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SBCF Seacoast Banking Corp. Of Florida

Filed: 5 May 21, 4:03pm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021
OR

 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,STUARTFL 34994
(Address of Principal Executive Offices) (Zip Code)
(772)287-4000
(Registrant’s Telephone Number, Including Area Code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockSBCFNasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                                Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes No

Common Stock, $0.10 Par Value – 55,294,320 shares as of March 31, 2021



INDEX
 SEACOAST BANKING CORPORATION OF FLORIDA

2

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31,
(In thousands, except per share data)20212020
Interest and fees on loans$62,298 $63,440 
Interest and dividends on securities6,446 8,818 
Interest on interest bearing deposits and other investments586 734 
Total Interest Income69,330 72,992 
Interest on deposits1,065 3,190 
Interest on time certificates1,187 4,768 
Interest on borrowed money468 1,857 
Total Interest Expense2,720 9,815 
Net Interest Income66,610 63,177 
Provision for credit losses(5,715)29,513 
Net Interest Income after Provision for Credit Losses72,325 33,664 
Noninterest income
Other income17,785 14,669 
Securities (losses) gains, net(114)19 
Total Noninterest Income (Note I – Noninterest Income and Expense)17,671 14,688 
Total Noninterest Expenses (Note I – Noninterest Income and Expense)46,120 47,798 
Income Before Income Taxes43,876 554 
Provision (benefit) for income taxes10,157 (155)
Net Income$33,719 $709 
Share Data
Net income per share of common stock
Diluted$0.60 $0.01 
Basic0.61 0.01 
Average common shares outstanding
Diluted55,992 52,284 
Basic55,271 51,803 
See notes to unaudited condensed consolidated financial statements.
 


3

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three Months Ended March 31,
(In thousands)20212020
Net Income$33,719 $709 
Other comprehensive income (loss):
Available-for-sale securities:
Unrealized (losses) gains on available-for-sale securities, net of tax benefit of $3.1 million and tax expense of $26 thousand for the three months ended March 31, 2021 and 2020, respectively$(10,851)$130 
Amortization of unrealized losses on securities transferred to held-to-maturity, net of tax expenses of $6 thousand and $12 thousand for the three months ended March 31, 2021 and 2020, respectively24 47 
Reclassification adjustment for losses included in net income, net of tax benefit of $22 thousand for the three months ended March 31, 2020117 
Available-for-sale securities, net of tax$(10,827)$294 
Unrealized losses on derivatives designated as cash flow hedges, net of reclassifications to income, net of tax benefit of $47 thousand for the three months ended March 31, 2021$(138)$
Total other comprehensive (loss) income$(10,965)$294 
Comprehensive Income$22,754 $1,003 
See notes to unaudited condensed consolidated financial statements.

 


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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31,December 31,
(In thousands, except share data)20212020
Assets  
Cash and due from banks$89,123 $86,630 
Interest bearing deposits with other banks890,202 317,458 
Total cash and cash equivalents979,325 404,088 
Time deposits with other banks750 750 
Debt securities:
Securities available-for-sale (at fair value)1,051,396 1,398,157 
Securities held-to-maturity (fair value $500.7 million at March 31, 2021 and $192.2 million at December 31, 2020)512,307 184,484 
Total debt securities1,563,703 1,582,641 
Loans held for sale (at fair value)60,924 68,890 
Loans5,661,492 5,735,349 
Less: Allowance for credit losses(86,643)(92,733)
Loans, net of allowance for credit losses5,574,849 5,642,616 
Bank premises and equipment, net70,385 75,117 
Other real estate owned15,549 12,750 
Goodwill221,176 221,176 
Other intangible assets, net15,382 16,745 
Bank owned life insurance132,634 131,776 
Net deferred tax assets24,497 23,629 
Other assets152,646 162,214 
Total Assets$8,811,820 $8,342,392 
Liabilities
Deposits$7,385,749 $6,932,561 
Securities sold under agreements to repurchase, maturing within 30 days109,171 119,609 
Subordinated debt71,436 71,365 
Other liabilities90,115 88,455 
Total Liabilities7,656,471 7,211,990 
Shareholders' Equity
Common stock, par value $0.10 per share, authorized 120,000,000 shares, issued 55,647,636 and outstanding 55,294,320 at March 31, 2021, and authorized 120,000,000, issued 55,584,979 and outstanding 55,243,226 shares at December 31, 20205,529 5,524 
Other shareholders' equity1,149,820 1,124,878 
Total Shareholders' Equity1,155,349 1,130,402 
Total Liabilities and Shareholders' Equity$8,811,820 $8,342,392 
 See notes to unaudited condensed consolidated financial statements.

5

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
Three Months Ended March 31,
(In thousands)20212020
Cash Flows from Operating Activities  
Net income$33,719 $709 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation1,440 1,511 
Amortization of premiums and discounts on securities, net2,362 989 
Amortization of operating lease right-of-use assets1,102 1,274 
Other amortization and accretion, net(4,437)(1,531)
Stock based compensation1,759 2,000 
Origination of loans designated for sale(163,863)(73,223)
Sale of loans designated for sale177,516 66,126 
Provision for credit losses(5,715)29,513 
Deferred income taxes2,320 2,207 
Losses on sale of securities95 
Gains on sale of loans(5,570)(2,138)
Gains on sale and write-downs of other real estate owned(167)(415)
Losses on disposition of fixed assets and write-downs upon transfer of bank premises to other real estate owned315 219 
Changes in operating assets and liabilities, net of effects from acquired companies:
Net decrease (increase) in other assets4,658 (6,245)
Net increase in other liabilities1,659 3,595 
Net cash provided by operating activities47,098 24,686 
Cash Flows from Investing Activities
Maturities and repayments of debt securities available-for-sale155,860 82,715 
Maturities and repayments of debt securities held-to-maturity43,291 8,894 
Proceeds from sale of debt securities available-for-sale27,765 
Purchases of debt securities available-for-sale(36,512)(74,213)
Purchases of debt securities held-to-maturity(160,031)
Net new loans and principal repayments79,353 25,154 
Proceeds from sale of other real estate owned1,340 3,736 
Additions to other real estate owned(654)
Proceeds from sale of FHLB and Federal Reserve Bank Stock2,704 27,923 
Purchase of FHLB and Federal Reserve Bank Stock(55)(26,227)
Net cash from bank acquisition33,883 
Additions to bank premises and equipment(341)(570)
Net cash provided by investing activities84,955 109,060 
 See notes to unaudited condensed consolidated financial statements.

 
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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31,
(In thousands)20212020
Cash Flows from Financing Activities  
Net increase in deposits$453,188 $129,005 
Net decrease in repurchase agreements(10,438)(21,398)
Net decrease in FHLB borrowings with original maturities of three months or less(170,000)
Proceeds from FHLB borrowings with original maturities of more than three months120,000 
Stock based employee benefit plans434 (1,010)
Dividends paid
Net cash provided by financing activities443,184 56,597 
Net increase in cash and cash equivalents575,237 190,343 
Cash and cash equivalents at beginning of period404,088 124,531 
Cash and cash equivalents at end of period$979,325 $314,874 
Supplemental disclosure of cash flow information:
Cash paid during the period for interest$3,695 $10,259 
Cash paid during the period for taxes
Recognition of operating lease right-of-use assets33 
Recognition of operating lease liabilities33 
Supplemental disclosure of non-cash investing activities:
Transfer of debt securities from available-for-sale to held-to-maturity$210,805 $
Transfers from loans to other real estate owned5,571 
Transfers from bank premises to other real estate owned3,318 
See notes to unaudited condensed consolidated financial statements.
 
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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Accumulated
Other
 Common StockPaid-inRetainedTreasuryComprehensive 
(In thousands)SharesAmountCapitalEarningsStockIncome (Loss)Total
Balance at December 31, 202055,243 $5,524 $856,092 $256,701 $(8,285)$20,370 $1,130,402 
Comprehensive income— — — 33,719 — (10,965)22,754 
Stock based compensation expense— — 1,759 — — — 1,759 
Common stock transactions related to stock based employee benefit plans20 0— (408)— (406)
Common stock issued for stock options31 837 — — — 840 
Three months ended March 31, 202151 2,596 33,719 (408)(10,965)24,947 
Balance at March 31, 202155,294 $5,529 $858,688 $290,420 $(8,693)$9,405 $1,155,349 
Accumulated
Other
Common StockPaid-inRetainedTreasuryComprehensive
(In thousands)SharesAmountCapitalEarningsStockIncome (Loss)Total
Balance at December 31, 201951,514 $5,151 $786,242 $195,813 $(6,032)$4,465 $985,639 
Comprehensive income— — — 709 — 294 1,003 
Stock based compensation expense— — 2,000 — — — 2,000 
Common stock transactions related to stock based employee benefit plans115 12 (32)— (1,390)— (1,410)
Common stock issued for stock options37 396 — — — 400 
Cumulative change in accounting principle upon adoption of new accounting pronouncement— — — (16,876)— — (16,876)
Issuance of common stock, pursuant to acquisition1,043 104 20,927 — — — 21,031 
Three months ended March 31, 20201,195 120 23,291 (16,167)(1,390)294 6,148 
Balance at March 31, 202052,709 $5,271 $809,533 $179,646 $(7,422)$4,759 $991,787 
 See notes to unaudited condensed consolidated financial statements.

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SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A – Basis of Presentation
Basis of Presentation: The accompanying unaudited condensed consolidated financial statements of Seacoast Banking Corporation of Florida and its subsidiaries (the "Company") have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current period presentation.
Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Use of Estimates: The preparation of these condensed consolidated financial statements requires management to make judgments in the application of certain accounting policies that involve significant estimates and assumptions. The Company has established policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements. Specific areas, among others, requiring the application of management’s estimates include determination of the allowance for credit losses, acquisition accounting and purchased loans, intangible assets and impairment testing, other fair value measurements and contingent liabilities.

Note B – Recently Issued Accounting Standards, Not Yet Adopted
None this period.

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 months ended March 31, 2021, 0 options to purchase shares of the Company's common stock were anti-dilutive, compared to 489,000 shares that were excluded in the computation of diluted earnings per share for the three months ended March 31, 2020.
Three Months Ended March 31,
(Dollars in thousands, except per share data)20212020
Basic earnings per share  
Net income$33,719 $709 
Average common shares outstanding55,271 51,803 
Net income per share$0.61 $0.01 
Diluted earnings per share
Net income$33,719 $709 
Average common shares outstanding55,271 51,803 
Add: Dilutive effect of employee restricted stock and stock options721 481 
Average diluted shares outstanding55,992 52,284 
Net income per share$0.60 $0.01 

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Note D – Securities
The amortized cost, gross unrealized gains and losses and fair value of securities available-for-sale and held-to-maturity at March 31, 2021 and December 31, 2020 are summarized as follows:
 March 31, 2021
(In thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
Debt securities available-for-sale    
U.S. Treasury securities and obligations of U.S. government agencies$7,686 $334 $(2)$8,018 
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities746,409 14,584 (6,774)754,219 
Private mortgage-backed securities and collateralized mortgage obligations80,156 1,989 (261)81,884 
Collateralized loan obligations172,392 239 (160)172,471 
Obligations of state and political subdivisions32,914 1,943 (53)34,804 
Totals$1,039,557 $19,089 $(7,250)$1,051,396 
Debt securities held-to-maturity
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities$512,307 $5,539 $(17,126)$500,720 
Totals$512,307 $5,539 $(17,126)$500,720 
 December 31, 2020
(In thousands)Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
Debt securities available-for-sale    
U.S. Treasury securities and obligations of U.S. government agencies$8,250 $528 $(1)$8,777 
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities1,038,437 23,457 (1,240)1,060,654 
Private mortgage-backed securities and collateralized mortgage obligations89,284 2,131 (210)91,205 
Collateralized loan obligations202,563 279 (647)202,195 
Obligations of state and political subdivisions33,005 2,321 35,326 
Totals$1,371,539 $28,716 $(2,098)$1,398,157 
Debt securities held-to-maturity
Mortgage-backed securities of U.S. government-sponsored entities$184,484 $7,818 $(123)$192,179 
Totals$184,484 $7,818 $(123)$192,179 
NaN securities were sold during the three months ended March 31, 2021. For the three months ended March 31, 2020, proceeds from sales of securities were $27.8 million, which resulted in gross gains of $0.1 million and gross losses of $0.2 million. Also included in “Securities gains (losses), net” is a decrease of $0.1 million for the three months ended March 31, 2021 and an increase of $0.1 million for the three months ended March 31, 2020 in the value of a CRA-qualified mutual fund.
During the three months ended March 31, 2021, the Company reclassified debt securities with an amortized cost of $210.8 million from available-for-sale to held-to-maturity, as it has the ability and intent to hold these securities to maturity. These securities had net unrealized gains of $0.8 million at the date of transfer, which will continue to be reported in accumulated other comprehensive income, and will be amortized over the remaining life of the securities as an adjustment of yield. The effect on interest income of the amortization of net unrealized gains is offset by the amortization of the premium on the securities transferred.
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At March 31, 2021, debt securities with a fair value of $350.5 million were pledged primarily as collateral for public deposits and secured borrowings.
The amortized cost and fair value of debt securities held-to-maturity and available-for-sale at March 31, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because prepayments of the underlying collateral for these securities may occur, due to the right to call or repay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
 Held-to-MaturityAvailable-for-Sale
(In thousands)Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Due in less than one year$$$435 $437 
Due after one year through five years12,400 13,310 
Due after five years through ten years8,113 8,464 
Due after ten years19,652 20,611 
 40,600 42,822 
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities512,307 500,720 746,409 754,219 
Private mortgage-backed securities and collateralized mortgage obligations80,156 81,884 
Collateralized loan obligations172,392 172,471 
Totals$512,307 $500,720 $1,039,557 $1,051,396 
The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, or using observable market data. The tables below indicate the fair value of available-for-sale debt securities with unrealized losses for which no allowance for credit losses has been recorded.
 March 31, 2021
 Less Than 12 Months12 Months or LongerTotal
(In thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
U.S. Treasury securities and obligations of U.S. government agencies$$$253 $(2)$253 $(2)
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities314,851 (6,725)4,888 (49)319,739 (6,774)
Private mortgage-backed securities and collateralized mortgage obligations18,752 (236)2,029 (25)20,781 (261)
Collateralized loan obligations125,035 (88)28,435 (72)153,470 (160)
Obligations of state and political subdivisions4,982 (53)4,982 (53)
Totals$463,620 $(7,102)$35,605 $(148)$499,225 $(7,250)
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 December 31, 2020
 Less Than 12 Months12 Months or LongerTotal
(In thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
U.S. Treasury securities and obligations of U.S. government agencies$$$256 $(1)$256 $(1)
Mortgage-backed securities and collateralized mortgage obligations of U.S. government-sponsored entities203,405 (1,218)569 (22)203,974 (1,240)
Private mortgage-backed securities and collateralized mortgage obligations23,997 (210)23,997 (210)
Collateralized loan obligations104,697 (102)72,513 (545)177,210 (647)
Totals$332,099 $(1,530)$73,338 $(568)$405,437 $(2,098)
At March 31, 2021, the Company had $6.8 million of unrealized losses on mortgage-backed securities and collateralized mortgage obligations issued by government-sponsored entities having a fair value of $319.7 million. These securities are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. The implied government guarantee of principal and interest payments and the high credit rating of the portfolio provide sufficient basis for the current expectation that there is no risk of loss if default were to occur. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at March 31, 2021, 0 allowance for credit losses has been recorded.
At March 31, 2021, the Company had $0.3 million of unrealized losses on private label residential and commercial mortgage-backed securities and collateralized mortgage obligations having a fair value of $20.8 million. The collateral underlying these mortgage investments is primarily residential real estate. The securities have average credit support of 31%. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at March 31, 2021, 0 allowance for credit losses has been recorded.
At March 31, 2021, the Company had $0.2 million in unrealized losses in uncapped 3-month LIBOR floating rate collateralized loan obligations ("CLOs") having a fair value of $153.5 million. CLOs are special purpose vehicles and those in which the Company has invested acquire nearly all first-lien, broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors. As of March 31, 2021, these positions are in AAA and AA tranches, with average credit support of 27% and 24%, respectively. The Company evaluates the securities for potential credit losses by modeling expected loan-level defaults, recoveries, and prepayments for each CLO security. Based on the assessment of all relevant factors, the Company believes that the unrealized loss positions on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality, and expects to recover the entire amortized cost basis of these securities. Therefore, at March 31, 2021, 0 allowance for credit losses has been recorded.
All HTM debt securities are issued by government-sponsored entities, which are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. While the potential for default on these securities may be something greater than zero, the long history with no credit losses, the implied government guarantee of principal and interest payments and the high credit rating of the HTM portfolio provide sufficient basis for the current expectation that there is no risk of loss if default were to occur. As a result, as of March 31, 2021, 0 allowance for credit losses has been recorded.
Included in other assets at March 31, 2021 is $31.2 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value. The Company has not identified events or changes in circumstances that may have a significant adverse effect on the fair value of these cost method investment securities. Also included in other assets is a $6.4 million investment in a CRA-qualified mutual fund carried at fair value. Accrued interest receivable on AFS and HTM debt securities of $2.6 million and $0.8 million at March 31, 2021, respectively, and $3.2 million and $0.4 million at December 31, 2020, respectively, is also included in other assets.
The Company holds 11,330 shares of Visa Class B stock, which, following resolution of Visa litigation, will be converted to Visa Class A shares. Under the current conversion ratio that became effective September 27, 2019, the Company would receive 1.6228 shares of Class A stock for each share of Class B stock for a total of 18,386 shares of Visa Class A stock. The ownership of Visa stock is related to prior ownership in Visa's network while Visa operated as a cooperative, and is recorded on the Company's financial records at a zero basis.
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Note E – Loans
Loans held for investment are categorized into the following segments:
Construction and land development: Loans are extended to both commercial and consumer customers which are collateralized by and for the purpose of funding land development and construction projects, including 1-4 family residential construction, multi-family property and non-farm residential property where the primary source of repayment is from proceeds of the sale, refinancing or permanent financing of the property.
Commercial real estate - owner-occupied: Loans are extended to commercial customers for the purpose of acquiring real estate to be occupied by the borrower's business. These loans are collateralized by the subject property and the repayment of these loans is largely dependent on the performance of the company occupying the property.
Commercial real estate - non owner-occupied: Loans are extended to commercial customers for the purpose of acquiring commercial property where occupancy by the borrower is not their primary intent. These loans are viewed primarily as cash flow loans, collateralized by the subject property, and the repayment of these loans is largely dependent on rental income from the successful operation of the property.
Residential real estate: Loans are extended to consumer customers and collateralized primarily by 1-4 family residential properties and include fixed and variable rate mortgages, home equity mortgages, and home equity lines of credit. Loans are primarily written based on conventional loan agency guidelines, including loans that exceed agency value limitations. Sources of repayment may be from the occupant of the residential property or from cash flows on rental income from the successful operation of the property.
Commercial and financial: Loans are extended to commercial customers. The purpose of the loans can be working capital, physical asset expansion, asset acquisition or other business purposes. Loans may be collateralized by assets owned by the borrower or the borrower's business. Commercial loans are based primarily on the historical and projected cash flow of the borrower's business and secondarily on the capacity of credit enhancements, guarantees and underlying collateral provided by the borrower.
Consumer: Loans are extended to consumer customers. The segment includes both installment loans and lines of credit which may be collateralized or non-collateralized.
Paycheck Protection Program ("PPP"): Loans originated under a temporary program established by the CARES Act, and extended by the Economic Aid Act. Under the terms of the program, balances may be forgiven if the borrower uses the funds in a manner consistent with the program guidelines, and repayment is guaranteed by the U.S. government.
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The following tables present net loan balances by segment as of:
 March 31, 2021
(In thousands)Portfolio LoansAcquired Non-PCD LoansPCD LoansTotal
Construction and land development$206,627 $18,465 $2,025 $227,117 
Commercial real estate - owner-occupied868,347 225,785 38,953 1,133,085 
Commercial real estate - non owner-occupied1,116,362 294,128 27,875 1,438,365 
Residential real estate1,088,822 149,762 7,965 1,246,549 
Commercial and financial760,975 84,309 15,529 860,813 
Consumer167,778 5,900 232 173,910 
Paycheck Protection Program547,308 34,345 581,653 
Totals$4,756,219 $812,694 $92,579 $5,661,492 
 December 31, 2020
(In thousands)Portfolio LoansAcquired Non-PCD LoansPCD LoansTotal
Construction and land development$216,420 $26,250 $2,438 $245,108 
Commercial real estate - owner occupied854,769 247,090 39,451 1,141,310 
Commercial real estate - non-owner occupied1,043,459 323,273 29,122 1,395,854 
Residential real estate1,155,914 176,105 10,609 1,342,628 
Commercial and financial743,846 94,627 16,280 854,753 
Consumer181,797 6,660 278 188,735 
Paycheck Protection Program515,532 51,429 566,961 
Totals$4,711,737 $925,434 $98,178 $5,735,349 
The amortized cost basis of loans at March 31, 2021 included net deferred costs of $23.8 million on non-PPP portfolio loans and net deferred fees of $13.5 million on PPP loans. At December 31, 2020, the amortized cost basis included net deferred costs of $22.6 million on non-PPP portfolio loans and net deferred fees of $9.5 million on PPP loans. At March 31, 2021, the remaining fair value adjustments on acquired loans were $27.3 million, or 2.9% of the outstanding acquired loan balances, compared to $30.2 million, or 2.9% of the acquired loan balances at December 31, 2020. These amounts are accreted into interest income over the remaining lives of the related loans on a level yield basis.
Accrued interest receivable is included within Other Assets and was $20.9 million and $25.8 million at March 31, 2021 and December 31, 2020, respectively.
14

