March 31, 2019
Operating lease cost	$	1,405
Variable lease cost	306
Short-term lease cost	229
Sublease income	(128		)
Total lease cost	$	1,812

The following table provides supplemental information related to leases as of and for the three months ended March 31, 2019:

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(In thousands) September 30, 2018 December 31, 2017
Fair-Value of Pledged Securities - overnight and continuous
Mortgage-backed securities and collateralized mortgage
obligations of U.S. Government Sponsored Entities $ 189,035
$ 216,094



(In thousands, except for weighted average data)	March 31, 2019
Operating lease right-of-use assets	$	28,052
Operating lease liabilities	32,270
Cash paid for amounts included in the measurement of operating lease liabilities	1,512
Right-of-use assets obtained in exchange for new operating lease obligations	—
Weighted average remaining lease term for operating leases	9 years
Weighted average discount rate for operating leases	4.69		%

The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If, at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company includes the extended term in the calculation of the lease liability. Maturities of lease liabilities as of March 31, 2019 are as follows:



(In thousands)
Twelve Months Ended March 31,
2020	$	5,902
2021	5,114
2022	4,698
2023	3,907
2024	3,445
Thereafter	17,027
Total undiscounted cash flows	40,093
Less: Net present value adjustment	(7,823		)
Total	$	32,270

Note HI – Noninterest Income and Expense

Detail of noninterest income and expenses for the ~~three and~~ ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ are as follows:

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	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(In thousands)	2018			2017			2018			2017			2019			2018
Noninterest income
Service charges on deposit accounts	$	2,833		$	2,626		$	8,179		$	7,483		$	2,697		$	2,672
Trust fees	1,083			967			3,143			2,764			1,017			1,021
Mortgage banking fees	1,135			2,138			3,873			4,962			1,115			1,402
Brokerage commissions and fees	444			351			1,264			1,079			436			359
Marine finance fees	194			137			1,213			597			362			573
Interchange income	3,119			2,582			9,137			7,747			3,401			2,942
BOLI income	1,078			836			3,200			2,326			915			1,056
SBA gains													636			734
Other income	2,453			1,844			7,497			4,895			2,266			1,639
	12,339			11,481			37,506			31,853			12,845			12,398
Securities losses, net	(48		)	(47		)	(198		)	(26		)	(9		)	(102		)
Totals	$	12,291		$	11,434		$	37,308		$	31,827
Total													$	12,836		$	12,296

Noninterest expense
Salaries and wages	$	17,129		$	15,627		$	48,939		$	49,371		$	18,506		$	15,381
Employee benefits	3,205			2,917			9,320			8,920			4,206			3,081
Outsourced data processing costs	3,493			3,231			10,565			9,956			3,845			3,679
Telephone/data lines	624			573			1,879			1,753			811			612
Occupancy	3,214			2,447			9,647			10,025			3,807			3,117
Furniture and equipment	1,367			1,191			4,292			4,261			1,757			1,457
Marketing	1,139			1,298			3,735			3,294			1,132			1,252
Legal and professional fees	2,019			2,560			6,293			7,968			2,847			1,973
FDIC assessments	431			548			1,624			1,768			488			598
Amortization of intangibles	1,004			839			2,997			2,397			1,458			989
Net (gain)/loss and disposition expense on other real estate owned	(136		)	(297		)	461			(293		)
Foreclosed property expense and net (gain)/loss on sale													(40		)	192
Other	3,910			3,427			13,057			11,312			4,282			4,833
Total	$	37,399		$	34,361		$	112,809		$	110,732		$	43,099		$	37,164

Note IJ – Equity Capital

The Company is well capitalized and at ~~September 30, 2018,~~March 31, 2019, the Company and the Company’s principal banking subsidiary, Seacoast Bank, exceeded the common equity Tier 1 capital ratio (CET1) 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 K – Contingent Liabilities

~~Table of Contents~~

~~Note J – Contingencies~~

The Company and its subsidiaries, because of the nature of their ~~businesses,~~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 ~~material~~materially adverse effect on the Company’s consolidated financial condition, or operating results or cash ~~flows, although no assurance can be given with respect to the ultimate outcome of any such claim or litigation.~~flows.

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 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 included:

Table of Contents

(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, 2018

Available for sale debt securities ⁽¹⁾
$ 923,206
$ 99
$ 923,107
$ —
Loans held for sale ⁽²⁾
16,172
—
16,172
—
Loans ⁽³⁾
7,268
—
2,255
5,013
Other real estate owned ⁽⁴⁾
4,715
—
64
4,651
Equity securities ⁽⁵⁾
6,145
6,145
—
—

December 31, 2017
Available for sale debt securities ⁽¹⁾⁽⁵⁾
$ 949,460
$ 100
$ 949,360
$ —
Loans held for sale ⁽²⁾
24,306
—
24,306
—
Loans ⁽³⁾
4,192
—
3,454
738
Other real estate owned ⁽⁴⁾
7,640
—
60
7,580
Equity securities ⁽⁵⁾
6,344
6,344
—
—



(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)
March 31, 2019
Available for sale debt securities¹	$	877,549	$	100	$	877,449	$	—
Loans held for sale²	13,900		—		13,900		—
Loans³	8,312		—		2,102		6,210
Other real estate owned⁴	11,921		—		313		11,608
Equity securities⁵	6,283		6,283		—		—

December 31, 2018
Available for sale debt securities^1,5	$	865,831	$	100	$	865,731	$	—
Loans held for sale²	11,873		—		11,873		—
Loans³	8,590		—		2,290		6,300
Other real estate owned⁴	12,802		—		297		12,505
Equity securities⁵	6,205		6,205		—		—
¹See Note D for further detail of fair value of individual investment categories.
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.
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.

~~(1) See Note D~~

Available for ~~further detail of fair value of individual investment categories.~~

~~(2) Recurring fair value basis determined using observable market data.~~

(3) See Note F. 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 310.

~~(4) Fair value is measured on a nonrecurring basis in accordance with ASC 360.~~

~~(5) Prior to adoption of ASU 2016-1 on January 1, 2018, an investment in shares of a mutual fund that invests primarily in CRA-qualified~~sale debt securities ~~was classified as an available for sale security. Beginning in 2018, this security is~~: U.S. Treasury securities are reported at fair value inutilizing Level 1 inputs. Other ~~Assets. Fair~~securities are reported at fair value utilizing Level 2 inputs. The estimated fair value of a security is determined based on market ~~quotations.~~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.

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. 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 are 90 days or more past due or on nonaccrual as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. The aggregate fair value and contractual balance of loans held for sale as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 is as follows:


(In thousands)	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Aggregate fair value	$	16,172	$	24,306	$	13,900	$	11,873
Contractual balance	15,722		23,627		13,399		11,562
Excess	450		679		501		311

Loans: Level 2 loans consist of impaired real estate loans which are collateral dependent. 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

~~Table of Contents~~

on the comparative sales approach. Level 3 loans consist of commercial and commercial real estate impaired loans. For these loans evaluations may use either a single valuation approach or a combination of approaches, such as comparative sales, cost and/or

Table of Contents

income approach. A significant unobservable input in the income approach is the estimated capitalization rate for a given piece of collateral. At ~~September 30, 2018,~~March 31, 2019, the capitalization rates utilized to determine fair value of the underlying collateral averaged approximately 7.6%. 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 3 in the fair value hierarchy. Impaired loans measured at fair value total ~~$7.3 million with a specific reserve of $6.1 million at September 30, 2018, compared to $4.2~~$8.3 million with a specific reserve of $2.4 million at March 31, 2019, compared to $8.6 million with a specific reserve of $2.7 million at December 31, ~~2017.~~2018.

For loans classified as level 3, the changes included additions of $1.2 million related to loans that became impaired during 2019, offset by paydowns and chargeoffs of $1.3 million for the three months ended March 31, 2019.

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 during the three months ended March 31, 2019, changes included reductions primarily consisting of sales of $1.3 million offset by the addition of foreclosed loans of $0.4 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 valuation process. There were no such transfers ~~during the~~ ~~nine~~ ~~months ended September 30, 2018~~for loans and ~~2017.~~

~~For loans classified as level 3, the changes included additions of $8.2 million related to loans that became impaired during 2018, offset by paydowns and chargeoffs of $3.9 million for the~~ ~~nine~~ ~~months ended September 30, 2018.~~

~~For~~ OREO classified as level 3 during the ~~nine~~three months ended ~~September 30, 2018, changes included the addition of foreclosed loans of $0.3 million~~March 31, 2019 and ~~migrated branches taken out of service of $2.0 million offset by reductions primarily consisting of sales of $5.3 million.~~2018.

The carrying amount and fair value of the Company’s other financial instruments that ~~are~~were not ~~measured at fair value on a recurring basis~~disclosed previously in the balance sheet and for which carrying amount is not fair value as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 is as follows:


(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)			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, 2018
March 31, 2019
Financial Assets
Debt securities held to maturity ⁽¹⁾	$	367,387	$	—	$	353,919	$	—
Debt securities held to maturity¹										$	295,485	$	—	$	291,340	$	—
Time deposits with other banks	9,813		—		—		9,715			8,174		—		—		8,105
Loans, net	4,018,190		—		—		3,982,029			4,787,307		—		—		4,760,789
Financial Liabilities
Deposit liabilities	4,643,510		—		—		4,638,270			5,605,578		—		—		5,603,019
Federal Home Loan Bank (FHLB) borrowings	261,000		—		—		261,036			3,000		—		—		3,000
Subordinated debt	70,734		—		61,716		—			70,874		—		61,039		—

December 31, 2017
December 31, 2018
Financial Assets
Debt securities held to maturity ⁽¹⁾	$	416,863	$	—	$	414,470	$	—
Debt securities held to maturity¹										$	357,949	$	—	$	349,895	$	—
Time deposits with other banks	12,553		—		—		12,493			8,243		—		—		8,132
Loans, net	3,786,063		—		—		3,760,754			4,784,201		—		—		4,835,248
Financial Liabilities
Deposit liabilities	4,592,720		—		—		4,588,515			5,177,240		—		—		5,172,098
Federal Home Loan Bank (FHLB) borrowings	211,000		—		—		211,000			380,000		—		—		380,027
Subordinated debt	70,521		—		61,530		—			70,804		—		61,224		—
¹See Note D for further detail of individual investment categories.									¹See Note D for further detail of individual investment categories.

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~~(1) See Note D 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, 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 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

~~Debt~~Held to maturity debt securities: ~~U.S. Treasury debt securities are reported at fair value utilizing Level 1 inputs. Other~~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.

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. ~~Prior to adoption of ASU 2016-1 on January 1, 2018, the estimated fair value of the loan portfolio utilized an “entrance price” approach. Beginning in 2018, the~~The fair value approach considers market-driven variables including credit related factors and reflects an “exit price” as defined in ASC 820.

Deposit Liabilities: The fair value of demand deposits, savings accounts and money market deposits is the amount payable at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for funding of similar remaining maturities.

Note LM – Business Combinations

Acquisition of ~~GulfShore Bancshares,~~First Green Bancorp, Inc.

On ~~April 7, 2017,~~October 19, 2018, the Company completed its acquisition of ~~GulfShore Bancshares, Inc. ("Gulfshore"~~First Green Bancorp, Inc (“First Green”)~~, the parent company of GulfShore Bank.~~. Simultaneously, upon completion of the merger ~~GulfShore’s~~of First Green and the Company, First Green's wholly owned subsidiary bank, ~~GulfShore~~First Green Bank was merged with and into Seacoast Bank. ~~GulfShore, headquartered in Tampa, Florida,~~Prior to the acquisition, First Green operated 3seven branches in ~~Tampa~~the Orlando, Daytona, and ~~St. Petersburg. This acquisition added $358 million in total assets, $251 million in loans and $285 million in deposits to Seacoast.~~Fort Lauderdale markets.

As a result of this acquisition, the Company expects to enhance its presence in the ~~Tampa, Florida market,~~Orlando, Daytona, and Fort Lauderdale markets, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results to the extent the Company earns more from interest earning assets than it pays in interest on its interest bearing liabilities.

The Company acquired 100% of the outstanding common stock of ~~GulfShore.~~First Green. Under the terms of the definitive agreement, ~~GulfShore shareholders received, for~~ each share of ~~GulfShore~~First Green common stock was converted into the ~~combination of $1.47 in cash and 0.4807~~right to receive 0.7324 shares of Seacoast common ~~stock (based on Seacoast’s closing price of $23.94 per share on April 7, 2017).~~stock.

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(In thousands, except per share data)	April 7, 2017		October 19, 2018
Shares exchanged for cash	$	8,034	$	5,462

Number of GulfShore Bancshares, Inc. common shares outstanding	5,464
Per share exchange ratio	0.4807		0.7324
Number of shares of common stock issued	2,627		4,000
Multiplied by common stock price per share on April 7, 2017	$	23.94
Multiplied by common stock price per share on October 19, 2018			$	26.87
Value of common stock issued	62,883		107,486

Cash paid for First Green vested stock options			6,558
Total purchase price	$	70,917	$	114,044

The acquisition of First Green was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill of ~~$37.1~~$56.7 million for this acquisition that is nondeductible for tax purposes. The

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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 are known. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The adjustments reflected in the table below are the result of information obtained subsequent to the initial measurement.


(In thousands)	Initially Reported April 7, 2017		Measurement Period Adjustments		As Adjusted April 7, 2017		Initially Measured October 19, 2018		Measurement Period Adjustments			As Adjusted October 19, 2018
Assets:
Cash	$	55,540	$	—	$	55,540	$	29,434	$	—		$	29,434
Investment securities	316		—		316		32,145		—			32,145
Loans, net	250,876		—		250,876		631,497		—			631,497
Fixed assets	1,307		—		1,307		16,828		—			16,828
Other real estate owned	13		—		13		410		—			410
Core deposit intangibles	3,927		—		3,927		10,170		(678		)	9,492
Goodwill	37,098		—		37,098		56,198		506			56,704
Other assets	8,572		—		8,572		40,669		172			40,841
Totals	$	357,649	—		$	357,649	$	817,351	$	—		$	817,351

Liabilities:
Deposits	$	285,350	$	—	$	285,350	$	624,289	$	—		$	624,289
Other liabilities	1,382		—		1,382		79,018		—			79,018
Totals	$	286,732	—		$	286,732	$	703,307	$	—		$	703,307

The table below presents information with respect to the fair value of acquired loans, as well as their unpaid principal balance (“Book Balance”) at acquisition date.

April 7, 2017
(In thousands) Book Balance Fair Value
Loans:

Single family residential real estate $ 101,281
$ 99,598
Commercial real estate 106,729
103,905
Construction/development/land 13,175
11,653
Commercial loans 32,137
32,247
Consumer and other loans 3,554
3,473
Purchased credit-impaired —
—
Total acquired loans $ 256,876
$ 250,876

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No loans acquired were specifically identified with credit deficiency factors, pursuant to ASC Topic 310-30. The factors we considered to identify loans as PCI loans were all acquired loans that were nonaccrual, 60 days or more past due, designated as TDR, graded “special mention” or “substandard.”

Loans without specifically identified credit deficiency factors are referred to as PULs for disclosure purposes. These loans were then evaluated to determine estimated fair values as of the acquisition date. Although no specific credit deficiencies were identifiable, we believe there is an element of risk as to whether all contractual cash flows will be eventually received. Factors that were considered included the economic environment both nationally and locally as well as the real estate market particularly in Florida. We have applied ASC Topic 310-20 accounting treatment to the PULs.

The Company believes the deposits assumed from the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.

~~Acquisition of NorthStar Banking Corporation~~

On October 20, 2017, the Company completed its acquisition of NorthStar Banking Corporation (“NSBC”). Simultaneously, upon completion of the merger of NSBC with and into the Company, NSBC’s wholly owned subsidiary bank, NorthStar Bank (“NorthStar”), was merged with and into Seacoast Bank. NorthStar, headquartered in Tampa, Florida, operated three branches in Tampa. This acquisition added $216 million in total assets, $137 million in loans and $182 million in deposits to Seacoast.

As a result of this acquisition, the Company expects to further enhance its presence in the Tampa, Florida market, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results to the extent the Company earns more from interest earning assets than it pays in interest on its interest bearing liabilities.

The Company acquired 100% of the outstanding common stock of NSBC. Under the terms of the definitive agreement, NSBC shareholders received, for each share of NSBC common stock, the combination of $2.40 in cash and 0.5605 shares of Seacoast common stock (based on Seacoast’s closing price of $24.92 per share on October 20, 2017).

(In thousands, except per share data) October 20, 2017
Shares exchanged for cash $ 4,701

Number of NorthStar Banking Corporation common shares outstanding 1,958
Per share exchange ratio 0.5605
Number of shares of common stock issued 1,098
Multiplied by common stock price per share on October 20, 2017 $ 24.92
Value of common stock issued 27,353
Cash paid for NorthStar Banking Corporation vested stock options 801

Total purchase price $ 32,855

~~The acquisition was accounted for under the acquisition method in accordance with ASC Topic 805,~~ ~~Business Combinations~~. The Company recognized goodwill of $12.3 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.

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(In thousands)
Initially Reported
October 20, 2017

Measurement
Period
Adjustments

As Adjusted
October 20, 2017
Assets:

Cash $ 5,485
$ —
$ 5,485
Investment securities 56,123
—
56,123
Loans, net 136,832
—
136,832
Fixed assets 2,637
—
2,637
Core deposit intangibles 1,275
—
1,275
Goodwill 12,404
(99 ) 12,305
Other assets 1,522
99
1,621
Totals $ 216,278
$ —
$ 216,278

Liabilities:
Deposits $ 182,443
$ —
$ 182,443
Other liabilities 980
—
980
Totals $ 183,423
$ —
$ 183,423

~~The table below presents information with respect to the fair value of acquired loans, as well as their unpaid principal balance (“Book Balance”) at acquisition date.~~


	October 20, 2017				October 19, 2018
(In thousands)	Book Balance		Fair Value		Book Balance		Fair Value
Loans:
Single family residential real estate	$	15,111	$	15,096	$	101,674	$	101,119
Commercial real estate	73,139		69,554		437,767		406,613
Construction/development/land	11,706		10,390		61,195		58,385
Commercial loans	31,200		30,854		56,288		54,973
Consumer and other loans	6,761		6,645		9,156		8,942
Purchased Credit Impaired	5,527		4,293		2,136		1,465
Total acquired loans	$	143,444	$	136,832	$	668,216	$	631,497

For the loans acquired we first segregated all acquired loans with specifically identified credit deficiency factors. The factors we considered to identify loans as PCI loans were all acquired loans that were nonaccrual, 60 days or more past due, designated as TDR, graded “special mention” or “substandard.” These loans were then evaluated to determine estimated fair values as of the acquisition date. As required by generally accepted accounting principles, we are accounting for these loans pursuant to ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of October ~~20, 2017~~19, 2018 for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.

(In thousands) October 20, 2017
Contractually required principal and interest $ 5,596
Non-accretable difference (689 )
Cash flows expected to be collected 4,907
Accretable yield (614 )
Total purchased credit-impaired loan acquired $ 4,293

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that were considered included the economic environment both nationally and locally as well as the real estate market particularly in Florida. We have applied ASC Topic 310-20 accounting treatment to the PULs.

~~Acquisition of Palm Beach Community Bank~~

On November 3, 2017, the Company completed its acquisition of Palm Beach Community Bank (“PBCB”). PBCB was merged with and into Seacoast Bank. This acquisition added $357 million in total assets, $270 million in loans and $269 million in deposits to Seacoast. PBCB, headquartered in West Palm Beach, Florida, operated four branches in West Palm Beach.

As a result of this acquisition, the Company expects to enhance its presence in the Palm Beach, Florida market, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results to the extent the Company earns more from interest earning assets than it pays in interest on its interest bearing liabilities.

The Company acquired 100% of the outstanding common stock of PBCB. Under the terms of the definitive agreement, PBCB shareholders received, for each share of PBCB common stock, the combination of $6.26 in cash and 0.9240 shares of Seacoast common stock (based on Seacoast’s closing price of $24.31 per share on November 3, 2017).

