Business Combinations

Acquisition of GulfShore Bancshares, Inc.

On April 7, 2017, the Company completed its acquisition of GulfShore Bancshares, Inc. ("Gulfshore"), the parent company of GulfShore Bank. Simultaneously, upon completion of the merger, GulfShore’s wholly owned subsidiary bank, GulfShore Bank, was merged with and into Seacoast Bank. GulfShore, headquartered in Tampa, Florida, operated 3 branches in Tampa and St. Petersburg. This acquisition added $358 million in total assets, $251 million in loans and $285 million in deposits to Seacoast.

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

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



(In thousands, except per share data)	April 7, 2017
Shares exchanged for cash	$	8,034

Number of GulfShore Bancshares, Inc. common shares outstanding	5,464
Per share exchange ratio	0.4807
Number of shares of common stock issued	2,627
Multiplied by common stock price per share on April 7, 2017	$	23.94
Value of common stock issued	62,883

Total purchase price	$	70,917

The acquisition was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill of $37.1 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.



(In thousands)	Initially Reported April 7, 2017		Measurement Period Adjustments		As Adjusted April 7, 2017
Assets:
Cash	$	55,540	$	—	$	55,540
Investment securities	316		—		316
Loans, net	250,876		—		250,876
Fixed assets	1,307		—		1,307
Other real estate owned	13		—		13
Core deposit intangibles	3,927		—		3,927
Goodwill	37,098		—		37,098
Other assets	8,572		—		8,572
Totals	$	357,649	—		$	357,649

Liabilities:
Deposits	$	285,350	$	—	$	285,350
Other liabilities	1,382		—		1,382
Totals	$	286,732	—		$	286,732

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



	April 7, 2017
(In thousands)	Book Balance		Fair Value
Loans:
Single family residential real estate	$	101,281	$	99,598
Commercial real estate	106,729		103,905
Construction/development/land	13,175		11,653
Commercial loans	32,137		32,247
Consumer and other loans	3,554		3,473
Purchased credit-impaired	—		—
Total acquired loans	$	256,876	$	250,876

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

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

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

Acquisition of NorthStar Banking Corporation

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

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

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



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

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

Total purchase price	$	32,855

The acquisition was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill of $12.3 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.



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

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

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



	October 20, 2017
(In thousands)	Book Balance		Fair Value
Loans:
Single family residential real estate	$	15,111	$	15,096
Commercial real estate	73,139		69,554
Construction/development/land	11,706		10,390
Commercial loans	31,200		30,854
Consumer and other loans	6,761		6,645
Purchased Credit Impaired	5,527		4,293
Total acquired loans	$	143,444	$	136,832

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



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

Acquisition of Palm Beach Community Bank

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

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

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



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

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

The acquisition was accounted for under the acquisition method in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill of $34.8 million for this acquisition that is nondeductible for tax purposes. Determining fair values of assets and liabilities, especially the loan portfolio, core deposit intangibles, and deferred taxes, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values.



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

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



	As Adjusted November 3, 2017
(In thousands)	Book Balance		Fair Value
Loans:
Single family residential real estate	$	30,153	$	30,990
Commercial real estate	134,705		132,089
Construction/development/land	69,686		67,425
Commercial loans	36,076		35,876
Consumer and other loans	179		172
Purchased Credit Impaired	4,768		3,766
Total acquired loans	$	275,567	$	270,318

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



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

Pro-Forma Information

Pro-forma data for the three and nine months ended September 30, 2017 as if the acquisitions of GulfShore, NSBC and PBCB occurred at the beginning of 2017 is as follows:



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

Acquisition of First Green Bancorp, Inc.

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



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

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