The following tables present the status of net loan balances as of March 31, 2021 and December 31, 2020. Loans on short-term payment deferral at the reporting date are reported as current.
 March 31, 2021
(In thousands)CurrentAccruing
30-59 Days
Past Due
Accruing
60-89 Days
Past Due
Accruing
Greater
Than
90 Days
NonaccrualTotal
Portfolio Loans      
Construction and land development$206,473 $$$$154 $206,627 
Commercial real estate - owner-occupied865,373 732 2,242 868,347 
Commercial real estate - non owner-occupied1,114,278 2,084 1,116,362 
Residential real estate1,073,848 4,344 1,078 720 8,832 1,088,822 
Commercial and financial755,349 1,144 36 4,445 760,975 
Consumer166,587 768 423 167,778 
Paycheck Protection Program547,308 547,308 
Total Portfolio Loans$4,729,216 $6,988 $1,114 $721 $18,180 $4,756,219 
Acquired Non-PCD Loans
Construction and land development$18,465 $$$$$18,465 
Commercial real estate - owner-occupied223,758 2,027 225,785 
Commercial real estate - non owner-occupied293,148 980 294,128 
Residential real estate145,347 596 104 3,715 149,762 
Commercial and financial83,671 638 84,309 
Consumer5,900 5,900 
Paycheck Protection Program34,345 34,345 
 Total Acquired Non-PCD Loans$804,634 $596 $104 $$7,360 $812,694 
PCD Loans
Construction and land development$2,017 $$$$$2,025 
Commercial real estate - owner-occupied36,057 2,896 38,953 
Commercial real estate - non owner-occupied23,068 4,807 27,875 
Residential real estate6,899 1,066 7,965 
Commercial and financial14,518 1,011 15,529 
Consumer232 232 
Total PCD Loans$82,791 $$$$9,788 $92,579 
Total Loans$5,616,641 $7,584 $1,218 $721 $35,328 $5,661,492 
 
15

 December 31, 2020
(In thousands)CurrentAccruing
30-59 Days
Past Due
Accruing
60-89 Days
Past Due
Accruing
Greater
Than
90 Days
NonaccrualTotal
Portfolio Loans      
Construction and land development$216,262 $$$$158 $216,420 
Commercial real estate - owner occupied851,222 1,076 2,471 854,769 
Commercial real estate - non-owner occupied1,041,306 2,153 1,043,459 
Residential real estate1,142,893 3,002 1,427 61 8,531 1,155,914 
Commercial and financial737,362 135 1,967 4,382 743,846 
Consumer180,879 203 138 575 181,797 
Paycheck Protection Program515,532 515,532 
 Total Portfolio Loans$4,685,456 $4,416 $3,532 $63 $18,270 $4,711,737 
Acquired Non-PCD Loans
Construction and land development$26,250 $$$$$26,250 
Commercial real estate - owner occupied244,486 2,604 247,090 
Commercial real estate - non-owner occupied322,264 1,009 323,273 
Residential real estate171,507 1,605 104 2,889 176,105 
Commercial and financial93,223 216 1,188 94,627 
Consumer6,640 20 6,660 
Paycheck Protection Program51,429 51,429 
 Total Acquired Non-PCD Loans$915,799 $1,841 $104 $$7,690 $925,434 
PCD Loans
Construction and land development$2,429 $$$$$2,438 
Commercial real estate - owner occupied36,345 3,106 39,451 
Commercial real estate - non-owner occupied24,200 4,922 29,122 
Residential real estate9,537 1,072 10,609 
Commercial and financial15,121 125 1,034 16,280 
Consumer271 278 
 Total PCD Loans$87,903 $125 $$$10,150 $98,178 
Total Loans$5,689,158 $6,382 $3,636 $63 $36,110 $5,735,349 
All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest subsequently received on such loans is accounted for under the cost-recovery method, whereby interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and future payments are reasonably assured. The Company recognized $0.2 million and $0.3 million in interest income on nonaccrual loans during the three months ended March 31, 2021 and 2020, respectively.
16

The following tables present net balances of loans on nonaccrual status and the related allowance for credit losses, if any, as of:
March 31, 2021
(In thousands)Nonaccrual Loans With No Related AllowanceNonaccrual Loans With an AllowanceTotal Nonaccrual LoansAllowance for Credit Losses
Construction and land development$144 $18 $162 $
Commercial real estate - owner-occupied6,891 274 7,165 274 
Commercial real estate - non owner-occupied3,946 3,925 7,871 1,746 
Residential real estate11,592 2,021 13,613 1,123 
Commercial and financial3,751 2,343 6,094 1,620 
Consumer51 372 423 87 
Totals$26,375 $8,953 $35,328 $4,857 
December 31, 2020
(In thousands)Nonaccrual Loans With No Related AllowanceNonaccrual Loans With an AllowanceTotal Nonaccrual LoansAllowance for Credit Losses
Construction and land development$148 $19 $167 $
Commercial real estate - owner-occupied7,893 288 8,181 287 
Commercial real estate - non owner-occupied5,666 2,418 8,084 1,640 
Residential real estate9,520 2,972 12,492 1,587 
Commercial and financial3,175 3,429 6,604 2,235 
Consumer222 360 582 75 
Totals$26,624 $9,486 $36,110 $5,832 
Collateral-Dependent Loans
Loans are considered collateral-dependent when the repayment, based on the Company's assessment as of the reporting date, is expected to be provided substantially through the operation or sale of the underlying collateral and there are no other available and reliable sources of repayment. The following table presents collateral-dependent loans as of:
(In thousands)March 31, 2021December 31, 2020
Construction and land development$181 $189 
Commercial real estate - owner-occupied11,503 11,992 
Commercial real estate - non owner-occupied7,114 7,285 
Residential real estate17,460 16,652 
Commercial and financial10,475 11,198 
Consumer424 586 
Totals$47,157 $47,902 
Loans by Risk Rating
The Company utilizes an internal asset classification system as a means of identifying problem and potential problem loans. The following classifications are used to categorize loans under the internal classification system:
Pass: Loans that are not problem loans or potential problem loans are considered to be pass-rated.
Special Mention: Loans that do not currently expose the Company to sufficient risk to warrant classification in the Substandard or Doubtful categories, but possess weaknesses that deserve management's close attention are deemed to be Special Mention.
17

Substandard: Loans with the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Substandard Impaired: Loans typically placed on nonaccrual and considered to be collateral-dependent or accruing TDRs.
Doubtful: Loans that have all the weaknesses inherent in those classified Substandard with the added characteristic that the weakness present makes collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are likely to be charged off.
The following tables present the risk rating of loans by year of origination as of:
March 31, 2021
(In thousands)20212020201920182017PriorRevolvingTotal
Construction and Land Development
Risk Ratings:
Pass$11,721 $61,751 $41,791 $27,743 $12,069 $24,206 $37,615 $216,896 
Special Mention8,486 262 8,748 
Substandard1,212 1,212 
Substandard Impaired37 224 261 
Doubtful
Total$11,721 $61,751 $41,791 $36,229 $12,106 $25,904 $37,615 $227,117 
Commercial real estate - owner-occupied
Risk Ratings:
Pass$39,915 $153,127 $195,476 $150,551 $132,555 $412,493 $13,064 $1,097,181 
Special Mention5,891 1,839 1,294 8,202 17,226 
Substandard4,152 5,423 9,575 
Substandard Impaired2,952 716 1,862 3,573 9,103 
Doubtful
Total$39,915 $159,018 $200,267 $152,561 $138,569 $429,691 $13,064 $1,133,085 
Commercial real estate - non owner-occupied
Risk Ratings:
Pass$79,711 $161,211 $311,098 $188,793 $111,807 $510,852 $9,084 $1,372,556 
Special Mention430 9,443 16,575 9,800 36,248 
Substandard9,708 11,981 21,689 
Substandard Impaired2,397 5,475 7,872 
Doubtful
Total$79,711 $161,211 $313,925 $207,944 $128,382 $538,108 $9,084 $1,438,365 
Residential real estate
Risk Ratings:
Pass$21,192 $118,310 $125,666 $174,835 $175,133 $280,387 $327,456 $1,222,979 
Special Mention49 70 2,069 319 1,579 4,086 
Substandard388 40 428 
Substandard Impaired453 1,053 1,342 4,016 10,291 1,901 19,056 
Doubtful
Total$21,192 $118,812 $126,719 $176,247 $181,218 $291,385 $330,976 $1,246,549 
18

March 31, 2021
(In thousands)20212020201920182017PriorRevolvingTotal
Commercial and financial
Risk Ratings:
Pass$60,114 $218,567 $134,501 $92,551 $56,103 $86,551 $188,805 $837,192 
Special Mention67 905 919 293 95 436 2,715 
Substandard153 41 2,536 1,560 3,826 254 8,370 
Substandard Impaired4,824 2,970 1,684 2,490 68 12,036 
Doubtful1
500 500 
Total$60,114 $218,787 $140,271 $99,476 $59,640 $92,962 $189,563 $860,813 
Consumer
Risk Ratings:
Pass$7,025 $42,871 $37,567 $26,482 $16,226 $27,290 $13,534 $170,995 
Special Mention85 52 25 605 1,276 2,043 
Substandard16 190 206 
Substandard Impaired27 49 62 519 666 
Doubtful
Total$7,025 $42,898 $37,701 $26,543 $16,329 $28,414 $15,000 $173,910 
Paycheck Protection Program
Risk Ratings:
Pass$232,438 $349,215 $$$$$$581,653 
Total$232,438 $349,215 $$$$$$581,653 
Consolidated
Risk Ratings:
Pass$452,116 $1,105,052 $846,099 $660,955 $503,893 $1,341,779 $589,558 $5,499,452 
Special Mention6,007 3,259 20,264 18,962 19,283 3,291 71,066 
Substandard153 41 12,244 5,728 22,830 484 41,480 
Substandard Impaired480 11,275 5,037 7,661 22,572 1,969 48,994 
Doubtful1
500 500 
Total$452,116 $1,111,692 $860,674 $699,000 $536,244 $1,406,464 $595,302 $5,661,492 
1Loans classified as doubtful are fully reserved as of March 31, 2021.
December 31, 2020
(In thousands)20202019201820172016PriorRevolvingTotal
Construction and Land Development
Risk Ratings:
Pass$62,107 $52,384 $46,067 $15,873 $7,335 $17,873 $35,324 $236,963 
Special Mention206 245 5,918 1,449 7,818 
Substandard51 51 
Substandard Impaired37 239 276 
Doubtful
Total$62,313 $52,629 $51,985 $15,910 $7,335 $19,612 $35,324 $245,108 
Commercial real estate - owner-occupied
Risk Ratings:
Pass$155,953 $198,559 $156,276 $138,341 $148,389 $287,772 $14,255 $1,099,545 
Special Mention5,773 1,858 3,305 4,471 4,050 19,459 
Substandard4,709 1,955 5,508 12,172 
Substandard Impaired3,151 747 1,362 4,874 10,134 
Doubtful
Total$161,726 $203,568 $160,328 $144,412 $154,815 $302,204 $14,257 $1,141,310 
19

December 31, 2020
(In thousands)20202019201820172016PriorRevolvingTotal
Commercial real estate - non owner-occupied
Risk Ratings:
Pass$159,299 $313,287 $201,112 $123,357 $175,623 $356,943 $8,596 $1,338,217 
Special Mention431 9,487 7,580 10,240 114 27,852 
Substandard9,709 8,311 3,682 21,702 
Substandard Impaired2,418 125 5,540 8,083 
Doubtful
Total$159,299 $316,136 $220,308 $130,937 $194,299 $366,279 $8,596 $1,395,854 
Residential real estate
Risk Ratings:
Pass$96,819 $144,329 $204,077 $205,046 $160,612 $159,742 $350,502 $1,321,127 
Special Mention33 720 966 479 2,198 
Substandard350 896 1,452 100 2,798 
Substandard Impaired109 726 1,520 1,762 715 9,671 2,002 16,505 
Doubtful
Total$97,278 $145,055 $205,630 $208,424 $161,327 $171,831 $353,083 $1,342,628 
Commercial and financial
Risk Ratings:
Pass$214,774 $146,511 $103,769 $60,782 $39,692 $53,758 $204,304 $823,590 
Special Mention71 946 965 5,612 67 635 209 8,505 
Substandard154 41 3,016 1,609 553 3,239 764 9,376 
Substandard Impaired317 4,595 3,199 2,292 2,074 704 81 13,262 
Doubtful1
20 20 
Total$215,316 $152,093 $110,949 $70,295 $42,386 $58,336 $205,378 $854,753 
Consumer
Risk Ratings:
Pass$46,476 $43,143 $30,433 $18,937 $21,880 $9,488 $15,089 $185,446 
Special Mention58 27 14 41 42 21 1,854 2,057 
Substandard42 151 228 425 
Substandard Impaired50 193 24 329 183 21 807 
Doubtful
Total$46,541 $43,220 $30,640 $19,044 $22,255 $9,843 $17,192 $188,735 
Paycheck Protection Program
Risk Ratings:
Pass$566,961 $$$$$$$566,961 
Total$566,961 $$$$$$$566,961 
Consolidated
Risk Ratings:
Pass$1,302,389 $898,213 $741,734 $562,336 $553,531 $885,576 $628,070 $5,571,849 
Special Mention6,108 3,507 19,722 13,953 14,820 7,235 2,544 67,889 
Substandard504 41 12,725 7,256 10,823 14,083 1,092 46,524 
Substandard Impaired433 10,940 5,659 5,477 3,243 21,211 2,104 49,067 
Doubtful1
20 20 
Total$1,309,434 $912,701 $779,840 $589,022 $582,417 $928,105 $633,830 $5,735,349 
1Loans classified as doubtful are fully reserved at December 31, 2020.
Loans Modified in Connection with COVID-19 Pandemic
The CARES Act, which was signed into law on March 27, 2020, and amended by the Consolidated Appropriations Act on December 27, 2020, encourages financial institutions to practice prudent efforts to work with borrowers financially impacted by the COVID-19 pandemic by providing an option to exclude from TDR consideration certain loan modifications that might otherwise be categorized as TDRs under ASC 310-40. This option is available for modifications that are deemed to be COVID-related, where the borrower was not more than 30 days past due on December 31, 2019, and the modification is executed between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency.
20