(In thousands, except per share data) November 3, 2017
Shares exchanged for cash $ 15,694

Number of Palm Beach Community Bank common shares outstanding 2,507
Per share exchange ratio 0.9240
Number of shares of common stock issued 2,316
Multiplied by common stock price per share on November 3, 2017 $ 24.31
Value of common stock issued 56,312
Total purchase price $ 72,006

~~The acquisition was accounted for under the acquisition method in accordance with ASC Topic 805,~~ ~~Business Combinations~~. The Company recognized goodwill of $34.8 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.

(In thousands)
Initially Reported
November 3, 2017

Measurement
Period
Adjustments

As Adjusted
November 3, 2017
Assets:

Cash $ 9,301
$ —
$ 9,301
Investment securities 22,098
—
22,098
Loans, net 272,090
(1,772 ) 270,318
Fixed assets 7,641
—
7,641
Core deposit intangibles 2,523
—
2,523
Goodwill 33,428
1,323
34,751
Other assets 9,909
449
10,358
Totals $ 356,990
$ —
$ 356,990
Liabilities:
Deposits $ 268,633
$ —
$ 268,633
Other liabilities 16,351
—
16,351
Totals $ 284,984
$ —
$ 284,984

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~~The table below presents information with respect to the fair value of acquired loans, as well as their unpaid principal balance (“Book Balance”) at acquisition date.~~

As Adjusted
November 3, 2017
(In thousands) Book Balance Fair Value
Loans:

Single family residential real estate $ 30,153
$ 30,990
Commercial real estate 134,705
132,089
Construction/development/land 69,686
67,425
Commercial loans 36,076
35,876
Consumer and other loans 179
172
Purchased Credit Impaired 4,768
3,766
Total acquired loans $ 275,567
$ 270,318

For the loans acquired we first segregated all acquired loans with specifically identified credit deficiency factors. The factors we considered to identify loans as PCI loans were all acquired loans that were nonaccrual, 60 days or more past due, designated as TDR, graded “special mention” or “substandard.” These loans were then evaluated to determine estimated fair values as of the acquisition date. As required by generally accepted accounting principles, we are accounting for these loans pursuant to ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of November 3, 2017 for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.


(In thousands)	November 3, 2017			October 19, 2018
Contractually required principal and interest	$	4,768		$	2,136
Non-accretable difference	(1,002		)	(671		)
Cash flows expected to be collected	3,766			1,465
Accretable yield	—			—
Total purchased credit-impaired loan acquired	$	3,766		$	1,465

Pro-Forma Information

Pro-forma data for the ~~three and~~ ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 presents information as if the ~~acquisitions~~acquisition of ~~GulfShore, NSBC and PBCB~~First Green occurred at the beginning of ~~2017 is~~2018, as follows:

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	Three Months Ended March 31,
(In thousands, except per share amounts)	2018
Net interest income	$	57,416
Net income	22,065
EPS - basic	$	0.43
EPS - diluted	0.43

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except per share amounts) 2017 2017
Net interest income $ 51,115
$ 146,668
Net income 16,321
37,149
EPS - basic 0.35
0.81
EPS - diluted 0.35
0.80

~~Acquisition of First Green Bancorp, Inc.~~

On October 19, 2018, the Company completed its acquisition of First Green Bancorp, Inc ("First Green"). Simultaneously, upon completion of the merger of First Green with and into the Company, First Green's wholly owned subsidiary bank, First Green Bank, was merged with and into Seacoast Bank. Prior to the acquisition , First Green operated seven branches in the Orlando, Daytona, and Fort Lauderdale markets. The Company acquired 100% of the outstanding common stock of First Green. Under the terms of the definitive agreement, each share of First Green common stock was converted into the right to receive 0.7324 shares of Seacoast common stock.

(In thousands, except per share data) October 19, 2018
Number of First Green common shares outstanding 5,462
Per share exchange ratio 0.7324
Number of shares of Seacoast common stock issued 4,000
Multiplied by common stock price per share on October 19, 2018 $ 26.87
Value of common stock issued 107,486
Cash paid for First Green stock options 6,558
Total purchase price $ 114,044

The acquisition of First Green will be accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The Company's assessment of the fair value of assets acquired and liabilities assumed as of the acquisition date is incomplete at the time of this filing; therefore, certain disclosures have been omitted. The Company expects to recognize goodwill in this transaction, which is expected to be nondeductible for tax purposes.

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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 (the “Company”) and their results of operations. Nearly all of the Company’s operations are contained in its banking subsidiary, Seacoast 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 months ~~and nine months~~ ended ~~September 30, 2018~~March 31, 2019 compared to the three months ~~and nine months~~ ended ~~September 30, 2017~~March 31, 2018 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of ~~September 30, 2018~~March 31, 2019 compared to December 31, ~~2017.~~2018.

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 the ~~“Company,” “we,” “us,”~~“Company”, “we”, “us”, and “our” 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 our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance or achievements of Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) or its wholly-owned banking subsidiary, Seacoast National Bank ("Seacoast Bank") to be materially different from those set forth in the forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “further,” “plan,”“may”, “will”, “anticipate”, “assume”, “should”, “support”, “indicate”, “would”, “believe”, “contemplate”, “expect”, “estimate”, “continue”, “further”, “plan”, “point ~~to,” “project,” “could,” “intend,”~~to”, “project”, “could”, “intend”, “target” ~~and~~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:~~

limitation.

the effects of current and future economic, business and market conditions in the United States generally or in the communities we serve;

changes in governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”);

legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators, including those associated with the Dodd Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and changes in the scope and cost of Federal Deposit Insurance Corporation (“FDIC”) insurance and other coverage;

changes in accounting policies, rules and practices and applications or determinations made thereunder, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board (the “FASB”), the Securities and Exchange Commission (the “Commission” or “SEC”), and the Public Company Accounting Oversight Board (the “PCAOB”);

the risks of changes in interest rates on the levels, composition and costs of deposits, including the risk of losing customer checking and savings account deposits as customers pursue other, high-yield investments, which could increase our funding costs;

the risks of changes in interest rates on loan demand, and the values and liquidity of loan collateral, debt securities, and interest sensitive assets and liabilities;

changes in borrower credit risks and payment behaviors;

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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 in the United States and in the communities we serve, which could impact write-downs of assets, our ability to liquidate non-performing assets, realized losses on the disposition of non-performing assets and increased credit losses;

our ability to comply with any requirements imposed on us or on our banking subsidiary, Seacoast ~~National~~ Bank ~~(“Seacoast Bank”)~~ by regulators and the potential negative consequences that may result;

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the effects of problems encountered by other financial institutions that adversely affect us or the banking industry generally could require us to change certain business practices, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses;

our 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, including changes in borrowers’ credit risks and payment behaviors from those used in our loan portfolio stress test;

the effects of competition from a wide variety of local, regional, national and other traditional and non-traditional providers of financial, investment and insurance services;

the failure of assumptions and estimates underlying the establishment of reserves for possible loan losses and other estimates;

the impact on the valuation of our investments due to market volatility or counterparty payment risk;

statutory and regulatory restrictions on our ability to pay dividends to our shareholders;

any applicable regulatory limits on Seacoast Bank’s ability to pay dividends to us;

increases in regulatory capital requirements for banking organizations generally, which may adversely affect our ability to expand our business or could cause us to shrink our business;

the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions;

our ability to continue to identify acquisition targets and successfully acquire desirable financial institutions to sustain our growth, to expand our presence in our markets and to enter new markets;

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

our ability to identify and address increased cybersecurity risks, including data security breaches, malware, "denial of service" attacks, "hacking", and identity theft, a failure of which could result in potential business disruptions or financial losses;

inability of our risk management framework to manage risks associated with our business such as credit risk and operational risk, including third party vendors and other service providers;

dependence on key suppliers or vendors to obtain equipment or services for our business on acceptable ~~terms:~~

the effects of the failure of any component of our business infrastructure provided by a third party could disrupt our business, result in the disclosure of and/or misuse of confidential information or proprietary information, increase our costs, negatively affect our reputation, and cause losses;

~~the inability of internal controls and procedures to prevent, detect or mitigate any material errors or fraudulent acts;~~terms;

reduction in or the termination of our ability to use the mobile-based platform that is critical to our business growth strategy, including a failure in or breach of our operational or security systems or those of ~~our~~its third party service providers;

the effects of war or other conflicts, acts of terrorism, natural disasters or other catastrophic events that may affect general economic conditions;

unexpected outcomes of, and the costs associated with, existing or new litigation involving us;

our 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 our deferred tax assets could be reduced if estimates of future taxable income from our operations and tax planning strategies are less than currently estimated ~~or adjustments to our preliminary estimates of the impact of the Tax Cuts and Jobs Act (the “Tax Reform Act”) on certain tax attributes including our deferred tax assets,~~ and sales of our capital stock could trigger a reduction in the amount of net operating loss carryforwards that we may be able to utilize for income tax purposes; and

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

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All written or oral forward-looking statements that are made by us or are attributable to us are expressly qualified in their entirety by this cautionary notice. We assume 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~~First Quarter 2019

Vision 2020 Update

We remain confident in our ability to achieve our Vision 2020 targets announced in 2017.



	Vision 2020 Targets
Return on Tangible Assets	1.30% +
Return on Tangible Common Equity	16% +
Efficiency Ratio	Below 50%

First Quarter Operating Highlights

Modernizing How We Sell

In the first quarter, we completed a pilot program for automated fulfillment of small business loan products. The pilot was limited to a select group of products, and offers auto-decisioning and digitized onboarding. Once fully implemented, this technology will significantly reduce the cost to originate small business loans to current customers, while maintaining our strict credit underwriting culture.

Lowering Our Cost to Serve

We consolidated one banking center location in the first quarter in alignment with our Vision 2020 objective of reducing our footprint to meet the evolving needs of our customers. We expect a six-month payback period, and recorded $0.2 million in associated expenses. We have two additional banking center consolidations planned in 2019. We expect negligible customer impact given the proximity to other banking centers and increased usage of digital channels by these customers.

At quarter end, average deposits per banking center exceeded $112 million, up from $96 million in the first quarter of 2018.

During the second quarter of 2019, our continued focus on efficiency and streamlining operations will result in a reduction of approximately 50 full time equivalent employees. While the Company will incur severance charges of approximately $1.5 million, this in combination with other expense initiatives, including two more banking center closures will result in $10 million in pre-tax expense reductions annually.

Driving Improvements in How Our Business Operates

Late in 2018, we launched a large-scale initiative to implement a fully digital loan origination platform across all business banking units. This follows the successful rollout of our fully digital mortgage banking origination platform. This investment will provide financial returns through a significant improvement in efficiency and banker productivity in 2020 and beyond.

Scaling and Evolving Our Culture

We continue to invest in business bankers. In the first quarter we on-boarded 10 new business bankers in order to fully support the strong markets we serve and to advance our growth and operating leverage objectives. We have a robust pipeline of talent as we enter the second quarter and will continue to opportunistically add top-tier bankers in both the South Florida and Tampa markets.

In the first quarter of 2019, Seacoast Bank’s 401(k) plan was recognized as a Best in Class 401(k) Plan for 2019 by PLANSPONSOR magazine. Associate participation in the 401(k) plan and Seacoast's contribution match differentiates us from industry peers.

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Results of Operations

Earnings Overview

~~Third quarter 2018 and year to date results~~First Quarter 2019 Results

We remain ~~focused~~confident in our ability to achieve our ~~vision~~Vision 2020 targets announced at our Investor Day in early 2017. These include a return on tangible assets of 1.30%+, a return on tangible common equity of 16%+, and an efficiency ratio below 50%. For the ~~third~~first quarter of ~~2018,~~2019, Seacoast reported net income of ~~$16.3~~$22.7 million, or ~~$0.34~~$0.44 per average common diluted share, compared to ~~$17.0~~$16.0 million, or ~~$0.35~~$0.31, for the prior quarter and ~~$14.2~~$18.0 million, or $~~0.32~~$0.38, for the ~~third~~first quarter of ~~2017. For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2018, net income was~~ ~~$51.3~~ ~~million or $1.07 per average common diluted share, compared to~~ ~~$29.8~~ ~~million or $0.70 for the nine month~~

~~Table of Contents~~

~~s ended September 30, 2017.~~2018. Adjusted net income¹ (a non-GAAP measure) for the first quarter of 2019 totaled ~~$17.6~~$24.2 million, or ~~$0.37~~$0.47, per average common diluted share, compared to ~~$18.3~~$23.9 million, or ~~$0.38~~$0.47, for the prior quarter and ~~$15.1~~$19.3 million, or ~~$0.35~~$0.40, for the ~~third~~first quarter of ~~2017. For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2018, adjusted net income~~¹ ~~totaled~~ ~~$55.2~~ ~~million or $1.15 per average common diluted share, compared to $38.1 million or $0.90 for the~~ ~~nine~~ ~~months ended September 30, 2017.~~2018.

¹~~Non-GAAP measure. See the reconciliation of net income to adjusted net income.~~


	Third		Second		Third		Nine Months Ended					First		Fourth		First
	Quarter		Quarter		Quarter		September 30,					Quarter		Quarter		Quarter
	2018		2018		2017		2018		2017			2019		2018		2018
Return on average tangible assets	1.18	%	1.24	%	1.12	%	1.25	%	0.85	%		1.48	%	1.05	%	1.34	%
Return on average tangible shareholders' equity	12.0		13.1		12.5		13.1		9.6			14.86		10.94		14.41
Efficiency ratio	57.0		58.4		58.9		57.7		67.7			56.55		65.76		57.80

Adjusted return on average tangible assets¹	1.22	%	1.28	%	1.16	%	1.29	%	1.03	%		1.50	%	1.49	%	1.38	%
Adjusted return on average tangible shareholders' equity¹	12.4		13.5		12.8		13.5		11.7			15.11		15.44		14.82
Adjusted efficiency ratio¹	56.3		57.3		57.7		56.9		61.0			55.81		54.19		57.05
¹Non-GAAP measure. See the reconciliation of net income to adjusted net income.											¹Non-GAAP measure. See the reconciliation of net income to adjusted net income.

¹~~Non-GAAP measure. See the reconciliation of net income to adjusted net income and noninterest expenses to adjusted noninterest expenses.~~

For the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019, our adjusted return on average tangible assets¹and adjusted return on average tangible shareholders' equity¹ ~~were~~ improved when compared to the same period in the prior year. This improvement is the result of higher adjusted net income¹ in the current year to date period, partially offset by higher tangible assets and higher tangible shareholders' equity. The improvement in the adjusted efficiency ratio¹ reflects our disciplined expense control and ~~the preliminary results of projects underway to streamline and automate operational functions.~~focus on increasing revenue.

Net Interest Income and Margin

Net interest income (on a fully taxable equivalent basis) for the quarter totaled ~~$51.6~~$60.9 million, increasing ~~$1.4~~$0.8 million or 3%1% during the ~~third~~first quarter of ~~2018~~2019 compared to ~~second~~prior quarter, ~~2018,~~ and was ~~$5.8~~$11.0 million or ~~13%~~22% higher than ~~third~~first quarter ~~2017. For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2018, net interest income totaled~~ ~~$151.5~~ ~~million, an increase~~ of ~~$23.5 million or 18% compared to the~~ ~~nine~~ ~~months ended September 30, 2017.~~2018. Net interest margin was ~~3.82%~~4.02% in the ~~third~~first quarter ~~2018,~~2019, compared to ~~3.77% for second~~4.00% in the fourth quarter 2018 and ~~3.74%~~3.80% in the ~~prior year’s third~~first quarter 2018. The net interest margin continues to benefit from positive remixing of interest earning assets as well as actions taken to reduce reliance on wholesale Federal Home Loan Bank advances and migrate funding towards lower rate deposit balances during the quarter.

Loan growth, balance sheet mix and increases in benchmark interest rates have been the primary forces affecting net interest income and net interest margin results. Acquisitions have further accelerated these trends. Organic loan growth of ~~$267~~$299.8 million, or 8%, since ~~September 30, 2017,~~March 31, 2018, plus the addition of ~~$137~~$631.5 million in loans from the ~~NorthStar~~First Green merger ~~and $270 million from the PBCB merger, all~~ contributed to the net interest income improvement year over year for the ~~third~~first quarter ~~and~~ ~~nine~~ ~~months~~ ended ~~September 30, 2018~~March 31, 2019. Net interest income for ~~2018~~2019 should continue to benefit from the impact of ~~the acquisitions completed in fourth quarter 2017 and~~ the First Green acquisition completed on October 19, 2018.

The following table details the trend for net interest income and margin results (on a tax equivalent basis, a non-GAAP measure), 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 2018 $ 51,709
3.82 % 4.38 % 0.82 %
Second quarter 2018 50,294
3.77 % 4.25 % 0.71 %
Third quarter 2017 45,903
3.74 % 4.10 % 0.51 %

Nine Months Ended September 30, 2018 151,856
3.79 % 4.29 % 0.72 %
Nine Months Ended September 30, 2017 128,600
3.74 % 4.04 % 0.42 %

¹~~On tax equivalent basis, a non-GAAP~~Non-GAAP measure. See the reconciliation of net income to adjusted net income.

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(In thousands, except ratios)	Net Interest Income¹		Net Interest Margin¹		Yield on Earning Assets¹		Rate on Interest Bearing Liabilities
First quarter 2019	$	60,861	4.02	%	4.79	%	1.13	%
Fourth quarter 2018	60,100		4.00	%	4.67	%	0.97	%
First quarter 2018	49,853		3.80	%	4.23	%	0.62	%
¹On tax equivalent basis, a non-GAAP measure. See the reconciliation of net interest income to net interest income on a tax equivalent basis.

For the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, a steepening of the Treasury yield curve and higher short term rates, including add-on rates for new loan production, contributed to the 522 basis point improvement in net interest margin, compared to the first ~~nine~~three months of ~~2017.~~2018. Our loan and debt securities yields were 1548 and 2230 basis points higher, respectively, and our yield on federal funds sold and other investments was ~~124~~36 basis points ~~higher,~~lower, compared to results for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018. The impact on net interest margin from accretion of purchase discounts on acquired loans was 26 basis points in the first quarter of 2019. Partially offsetting, the rate for interest bearing funding was higher by 3051 basis points, when comparing the same ~~nine-month~~three-month periods for ~~2018~~2019 and ~~2017.~~2018.

Total average loans increased ~~$601.2~~$966.7 million, or ~~18%~~25%, for ~~third~~first quarter 2019 compared to first quarter 2018, ~~compared to third quarter 2017,~~ and increased ~~$60.1~~$227.4 million, or 2%5%, from ~~second~~the fourth quarter of 2018. Average debt securities decreased ~~$66.3~~$181.0 million, or 5%13%, for ~~third~~first quarter ~~2018~~2019 year over year and were ~~$40.2~~$44.0 million, or 3%, lower from ~~2018’s second quarter. For~~ the ~~nine~~ ~~months ended September 30, 2018, average loans were $744.2 million or 23% higher and debt securities increased $28.7 million or 2%, respectively, compared to the~~ ~~nine~~ ~~months ended September 30, 2017.~~fourth quarter of 2018.

Average loans as a percentage of average earning assets totaled ~~74.6%~~79% during the ~~third~~first quarter of ~~2018,~~2019, compared to ~~73.7%~~77% during the ~~second~~fourth quarter of 2018 and ~~70.0%~~73% a year ago. As average total loans as a percentage of earning assets increased, the mix of loans has remained fairly stable, with volumes related to commercial real estate representing ~~47.5%~~49% of total loans at ~~September 30, 2018, compared to 47.9% at~~March 31, 2019 and December 31, ~~2017~~2018 and ~~47.3%~~47% at ~~September 30, 2017~~March 31, 2018 (see “Loan Portfolio”).

