ACQUISITION

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

NOTE K — ACQUISITION

Acquisition of The BANKshares, Inc.

On October 1, 2014, the Company completed its previously announced acquisition of The BANKshares, Inc. (“BANKshares”) as set forth in the Agreement and Plan of Merger (“Agreement”) whereby BANKshares merged with and into the Company. Pursuant to and simultaneously with the merger of BANKshares with and into the Company, BANKshares’s wholly owned subsidiary bank, BankFIRST (“BF”), merged with and into the Company’s subsidiary bank, Seacoast National Bank.

The Company’s primary reasons for the transaction were to further solidify its market share in the southeast Florida market and expand its customer base to enhance deposit fee income and leverage operating cost through economies of scale. The acquisition increased the Company’s total assets and total deposits by approximately 29% and 29%, respectively, as compared with the balances at September 30, 2014, and is expected to positively affect the Company’s operating results to the extent the Company earns more from interest earning assets than it pays in interest on its interest bearing liabilities.

The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill on this acquisition of $22.0 million, which is nondeductible for tax purposes as this acquisition is a nontaxable transaction. The goodwill is calculated based on the fair values of the assets acquired and liabilities assumed as of the acquisition date and is considered reasonable for a variety of reasons including the following:

• attractiveness in the pricing of the acquired loans;

• ability to increase market share in central Florida;

• attractiveness of core deposit customer relationships;

• opportunities to enhance income and efficiency due to duplications of effort and decentralized processes and to enhance income by centralizing some duties and removing duplications of effort.

Fair value estimates 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. Fair values are preliminary estimates due to pending valuations for the core deposit intangible and pending appraisals on loans and other real estate owned.

The Company acquired 100% of the outstanding common stock of BANKshares. The purchase price consisted of stock. Each share of BANKshares common stock was exchanged for 0.4975 shares of the Company’s common stock. Based on the closing price of the Company’s common stock on September 30, 2014, the resulting purchase price was $76.8 million. The table below summarizes the purchase price calculation.

	September 30,
(Dollars in thousands, except per share data)	2014
Number of shares of BANKshares common stock outstanding		12,644,763
BANKshares preferred shares that convert to BANKshares common shares upon a change in control		1,476,660
Total BANKshares common shares including conversion of preferred shares		14,121,423
Per share exchange ratio		0.4975
Number of shares of common stock issued		7,025,408
Multiplied by common stock price per share on September 30, 2014	$	10.93
Total purchase price		76,787,709

The list below summarizes the preliminary estimates of the fair value of the assets purchased, including goodwill, and liabilities assumed as of the October 1, 2014 purchase date.

(Dollars in thousands)	Oct. 1, 2014
Assets:
Cash and cash equivalents	$	110,996
Loans, held for investment		356,022
Purchased credit impaired loans		8,481
Loans held for sale		486
Investments		85,355
Bank premises		12,119
Other real estate owned		2,837
Core deposit intangible		7,765
Goodwill		22,013
Other assets		19,117
Total assets acquired		625,191
Liabilities:
Deposits	$	516,297
Subordinated debt		10,930
Repurchase agreements		18,478
Other liabilities		2,698
Total liabilities assumed	$	548,403

In the acquisition, the Company purchased $365 million of loans at fair value, net of $13.8 million or 3.7%, estimated discount to the outstanding principal balance, representing 26% of the Company’s total loans at September 30, 2014. Of the total loans acquired, management identified $9.3 million with credit deficiencies. All loans that were on non-accrual status and all loan relationships that were identified as impaired as of the acquisition date were considered by management to be credit impaired and are accounted for pursuant to ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of October 1, 2014 for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.

(Dollars in thousands, except per share data)	Oct. 1, 2014
Contractually required principal and interest	$	12,057
Non-accretable difference		970
Cash flows expected to be collected		11,087
Accretable yield		2,606
Total purchased credit-impaired loans acquired	$	8,481

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

	Oct. 1, 2014
(Dollars in thousands)		Book Balance		Fair Value
Loans:
Single family residential real estate	$	50,768	$	49,184
Commercial real estate		229,859		224,837
Construction/development/land		30,994		27,442
Commercial loans		52,458		51,479
Consumer and other loans		3,647		3,568
Purchased credit-impaired		11,087		8,481
Total earning assets	$	378,813	$	364,989

In its assumption of the deposit liabilities, the Company believed the deposits assumed from the acquisition have an intangible value. The Company applied ASC Topic 805, which prescribes the accounting for goodwill and other intangible assets such as core deposit intangibles, in a business combination. The Company determined the estimated fair value of the core deposit intangible asset totaled $7.8 million, which will be amortized on the straight line amortization method over an estimated economic life not to exceed ten years. 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.

Pro-forma information

Pro-forma data for the three and nine month periods ending September 30, 2014 and 2013 listed in the table below presents pro-forma information as if the acquisition occurred at the beginning of 2013.

	Three months ended September 30,				Nine months ended September 30,
		2014		2013		2014		2013
Net interest income	$	22,877	$	22,244	$	66,649	$	64,511
Net income available to common shareholders		3,891		46,527		11,410		52,528
EPS - basic	$	0.15	$	1.78	$	0.35	$	1.59
EPS - diluted	$	0.15	$	1.80	$	0.35	$	1.60