Federal banking regulators issued similar guidance that also allows lenders to conclude that short-term modifications for borrowers affected by the pandemic should not be considered TDRs if the borrower was current at the time of modification. Seacoast has provided financially impacted borrowers with loan accommodations, primarily consisting of payment deferrals of up to six months. At its peak on June 30, 2020, loans on deferral represented $1.1 billion, or 21% of total non-PPP loans. In the second half of 2020, the large majority of these borrowers successfully resumed making contractual payments, and the level of loans with accommodations decreased to $28.4 million, or 0.6% of total non-PPP loans at March 31, 2021. Types of outstanding accommodations at March 31, 2021 included a combination of one or more of the following: full payment deferral, partial payment deferral, reduction of interest rate, extension of the original maturity date, or re-amortization of the facility.
The following table presents the balance of loans with active payment accommodations at the specified dates, excluding PPP loans:
(In thousands)March 31, 2021December 31, 2020
Construction and land development$1,037 $1,032 
Commercial real estate - owner-occupied2,204 14,248 
Commercial real estate - non owner-occupied8,797 32,549 
Residential real estate5,286 12,839 
Commercial and financial9,949 11,915 
Consumer1,135 1,479 
Totals$28,408 $74,062 
Troubled Debt Restructured Loans
The Company’s TDR concessions granted to certain borrowers generally do not include forgiveness of principal balances, but may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a limited period of time. Loan modifications are not reported in calendar years after modification if the loans 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.
The following table presents loans that were modified in a troubled debt restructuring during the three months ended:
Three Months Ended March 31,
20212020
(In thousands)Number of ContractsPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded InvestmentNumber of ContractsPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded Investment
Construction and land development$$$$
Commercial real estate - owner-occupied
Commercial real estate - non owner-occupied
Residential real estate27 27 45 45 
Commercial and financial437 437 
Consumer
Totals$27 $27 $482 $482 
The TDRs described above resulted in a specific allowance for credit losses of $0.2 million as of March 31, 2021 and $0.1 million as of March 31, 2020. During the three months ended March 31, 2021, there were 0 defaults on loans that had been modified in TDRs within the preceding twelve months. During the three months ended March 31, 2020, there were 3 defaults totaling $1.4 million of loans to a single borrower that had been modified to a TDR within the preceding twelve months. The Company considers a loan to have defaulted when it becomes 90 days or more delinquent under the modified terms, has been transferred to nonaccrual status, is charged off or has been transferred to other real estate owned. For loans measured based on the present value of expected future cash flows, $5,000 and $24,000 for the three months ended March 31, 2021, and 2020, respectively, was included in interest income and represents the change in present value attributable to the passage of time.
21


Note F – Allowance for Credit Losses
Activity in the allowance for credit losses is summarized as follows:
 Three Months Ended March 31, 2021
(In thousands)Beginning
Balance
Provision
for Credit
Losses
Charge-
Offs
RecoveriesTDR
Allowance
Adjustments
Ending
Balance
Construction and land development$4,920 $(510)$$18 $$4,428 
Commercial real estate - owner-occupied9,868 (76)9,792 
Commercial real estate - non owner-occupied38,266 (2,038)36,229 
Residential real estate17,500 (3,372)229 (4)14,353 
Commercial and financial18,690 775 (756)207 18,916 
Consumer3,489 (494)(185)116 (1)2,925 
Paycheck Protection Program
Totals$92,733 $(5,715)$(941)$571 $(5)$86,643 
 Three Months Ended March 31, 2020
(In thousands)Beginning
Balance
Impact of Adoption of ASC 326Initial Allowance on PCD Loans Acquired During the PeriodProvision
for Credit
Losses
Charge-
Offs
RecoveriesTDR
Allowance
Adjustments
Ending
Balance
Construction and land development$1,842 $1,479 $48 $1,248 $$29 $$4,646 
Commercial real estate - owner occupied5,361 80 207 (264)(44)(13)5,327 
Commercial real estate - non-owner occupied7,863 9,341 140 18,283 (12)28 35,643 
Residential real estate7,667 5,787 97 6,260 (18)116 (10)19,899 
Commercial and financial9,716 3,677 11 2,746 (1,100)420 15,470 
Consumer2,705 862 13 1,240 (473)80 (1)4,426 
Totals$35,154 $21,226 $516 $29,513 $(1,647)$673 $(24)$85,411 
Management establishes the allowance using relevant available information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts to project losses over a three-year forecast period. Forecast data is sourced primarily from Moody’s Analytics, a firm widely recognized for its research, analysis, and economic forecasts. For portfolio segments with a weighted average life longer than three years, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans within each segment.

Historical credit losses provide the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in current and forecasted environmental conditions, such as changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.
As of March 31, 2021, the Company utilized Moody’s most recent “U.S. Macroeconomic Outlook Baseline” scenario and considered the uncertainty associated with the assumptions in the Baseline scenario, including the potential for increasing COVID-19 infections and the resulting potential erosion in consumer confidence, and the risk that government stimulus programs are less effective than expected. Outcomes in any or all of these factors could differ from the Baseline scenario, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions, and for additional dimensions of risk not captured in the quantitative model.
In the Construction and Land Development segment, the decrease in reserves during the quarter reflects the impact of lower loan balances within the segment as well as improved economic variables relating to residential real estate and consumer confidence. In this segment, the primary source of repayment is typically from proceeds of the sale, refinancing, or permanent
22

financing of the underlying property; therefore, industry and collateral type and estimated collateral values are among the relevant factors in assessing expected losses.
In the Commercial Real Estate - Owner-Occupied segment, the decrease in reserves is the result of lower loan balances within this segment. Risk characteristics include but are not limited to, collateral type, loan seasoning, and lien position.
In the Commercial Real Estate - Non Owner-Occupied segment, the decrease in reserves is the result of lower loan balances within this segment, and reflects improved economic forecast variables including lower unemployment and an improvement in expectations for corporate profits over the forecast period. Repayment is often dependent upon rental income from the successful operation of the underlying property. Loan performance may be adversely affected by general economic conditions or conditions specific to the real estate market, including property types. Collateral type, loan seasoning, and lien position are among the risk characteristics analyzed for this segment.
The Residential Real Estate segment includes first mortgages secured by residential property, and home equity lines of credit. The decrease in reserves reflects the impact of lower loan balances within the segment, a decrease in reserves on individually evaluated loans, improved economic forecast variables including unemployment and continued strength in the Florida housing market. Risk characteristics considered for this segment include, but are not limited to, collateral type, lien position, loan to value ratios, and loan seasoning.
In the Commercial and Financial segment, borrowers are primarily small to medium sized professional firms and other businesses, and loans are generally supported by projected cash flows of the business, collateralized by business assets, and/or guaranteed by the business owners. The increase in reserves corresponds with the increase in loan balances within the segment. Industry, collateral type, estimated collateral values and loan seasoning are among the relevant factors in assessing expected losses.
Consumer loans include installment and revolving lines, loans for automobiles, boats, and other personal or family purposes. Risk characteristics considered for this segment include, but are not limited to, collateral type, loan to value ratios, loan seasoning and FICO score. A decrease in the reserve is attributed to lower loan balances and lower unemployment.
Balances outstanding under the Paycheck Protection Program are guaranteed by the U.S. government and have not been assigned a reserve.
The allowance for credit losses is composed of specific allowances for loans individually evaluated and general allowances for loans grouped into loan pools based on similar characteristics, which are collectively evaluated. The Company’s loan portfolio and related allowance at March 31, 2021 and December 31, 2020 is shown in the following tables:
 March 31, 2021
 Individually EvaluatedCollectively EvaluatedTotal
(In thousands)Recorded
Investment
Associated
Allowance
Recorded
Investment
Associated
Allowance
Recorded
Investment
Associated
Allowance
Construction and land development$261 $11 $226,856 $4,417 $227,117 $4,428 
Commercial real estate - owner occupied9,209 422 1,123,876 9,370 1,133,085 9,792 
Commercial real estate - non owner-occupied7,871 1,746 1,430,494 34,483 1,438,365 36,229 
Residential real estate19,057 1,280 1,227,492 13,073 1,246,549 14,353 
Commercial and financial12,536 2,749 848,277 16,167 860,813 18,916 
Consumer667 104 173,243 2,821 173,910 2,925 
Paycheck Protection Program581,653 581,653 
Totals$49,601 $6,312 $5,611,891 $80,331 $5,661,492 $86,643 

23

 December 31, 2020
 Individually EvaluatedCollectively Evaluated
 Total
(In thousands)Recorded
Investment
Associated
Allowance
Recorded
Investment
Associated
Allowance
Recorded
Investment
Associated
Allowance
Construction and land development$276 $13 $244,832 $4,907 $245,108 $4,920 
Commercial real estate - owner occupied10,243 402 1,131,067 9,466 1,141,310 9,868 
Commercial real estate - non owner-occupied8,083 1,640 1,387,771 36,626 1,395,854 38,266 
Residential real estate16,506 2,064 1,326,122 15,436 1,342,628 17,500 
Commercial and financial13,281 3,498 841,472 15,192 854,753 18,690 
Consumer807 91 187,928 3,398 188,735 3,489 
Paycheck Protection Program566,961 566,961 
Totals$49,196 $7,708 $5,686,153 $85,025 $5,735,349 $92,733 

Note G – Derivatives
Back-to-Back Swaps
The Company offers interest rate swaps when requested by customers to allow them to hedge the risk of rising interest rates on their variable rate loans. Upon entering into these swaps, the Company enters into offsetting positions with counterparties in order to minimize the interest rate risk. These back-to-back swaps qualify as freestanding financial derivatives with the fair values reported in other assets and other liabilities. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under the arrangements for financial statement presentation purposes. Gains and losses on these back-to-back swaps, which offset, are recorded through noninterest income. No net gains or losses have been recognized to date on these instruments. As of March 31, 2021, the interest rate swaps had an aggregate notional value of $183.5 million, with a fair value of $10.5 million recorded in other assets and other liabilities. As of December 31, 2020, the interest rate swaps had an aggregate notional value of $182.4 million, with a fair value of $13.3 million recorded in other assets and other liabilities. The weighted average maturity was 7.4 years and 7.5 years as of March 31, 2021 and December 31, 2020, respectively.
Interest Rate Floors Designated as Cash Flow Hedges
The Company has entered into interest rate floor contracts to mitigate exposure to the variability of future cash flows due to changes in interest rates on certain segments of its variable-rate loans. During 2020, the Company entered into 2 interest rate floor contracts, each with a notional amount of $150.0 million, maturing in October 2023 and November 2023. The Company considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest rates and has designated them as cash flow hedges. Therefore, changes in the fair value of these derivative instruments are recognized in other comprehensive income. Amortization of the premium paid on cash flow hedges is recognized in earnings over the term of the hedge in the same caption as the hedged item. For the three months ended March 31, 2021, the Company recognized a loss through other comprehensive income of $0.2 million and reclassified $42,000 out of accumulated other comprehensive income and into interest income. As of March 31, 2021 and December 31, 2020, the interest rate floors had a fair value of $0.8 million and $1.0 million, respectively, recorded in other assets in the consolidated balance sheet. Over the next twelve months the Company expects to reclassify $0.3 million from accumulated other comprehensive income into interest income related to these agreements.
(In thousands)Notional AmountFair ValueBalance Sheet Category
At March 31, 2021
Back-to-back swaps$183,491 $10,527 Other Assets and Other Liabilities
Interest rate floors300,000 778 Other Assets
At December 31, 2020
Back-to-back swaps$182,379 $13,339 Other Assets and Other Liabilities
Interest rate floors300,000 1,004 Other Assets

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Note H – Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase are accounted for as secured borrowings. For securities sold under agreements to repurchase, the Company is required to pledge collateral with value sufficient to fully collateralized borrowings. Company securities pledged were as follows by collateral type and maturity as of: 
(In thousands)March 31, 2021December 31, 2020
Fair value of pledged securities - overnight and continuous:
Mortgage-backed securities and collateralized mortgage obligations of U.S. government sponsored entities$120,071 $137,268 

Note I – Noninterest Income and Expense
Details of noninterest income and expenses for the three months ended March 31, 2021 and 2020 are as follows:
 Three Months Ended March 31,
(In thousands)20212020
Noninterest income  
Service charges on deposit accounts$2,338 $2,825 
Interchange income3,820 3,246 
Wealth management income2,323 1,867 
Mortgage banking fees4,225 2,208 
Marine finance fees189 146 
SBA gains287 139 
BOLI income859 886 
Other income3,744 3,352 
 17,785 14,669 
 Securities (losses) gains, net(114)19 
 Total$17,671 $14,688 
Noninterest expense
Salaries and wages$21,393 $23,698 
Employee benefits4,980 4,255 
Outsourced data processing costs4,468 4,633 
Telephone/data lines785 714 
Occupancy3,789 3,353 
Furniture and equipment1,254 1,623 
Marketing1,168 1,278 
Legal and professional fees2,582 3,363 
FDIC assessments526 
Amortization of intangibles1,211 1,456 
Foreclosed property expense and net gain on sale(65)(315)
Provision for credit losses on unfunded commitments46 
Other4,029 3,694 
 Total$46,120 $47,798 


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Note J – Equity Capital
The Company is well capitalized and at March 31, 2021, the Company and the Company’s principal banking subsidiary, Seacoast Bank, exceeded the common equity Tier 1 (CET1) capital ratio regulatory threshold of 6.5% for well-capitalized institutions under the Basel III standardized transition approach, as well as risk-based and leverage ratio requirements for well capitalized banks under the regulatory framework for prompt corrective action.

Note K – Contingent Liabilities
The Company and its subsidiaries, because of the nature of their business, are at all times subject to numerous legal actions, threatened or filed. Management presently believes that none of the legal proceedings to which it is a party are likely to have a materially adverse effect on the Company’s consolidated financial condition, operating results or cash flows.