Loan production is detailed in the following table for the periods specified:


	Third		Second		Third		Nine Months Ended				First		Fourth		First
	Quarter		Quarter		Quarter		September 30,				Quarter		Quarter		Quarter
(In thousands)	2018		2018		2017		2018		2017		2019		2018		2018
Commercial pipeline	$	196,512	$	194,928	$	155,355	$	196,512	$	155,355	$	177,318	$	164,064	$	122,743
Commercial loans closed	130,989		140,437		146,121		393,490		350,887		109,076		159,388		122,064

Residential pipeline	$	58,928	$	63,714	$	63,960	$	58,928	$	63,960	45,284		43,655		70,755
Residential loans retained	78,663		75,036		73,611		232,752		237,027		49,645		73,201		79,053
Residential loans sold	55,848		52,175		103,841		157,710		189,675		32,558		31,525		49,687

Consumer and small business pipeline	$	59,715	$	52,915	$	47,002	$	59,715	$	47,002	67,591		53,453		50,361
Consumer and small business originations	125,920		104,910		86,954		329,211		274,358		118,503		114,195		98,381

Consumer and small business originations reached ~~$126~~$118.5 million during the ~~third~~first quarter of ~~2018 and $329 million year to date for 2018,~~2019 and commercial loans closed totaled ~~$131~~$109.1 million for the ~~third~~first quarter of ~~2018 and $393 million year to date for 2018.~~2019. The increase in consumer and small business loan originations is attributable, in part, to our commitment to serving small businesses and the expansion of our Small Business Administration ("SBA") program. Closed residential loans during the first quarter ~~and year to date~~ for ~~2018~~2019 totaled $135 million and $390 million, respectively, reflecting continued strong performance. A $19.5 million fixed rate residential loan pool, with a weighted average yield of 4.15% and average FICO score of 775, was acquired during the third quarter of 2018 and included in residential loans retained.$82.2 million.

Pipelines (loans in underwriting and approval or approved and not yet closed) remained strong at ~~$197~~$177.3 million in commercial, ~~$59~~$45.3 million in mortgage, and ~~$60~~$67.6 million (a new peak) in consumer and small business at ~~September 30, 2018.~~March 31, 2019. Commercial pipelines increased $2$13.3 million over ~~June 30,~~December 31, 2018, and were ~~$41~~$54.6 million or ~~26%~~44% higher compared to ~~September 30, 2017. Mortgage~~March 31, 2018. Residential pipelines ~~decreased $5~~increased $1.6 million from December 31, 2018, and were lower by $25.5 million or 8%36%, compared to ~~both June 30, 2018 and September 30, 2017.~~March 31, 2018. The consumer and small business pipeline increased from ~~June 30,~~December 31, 2018 by $7$14.1 million or ~~13%~~26%, and increased from ~~September 30, 2017~~March 31, 2018 by ~~$13~~$17.2 million or ~~27%~~34%.

Loan production remains strong, supported by customer analytics and expansion of the banking ~~teams, particularly~~teams. During the first quarter of 2019, we hired 10 business bankers in Tampa ~~Orlando~~ and ~~South Florida MSAs. In~~Ft. Lauderdale, augmenting the ~~third~~10 business bankers hired in the fourth quarter of ~~2018, we added senior leadership in Tampa with the hiring of the former President & CEO of SunTrust for the Tampa MSA. Also, the planned~~2018. The addition of lending personnel from the First Green acquisition is ~~expected to provide~~providing growth ~~in the Orlando and South Florida MSAs.~~as well.

Table of Contents

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

~~Table of Contents~~



Customer Relationship Funding
	March 31,			December 31,			September 30,			June 30,			March 31,
(In thousands, except ratios)	2019			2018			2018			2018			2018
Noninterest demand	$	1,676,009		$	1,569,602		$	1,488,689		$	1,463,652		$	1,488,261
Interest-bearing demand	1,100,477			1,014,032			912,891			976,281			1,015,054
Money market	1,192,070			1,173,950			1,036,940			1,023,170			1,035,531
Savings	508,320			493,807			451,958			444,736			437,878
Time certificates of deposit	1,128,702			925,849			753,032			789,601			742,819
Total deposits	$	5,605,578		$	5,177,240		$	4,643,510		$	4,697,440		$	4,719,543

Customer sweep accounts	$	148,005		$	214,323		$	189,035		$	200,050		$	173,249

Noninterest demand deposits as % of total deposits	29.9		%	30.3		%	32.1		%	31.2		%	31.5		%

Customer Relationship Funding
September 30, June 30, March 31, December 31, September 30,
(In thousands, except ratios) 2018 2018 2018 2017 2017
Noninterest demand $ 1,488,689
$ 1,463,652
$ 1,488,261
1,400,227
$ 1,284,118
Interest-bearing demand 912,891
976,281
1,015,054
1,050,755
935,097
Money market 1,036,940
1,023,170
1,035,531
931,458
870,788
Savings 451,958
444,736
437,878
434,346
379,499
Time certificates of deposit 753,032
789,601
742,819
775,934
643,098
Total deposits $ 4,643,510
$ 4,697,440
4,719,543
4,592,720
$ 4,112,600

Customer sweep accounts $ 189,035
$ 200,050
173,249
216,094
$ 142,153

Total core customer funding¹
$ 4,079,513
$ 4,107,889
4,149,973
4,032,880
$ 3,611,655

Noninterest demand deposits as % of total deposits 32.1 % 31.2 % 31.5 % 30.5 % 31.2 %

~~(1)Total deposits and customer sweep accounts, excluding time certificates of deposit~~

The Company’s balance sheet continues to be primarily core deposit funded. Core customer funding increased to $4.1 billion at September 30, 2018, a 1% increase from December 31, 2017 and a 13% increase from September 30, 2017. Excluding acquisitions, core customer funding increased by $202 million, or 6%, from one year ago. Seacoast’sSeacoast's weighted average rate paid on total deposits (including noninterest demand deposits) ~~remains low at 0.38%~~was 0.67% for the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, and, despite an increase of 1613 basis points from the fourth quarter of 2018 and 34 basis points from the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, we believe reflects the significant value of the deposit franchise.

Short-term borrowings were entirely comprised of sweep repurchase agreements with Seacoast Bank customers at ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. No federal funds purchased were utilized at ~~September 30, 2018~~March 31, 2019 or ~~2017.~~2018. The average rate on customer repurchase accounts was ~~0.77%~~1.21% for the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, compared to ~~0.42%~~0.63% for the same period during ~~2017.~~2018.

FHLB borrowings totaled ~~$261.0~~$3.0 million at ~~September 30, 2018,~~March 31, 2019, with an average rate of ~~1.83%~~2.53% paid during the ~~nine~~three months ended ~~September 30, 2018 .~~March 31, 2019. FHLB borrowings averaged ~~$219.7~~$227.4 million for ~~2018,~~the first quarter of 2019, declining ~~$177.0~~$49.0 million, or ~~44.6%~~18%, compared to the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018. For ~~2018,~~2019, average subordinated debt of ~~$70.6~~$70.8 million related to trust preferred securities issued by subsidiary trusts of the Company ~~(including subordinated debt for Grand and BANKshares assumed on July 17, 2015 and October 1, 2014, respectively)~~ carried an average cost of ~~4.42%~~5.14%.

We have a positive interest rate gap and our net interest margin should benefit from rising interest rates. Further increases in interest rates are likely, and the Company’s asset sensitivity is further enhanced by its low cost deposit portfolio (see “Interest Rate Sensitivity”).

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

~~AVERAGE BALANCES, INTEREST INCOME AND EXPENSES, YIELDS AND RATES~~¹

~~SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES~~

2018 2017
Third Quarter Second Quarter Third Quarter
Average Yield/ Average Yield/ Average Yield/
(In thousands, except ratios) Balance Interest Rate Balance Interest Rate Balance Interest Rate
Assets
Earning assets:
Securities:
Taxable $ 1,284,774
$ 9,582
2.98
% $ 1,324,280
$ 9,389
2.84
% $ 1,356,276
$ 8,823
2.60
%
Nontaxable 31,411
283
3.60
32,055
273
3.41
26,256
290
4.42

Total Securities 1,316,185
9,865
3.00
1,356,335
9,662
2.85
1,382,532
9,113
2.64

Federal funds sold and other investments 51,255
634
4.91
49,387
585
4.75
76,773
664
3.43

Loans, net 4,008,527
48,802
4.83
3,948,460
46,549
4.73
3,407,376
40,456
4.70

Total Earning Assets 5,375,967
59,301
4.38
5,354,182
56,796
4.25
4,866,681
50,233
4.10

Allowance for loan losses (29,259 ) (29,234 ) (26,299 )
Cash and due from banks 110,929
110,549
99,864

Premises and equipment 63,771
64,445
57,023

Intangible assets 165,534
166,393
118,364

Bank owned life insurance 121,952
121,008
95,759

Other assets 94,433
90,692
104,727

Total Assets $ 5,903,327
$ 5,878,035
$ 5,316,119

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand $ 939,527
$ 426
0.18
% $ 996,929
$ 492
0.20
% $ 927,278
$ 273
0.12
%
Savings 444,935
170
0.15
439,691
118
0.11
377,729
52
0.05

Money market 1,031,960
1,501
0.58
1,027,705
1,378
0.54
870,166
605
0.28

Time deposits 779,608
2,975
1.51
790,404
2,629
1.33
548,092
1,266
0.92

Federal funds purchased and securities sold under agreements to repurchase 204,097
463
0.90
179,540
334
0.75
165,160
204
0.49

Federal Home Loan Bank borrowings 222,315
1,228
2.19
160,846
741
1.85
439,755
1,293
1.17

Other borrowings 70,694
829
4.65
70,623
810
4.60
70,409
637
3.59

Total Interest-Bearing Liabilities 3,693,136
7,592
0.82
3,665,738
6,502
0.71
3,398,589
4,330
0.51

Noninterest demand 1,451,751
1,473,331
1,276,779

Other liabilities 30,150
29,292
52,832

Total Liabilities 5,175,037
5,168,361
4,728,200

Shareholders' equity 728,290
709,674
587,919

Total Liabilities & Equity $ 5,903,327
$ 5,878,035
$ 5,316,119

Cost of deposits 0.43
% 0.39
% 0.22
%
Interest expense as a % of earning assets 0.56
% 0.49
% 0.35
%
Net interest income as a % of earning assets $ 51,709
3.82
% $ 50,294
3.77
% $ 45,903
3.74
%

¹On a fully taxable equivalent basis, a non-GAAP measure, as defined (see Non-GAAP measure below). All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.



Average Balances, Interest Income and Expenses, Yields and Rates¹

	2019							2018							2018
	First Quarter							Fourth Quarter							First Quarter
	Average					Yield/		Average					Yield/		Average					Yield/
(In thousands, except ratios)	Balance			Interest		Rate		Balance			Interest		Rate		Balance			Interest		Rate
Assets
Earning assets:
Securities:
Taxable	$	1,186,374		$	9,119	3.07	%	$	1,227,648		$	9,528	3.10	%	$	1,361,277		$	9,361	2.75	%
Nontaxable	26,561			190		2.86		29,255			252		3.45		32,640			307		3.76
Total Securities	1,212,935			9,309		3.07		1,256,903			9,780		3.11		1,393,917			9,668		2.77

Federal funds sold and other investments	91,136			918		4.09		87,146			835		3.80		56,173			616		4.45

Loans, net	4,839,046			62,335		5.22		4,611,691			59,559		5.12		3,872,369			45,284		4.74

Total Earning Assets	6,143,117			72,562		4.79		5,955,740			70,174		4.67		5,322,459			55,568		4.23

Allowance for loan losses	(32,966		)					(33,864		)					(27,469		)
Cash and due from banks	99,940							124,299							113,899
Premises and equipment	70,938							75,120							65,932
Intangible assets	230,066							213,713							167,136
Bank owned life insurance	123,708							132,495							122,268
Other assets	136,175							122,367							87,463
Total Assets	$	6,770,978						$	6,589,870						$	5,851,688

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand	$	1,029,726		$	839	0.33	%	$	974,711		$	515	0.21	%	$	1,001,672		$	450	0.18	%
Savings	500,347			477		0.39		509,434			418		0.33		435,433			104		0.10
Money market	1,158,939			2,557		0.89		1,161,599			2,207		0.75		976,498			984		0.41
Time deposits	1,042,346			4,959		1.93		899,153			3,901		1.72		776,807			2,179		1.14
Federal funds purchased and securities sold under agreements to repurchase	185,032			550		1.21		242,963			732		1.20		175,982			274		0.63
Federal Home Loan Bank borrowings	227,378			1,421		2.53		240,799			1,468		2.42		276,389			1,030		1.51
Other borrowings	70,836			898		5.14		70,764			833		4.67		70,550			694		3.99
Total Interest-Bearing Liabilities	4,214,604			11,701		1.13		4,099,423			10,074		0.97		3,713,331			5,715		0.62
Noninterest demand	1,612,548							1,628,842							1,413,967
Other liabilities	64,262							33,846							29,150
Total Liabilities	5,891,414							5,762,111							5,156,448

Shareholders' equity	879,564							827,759							695,240

Total Liabilities & Equity	$	6,770,978						$	6,589,870						$	5,851,688

Cost of deposits						0.67	%						0.54	%						0.33	%
Interest expense as a % of earning assets						0.77	%						0.67	%						0.44	%
Net interest income as a % of earning assets				$	60,861	4.02	%				$	60,100	4.00	%				$	49,853	3.80	%

¹On a fully taxable equivalent basis, a non-GAAP measure, as defined (see non-GAAP measure below). 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.

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2018 2017
Year to Date Year to Date
Average Yield/ Average Yield/
(In thousands, except ratios) Balance Interest Rate Balance Interest Rate
Assets
Earning assets:
Securities:
Taxable $ 1,323,164
$ 28,332
2.85
% $ 1,299,128
$ 25,289
2.60
%
Nontaxable 32,031
863
3.59
27,388
1,047
5.10

Total Securities 1,355,195
29,195
2.87
1,326,516
26,336
2.65

Federal funds sold and other investments 52,253
1,835
4.70
68,766
1,778
3.46

Loans, net 3,943,617
140,635
4.77
3,199,408
110,668
4.62

Total Earning Assets 5,351,065
171,665
4.29
4,594,690
138,782
4.04

Allowance for loan losses (28,660 ) (25,211 )
Cash and due from banks 111,781
101,858

Premises and equipment 64,708
58,401

Intangible assets 166,348
104,079

Bank owned life insurance 121,742
89,401

Other assets 90,888
111,661

Total Assets $ 5,877,872
$ 5,034,879

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand $ 979,148
$ 1,368
0.19
% $ 904,175
$ 698
0.10
%
Savings 440,054
392
0.12
370,145
147
0.05

Money market 1,012,259
3,863
0.51
847,705
1,563
0.25

Time deposits 782,283
7,783
1.33
443,416
2,646
0.80

Federal funds purchased and securities sold under agreements to repurchase 186,643
1,071
0.77
173,601
551
0.42

Federal Home Loan Bank borrowings 219,652
2,999
1.83
396,610
2,775
0.94

Other borrowings 70,623
2,333
4.42
70,342
1,802
3.43

Total Interest-Bearing Liabilities 3,690,662
19,809
0.72
3,205,994
10,182
0.42

Noninterest demand 1,446,488
1,248,290

Other liabilities 29,533
39,414

Total Liabilities 5,166,683
4,493,698

Shareholders' equity 711,189
541,181

Total Liabilities & Equity $ 5,877,872
$ 5,034,879

Cost of deposits 0.38
% 0.22
%
Interest expense as a % of earning assets 0.49
% 0.30
%
Net interest income as a % of earning assets $ 151,856
3.79
% $ 128,600
3.74
%

(1) On a fully taxable equivalent basis, a non-GAAP measure, as defined (see Non-GAAP measure below). 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.

Taxable Equivalent Measure

Fully taxable equivalent net interest income and net interest margin is a common term and measure used in the banking industry but is not a term used under GAAP. We believe that these presentations of tax equivalent net interest income and tax equivalent net interest margin aid in the comparability of net interest income arising from both taxable and tax-exempt sources over the periods presented. We further believe these non-GAAP measures enhance investors’ understanding of the Company’s business and performance, and facilitate an understanding of performance trends and comparisons with the performance of other financial

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institutions. The limitations associated with these measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently, including as a result of using different assumed tax rates. These disclosures should not be considered as an alternative to GAAP. The following information is provided to reconcile GAAP measures and tax equivalent net interest income and net interest margin on a tax equivalent basis.


	Third			Second			Third			Nine Months Ended						First			Fourth			First
	Quarter			Quarter			Quarter			September 30,						Quarter			Quarter			Quarter
(In thousands, except ratios)	2018			2018			2017			2018			2017			2019			2018			2018
Nontaxable interest income adjustment	$	147		$	87		$	154		$	325		$	529		$	87		$	116		$	91
Tax Rate	21		%	21		%	35		%	21		%	35		%	21		%	21		%	21		%
Net interest income (TE)	$	51,709		$	50,294		$	45,903		$	151,856		$	128,600		$	60,861		$	60,100		$	49,853
Total net interest income (not TE)	51,562			50,207			45,749			151,531			128,070			60,774			59,984			49,762
Net interest margin (TE)	3.82		%	3.77		%	3.74		%	3.79		%	3.74		%	4.02		%	4.00		%	3.80		%
Net interest margin (not TE)	3.81			3.76			3.73			3.79			3.73			4.01			3.99			3.79
TE = Tax Equivalent

~~TE = Tax Equivalent~~

Noninterest Income

Noninterest income totaled ~~$12.3~~$12.8 million for the ~~third~~first quarter of ~~2018, a decrease~~2019, an increase of ~~$0.4~~$0.1 million, or 3%1%, compared to the ~~second~~fourth quarter of 2018 and an increase of ~~$0.9~~$0.5 million, or 7%4%, from the ~~third~~first quarter of ~~2017.~~2018. Organic and acquisition-related growth were primary factors contributing to growth in noninterest income. For the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019, noninterest income ~~totaled~~ ~~$37.3 million, 17% higher than the~~ ~~nine~~ ~~months ended September 30, 2017. Results for the~~ ~~nine~~ months reflect growth in deposits and increased customer engagement, resulting in revenue improvement in nearly every category. Only mortgage banking fees were lower during the nine months, by $1.1 million, with the prior year benefiting from a larger portfolio sale of $57.9 million that added $0.8 million to mortgage banking fees in the third quarter of 2017. For the ~~nine~~ ~~months ended~~ ~~September 30, 2018, noninterest income (excluding securities losses)~~ accounted for ~~19.8%~~17% of total revenue (net interest income plus noninterest ~~income, excluding securities losses)~~income), compared to ~~19.9%~~20% for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018.

Compared to the fourth quarter of 2018, service charges on deposit results were lower by $0.3 million, impacted by fewer business days in the first quarter of 2019, but mortgage banking fees were higher and entirely offsetting, the result of a successful introduction of new saleable residential mortgage products and a focus on generating saleable volume. SBA and marine-related fees improved modestly from the fourth quarter of 2018, the result of higher volumes in both units, and interchange income increased $0.2 million sequentially. Interchange income is dependent upon business volumes transacted, as well as the fees permitted by Visa^® and MasterCard^®. Wealth-related fees (trust and brokerage income) were down modestly, the result of lower equity valuations, and other income declined primarily due to the prior quarter benefiting from a $0.3 million bank owned life insurance ("BOLI") payout. The decline in BOLI-related income from the fourth quarter of 2018 was the result of the cancellation of low yielding policies acquired in the First Green acquisition. Finally, securities losses for the first quarter of 2019 were lower by $0.4 million from the fourth quarter of 2018.

