Loans

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Loans

Loans

Loans held for investment are categorized into the following segments:

•Construction and land development: Loans are extended to both commercial and consumer customers which are collateralized by and for the purpose of funding land development and construction projects, including 1-4 family residential construction, multi-family property and non-farm residential property where the primary source of repayment is from proceeds of the sale, refinancing or permanent financing of the property.

•Commercial real estate - owner-occupied: Loans are extended to commercial customers for the purpose of acquiring real estate to be occupied by the borrower's business. These loans are collateralized by the subject property and the repayment of these loans is largely dependent on the performance of the company occupying the property.

•Commercial real estate - non owner-occupied: Loans are extended to commercial customers for the purpose of acquiring commercial property where occupancy by the borrower is not their primary intent. These loans are viewed primarily as cash flow loans, collateralized by the subject property, and the repayment of these loans is largely dependent on rental income from the successful operation of the property.

•Residential real estate: Loans are extended to consumer customers and collateralized primarily by 1-4 family residential properties and include fixed and variable rate mortgages, home equity mortgages, and home equity lines of credit. Loans are primarily written based on conventional loan agency guidelines, including loans that exceed agency value limitations. Sources of repayment may be from the occupant of the residential property or from cash flows on rental income from the successful operation of the property.

•Commercial and financial: Loans are extended to commercial customers. The purpose of the loans can be working capital, physical asset expansion, asset acquisition or other business purposes. Loans may be collateralized by assets owned by the borrower or the borrower's business. Commercial loans are based primarily on the historical and projected cash flow of the borrower's business and secondarily on the capacity of credit enhancements, guarantees and underlying collateral provided by the borrower.

•Consumer: Loans are extended to consumer customers. The segment includes both installment loans and lines of credit which may be collateralized or non-collateralized.

•Paycheck Protection Program ("PPP"): Loans originated under a temporary program established by the CARES Act. Under the terms of the program, balances may be forgiven if the borrower uses the funds in a manner consistent with the program guidelines, and repayment is guaranteed by the U.S. government.

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

	June 30, 2020
(In thousands)	Portfolio Loans		Acquired Non-PCD Loans		PCD Loans		Total
Construction and land development	$	270,715	$	25,691	$	2,429	$	298,835
Commercial real estate - owner-occupied	832,943		216,598		27,109		1,076,650
Commercial real estate - non owner-occupied	1,074,063		306,880		11,844		1,392,787
Residential real estate	1,249,368		210,247		8,556		1,468,171
Commercial and financial	692,933		63,272		1,027		757,232
Consumer	195,863		5,700		364		201,927
Paycheck Protection Program	576,450		—		—		576,450
Totals	$	4,892,335	$	828,388	$	51,329	$	5,772,052

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

The amortized cost basis of loans at June 30, 2020 included net deferred costs of $21.5 million on non-PPP portfolio loans and net deferred fees of $13.0 million on PPP loans. At December 31, 2019, the amortized cost basis included net deferred costs of $19.9 million. In the first quarter of 2020, the Company completed the acquisition of First Bank of the Palm Beaches, adding PCD loans of $43.0 million and Non-PCD loans of $103.8 million. See additional discussion in Note L - Business Combinations. At June 30, 2020, the remaining fair value adjustments on acquired loans was $28.9 million, or 3.3% of the outstanding acquired loan balances, which consisted of $1.0 million on PCD loans and $27.9 million on acquired Non-PCD loans. At December 31, 2019, the remaining fair value adjustments for acquired loans was $34.9 million, or 3.8% of the acquired loan balances. These amounts are accreted into interest income over the remaining lives of the related loans on a level yield basis. Accrued interest receivable is included within Other Assets and was $25.3 million and $14.9 million at June 30, 2020 and December 31, 2019, respectively.

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

	June 30, 2020
(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total
Portfolio Loans
Construction and land development	$	270,070	$	—	$	623	$	—	$	22	$	270,715
Commercial real estate - owner-occupied	829,903		—		—		615		2,425		832,943
Commercial real estate - non owner-occupied	1,069,979		1,988		—		—		2,096		1,074,063
Residential real estate	1,230,480		3,729		4,833		—		10,326		1,249,368
Commercial and financial	683,667		2,034		39		216		6,977		692,933
Consumer	195,246		169		46		—		402		195,863
Paycheck Protection Program	576,450		—		—		—		—		576,450
Total Portfolio Loans	4,855,795		7,920		5,541		831		22,248		4,892,335
Acquired Non-PCD Loans
Construction and land development	25,117		—		—		—		574		25,691
Commercial real estate - owner-occupied	213,731		1,526		—		—		1,341		216,598
Commercial real estate - non owner-occupied	306,612		—		—		268		—		306,880
Residential real estate	208,963		—		—		—		1,284		210,247
Commercial and financial	60,941		—		—		—		2,331		63,272
Consumer	5,677		23		—		—		—		5,700
Total Acquired Non-PCD Loans	821,041		1,549		—		268		5,530		828,388
PCD Loans
Construction and land development	2,419		—		—		—		10		2,429
Commercial real estate - owner-occupied	27,109		—		—		—		—		27,109
Commercial real estate - non owner-occupied	10,808		—		—		—		1,036		11,844
Residential real estate	7,379		—		—		—		1,177		8,556
Commercial and financial	977		—		—		—		50		1,027
Consumer	277		87		—		—		—		364
Total PCD Loans	48,969		87		—		—		2,273		51,329
Total Loans	$	5,725,805	$	9,556	$	5,541	$	1,099	$	30,051	$	5,772,052

	December 31, 2019
(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total
Portfolio Loans
Construction and land development	$	276,984	$	—	$	—	$	—	$	4,351	$	281,335
Commercial real estate	1,828,629		1,606		220		—		4,356		1,834,811
Residential real estate	1,294,778		1,564		18		—		7,945		1,304,305
Commercial and financial	690,412		2,553		—		108		4,228		697,301
Consumer	199,424		317		315		—		110		200,166
Total Portfolio Loans	4,290,227		6,040		553		108		20,990		4,317,918
Purchased Unimpaired Loans
Construction and land development	43,044		—		—		—		574		43,618
Commercial real estate	531,325		942		431		—		1,245		533,943
Residential real estate	201,159		277		—		—		412		201,848
Commercial and financial	78,705		—		—		—		1,667		80,372
Consumer	8,039		—		—		—		—		8,039
Total PULs	862,272		1,219		431		—		3,898		867,820
Purchased Credit Impaired Loans
Construction and land development	148		—		—		—		12		160
Commercial real estate	9,298		—		—		—		919		10,217
Residential real estate	587		—		—		—		1,123		1,710
Commercial and financial	566		—		—		—		13		579
Consumer	—		—		—		—		—		—
Total PCI Loans	10,599		—		—		—		2,067		12,666
Total Loans	$	5,163,098	$	7,259	$	984	$	108	$	26,955	$	5,198,404

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cost-recovery method. Under the cost-recovery method, 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 $0.3 million in interest income on nonaccrual loans during each of the three months ended June 30, 2020 and 2019. The following tables present net balances of loans on nonaccrual status and the related allowance for credit losses, if any, as of:

	June 30, 2020
(In thousands)	Nonaccrual Loans With No Related Allowance		Nonaccrual Loans With an Allowance		Total Nonaccrual Loans		Allowance for Credit Losses
Construction and land development	$	585	$	21	$	606	$	11
Commercial real estate - owner-occupied	3,445		321		3,766		160
Commercial real estate - non owner-occupied	2,096		1,036		3,132		204
Residential real estate	11,871		916		12,787		793
Commercial and financial	4,808		4,550		9,358		3,409
Consumer	32		370		402		86
Totals	$	22,837	$	7,214	$	30,051	$	4,663

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

Collateral Dependent 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)	June 30, 2020		December 31, 2019
Construction and land development	$	634	$	4,926
Commercial real estate - owner-occupied	6,173		2,571
Commercial real estate - non owner-occupied	3,574		3,152
Residential real estate	14,117		11,550
Commercial and financial	5,526		4,338
Consumer	410		141
Totals	$	30,434	$	26,678

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.

•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:

	June 30, 2020
(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving		Total
Construction and Land Development
Risk Ratings:
Pass	$	29,412	$	95,549	$	70,528	$	35,134	$	10,478	$	18,260	$	33,439	$	292,800
Special Mention	198		503		1,378		38		—		2,147		—		4,264
Substandard	—		—		—		—		—		58		988		1,046
Substandard Impaired	—		—		—		—		574		151		—		725
Doubtful	—		—		—		—		—		—		—		—
Total	29,610		96,052		71,906		35,172		11,052		20,616		34,427		298,835
Commercial real estate - owner-occupied
Risk Ratings:
Pass	74,304		185,717		157,946		139,936		158,728		317,778		15,952		1,050,361
Special Mention	199		1,616		—		1,016		4,471		4,088		—		11,390
Substandard	—		—		570		3,782		1,066		5,100		—		10,518
Substandard Impaired	—		—		—		426		—		3,634		—		4,060
Doubtful1	—		—		—		—		321		—		—		321
Total	74,503		187,333		158,516		145,160		164,586		330,600		15,952		1,076,650
Commercial real estate - non owner-occupied
Risk Ratings:
Pass	80,710		321,844		230,276		130,437		196,698		390,280		6,150		1,356,395
Special Mention	—		105		—		1,376		7,876		1,117		—		10,474
Substandard	—		—		5,705		—		8,326		6,367		1,350		21,748
Substandard Impaired	—		—		—		—		126		4,044		—		4,170
Doubtful	—		—		—		—		—		—		—		—
Total	80,710		321,949		235,981		131,813		213,026		401,808		7,500		1,392,787
Residential real estate
Risk Ratings:
Pass	32,562		160,057		261,757		273,829		196,662		202,708		312,596		1,440,171
Special Mention	—		190		277		721		3,387		621		68		5,264
Substandard	—		—		1,334		—		—		1,607		1,580		4,521
Substandard Impaired	84		693		—		3,613		—		10,495		3,330		18,215
Doubtful	—		—		—		—		—		—		—		—
Total	32,646		160,940		263,368		278,163		200,049		215,431		317,574		1,468,171
Commercial and financial
Risk Ratings:
Pass	100,094		152,509		115,004		88,448		44,728		52,576		185,175		738,534
Special Mention	—		287		14		530		95		2,255		1,181		4,362
Substandard	—		148		337		259		425		1,698		2,099		4,966
Substandard Impaired	—		644		1,847		2,403		1,819		940		1,669		9,322
Doubtful1	—		—		—		39		—		—		9		48
Total	100,094		153,588		117,202		91,679		47,067		57,469		190,133		757,232

	June 30, 2020
(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving		Total
Consumer
Risk Ratings:
Pass	29,140		55,596		38,416		25,291		26,191		12,986		11,225		198,845
Special Mention	—		23		29		105		—		87		1,751		1,995
Substandard	—		—		—		19		8		39		340		406
Substandard Impaired	41		52		48		—		316		224		—		681
Doubtful	—		—		—		—		—		—		—		—
Total	29,181		55,671		38,493		25,415		26,515		13,336		13,316		201,927
Paycheck Protection Program
Risk Ratings:
Pass	576,450		—		—		—		—		—		—		576,450
Total	576,450		—		—		—		—		—		—		576,450
Consolidated
Risk Ratings:
Pass	922,672		971,272		873,927		693,075		633,485		994,588		564,537		5,653,556
Special Mention	397		2,724		1,698		3,786		15,829		10,315		3,000		37,749
Substandard	—		148		7,946		4,060		9,825		14,869		6,357		43,205
Substandard Impaired	125		1,389		1,895		6,442		2,835		19,488		4,999		37,173
Doubtful1	—		—		—		39		321		—		9		369
Total	$	923,194	$	975,533	$	885,466	$	707,402	$	662,295	$	1,039,260	$	578,902	$	5,772,052
1Loans classified as doubtful are fully reserved as of June 30, 2020.

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

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

Troubled Debt Restructured Loans

The Company’s TDR concessions granted to certain borrowers generally do not include forgiveness of principal balances, but may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a limited period of time. Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements.

Loans Modified in Connection with COVID-19 Pandemic

The CARES Act, which was signed into law on March 27, 2020, encourages financial institutions to practice prudent efforts to work with borrowers impacted by the COVID-19 pandemic by providing an option for financial institutions to exclude from TDR consideration certain loan modifications that might otherwise be categorized as TDRs under ASC 310-40. This option is available for modifications that are deemed to be COVID-related, where the borrower was not more than 30 days past due on

December 31, 2019, and the modification is executed between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end of the COVID-19 national emergency. Federal banking regulators issued similar guidance that also allows lenders to conclude that short-term modifications for borrowers affected by the pandemic should not be considered TDRs if the borrower was current at the time of modification. Seacoast began offering short-term payment deferrals of up to six months to eligible borrowers in March 2020 and, at June 30, 2020, had $1.1 billion of loans on payment deferral, none of which have been classified as TDRs.

The following table presents loans on payment deferral, excluding PPP loans, as of June 30, 2020:

(In thousands)	Loans Outstanding		% on Payment Deferral
Construction and land development	$	14,488	5%
Commercial real estate - owner-occupied	320,406		30%
Commercial real estate - non owner-occupied	445,311		32%
Residential real estate	148,035		10%
Commercial and financial	130,877		17%
Consumer	17,926		9%
Totals	$	1,077,043	21%

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

	Three Months Ended June 30,
	2020					2019
(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Construction and land development	1	$	12	$	12	—	$	—	$	—
Commercial real estate - owner-occupied	—	—		—		1	351		351
Commercial real estate - non owner-occupied	—	—		—		—	—		—
Residential real estate	—	—		—		—	—		—
Commercial and financial	—	—		—		—	—		—
Consumer	2	47		47		1	19		19
Totals	3	$	59	$	59	2	$	370	$	370

	Six Months Ended June 30,
	2020					2019
(In thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Construction and land development	1	$	12	$	12	—	$	—	$	—
Commercial real estate - owner-occupied	—	—		—		2	2,166		2,166
Commercial real estate - non owner-occupied	—	—		—		—	—		—
Residential real estate	1	45		45		—	—		—
Commercial and financial	4	437		437		1	180		180
Consumer	2	47		47		1	19		19
Totals	8	$	541	$	541	4	$	2,365	$	2,365

The TDRs described above resulted in a specific allowance for credit losses of $0.4 million as of June 30, 2020, and no specific allowance for credit losses as of June 30, 2019. During the six months ended June 30, 2020, there were three defaults totaling $1.4 million of loans that had been modified in TDRs within the preceding twelve months. During the six months ended June 30, 2019, there were no payment defaults on loans 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, or has been transferred to other real estate owned. For loans measured based on the present value of expected future cash flows, $21,000 and $27,000 for the three months ended June 30, 2020, and 2019, respectively, and $46,000 and $62,000 for the six months ended June 30, 2020, and 2019, respectively, was included in interest income and represents the change in present value attributable to the passage of time.