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Note L – Fair Value
Under ASC Topic 820, fair value measurements for items measured at fair value on a recurring and nonrecurring basis at March 31, 2021 and December 31, 2020 included:
(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)
At March 31, 2021    
Financial Assets
Available-for-sale debt securities1
$1,051,396 $199 $1,051,197 $
Derivative financial instruments2
11,305 11,305 
Loans held for sale2
60,924 60,924 
Loans3
9,929 1,368 8,561 
Other real estate owned4
15,549 3,390 12,159 
Equity securities5
6,416 6,416 
Financial Liabilities
Derivative financial instruments2
$10,527 $$10,527 $
At December 31, 2020
Financial Assets
Available-for-sale debt securities1
$1,398,157 $101 $1,398,056 $
Derivative financial instruments2
14,343 14,343 
Loans held for sale2
68,890 68,890 
Loans3
8,806 1,900 6,906 
Other real estate owned4
12,750 72 12,678 
Equity securities5
6,530 6,530 
Financial Liabilities
Derivative financial instruments2
$13,339 $$13,339 $
1See “Note D – Securities” for further detail of fair value of individual investment categories.
2Recurring fair value basis determined using observable market data.
3SeeNote E – Loans.” Nonrecurring fair value adjustments to collateral-dependent loans reflect full or partial write-downs that are based on current appraised values of the collateral in accordance with ASC Topic 310.
4Fair value is measured on a nonrecurring basis in accordance with ASC Topic 360.
5An investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities, reported at fair value in Other Assets. Recurring fair value basis is determined using market quotations.
Available-for-sale debt securities: Level 1 securities consist of U.S. Treasury securities. Other securities are reported at fair value utilizing Level 2 inputs. The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available.
The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. The fair value of collateralized loan obligations is determined from broker quotes. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using internal models.
Derivative financial instruments: The Company offers interest rate swaps to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while
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providing a contract for fixed interest payments for the customer. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2. Other derivatives consist of interest rate floors designated as cash flow hedges. The fair values of these instruments are based upon the estimated amount the Company would receive or pay to terminate the instruments, taking into account current interest rates and, when appropriate, the current creditworthiness of the counterparties. Interest rate floors designated as cash flow hedges are classified within Level 2.
Loans held for sale: Fair values are based upon estimated values to be received from independent third party purchasers. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Fair market value changes occur due to changes in interest rates, the borrower’s credit, the secondary loan market and the market for a borrower’s debt. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of the loans were 90 days or more past due or on nonaccrual as of March 31, 2021 and December 31, 2020.
The aggregate fair value and contractual balance of loans held for sale as of March 31, 2021 and December 31, 2020 is as follows:
(In thousands)March 31, 2021December 31, 2020
Aggregate fair value$60,924 $68,890 
Contractual balance59,387 66,415 
Excess1,537 2,475 
Loans: Loans carried at fair value consist of collateral-dependent real estate loans. Fair value is based on recent real estate appraisals less estimated costs of sale. These evaluations may use either a single valuation approach or a combination of approaches, such as comparative sales, cost and/or income approach. A significant unobservable input in the income approach is the estimated capitalization rate for a given piece of collateral. At March 31, 2021 capitalization rates utilized to determine fair value of the underlying collateral averaged approximately 7.2%. Adjustments to comparable sales may be made by an appraiser to reflect local market conditions or other economic factors and may result in changes in the fair value of an asset over time. As such, the fair value of these loans is considered level 3 in the fair value hierarchy. Collateral-dependent loans measured at fair value totaled $9.9 million with a specific reserve of $6.3 million at March 31, 2021, compared to $8.8 million with a specific reserve of $7.7 million at December 31, 2020.
For loans classified as Level 3, changes included loan additions of $2.0 million offset by $0.3 million in paydowns and charge-offs for the three months ended March 31, 2021.
Other real estate owned: When appraisals are used to determine fair value and the appraisals are based on a market approach, the fair value of other real estate owned (“OREO”) is classified as a Level 2 input. When the fair value of OREO is based on appraisals which require significant adjustments to market-based valuation inputs or apply an income approach based on unobservable cash flows, the fair value of OREO is classified as Level 3.
For OREO classified as Level 3 at March 31, 2021, changes during the first quarter of 2021 included additions of $0.7 million offset by sales of $1.2 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 quarterly valuation process. There were no such transfers during the three months ended March 31, 2021 and 2020.
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The carrying amount and fair value of the Company’s other financial instruments that were not disclosed previously in the balance sheet and for which carrying amount is not fair value as of March 31, 2021 and December 31, 2020 is as follows:
(In thousands)Carrying AmountQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
March 31, 2021    
Financial Assets    
Debt securities held-to-maturity1
$512,307 $$500,720 $
Time deposits with other banks750 760 
Loans, net5,651,563 5,608,009 
Financial Liabilities
Deposit liabilities7,385,749 7,388,104 
Subordinated debt71,436 58,285 
December 31, 2020
Financial Assets
Debt securities held-to-maturity1

$184,484 $$192,179 $
Time deposits with other banks750 762 
Loans, net5,633,810 5,686,019 
Financial Liabilities
Deposit liabilities6,932,561 6,936,097 
Subordinated debt71,365 58,227 
1See “Note D – Securities” for further detail of individual investment categories.
The short maturity of Seacoast’s assets and liabilities results in having a significant number of financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following balance sheet captions: cash and due from banks, interest bearing deposits with other banks, FHLB borrowings and securities sold under agreements to repurchase, maturing within 30 days.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value at March 31, 2021 and December 31, 2020:
Held-to-maturity debt securities: These debt securities are reported at fair value utilizing level 2 inputs. The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available.
The Company reviews the prices supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. From time to time, the Company will validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from other brokers and third-party sources or derived using internal models.
Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial or mortgage. Each loan category is further segmented into fixed and adjustable-rate interest terms as well as performing and nonperforming categories. The fair value of loans is calculated by discounting scheduled cash flows through the estimated life including prepayment considerations, using estimated market discount rates that reflect the risks inherent in the loan. The fair value approach considers market-driven variables including credit related factors and reflects an “exit price” as defined in ASC Topic 820.
Deposit liabilities: The fair value of demand deposits, savings accounts and money market deposits is the amount payable at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for funding of similar remaining maturities.
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Note M – Business Combinations
Proposed Acquisition of Legacy Bank of Florida
On March 23, 2021, the Company announced that it had entered into an agreement and plan of merger with Legacy Bank of Florida (“Legacy”). Pursuant to the terms of the merger agreement, Legacy, headquartered in Boca Raton, FL, will be merged with and into Seacoast Bank. Legacy operates 5 branches in Broward and Palm Beach counties in Florida’s largest metropolitan statistical area with $501 million in deposits and $490 million in loans as of March 31, 2021. This acquisition is anticipated to close in the third quarter of 2021, subject to the receipt of approvals from regulatory authorities, the approval of Legacy shareholders and the satisfaction of other customary conditions.
Acquisition of Fourth Street Banking Company
On August 21, 2020, the Company completed its acquisition of Fourth Street Banking Company (“Fourth Street”). Simultaneously, upon completion of the merger of Fourth Street and the Company, Fourth Street's wholly owned subsidiary bank, Freedom Bank, was merged with and into Seacoast Bank. Prior to the acquisition, Freedom Bank operated 2 branches in St. Petersburg, Florida.
As a result of this acquisition, the Company expects to enhance its presence in St. Petersburg, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.
The Company acquired 100% of the outstanding common stock of Fourth Street. Under the terms of the definitive agreement, each share of Fourth Street common stock was converted into the right to receive 0.1275 share of Seacoast common stock.
(In thousands, except per share data)August 21, 2020
Number of Fourth Street common shares outstanding11,220 
Shares issued upon conversion of convertible debt5,405 
Per share exchange ratio0.1275 
Number of shares of common stock issued2,120 
Multiplied by common stock price per share on August 21, 2020$19.40 
Value of common stock issued41,121 
Cash paid for Fourth Street vested stock options596 
Total purchase price$41,717 
The acquisition of Fourth Street was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill of $9.0 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The fair values initially assigned to assets acquired and liabilities assumed are preliminary and could change for up to one year after the closing date of the acquisition as new information and circumstances relative to closing date fair values becomes known.
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(In thousands)Initially Measured
August 21, 2020
Assets: 
Cash$38,082 
Investment securities3,498 
Loans303,434 
Bank premises and equipment9,480 
Core deposit intangibles1,310 
Goodwill9,030 
Other assets7,088 
Total assets$371,922 
Liabilities:
Deposits$329,662 
Other liabilities543 
Total liabilities$330,205 
The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.
August 21, 2020
(In thousands)Book BalanceFair Value
Loans:  
Construction and land development$9,197 $8,851 
Commercial real estate - owner-occupied77,936 75,215 
Commercial real estate - non owner-occupied76,014 71,171 
Residential real estate23,548 23,227 
Commercial and financial72,745 68,096 
Consumer2,748 2,694 
PPP loans55,005 54,180 
Total acquired loans$317,193 $303,434 
The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:
(In thousands)August 21, 2020
Book balance of loans at acquisition$59,455 
Allowance for credit losses at acquisition(5,763)
Non-credit related discount(4,319)
Total PCD loans acquired$49,373 
The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.
Acquisition of First Bank of the Palm Beaches
On March 13, 2020, the Company completed its acquisition of First Bank of the Palm Beaches (“FBPB”). FBPB was merged with and into Seacoast Bank. FBPB operated 2 branches in the Palm Beach market.
As a result of this acquisition, the Company expects to enhance its presence in the Palm Beach market, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results.
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The Company acquired 100% of the outstanding common stock of FBPB. Under the terms of the definitive agreement, each share of FBPB common stock was converted into the right to receive 0.2000 share of Seacoast common stock.
(In thousands, except per share data)March 13, 2020
Number of FBPB common shares outstanding5,213 
Per share exchange ratio0.2000 
Number of shares of common stock issued1,043 
Multiplied by common stock price per share on March 13, 2020$20.17 
Value of common stock issued21,031 
Cash paid for FBPB vested stock options866 
Total purchase price$21,897 
The acquisition of FBPB was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill of $6.9 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The adjustment reflected in the table below are the result of information obtained subsequent to the initial measurement.
(In thousands)Initially Measured
March 13, 2020
Measurement Period AdjustmentsAs Adjusted March 13, 2020
Assets: 
Cash$34,749 $$34,749 
Investment securities447 447 
Loans146,839 (62)146,777 
Bank premises and equipment6,086 6,086 
Core deposit intangibles819 819 
Goodwill6,799 62 6,861 
Other assets1,285 20 1,305 
Total assets$197,024 $20 $197,044 
Liabilities:
Deposits$173,741 $$173,741 
Other liabilities1,386 20 1,406 
Total liabilities$175,127 $20 $175,147 
The table below presents information with respect to the fair value and unpaid principal balance of acquired loans at the acquisition date.
March 13, 2020
(In thousands)Book BalanceFair Value
Loans:  
Construction and land development$9,493 $9,012 
Commercial real estate - owner-occupied46,221 45,171 
Commercial real estate - non owner-occupied36,268 35,079 
Residential real estate47,569 47,043 
Commercial and financial9,659 9,388 
Consumer1,132 1,084 
Total acquired loans$150,342 $146,777 
The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:
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(In thousands)March 13, 2020
Book balance of loans at acquisition$43,682 
Allowance for credit losses at acquisition(516)
Non-credit related discount(128)
Total PCD loans acquired$43,038 
The Company believes the deposits assumed in the acquisition have an intangible value. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.

Note N – Subsequent Event
On April 20, 2021, the Company’s Board of Directors approved a $0.13 cash dividend payable to shareholders of record on June 15, 2021, to be paid on June 30, 2021.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
The purpose of this discussion and analysis is to aid in understanding significant changes in the financial condition of Seacoast Banking Corporation of Florida and its subsidiaries ("Seacoast" or the “Company”) and their results of operations. Nearly all of the Company’s operations are contained in its banking subsidiary, Seacoast National Bank (“Seacoast Bank” or the “Bank”). Such discussion and analysis should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related notes included in this report.
The emphasis of this discussion will be on the three months ended March 31, 2021 compared to the three months ended March 31, 2020 for the consolidated statements of income. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of March 31, 2021 compared to December 31, 2020.
This discussion and analysis contains statements that may be considered “forward-looking statements” as defined in, and subject to the protections of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. See the following section for additional information regarding forward-looking statements.
For purposes of the following discussion, the words “Seacoast" or the "Company” refer to the combined entities of Seacoast Banking Corporation of Florida and its direct and indirect wholly owned subsidiaries.

Special Cautionary Notice Regarding Forward-Looking Statements
Certain statements made or incorporated by reference herein which are not statements of historical fact, including those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are “forward-looking statements” within the meaning, and protections, of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, and intentions about future performance, and involve known and unknown risks, uncertainties and other factors, any of which may be impacted by the COVID-19 pandemic and related effects on the U.S. economy, which may be beyond the Company's control, and which may cause the actual results, performance or achievements of Seacoast Banking Corporation of Florida (“Seacoast” or the “Company”) or its wholly-owned banking subsidiary, Seacoast National Bank (“Seacoast Bank), to be materially different from those set forth in the forward-looking statements.
All statements other than statements of historical fact could be forward-looking statements. You can identify these forward-looking statements through the use of words such as "may," "will," "anticipate," "assume," "should," "support," "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "further," "plan," "point to," "project," "could," "intend," "target" or other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:
the effects of future economic and market conditions, including seasonality;
the adverse impact of COVID-19 (economic and otherwise) on the Company and its customers, counterparties, employees, and third-party service providers, and the adverse impacts to our business, financial position, results of operations, and prospects, including the ongoing potential to adversely affect Seacoast’s revenues and values of its assets and liabilities, lead to a tightening of credit, and increase stock price volatility;
government or regulatory responses to the COVID-19 pandemic;
governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve ("Federal Reserve"), as well as legislative, tax and regulatory changes;
changes in accounting policies, rules and practices, including the impact of the adoption of the current expected credit losses (“CECL”) methodology;
our participation in the Paycheck Protection Program (“PPP”);
the risks of changes in interest rates on the level and composition of deposits, loan demand, liquidity and the values of loan collateral, securities, and interest rate sensitive assets and liabilities;
34

interest rate risks, sensitivities and the shape of the yield curve; uncertainty related to the impact of LIBOR calculations on securities, loans and debt;
governmental actions to stimulate the economy and provide support for small businesses have resulted in material increases to the Company’s liquidity position, adversely affecting the net interest margin. The duration of this liquidity remaining on the balance sheet is uncertain;
changes in borrower credit risks and payment behaviors, including as a result of the financial impact of COVID-19;
changes in retail distribution strategies, customer preferences and behavior;
changes in the availability and cost of credit and capital in the financial markets;
changes in the prices, values and sales volumes of residential and commercial real estate; the Company's ability to comply with any regulatory requirements;
the effects of problems encountered by other financial institutions that adversely affect Seacoast or the banking industry;
Seacoast's concentration in commercial real estate loans and in real estate collateral in the state of Florida;
inaccuracies or other failures from the use of models, including the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit conditions;
the impact on the valuation of Seacoast's investments due to market volatility or counterparty payment risk;
statutory and regulatory dividend restrictions;
increases in regulatory capital requirements for banking organizations generally;
the risks of mergers, acquisitions and divestitures, including Seacoast's ability to continue to identify acquisition targets and successfully acquire and integrate desirable financial institutions;
changes in technology or products that may be more difficult, costly, or less effective than anticipated;
the Company's ability to identify and address increased cybersecurity risks, including as a result of employees working remotely;
inability of Seacoast's risk management framework to manage risks associated with the business;
dependence on key suppliers or vendors to obtain equipment or services for the business on acceptable terms;
reduction in or the termination of Seacoast's ability to use the mobile-based platform that is critical to the Company's business growth strategy;
the effects of war or other conflicts, acts of terrorism, natural disasters, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions;
unexpected outcomes of, and the costs associated with, existing or new litigation involving the Company, including as a result of the Company’s participation in the PPP;
Seacoast's ability to maintain adequate internal controls over financial reporting; potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;
the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, non-bank financial technology providers, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in the Company's market areas and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet;
the failure of assumptions underlying the establishment of reserves for possible credit losses;
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the risks relating to the Legacy Bank of Florida proposed merger including, without limitation: the timing to consummate the proposed merger; the risk that a condition to closing of the proposed merger may not be satisfied; the risk that the merger may not be completed at all; the diversion of management time on issues related to the proposed merger; unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following the merger being lower than expected; the risk of deposit and customer attrition; any changes in deposit mix; unexpected operating and other costs, which may differ or change from expectation; the risk of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees; increased competitive pressures on solicitations of customers by competitors; as well as difficulties and risks inherent with entering new markets; and,
other factors and risks described under “Risk Factors” herein and in any of the Company's subsequent reports filed with the SEC and available on its website at www.sec.gov.
All written or oral forward-looking statements that are made or are attributable to Seacoast are expressly qualified in their entirety by this cautionary notice. The Company assumes no obligation to update, revise or correct any forward-looking statements that are made from time to time, either as a result of future developments, new information or otherwise, except as may be required by law.

Business Developments
Announcement of Legacy Bank of Florida Acquisition
During the first quarter of 2021, Seacoast announced the proposed upcoming acquisition of Legacy Bank of Florida, which is expected to close in the third quarter of 2021, subject to regulatory approval, the approval of Legacy Bank’s shareholders and the satisfaction of other customary conditions. As of March 31, 2021, Legacy Bank operated five branches and had $490 million in loans and $501 million in deposits. The acquisition will expand Seacoast’s growing presence in Broward and Palm Beach counties, part of Florida’s largest MSA.
Declaration of Cash Dividend to Common Shareholders
On April 20, 2021, the Company’s Board of Directors approved a $0.13 cash dividend payable to shareholders of record on June 15, 2021, to be paid on June 30, 2021.
Impact of COVID-19 Pandemic
The COVID-19 pandemic and related restrictive measures taken by governments, businesses and individuals caused unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve. As the restrictive measures have been eased during 2020 and into 2021, the U.S. economy has begun to recover and with the availability and distribution of a COVID-19 vaccine, we anticipate continued improvements in commercial and consumer activity and the U.S. economy.
While indications of recovery exist, we recognize that our business and consumer customers are experiencing varying degrees of financial distress, which is expected to continue into the second quarter of 2021, especially if new COVID-19 variant infections increase and new economic restrictions are mandated. Changing consumer behavior and the impact of government support programs including the PPP have contributed to higher customer deposit balances, which may adversely affect our net interest income and net interest margin. Commercial activity has improved, but has not returned to the levels existing prior to the outbreak of the pandemic, which may result in our customers’ inability to meet their loan obligations to us. In addition, the economic pressures and uncertainties related to the COVID-19 pandemic have resulted in changes in consumer spending behaviors, which may negatively impact the demand for loans and other services we offer. Our borrowers include customers in industries such as hotel/lodging, restaurants and retail and commercial real estate, all of which have been significantly impacted by the COVID-19 pandemic. We recognize that these industries may take longer to recover as consumers may be hesitant to return to full social interaction or may change their spending habits on a more permanent basis as a result of the pandemic. We continue to monitor these customers closely.
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We have taken deliberate actions to maintain our balance sheet strength to serve our clients and communities, including maintaining higher levels of liquidity and managing our assets and liabilities in order to maintain a strong capital position and support business growth and acquisition opportunities; however, future economic conditions are subject to significant uncertainty. Uncertainties associated with the pandemic include the duration of the COVID-19 outbreak and any related variant infections, the availability and effectiveness of COVID-19 vaccines, the impact to our customers, employees and vendors and the impact to the economy as a whole.