Noninterest income for the ~~third and second quarters~~first quarter of ~~2018,~~2019, compared to the ~~third quarter of 2017, and for the~~ ~~nine~~ ~~months ended September 30, 2018 and 2017 is detailed as follows:~~

Third Second Third Nine months ended
Quarter Quarter Quarter September 30,
(In thousands) 2018 2018 2017 2018 2017
Service charges on deposit accounts $ 2,833
$ 2,674
$ 2,626
$ 8,179
$ 7,483
Trust fees 1,083
1,039
967
3,143
2,764
Mortgage banking fees 1,135
1,336
2,138
3,873
4,962
Brokerage commissions and fees 444
461
351
1,264
1,079
Marine finance fees 194
446
137
1,213
597
Interchange income 3,119
3,076
2,582
9,137
7,747
BOLI income 1,078
1,066
836
3,200
2,326
Other income 2,453
2,671
1,844
7,497
4,895
12,339
12,769
11,481
37,506
31,853
Securities gains (losses), net (48 ) (48 ) (47 ) (198 ) (26 )
Total $ 12,291
$ 12,721
$ 11,434
$ 37,308
$ 31,827

~~For the third~~fourth quarter of 2018 and ~~nine~~ ~~months ended September 30,~~the first quarter of 2018 ~~most categories of service fee income showed year over year growth. Service charges on deposit accounts increased 9.3% and interchange income improved 17.9% for the~~ ~~nine~~ months ended September 30, 2018, compared to prior year. These increases reflect continued strength in deepening relationships with new and existing customers and benefits from acquisition activity. Overdraft fees represented 54% of total service charges on deposits during the ~~nine~~ ~~months ended September 30, 2018, versus 57% for all of 2017. The increase in interchange revenue reflects higher business volumes transacted.~~is detailed as follows:

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	First			Fourth			First
	Quarter			Quarter			Quarter
(In thousands)	2019			2018			2018
Service charges on deposit accounts	$	2,697		$	3,019		$	2,672
Trust fees	1,017			1,040			1,021
Mortgage banking fees	1,115			809			1,402
Brokerage commissions and fees	436			468			359
Marine finance fees	362			185			573
Interchange income	3,401			3,198			2,942
BOLI income	915			1,091			1,056
SBA gains	636			519			734
Other income	2,266			2,810			1,639
	12,845			13,139			12,398
Securities losses, net	(9		)	(425		)	(102		)
Total	$	12,836		$	12,714		$	12,296

Year over year, results for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 reflect growth in deposits and increased customer engagement. Service charges on deposits and interchange income increased by 9%, on a combined basis. This increase reflects continued strength in new customer acquisition and cross sell, and benefits from acquisition activity. Overdraft fees totaling $1.5 million for 2019 represented 55% of total service charges on deposit, the same percentage as a year ago.

Wealth management, including brokerage commissions and fees, and trust fees, continued to ~~rise~~grow during the ~~third~~first quarter of ~~2018,~~2019, increasing ~~1.8%~~5% from ~~second~~first quarter ~~2018, and for the~~ ~~nine~~ ~~months ended September 30, 2018, increased 14.7% compared to the same period in 2017. Trust~~2018. While trust fees ~~increased 13.7% and~~were level year over year, brokerage commissions and fees were ~~17.1%~~21% higher for the ~~nine~~three months ~~year over year.~~ended March 31, 2019, compared to the three months ended March 31, 2018. This increase is the result of a growing sales and support team, industry leading products including digital tools, and the benefit of direct referrals from the branches and lending network. ~~Our Wealth Management team added almost $100 million in new assets under management during the~~ ~~nine~~ ~~months ended September 30, 2018, and we~~We expect wealth management revenues to continue to grow over time.

Mortgage production was ~~higher~~lower during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 compared to ~~2017’s first nine months~~2018 (see “Loan Portfolio”), and the amount of loans sold from that production was also higher, but spreads were narrower. The sale of $57.9 million of seasoned conforming mortgages during the third quarter of 2017 generated $0.8 million in incremental gains, and contributed to the overall decrease inwith mortgage banking ~~revenue~~activity generating fees of $1.1 million ~~or 21.9%~~ for the ~~nine~~ ~~months ended September 30, 2018,~~first quarter of 2019 as compared to $1.4 million for the ~~nine~~ ~~months ended September 30, 2017. Originated~~first quarter of 2018. Fee income opportunities were more limited. However, as mentioned previously, the introduction of new saleable residential mortgage ~~loans are processed by commissioned employees of Seacoast, with many mortgage loans referred by the Company’s branch personnel.~~products and a focus on generating saleable volume should create income growth prospectively.

Marine ~~finance revenue was higher for 2018, increasing 41.6% and 103.2%, respectively,~~lending originations sold were lower for the ~~third~~first quarter 2019, decreasing 37% for the first quarter of ~~2018 and~~ ~~nine~~ ~~months ended September 30, 2018,~~2019 compared to the same ~~periods~~period in ~~2017. Continued demand~~2018. Fee income for marine vessel financing ~~and~~was impacted by a larger portion of originations being ~~sold were primary contributors to the improvement.~~retained. In addition to our principal marine lending office in Ft. Lauderdale, Florida, we continue to use third party independent contractors in Texas and on the west coast of the United States to assist in generating marine loans.

BOLI and Small Business Administration ("SBA") income ~~was significantly higher~~totaled $0.9 million and $0.6 million, respectively, for the ~~third~~first quarter of ~~2018, up 28.9%~~2019, slightly lower from a year ~~over year,~~ago, but representing 7% and ~~up 37.6% for the~~ ~~nine~~ ~~months ended September 30, 2018, primarily the result~~5% of ~~additions during 2017. At September 30, 2018, the average balance increased 36.2% compared to the~~ ~~nine~~ ~~months ended September 30, 2017.~~

overall noninterest income, respectively. Other income was ~~53.2%~~38% higher year over year for the ~~nine~~three months ended ~~September 30,~~March 31, 2019, increasing $0.6 million year over year compared to first quarter 2018. ~~Of the increase of $2.6 million, continued progress by our Small Business Administration (“SBA”) lending group generated incremental fees of $2.0 million for 2018 year to date, and additional~~Additional income of ~~$0.4~~$0.2 million was distributed from Community Reinvestment Act ("CRA") ~~investments. A~~investments and a general increase in other fee categories also ~~occurred, including wire transfer fees, check cashing fees, and other miscellaneous fees.~~occurred.

Noninterest Expenses

Seacoast management expects its efficiency ratios to improve in 2019. The Company expects its digital servicing capabilities and technology to support better, more efficient channel integration allowing consumers to choose their path of convenience to satisfy their banking needs. Acquisition activity added to noninterest expenses with acquisition related costs for First Green in the fourth quarter of 2018 of approximately $8.0 million, and an additional $0.3 million during the first quarter of 2019. The Company consolidated five branches in conjunction with the acquisition of First Green, in alignment with our Vision 2020 objective of reducing our footprint to meet the evolving demands of our customers. We consolidated one additional banking center during the first quarter 2019 and recorded $0.2 million in associated expenses, and plan on consolidating two more banking centers in 2019. Our investments in 2018 launched a number of new enhancements, resulting in even greater digital access for our customers, and providing improvements in productivity for our customers in their daily lives. In the second quarter of 2019,

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our continued focus on efficiency and streamlining operations will result in a reduction of approximately 50 full time equivalent employees. While the Company will incur severance charges of approximately $1.5 million, this in combination with other expense initiatives, including the two additional banking center closures planned in 2019, should result in approximately $10 million in pretax expense reductions annually. We expect greater operating leverage in 2020 and beyond.

For the first quarter of 2019, our 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), was 56.55% compared to 65.76% for the fourth quarter of 2018 and 57.80% for the first quarter of 2018. Adjusted noninterest expense (a non-GAAP measure, see table below for a reconciliation to noninterest expense, the most comparable GAAP number) was $41.1 million for the first quarter of 2019, compared to $39.5 million for the fourth quarter of 2018 and $35.5 million for the first quarter of 2018. The adjusted efficiency ratio¹ year over year improved, declining from 57.05% for the first quarter 2018 to 55.81% for the first quarter of 2019.

¹Non-GAAP measure. See the reconciliation of net income to adjusted net income.



	First			Fourth			First
	Quarter			Quarter			Quarter
(In thousands, except ratios)	2019			2018			2018
Noninterest expense, as reported	$	43,099		$	49,464		$	37,164

Merger related charges	(335		)	(8,034		)	(470		)
Amortization of intangibles	(1,458		)	(1,303		)	(989		)
Branch reductions and other expense initiatives¹	(208		)	(587		)	—
Foreclosed property expense and net gain/(loss)on sale	40			—			(192		)
Total adjustments	(1,961		)	(9,924		)	(1,651		)

Adjusted noninterest expense²	$	41,138		$	39,540		$	35,513

Adjusted efficiency ratio^2,3	55.81		%	54.19		%	57.05		%
¹Includes severance payments, contract termination costs, disposition of branch premises and fixed assets, and other costs to accomplish branch consolidation and other expense reduction strategies.
²Non-GAAP measure.
³Efficiency ratio is defined as (noninterest expense less amortization of intangibles and gains, losses, and expenses on foreclosed properties) divided by the net operating revenue (net interest on a fully tax equivalent basis plus noninterest income excluding securities gains).

Noninterest expenses for the ~~third~~first quarter of 2019 totaled $43.1 million, decreasing $6.4 million, or 13%, compared to the fourth quarter of 2018, ~~totaled $37.4 million,~~and increasing ~~$3.0~~$5.9 million, or ~~8.8% compared to third~~16%, from the first quarter ~~2017, and were $2.1 million or 1.9% higher for the~~ ~~nine~~ ~~months ended September 30, 2018, compared to 2017.~~of 2018. Noninterest expenses for the ~~third and second quarters~~first quarter of 2019, as compared to the fourth quarter of 2018 ~~compared to third quarter 2017,~~ and the ~~nine~~ ~~months ended September 30,~~first quarter of 2018 ~~and 2017, is~~are detailed as follows:

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Third Second Third Nine Months Ended
Quarter
Quarter
Quarter September 30,
(In thousands, except ratios) 2018 2018 2017 2018 2017
Noninterest expense

Salaries and wages $ 17,129
$ 16,429
$ 15,627
$ 48,939
$ 49,371
Employee benefits 3,205
3,034
2,917
9,320
8,920
Outsourced data processing costs 3,493
3,393
3,231
10,565
9,956
Telephone/data lines 624
643
573
1,879
1,753
Occupancy 3,214
3,316
2,447
9,647
10,025
Furniture and equipment 1,367
1,468
1,191
4,292
4,261
Marketing 1,139
1,344
1,298
3,735
3,294
Legal and professional fees 2,019
2,301
2,560
6,293
7,968
FDIC assessments 431
595
548
1,624
1,768
Amortization of intangibles 1,004
1,004
839
2,997
2,397
Foreclosed property expense and net (gain)/loss on sale (136 ) 405
(297 ) 461
(293 )
Other 3,910
4,314
3,427
13,057
11,312
TOTAL $ 37,399
$ 38,246
$ 34,361
$ 112,809
$ 110,732

Efficiency ratio¹
57.0 % 58.4 % 58.9 % 57.7 % 67.7 %

¹Efficiency ratio is defined as (noninterest expense less foreclosed property expense and amortization of intangibles) divided by net operating revenue (net interest income on a fully tax equivalent basis plus noninterest income excluding securities gains)



	First			Fourth		First
	Quarter			Quarter		Quarter
(In thousands)	2019			2018		2018
Noninterest expense
Salaries and wages	$	18,506		$	22,172	$	15,381
Employee benefits	4,206			3,625		3,081
Outsourced data processing costs	3,845			5,809		3,679
Telephone/data lines	811			602		612
Occupancy	3,807			3,747		3,117
Furniture and equipment	1,757			2,452		1,457
Marketing	1,132			1,350		1,252
Legal and professional fees	2,847			3,668		1,973
FDIC assessments	488			571		598
Amortization of intangibles	1,458			1,303		989
Foreclosed property expense and net (gain)/loss on sale	(40		)	—		192
Other	4,282			4,165		4,833
Total	$	43,099		$	49,464	$	37,164

~~For 2018, salaries~~Salaries and wages totaled $18.5 million for the first quarter of 2019, $22.2 million for the fourth quarter of 2018 , and $15.4 million for the first quarter ~~$16.4 million for the second quarter, $17.1 million for the third quarter, and aggregated to$48.9 million for the~~ ~~nine~~ ~~months ended September 30,~~of 2018. Salaries and wages were ~~$0.4~~$3.1 million ~~lower~~higher year over year, when compared to the ~~nine~~three months ended ~~September 30, 2017. The increase in salaries and wages~~for third quarter 2018 compared to second quarter 2018 was the result of continued investments in talent, including the hiring of a new senior leadership position, a Market President and Head of Commercial Lending for the Tampa market. We believe the Tampa, Florida market offers a significant opportunity for growth. During the second quarter 2018, we also acquired two commercial banking team leaders, four commercial bankers, and made investments in talent to support scaling the organization prudently. We also granted 191,000 restricted shares during the second quarter of 2018, along with performance awards for up to an additional 356,000 shares upon meeting certain performance criteria. All were granted deep into the organization, with the goal of providing meaningful value to our associates for achieving our target objectives.March 31, 2018. Base salaries were ~~$5.0~~the primary cause, increasing $2.6 million, or ~~13% higher for the first~~ ~~nine~~ ~~months of 2018~~19%, with 902 full-time equivalent employees at March 31, 2019, compared to ~~a year ago, reflecting our investment in talent and the full impact of additional personnel retained as part of the 2017 acquisitions of GulfShore, NorthStar and PBCB.~~814 at March 31, 2018. Improved revenue generation and lending production, ~~and expectations for performance results in 2018,~~ among other factors, resulted in commissions, ~~sales~~cash and ~~equity award expense~~stock incentives (aggregated) that were ~~$2.1~~$0.2 million higher ~~for the~~ ~~nine~~ ~~months ended September 30, 2018, compared to the first~~ ~~nine~~ ~~months of 2017.~~year over year. Severance costs also increased by $0.1 million year over year, and ~~cash incentives decreased $1.9 million and $2.9 million, respectively, compared to the~~ ~~nine~~ ~~months ended September 30, 2017, reflecting the impact of merger activities and executive realignment a year ago. Deferred~~deferred loan origination costs (a contra expense)~~, increased $2.8~~ decreased by $0.2 million, ~~year over year, reflecting a greater number of loans produced during~~due to lower loan production in the first ~~nine~~ ~~months~~quarter of ~~2018, versus 2017.~~2019, compared to the first quarter of 2018.

During the first quarter 2019, employee benefits costs (group health insurance, defined contribution plan, payroll taxes, and unemployment compensation) increased $0.6 million, or 16%, compared to the fourth quarter of 2018, and increased $1.1 million, or 37%, compared to the first quarter of 2018. These costs reflect the higher staffing (and base salary cost) discussed above. Payroll taxes typically peak during first quarter each year, and were $0.6 million and $0.5 million greater than expenditures in the fourth and first quarter of 2018, respectively. Our self-funded health care plan, totaling $1.7 million for the first quarter of 2019, was $0.5 million higher than a year ago for first quarter.

Seacoast Bank utilizes third parties for its core data processing systems and outsourced data processing costs are directly related to the number of transactions processed. Outsourced data processing costs totaled ~~$3.7~~$3.8 million, ~~$3.4~~$5.8 million and ~~$3.5~~$3.7 million for the first ~~second~~quarter 2019, fourth quarter 2018 and first quarter 2018, respectively. Data processing costs included one-time charges for conversion activity related to our acquisition in the fourth quarter of 2018. We continue to improve and enhance our mobile and other digital products and services through our core data processor, which may increase our outsourced data processing costs as customers adopt improvements and products and as the Company's business volumes grow.

Telephone and data line expenditures, including electronic communications with customers and between branch locations and personnel, as well as our third ~~quarters~~party data processors, increased $0.2 million during the first quarter of 2019, when compared to the fourth quarter of 2018 ~~respectively, totaling $10.6 million~~and the first quarter of 2018, or 35% and 33%, respectively. Additional activity for ~~the~~ ~~nine~~ ~~months ended September 30, 2018, an increase of $0.6 million or 6.1%~~acquired First Green branches and locations closed, as well as additional customers from the ~~first~~ ~~nine~~ ~~months of 2017. The~~acquisition, were the primary ~~cause for~~contributors to the ~~increase year over year was software licensing~~increases in telephone and ~~maintenance costs aggregating to $0.7 million.~~data line expenses.

Total occupancy, furniture and equipment expenses for the ~~first, second and third quarters of 2018 totaled $4.6 million, $4.8 million and $4.6 million, respectively, and were $13.9 million for the~~ ~~nine~~three months ended ~~September 30, 2018. These costs were $0.3~~March 31, 2019 decreased $0.6 million, ~~lower~~or 10%, from the fourth quarter of 2018, and increased $1.0 million, or 22%, compared to the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018. Asset write-offs related to branch closures ~~were~~was a primary contributor, with write-offs adding $0.2 million and $0.8 million, respectively, to ~~the reduction in expense, and were $1.8 million lower~~expenses for the ~~nine~~three months ended ~~September 30, 2018, compared to a year ago.~~March 31, 2019 and December 31, 2018. We believe branches are still valuable to our customers for more complex transactions, but simple tasks, such as depositing and withdrawing funds, are rapidly migrating to the digital world. ~~Our goal at~~We anticipate that branch consolidations will continue for the ~~beginning of 2017~~Company and the banking industry in general. Lease expense was ~~to close 20% of our locations over the next 24 to 36 months. During 2018 we consolidated two office locations in~~higher for the first quarter of 2019 by approximately $0.3 million, primarily attributed to additional branches acquired from First Green. In addition, at March 31, 2019, the Company's operations center lease expired and ~~none in the second and third quarters, compared~~all personnel occupying this space moved to ~~five locations for the~~ ~~nine~~ ~~months ended September 30, 2017. Partially offsetting were~~an adjacent main campus building currently owned, with an annual lease ~~payments~~savings of $0.4 million,

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prospectively. Depreciation, repairs and ~~depreciation expense, each~~maintenance, and other furniture and equipment expenditures were higher ~~by $0.7~~compared to a year ago, increasing $0.1 million, $0.2 million and $0.2 million, respectively ~~for~~during the first ~~nine~~ ~~months~~quarter of ~~2018~~2019 when compared to the first ~~nine~~ ~~months~~quarter of ~~2017. Upon acquiring First Green in October 2018, we consolidated five banking locations in alignment with our Vision 2020 objective of reducing our footprint.~~2018.

For the first ~~second~~quarter of 2019, fourth quarter of 2018 and ~~third quarters~~first quarter of 2018, marketing expenses (including sales promotion costs, ad agency production and printing costs, digital, newspaper, TV and radio advertising, and other public relations costs) totaled $1.1 million, $1.4 million and $1.3 million, ~~$1.3 million~~respectively. Incremental use of marketing activities to connect and ~~$1.1 million, respectively, and aggregated to $3.7 million for the~~ ~~nine~~ months ended September 30, 2018, increasing by $0.4 million or 13.4% compared to prior year. Costs associated with direct mail, corporate sponsorships, and local market corporate events were the largest contributors to the $0.6 million increase, and were incurred to solidify customer acquisition and corporate brand ~~awareness.~~awareness within the Orlando and new Tampa footprint contributed to the higher expenditures in the fourth quarter of 2018.

Legal and professional fees for the first ~~second and third quarters~~quarter of 2019, fourth quarter of 2018 ~~were $2.0~~and first quarter of 2018 totaled $2.8 million, ~~$2.3~~$3.7 million, and $2.0 million, respectively, peaking in the fourth quarter of 2018 when First Green was acquired.

Growth in total assets (both organic and ~~aggregated~~through acquisitions) increased the basis for calculating our Federal Deposit Insurance Corporation ("FDIC") premiums. FICO bonds, issued by the U.S. government to ~~$6.3~~create and support the Resolution Trust Corporation ("RTC"), formed during the savings and loan crisis of the early 1990's, have also been included in quarterly assessments to date, but have been repaid, reducing the assessment for Seacoast by almost $0.2 million annually on a prospective basis. Also, the FDIC's reserves hit 1.36% recently, near a reserve balance of 1.38%, at which time further relief for banks under $10 billion in assets has been mandated by statute in the form of small bank credit awards to be applied to offset quarterly FDIC premium assessments prospectively. The Company's subsidiary bank has approximately $1.6 million of these credit awards that the bank should be able to apply against premiums charged, once the FDIC achieves its 1.38% reserve. FDIC assessments were $0.5 million, $0.6 million and $0.6 million for the ~~nine~~ ~~months ended September 30,~~first quarter of 2019, fourth quarter of 2018 ~~a decrease~~and first quarter of ~~$1.7 million or 21% compared to the prior year.~~2018, respectively.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and December 31, 2018, foreclosed property expense and net losses on the sale of OREO properties ~~totaled $0.5 million~~were nominal, compared to ~~a gain in~~$0.2 million for the ~~prior period~~first quarter of ~~$0.3 million~~2018 (see “Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality”).

