Business Combinations

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Business Combinations

Note S - Business Combinations

Acquisition of Grand Bankshares, Inc.

On July 17, 2015, the Company completed its previously announced acquisition of Grand Bankshares, Inc. (“Grand”) as set forth in the Agreement and Plan of Merger (“Agreement”) whereby Grand merged with and into the Company. Pursuant to and simultaneously with the merger of Grand with and into the Company, Grand’s wholly owned subsidiary bank, Grand Bank & Trust of Florida (“GB”), merged with and into the Company’s subsidiary bank, Seacoast Bank. The acquisition related costs were approximately $3.1 million and these expenses are reported in noninterest expenses in the consolidated statement of income. As a result of this acquisition, the Company expects to further solidify its market share in the attractive Palm Beach market, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results to the extent the Company earns more from interest earning assets than it pays in interest on its interest bearing liabilities.

The Company acquired 100% of the outstanding common stock of Grand. The purchase price consisted of stock, and additionally the Company paid approximately $1.48 million in cash for all of Grand’s outstanding shares of preferred B stock, representing the par value of $1,000 per share of preferred B stock. Each share of Grand common stock and Preferred A stock was exchanged for 0.3114 shares of the Company’s common stock, or approximately 1.09 million shares of Company stock. Based on the price of the Company’s common stock of $15.75 per share on July 17, 2015, plus cash paid for Grand’s outstanding shares of preferred B stock, the total purchase price was $18.7 million.

	July 15, 2015
Grand preferred B shares exchanged for cash	$	1,481,000
Number of Grand common shares outstanding		3,501,185
Per share exchange ratio		0.3114
Number of shares of common stock issued		1,090,269
Multiplied by comon stock price per share on July 17, 2015	$	15.75
Value of common stock issued		17,171,737
Total purchase price	$	18,652,737

The acquisition is accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. As previously disclosed the fair value initially assigned to assets acquired and liabilities assumed were preliminary and could change for up to one year after the closing date of the acquisition as new information and circumstances relative to closing date fair values are known. Based on recoveries of principal and interest on loans previously charged off and OREO appraisals received subsequent to the acquisition date, the Company adjusted its initial fair value estimates at acquisition date as indicated in the table below. Determining fair values of assets and liabilities, especially the loan portfolio and foreclosed real estate, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Adjustments under ASU Topic 805 resulted in a bargain purchase gain of $416,000 that was recorded in noninterest income in the fourth quarter of 2015.

			Measurement
	July 17, 2015		Period		July 17, 2015
	(Initially Reported)		Adjustments		(As Adjusted)
	(in thousands)
Assets:
Cash	$	34,408	$	0	$	34,408
Investment securities		46,366		0		46,366
Loans, net		109,988		1,304		111,292
Fixed assets		4,191		0		4,191
OREO		2,424		437		2,861
Core deposit intangibles		2,564		0		2,564
Goodwill		555		(555)		0
Other assets		14,163		(770)		13,393
	$	214,659	$	416	$	215,075
Liabilities:
Deposits	$	188,469	$	0	$	188,469
Borrowings		1,658		0		1,658
Subordinated debt		5,151		0		5,151
Other liabilities		728		0		728
	$	196,006	$	0	$	196,006
Bargain purchase gain			$	(416)

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.

	July 17, 2015
(Dollars in thousands)	Book Balance		Fair Value
Loans:
Single family residential real estate	$	6,158	$	6,379
Commercial real estate		82,782		81,191
Construction/development/land		979		913
Commercial loans		2,393		1,516
Consumer and other loans		14,575		13,692
Purchased credit-impaired		10,993		7,601
Total acquired loans	$	117,880	$	111,292

For the loans acquired we first segregated all acquired loans with specifically identified credit deficiency factor(s). The factors we considered to identify loans as Purchase Credit Impaired (“PCI”) loans were all acquired loans that were nonaccrual, 60 days or more past due, designated as Trouble Debt Restructured (“TDR”), graded “special mention” or “substandard.” These loans were then evaluated to determine estimated fair values as of the acquisition date. As required by generally accepted accounting principles, we are accounting for these loans pursuant to ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of March 11, 2016 for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.

(Dollars in thousands)	July 17, 2015
Contractually required principal and interest	$	12,552
Non-accretable difference		(4,249)
Cash flows expected to be collected		8,303
Accretable yield		(702)
Total purchased credit impaired loans acquired	$	7,601

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

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

The Company recognized no goodwill for this acquisition, based on the fair values of the assets acquired and liabilities assumed as of the acquisition date and, in some instances, based on use of third party experts for valuations. The acquisition of Grand constituted a business combination. Accordingly, the assets acquired and liabilities assumed are presented at their fair values. The determination of fair value requires management to make estimates about discount rates and future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. 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.

The operating results of the Company for the twelve months ended December 31, 2015 includes the operating results of the acquired assets and assumed liabilities since the date of acquisition of July 17, 2015.

Acquisition of Floridian Financial Group, Inc.

On March 11, 2016, the Company completed its acquisition of Floridian Financial Group, Inc. (“Floridian”), the parent company of Floridian Bank. Simultaneously, upon completion of the merger, Floridian’s wholly owned subsidiary bank, Floridian Bank, was merged with and into Seacoast Bank. Floridian, headquartered in Lake Mary, Florida, operated 10 branches in Orlando and Daytona Beach, of which several were consolidated with Seacoast locations. This acquisition added approximately $417 million in total assets, $337 million in deposits, and $267 million in loans to Seacoast. As a result of this acquisition the Company expects to further solidify its market share in the Central Florida market, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results to the extent the Company earns more from interest earning assets than it pays in interest on its interest bearing liabilities.

The Company acquired 100% of the outstanding common stock of Floridian. Under the terms of the definitive agreement, Floridian shareholders received, at their election, (i) the combination of $4.29 in cash and 0.5291 shares of Seacoast common stock, (ii) $12.25 in cash, or (iii) 0.8140 shares of Seacoast common stock, subject to a customary proration mechanism so that the aggregate consideration mix equals 35% cash and 65% Seacoast shares (based on Seacoast’s closing price of $15.47 per share on March 11, 2016).

	March 11, 2016
Floridian shares exchanged for cash	$	26,699,000
Number of Floridian common shares outstanding		6,222,119
Per share exchange ratio		0.5289
Number of shares of common stock issued		3,291,066
Multiplied by common stock price per share on March 11, 2016	$	15.47
Value of common stock issued		50,912,791
Total purchase price	$	77,611,791

The acquisition is accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill on this acquisition which is nondeductible for tax purposes as this acquisition is a nontaxable transaction. The goodwill was calculated based on the fair values of the assets acquired and liabilities assumed as of the acquisition date. Loans that were nonaccrual and all loan relationships identified as impaired as of the acquisition date were considered by management to be credit impaired and were accounted for pursuant to ASC Topic 310-30.

			Measurement
	March 11, 2016		Period		March 11, 2016
	(Initially Reported)		Adjustments		(As Adjusted)
	(in thousands)
Assets:
Cash	$	28,243	$	0	$	28,243
Investment securities		66,912		95		67,007
Loans, net		268,249		(2,112)		266,137
Fixed assets		7,801		(628)		7,173
Core deposit intangibles		3,375		0		3,375
Goodwill		29,985		1,647		31,632
Other assets		12,879		998		13,877
	$	417,444	$	0	$	417,444
Liabilities:
Deposits	$	337,341	$	0	$	337,341
Other liabilities		2,492		0		2,492
	$	339,833	$	0	$	339,833

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.

	March 11, 2016
(Dollars in thousands)	Book Balance		Fair Value
Loans:
Single family residential real estate	$	38,304	$	37,367
Commercial real estate		172,531		167,105
Construction/development/land		20,546		18,108
Commercial loans		39,070		37,804
Consumer and other loans		3,385		3,110
Purchased credit-impaired		6,186		2,643
Total acquired loans	$	280,022	$	266,137

For the loans acquired we first segregated all acquired loans with specifically identified credit deficiency factor(s). The factors we considered to identify loans as Purchase Credit Impaired (“PCI”) loans were all acquired loans that were nonaccrual, 60 days or more past due, designated as Trouble Debt Restructured (“TDR”), graded “special mention” or “substandard.” These loans were then evaluated to determine estimated fair values as of the acquisition date. As required by generally accepted accounting principles, we are accounting for these loans pursuant to ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of March 11, 2016 for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.

(Dollars in thousands)	March 11, 2016
Contractually required principal and interest	$	8,031
Non-accretable difference		(4,820)
Cash flows expected to be collected		3,211
Accretable yield		(568)
Total purchased credit impaired loans acquired	$	2,643

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

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

The Company recognized goodwill of $32 million for this acquisition that is nondeductible for tax purposes. The acquisition of Floridian constitutes a business combination. Accordingly, the assets acquired and liabilities assumed are presented at their fair values. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events, and in some instances rely on use of third party experts.

The operating results of the Company for the twelve months ended December 31, 2016 include the operating results of the acquired assets and assumed liabilities since the date of acquisition of March 11, 2016. Pro-forma data for the twelve months ended December 31, 2016 and 2015 listed in the table below present pro-forma information as if the acquisition occurred at the beginning of 2015.

	Twelve Months Ended
	December 31,
(Dollars in thousands, except per share amounts)	2016		2015
Net interest income	$	142,354	$	122,413
Net income available to common shareholders		30,466		27,070
EPS - basic	$	0.81	$	0.74
EPS - diluted		0.80		0.73

Acquisition of BMO Harris Central Florida Offices, Deposits and Loans

On June 3, 2016, Seacoast Bank assumed approximately $314 million in deposits related to business and consumer banking customers at a deposit premium of 3.0% of the deposit balances, $63 million in business loans at a loan premium of 0.5%, and fourteen branches of BMO Harris Bank N.A. (“BMO”), located in the Orlando Metropolitan Statistical Area (“MSA”). As a result of this acquisition the Company expects to further improve its market share in the Central Florida market, expand its customer base and leverage operating cost through economies of scale, and positively affect the Company’s operating results to the extent the Company earns more from interest earning assets than it pays in interest on its interest bearing liabilities.

The fair values listed are preliminary and are subject to adjustment. The acquisition is accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. 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 are known. Determining fair values of assets and liabilities, especially the loan portfolio and bank premises and leases related to the fourteen branches acquired, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.

			Measurement
	June 3, 2016		Period		June 3, 2016
	(Initially Reported)		Adjustments		(As Adjusted)
	(in thousands)
Assets:
Cash from BMO (net of payable)	$	234,094	$	0	$	234,094
Loans, net		62,671		0		62,671
Fixed assets		3,715		0		3,715
Core deposit intangibles		5,223		(135)		5,088
Goodwill		7,645		163		7,808
Other assets		952		(28)		924
	$	314,300	$	0	$	314,300
Liabilities:
Deposits	$	314,248	$	0	$	314,248
Other liabilities		52		0		52
	$	314,300	$	0	$	314,300

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.

	June 3, 2016
(Dollars in thousands)	Book Balance		Fair Value
Loans:
Commercial real estate	$	31,564	$	31,200
Commercial loans		32,479		31,471
Purchased credit-impaired		0		0
Total acquired loans	$	64,043	$	62,671

At June 3, 2016, no loans acquired from BMO Harris were specifically identified with a credit deficiency factor(s). The factors we consider to identify loans as PCI loans are acquired loans that were nonaccrual, 60 days or more past due, designated as TDR, graded “special mention” or “substandard.” PULs were evaluated to determine estimated fair values as of the acquisition date. Although no specific credit deficiencies were identifiable, we believe there is an element of risk as to whether all contractual cash flows will be eventually received. Factors that were considered included the economic environment both nationally and locally as well as the real estate market particularly in Florida. We have applied ASC Topic 310-20 accounting treatment to the PULs.

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

The Company recognized intangibles (including goodwill) of approximately $13 million for this acquisition that is deductible for tax purposes over a 15-year period. The acquisition of BMO Harris’s Orlando banking operations by Seacoast Bank constitutes a business combination. Accordingly, the assets acquired and liabilities assumed are presented at their fair values. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change, and in some instances rely on use of third party experts. These fair value estimates are considered preliminary and are subject to change for up to one year after the closing date of the acquisition as additional information becomes available. For the BMO Harris transaction, fair values as presented for loans, fixed assets, deposits, and certain other assets and liabilities are necessarily considered preliminary.

Announced Acquisition of GulfShore Bancshares, Inc.

On November 3, 2016, the Company announced that it signed a definitive agreement to acquire GulfShore Bancshares, Inc. (“GulfShore”), the parent company of GulfShore Bank. Upon completion of the merger, Seacoast expects GulfShore Bank will be merged into Seacoast Bank. GulfShore, headquartered in Tampa, Florida, currently operates three branches in Tampa and will add approximately $328 million in assets, $276 million in deposits, and $262 million in loans to Seacoast.

Under the terms of the definitive agreement, each share of GulfShore common stock (except for specified shares of GulfShore common stock held by GulfShore or Seacoast and any dissenting shares) will be converted into the right to receive the combination of $1.47 in cash and 0.4807 shares of Seacoast common stock.

The transaction is expected to close on April 7, 2017.

The acquisition will be accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Some disclosures are being omitted at this time as the information is not available and incomplete. The Company will recognize goodwill on this acquisition which is nondeductible for tax purposes as this acquisition is a nontaxable transaction. The goodwill will be calculated based on the fair values of the assets acquired and liabilities assumed as of the acquisition date, which at the time of this filing were incomplete and reliant upon use of third party experts for pending valuations, including the core deposit intangible and pending appraisals on purchased unimpaired loans and purchased credit impaired loans, bank premises and other fixed assets, other real estate owned, subordinated debt, and remaining assets and other liabilities. Loans that are nonaccrual and all loan relationships identified as impaired as of the acquisition date will be considered by management to be credit impaired and will be accounted for pursuant to ASC Topic 310-30. 

The Company believes the deposits assumed from the acquisition will have an intangible value. The Company will be applying ASC Topic 805, which prescribes the accounting for goodwill and other intangible assets such as core deposit intangibles, in a business combination. In determining the valuation amount, deposits will be analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.