Results of Operations
For the first quarter of 2021, the Company reported net income of $33.7 million, or $0.60 per average diluted share, compared to $29.3 million, or $0.53, for the fourth quarter of 2020 and $0.7 million, or $0.01, for the first quarter of 2020. Adjusted net income1 for the first quarter of 2021 totaled $35.5 million, or $0.63 per average diluted share, compared to $30.7 million, or $0.55, for the fourth quarter of 2020 and $5.5 million, or $0.10, for the first quarter of 2020.
FirstFourthFirst
QuarterQuarterQuarter
202120202020
Return on average tangible assets1.70 %1.49 %0.11 %
Return on average tangible shareholders' equity15.62 13.87 0.95 
Efficiency ratio53.21 48.23 59.85 
Adjusted return on average tangible assets1
1.75 %1.50 %0.32 %
Adjusted return on average tangible shareholders' equity1
16.01 14.00 2.86 
Adjusted efficiency ratio1
51.99 48.75 53.55 
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.
Net Interest Income and Margin
Net interest income for the first quarter of 2021 totaled $66.6 million, decreasing $2.2 million, or 3%, compared to the fourth quarter of 2020, and increasing $3.4 million, or 5%, compared to the first quarter of 2020. The decrease quarter-over-quarter was due to lower accretion of purchase discount on acquired loans, fewer days in the quarter, lower loan balances excluding Paycheck Protection Program (“PPP”) loans and lower yields, partially offset by higher income from PPP loans and lower cost of deposits. Net interest margin (on a fully tax equivalent basis)1 was 3.51% in the first quarter 2021, compared to 3.59% in the fourth quarter of 2020 and 3.93% in the first quarter of 2020. The effect of accretion of purchase discounts on acquired loans was an increase of 15 basis points in the first quarter of 2021, compared to an increase of 23 basis points in the fourth quarter 2020 and an increase of 27 basis points in the first quarter of 2020. The effect of interest and fees on PPP loans was an increase of 11 basis points in the first quarter of 2021, and a decrease of one basis point in the fourth quarter of 2020. Excluding these items, net interest margin declined to 3.25% from 3.37% in the fourth quarter of 2020 and 3.66% in the first quarter of 2020. The decrease from the fourth quarter of 2020 is largely the result of significant growth in cash balances. The decrease from the first quarter of 2020 also reflects the lower interest rate environment. The yield on loans in the first quarter of 2021, excluding PPP and accretion of purchase discount, decreased eight basis points compared to the fourth quarter of 2020, and decreased 42 basis points compared to the first quarter of 2020, both largely due to the impact of the overall lower rate environment. The yield on securities declined eight basis points compared to the fourth quarter of 2020 and 137 basis points from the first quarter of 2020, resulting from elevated prepayments and lower yields on new purchases. The cost of deposits declined to 13 basis points in the first quarter of 2021, compared to 19 basis points in the fourth quarter of 2020 and 57 basis points in the first quarter of 2020. Lower cost of deposits reflects lower market rates, and a favorable shift in product mix to include a higher proportion of noninterest bearing demand deposits to total deposits. The following table details the trend for net interest income and margin results (on a tax equivalent basis)1, the yield on earning assets and the rate paid on interest bearing liabilities for the periods specified:
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.
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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 2021$66,741 3.51 %3.65 %0.23 %
Fourth quarter 202068,903 3.59 %3.80 %0.33 %
First quarter 202063,291 3.93 %4.54 %0.90 %
1On tax equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP.
Total average loans decreased $146.7 million, or 2%, for the first quarter of 2021 compared to the fourth quarter of 2020, and increased $544.1 million, or 10%, from the first quarter of 2020. The decrease from the prior quarter reflects the effect of elevated payoffs exceeding loan originations, and a net decrease in PPP loans as a result of loan forgiveness. The increase from the prior year reflects the Company's participation in the PPP program and the acquisitions of FBPB and Freedom Bank.
Average loans as a percentage of average earning assets totaled 75% for the first quarter of 2021, 77% for the fourth quarter of 2020 and 81% for the first quarter of 2020.
Loan production is detailed in the following table for the periods specified:
FirstFourthFirst
QuarterQuarterQuarter
(In thousands)202120202020
Commercial pipeline at period end$240,871 $166,735 $171,125 
Commercial loan originations204,253 277,389 183,330 
Residential pipeline - saleable at period end92,141 92,017 75,226 
Residential loans - sold138,337 161,628 62,865 
Residential pipeline - portfolio at period end72,448 25,083 11,779 
Residential loans - retained46,620 54,464 25,776 
Consumer pipeline at period end28,127 18,207 29,123 
Consumer originations46,745 47,529 51,516 
PPP originations232,478 — — 
Commercial originations during the first quarter of 2021 were $204.3 million, a decrease of $73.1 million, or 26%, compared to the fourth quarter of 2020, typical of seasonal activity, and an increase of $20.9 million, or 11%, compared to the first quarter of 2020.
The commercial pipeline increased $74.1 million, or 44%, to $240.9 million at March 31, 2021, compared to December 31, 2020, and increased $69.7 million, or 41%, compared to March 31, 2020, reflecting increasing demand in line with Florida’s strong economic recovery.
The Company originates residential mortgage loans identified for sale to investors in the secondary market. The Company uses rate locks with investors at the time of application, thereby eliminating interest rate risk. Residential loans originated for sale in the secondary market totaled $138.3 million in the first quarter of 2021, compared to $161.6 million in the fourth quarter of 2020 and $62.9 million in the first quarter of 2020, a decrease of 14% and an increase of 120%, respectively. Lower mortgage interest rates since the first quarter of 2020 have fueled an increase in refinancings. In addition, significant inflows of new residents and businesses into Florida continues to drive demand for mortgage originations. Residential saleable pipelines were $92.1 million as of March 31, 2021, compared to $92.0 million as of December 31, 2020 and $75.2 million as of March 31, 2020.
Residential loan production retained in the portfolio for the first quarter of 2021 was $46.6 million compared to $54.5 million in the fourth quarter of 2020 and $25.8 million in the first quarter of 2020, a decrease of 14% and an increase of 81%, respectively. The pipeline of residential loans intended to be retained in the portfolio was $72.4 million as of March 31, 2021, compared to $25.1 million as of December 31, 2020, and $11.8 million as of March 31, 2020. The increase in the retained
38

residential pipeline reflects a selective Florida correspondent program expanded during the first quarter of 2021 to generate both portfolio growth and cross-sell opportunities for depository and other products.
Consumer originations totaled $46.7 million during the first quarter of 2021, a decrease of $0.8 million, or 2%, from the fourth quarter of 2020 and a decrease of $4.8 million, or 9%, from the first quarter of 2020. The consumer pipeline was $28.1 million as of March 31, 2021, compared to $18.2 million as of December 31, 2020 and $29.1 million at March 31, 2020.
In March 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. The CARES Act includes provisions for the Paycheck Protection Program (“PPP”) offered through the U.S. Small Business Administration (“SBA”). Loans originated under this program have a contractual rate of interest of 1% with principal and interest that may be forgiven, provided that the borrower uses the funds in a manner consistent with PPP guidelines. Seacoast assisted borrowers in 2020 with more than 5,500 loans originated through the PPP and, when combined with PPP loans acquired from Freedom Bank, outstanding balances totaled $567.0 million at December 31, 2020. In January 2021, the program was renewed, and the Company originated more than 2,450 additional loans totaling $232.5 million in the first quarter of 2021.
Average debt securities increased $53.9 million, or 4%, for the first quarter 2021 compared to the fourth quarter 2020, and were $404.2 million, or 34%, higher compared to the first quarter of 2020. Increases reflect the impact of purchases, offset by paydowns and maturities.
The cost of average interest-bearing liabilities contracted in the three months ended March 31, 2021 to 23 basis points from 33 basis points for the three months ended December 31, 2020, and from 90 basis points for the three months ended March 31, 2020. The cost of average total deposits (including noninterest bearing demand deposits) in the first quarter of 2021 was 13 basis points compared to 19 basis points in the fourth quarter of 2020 and 57 basis points in the first quarter of 2020, reflecting continued repricing downward of interest-bearing deposits and time deposits.
During the first quarter of 2021, average transaction deposits (noninterest and interest bearing demand) increased $149.7 million, or 4%, compared to the fourth quarter of 2020 and increased $1.2 billion, or 44%, compared to the first quarter of 2020, reflecting higher customer deposit balances along with new and acquired relationships.
The Company’s deposit mix remains favorable, with 90% of average deposit balances comprised of savings, money market, and demand deposits for the three months ended March 31, 2021. Seacoast's average cost of deposits, including noninterest bearing demand deposits, decreased to 13 basis points for the three months ended March 31, 2021 compared to 19 basis points for the three months ended December 31, 2020 and 57 basis points for the three months ended March 31, 2020, reflecting the lower rate environment and shifts in deposit mix with a higher proportion of low cost deposits. Brokered CDs totaled $93.5 million at March 31, 2021, with a weighted average rate of 0.99% and $73.5 million maturing in the second quarter of 2021.
Sweep repurchase agreements with customers increased $41.8 million, or 59%, year-over-year. For the three months ended March 31, 2021, the average balance was $112.8 million compared to an average balance of $101.7 million for the three months ended December 31, 2020 and an average balance of $71.1 million for the three months ended March 31, 2020. The average rate on customer sweep repurchase accounts was 0.15% for the three months ended March 31, 2021, compared to 0.16% for the three months ended December 31, 2020 and 0.95% for three months ended March 31, 2020. No federal funds purchased were utilized at March 31, 2021 or March 31, 2020.
The Company had no FHLB borrowings during the three months ended March 31, 2021, average FHLB borrowings of $16.0 million with an average rate of 1.99% for the three months ended December 31, 2020, and $250.0 million with an average rate of 1.56% for the three months ended March 31, 2020. The decrease reflects the impact of higher average deposit balances that were sufficient to fund the Company’s liquidity needs during the first quarter of 2021.
For the three months ended March 31, 2021, subordinated debt averaged $71.4 million, compared to $71.3 million for the three months ended December 31, 2020 and $71.1 million for the three months ended March 31, 2020. The average rate on subordinated debt for the three months ended March 31, 2021 was 2.43%, compared to 2.43% for the three months ended December 31, 2020 and 4.08% for the three months ended March 31, 2020. The subordinated debt relates to trust preferred securities issued by subsidiary trusts of the Company.

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The following tables detail 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 Rates1
 20212020
 First QuarterFourth QuarterFirst Quarter
 Average Yield/Average Yield/Average Yield/
(In thousands, except ratios)BalanceInterestRateBalanceInterestRateBalanceInterestRate
Assets
Earning assets:
Securities:
Taxable$1,550,457 $6,298 1.62 %$1,496,536 $6,477 1.73 %$1,152,473 $8,696 3.02 %
Nontaxable25,932 187 2.89 25,943 109 1.68 19,740 152 3.09 
Total Securities1,576,389 6,485 1.65 1,522,479 6,586 1.73 1,172,213 8,848 3.02 
Federal funds sold and other investments377,344 586 0.63 197,379 523 1.05 87,924 734 3.36 
Loans excluding PPP loans5,149,642 55,504 4.37 5,276,224 60,497 4.56 5,215,234 63,524 4.90 
PPP Loans609,733 6,886 4.58 629,855 5,187 3.28 — — — 
Total Loans5,759,375 62,390 4.39 5,906,079 65,684 4.42 5,215,234 63,524 4.90 
Total Earning Assets7,713,108 69,461 3.65 7,625,937 72,793 3.80 6,475,371 73,106 4.54 
Allowance for loan losses(91,735)(93,148)(56,931)
Cash and due from banks255,685 235,519 90,084 
Premises and equipment74,272 76,001 67,585 
Intangible assets237,323 238,631 226,712 
Bank owned life insurance132,079 131,208 126,492 
Other assets164,622 162,248 126,230 
Total Assets$8,485,354 $8,376,396 $7,055,543 
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand$1,600,490 $258 0.07 %$1,458,299 $249 0.07 %$1,173,930 $834 0.29 %
Savings722,274 137 0.08 672,864 166 0.10 526,727 348 0.27 
Money market1,609,938 670 0.17 1,523,960 813 0.21 1,128,757 2,008 0.72 
Time deposits711,320 1,187 0.68 911,091 2,104 0.92 1,151,750 4,768 1.67 
Securities sold under agreements to repurchase112,834 41 0.15 101,665 42 0.16 71,065 167 0.95 
Federal Home Loan Bank borrowings— — — 15,978 80 1.99 250,022 968 1.56 
Other borrowings71,390 427 2.43 71,321 436 2.43 71,114 722 4.08 
Total Interest-Bearing Liabilities4,828,246 2,720 0.23 4,755,178 3,890 0.33 4,373,365 9,815 0.90 
Noninterest demand2,432,038 2,424,523 1,625,215 
Other liabilities88,654 85,622 62,970 
Total Liabilities7,348,938 7,265,323 6,061,550 
Shareholders' equity1,136,416 1,111,073 993,993 
Total Liabilities & Equity$8,485,354 $8,376,396 $7,055,543 
Cost of deposits0.13 %0.19 %0.57 %
Interest expense as a % of earning assets0.14 %0.20 %0.61 %
Net interest income as a % of earning assets$66,741 3.51 %$68,903 3.59 %$63,291 3.93 %
1On a fully taxable equivalent basis, a non-GAAP measure - see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and a reconciliation to GAAP. All yields and rates have been computed on an annual basis using amortized cost. Fees on loans have been included in interest on loans. Nonaccrual loans are included in loan balances.
40

Noninterest Income
Noninterest income totaled $17.7 million for the first quarter of 2021, an increase of $2.7 million, or 18%, compared to the fourth quarter of 2020 and an increase of $3.0 million, or 20%, from the first quarter of 2020.
Noninterest income is detailed as follows:
FirstFourthFirst
QuarterQuarterQuarter
(In thousands)202120202020
Service charges on deposit accounts$2,338 $2,423 $2,825 
Interchange income3,820 3,596 3,246 
Wealth management income2,323 1,949 1,867 
Mortgage banking fees4,225 3,646 2,208 
Marine finance fees189 145 146 
SBA gains287 113 139 
BOLI income859 889 886 
Other income3,744 2,187 3,352 
 17,785 14,948 14,669 
Securities (losses) gains, net(114)(18)19 
Total$17,671 $14,930 $14,688 
Service charges on deposits were $2.3 million in the first quarter of 2021, a decrease of $0.1 million, or 4%, compared to the fourth quarter of 2020 and a decrease of $0.5 million, or 17%, compared to the first quarter of 2020. Decreases in service charges reflect the impact of higher average deposit balances during the first quarter of 2021. Overdraft fees represent 39% of total service charges on deposits for the three months ended March 31, 2021.
Interchange income reached a record $3.8 million for the three months ended March 31, 2021, an increase of $0.2 million, or 6%, compared to the three months ended December 31, 2020, and an increase of $0.6 million, or 18%, compared to the three months ended March 31, 2020. The first quarter of 2021 benefited from a higher volume of transactions and higher per-card spending.
Wealth management income, including trust fees and brokerage commissions and fees, was a record $2.3 million in the first quarter of 2021, increasing $0.4 million, or 19%, from the fourth quarter of 2020 and increasing $0.5 million, or 24% compared to the first quarter of 2020. Assets under management have grown significantly with the addition of new relationships, increasing $156 million from December 31, 2020 and $436 million from March 31, 2020 to exceed $1 billion at March 31, 2021.
Mortgage banking fees increased by $0.6 million, or 16%, to $4.2 million in the first quarter of 2021 compared to the fourth quarter of 2020, and increased $2.0 million, or 91%, compared to the first quarter of 2020, with mortgage rates at historic lows and an influx of new residents and businesses into Florida driving demand for mortgage originations.
Marine finance fees were $0.2 million, compared to $0.1 million in the fourth quarter of 2020 and $0.1 million in the first quarter of 2020.
SBA gains totaled $0.3 million, an increase of $0.2 million, or 154%, compared to the fourth quarter of 2020 and an increase of $0.1 million, or 106%, compared to the first quarter of 2020.
Bank owned life insurance (“BOLI”) income totaled $0.9 million for the first quarter of 2021, in line with the fourth quarter of 2020 and prior year results.
Other income was $3.7 million in the first quarter of 2021, an increase of $1.6 million, or 71%, quarter-over-quarter and an increase of $0.4 million, or 12%, year-over-year. Included in other income in the first quarter of 2021 is $1.7 million in income associated with the resolution of contingencies on two loans acquired in 2017. Similar activity is not expected in subsequent periods.
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Noninterest Expenses
The Company has demonstrated its commitment to efficiency through disciplined, proactive management of its cost structure. For the first quarter of 2021, the efficiency ratio, defined as noninterest expense less amortization of intangibles and gains, losses, and expenses on foreclosed properties divided by net operating revenue (net interest income on a fully taxable equivalent basis plus noninterest income excluding securities gains and losses), was 53.21% compared to 48.23% for the fourth quarter of 2020 and 59.85% for the first quarter of 2020. The increase in the efficiency ratio quarter-over-quarter reflects overall higher noninterest expense, attributed to higher seasonal payroll related expenses and a return to more normalized legal and professional fees, as well as lower net interest income, partially offset by an increase in noninterest income. The decrease in the efficiency ratio when compared to the prior year quarter reflects higher merger-related charges in the 2020 quarter and higher net interest income and noninterest income in the 2021 quarter.
The adjusted efficiency ratio1 was 51.99% in the first quarter of 2021, compared to 48.75% in the fourth quarter of 2020 and 53.55% in the first quarter of 2020. The increase in the adjusted efficiency ratio quarter-over-quarter reflects higher noninterest expense and lower net interest income, partially offset by higher noninterest income. The decrease in the adjusted efficiency ratio compared to the prior year quarter reflects higher net interest income and higher noninterest income in the 2021 quarter, partially offset by higher noninterest expenses. At March 31, 2021, adjusted noninterest expense1 as a percent of average tangible assets was 2.16% for the first quarter of 2021 compared to 2.00% for the fourth quarter of 2020 and 2.46% for the first quarter of 2020.
FirstFourthFirst
QuarterQuarterQuarter
(In thousands, except ratios)202120202020
Noninterest expense, as reported$46,120 $43,681 $47,798 
Merger-related charges(581)— (4,553)
Amortization of intangibles(1,211)(1,421)(1,456)
Business continuity expenses— — (307)
Branch reductions and other expense initiatives(449)(354)— 
Adjusted noninterest expense1
$43,879 $41,906 $41,482 
Foreclosed property expense and net (loss)/gain on sale65 (1,821)315 
Provision for credit losses on unfunded commitments— 795 (46)
Net adjusted noninterest expense1
$43,944 $40,880 $41,751 
Efficiency ratio53.21 %48.23 %59.85 %
Adjusted efficiency ratio1,2
51.99 48.75 53.55 
Adjusted noninterest expense as a percent of average tangible assets1,2
2.16 2.00 2.46 
1Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.
2Adjusted efficiency ratio is defined as noninterest expense, including adjustments to noninterest expense divided by aggregated tax equivalent net interest income and noninterest income, including adjustments to revenue.
42