Other expense totaled ~~$4.8 million,~~ $4.3 million, $4.2 million and ~~$3.9~~$4.8 million for the first ~~second~~quarter of 2019, the fourth quarter of 2018 and ~~third quarters~~first quarter of 2018, respectively, and ~~increased $1.7 million or 15.4%~~decreased 11% for the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, compared to the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018. Primary contributors to the ~~$1.7~~$0.5 million ~~increase~~decrease year over year were ~~SBA and~~ marine lending fees ~~(up $0.4~~(down $0.1 million compared to a year ago), losses and charge-offs related to robbery, ~~(up $0.2 million), loan servicing costs (up $0.3 million), director fees (up $0.2~~fraud, and other losses (down $0.1 million), and ~~other higher expenses related to the growth of the business.~~

Third Second Third Nine Months Ended
Quarter
Quarter
Quarter September 30,
(In thousands, except ratios) 2018 2018 2017 2018 2017
Noninterest expense, as reported $ 37,399
$ 38,246
$ 34,361
$ 112,809
$ 110,732

Merger related charges 482
695
491
1,647
6,105
Amortization of intangibles 1,004
1,004
839
2,997
2,397
Business continuity expenses - Hurricane Irma —
—
352
—
352
Branch reductions and other expense initiatives¹
—
—
(127 ) —
4,321
Total adjustments 1,486
1,699
1,555
4,644
13,175

Adjusted noninterest expense²
$ 35,913

$ 36,547

$ 32,806
$ 108,165
$ 97,557

Adjusted efficiency ratio ^2,3
56.3 % 57.3 % 57.7 % 56.9 % 61.0 %

¹~~Includes severance payments, contract termination~~miscellaneous loan costs ~~disposition of branch premises and fixed assets, and other costs to accomplish branch consolidation and other expense reduction strategies.~~(down $0.3 million).

²~~Non-GAAP measure.~~

³~~Efficiency ratio is defined as (noninterest expense less foreclosed property expense and amortization of intangibles) divided~~

~~by the net operating revenue (net interest on a fully tax equivalent basis plus noninterest income excluding securities gains).~~

~~Merger related charges were lower for 2018, totaling $0.5 million and $1.6 million for the third quarter and~~ ~~nine~~ ~~months ended September 30, 2018, respectively, compared to $0.5 million for the third quarter and $6.1 million for the~~ ~~nine~~ months ended September 30, 2017, with most expenditures associated with either the First Green or GulfShore acquisitions in each year. In addition, branch consolidation and other expense initiatives for the ~~nine~~ months ended September 30, 2017 totaled $4.3 million, including costs in the first quarter of 2017 related to a realignment of the executive team structure and expenses associated with a reduction in workforce initiative. Business continuity expenses related to Hurricane Irma were also incremental in 2017, adding $0.4 million. Adjusted noninterest expense²~~(a non-GAAP measure, see table below for a reconciliation to noninterest expense, the most comparable GAAP number) was $35.9 million and $108.2 million for the third quarter and~~ ~~nine~~ months ended September 30, 2018, respectively, decreasing $0.6 million or 1.7% compared to the second quarter of 2018, increasing $3.1 million or 9.5% compared to the prior year’s third quarter, and was $10.6 million or 10.9% higher for the ~~nine~~ ~~months ended September 30, 2018, compared to prior year.~~

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Seacoast management expects its efficiency ratios to continue to improve. The Company anticipates that the improvements to its processes and tools for commercial banking, investment in talent and tools for our enterprise risk management and technology functions, and further upgrades to our analytics and digital marketing capabilities, will help scale our organization appropriately, and will continue to deliver sustainable earnings growth prospectively. In the third quarter of 2018 we launched a large-scale initiative to implement a fully digital loan origination platform across all business units. This follows our successful roll-out of our fully digital mortgage banking origination platform. Our expense control initiative launched at the end of the second quarter of 2018, designed to reduce overhead and become more streamlined in our approach, will continue into 2019. We are targeting $7 million in expense reductions in 2019 which will be reinvested in expanding bankers in Tampa and South Florida, installation of the fully digital platform, and development of digital direct fulfillment for small business lending. These investments will support growth and greater operating leverage into 2020.

Income Taxes

The Tax Reform Act, enacted by the U.S. Congress and signed by the President of the United States near the end of December 2017, had a significant impact on our deferred tax position and provision for taxes at year-end 2017. The new legislation resulted in additional provisioning of $8.6 million during the fourth quarter of 2017 to reflect the decline in value of net deferred tax assets.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ provision for income taxes totaled ~~$15.3~~$6.4 million and ~~$16.0~~$5.8 million, respectively. The Company’s overall effective tax rate decreased to ~~23.0%~~22.0% for the first ~~nine~~three months of ~~2018~~2019 from ~~34.9%~~24.3% for the first ~~nine~~three months a year ~~ago, reflecting the~~ago. Additionally, discrete benefits related to share-based compensation provided a tax benefit of $0.6 million for the three months ended March 31, 2019, compared to $0.2 million for the three months ended March 31, 2018. Offsetting this tax benefit in 2018 for the first quarter was a ~~lower federal rate the legislation provides, offset by a $248,000~~$0.2 million write down of deferred tax assets arising from measurement period adjustments on a 2017 bank ~~acquisition recorded in the first quarter of 2018. Additionally, discrete benefits related to share-based compensation provided a tax benefit of $732,000 for the~~ ~~nine~~ ~~months ended September 30, 2018, compared to $702,000 for the~~ ~~nine~~ ~~months September 30, 2017.~~acquisition.

Management believes all of the future tax benefits of the Company’s deferred tax assets can be realized and no valuation allowance is required.

Explanation of Certain Unaudited Non-GAAP Financial Measures

This report contains financial information determined by methods other than Generally Accepted Accounting Principles (“GAAP”), including adjusted net income, tax equivalent net interest income and margin, and adjusted noninterest expense and efficiency ratios. The most directly comparable GAAP measures are net income, net interest income, net interest margin, noninterest expense, and efficiency 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 calculate these measures differently. The Company provides reconciliations between GAAP and these non-GAAP measures. These disclosures should not be considered an alternative to GAAP.

The following table provides reconciliation between GAAP net income and adjusted net income.

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Third Second Third Nine Months Ended
Quarter Quarter Quarter September 30,
(In thousands except per share data) 2018 2018 2017 2018 2017
Net income, as reported:

Net income $ 16,322
$ 16,964
$ 14,216
$ 51,313
$ 29,818

Diluted earnings per share $ 0.34
$ 0.35
$ 0.32
$ 1.07
$ 0.70

Adjusted net income:

Net income $ 16,322
$ 16,964
$ 14,216
$ 51,313
$ 29,818
Security losses, net 48
48
47
198
26
Total adjustments to revenue 48
48
47
198
26

Merger related charges 482
695
491
1,647
6,105
Amortization of intangibles 1,004
1,004
839
2,997
2,397
Business continuity expenses - Hurricane Irma —
—
352
—
352
Branch reductions and other expense initiatives¹
—
—
(127 ) —
4,321
Total adjustments to noninterest expenses 1,486
1,699
1,555
4,644
13,175

Effective tax rate on adjustments (230 ) (443 ) (673 ) (1,211 ) (4,939 )
Effect of change in corporate tax rate —
—
—
248
—
Adjusted net income $ 17,626
$ 18,268
$ 15,145
$ 55,192
$ 38,080

Adjusted diluted earnings per share $ 0.37
$ 0.38
$ 0.35
$ 1.15
$ 0.90

¹ ~~Includes severance, contract termination costs, disposition of branch, premises and fixed assets, and other costs to effect our branch consolidation and other expense reduction strategies.~~



	First			Fourth			First
	Quarter			Quarter			Quarter
(In thousands, except per share data)	2019			2018			2018
Net income, as reported:
Net income	$	22,705		$	15,962		$	18,027

Diluted earnings per share	$	0.44		$	0.31		$	0.38

Adjusted net income:
Net income	$	22,705		$	15,962		$	18,027
Security losses, net	9			425			102
BOLI benefits on death (included in other income)	—			(280		)	—
Total adjustments to revenue	9			145			102

Merger related charges	(335		)	(8,034		)	(470		)
Amortization of intangibles	(1,458		)	(1,303		)	(989		)
Branch reductions and other expense initiatives¹	(208		)	(587		)	—
Total adjustments to noninterest expenses	(2,001		)	(9,924		)	(1,459		)

Effective tax rate on adjustments	510			2,623			538
Taxes and tax penalties on acquisition-related BOLI redemption	—			(485		)	—
Tax effect of change in corporate tax rate	—			—			(248		)
Adjusted net income	$	24,205		$	23,893		$	19,298

Adjusted diluted earnings per share	$	0.47		$	0.47		$	0.40

Average Assets	$	6,770,978		$	6,589,870		$	5,851,688
Less average goodwill and intangible assets	(230,066		)	(213,713		)	(167,136		)
Average Tangible Assets	$	6,540,912		$	6,376,157		$	5,684,552

Return on Average Assets (ROA)	1.36		%	0.96		%	1.25		%
Impact of removing average intangible assets and related amortization	0.12			0.09			0.09
Return on Average Tangible Assets (ROTA)	1.48			1.05			1.34
Impact of other adjustments for Adjusted Net Income	0.02			0.44			0.04
Adjusted Return on Average Tangible Assets	1.50			1.49			1.38

Average Shareholders' Equity	$	879,564		$	827,759		$	695,240
Less average goodwill and intangible assets	(230,066		)	(213,713		)	(167,136		)
Average Tangible Equity	$	649,498		$	614,046		$	528,104

Return on Average Shareholders' Equity	10.47		%	7.65		%	10.52		%
Impact of removing average intangible assets and related amortization	4.39			3.29			3.89
Return on Average Tangible Common Equity (ROTCE)	14.86			10.94			14.41
Impact of other adjustments for Adjusted Net Income	0.25			4.50			0.41
Adjusted Return on Average Tangible Common Equity	15.11			15.44			14.82
¹Includes severance, contract termination costs, disposition of branch premises and fixed assets, and other costs to effect our branch consolidation and other expense reduction strategies.

Financial Condition

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Total assets increased ~~$120.8~~$35.7 million, or ~~2.1%~~0.5%, from December 31, ~~2017,~~2018, benefiting from new relationships derived through our ~~recent acquisitions~~unique combination of ~~NorthStar~~customer analytics, marketing automation, and experienced bankers in ~~October 2017 and PBCB in November of 2017, along with organic growth.~~growing urban markets.

Securities

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

At ~~September 30, 2018,~~March 31, 2019, the Company had ~~$923.2~~$877.5 million in debt securities available for sale, and ~~$367.4~~$295.5 million in debt securities held to maturity. The Company's total debt securities portfolio decreased ~~$75.7~~$50.7 million, or ~~5.5%~~4%, from December 31, ~~2017. Given~~2018. In connection with the ~~current interest rate environment,~~adoption of ASU 2017-12 in January 2019, the Company elected to transfer securities ~~portfolio is being used as a liquidity source~~with an aggregate amortized cost basis of $53.5 million and fair value of $52.8 million from the held-to-maturity designation to ~~fund loan growth. Debt~~available-for-sale.

There were no debt security purchases for the ~~nine~~three months ended ~~September 30, 2018 aggregated to $105~~March 31, 2019 and $27.1 million ~~and were less than~~in maturities ~~(principally pay-downs)~~(primarily paydowns of $26.1 million) over the same period. ~~Debt~~For 2018, there were no debt security purchases during the fourth quarter and purchases of $72.3 million in the first ~~second, third~~quarter, and principal pay-downs for the fourth and first quarters of ~~2017 totaled $43 million, $213 million, $35~~2018 were similar in size, equal to $42.9 million and ~~$220~~$43.3 million, respectively. Securities acquired from GulfShore in the second quarter of 2017 were nominal, and securities acquired from NorthStar and PBCB aggregated to $78.2 million. Funding for investments in 2017 was derived from liquidity, both legacy and that acquired in mergers, and increases in funding from our core customer deposit base and FHLB borrowings.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2019, $35.0 million of certain low yielding debt securities were sold, which resulted in a loss of $0.1 million. Proceeds from the sale of securities during the fourth quarter of 2018 of $64.4 million included net losses of $0.5 million. In comparison, there were no sales of debt securities ~~were transacted. During~~transacted in the ~~nine~~ ~~months ended September 30, 2017, sales~~first quarter of ~~securities resulted in proceeds of $7.5 million (including net losses of $26,000). Management believes the securities sold had minimal opportunity to further increase in value.~~2018.

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Debt securities are generally acquired which return principal monthly. ~~During 2018, maturities (primarily comprised of pay-downs) totaled $158 million. During the~~ ~~nine~~ months ended September 30, 2017, maturities (primarily pay-downs) totaled $240 million. Securities that are fixed rate comprise 62% of the total debt securities portfolio, with remaining securities in the portfolio adjustable rate, or 38% of the total portfolio. The modified duration of the investment portfolio at ~~September 30, 2018~~March 31, 2019 was ~~3.6~~3.7 years, compared to ~~4.4~~4.8 years at December 31, ~~2017.~~2018.

At ~~September 30, 2018,~~March 31, 2019, available for sale debt securities had ~~gross unrealized losses of $26.4 million and gross unrealized gains of $1.6 million, compared to~~ gross unrealized losses of $8.5 million and gross unrealized gains of ~~$4.2~~$3.5 million, compared to gross unrealized losses of $18.3 million and gross unrealized gains of $1.3 million at December 31, ~~2017.~~2018. All of the debt securities with unrealized losses are reviewed for other-than-temporary impairment at least quarterly. As a result of these reviews it was determined that the debt securities with unrealized losses are not other than temporarily impaired and the Company has the intent and ability to retain these debt securities until recovery over the periods presented (see additional discussion under “Other Fair Value Measurements” and “Other than Temporary Impairment of Securities” in “Critical Accounting Policies and Estimates”).

Company management considers the overall quality of the debt securities portfolio to be high. The Company has no exposure to debt securities with subprime collateral. The Company does not have an investment position in trust preferred securities.

The credit quality of the Company’s ~~debt~~ securities holdings are ~~primarily~~all investment grade. As of March 31, 2019, the Company’s investment securities, except for $37.5 million of securities issued by states and their political subdivisions, generally are traded in liquid markets. U.S. Treasury and U.S. Government agency obligations totaled $825.8 million, or 70% of the total portfolio. The portfolio also includes $67.9 million in private label securities, most secured by residential real estate collateral originated in 2005 or prior years with low loan to values, and current FICO scores above 700. Generally these securities have credit support exceeding 5%. The collateral underlying these mortgage investments are primarily 30- and 15-year fixed rate, 5/1 and 10/1 adjustable rate mortgage loans. Historically, the mortgage loans serving as collateral for those investments have had minimal foreclosures and losses. The Company also has invested $241.7 million in uncapped 3-month LIBOR floating rate collateralized loan obligations. Collateralized loan obligations are special purpose vehicles that purchase 1st lien sub-investment grade corporate loans while providing support to senior tranche investors. As of March 31, 2019, the Company held 84% in AAA/AA tranches and 16% in A rated tranches with average credit support of 31% and 19%, respectively. The Company performs routine evaluations on these securities to assess both structure and collateral.

Loan Portfolio

Total loans (net of unearned income and excluding the allowance for loan losses) were ~~$4.1~~$4.8 billion at ~~September 30, 2018, $241.9~~March 31, 2019, $3.2 million ~~or 6.3%~~ more than at December 31, ~~2017. During 2018, loan growth has continued across all business lines.~~2018. For ~~2018, $393.5~~the first quarter of 2019, $109.1 million in commercial and commercial real estate loans were originated compared to ~~$350.9~~$159.4 million ~~for~~during the ~~nine~~ ~~months ended September 30, 2017.~~fourth quarter of 2018. Our loan pipeline for commercial and commercial real estate loans totaled ~~$196.5~~$177.3 million at ~~September 30, 2018, a record high.~~March 31, 2019. The Company also closed ~~$390~~$82.2 million in residential loans during ~~2018, including a $19.5 million residential loan pool acquired during~~ the ~~third~~first quarter of ~~2018. In~~2019. For comparison, residential loans totaling ~~$426.7~~$104.7 million were closed ~~for~~during the ~~first nine months~~fourth quarter of ~~2017.~~2018. This is consistent with the Residential Lending team's focus away from portfolio construction lending. The residential mortgage pipeline at ~~September 30, 2018~~March 31, 2019 totaled ~~$58.9 million, versus $48.8 million at December 31, 2017.~~$45.3 million. Consumer and small business originations ~~have~~ totaled ~~$329.2~~$118.5 million since year end ~~2017,~~ 2018,

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higher by ~~$54.9~~$4.3 million compared to the ~~nine~~three months ended ~~September 30, 2017,~~December 31, 2018, and the pipeline for these loans at March 31, 2019 was ~~$59.7~~$67.6 million, ~~compared to $38.8 million at December 31, 2017.~~

~~The NorthStar and PBCB acquisitions during 2017 contributed $136.8 million and $270.3 million in loans, respectively. During the third quarter of 2018,~~ a $19.5 million pool of whole loan fixed rate mortgages with a weighted average yield of 4.15% and average FICO score of 775 was acquired and added to the portfolio. During the first quarter of 2017, a $43 million pool of whole loan adjustable rate mortgages with a weighted average yield of 3.20% and average FICO score of 751 was acquired and added to the portfolio. Also in 2017, the Company sold two seasoned mortgage portfolio pools summing to $86.4 million ($58.0 million in the third quarter of 2017 and $28.4 million in the fourth quarter of 2017).record high. The mortgage pools sold were believed to have reached their peak in market value. Success in commercial lending through our Accelerate commercial banking model has increased loan growth. Analytics and digital marketing have further fueled loan growth in the consumer and small business channels.

~~The Company expects the~~ First Green acquisition ~~on October 19, 2018 to amplify loan growth~~ during the fourth quarter of 2018 ~~and enhance opportunities for all types of~~contributed $631.5 million in loans. Success in commercial lending through continued investment in ~~2019. We will continue to expand~~ our business ~~banking teams, adding~~bankers has increased loan growth. We hired 10 business bankers in Fort Lauderdale and Tampa during the first three months of 2019, augmenting the 10 business bankers hired in the fourth quarter of 2018. Adding new, seasoned, commercial loan officers where market opportunities arise should enhance growth opportunities and ~~improving service through electronic and digital means.~~ provide talent enhancements.

We believe that achieving our loan growth objectives, together with the prudent management of credit risk will provide us with the potential to make further, meaningful improvements to our earnings in ~~the final quarter of 2018,~~2019 and into ~~2019.~~2020.

Our strong growth is accompanied by sound risk management procedures. Our lending policies contain numerous guardrails that pertain to lending by type of collateral and purpose, along with limits regarding loan concentrations and the dollar amount (size) of loans. Our exposure to commercial real estate lending is significantly below regulatory limits (see “Loan Concentrations”).

The following tables detail loan portfolio composition at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 for portfolio loans, purchased credit impaired loans (“PCI”) and purchased unimpaired loans (“PUL”) as defined in Note E-Loans.

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	September 30, 2018								March 31, 2019
(In thousands)	Portfolio Loans		PCI Loans		PULs		Total		Portfolio Loans		PCI Loans		PULs		Total
Construction and land development	$	289,449	$	129	$	86,679	$	376,257	$	308,846	$	153	$	108,566	$	417,565
Commercial real estate ¹	1,357,721		10,838		358,140		1,726,699		1,478,955		10,393		673,069		2,162,417
Residential real estate	994,575		1,356		156,709		1,152,640		1,077,523		2,575		249,068		1,329,166
Commercial and financial	554,627		728		55,600		610,955		606,179		667		106,033		712,879
Consumer	187,199		—		5,573		192,772		195,719		—		10,695		206,414
NET LOAN BALANCES ²	$	3,383,571	$	13,051	$	662,701	$	4,059,323
Net Loan Balances²									$	3,667,222	$	13,788	$	1,147,431	$	4,828,441

December 31, 2017
(In thousands) Portfolio Loans PCI Loans PULs Total
Construction and land development $ 215,315
$ 1,121
$ 126,689
$ 343,125
Commercial real estate ¹
1,170,618
9,776
459,598
1,639,992
Residential real estate 845,420
5,626
187,764
1,038,810
Commercial and financial 512,430
894
92,690
606,014
Consumer 178,826
—
10,610
189,436
NET LOAN BALANCES ²
$ 2,922,609
$ 17,417
$ 877,351
$ 3,817,377

¹~~Commercial real estate includes owner-occupied balances of $829.4 million and $791.4 million for September 30, 2018 and December 31, 2017, respectively.~~

²~~Net loan balances at September 30, 2018 and December 31, 2017 include deferred costs of $15.9 million and $12.9 million, respectively.~~



	December 31, 2018
(In thousands)	Portfolio Loans		PCI Loans		PULs		Total
Construction and land development	$	301,473	$	151	$	141,944	$	443,568
Commercial real estate¹	1,437,989		10,828		683,249		2,132,066
Residential real estate	1,055,525		2,718		266,134		1,324,377
Commercial and financial	603,057		737		118,528		722,322
Consumer	190,207		—		12,674		202,881
Net Loan Balances²	$	3,588,251	$	14,434	$	1,222,529	$	4,825,214
¹Commercial real estate includes owner-occupied balances of $989.2 million and $970.2 million for March 31, 2019 and December 31, 2018, respectively.
²Net loan balances at March 31, 2019 and December 31, 2018 include deferred costs of $17.8 million and $16.9 million, respectively.

Commercial real estate loans were higher by ~~$86.7~~$30.4 million totaling ~~$1.7~~$2.2 billion at ~~September 30, 2018,~~March 31, 2019, compared to December 31, ~~2017.~~2018. Owner occupied loans represent ~~$829.4~~$989.2 million or ~~70.9%~~46% of the commercial real estate portfolio. Office building loans of ~~$542.7~~$652.2 million or ~~31.4%~~30% of commercial real estate mortgages comprise our largest concentration, with a substantial portion owner-occupied. Portfolio composition also includes lending for retail trade, industrial, health care, churches and educational facilities, recreation, multifamily, lodging, agriculture, convenience stores, marinas, and other types of real estate.

The Company’s ten largest commercial and commercial real estate funded and unfunded loan relationships at ~~September 30, 2018~~March 31, 2019 aggregated to ~~$190.6~~$220.5 million (versus ~~$169.7~~$218.6 million at December 31, ~~2017)~~2018), of which ~~$142.7~~$154.1 million was funded. The Company’s 92127 commercial and commercial real estate relationships in excess of $5 million totaled ~~$883.4 million,~~$1.2 billion, of which ~~$712.5 million~~$1.0 billion was funded at ~~September 30, 2018~~March 31, 2019 (compared to 89128 relationships of ~~$803.5 million~~$1.3 billion at December 31, ~~2017,~~2018, of which ~~$684.2 million~~$1.0 billion was funded).

Fixed rate and adjustable rate loans secured by commercial real estate, excluding construction loans, totaled approximately ~~$1.4~~$1.6 billion and ~~$347.9~~$525.9 million, respectively, at ~~September 30, 2018,~~March 31, 2019, compared to ~~$1.2~~$1.6 billion and ~~$410.0~~$533.4 million, respectively, at December 31, ~~2017.~~2018.

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Reflecting more muted production during the ~~impact of organic loan growth and the NorthStar and PBCB loan acquisitions,~~quarter, commercial and financial loans (“C&I”) outstanding at ~~September 30, 2018 increased~~March 31, 2019 decreased to ~~$611.0~~$712.9 million, updown from ~~$606.0~~$722.3 million at December 31, ~~2017.~~2018. Commercial lending activities are directed principally towards businesses whose demand for funds are within the Company’s lending limits, such as small- to medium-sized professional firms, retail and wholesale outlets, and light industrial and manufacturing concerns. Such businesses are smaller and subject to the risks of lending to small- to medium-sized businesses, including, but not limited to, the effects of a downturn in the local economy, possible business failure, and insufficient cash flows.

Residential mortgage loans increased ~~$113.8~~$4.8 million ~~or 11.0%~~ to ~~$1.15~~$1.3 billion as of ~~September 30, 2018,~~March 31, 2019, compared to ~~the balance outstanding at~~ December 31, ~~2017.~~2018. Substantially all residential originations have been underwritten to conventional loan agency standards, including loans having balances that exceed agency value limitations. At ~~September 30, 2018,~~March 31, 2019, approximately ~~$534~~$611.3 million or 46% of the Company’s residential mortgage balances were adjustable 1-4 family mortgage loans (including hybrid adjustable rate mortgages). Fixed rate mortgages totaled approximately ~~$300~~$379.4 million ~~(26%~~(29% of the residential mortgage portfolio) at ~~September 30, 2018,~~March 31, 2019, of which 15- and 30-year mortgages totaled ~~$24~~$34.9 million and ~~$237~~$291.8 million, respectively. Remaining fixed rate balances were comprised of home improvement loans totaling ~~$112~~$128.0 million, most with maturities of 10 years or less, and home

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equity lines of credit, primarily floating rates, totaling ~~$246~~$263.1 million at ~~September 30, 2018.~~March 31, 2019. In comparison, loans secured by residential properties having fixed rates totaled ~~$247~~$370.2 million at December 31, ~~2017,~~2018, with 15- and 30-year fixed rate residential mortgages totaling ~~$22~~$32.1 million and ~~$173~~$276.5 million, respectively, and home equity mortgages and lines of credit totaling ~~$123~~$135.8 million and ~~$233~~$261.9 million, respectively.

The Company also provides consumer loans (including installment loans, loans for automobiles, boats, and other personal, family and household purposes) which increased ~~$3.3~~$3.5 million, or ~~0.0%~~2%, from December 31, ~~2017~~2018 to total ~~$192.8~~$206.4 million (versus ~~$189.4~~$201.7 million at December 31, ~~2017)~~2018). Of the ~~$3.3~~$3.5 million increase, automobile and truck loans, and marine loans, increased $1.2 million and $3.5 million, respectively, while other consumer loans ~~increased $0.6 million, $0.2 million and $0.6 million, respectively.~~declined $1.2 million.

At ~~September 30, 2018,~~March 31, 2019, the Company had unfunded commitments to make loans of ~~$865~~$992.4 million, compared to ~~$808~~$982.7 million at December 31, ~~2017.~~2018.

Loan Concentrations

The Company has developed guardrails to manage loan types that are most impacted by stressed market conditions in order to achieve lower levels of credit loss volatility in the future. Outstanding balances for commercial and commercial real estate (“CRE”) loan relationships greater than $10 million totaled ~~$360.0~~$465.4 million and represented 9%10% of the total portfolio at ~~September 30,~~March 31, 2019 compared to $502.1 million or 10% at year-end 2018.

Concentrations in total construction and land development loans and total CRE loans are maintained well below regulatory limits. Construction and land development and CRE loan concentrations as a percentage of total risk based capital, were stable at ~~59%~~57% and ~~199%~~216%, respectively, at ~~September 30, 2018.~~March 31, 2019. Regulatory guidance suggests limits of 100% and 300%, respectively. 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, or “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.

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

Nonperforming assets (“NPAs”) at ~~September 30, 2018~~March 31, 2019 totaled ~~$30.9~~$34.3 million, and were comprised of $19.0 million of nonaccrual portfolio loans, $7.1 million of nonaccrual purchased loans, $0.4 million of non-acquired other real estate owned (“OREO”), $1.2 million of acquired OREO and $3.1 million of branches out of service. Nonaccrual portfolio loans increased $6.6 million compared to December 31, 2017, primarily the result of a transfer of a single credit to nonaccrual status in the second quarter of 2018. NPAs increased from $27.2 million recorded as of December 31, 2017 (comprised of $12.6$15.4 million of nonaccrual portfolio loans, $7.0 million of nonaccrual purchased loans, ~~$2.2~~$0.8 million of non-acquired ~~OREO, $1.6~~other real estate owned (“OREO”), $1.7 million of acquired OREO and ~~$3.8~~$9.4 million of branches taken out of ~~service).~~service. Compared to December 31, 2018, nonaccrual purchased loans decreased $3.7 million and acquired OREO declined $1.3 million, primarily the result of a payoff of a single $3.0 million acquired residential real estate loan and the sale of a single commercial real estate OREO acquired from First Green. Overall, NPAs decreased $5.0 million, or 13%, from $39.3 million recorded as of December 31, 2018. At ~~September 30, 2018,~~March 31, 2019, approximately ~~94%~~83% of nonaccrual loans were secured with real estate. See the tables below for details about nonaccrual loans. At ~~September 30, 2018,~~March 31, 2019, nonaccrual loans were written down by approximately $7.1 million or ~~21%~~24% of the original loan balance (including specific impairment reserves). Since December 31, ~~2017,~~2018, OREO amounts related to branches taken out of service that are actively being marketed, ~~decreased $0.7~~the largest component of OREO totaling $9.4 million, ~~and OREO for foreclosed properties decreased $2.3 million. During the~~ ~~nine~~ ~~months ended September 30, 2018, a single residence valued at $3.8 million (added to acquired OREO during the first quarter~~did not change.

Table of ~~2018) was subsequently sold in the third quarter of 2018.~~Contents

Nonperforming loans to total loans outstanding at ~~September 30, 2018 increased~~March 31, 2019 decreased to ~~0.64%~~0.46% from ~~0.51%~~0.55% at December 31, ~~2017.~~2018. Nonperforming assets to total assets at March 31, 2019 decreased to 0.51% from 0.58% at December 31, 2018.

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

The Company pursues loan restructurings in selected cases where it expects to realize better values than may be expected through traditional collection activities. The Company has worked with retail mortgage customers, when possible, to achieve lower payment structures in an effort to avoid foreclosure. ~~TDRs~~Troubled debt restructurings ("TDRs") have been a part of the Company’s loss mitigation activities and can include rate reductions, payment extensions and principal deferrals. Company policy requires TDRs that are classified as nonaccrual loans after restructuring remain on nonaccrual until performance can be verified, which usually requires six months of performance under the restructured loan terms. Accruing restructured loans totaled ~~$13.8~~$14.9 million at ~~September 30, 2018,~~March 31, 2019, compared to ~~$15.6~~$13.3 million at December 31, ~~2017.~~2018. Accruing TDRs are excluded from our nonperforming asset ratios. The table below set forth details related to nonaccrual and accruing restructured loans.

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September 30, 2018	Nonaccrual Loans						Accruing Restructured
									March 31, 2019
									Nonaccrual Loans						Accruing Restructured Loans
(In thousands)	NonCurrent		Performing		Total		Loans		Non-Current		Performing		Total		Accruing Restructured Loans
Construction & land development
Residential	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial	67		—		67		18		—		—		—		11
Individuals	—		147		147		180		—		42		42		160
	67		147		214		198		—		42		42		171
Residential real estate mortgages	5,524		7,430		12,954		7,624		2,723		8,041		10,764		6,774
Commercial real estate mortgages	2,039		9,469		11,508		5,707		6,266		1,437		7,703		7,432
Real estate loans	7,630		17,046		24,676		13,529		8,989		9,520		18,509		14,377
Commercial and financial	1,261		25		1,286		—		2,608		1,170		3,778		180
Consumer	102		76		178		268		56		70		126		300
	$	8,993	$	17,147	$	26,140	$	13,797	$	11,653	$	10,760	$	22,413	$	14,857

At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, total TDRs (performing and nonperforming) were comprised of the following loans by type of modification:


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
(In thousands)	Number	Amount		Number	Amount		Number	Amount		Number	Amount
Rate reduction	59	$	11,146	71	$	12,843	55	$	12,387	56	$	10,739
Maturity extended with change in terms	47	5,266		51	5,803		44	4,530		48	5,083
Chapter 7 bankruptcies	23	1,437		28	1,812		22	1,218		22	1,275
Not elsewhere classified	10	1,035		11	1,190		9	763		11	966
	139	$	18,884	161	$	21,648	130	$	18,898	137	$	18,063

~~There~~During the three months ended March 31, 2019, two loans were ~~no new TDRs identified during the third quarter. Year to date for 2018, there was one newly identified~~modified in a TDR totaling ~~$0.1~~$2.0 million, compared to ~~$0.1~~$0.2 million for all of ~~2017.~~2018. 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. No accruing loans that were restructured within the twelve months preceding ~~September 30, 2018~~March 31, 2019 defaulted during the twelve months ended ~~September 30, 2018, or for 2017.~~March 31, 2019. A restructured loan is considered in default when it becomes 90 days or more past due under the modified terms, has been transferred to nonaccrual status, or has been transferred to OREO.

At ~~September 30, 2018,~~March 31, 2019, loans (excluding PCI) totaling ~~$38.1~~$35.4 million were considered impaired (comprised of total nonaccrual, loans 90 days or more past due, and TDRs) and ~~$6.1~~$2.4 million of the allowance for loan losses was allocated for potential losses on these loans, compared to ~~$30.3~~$36.7 million and ~~$2.4~~$2.7 million, respectively, at December 31, ~~2017.~~2018.

In accordance with regulatory reporting requirements, loans are placed on nonaccrual following the Retail Classification of Loan interagency guidance. Typically loans 90 days or more past due are reviewed for impairment, and if deemed impaired, are placed

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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, the loan carrying value is analyzed and any changes are appropriately made as described above.

Cash and Cash Equivalents and Liquidity Risk Management

~~Cash and cash equivalents (including interest bearing deposits), totaled $105.1 million on a consolidated basis at September 30, 2018, compared to $109.5 million at December 31, 2017.~~

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.

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Funding sources include primarily ~~include~~ customer-based core deposits, collateral-backed borrowings, cash flows from operations, cash flows from our loan and investment portfolios and asset sales (primarily secondary marketing for residential real estate mortgages and marine financings). Cash flows from operations are a significant component of liquidity risk management and we consider both deposit maturities and the scheduled cash flows from loan and investment maturities and payments when managing risk.

The Company does not rely on and is not dependent on off-balance sheet financing or significant amounts of wholesale funding.

Deposits are ~~also~~ 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. We routinely use debt securities and loans as collateral for secured borrowings. In the event of severe market disruptions, we have access to secured borrowings through the FHLB and the Federal Reserve Bank of Atlanta under its borrower-in-custody program.

Cash and cash equivalents (including interest bearing deposits), totaled $204.0 million on a consolidated basis at March 31, 2019, compared to $116.0 million at December 31, 2018. Higher cash and cash equivalent balances at March 31, 2019 reflect seasonality as deposits typically peak in the first quarter, as well as proceeds from the sales of available for sale debt securities, proceeds from the redemption of First Green bank owned life insurance policies redeemed in the fourth quarter of 2018 and settled in the first quarter of 2019, and additional funds held in anticipation of brokered certificates of deposit ("CDs") maturing during the first week of April 2019.

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 ~~held~~available for sale and interest-bearing deposits. The Company is also able to provide short term financing of its activities by selling, under an agreement to repurchase, United States Treasury and Government agency debt securities not pledged to secure public deposits or trust funds. At ~~September 30, 2018,~~March 31, 2019, Seacoast Bank had available unsecured lines of ~~$130~~$130.0 million and lines of credit under current lendable collateral value, which are subject to change, of ~~$1.064~~$1.4 billion. Seacoast had ~~$511~~$473.9 million of United States Treasury and Government agency debt securities and mortgage backed debt securities not pledged and available for use under repurchase agreements, and had an additional ~~$591 million~~$1.0 billion in residential and commercial real estate loans available as collateral. In comparison, at December 31, ~~2017, the Company~~2018, Seacoast Bank had available unsecured lines of ~~$95~~$130.0 million and lines of credit of ~~$1.006 billion,~~$781.7 million, and had ~~$455~~$665.7 million of Treasury and Government agency debt securities and mortgage backed debt securities not pledged and available for use under repurchase agreements, as well as an additional ~~$593~~$869.8 million in residential and commercial real estate loans available as collateral.

~~The Company does not rely on and is not dependent on off-balance sheet financing or significant amounts of wholesale funding. During the~~ ~~nine~~ months ended September 30, 2018, $295.0 million of brokered certificates of deposit (“CDs”) at an average rate of 1.49% matured, and the Company acquired $275.0 million in brokered CDs at a weighted average rate of 1.96%. Of the $275.0 million acquired, $85.0 million matured in the second quarter of 2018, $140.0 million matures in the fourth quarter of 2018, and $50.0 million matures in the first quarter of 2019. Total brokered CDs at September 30, 2018 totaled $192.2 million, compared to $217.4 million at December 31, 2017.

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. ~~At September 30, 2018,~~During the first quarter of 2019, Seacoast Bank ~~can~~distributed $3.3 million to the Company and, at March 31, 2019, is eligible to distribute dividends to the Company of approximately ~~$88 million.~~$124.0 million without prior approval. At ~~September 30, 2018,~~March 31, 2019, the Company had cash and cash equivalents at the parent of approximately ~~$48.0~~$41.6 million, compared to ~~$34.4~~$40.3 million at December 31, ~~2017. The increase includes $21.3 million in cash received in January 2018 from the sale of Visa Class B stock that was recorded in December 2017, offset primarily by taxes associated with the sale.~~2018.

Deposits and Borrowings

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

Total deposits increased ~~$50.8~~$428.3 million, or ~~1.1%~~8%, to ~~$4.64~~$5.6 billion at ~~September 30, 2018,~~March 31, 2019, compared to December 31, ~~2017.~~2018. At ~~September 30, 2018,~~March 31, 2019, total deposits excluding brokered CDs grew ~~$76.0~~$281.1 million, or ~~1.7%~~6%, from year-end ~~2017.~~2018.

Since December 31, ~~2017, noninterest bearing demand deposits increased $88.5 million or 6.3% to $1.49 billion,~~2018, interest bearing deposits (interest bearing demand, savings and money ~~markets~~market deposits) ~~decreased $14.8~~increased $119.1 million or ~~0.6%~~4% to ~~$2.40~~$2.8 billion, and CDs ~~decreased $22.9~~(excluding broker CDs) increased $55.6 million or ~~3.0%~~8% to ~~$753.0~~$760.9 million. Noninterest demand deposits ~~represent 32% of deposits,~~were higher by $106.4 million or 7% compared to year-end 2018, totaling $1.7 billion. Noninterest demand

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deposits represented 30% of total deposits at March 31, 2019 and December 31, ~~2017.~~2018. Core deposit growth reflects our success in growing households ~~both organically~~through our unique capabilities in customer analytics and ~~through acquisitions.~~marketing automation.

~~Brokered~~During the three months ended March 31, 2019, $134.1 million of brokered CDs ~~are~~at an average rate of 2.19% matured, and the ~~primary contributor~~Company acquired $281.3 million in brokered CDs at a weighted average rate of 2.31%. Of the $281.3 million acquired, $231.3 million matures in the second quarter of 2019 and $50.0 million matures in the fourth quarter of 2019. Total brokered CDs at March 31, 2019 totaled $367.8 million compared to ~~the decrease in CDs since~~$220.6 million at December 31, 2017, lower by $25.2 million or 11.6%. An intentional decrease in higher cost time deposits was recorded over the two years prior to the 2016 and 2017 acquisitions, and was more than offset by increases in low cost or no cost deposits.2018.

Customer repurchase agreements totaled ~~$189.0~~$148.0 million at ~~September 30, 2018,~~March 31, 2019, decreasing ~~$27.1~~$66.3 million or ~~12.5%~~31% from December 31, ~~2017. The repurchase~~2018. 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.

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No unsecured federal funds purchased were outstanding at ~~September 30, 2018.~~March 31, 2019.

At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, borrowings were comprised of subordinated debt of ~~$70.7~~$70.9 million and ~~$70.5~~$70.8 million, respectively, related to trust preferred securities issued by trusts organized or acquired by the Company, and borrowings from FHLB of ~~$261.0~~$3.0 million and ~~$211.0~~$380.0 million, respectively. At ~~September 30, 2018, our~~March 31, 2019, the remaining $3.0 million of FHLB borrowings ~~were all maturing within 30 days, with the exception of maturities of $3.0 million~~matures in April ~~2019 and $60.0 million in June~~ 2019. The weighted average rate for FHLB funds during the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 was 2.53% and ~~2017 was 1.83% and 0.94%~~1.51%, respectively, and compared to ~~0.99%~~1.99% for the year ended December 31, ~~2017.~~2018. Secured FHLB borrowings are an integral tool in liquidity management for the Company.

The Company ~~has two~~issued subordinated debt in conjunction with its wholly owned trust subsidiaries, SBCF Capital Trust I and SBCF Statutory Trust II that were ~~both~~ formed in 2005. In 2007, the Company ~~formed an~~issued additional subordinated debt for its wholly owned trust subsidiary, SBCF Statutory Trust III. The 2005 subordinated debt for each trust totaled $20.6 million (aggregating to $41.2 million) and the 2007 subordinated debt totaled $12.4 million. As part of the October 1, 2014 The BANKshares Inc. acquisition, the Company inherited three junior subordinated debentures totaling $5.2 million, $4.1 million, and $5.2 million, respectively. Also, as part of the Grand acquisition, the Company inherited an additional junior subordinated debenture totaling $7.2 million. The acquired junior subordinated debentures (in accordance with ~~ASU~~ASC Topic 805 Business ~~Combinations)~~Combinations) were recorded at fair value, which collectively is ~~$4.6~~$4.4 million lower than face value at ~~September 30, 2018.~~March 31, 2019. This amount is being amortized into interest expense over the acquired subordinated debts’ remaining term to maturity. All trust preferred securities are guaranteed by the Company on a junior subordinated basis.

Under Basel III and Federal Reserve rules, qualified trust preferred securities and other restricted capital elements can be included as Tier 1 capital, within limitations. The Company believes that its trust preferred securities qualify under these capital rules. The weighted average interest rate of our outstanding subordinated debt related to trust preferred securities was ~~4.42%~~5.14% and ~~3.43%~~3.99% for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, and compared to ~~3.47%~~4.48% for the year ended December 31, ~~2017.~~2018.

Off-Balance Sheet Transactions

In the normal course of business, we may engage in a variety of financial transactions that, under generally accepted accounting principles, either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk.

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

For commercial customers, loan commitments generally take the form of revolving credit arrangements. For retail customers, loan commitments 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 ~~$865~~$992.4 million at ~~September 30, 2018~~March 31, 2019 and ~~$808~~$982.7 million at December 31, ~~2017.~~2018.

Capital Resources

The Company’s equity capital at ~~September 30, 2018~~March 31, 2019 increased ~~$43.2~~$32.2 million from December 31, ~~2017~~2018 to ~~$732.8~~$896.4 million.

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The ratio of shareholders’ equity to period end total assets was ~~12.36%~~13.21% and ~~11.87%~~12.81% at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The ratio of tangible shareholders’ equity to tangible assets was ~~9.85%~~10.18% and ~~9.27%~~9.72% at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Equity has increased as a result of earnings retained by the Company.

Activity in shareholders’ equity for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ follows:

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(In thousands)	2018			2017		2019		2018
Beginning balance at December 31, 2017 and 2016	$	689,664		$	435,397
Beginning balance at December 31, 2018 and 2017						$	864,267	$	689,664
Net income	51,313			29,818		22,705		18,027
Issuance of stock via common stock offering on February 21, 2017	—			55,660
Issuance of stock pursuant to acquisition of GulfShore	—			62,882
Stock compensation (net of Treasury shares acquired)	6,503			4,337		609		2,064
Change in other comprehensive income	(14,649		)	6,347		8,843		(7,894		)
Ending balance at September 30, 2018 and 2017	$	732,831		$	594,441
Ending balance at March 31, 2019 and 2018						$	896,424	$	701,861

Capital ratios are well above regulatory requirements for well-capitalized institutions. ~~Seacoast’s management~~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 IJ – ~~Shareholders’ Equity”~~Equity Capital”).

September 30, 2018: Seacoast (Consolidated)
Seacoast
Bank

Minimum to be Well- Capitalized¹
Common equity Tier 1 ratio (CET1) 13.19% 13.65% 6.5%
Tier 1 capital ratio 14.80% 13.65% 8.0%
Total risk-based capital ratio 15.57% 14.42% 10.0%
Tier 1 leverage ratio 11.33% 10.45% 5.0%

¹~~For subsidiary bank only~~



March 31, 2019	Seacoast (Consolidated)		Seacoast Bank		Minimum to be Well- Capitalized¹
Total Risk-Based Capital Ratio	15.00	%	14.14	%	10.0	%
Tier 1 Capital Ratio	14.36	%	13.50	%	8.0	%
Common Equity Tier 1 Ratio (CET1)	12.98	%	13.50	%	6.5	%
Leverage Ratio	11.28	%	10.60	%	5.0	%
¹For subsidiary bank only

The Company’s total risk-based capital ratio was ~~15.57%~~15.00% at ~~September 30, 2018,~~March 31, 2019, an increase from December 31, ~~2017’s~~2018’s ratio of ~~14.24%~~14.43%. Higher earnings have been a primary contributor. At ~~September 30, 2018,~~March 31, 2019, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was ~~10.45%~~10.60%, ~~compared~~well above the minimum to ~~9.72% at December 31, 2017, reflecting earnings during the first quarter.~~be well capitalized under regulatory guidelines.

Accumulated other comprehensive income ~~declined $14.6~~increased $8.8 million during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 from December 31, ~~2017,~~2018, primarily reflecting the impact of ~~higher~~lower interest rates on available for sale securities.

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 ~~$88~~$124.0 million of dividends to the Company.

The OCC and the Federal Reserve have policies that encourage banks and bank holding companies to pay dividends from current earnings, and have the general authority to limit the dividends paid by national banks and bank holding companies, respectively, if such payment may be deemed to constitute an unsafe or unsound practice. If, in the particular circumstances, either of these federal regulators determined that the payment of dividends would constitute an unsafe or unsound banking practice, either the OCC or the Federal Reserve may, among other things, issue a cease and desist order prohibiting the payment of dividends by Seacoast Bank or us, respectively. ~~Under a recently adopted Federal Reserve policy, the~~The board of directors of a bank holding company must consider different factors to ensure that its dividend level is prudent relative to the organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may occur before the payment date that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company, such as Seacoast, should consult with the Federal Reserve and eliminate, defer, or significantly reduce the bank holding company’s dividends if: (i) its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) its prospective rate of earnings retention is not consistent with

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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 our acquisitions were recorded at fair value when acquired. All trust preferred securities are guaranteed by the Company on a junior

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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 ~~$70.7~~$70.9 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.

The Company’s capital is expected to continue to increase with positive earnings.

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. We have established policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements. Management, after consultation with the Company’s Audit Committee, believes the most critical accounting estimates and assumptions that involve the most difficult, subjective and complex assessments are:

the allowance and the provision for loan losses;

acquisition accounting and purchased loans;

intangible assets and impairment testing;

other fair value adjustments;

other than temporary impairment of debt securities;

realization of deferred tax assets; 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 us that could have a material effect on our 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 Loan Losses – Critical Accounting Policies and Estimates

Management determines the ~~provision~~allowance for loan losses by continuously analyzing and monitoring delinquencies, nonperforming ~~loans~~loan levels and the outstanding balances for each loan category, as well as the amount of net charge-offs, for estimating losses inherent in its portfolio. While the Company’s policies and procedures used to estimate the ~~provision~~allowance for loan losses ~~charged to operations~~ are considered adequate by management, factors beyond the control of the Company, such as general economic conditions, both locally and nationally, make management’s judgment as to the adequacy of the provision and allowance for loan losses approximate and imprecise (see “Nonperforming Assets”).

The provision for loan losses is the result of a detailed analysis estimating for probable loan losses. The analysis includes the evaluation of impaired and purchased credit impaired loans as prescribed under FASB Accounting Standards Codification (“ASC”) Topic 310, Receivables as well as an analysis of homogeneous loan pools not individually evaluated as prescribed under ASC 450, Contingencies. ~~For the~~ ~~nine~~ ~~months ended September 30, 2018 and 2017, the Company recorded provision for loan losses of $9.4 million and $3.4 million, respectively.~~ The provision for loan losses for the ~~third~~first quarter of ~~2018~~2019 was $~~5.8~~$1.4 million, ~~compared to $2.5 million for the second quarter of 2018, and~~which compared to $~~0.7~~1.1 million for the ~~third~~first quarter of 2017. A $3.1 million increase in provision during the third quarter of 2018 for a single impaired commercial real estate loan, originated in 2007, and discussed last quarter upon the loan moving to nonaccrual status, as well as the effects of portfolio growth, were primary causes for the increase in provision for the third quarter of 2018, compared to prior quarters. Net2018. The Company incurred net charge-offs during the ~~third~~first quarter ~~and second quarters~~ of ~~2018 summed to $0.8~~2019 of $1.0 million, and ~~$1.7 million, respectively, and~~net charge-offs were near zero for the first quarter of 2018. Net charge-offs for the first quarter of 2019 were 0.08% of average loans, and for the four most recent quarters averaged ~~0.10%~~0.16% of outstanding loans. Delinquency trends remain low, with nonperforming loans decreasing ~~$0.1~~$4.1 million during the quarter ended ~~September 30, 2018~~March 31, 2019 (see section titled “Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality”).

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Management continuously monitors the quality of the Company’s loan portfolio and maintains an allowance for loan losses it believes is sufficient to absorb probable losses incurred in the loan portfolio. The allowance for loan losses increased ~~$6.8~~$4.7 million, or 17%, to ~~$33.9~~$32.8 million at ~~September 30, 2018,~~March 31, 2019, compared to ~~$27.1~~$28.1 million at ~~December~~March 31, ~~2017.~~2018. The allowance for loan and lease losses

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(“ALLL”) framework has four basic elements: (1) specific allowances for loans individually evaluated for impairment; (2) general allowances for pools of homogeneous non-purchased loans (“portfolio loans”) within the portfolio that have similar risk characteristics, which are not individually evaluated; (3) specific allowances for purchased impaired loans which are individually evaluated based on the ~~loans~~loan's expected principal and interest cash flows; and (4) general allowances for purchased unimpaired pools of homogeneous loans that have similar risk characteristics. The aggregate of these four components results in our total ALLL.

The first component of the ALLL analysis involves the estimation of an allowance specific to individually evaluated impaired portfolio loans, including accruing and non-accruing restructured commercial and consumer loans. In this process, a specific allowance is established for impaired loans based on an analysis of the most probable sources of repayment, including discounted cash flows, liquidation or operation of the collateral, or the market value of the loan itself. It is the Company’s policy to charge off any portion of the loan deemed ~~uncollectable.~~uncollectible. Restructured consumer loans are also evaluated and included in this element of the estimate. As of ~~September 30, 2018,~~March 31, 2019, the specific allowance related to impaired portfolio loans individually evaluated totaled ~~$6.1~~$2.4 million, ~~including $3.4 million for the single commercial real estate loan discussed previously,~~ and compared to ~~$2.4~~$2.7 million at ~~December~~March 31, ~~2017.~~2018. Residential loans that become 90 days past due are placed on nonaccrual and a specific allowance is made for any loan that becomes 120 days past due. Residential loans are subsequently written down if they become 180 days past due and such write-downs are supported by a current appraisal, consistent with current banking regulations.

The second component of the ALLL analysis, the general allowance for homogeneous portfolio loan pools not individually evaluated, is determined by applying factors to pools of loans within the portfolio that have similar risk characteristics. The general allowance is determined by applying a migration model to portfolio segments that allows us to observe performance over time, and to separately analyze sub-segments based onin vintage, risk rating, and origination tactics. 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 historical loss experience. These influences may include elements such as changes in concentration, macroeconomic conditions, and/or recent observable asset quality trends. Our analysis of the adequacy of the allowance for loan losses also takes into account qualitative factors such as credit quality, loan concentrations, internal controls, audit results, staff turnover, local market conditions, employment levels and loan growth.

The third component consists of amounts reserved for purchased credit-impaired ~~loans (PCI).~~("PCI") loans. On a quarterly basis, the Company updates the amount of loan principal and interest cash flows expected to be collected, incorporating assumptions regarding default rates, loss severities, the amounts and timing of prepayments and other factors that are reflective of current market conditions. Probable decreases in expected loan cash flows trigger the recognition of impairment, which is then measured as the present value of the expected principal loss plus any related foregone interest cash flows discounted at the pool’s effective interest rate. Impairments that occur after the acquisition date are recognized through the provision for loan losses. Probable and significant increases in expected principal cash flows would first reverse any previously recorded allowance for loan losses; any remaining increases are recognized prospectively as interest income. The impacts of (i) prepayments, (ii) changes in variable interest rates, and (iii) any other changes in the timing of expected cash flows are recognized prospectively as adjustments to interest income. Disposals of loans, which may include sales of loans, receipt of payments in full by the borrower, or foreclosure, result in removal of the loan from the PCI portfolio.

The final component consists of amounts reserved for purchased unimpaired loans ~~(PUL)~~("PUL"). Loans collectively evaluated for impairment reported at ~~September 30, 2018~~March 31, 2019 include loans acquired from PBCB on November 3, 2017, NorthStar on October 20, 2017, GulfShore on April 7, 2017, BMO Harris on June 3, 2016, Floridian Bank on March 11, 2016, Grand Bank on July 17, 2015 and BANKshares on October 1, 2014acquisitions that are not PCI loans. These loans are performing loans recorded at estimated fair value at the acquisition date. ~~These fair~~Fair value discount amounts are accreted into income over the remaining lives of the related loans on a level yield basis.

The allowance as a percentage of portfolio loans outstanding (excluding PCI and PUL loans) was ~~0.98%~~0.89% at ~~September 30, 2018,~~March 31, 2019, no change compared to ~~0.90% at~~ December 31, ~~2017.~~2018. The risk profile of the loan portfolio reflects adherence to credit management methodologies to execute a low risk strategic plan for loan growth. New loan production is focused on ~~adjustable rate~~ residential real estate loans, owner-occupied commercial real estate, small business loans for professionals and businesses, as well as consumer lending. Strategies, processes and controls are in place to ensure that new production is well underwritten and maintains a focus on smaller, diversified and lower-risk lending.

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 30, 2018,~~March 31, 2019, the Company had ~~$1.328~~$1.3 billion in loans secured by residential real estate and ~~$1.927~~$2.2 billion in loans secured by commercial real estate,

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~~estate,~~ representing ~~32.7%~~28% and ~~47.5%~~45% of total loans outstanding, respectively. In addition, the Company is subject to a geographic concentration of credit because it ~~primarily~~only operates in ~~central and southeastern~~ Florida.

It is the practice of the Company to ensure that its charge-off policy meets or exceeds regulatory minimums. Losses on unsecured consumer loans are recognized at 90 days past due, compared to the regulatory loss criteria of 120 days. In compliance with Federal Financial Institution Examination Council guidelines, secured consumer loans, including residential real estate, are typically charged-off or charged down between 120 and 180 days past due, depending on the collateral type. Commercial loans and real estate loans are typically placed on nonaccrual status when principal or interest is past due for 90 days or more, unless the loan is both secured by collateral having realizable value sufficient to discharge the debt in-full and the loan is in process of collection. Secured loans may be charged-down to the estimated value of the collateral with previously accrued unpaid interest reversed. 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.

While it is the Company’s policy to charge off in the current period loans infor which a loss is considered probable, there are additional risks of future losses that cannot be quantified precisely or attributed to particular loans or classes of loans. Because these risks include the state of the economy, borrower payment behaviors and local market conditions as well as conditions affecting individual borrowers, management’s judgment of the allowance is necessarily approximate and imprecise. The allowance is also subject to regulatory examinations and determinations as to adequacy, which may take into account such factors as the methodology used to calculate the ALLL and the size of the ALLL in comparison to a group of peer companies identified by the regulatory agencies.

Management has established a transition oversight committee responsible for implementing the allowance guidance set forth under

ASU 2016-13, Financial Instruments –Credit Losses (Topic 326). Development of accounting policies and business processes is currently underway and will ~~consistently evaluate~~be established in time for the ~~ALLL methodology and seek~~Company to ~~refine and enhance this process~~adopt the new guidance on January 1, 2020. The Company may recognize an increase in the allowance for credit losses upon adoption, recorded as ~~appropriate. As~~ a ~~result, it is likely that~~one-time cumulative adjustment to retained earnings. However, the ~~methodology will continue to evolve over time.~~magnitude of the impact on the Company's consolidated financial statements has not yet been determined.

Note F to the financial statements (titled “Allowance for Loan Losses”) summarizes the Company’s allocation of the allowance for loan losses to construction and land development loans, commercial and residential estate loans, commercial and financial loans, and consumer loans, and provides more specific detail regarding charge-offs and recoveries for each loan component and the composition of the loan portfolio at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

Acquisition Accounting and Purchased Loans – Critical Accounting Policies and Estimates

The Company accounts for its 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. No allowance for loan losses related to the acquired loans is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. All loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic ~~820.~~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.

Over the life of the PCI loans acquired, the Company continues to estimate cash flows expected to be collected. The Company evaluates at each balance sheet date whether the present value of the acquired loans using the effective interest rates has decreased and if so, recognizes a provision for loan loss in its consolidated statement of income. For any increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the loan’s remaining life.

Intangible Assets and Impairment Testing – Critical Accounting Policies and Estimates

Intangible assets consist of goodwill and core deposit intangibles. Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions. The core deposit intangible represents the excess intangible value of acquired deposit customer relationships as determined by valuation specialists. Core deposit intangibles are amortized on a straight-line basis, and are evaluated for indications of potential impairment at least annually. Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis. We performed an annual impairment test of goodwill as required by ~~FASB~~ ASC Topic 350, Intangibles—Goodwill and Other, in the fourth quarter of ~~2017.~~2018. Seacoast conducted the test internally, documenting the impairment

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test results, and concluded that no impairment occurred. Goodwill was not recorded for the Grand acquisition (on July 17, 2015) that resulted in a bargain purchase gain; however a core deposit intangible was recorded.

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.

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Other Fair Value Measurements – Critical Accounting Policies and Estimates

“As Is” values are used to measure fair market value on impaired loans, OREO and repossessed assets. All impaired loans, OREO and repossessed assets 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 loans are loans ~~that are~~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 will be requested. Upon receipt of the “As Is” appraisal a charge-off is recognized for the difference between the loan amount and its current fair market value.

The fair value of the available for sale securities portfolio at ~~September 30, 2018~~March 31, 2019 was less than historical amortized cost, producing net unrealized losses of ~~$24.8~~$5.0 million that have been included in other comprehensive income (loss) as a component of shareholders’ equity (net of taxes). The Company made no change to the valuation techniques used to determine the fair values of securities during ~~2018~~2019 and ~~2017.~~2018. 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.

During 2014, management identified $158.8 million of investment securities available for sale and transferred them to held for investment. The unrealized holding losses at the date of transfer totaled $3.1 million. For the securities that were transferred into the held for investment category from the available for sale category, the unrealized holding losses at the date of the transfer will continue to be reported in other comprehensive income, and will be amortized over the remaining life of the security as an adjustment of yield in a manner consistent with the amortization of a discount. At ~~September 30, 2018,~~March 31, 2019, the remaining unamortized amount of these losses was ~~$0.8~~$0.6 million. The amortization of unrealized holding losses reported in equity will offset the effect on interest income of the amortization of the discount. Management believes the securities transferred are a core banking asset that they now intend to hold until maturity, and if interest rates were to increase before maturity, the fair values would be impacted more significantly and therefore are not consistent with the characteristics of an available for sale investment.

~~Seacoast Bank~~The Company also holds 11,330 shares of Visa Class B stock, which following resolution of Visa's ~~pending~~ litigation will be converted to Visa Class A shares. Under the current conversion rate that became effective June 28, 2018, the Company expects to receive 1.6298 shares of Class A stock for each share of Class B stock, for a total of 18,465 shares of Visa Class A stock. Our ownership of Visa stock is related to prior ownership in Visa’s network, while Visa operated as a cooperative. This ownership is recorded on our financial records at a zero basis. Also included in other assets is a ~~$6.1~~$6.3 million investment in a CRA related mutual fund carried at fair value.

Other Than Temporary Impairment of Debt Securities – Critical Accounting Policies and Estimates

Seacoast reviews investments quarterly for other than temporary impairment (“OTTI”). The following primary factors are considered for securities identified for OTTI testing: 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. Prices obtained from pricing services are usually not adjusted. Based on our internal review procedures and the fair values provided by the pricing services, we believe that the fair values provided by the pricing services are consistent with the principles of ASC Topic 820, Fair Value Measurement. However, on occasion pricing provided by the pricing services may not be consistent with other observed prices in the market for similar securities. Using observable market factors, including interest rate and yield curves, volatilities, prepayment speeds, loss severities and default rates, the Company may at times validate the observed prices using a discounted cash flow model and using the observed prices for similar securities to determine the fair value of its securities.

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Changes in the fair values, as a result of deteriorating economic conditions and credit spread changes, should only be temporary. Further, management believes that the Company’s other sources of liquidity, as well as the cash flow from principal and interest payments from its securities portfolio, reduces the risk that losses would be realized as a result of a need to sell securities to obtain liquidity.

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Income Taxes and Realization of Deferred ~~Tax Assets~~Taxes – Critical Accounting Policies and Estimates

Seacoast is subject to income tax laws of the various jurisdictions in which it operates, including U.S. federal, state and local jurisdictions. These laws can be complex and subject to interpretation. Seacoast makes assumptions about how these laws should be applied when determining the provision for income tax expense, including assumptions around the timing of when certain items may be deemed taxable.

Seacoast’s provision for income taxes is comprised of current and deferred taxes. Deferred taxes represent the difference in measurement of assets and liabilities for financial reporting purposes compared to income tax return purposes. Deferred tax assets may also be recognized in connection with certain net operating losses (NOLs) and tax credits. Deferred tax assets are recognized if, based upon management’s judgment, it is more likely than not the benefits of the deferred tax assets will be realized.

At ~~September 30, 2018,~~March 31, 2019, the Company had net ~~tax assets of $25.8 million, including net~~ deferred tax assets ~~(“DTA”~~("DTA") of ~~$25.3 million and current receivable of $0.5~~$24.6 million. Although realization is not assured, management believes that realization of the carrying value of the DTA is more likely than not, based upon expectations as to future taxable income and tax planning strategies, as defined by ASC Topic 740 Income Taxes. In comparison, at December 31, ~~2017~~2018 the Company had a net DTA of ~~$25.4~~$29.0 million.

Factors that support this conclusion:

Income before tax ("IBT") has steadily increased as a result of organic growth, and the ~~2015 Grand,~~ 2016 Floridian and BMO, ~~and~~ 2017 GulfShore, NorthStar and PBCB, and 2018 First Green acquisitions ~~should~~will further assist in achieving management’s forecast of future earnings which recovers the remaining state net operating loss carry-forwards well before expiration;

The Company has utilized all of its federal net operating loss carry-forwards, with the exception of those inherited in the acquisitions to which section 382 limitations apply;

Credit costs and overall credit risk ~~has~~have been stable which decreases their impact on future taxable earnings;

Growth rates for loans are at levels adequately supported by loan officers and support staff;

We believe new loan production credit quality and concentrations are well managed; and

Current economic growth forecasts for Florida and the Company’s markets are supportive.

Contingent Liabilities – Critical Accounting Policies and Estimates

The Company is subject to contingent liabilities, including judicial, regulatory and arbitration proceedings, and tax and other claims arising from the conduct of our business activities. These proceedings include actions brought against the Company and/or our subsidiaries with respect to transactions in which the Company and/or our subsidiaries acted as a lender, a financial ~~advisor,~~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 our ~~advisors~~advisers may learn of additional information that can affect our 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 30, 2018,~~March 31, 2019, 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 third quarter 2018~~Company's Asset and Liability Management Committee ~~(“ALCO”~~("ALCO") ~~model~~uses simulation ~~indicates~~analysis to monitor changes in net interest income ~~would increase 7.5% if~~due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a twelve month period is subjected to instantaneous changes in market rates ~~increased~~of 100 basis point increases up to 200 basis points inof change or a ~~parallel fashion over the next 12 months and 3.9% if interest rates increased~~ 100 basis ~~points in a parallel fashion over the next 12 months, and improve 13.3% and 7.0%, respectively,~~point decrease on ~~a 13 to 24 month basis. This compares with the Company’s third quarter 2017 model simulation, which indicated~~ net interest income ~~would increase 7.1% if~~and is monitored on a quarterly basis.

The following table presents the ALCO simulation model's projected impact of a change in interest rates ~~were increased 200 basis points~~on the projected baseline net interest income for the 12 and 24 month periods beginning on January 1, 2019, holding all other changes in ~~a parallel fashion over~~ the ~~next 12 months and 3.7% if~~balance sheet

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static. This change in interest rates ~~increased 100 basis points,~~assumes parallel shifts in the yield curve and ~~improve 12.5% and 6.5%, respectively, on a 13 to 24 month basis. These simulations do~~does not ~~include~~take into account changes in the ~~impact~~slope of ~~accretion from purchased credit impaired, or unimpaired loans.~~the yield curve.



	% Change in Projected Baseline Net Interest Income
Change in Interest Rates	1-12 months		13-24 months

+2.00%	5.65	%	7.48	%
+1.00%	2.91	%	3.92	%
Current	0.00	%	0.00	%
-1.00%	-2.69	%	-4.16	%

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 ~~22.2%~~24.5% at ~~September 30, 2018.~~March 31, 2019. 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.

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

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to the net interest income simulation, which assumes interest rates will change over a period of time, EVE uses instantaneous changes in rates.

EVE values only the current balance sheet, and does not incorporate the growth assumptions that are used in the net interest income simulation model. As with the net interest income simulation model, assumptions about the timing and variability of balance sheet cash flows are critical in the EVE analysis. Particularly important are the assumptions driving prepayments and the expected changes in balances and pricing of the indeterminate life deposit portfolios. Core deposits are a more significant funding source for the Company, making the lives attached to core deposits more important to the accuracy of our modeling of EVE. The Company periodically reassesses its assumptions regarding the indeterminate lives of core deposits utilizing an independent third party resource to assist. With lower interest rates over a prolonged period, the average lives of core deposits have trended higher and favorably impacted our model estimates of EVE for higher rates. ~~Based~~

The following table presents the projected impact of a change in interest rates on ~~our third quarter 2018 modeling, an instantaneous 100 basis point increase~~the balance sheet. This change in interest rates ~~is estimated to increase~~assumes parallel shifts in the ~~EVE 6.4% versus~~yield curve and does not take into account changes in the ~~EVE in a stable rate environment, while a 200 basis point increase in rates is estimated to increase~~slope of the ~~EVE 12.9%.~~yield curve.



	% Change in Economic Value of Equity
Change in Interest Rates	% Change in Economic Value of Equity

+2.00%	17.30	%
+1.00%	10.40	%
Current	0.00	%
-1.00%	-13.60	%
-2.00%	-27.80	%

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.

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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 30, 2018~~March 31, 2019 and concluded that those disclosure controls and procedures are effective. There have been no changes to the Company’s internal control over financial reporting that have occurred during the ~~third~~first quarter of ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

While the Company believes that its existing disclosure controls and procedures have been effective to accomplish these objectives, the Company intends to continue to examine, refine and formalize its disclosure controls and procedures and to monitor ongoing developments in this area.

Part II OTHER INFORMATION

Item 1. Legal Proceedings

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 position, or operating results or cash flows.

Item 1A. Risk Factors

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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, ~~2017,~~2018, 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. There have been no material changes with respect to the risk factors disclosed in our Annual Report on form 10-K for the year ended December 31, ~~2017.~~2018.

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

Issuer purchases of equity securities during the first ~~nine~~three months of ~~2018,~~2019, entirely related to equity incentive plan activity, were as follows:

~~Table of Contents~~

Period
Total
Number of
Shares
Purchased

Average Price
Paid Per Share

Total Number of
Shares Purchased
as part of Public
Announced Plan*

Maximum
Number of
Shares that May
yet be Purchased
Under the Plan
1/1/18 to 1/31/18 117
$ 25.21
292,173
122,827
2/1/18 to 2/28/18 139
25.86
292,312
122,688
3/1/18 to 3/31/18 226
26.63
292,538
122,462
Total - 1st Quarter 482
25.90
292,538
122,462
4/1/18 to 4/30/18 26,163
26.47
318,701
96,299
5/1/18 to 5/31/18 —
—
318,701
96,299
6/1/18 to 6/30/18 111
31.54
318,812
96,188
Total - 2nd Quarter 26,274
26.49
318,812
96,188
7/1/18 to 7/31/18 2,763

31.58

321,575

93,425
8/1/18 to 8/31/18 —

—

321,575

93,425
9/1/18 to 9/30/18 —

—

321,575

93,425
Total - 3rd Quarter 2,763

31.58

321,575

93,425
Year to Date 2018 29,519
$ 26.96
321,575
93,425



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
1/1/19 to 1/31/19	1,431	$	26.14	327,337	87,663
2/1/19 to 2/28/19	1,489	25.03		328,826	86,174
3/1/19 to 3/31/19	1,353	27.57		330,179	84,821
Year to Date 2019	4,273	$	26.21	330,179	84,821

*The¹The plan to purchase equity securities totaling 165,000 was approved on September 18, 2001, with no expiration date. An additional 250,000 shares ~~was~~were added to the plan and approved on May 20, 2014.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

5958

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Item 6. Exhibits



	Exhibit 2.1 Agreement and Plan of Merger, dated as of June 11, 2018, by and among Seacoast Banking Corporation of Florida, Seacoast National Bank, First Green Bancorp, Inc., and First Green Bank from Exhibit 2.1 to the Company's Form 8-K filed June 15, 2018.

	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 to the Company’s Form 8-K, filed December 21, 2007.

~~Table of Contents~~




	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~~2002..
	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.
	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 30, 2018~~March 31, 2019 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, (iv) the Notes to Condensed Consolidated Financial Statements.

6159

Table of Contents

~~SIGNATURE~~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 6, 2018~~May 7, 2019	/s/ Dennis S. Hudson, III
	DENNIS S. HUDSON, III
	Chairman & Chief Executive Officer



~~November 6, 2018~~May 7, 2019	/s/ Charles M. Shaffer
	CHARLES M. SHAFFER
	Executive Vice President & Chief Financial Officer

6260



	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2018		2017		2018		2017
Basic earnings per share
Net income	$	16,322	$	14,216	$	51,313	$	29,818
Average common stock outstanding	47,205,383		43,151,248		47,108,302		41,626,356
Net income per share	$	0.35	$	0.33	$	1.09	$	0.72

Diluted earnings per share
Net income	$	16,322	$	14,216	$	51,313	$	29,818
Average common stock outstanding	47,205,383		43,151,248		47,108,302		41,626,356
Add: Dilutive effect of employee restricted stock and stock options	823,947		640,860		794,791		671,780
Average diluted stock outstanding	48,029,330		43,792,108		47,903,093		42,298,136
Net income per share	$	0.34	$	0.32	$	1.07	$	0.70



(In thousands)	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Specific Reserve Recorded		Valuation Allowance Recorded
September 30, 2018
Commercial and financial	1	$	98	$	—	$	—	$	—
Totals	1	$	98	$	—	$	—	$	—
September 30, 2017
Construction and land development	1	$	52	$	46	$	6	$	6
Residential real estate	1	15		15		—		—
Totals	2	$	67	$	61	$	6	$	6



	Nine Months Ended September 30, 2018
(In thousands)	Beginning Balance		Provision for Loan Losses			Charge- Offs			Recoveries		TDR Allowance Adjustments			Ending Balance
Construction & land development	$	1,642	$	414		$	—		$	13	$	—		$	2,069
Commercial real estate	9,285		3,826			(15		)	268		(46		)	13,318
Residential real estate	7,131		(78		)	(33		)	733		(108		)	7,645
Commercial and financial	7,297		3,639			(2,985		)	211		—			8,162
Consumer	1,767		1,587			(931		)	251		(3		)	2,671
Totals	$	27,122	$	9,388		$	(3,964	)	$	1,476	$	(157	)	$	33,865



	Nine Months Ended September 30, 2017
(In thousands)	Beginning Balance		Provision for Loan Losses			Charge- Offs			Recoveries		TDR Allowance Adjustments			Ending Balance
Construction & land development	$	1,219	$	(496	)	$	—		$	891	$	(2	)	$	1,612
Commercial real estate	9,273		410			(341		)	613		(49		)	9,906
Residential real estate	7,483		90			(482		)	266		(223		)	7,134
Commercial and financial	3,636		3,036			(837		)	154		—			5,989
Consumer	1,789		345			(756		)	221		(8		)	1,591
Totals	$	23,400	$	3,385		$	(2,416	)	$	2,145	$	(282	)	$	26,232



(In thousands)	Initially Reported October 20, 2017		Measurement Period Adjustments			As Adjusted October 20, 2017
Assets:
Cash	$	5,485	$	—		$	5,485
Investment securities	56,123		—			56,123
Loans, net	136,832		—			136,832
Fixed assets	2,637		—			2,637
Core deposit intangibles	1,275		—			1,275
Goodwill	12,404		(99		)	12,305
Other assets	1,522		99			1,621
Totals	$	216,278	$	—		$	216,278

Liabilities:
Deposits	$	182,443	$	—		$	182,443
Other liabilities	980		—			980
Totals	$	183,423	$	—		$	183,423



(In thousands)	Initially Reported November 3, 2017		Measurement Period Adjustments			As Adjusted November 3, 2017
Assets:
Cash	$	9,301	$	—		$	9,301
Investment securities	22,098		—			22,098
Loans, net	272,090		(1,772		)	270,318
Fixed assets	7,641		—			7,641
Core deposit intangibles	2,523		—			2,523
Goodwill	33,428		1,323			34,751
Other assets	9,909		449			10,358
Totals	$	356,990	$	—		$	356,990
Liabilities:
Deposits	$	268,633	$	—		$	268,633
Other liabilities	16,351		—			16,351
Totals	$	284,984	$	—		$	284,984



(In thousands, except per share data)	October 19, 2018
Number of First Green common shares outstanding	5,462
Per share exchange ratio	0.7324
Number of shares of Seacoast common stock issued	4,000
Multiplied by common stock price per share on October 19, 2018	$	26.87
Value of common stock issued	107,486
Cash paid for First Green stock options	6,558
Total purchase price	$	114,044



	2018																	2017
	Third Quarter							Second Quarter							Third Quarter
	Average					Yield/		Average					Yield/		Average					Yield/
(In thousands, except ratios)	Balance			Interest		Rate		Balance			Interest		Rate		Balance			Interest		Rate
Assets
Earning assets:
Securities:
Taxable	$	1,284,774		$	9,582	2.98	%	$	1,324,280		$	9,389	2.84	%	$	1,356,276		$	8,823	2.60	%
Nontaxable	31,411			283		3.60		32,055			273		3.41		26,256			290		4.42
Total Securities	1,316,185			9,865		3.00		1,356,335			9,662		2.85		1,382,532			9,113		2.64

Federal funds sold and other investments	51,255			634		4.91		49,387			585		4.75		76,773			664		3.43

Loans, net	4,008,527			48,802		4.83		3,948,460			46,549		4.73		3,407,376			40,456		4.70

Total Earning Assets	5,375,967			59,301		4.38		5,354,182			56,796		4.25		4,866,681			50,233		4.10

Allowance for loan losses	(29,259		)					(29,234		)					(26,299		)
Cash and due from banks	110,929							110,549							99,864
Premises and equipment	63,771							64,445							57,023
Intangible assets	165,534							166,393							118,364
Bank owned life insurance	121,952							121,008							95,759
Other assets	94,433							90,692							104,727
Total Assets	$	5,903,327						$	5,878,035						$	5,316,119

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand	$	939,527		$	426	0.18	%	$	996,929		$	492	0.20	%	$	927,278		$	273	0.12	%
Savings	444,935			170		0.15		439,691			118		0.11		377,729			52		0.05
Money market	1,031,960			1,501		0.58		1,027,705			1,378		0.54		870,166			605		0.28
Time deposits	779,608			2,975		1.51		790,404			2,629		1.33		548,092			1,266		0.92
Federal funds purchased and securities sold under agreements to repurchase	204,097			463		0.90		179,540			334		0.75		165,160			204		0.49
Federal Home Loan Bank borrowings	222,315			1,228		2.19		160,846			741		1.85		439,755			1,293		1.17
Other borrowings	70,694			829		4.65		70,623			810		4.60		70,409			637		3.59
Total Interest-Bearing Liabilities	3,693,136			7,592		0.82		3,665,738			6,502		0.71		3,398,589			4,330		0.51
Noninterest demand	1,451,751							1,473,331							1,276,779
Other liabilities	30,150							29,292							52,832
Total Liabilities	5,175,037							5,168,361							4,728,200

Shareholders' equity	728,290							709,674							587,919

Total Liabilities & Equity	$	5,903,327						$	5,878,035						$	5,316,119

Cost of deposits						0.43	%						0.39	%						0.22	%
Interest expense as a % of earning assets						0.56	%						0.49	%						0.35	%
Net interest income as a % of earning assets				$	51,709	3.82	%				$	50,294	3.77	%				$	45,903	3.74	%



				2018							2017
	Year to Date							Year to Date
	Average					Yield/		Average					Yield/
(In thousands, except ratios)	Balance			Interest		Rate		Balance			Interest		Rate
Assets
Earning assets:
Securities:
Taxable	$	1,323,164		$	28,332	2.85	%	$	1,299,128		$	25,289	2.60	%
Nontaxable	32,031			863		3.59		27,388			1,047		5.10
Total Securities	1,355,195			29,195		2.87		1,326,516			26,336		2.65

Federal funds sold and other investments	52,253			1,835		4.70		68,766			1,778		3.46

Loans, net	3,943,617			140,635		4.77		3,199,408			110,668		4.62

Total Earning Assets	5,351,065			171,665		4.29		4,594,690			138,782		4.04

Allowance for loan losses	(28,660		)					(25,211		)
Cash and due from banks	111,781							101,858
Premises and equipment	64,708							58,401
Intangible assets	166,348							104,079
Bank owned life insurance	121,742							89,401
Other assets	90,888							111,661
Total Assets	$	5,877,872						$	5,034,879

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand	$	979,148		$	1,368	0.19	%	$	904,175		$	698	0.10	%
Savings	440,054			392		0.12		370,145			147		0.05
Money market	1,012,259			3,863		0.51		847,705			1,563		0.25
Time deposits	782,283			7,783		1.33		443,416			2,646		0.80
Federal funds purchased and securities sold under agreements to repurchase	186,643			1,071		0.77		173,601			551		0.42
Federal Home Loan Bank borrowings	219,652			2,999		1.83		396,610			2,775		0.94
Other borrowings	70,623			2,333		4.42		70,342			1,802		3.43
Total Interest-Bearing Liabilities	3,690,662			19,809		0.72		3,205,994			10,182		0.42
Noninterest demand	1,446,488							1,248,290
Other liabilities	29,533							39,414
Total Liabilities	5,166,683							4,493,698

Shareholders' equity	711,189							541,181
Total Liabilities & Equity	$	5,877,872						$	5,034,879


Cost of deposits						0.38	%						0.22	%
Interest expense as a % of earning assets						0.49	%						0.30	%
Net interest income as a % of earning assets				$	151,856	3.79	%				$	128,600	3.74	%



September 30, 2018:	Seacoast (Consolidated)	Seacoast Bank	Minimum to be Well- Capitalized¹
Common equity Tier 1 ratio (CET1)	13.19%	13.65%	6.5%
Tier 1 capital ratio	14.80%	13.65%	8.0%
Total risk-based capital ratio	15.57%	14.42%	10.0%
Tier 1 leverage ratio	11.33%	10.45%	5.0%