Noninterest expense for the first quarter of 2021 totaled $46.1 million, an increase of $2.4 million, or 6%, compared to the fourth quarter of 2020, and a decrease of $1.7 million, or 4%, from the first quarter of 2020. Noninterest expenses are detailed as follows:
FirstFourthFirst
QuarterQuarterQuarter
(In thousands)202120202020
Salaries and wages$21,393 $21,490 $23,698 
Employee benefits4,980 3,915 4,255 
Outsourced data processing costs4,468 4,233 4,633 
Telephone/data lines785 774 714 
Occupancy3,789 3,554 3,353 
Furniture and equipment1,254 1,317 1,623 
Marketing1,168 1,045 1,278 
Legal and professional fees2,582 509 3,363 
FDIC assessments526 528 — 
Amortization of intangibles1,211 1,421 1,456 
Foreclosed property expense and net (gain) loss on sale(65)1,821 (315)
Provision for credit losses on unfunded commitments— (795)46 
Other4,029 3,869 3,694 
Total$46,120 $43,681 $47,798 
Salaries and wages totaled $21.4 million for the first quarter of 2021, $21.5 million for the fourth quarter of 2020, and $23.7 million for the first quarter of 2020. The first quarter of 2020 included $2.2 million in merger-related expenses associated with the acquisition of First Bank of the Palm Beaches.
During the first quarter of 2021, employee benefit costs, which include costs associated with the Company's self-funded health insurance benefits, 401(k) plan, payroll taxes, and unemployment compensation, were $5.0 million, an increase of $1.1 million, or 27%, compared to the fourth quarter of 2020 and an increase of $0.7 million, or 17%, compared to the first quarter of 2020. The increase quarter-over-quarter reflects higher seasonal payroll taxes and 401(k) plan contributions typical of the first quarter. The increase compared to the prior year quarter primarily reflects the impact of increased benefits costs.
The Company utilizes third parties for its core data processing systems. Ongoing data processing costs are directly related to the number of transactions processed and the negotiated rates associated with those transactions. Outsourced data processing costs totaled $4.5 million, $4.2 million and $4.6 million for the first quarter of 2021, fourth quarter of 2020 and first quarter of 2020, respectively.
Telephone and data line expenditures, including electronic communications with customers and between branch and customer support locations and personnel, as well as with third-party data processors, were $0.8 million, $0.8 million, and $0.7 million for the first quarter of 2021, fourth quarter of 2020, and first quarter of 2020, respectively.
Total occupancy, furniture and equipment expenses were $5.0 million for the first quarter of 2021, $4.9 million in the fourth quarter of 2020, and $5.0 million in the first quarter of 2020. The first quarter of 2021 includes $0.3 million in costs associated with three branch consolidations, and the first quarter of 2020 includes $0.3 million in merger-related expenses.
Marketing expenses for the first quarter of 2021 totaled $1.2 million, $1.0 million in the fourth quarter of 2020 and $1.3 million in the first quarter of 2020. Targeted marketing campaigns allows the Company to engage of new and existing customers while maintaining a controlled expense base.
Legal and professional fees for the first quarter of 2021 were $2.6 million, an increase of $2.1 million, compared to the fourth quarter of 2020 and a decrease of $0.8 million, or 23%, compared to the first quarter of 2020. Acquisition-related expenses were $0.6 million in the first quarter of 2021 and $1.1 million in the first quarter of 2020, while the fourth quarter of 2020 benefited from the one-time recovery of certain legal expenses incurred during 2020.
43

FDIC assessments were $0.5 million for the first quarter of 2021 and the fourth quarter of 2020, while the first quarter of 2020 benefited from FDIC small bank assessment credits to offset expenses. These credits were fully utilized by the second quarter of 2020.
During the first quarter of 2021, the Company recorded gains on the sale of OREO, net of other expenses of $0.1 million compared to write-downs of $1.8 million in the fourth quarter of 2020 and net gains of $0.3 million in the first quarter of 2020 (see “Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality” for more discussion).
No adjustment to the reserve for credit losses on unfunded lending commitments was recorded in the first quarter of 2021, compared to a reversal of reserves of $0.8 million in the fourth quarter of 2020 and a nominal adjustment in the first quarter of 2020.
Other expense totaled $4.0 million, $3.9 million and $3.7 million for the first quarter of 2021, the fourth quarter of 2020 and the first quarter of 2020, respectively.
Income Taxes
For the first quarter of 2021, the Company recorded tax expense of $10.2 million compared to tax expense of $8.8 million in the fourth quarter of 2020 and tax benefit of $0.2 million in the first quarter of 2020. Taxes included nominal impacts for stock-based compensation in each of these periods.
Explanation of Certain Unaudited Non-GAAP Financial Measures
This report contains financial information determined by methods other than Generally Accepted Accounting Principles (“GAAP”). The financial highlights provide reconciliations between GAAP and adjusted financial measures including net income, fully taxable equivalent net interest income, noninterest income, noninterest expense, tax adjustments, net interest margin and other financial ratios. Management uses these non-GAAP financial measures in its analysis of the Company’s performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company’s performance. The Company believes the non-GAAP measures enhance investors’ understanding of the Company’s business and performance and if not provided would be requested by the investor community. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might define or calculate these measures differently. The Company provides reconciliations between GAAP and these non-GAAP measures. These disclosures should not be considered an alternative to GAAP.
Reconciliation of Non-GAAP Measures
FirstFourthFirst
QuarterQuarterQuarter
(In thousands, except per share data)202120202020
Net income, as reported:   
Net income$33,719 $29,347 $709 
Diluted earnings per share$0.60 $0.53 $0.01 
Noninterest Income$17,671 $14,930 $14,688 
Securities (gains) losses, net114 18 (19)
Total adjustments to noninterest income114 18 (19)
Total Adjusted Noninterest Income$17,785 $14,948 $14,669 
44

FirstFourthFirst
QuarterQuarterQuarter
(In thousands, except per share data)202120202020
Noninterest Expense46,120 $43,681 $47,798 
Merger-related charges(581)— (4,553)
Amortization of intangibles(1,211)(1,421)(1,456)
Business continuity expenses— — (307)
Branch reductions and other expense initiatives1
(449)(354)— 
Total adjustments to noninterest expense(2,241)(1,775)(6,316)
Total Adjusted Noninterest Expense$43,879 $41,906 $41,482 
Income Taxes$10,157 $8,793 $(155)
Tax effect of adjustments577 440 1,544 
Total adjustments to income taxes577 440 1,544 
Adjusted income taxes10,734 9,233 1,389 
Adjusted net income$35,497 $30,700 $5,462 
Earnings per diluted share, as reported$0.60 $0.53 $0.01 
Adjusted diluted earnings per share0.63 0.55 0.10 
Average diluted shares outstanding55,992 55,739 52,284 
Adjusted Noninterest Expense$43,879 $41,906 $41,482 
Foreclosed property expense and net (loss) gain on sale65 (1,821)315 
Provision for unfunded commitments— 795 (46)
Net Adjusted Noninterest Expense$43,944 $40,880 $41,751 
Revenue$84,281 $83,721 $77,865 
Total adjustments to revenue114 18 (19)
Impact of FTE adjustment131 112 114 
Adjusted revenue on a fully tax equivalent basis$84,526 $83,851 $77,960 
Adjusted Efficiency Ratio51.99 %48.75 %53.55 %
Net Adjusted Noninterest Expense as a Percent of Average Tangible Assets2
2.16 %2.00 %2.46 %
Net Interest Income$66,610 $68,791 $63,177 
Impact of FTE adjustment131 112 114 
Net interest income including FTE adjustment66,741 68,903 63,291 
Noninterest income17,671 14,930 14,688 
Noninterest expense46,120 43,681 47,798 
Pre-Tax Pre-Provision Earnings38,292 40,152 30,181 
Adjustments to noninterest income114 18 (19)
Adjustments to noninterest expense(2,176)(2,801)(6,047)
Adjusted Pre-Tax Pre-Provision Earnings$40,582 $42,971 $36,209 
Average Assets$8,485,354 $8,376,396 $7,055,543 
Less average goodwill and intangible assets(237,323)(238,631)(226,712)
Average Tangible Assets$8,248,031 $8,137,765 $6,828,831 
45

FirstFourthFirst
QuarterQuarterQuarter
(In thousands, except per share data)202120202020
Return on Average Assets (ROA)1.61 %1.39 %0.04 %
Impact of removing average intangible assets and related amortization0.09 0.10 0.07 
Return on Average Tangible Assets (ROTA)1.70 1.49 0.11 
Impact of other adjustments for Adjusted Net Income0.05 0.01 0.21 
Adjusted Return on Average Tangible Assets1.75 %1.50 %0.32 %
Average Shareholders' Equity$1,136,416 $1,111,073 $993,993 
Less average goodwill and intangible assets(237,323)(238,631)(226,712)
Average Tangible Equity$899,093 $872,442 $767,281 
Return on Average Shareholders' Equity12.03 %10.51 %0.29 %
Impact of removing average intangible assets and related amortization3.59 3.36 0.66 
Return on Average Tangible Common Equity (ROTCE)15.62 13.87 0.95 
Impact of other adjustments for Adjusted Net Income0.39 0.13 1.91 
Adjusted Return on Average Tangible Common Equity16.01 %14.00 %2.86 %
Loan Interest Income2
$62,390 $65,684 $63,524 
Accretion on acquired loans(2,868)(4,448)(4,287)
Interest and fees on PPP loans(6,886)(5,187)— 
Loan interest income excluding PPP and accretion on acquired loans2
$52,636 $56,049 $59,237 
Yield on Loans2
4.39 %4.42 %4.90 %
Impact of accretion on acquired loans(0.20)(0.30)(0.33)
Impact of PPP loans(0.04)0.11 — 
Yield on loans excluding PPP and accretion on acquired loans2
4.15 %4.23 %4.57 %
Net Interest Income2
$66,741 $68,903 $63,291 
Accretion on acquired loans(2,868)(4,448)(4,287)
Interest and fees on PPP loans(6,886)(5,187)— 
Net interest income excluding PPP and accretion on acquired loans2
$56,987 $59,268 $59,004 
Net Interest Margin2
3.51 %3.59 %3.93 %
Impact of accretion on acquired loans(0.15)(0.23)(0.27)
Impact of PPP loans(0.11)0.01 — 
Net interest margin excluding PPP and accretion on acquired loans2
3.25 %3.37 %3.66 %
Loan Interest Income2
$62,390 $65,684 $63,524 
Tax equivalent adjustment to loans(92)(89)(84)
Loan interest income excluding tax equivalent adjustment$62,298 $65,595 $63,440 
Securities Interest Income2
$6,485 $6,586 $8,848 
Tax equivalent adjustment to securities(39)(23)(30)
Securities interest income excluding tax equivalent adjustment$6,446 $6,563 $8,818 
46

FirstFourthFirst
QuarterQuarterQuarter
(In thousands, except per share data)202120202020
Net Interest Income2
$66,741 $68,903 $63,291 
Tax equivalent adjustments to loans(92)(89)(84)
Tax equivalent adjustments to securities(39)(23)(30)
Net interest income excluding tax equivalent adjustments$66,610 $68,791 $63,177 
1Includes severance, contract termination costs, disposition of branch premises and fixed assets, and other costs to effect the Company's branch consolidation and other expense reduction strategies.
2On a fully taxable equivalent basis. All yields and rates have been computed using amortized cost.

Financial Condition
Total assets increased $0.5 billion at March 31, 2021, or 6%, from December 31, 2020, reflecting the origination of PPP loans under the renewed program, as well as higher cash balances due to higher customer deposit balances.
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.
At March 31, 2021, the Company had $1.1 billion in debt securities available-for-sale and $512.3 million in debt securities held-to-maturity. The Company's total debt securities portfolio decreased $18.9 million, or 1%, from December 31, 2020.
During the three months ended March 31, 2021, the Company reclassified debt securities with an amortized cost of $210.8 million from available-for-sale to held-to-maturity. These securities had net unrealized gains of $0.8 million at the date of transfer, which will continue to be reported in accumulated other comprehensive income and will be amortized over the remaining life of the securities as an adjustment of yield. The effect on interest income of the amortization of net unrealized gains is offset by the amortization of the premium on the securities transferred. The Company has the intent and ability to retain these securities until maturity.
During the three months ended March 31, 2021, there were $196.5 million of debt security purchases and $199.2 million in aggregated paydowns and maturities. For the three months ended March 31, 2021, the Company had no sales of securities. For the three months ended March 31, 2020, there were $74.2 million debt security purchases and aggregated maturities and principal paydowns totaled $63.5 million. Proceeds from sales of securities during the three months ended March 31, 2020 totaled $27.8 million, with net losses of $0.1 million.
Debt securities generally return principal and interest monthly. At March 31, 2021, available-for-sale debt securities had gross unrealized losses of $7.3 million and gross unrealized gains of $19.1 million, compared to gross unrealized losses of $2.1 million and gross unrealized gains of $28.7 million at December 31, 2020. The modified duration of the available-for-sale portfolio at March 31, 2021 was 4.0 years, compared to 3.8 years at December 31, 2020.
The credit quality of the Company’s securities holdings is primarily investment grade. U.S. Treasuries, obligations of U.S. government agencies and obligations of U.S. government sponsored entities totaled $1.3 billion, or 82%, of the total portfolio.
The portfolio includes $80.2 million, with a fair value of $81.9 million, in private label residential and commercial mortgage-backed securities and collateralized mortgage obligations. Included are $55.1 million, with a fair value of $55.7 million, in private label mortgage-backed residential securities with weighted average credit support of 25%. The collateral underlying these mortgage investments includes both fixed-rate and adjustable-rate mortgage loans. Non-guaranteed agency commercial securities total $25.0 million, with a fair value of $26.2 million. These securities have weighted average credit support of 11%. The collateral underlying these mortgages are primarily pooled multifamily loans. 
The Company also has invested $172.4 million, with a fair value of $172.5 million, in uncapped 3-month LIBOR floating rate collateralized loan obligations (“CLOs”). CLOs are special purpose vehicles, and the Company’s holdings purchase nearly all first lien broadly syndicated corporate loans across a diversified band of industries while providing support to senior tranche investors. As of March 31, 2021, the Company held 24 total positions, all of which were in AAA/AA tranches with average credit support of 31%. The Company utilizes credit models with assumptions of loan level defaults, recoveries, and prepayments for each CLO security. The results of this analysis did not indicate expected credit losses.
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Held-to-maturity securities consist solely of mortgage-backed securities guaranteed by government agencies.
At March 31, 2021, the Company has determined that all debt securities in an unrealized loss position are the result of both broad investment type spreads and the current rate environment. Management believes that each investment will recover any price depreciations over its holding period as the debt securities move to maturity and there is the intent and ability to hold these investments to maturity if necessary. Therefore, at March 31, 2021, no allowance for credit losses has been recorded.
Loan Portfolio
Loans, net of unearned income and excluding the allowance for credit losses, were $5.7 billion at March 31, 2021, a $73.9 million decrease from December 31, 2020. During the first quarter of 2021, the Company participated in the most recent round of the PPP, resulting in originations of $232.5 million. This was offset by $213.8 million in PPP loans originated in 2020 that were forgiven by the SBA during the first quarter. Remaining decreases in the loan book reflect the impact of continued loan paydowns, while offsetting originations, particularly within the commercial loan portfolio, were seasonally lower during the quarter.
For the three months ended March 31, 2021, the Company originated $204.3 million in commercial and commercial real estate loans, compared to $183.3 million for the three months ended March 31, 2020, an increase of $20.9 million, or 11%. The loan pipeline for commercial and commercial real estate loans totaled $240.9 million at March 31, 2021. Prior year’s production and pipeline reflect the impact of the onset of the COVID-19 pandemic where the Company purposefully slowed originations. The current year activity reflects the Company’s return to its pre-pandemic credit policy and conservative underwriting guidelines.
The Company originated $46.6 million in residential loans retained in the portfolio during the three months ended March 31, 2021, compared to $25.8 million during the three months ended March 31, 2020, an increase of $20.8 million, or 81%. Saleable production increased for the three months ended March 31, 2021, representing $138.3 million versus $62.9 million during the three months ended March 31, 2020. The saleable residential mortgage pipeline increased to $92.1 million while the retained pipeline increased to $72.4 million as of March 31, 2021. Increases reflect the continued demand driven by low rates and inflows of new residents and businesses into Florida.
Consumer originations totaled $46.7 million for the three months ended March 31, 2021, a decrease of $4.8 million, or 9%, compared to the three months ended March 31, 2020, and the pipeline for these loans at March 31, 2021 was $28.1 million.
The Company remains committed to sound risk management procedures. Lending policies contain guardrails that pertain to lending by type of collateral and purpose, along with limits regarding loan concentrations and the principal amount of loans. The Company's exposure to commercial real estate lending remains well below regulatory limits (see “Loan Concentrations”).
The following tables detail loan portfolio composition at March 31, 2021 and December 31, 2020 for portfolio loans, purchased credit deteriorated (“PCD”) and loans purchased which are not considered purchased credit deteriorated (“Non-PCD”) as defined in Note E-Loans.
 March 31, 2021
(In thousands)Portfolio LoansAcquired Non-PCD LoansPCD LoansTotal
Construction and land development$206,627 $18,465 $2,025 $227,117 
Commercial real estate - owner-occupied868,347 225,785 38,953 1,133,085 
Commercial real estate - non owner-occupied1,116,362 294,128 27,875 1,438,365 
Residential real estate1,088,822 149,762 7,965 1,246,549 
Commercial and financial760,975 84,309 15,529 860,813 
Consumer167,778 5,900 232 173,910 
Paycheck Protection Program547,308 34,345 — 581,653 
Totals$4,756,219 $812,694 $92,579 $5,661,492 
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 December 31, 2020
(In thousands)Portfolio LoansAcquired Non-PCD LoansPCD LoansTotal
Construction and land development$216,420 $26,250 $2,438 $245,108 
Commercial real estate - owner-occupied854,769 247,090 39,451 1,141,310 
Commercial real estate - non owner-occupied1,043,459 323,273 29,122 1,395,854 
Residential real estate1,155,914 176,105 10,609 1,342,628 
Commercial and financial743,846 94,627 16,280 854,753 
Consumer181,797 6,660 278 188,735 
Paycheck Protection Program515,532 51,429 — 566,961 
Totals$4,711,737 $925,434 $98,178 $5,735,349 
The amortized cost basis of loans at March 31, 2021 included net deferred costs of $23.8 million on non-PPP portfolio loans and net deferred fees of $13.5 million on PPP loans. At December 31, 2020, the amortized cost basis included net deferred costs of $22.6 million on non-PPP portfolio loans and net deferred fees of $9.5 million on PPP loans. At March 31, 2021, the remaining fair value adjustments on acquired loans was $27.3 million, or 2.9% of the outstanding acquired loan balances. At December 31, 2020, the remaining fair value adjustments for acquired loans was $30.2 million, or 2.9% of the acquired loan balances. These amounts are accreted into interest income over the remaining lives of the related loans on a level yield basis.
Commercial real estate (“CRE”) loans, inclusive of owner-occupied commercial real estate, increased by $34.3 million, or 1%, in the three months ended March 31, 2021, totaling $2.6 billion at March 31, 2021 compared to $2.5 billion at December 31, 2020. Owner-occupied commercial real estate loans represent $1.1 billion, or 44%, of the commercial real estate portfolio.
Fixed-rate and adjustable-rate loans secured by commercial real estate, excluding construction loans, totaled approximately $2.1 billion and $445.7 million, respectively, at March 31, 2021, compared to $2.1 billion and $453.7 million, respectively, at December 31, 2020.
During the first quarter of 2021, the Company participated in the most recent round of the PPP and originated over 2,450 loans for $232.5 million. Also during the first quarter of 2021, $213.8 million in PPP loans funded in 2020 were forgiven by the SBA.
At March 31, 2021, Seacoast had $28.4 million of loans with payment accommodations to borrowers financially impacted by the COVID-19 pandemic, none of which have been classified as TDRs, compared to $74.1 million at December 31, 2020. Interest and fees have continued to accrue on these loans during the deferral period.
Residential real estate loans decreased $96.1 million, or 7%, to $1.2 billion as of March 31, 2021, compared to December 31, 2020. Substantially all residential mortgage originations have been underwritten to conventional loan agency standards, including loans having balances that exceed agency value limitations. At March 31, 2021, approximately $382.2 million, or 31%, of the Company’s residential mortgage balances were adjustable 1-4 family mortgage loans, which includes hybrid adjustable-rate mortgages. Fixed-rate mortgages totaled approximately $544.2 million, or 44%, at March 31, 2021, of which 15- and 30-year mortgages totaled $41.2 million and $361.0 million, respectively. Remaining fixed-rate balances were comprised of home improvement loans totaling $142.0 million, most with maturities of 10 years or less. Home equity lines of credit ("HELOCs"), primarily floating rates, totaled $320.1 million at March 31, 2021. In comparison, loans secured by residential properties having fixed rates totaled $499.0 million at December 31, 2020, with 15- and 30-year fixed-rate residential mortgages totaling $38.4 million and $362.9 million, respectively, and home equity mortgages and HELOCs totaling $163.5 million and $341.6 million, respectively. Borrowers in the residential real estate portfolio have an average credit score of 747. Specifically for HELOCs, borrowers have an average credit score of 762. The average LTV of our HELOC portfolio is 67% with 44% of the portfolio being in first lien position.
The Company also provides consumer loans, which include installment loans, auto loans, marine loans, and other consumer loans, which decreased $14.8 million, or 8%, to total $173.9 million compared to $188.7 million at December 31, 2020. Borrowers in the consumer portfolio have an average credit score of 731.
At March 31, 2021, the Company had unfunded loan commitments of $1.6 billion compared to $1.5 billion at December 31, 2020.
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Loan Concentrations
The Company has developed prudent guardrails to manage loan types that are most impacted by stressed market conditions in order to minimize credit risk concentration to capital. Outstanding balances for commercial and CRE loan relationships greater than $10 million totaled $798.0 million and represented 14% of the total portfolio at March 31, 2021 compared to $753.7 million, or 13%, at year-end 2020.
The Company’s ten largest commercial and commercial real estate funded and unfunded loan relationships at March 31, 2021 aggregated to $251.3 million, of which $189.1 million was funded compared to $254.3 million at December 31, 2020, of which $188.0 million was funded. The Company had 144 commercial and commercial real estate relationships in excess of $5 million totaling $1.4 billion, of which $1.2 billion was funded at March 31, 2021 compared to 135 relationships totaling $1.3 billion at December 31, 2020, of which $1.2 billion was funded.
Concentrations in total construction and land development loans and total CRE loans are maintained well below regulatory limits. Construction and land development and CRE loan concentrations as a percentage of subsidiary bank total risk based capital declined to 23% and 168%, respectively, at March 31, 2021, compared to 26% and 169%, respectively, at December 31, 2020. Regulatory guidance suggests limits of 100% and 300%, respectively. On a consolidated basis, construction and land development and commercial real estate loans represent 21% and 155%, respectively, of total consolidated risk based capital. To determine these ratios, the Company defines CRE in accordance with the guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) issued by the federal bank regulatory agencies in 2006 (and reinforced in 2015), which defines CRE loans as exposures secured by land development and construction, including 1-4 family residential construction, multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property (i.e., loans for which 50 percent or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Loans to real estate investment trusts (“REITs”) and unsecured loans to developers that closely correlate to the inherent risks in CRE markets would also be considered CRE loans under the Guidance. Loans on owner-occupied CRE are generally excluded. In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.
Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality
Nonperforming assets (“NPAs”) at March 31, 2021 totaled $50.9 million, and were comprised of $35.3 million of nonaccrual loans, $10.8 million of other real estate owned (“OREO”), and $4.7 million of branches and other properties used in bank operations taken out of service. Compared to December 31, 2020, nonaccrual loans decreased $0.8 million, primarily the result of paydowns. The increase in OREO for bank branches of $2.1 million reflects the addition of three branch properties totaling $3.3 million, offset by the sale of a branch property. Overall, NPAs increased $2.0 million, or 4%, from $48.9 million recorded as of December 31, 2020. At March 31, 2021, approximately 82% of nonaccrual loans were secured with real estate. See the tables below for details about nonaccrual loans. At March 31, 2021, nonaccrual loans were written down by approximately $7.5 million, or 11% of the original loan balance (including specific impairment reserves).
Nonperforming loans to total loans outstanding at March 31, 2021 decreased to 0.62% from 0.63% at December 31, 2020. Nonperforming assets to total assets at March 31, 2021 decreased to 0.58% from 0.59% at December 31, 2020.
The Company’s asset mitigation staff handles all foreclosure actions together with outside legal counsel.
The Company pursues loan restructurings in select cases where it expects to realize better values than may be expected through traditional collection activities. The Company has worked with retail mortgage customers, when possible, to achieve lower payment structures in an effort to avoid foreclosure. Troubled debt restructurings (“TDRs”) 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 TDRs totaled $4.1 million at March 31, 2021 compared to $4.2 million at December 31, 2020. Accruing TDRs are excluded from the nonperforming asset ratios.
Beginning in March 2020, in response to the economic downturn resulting from the COVID-19 pandemic, the Company has offered short-term payment deferrals to affected borrowers. As of March 31, 2021, pandemic-related deferrals totaled $28.4 million and are not considered TDRs. If economic conditions deteriorate further, these borrowers may be unable to resume scheduled payments, which may result in further modification of terms and the potential for classification as a TDR in future periods.
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The table below sets forth details related to nonaccrual and accruing restructured loans.
March 31, 2021
Nonaccrual LoansAccruing
Restructured Loans
(In thousands)Non-CurrentCurrentTotal
Construction and land development$37 $125 $162 $99 
Commercial real estate - owner-occupied2,027 5,138 7,165 107 
Commercial real estate - non owner-occupied1,884 5,987 7,871 — 
Residential real estate1,624 11,989 13,613 3,617 
Commercial and financial2,829 3,265 6,094 — 
Consumer332 91 423 244 
Total$8,733 $26,595 $35,328 $4,067 
December 31, 2020
Nonaccrual LoansAccruing
Restructured Loans
(In thousands)Non-CurrentCurrentTotal
Construction and land development$37 $129 $166 $109 
Commercial real estate - owner-occupied5,682 2,500 8,182 109 
Commercial real estate - non owner-occupied2,030 6,053 8,083 — 
Residential real estate4,074 8,418 12,492 3,740 
Commercial and financial3,777 2,827 6,604 — 
Consumer543 40 583 224 
Total$16,143 $19,967 $36,110 $4,182 
At March 31, 2021 and December 31, 2020, total TDRs (performing and nonperforming) were comprised of the following loans by type of modification:
 March 31, 2021December 31, 2020
(In thousands)NumberAmountNumberAmount
Maturity extended51 $5,327 51 $5,438 
Rate reduction35 4,118 37 4,275 
Chapter 7 bankruptcies12 389 13 417 
Not elsewhere classified189 160 
 Total104 $10,023 106 $10,290 
During the three months ended March 31, 2021, there were no defaults on loans that were modified in TDRs in the preceding twelve months, compared to three loans to a single borrower totaling $1.4 million for the three months ended March 31, 2020. 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. A restructured loan is considered in default when it becomes 90 days or more past due under the modified terms, has been transferred to nonaccrual status, has been charged off or has been transferred to OREO.
In accordance with regulatory reporting requirements, loans are placed on nonaccrual following the Retail Classification of Loan interagency guidance. The accrual of interest is generally discontinued on loans, except consumer loans, that become 90 days past due as to principal or interest unless collection of both principal and interest is assured by way of collateralization, guarantees or other security. Consumer loans that become 120 days past due are generally charged off. The loan carrying value is analyzed and any changes are appropriately made as described above quarterly.
Allowance for Credit Losses on Loans
Management estimates the allowance using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit losses provide the basis for estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific
51

risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.
During the first quarter of 2021, the Company recorded a reversal of provision of $5.7 million reflecting improvement in the economic forecast. No allowance has been assigned to PPP loans, which are guaranteed by the U.S. government. Net charge-offs for the first quarter of 2021 were $0.4 million, or 0.03% of average loans and, for the four most recent quarters, averaged 0.12% of outstanding loans. Excluding PPP loans, the ratio of allowance to total loans decreased to 1.71% at March 31, 2021 from 1.79% at December 31, 2020.
The following tables present the activity in the allowance for credit losses on loans by segment:
 Three Months Ended March 31, 2021
(In thousands)Beginning
Balance
Provision
for Credit
Losses
Charge-
Offs
RecoveriesTDR
Allowance
Adjustments
Ending
Balance
Construction and land development$4,920 $(510)$— $18 $— $4,428 
Commercial real estate - owner-occupied9,868 (76)— — — 9,792 
Commercial real estate - non owner-occupied38,266 (2,038)— — 36,229 
Residential real estate17,500 (3,372)— 229 (4)14,353 
Commercial and financial18,690 775 (756)207 — 18,916 
Consumer3,489 (494)(185)116 (1)2,925 
Paycheck Protection Program— — — — — — 
Totals$92,733 $(5,715)$(941)$571 $(5)$86,643 
At March 31, 2021, the Company had $1.2 billion in loans secured by residential real estate and $2.6 billion in loans secured by commercial real estate, representing 22% and 45% of total loans outstanding, respectively. In addition, the Company is subject to a geographic concentration of credit because it primarily operates in Florida.
LIBOR Transition
The Company’s LIBOR transition steering committee is responsible for overseeing the execution of the Company’s enterprise-wide LIBOR transition program, and for evaluating and mitigating risks associated with the transition from LIBOR. The LIBOR transition program includes a comprehensive review of the financial products, agreements, contracts, and business processes that may use LIBOR as a reference rate, and the development and execution of strategy to transition away from LIBOR, with appropriate consideration of the potential financial, customer, counterpart, regulatory and legal impacts. The Company continues to execute its LIBOR transition program, and to monitor regulatory and legislative activity to identify any necessary actions and facilitate the transition to alternative reference rates.
Cash and Cash Equivalents and Liquidity Risk Management
Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liability, as well as the risk of not being able to meet unexpected cash needs. Liquidity planning and management are necessary to ensure the ability to fund operations cost effectively and to meet current and future potential obligations such as loan commitments and unexpected deposit outflows.
Funding sources include primarily customer-based deposits, collateral-backed borrowings, brokered deposits, cash flows from operations, cash flows from the loan and investment portfolios and asset sales, primarily secondary marketing for residential real estate mortgages and marine loans. Cash flows from operations are a significant component of liquidity risk management and the Company considers both deposit maturities and the scheduled cash flows from loan and investment maturities and payments when managing risk.
Deposits are a primary source of liquidity. The stability of this funding source is affected by numerous factors, including returns available to customers on alternative investments, the quality of customer service levels, perception of safety and competitive forces. The Company routinely uses debt securities and loans as collateral for secured borrowings. In the event of severe market
52

disruptions, the Company has access to secured borrowings through the FHLB and the Federal Reserve Bank of Atlanta under its borrower-in-custody program.
The Company does not rely on and is not dependent on off-balance sheet financing or significant amounts of wholesale funding. The Company strategically increased brokered deposits in the first quarter of 2020 to supplement its liquidity position, given the unknown impact of the COVID-19 pandemic on business and economic conditions. Brokered certificates of deposit ("CDs") at March 31, 2021 were $93.5 million, a decrease of $140.3 million, or 60%, from December 31, 2020, with $73.5 million maturing in the second quarter of 2021.
Cash and cash equivalents, including interest bearing deposits, totaled $979.3 million on a consolidated basis at March 31, 2021, compared to $404.1 million at December 31, 2020, an increase of 142%. Higher cash and cash equivalent balances at March 31, 2021 reflect favorable deposit growth, including PPP loan funds, government stimulus payments received by our customers as well as the inflow of tax refunds during the quarter.
Contractual maturities for assets and liabilities are reviewed to meet current and expected future liquidity requirements. Sources of liquidity are maintained through a portfolio of high quality marketable assets, such as residential mortgage loans, debt securities available-for-sale and interest-bearing deposits. The Company is also able to provide short term financing of its activities by selling, under an agreement to repurchase, United States Treasury and Government agency debt securities not pledged to secure public deposits or trust funds. At March 31, 2021, the Company had available unsecured lines of credit of $135.0 million and secured lines of credit, which are subject to change, of $1.7 billion. In addition, the Company had $1.3 billion of debt securities and $703.8 million in residential and commercial real estate loans available as collateral. In comparison, at December 31, 2020, the Company had available unsecured lines of $135.0 million and secured lines of credit of $1.8 billion, and $1.2 billion of debt securities and $733.3 million in residential and commercial real estate loans available as collateral.
The Company has traditionally relied upon dividends from Seacoast Bank and securities offerings to provide funds to pay the Company’s expenses and to service the Company’s debt. During the first quarter of 2021, Seacoast Bank distributed $11.9 million to the Company and, at March 31, 2021, is eligible to distribute dividends to the Company of approximately $165.5 million without prior regulatory approval. At March 31, 2021, the Company had cash and cash equivalents at the parent of approximately $81.5 million compared to $70.1 million at December 31, 2020.
Deposits and Borrowings
Customer relationship funding is detailed in the following table for the periods specified:
 March 31,December 31,March 31,
(In thousands, except ratios)202120202020
Noninterest demand$2,685,247 $2,289,787 $1,703,628 
Interest-bearing demand1,647,935 1,566,069 1,234,193 
Money market1,671,179 1,556,370 1,124,378 
Savings768,362 689,179 554,836 
Time certificates of deposit613,026 831,156 1,270,464 
Total deposits$7,385,749 $6,932,561 $5,887,499 
Customer sweep accounts$109,171 $119,609 $64,723 
Noninterest demand deposits as % of total deposits36 %33 %29 %
The Company’s balance sheet continues to be primarily funded by core deposits.
Total deposits increased $0.5 billion, or 7%, to $7.4 billion at March 31, 2021, compared to $6.9 billion at December 31, 2020. The increase is attributed to new PPP loan originations, ongoing stimulus programs and tax refunds and growth in relationships.
Since December 31, 2020, interest bearing deposits (interest bearing demand, savings and money market deposits) increased $275.9 million, or 7%, to $4.1 billion, and CDs (excluding brokered CDs) decreased $77.8 million, or 13%, to $519.5 million. Noninterest demand deposits were higher by $395.5 million, or 17%, compared to year-end 2020, totaling $2.7 billion. Noninterest demand deposits represented 36% of total deposits at March 31, 2021 and 33% at December 31, 2020.
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During the three months ended March 31, 2021, $140.3 million of brokered CDs at an average rate of 1.13% matured. Brokered CDs at March 31, 2021 totaled $93.5 million compared to $233.8 million at December 31, 2020, with $73.5 million maturing in the second quarter of 2021.
Customer repurchase agreements totaled $109.2 million at March 31, 2021, decreasing $10.4 million, or 9%, from December 31, 2020. Repurchase agreements are offered by Seacoast to select customers who wish to sweep excess balances on a daily basis for investment purposes. Public funds comprise a significant amount of the outstanding balance.
No unsecured federal funds purchased were outstanding at March 31, 2021.
At March 31, 2021 and December 31, 2020, borrowings were comprised of subordinated debt of $71.4 million in each period, related to trust preferred securities issued by trusts organized or acquired by the Company, and there were no borrowings from FHLB. For the three months ended March 31, 2020, FHLB borrowings averaged $250.0 million with a weighted average rate of 1.56%.
The weighted average interest rate of outstanding subordinated debt related to trust preferred securities was 2.43%, 2.43%, and 4.08% for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, respectively.
Off-Balance Sheet Transactions
In the normal course of business, the Company may engage in a variety of financial transactions that, under generally accepted accounting principles, either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk.
Lending commitments include unfunded loan commitments and standby and commercial letters of credit. For loan commitments, the contractual amount of a commitment represents the maximum potential credit risk that could result if the entire commitment had been funded, the borrower had not performed according to the terms of the contract, and no collateral had been provided. A large majority of loan commitments and standby letters of credit expire without being funded, and accordingly, total contractual amounts are not representative of actual future credit exposure or liquidity requirements. Loan commitments and letters of credit expose the Company to credit risk in the event that the customer draws on the commitment and subsequently fails to perform under the terms of the lending agreement.
For commercial customers, loan commitments generally take the form of revolving credit arrangements. For retail customers, loan commitments generally are lines of credit secured by residential property. These instruments are not recorded on the balance sheet until funds are advanced under the commitment. Loan commitments were $1.6 billion at March 31, 2021 and $1.5 billion at December 31, 2020.
Capital Resources
The Company’s equity capital at March 31, 2021 increased $24.9 million, or 2%, from December 31, 2020 to $1.2 billion. Changes in equity included increases from net income of $33.7 million, partially offset by a decrease in accumulated other comprehensive income of $11.0 million primarily attributed to the decrease in market value of available-for-sale debt securities.
The ratio of shareholders’ equity to period end total assets was 13.11% and 13.55% at March 31, 2021 and December 31, 2020, respectively. The ratio of tangible shareholders’ equity to tangible assets was 10.71% and 11.01% at March 31, 2021 and December 31, 2020, respectively. The decrease was due to growth in the balance sheet, the result of bank acquisitions, PPP loans and associated liquidity.
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Activity in shareholders’ equity for the three months ended March 31, 2021 and 2020 follows:
(In thousands)20212020
Beginning balance at December 31, 2020 and 2019$1,130,402 $985,639 
Net income33,719 709 
Cumulative change in accounting principle upon adoption of new accounting pronouncement— (16,876)
Issuance of stock pursuant to acquisition— 21,031 
Stock compensation, net of Treasury shares acquired2,193 990 
Change in accumulated other comprehensive income(10,965)294 
Ending balance at March 31, 2021 and 2020$1,155,349 $991,787 
Capital ratios are well above regulatory requirements for well-capitalized institutions. Seacoast management's use of risk-based capital ratios in its analysis of the Company’s capital adequacy are “non-GAAP” financial measures. Seacoast management uses these measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company. The capital measures are not necessarily comparable to similar capital measures that may be presented by other companies (see “Note J – Equity Capital”).
March 31, 2021Seacoast (Consolidated)Seacoast
Bank
Minimum to be Well- Capitalized1
Total Risk-Based Capital Ratio19.07%17.55%10.00%
Tier 1 Capital Ratio18.0916.578.00
Common Equity Tier 1 Ratio (CET1)16.8016.576.50
Leverage Ratio12.1911.165.00
1For subsidiary bank only.
The Company’s total risk-based capital ratio was 19.07% at March 31, 2021, an increase from December 31, 2020’s ratio of 18.51%. During the first quarter of 2020, the Company adopted interagency guidance which delays the impact of CECL adoption on capital for two years followed by a three-year phase-in period. At March 31, 2021, the Bank’s leverage ratio (Tier 1 capital to adjusted total assets) was 11.16%, well above the minimum to be well capitalized under regulatory guidelines.
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 $165.5 million of dividends to the Company.
The OCC and the Federal Reserve have policies that encourage banks and bank holding companies to pay dividends from current earnings, and have the general authority to limit the dividends paid by national banks and bank holding companies, respectively, if such payment may be deemed to constitute an unsafe or unsound practice. If, in the particular circumstances, either of these federal regulators determined that the payment of dividends would constitute an unsafe or unsound banking practice, either the OCC or the Federal Reserve may, among other things, issue a cease and desist order prohibiting the payment of dividends by Seacoast Bank or us, respectively. The board of directors of a bank holding company must consider different factors to ensure that its dividend level, if any, is prudent relative to the organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may occur before the payment date that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company, such as Seacoast, should consult with the Federal Reserve and eliminate, defer, or significantly reduce the bank holding company’s dividends if: (i) its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or (iii) it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.
The Company has seven wholly owned trust subsidiaries that have issued trust preferred stock. Trust preferred securities from acquisitions were recorded at fair value when acquired. All trust preferred securities are guaranteed by the Company on a junior subordinated basis. The Federal Reserve’s rules permit qualified trust preferred securities and other restricted capital elements
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to be included under Basel III capital guidelines, with limitations, and net of goodwill and intangibles. The Company believes that its trust preferred securities qualify under these revised regulatory capital rules and believes that it can treat all $71.4 million of trust preferred securities as Tier 1 capital. For regulatory purposes, the trust preferred securities are added to the Company’s tangible common shareholders’ equity to calculate Tier 1 capital.

Critical Accounting Policies and Estimates
The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, (“GAAP”), including prevailing practices within the financial services industry. The preparation of consolidated financial statements requires management to make judgments in the application of certain of its accounting policies that involve significant estimates and assumptions. The Company has established policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements. Management believes the most critical accounting estimates and assumptions that involve the most difficult, subjective and complex assessments are: 
the allowance and the provision for credit losses on loans;
acquisition accounting and purchased loans;
intangible assets and impairment testing;
other fair value adjustments;
impairment of debt securities, and;
contingent liabilities.
The following is a discussion of the critical accounting policies intended to facilitate a reader’s understanding of the judgments, estimates and assumptions underlying these accounting policies and the possible or likely events or uncertainties known to the Company that could have a material effect on reported financial information.
Allowance and Provision for Credit Losses on Loans– Critical Accounting Policies and Estimates
For loans, management estimates the allowance for credit losses using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit losses provide the basis for estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.
The allowance for credit losses is measured on a collective basis when similar risk characteristics exist. The Company has developed an allowance model based on an analysis of probability of default ("PD") and loss given default ("LGD") to determine an expected loss by loan segment. PDs and LGDs are developed by analyzing the average historical loss migration of loans to default.
The allowance estimation process also applies an economic forecast scenario over a three year forecast period. The forecast may utilize one scenario or a composite of scenarios based on management's judgment and expectations around the current and future macroeconomic outlook. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. For portfolio segments with a weighted average life longer than three years, the Company reverts to longer term historical loss experience, adjusted for prepayments, to estimate losses over the remaining life of the loans within each segment.
Adjustments may be made to baseline reserves for some of the loan pools based on an assessment of internal and external influences on credit quality not fully reflected in the quantitative components of the allowance model. These influences may include elements such as changes in concentration, macroeconomic conditions, recent observable asset quality trends, staff turnover, regional market conditions, employment levels and loan growth. Based upon management's assessments of these factors, the Company may apply qualitative adjustments to the allowance.
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Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
The allowance for credit losses on troubled debt restructurings (“TDRs”) is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit losses is determining by discounting the expected future cash flows at the original interest rate of the loan.
It is the Company's practice to ensure that the charge-off policy meets or exceeds regulatory requirements. Losses on unsecured consumer loans are recognized at 90 days past due, compared to the regulatory loss criteria of 120 days. In compliance with Federal Financial Institution Examination Council guidelines, secured consumer loans, including residential real estate, are typically charged off or charged down between 120 and 180 days past due, depending on the collateral type. Commercial loans and real estate loans are typically placed on nonaccrual status when principal or interest is past due for 90 days or more, unless the loan is both secured by collateral having realizable value sufficient to discharge the debt in-full and the loan is in process of collection. Loans provided with short-term payment deferrals under the CARES Act or interagency guidance are not considered past due if in compliance with the terms of their deferral. Secured loans may be charged down to the estimated value of the collateral with previously accrued unpaid interest reversed against interest income. Subsequent charge-offs may be required as a result of changes in the market value of collateral or other repayment prospects. Initial charge-off amounts are based on valuation estimates derived from appraisals, broker price opinions, or other market information. Generally, new appraisals are not received until the foreclosure process is completed; however, collateral values are evaluated periodically based on market information and incremental charge-offs are recorded if it is determined that collateral values have declined from their initial estimates.
Note F to the financial statements (titled “Allowance for Credit Losses”) summarizes the Company’s allocation of the allowance for credit losses on loans by loan segment and provides detail regarding charge-offs and recoveries for each loan segment and the composition of the loan portfolio at March 31, 2021 and December 31, 2020.
Acquisition Accounting and Purchased Loans – Critical Accounting Policies and Estimates
The Company accounts for acquisitions under ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. All loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820, Fair Value Measurement. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of expected principal, interest and other cash flows. Loans are identified as purchased credit deteriorated (“PCD”) when they have experienced more-than-insignificant deterioration in credit quality since origination. An allowance for expected credit losses on PCD loans is recorded at the date of acquisition through an adjustment to the loans’ amortized cost basis. In contrast, expected credit losses on loans not considered PCD are recognized in net income at the date of acquisition.
Fair value estimates for acquired assets and assumed liabilities are based on the information available, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.
Intangible Assets and Impairment Testing – Critical Accounting Policies and Estimates
Intangible assets consist of goodwill, core deposit intangibles and mortgage servicing rights. Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions. The core deposit intangible represents the excess intangible value of acquired deposit customer relationships. Core deposit intangibles are amortized on a straight-line basis, and are evaluated for indications of potential impairment at least annually. Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis. The Company performed an annual impairment test of goodwill, as required by ASC Topic 350, Intangibles—Goodwill and Other, in the fourth quarter of 2020, and concluded that no impairment existed.
Fair value estimates for acquired assets and assumed liabilities are based on the information available, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.
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Other Fair Value Measurements – Critical Accounting Policies and Estimates
The fair value of collateral-dependent loans, OREO and repossessed assets is typically based on current appraisals, which are reviewed quarterly to determine if fair value adjustments are necessary based on known changes in the market and/or the project assumptions. When necessary, the appraised value may be adjusted based on more recent appraisal assumptions received by the Company on other similar properties, the tax assessed market value, comparative sales and/or an internal valuation. Collateral-dependent loans are loans where repayment is solely dependent on the liquidation of the collateral or operation of the collateral for repayment.
The Company also holds 11,330 shares of Visa Class B stock which, following resolution of Visa’s litigation, will be converted to Visa Class A shares. Under the current conversion rate that became effective September 27, 2019, the Company expects to receive 1.6228 shares of Class A stock for each share of Class B stock, for a total of 18,386 shares of Visa Class A stock. The Company's ownership is related to prior ownership in Visa’s network while Visa operated as a cooperative. This ownership is recorded on the Company's financial records at a zero basis.
Impairment of Debt Securities – Critical Accounting Policies and Estimates
Expected credit losses on both held-to-maturity (“HTM”) and available-for-sale (“AFS”) securities are recognized through a valuation allowance. For HTM securities, management estimates expected credit losses over the remaining expected life and recognizes this estimate as an allowance for credit losses. An AFS security is considered impaired if the fair value is less than amortized cost basis. For AFS securities, if any portion of the decline in fair value is related to credit, the amount of allowance is determined as the portion related to credit, limited to the difference between the amortized cost basis and the fair value of the security. If the fair value of the security increases in subsequent periods, or changes in factors used within the credit loss assessment result in a change in the estimated credit loss, the Company would reflect the change by decreasing the allowance. If the Company has the intent to sell or believes it is more likely than not that it will be required to sell an impaired AFS security before recovery of the amortized cost basis, the credit loss is recorded as a direct write-down of the amortized cost basis. Declines in the fair value of AFS securities that are not considered credit related are recognized in Accumulated Other Comprehensive Income on the Company’s Consolidated Balance Sheet.
Seacoast analyzes AFS debt securities quarterly for credit losses. The analysis is performed on an individual security basis for all securities where fair value has declined below amortized cost. Fair value is based upon pricing obtained from third party pricing services. Based on internal review procedures and the fair values provided by the pricing services, the Company believes that the fair values provided by the pricing services are consistent with the principles of ASC Topic 820, Fair Value Measurement. However, on occasion pricing provided by the pricing services may not be consistent with other observed prices in the market for similar securities. Using observable market factors, including interest rate and yield curves, volatilities, prepayment speeds, loss severities and default rates, the Company may at times validate the observed prices using a discounted cash flow model and using the observed prices for similar securities to determine the fair value of its securities.
The Company utilizes both quantitative and qualitative assessments to determine if a security has a credit loss. Quantitative assessments are based on a discounted cash flow method. Qualitative assessments consider a range of factors including: percent decline in fair value, rating downgrades, subordination, duration, amortized loan-to-value, and the ability of the issuers to pay all amounts due in accordance with the contractual terms.
Contingent Liabilities – Critical Accounting Policies and Estimates
Seacoast is subject to contingent liabilities, including judicial, regulatory and arbitration proceedings, and tax and other claims arising from the conduct of the Company's business activities. These proceedings include actions brought against the Company and/or its subsidiaries with respect to transactions in which the Company and/or its subsidiaries acted as a lender, a financial adviser, a broker or acted in a related activity. Accruals are established for legal and other claims when it becomes probable that the Company will incur an expense and the amount can be reasonably estimated. Company management, together with attorneys, consultants and other professionals, assesses the probability and estimated amounts involved in a contingency. Throughout the life of a contingency, the Company or its advisers may learn of additional information that can affect the assessments about probability or about the estimates of amounts involved. Changes in these assessments can lead to changes in recorded reserves. In addition, the actual costs of resolving these claims may be substantially higher or lower than the amounts reserved for the claims. At March 31, 2021 and December 31, 2020, the Company had no significant accruals for contingent liabilities and had no known pending matters that could potentially be significant.

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Interest Rate Sensitivity
Fluctuations in interest rates may result in changes in the fair value of the Company’s financial instruments, cash flows and net interest income. This risk is managed using simulation modeling to calculate the most likely interest rate risk utilizing estimated loan and deposit growth. The objective is to optimize the Company’s financial position, liquidity, and net interest income while limiting their volatility.
Senior management regularly reviews the overall interest rate risk position and evaluates strategies to manage the risk. The Company's Asset and Liability Management Committee ("ALCO") uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a twelve-month period is subjected to instantaneous changes in market rates of 100 basis point increases up to 200 basis points of change on net interest income and is monitored on a quarterly basis.
The following table presents the ALCO simulation model's projected impact of a change in interest rates on the projected baseline net interest income for the 12 and 24 month periods beginning on April 1, 2021, holding all other changes in the balance sheet static. This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve.