Our concentration in commercial real estate loans could result in increased loan losses.

Commercial real estate (“CRE”) is cyclical and poses risks of loss to us due to our concentration levels and risks of the asset, especially during a difficult economy. As of December 31, 2016 and 2015, 50.2 percent and 49.8 percent of our loan portfolio were comprised of CRE loans, respectively. The banking regulators continue to give CRE lending greater scrutiny, and banks with higher levels of CRE loans are expected to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for possible losses and capital levels as a result of CRE lending growth and exposures. During 2016, we recorded a $2.4 million provision for loan losses, compared to a $2.6 million provision for losses during 2015, and compared to a $3.5 million recapture of provisioning during 2014.

Seacoast Bank has a written CRE concentration risk management program and monitors its exposure to CRE; however, there is no guarantee that the program will be effective in managing our concentration in CRE. Seacoast Bank’s CRE concentrations as of December 31, 2016 were favorably below regulatory guidance.

Liquidity risks could affect operations and jeopardize our financial condition.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our non-core funding sources include federal funds purchases, securities sold under repurchase agreements, non-core deposits, and short- and long-term debt. We are also members of the Federal Home Loan Bank of Atlanta (the “FHLB”) and the Federal Reserve Bank of Atlanta, where we can obtain advances collateralized with eligible assets. We maintain a portfolio of securities that can be used as a secondary source of liquidity. There are also other sources of liquidity available to us or Seacoast Bank should they be needed, including our ability to acquire additional non-core deposits, the issuance and sale of debt securities, and the issuance and sale of preferred or common securities in public or private transactions.

Our access to funding sources in amounts adequate or on terms which are acceptable to us could be impaired by other factors that affect us specifically or the financial services industry or economy in general. Factors that could detrimentally impact our access to liquidity sources include a downturn in the markets in which our loans are concentrated or adverse regulatory action against us. In addition, our access to deposits may be affected by the liquidity and/or cash flow needs of depositors. Although we have historically been able to replace maturing deposits and FHLB advances as necessary, we might not be able to replace such funds in the future and can lose a relatively inexpensive source of funds and increase our funding costs if, among other things, customers move funds out of bank deposits and into alternative investments, such as the stock market, that may be perceived as providing superior expected returns. We may be required to seek additional regulatory capital through capital raises at terms that may be very dilutive to existing shareholders.

Our ability to borrow could also be impaired by factors that are not specific to us, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry in light of recent turmoil faced by banking organizations and deterioration in credit markets.industry.

Our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay interest on our trust preferred securities or reinstate dividends.

We are a legal entity separate and distinct from Seacoast Bank and our other subsidiaries. Our primary source of revenue consists of dividends from Seacoast Bank. These dividends are the principal source of funds to pay dividends on our common stock, interest on our trust preferred securities and interest and principal on our debt. Various laws and regulations limit the amount of dividends that Seacoast Bank may pay us. Also, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary'ssubsidiary’s creditors. Limitations on our ability to receive dividends from our subsidiaries could have a material adverse effect on our liquidity and on our ability to pay dividends on common stock. Additionally, if our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, we may not be able to make payments on our trust preferred securities or reinstate dividend payments to our common shareholders. We currently do not expect to pay dividends on our common stock to shareholders in the foreseeable future and expect to retain all earnings, if any, to support our growth.

We must effectively manage our interest rate risk.The impact of changing interest rates on our results is difficult to predict and changes in interest rates may impact our performance in ways we cannot predict.

Our profitability is dependent to a large extent on our net interest income, which is the difference between the interest income paid to us on our loans and investments and the interest we pay to third parties such as our depositors, lenders and debt holders. Changes in interest rates can impact our profits and the fair values of certain of our assets and liabilities. Prolonged periods of unusually low interest rates may have an incrementally adverse effect on our earnings by reducing yields on loans and other earning assets over time. Increases in market interest rates may reduce our customers’ desire to borrow money from us or adversely affect their ability to repay their outstanding loans by increasing their debt service obligations through the periodic reset of adjustable interest rate loans. If our borrowers’ ability to pay their loans is impaired by increasing interest payment obligations, our level of nonperforming assets would increase, producing an adverse effect on operating results. Increases in interest rates can have a material impact on the volume of mortgage originations and re-financings, adversely affecting the profitability of our mortgage finance business. Interest rate risk can also result from mismatches between the dollar amounts of re-pricing or maturing assets and liabilities and from mismatches in the timing and rates at which our assets and liabilities re-price. We actively monitor and manage the balances of our maturing and re-pricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurance that we will be able to avoid material adverse effects on our net interest margin in all market conditions.

Federal prohibitions on the ability of financial institutions to pay interest on commercial demand deposit accounts were repealed in 2011 by the Dodd-Frank Act. This change has had limited impact to date due to the excess of commercial liquidity and the very low rate environment in recent years. There can be no assurance that we will not be materially adversely affected in the future if economic activity increases and interest rates rise, which may result in our interest expense increasing, and our net interest margin decreasing, if we must offer interest on commercial demand deposits to attract or retain customer deposits.

Our customers may pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding.

We may experience a decrease in customer deposits if customers perceive alternative investments, such as the stock market, as providing superior expected returns. When customers move money out of bank deposits in favor of alternative investments, we may lose a relatively inexpensive source of funds, and be forced to rely more heavily on borrowings and other sources of funding to fund our business and meet withdrawal demands, thereby increasing our funding costs and adversely affecting our net interest margin.

Consumers may decide not to use banks to complete their financial transactions, which could affect our net income.

Technology and other changes now allow parties to complete financial transactions without banks. For example, consumers can pay bills, transfer funds directly and obtain loans without banks. This process could result in the loss of interest and fee income, as well as the loss of customer deposits and the income generated from those deposits. The impact to our loan growth may be more significant prospectively.

Regulatory compliance burdens and associated costs have increased and adversely affect our business.

On July 21, 2010, the Dodd-Frank Act was signed into law.  The Dodd-Frank Act represents a significant overhaul of many aspects of the regulation of the financial services industry.

The Dodd-Frank Act directs applicable regulatory authorities to promulgate regulations implementing its provisions, and its effect on the Company and on the financial services industry as a whole will be clarified as those regulationsWe are issued. Certain provisions of the Act have been implemented by regulation, while others are expected to be implemented in the coming years. The Dodd-Frank Act addresses a number of issues, including capital requirements, compliance and risk management, debit card overdraft fees, healthcare, incentive compensation, expanded disclosures and corporate governance.  The Dodd-Frank Act established a new, independent CFPB, which has broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home equity loans and credit cards.  States will be permitted to adopt stricter consumer protection laws and can enforce consumer protection rules issued by the CFPB. The CFPB is working on a wide range of consumer protection initiatives, including revisions to existing regulations, many of which will likely impact our business.

The Dodd-Frank Act will increase our regulatory compliance burden and may have a material adverse effect on us, including increasing the costs associated with our regulatory examinations and compliance measures.  The changes resulting from the Dodd-Frank Act, as well as the resulting regulations promulgated by federal agencies, may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage ratio requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make necessary changes to comply with new laws and regulations. For a more detailed description of the Dodd-Frank Act, see “Item 1. Business—Supervision and Regulation” of this Form 10-K.

Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.

FDIC insurance premiums we pay may change and be significantly higher in the future. Market developments may significantly deplete the insurance fund of the FDIC and further reduce the ratio of reserves to insured deposits, thereby making it requisite upon the FDIC to charge higher premiums prospectively.

Weare required to maintain capital to meet regulatory requirements, and if we fail to maintain sufficient capital, whether due to losses, growth opportunities, or an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our compliance with regulatory requirements, would be adversely affected.

Both we and Seacoast Bank must meet regulatory capital requirements and maintain sufficient liquidity and our regulators may modify and adjust such requirements in the future. Our ability to raise additional capital, when and if needed in the future, will depend on conditions in the capital markets, general economic conditions and a number of other factors, including investor perceptions regarding the banking industry and the market, governmental activities, many of which are outside our control, and on our financial condition and performance. Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to meet these capital and other regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.

Although we currently comply with all capital requirements, we will be subject to more stringent regulatory capital ratio requirements in the future and we may need additional capital in order to meet those requirements. Our failure to remain “well capitalized” for bank regulatory purposes could affect customer confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to payresume payments of dividends on common stock, make distributions on our trust preferred securities, our ability to make acquisitions, and our business, results of operations and financial condition, generally. Under FDIC rules, if Seacoast Bank ceases to be a “well capitalized” institution for bank regulatory purposes, its ability to accept brokered deposits and the interest rates that it pays may both be restricted.

As of April 1, 2011, the FDIC implemented its new calculation methodology for insurance assessments, applying revised risk category ratings for calculating assessments to total assets less Tier 1 risk-based capital. Deposits are no longer utilized as the primary base and the base assessment rates vary depending on the DIF reserve ratio. We have not experienced any negative impact to our consolidated financial statements as a result of the new method as of December 31, 2016.

Changes in accounting and tax rules applicable to banks could adversely affect our financial condition and results of operations.

From time to time, the Financial Accounting Standards Board (the “FASB”) and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in us restating prior period financial statements.

Our cost of funds may increase as a result of general economic conditions, FDIC insurance assessments, interest rates and competitive pressures.

We have traditionally obtained funds through local deposits and thus we have a base of lower cost transaction deposits. Generally, we believe local deposits are a cheaper and more stable source of funds than other borrowings because interest rates paid for local deposits are typically lower than interest rates charged for borrowings from other institutional lenders and reflect a mix of transaction and time deposits, whereas brokered deposits typically are higher cost time deposits. Our costs of funds and our profitability and liquidity are likely to be adversely affected if, and to the extent, we have to rely upon higher cost borrowings from other institutional lenders or brokers to fund loan demand or liquidity needs, and changes in our deposit mix and growth could adversely affect our profitability and the ability to expand our loan portfolio.

Lending goals may not be attainable.

It may not be possible to safely, soundly and profitably make sufficient loans to creditworthy persons in the current economy to satisfy our prospective goals for commercial, residential and consumer lending volumes. Future demand for additional lending is unclear and uncertain, and opportunities to make loans may be more limited and/or involve risks or terms that we likely would not find acceptable or in our shareholders’ best interest. A failure to meet our lending goals could adversely affect our results of operation and financial condition, liquidity and capital. Also, the profitability of funding such loans using deposits may be adversely affected by increased FDIC insurance premiums.

Federal banking agencies periodically conduct examinations of our business, including for compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations may adversely affect us.

The Federal Reserve and the OCC periodically conduct examinations of our business and Seacoast Bank’s business, including for compliance with laws and regulations, and Seacoast Bank also may be subject to participationfuture regulatory examinations by the CFPB in its future regulatory examinations as discussed in the “Supervision and Regulation” section above. If, as a result of an examination, the Federal Reserve, the OCC and/or the CFPB were to determine that the financial condition, capital resources, asset quality, asset concentrations, earnings prospects, management, liquidity, sensitivity to market risk, or other aspects of any of our or Seacoast Bank’s operations had become unsatisfactory, or that we or our management were in violation of any law, regulation or guideline in effect from time to time, the regulators may take a number of different remedial actions as they deem appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the composition of our concentrations in portfolio or balance sheet assets, to assess civil monetary penalties against our officers or directors or to remove officers and directors.

Our future success is dependent on our ability to compete effectively in highly competitivemarkets.

We operate in the highly competitive markets of Martin, St. Lucie, Brevard, Indian River and Palm Beach and Broward Counties in southeastern Florida, the Orlando, Florida metropolitan statistical area in Orange, Seminole and Lake County, as well as in Volusia County, and more rural competitive counties in the Lake Okeechobee, Florida region. Our future growth and success will depend on our ability to compete effectively in these and other potential markets. We compete for loans, deposits and other financial services in geographic markets with other local, regional and national commercial banks, thrifts, credit unions, mortgage lenders, and securities and insurance brokerage firms. Many of our competitors offer products and services different from us, and have substantially greater resources, name recognition and market presence than we do, which benefits them in attracting business. Larger competitors may be able to price loans and deposits more aggressively than we can, and have broader customer and geographic bases to draw upon.

We are dependent on key personnel and the loss of one or more of those key personnel could harm our business.

Our future success significantly depends on the continued services and performance of our key management personnel. We believe our management team’s depth and breadth of experience in the banking industry is integral to executing our business plan. We also will need to continue to attract, motivate and retain other key personnel. The loss of the services of members of our senior management team or other key employees or the inability to attract additional qualified personnel as needed could have a material adverse effect on our business, financial position, results of operations and cash flows.

We are subject to losses due to fraudulent and negligent acts on the part of loan applicants, mortgage brokers, other vendors and our employees.

When we originate mortgage loans, we rely heavily upon information supplied by loan applicants and third parties, including the information contained in the loan application, property appraisal, title information and employment and income documentation provided by third parties. If any of this information is misrepresented and such misrepresentation is not detected prior to loan funding, we generally bear the risk of loss associated with the misrepresentation.

We operate in a heavily regulated environment.

We and our subsidiaries are regulated by several regulators, including the Federal Reserve, the OCC, the SEC, the FDIC, Nasdaq, and the CFPB. Our success is affected by state and federal regulations affecting banks and bank holding companies, the securities markets and banking, securities and insurance regulators. Banking regulations are primarily intended to protect consumers and depositors, not shareholders. The financial services industry also is subject to frequent legislative and regulatory changes and proposed changes, the effects of which cannot be predicted. These changes, if adopted, could require us to maintain more capital, liquidity and risk controls which could adversely affect our growth, profitability and financial condition.

We are subject to internal control reporting requirements that increase compliance costs and failure to comply with such requirements could adversely affect our reputation and the value of our securities.

We are required to comply with various corporate governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002, as well as rules and regulations adopted by the SEC, the Public Company Accounting Oversight Board and Nasdaq.NASDAQ. In particular, we are required to include management and independent registered public accounting firm reports on internal controls as part of our Annual Report on Form 10-K pursuant to Section 404 of the Sarbanes-Oxley Act. The SEC also has proposed a number of new rules or regulations requiring additional disclosure, such as lower-level employee compensation. We expect to continue to spend significant amounts of time and money on compliance with these rules. Our failure to track and comply with the various rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the value of our securities.

Our controls and procedures may fail or be circumvented.   

Management regularly reviews and updates our internal controls over financial reporting, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

Our operations rely on external vendors.   

We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations, particularly in the areas of operations, treasury management systems, information technology and security, exposing us to the risk that these vendors will not perform as required by our agreements. An external vendor’s failure to perform in accordance with our agreement could be disruptive to our operations, which could have a material adverse impact on our business, financial condition and results of operations. Our regulators also impose requirements on us with respect to monitoring and implementing adequate controls and procedures in connection with our third party vendors.

From time to time, we may decide to retain a new vendor for new or existing products and services. Transition to these new vendors may not proceed as anticipated and could negatively impact our customers or our ability to conduct business, which, in turn, could have an adverse effect on our business, results of operations and financial condition.

We must effectively manage our information systems risk.

We rely heavily on our communications and information systems to conduct our business. The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. Our ability to compete successfully depends in part upon our ability to use technology to provide products and services that will satisfy customer demands. Many of the Company’s competitors invest substantially greater resources in technological improvements than we do. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers, which may negatively affect our business, results of operations or financial condition.

Our communications and information systems remain vulnerable to unexpected disruptions and failures. Any failure or interruption of these systems could impair our ability to serve our customers and to operate our business and could damage our reputation, result in a loss of business, subject us to additional regulatory scrutiny or enforcement or expose us to civil litigation and possible financial liability. While we have developed extensive recovery plans, we cannot assure that those plans will be effective to prevent adverse effects upon us and our customers resulting from system failures. While we maintain an insurance policy which we believe provides sufficient coverage at a manageable expense for an institution of our size and scope with similar technological systems, we cannot assure that this policy would be sufficient to cover all related financial losses and damages should we experience any one or more of our or a third party’s systems failing or experiencing a cyber-attack.

We collect and store sensitive data, including personally identifiable information of our customers and employees. Computer break-ins of our systems or our customers’ systems, thefts of data and other breaches and criminal activity may result in significant costs to respond, liability for customer losses if we are at fault, damage to our customer relationships, regulatory scrutiny and enforcement and loss of future business opportunities due to reputational damage. Although we, with the help of third-party service providers, will continue to implement security technology and establish operational procedures to protect sensitive data, there can be no assurance that these measures will be effective. We advise and provide training to our customers regarding protection of their systems, but there is no assurance that our advice and training will be appropriately acted upon by our customers or effective to prevent losses. In some cases we may elect to contribute to the cost of responding to cybercrime against our customers, even when we are not at fault, in order to maintain valuable customer relationships.

Disruptions to our information systems and security breaches could adversely affect our business and reputation.

In our ordinary course of business, we rely on electronic communications and information systems to conduct our businesses and to store sensitive data, including financial information regarding our customers. The integrity of information systems of financial institutions are under significant threat from cyber-attacks by third parties, including through coordinated attacks sponsored by foreign nations and criminal organizations to disrupt business operations and other compromises to data and systems for political or criminal purposes. We employ an in-depth, layered, defense approach that leverages people, processes and technology to manage and maintain cyber security controls.

Notwithstanding the strength of our defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and attackers respond rapidly to changes in defensive measures. Cyber security risks may also occur with our third-party service providers, and may interfere with their ability to fulfill their contractual obligations to us, with attendant potential for financial loss or liability that could adversely affect our financial condition or results of operations. We offer our clients the ability to bank remotely and provide other technology based products and services, which services include the secure transmission of confidential information over the Internet and other remote channels. To the extent that our client's systems are not secure or are otherwise compromised, our network could be vulnerable to unauthorized access, malicious software, phishing schemes and other security breaches. To the extent that our activities or the activities of our clients or third-party service providers involve the storage and transmission of confidential information, security breaches and malicious software could expose us to claims, regulatory scrutiny, litigation and other possible liabilities. While to date we have not experienced a significant compromise, significant data loss or material financial losses related to cyber security attacks, our systems and those of our clients and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future. We may suffer material financial losses related to these risks in the future or we may be subject to liability for compromises to our client or third-party service provider systems. Any such losses or liabilities could adversely affect our financial condition or results of operations, and could expose us to reputation risk, the loss of client business, increased operational costs, as well as additional regulatory scrutiny, possible litigation, and related financial liability. These risks also include possible business interruption, including the inability to access critical information and systems.

The anti-takeover provisions in our Articles of Incorporation and under Florida law may make it more difficult for takeover attempts that have not been approved by our board of directors.

Florida law and our Articles of Incorporation include anti-takeover provisions, such as provisions that encourage persons seeking to acquire control of us to consult with our board, and which enable the board to negotiate and give consideration on behalf of us and our shareholders and other constituencies to the merits of any offer made. Such provisions, as well as supermajority voting and quorum requirements, and a staggered board of directors, and the Protective Amendment, may make any takeover attempts and other acquisitions of interests in us, by means of a tender offer, open market purchase, a proxy fight or otherwise, that have not been approved by our board of directors more difficult and more expensive. These provisions may discourage possible business combinations that a majority of our shareholders may believe to be desirable and beneficial. As a result, our board of directors may decide not to pursue transactions that would otherwise be in the best interests of holders of our common stock.

Hurricanes or other adverse weather events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business and results ofoperations.of operations.

Our market areas in Florida are susceptible to hurricanes, tropical storms and related flooding and wind damage. Such weather events can disrupt operations, result in damage to properties and negatively affect the local economies in the markets where we operate. We cannot predict whether or to what extent damage that may be caused by future hurricanes will affect our operations or the economies in our current or future market areas, but such weather events could result in a decline in loan originations, a decline in the value or destruction of properties securing our loans and an increase in the delinquencies, foreclosures or loan losses. Our business and results of operations may be adversely affected by these and other negative effects of future hurricanes, tropical storms, related flooding and wind damage and other similar weather events. As a result of the potential for such weather events, many of our customers have incurred significantly higher property and casualty insurance premiums on their properties located in our markets, which may adversely affect real estate sales and values in our markets.

The CFPB’s issued rules may have a negative impact on our loan origination process, and compliance and collection costs, which could adversely affect our mortgage lending operations and operating results.

The CFPB issued rules that are likely to impact our residential mortgage lending practices, and the residential mortgage market generally, including rules that implement the “ability-to-repay” requirement and provide protection from liability for “qualified mortgages,” as required by the Dodd-Frank Act, which took effect on January 10, 2014. The CFPB has also issued a number of other mortgage-related rules, including new rules pertaining to loan originator compensation, and that establish qualification, registration and licensing requirements for loan originators. These and other changes are likely to impose restrictions on future mortgage loan originations, diminish lenders’ rights against delinquent borrowers or otherwise change the ways in which lenders make and administer residential mortgage loans. These rules could have a negative effect on the financial performance of Seacoast Bank’s mortgage lending operations, by, among other things, reducing the volume of mortgage loans that Seacoast Bank can originate and sell into the secondary market, increasing its compliance burden and impairing Seacoast Bank’s ability to proceed against certain delinquent borrowers with timely and effective collection efforts.

Ownership concentrations of our common stock and actions by large shareholders may affect the market price of our common stock.

A substantial number of shares of our common stock are owned by a small number of large institutional investors and those shares could be sold into the public market pursuant. In the event these large shareholders elect to sell their shares, such sales or attempted sales could result in significant downward pressure on the market price of our common stock and actual price declines.

A reduction in consumer confidence could negatively impact our results of operations and financial condition.

The beginning of 2017 has seen significant market volatility driven in part by concerns relating to, among other things, the 2016 U.S. presidential election. The continued impact of this issue could adversely affect the U.S. or global economies, with direct or indirect impacts on the Company and our business. Results could include drops in consumer and business confidence, credit deterioration, diminished capital markets activity, and delays in the Federal Reserve Board increases in interest rates.

Risks Related to our Common Stock

We may issue additional shares of common or preferred stock, which may dilute the interests of our shareholders and may adversely affect the market price of our common stock.

We are currently authorized to issue up to 60 million shares of common stock, of which 38,021,83546.9 million shares were outstanding as of December 31, 2016,2017, and up to 4 million shares of preferred stock, of which no shares are outstanding. Subject to certain NASDAQ requirements, our board of directors has authority, without action or vote of the shareholders, to issue all or part of the remaining authorized but unissued shares and to establish the terms of any series of preferred stock. These authorized but unissued shares could be issued on terms or in circumstances that could dilute the interests of other shareholders.

Our stock price is subject to fluctuations, and the value of your investment may decline.

The trading price of our common stock is subject to wide fluctuations.fluctuations during certain periods, and may be subject to fluctuations in the future. The stock market in general, and the market for the stocks of commercial banks and other financial services companies in particular, has experienced significant price and volume fluctuations that sometimes have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance, and the value of your investment may decline.

Ownership concentrations

Securities analysts might not continue coverage on our common stock, which could adversely affect the market for our common stock.

The trading price of our common stock depends in part on the research and actions by large shareholdersreports that securities analysts publish about us and our business. We do not have any control over these analysts, and they may not continue to cover our common stock. If securities analysts do not continue to cover our common stock, the lack of research coverage may adversely affect its market price. If securities analysts continue to cover our common stock, and our common stock is the subject of an unfavorable report, the price of our common stock may decline. If one or more of these analysts cease to cover us or fail to publish regular reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our common stock to decline.

Offerings of debt, which would rank senior to our common stock upon liquidation, may adversely affect the market price of our common stock.

A substantial numberWe may attempt to increase our capital resources or, if our or Seacoast Bank’s regulatory capital ratios fall below the required minimums, we could be forced to raise additional capital by making additional offerings of sharesdebt or equity securities, senior or subordinated notes, preferred stock and common stock. Upon liquidation, holders of our debt securities and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our common stock.

Shares of our common stock are owned by a small number of large institutional investors,not insured deposits and those shares could be sold into the public market pursuant to the registration rights of such institutional investors. In the event of these large shareholders elect to sell their shares, such sales or attempted sales could result in significant downward pressure on the market pricemay lose value.

Shares of our common stock are not savings accounts, deposits or other obligations of any depository institution and actual price declines.are not insured or guaranteed by the FDIC or any other governmental agency or instrumentality, any other deposit insurance fund or by any other public or private entity, and are subject to investment risk, including the possible loss of principal.

None.

We and Seacoast Bank’sSeacoast’s main office occupies approximately 66,000 square feetall of a 68,000 square foot building in Stuart, Florida. This building, together with an adjacent 10-lane drive-through banking facility and an additional 27,000-square foot office building are situated on approximately eight acres of land in the center of Stuart that is zoned for commercial use. The buildingbuildings and land are owned by Seacoast Bank, which leases out portions of the 27,000-square foot building not utilized by us and Seacoast Bank to unaffiliated third parties.

Adjacent to the main office, Seacoast Bank leases approximately 21,400 square feet of office space from third parties to house operational departments, consisting primarily of information systems and retail support. Seacoast Bank owns its equipment, which is used for servicing bank deposits and loan accounts as well as on-line banking services, and providing tellers and other customer service personnel with access to customers’ records. In addition, Seacoast Bank owns an operations center consisting of a 4,939 square foot building situated on 1.44 acres in Okeechobee, Florida. Our PGA Blvd. branch is utilized asSeacoast Bank contracts with a third party in Nashville, Tennessee to provide network backup services for disaster recovery site should natural disasters or other events preclude the use of Seacoast Bank’s primary operations center.

Seacoast currently operates its Seacoast Marine Finance Division in a 2,009 square foot leased facility in Ft. Lauderdale, Florida, and has representation in California Washington and Arizona. The 1,200 square foot leased space in Newport Beach, California was closed at December 31, 2014.Texas.

Seacoast Business Funding, a receivables factoring division of Seacoast Bank, occupies 1,511 square feet of leased space on the first floor of the Winter Park branch in Orlando, Florida, and Seacoast Bank 6,000 square feet of leased space in Boynton Beach, Florida.

Seacoast Bank owns or leases all of the real property and/or buildings in which we operate our business. As ofAt December 31, 2016,2017, we and our subsidiaries had 4650 branch offices, five commercial lending offices and its main office in Florida atFlorida. At December 31, 2016. As of December 31, 2016,2017, the net carrying value of these offices (excluding the main office) was approximately $43.6$49.6 million. Seacoast Bank’s branch and commercial lending offices in 2015 are generally described as follows:

For additional information regarding our properties, please refer to Notes G and K of the Notes to Consolidated Financial Statements.

We and our subsidiaries are subject, in the ordinary course, to litigation incidentincidental to the businesses in which we are engaged. Management presently believes that none of the legal proceedings to which we are a party are likely to have a material effect on our consolidated financial position, operating results or cash flows, although no assurance can be given with respect to the ultimate outcome of any such claim or litigation.

Not applicable.

Part II

Holders of our common stock are entitled to one vote per share on all matters presented to shareholders as provided in our Articles of Incorporation.

Our common stock is traded under the symbol “SBCF” on the Nasdaq Global Select Market, which is a national securities exchange (“Nasdaq”NASDAQ”). As of February 28, 2017January 31, 2018 there were 40,734,38246,917,528 shares of our common stock outstanding, held by approximately 2,2041,818 record holders.

The table below sets forth the high and low sale prices per share of our common stock on Nasdaq and the dividends paid per share of our common stockNASDAQ for the indicated periods. We have not paid dividends to our shareholders since 2009.

Dividends from Seacoast Bank are our primary source of funds to pay dividends on our common stock. Under the National Bank Act, national banks may in any calendar year, without the approval of the OCC, pay dividends to the extent of net profits for that year, plus retained net profits for the preceding two years (less any required transfers to surplus). The need to maintain adequate capital in Seacoast Bank also limits dividends that may be paid to us. We have not paid dividends since 2009.

Any dividends paid on our common stock would be declared and paid at the discretion of our board of directors and would be dependent upon our liquidity, financial condition, results of operations, capital requirements and such other factors as our board of directors may deem relevant. We do not expect to pay dividends on our common stock in the immediate future and expect to retain any earnings to support our growth.

Additional information regarding restrictions on the ability of Seacoast Bank to pay dividends to us is contained in Note C of the Notes to Consolidated Financial Statements. See “Item 1. Business- Payment of Dividends” of this Form 10-K for information with respect to the regulatory restrictions on dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

See the information included under Part III, Item 12, which is incorporated in response to this item by reference.

For fiveFive years of selected financial data of the Company is set forth under the caption “Financial Highlights” on page 114.104.

Management’s Discussion and Analysis of Financial Condition and Results of Operations appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 57-94.45-84.

For discussion of the quantitative and qualitative disclosures about market risk, see “Interest Rate Sensitivity”, “Securities”,Sensitivity,” “Securities,” and “Market Risk” sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 89-90, 68-69,82, 62-63, and pages 90-91.82-83.

The report of Crowe Horwath LLP, independent registered public accounting firms,firm and the Consolidated Financial Statements and Notes appear on pages 115-172.105-168. Quarterly Consolidated Income Statements are included on page 113103 entitled “Selected Quarterly Financial Information”.

None.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, as defined in SEC Rule 13a-15 under the Exchange Act, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In connection with the preparation of this Annual Report on Form 10-K, as of the end of the period covered by this report, an evaluation was performed, with the participation of the CEO and CFO, of the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15 of the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2016.2017. This assessment was based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control—Integrated Framework 2013. Based on this assessment, management believes that, as of December 31, 2016,2017, our internal control over financial reporting was effective.

Our independent registered public accounting firm, CroweHorwathLLP, has issued an attestationaudit report on our internal control over financial reporting which is included herein.

During 20152016 and 2016,2017, there were no changes in our internal control over financial reporting that occurred or that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

None.

Part III

Information concerning our directors and executive officers is set forth under the headings “Proposal 1 - Election of Directors,” “Corporate Governance,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Certain Transactions and Business Relationships” in the 20172018 Proxy Statement, incorporated herein by reference.

Information regarding the compensation paid by us to our directors and executive officers is set forth under the headings “Executive Compensation,” “Compensation Discussion & Analysis,” “Compensation and Governance Committee Report” and “2016“2017 Director Compensation” in the 20172018 Proxy Statement which are incorporated herein by reference.

The following table sets forth information about our common stock that may be issued under all of our existing compensation plans as of December 31, 2016.2017.

Equity Compensation Plan Information

Additional information regarding the ownership of our common stock is set forth under the headings “Proposal 1 - Election of Directors” and “Security Ownership of Management and Certain Beneficial Holders” in the 20172018 Proxy Statement, and is incorporated herein by reference.

Information regarding certain relationships and transactions between us and our officers, directors and significant shareholders is set forth under the heading “Compensation and Governance Committee Interlocks and Insider Participation” and “Certain Transactions and Business Relationships” and “Corporate Governance” in the 20172018 Proxy Statement and is incorporated herein by reference.

Information concerning our principal accounting fees and services is set forth under the heading “Relationship with Independent Registered Public Accounting Firm; Audit and Non- Audit Fees” in the 20172018 Proxy Statement, and is incorporated herein by reference.

Part IV

(a)(1)    The Consolidated Financial Statements, the Notes thereto and the report of the Independent Registered Public Accounting Firm thereon listed in Item 8 are set forth commencing on page .105.

(a)(2)     List of financial statement schedules

All schedules normally required by Form 10-K are omitted, since either they are not applicable or the required information is shown in the financial statements or the notes thereto.

(a)(3)    Listing of Exhibits

PLEASE NOTE: It is inappropriate for readers to assume the accuracy of, or rely upon any covenants, representations or warranties that may be contained in agreements or other documents filed as Exhibits to, or incorporated by reference in, this report. Any such covenants, representations or warranties may have been qualified or superseded by disclosures contained in separate schedules or exhibits not filed with or incorporated by reference in this report, may reflect the parties’ negotiated risk allocation in the particular transaction, may be qualified by materiality standards that differ from those applicable for securities law purposes, may not be true as of the date of this report or any other date, and may be subject to waivers by any or all of the parties. Where exhibits and schedules to agreements filed or incorporated by reference as Exhibits hereto are not included in these Exhibits, such exhibits and schedules to agreements are not included or incorporated by reference herein.

The following Exhibits are attached hereto or incorporated by reference herein (unless indicated otherwise, all documents referenced below were filed pursuant to the Exchange Act by Seacoast Banking Corporation of Florida, Commission File No. 0-13660):

Exhibit 3.1.1 Amended and Restated Articles of Incorporation

Incorporated herein by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, filed May 10, 2006.

Exhibit 3.1.2 Articles of Amendment to the Amended and Restated Articles of Incorporation

Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed December 23, 2008.

Exhibit 3.1.3 Articles of Amendment to the Amended and Restated Articles of Incorporation

Incorporated herein by reference from Exhibit 3.4 to the Company’s Form S-1, filed June 22, 2009.

Exhibit 3.1.4 Articles of Amendment to the Amended and Restated Articles of Incorporation

Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed July 20, 2009.

Exhibit 3.1.5 Articles of Amendment to the Amended and Restated Articles of Incorporation

Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed December 3, 2009.

Exhibit 3.1.6 Articles of Amendment to the Amended and Restated Articles of Incorporation

Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K/A, filed July 14, 2010.

Exhibit 3.1.7 Articles of Amendment to the Amended and Restated Articles of Incorporation

Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed June 25, 2010.

Exhibit 3.1.8 Articles of Amendment to the Amended and Restated Articles of Incorporation

Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed June 1, 2011.

Exhibit 3.1.9 Articles of Amendment to the Amended and Restated Articles of Incorporation

Incorporated herein by reference from Exhibit 3.1 to the Company’s Form 8-K, filed December 13, 2013.

Exhibit 3.2 Amended and Restated By-laws of the Company

Incorporated herein by reference from Exhibit 3.2 to the Company’s Form 8-K, filed December 21, 2007.

Exhibit 4.1 Specimen Common Stock Certificate

Incorporated herein by reference from Exhibit 4.1 to the Company’s Form 10-K, filed on March 17, 2014.

Exhibit 4.2 Junior Subordinated Indenture

Dated as of March 31, 2005, between the Company and Wilmington Trust Company, as Trustee (including the form of the Floating Rate Junior Subordinated Note, which appears in Section 2.1 thereof), incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K filed April 5, 2005.

Exhibit 4.3 Guarantee Agreement

Dated as of March 31, 2005 between the Company, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee, incorporated herein by reference from Exhibit 10.2 to the Company’s Form 8-K filed April 5, 2005.

Exhibit 4.4 Amended and Restated Trust Agreement

Dated as of March 31, 2005, among the Company, as Depositor, Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as Delaware Trustee and the Administrative Trustees named therein, as Administrative Trustees (including exhibits containing the related forms of the SBCF Capital Trust I Common Securities Certificate and the Preferred Securities Certificate), incorporated herein by reference from Exhibit 10.3 to the Company’s Form 8-K filed April 5, 2005.

Exhibit 4.5 Indenture

Dated as of December 16, 2005, between the Company and U.S. Bank National Association, as Trustee (including the form of the Junior Subordinated Debt Security, which appears as Exhibit A to the Indenture), incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K filed December 21, 2005.

Exhibit 4.6 Guarantee Agreement

Dated as of December 16, 2005, between the Company, as Guarantor, and U.S. Bank National Association, as Guarantee Trustee, incorporated herein by reference from Exhibit 10.2 to the Company’s Form 8-K filed December 21, 2005.

Exhibit 4.7 Amended and Restated Declaration of Trust

Dated as of December 16, 2005, among the Company, as Sponsor, Dennis S. Hudson, III and William R. Hahl, as Administrators, and U.S. Bank National Association, as Institutional Trustee (including exhibits containing the related forms of the SBCF Statutory Trust II Common Securities Certificate and the Capital Securities Certificate), incorporated herein by reference from Exhibit 10.3 to the Company’s Form 8-K filed December 21, 2005.

Exhibit 4.8 Indenture

Dated June 29, 2007, between the Company and LaSalle Bank, as Trustee (including the form of the Junior Subordinated Debt Security, which appears as Exhibit A to the Indenture), incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K filed July 3, 2007.

Exhibit 4.9 Guarantee Agreement

Dated June 29, 2007, between the Company, as Guarantor, and LaSalle Bank, as Guarantee Trustee, incorporated herein by reference from Exhibit 10.2 to the Company’s Form 8-K filed July 3, 2007.

Exhibit 4.10 Amended and Restated Declaration of Trust

Dated June 29, 2007, among the Company, as Sponsor, Dennis S. Hudson, III and William R. Hahl, as Administrators, and LaSalle Bank, as Institutional Trustee (including exhibits containing the related forms of the SBCF Statutory Trust III Common Securities Certificate and the Capital Securities Certificate), incorporated herein by reference from Exhibit 10.3 to the Company’s Form 8-K filed July 3, 2007.

Exhibit 4.11 Registration Rights Agreement

Dated January 13, 2014, between the Company and CapGen Capital Group III, L.P., incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed January 14, 2014.

Exhibit 10.1 Amended and Restated Retirement Savings Plan*

Incorporated herein by reference from Exhibit 10.1 to the Company’s Annual Report on Form 10-K, filed March 15, 2011.

Exhibit 10.2 Amended and Restated Employee Stock Purchase Plan*

Incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement on DEF 14A, filed with the Commission on April 27, 2009.

Exhibit 10.3 Dividend Reinvestment and Stock Purchase Plan

Incorporated by reference to the Company’s Form S-3 filed on November 12, 2014.30, 2017.

Exhibit 10.4 2000 Long Term Incentive Plan as Amended*

Incorporated herein by reference from the Company’s Registration Statement on Form S-8 File No. 333-49972, filed November 15, 2000, and Proxy Statement on Form DEF 14A, filed on March 13, 2000.

Exhibit 10.5 Executive Deferred Compensation Plan*

Incorporated herein by reference from Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed March 30, 2001.

Exhibit 10.6 Change of Control Employment Agreement*

Dated December 24, 2003 between William R. Hahl and the Company, incorporated herein by reference from Exhibit 10.17 to the Company’s Form 8-K, filed December 29, 2003.

Exhibit 10.7 Amended and Restated Directors Deferred Compensation Plan*

Incorporated herein to the Company’s Form 10-K filed March 14, 2016.

Exhibit 10.8 2008 Long-Term Incentive Plan*

Incorporated herein by reference from Exhibit A to the Company’s Proxy Statement on Form DEF 14A, filed March 18, 2008.

Exhibit 10.9 Form of 409A Amendment to Employment Agreement with William R. Hahl*

Incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed January 5, 2009.

Exhibit 10.10 2013 Incentive Plan

Incorporated herein by reference from Appendix A to the Company’s Proxy Statement on Form DEF 14A, filed April 9, 2013.

Exhibit 10.11 Letter Agreement Regarding Lead Director Position*

Dated March 1, 2014 between Roger O. Goldman and the Company, incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed March 6, 2014.

Exhibit 10.12 Form of Change of Control Employment Agreement with Daniel Chappell, Charles Cross, David Houdeshell, Jeffery D. Lee and Charles Shaffer*

Incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed November 3, 2014.

Exhibit 10.13 Employment Agreement*

Dated December 18, 2014 between Dennis S. Hudson, III and the Company, incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed December 19, 2014.

Exhibit 10.14 Agreement and Plan of Merger

Dated March 25, 2015, by and among the Company, Seacoast Bank, Grand Bankshares, Inc. and Grand Bank & Trust of Florida, incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed March 31, 2015.

Exhibit 10.15 Branch Sale Agreement

Dated October 14, 2015, by and between Seacoast Bank and BMO Harris Bank N.A., incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed October 19, 2015.

Exhibit 10.16 Agreement and Plan of Merger

Dated November 2, 2015, by and among the Company, Seacoast Bank, Floridian Financial Group, Inc. and Floridian Bank, incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed November 4, 2015.

Exhibit 10.17 Change of Control Employment Agreement*

Dated August 6, 2015 between Stephen Fowle and the Company, incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed August 10, 2015.

Exhibit 10.18 Executive Transition Agreement*

Dated April 30, 2015 between William R. Hahl and the Company, incorporated herein to the Company’s Form 10-K, filed March 14, 2016.

Exhibit 10.1910.15 Observation Rights Agreement

Dated March 23, 2016, Observer Rights Agreement by and between the Company, Basswood and Matthew Lindenbaum, incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed March 24, 2016.

Exhibit 10.2010.16 Amendment No. 1 to Observer Rights Agreement

Dated July 26, 2016, the Company entered into Amendment No. 1 to the Observer Rights Agreement dated as of March 23, 2016, whereby the date which either Matthew Lindenbaum or the Company may terminate the Agreement was extended, incorporated herein by reference from Exhibit 10.1 to the Company’s From 8-K, filed July 29, 2016.

Exhibit 10.2110.17 Form of Change of Control Employment Agreement with Charles Cross, David Houdeshell and Charles Shaffer,

Incorporated incorporated herein by reference from Exhibit 10.1 to the Company’s Form 8-K, filed September 23, 2016.

Exhibit 10.2210.18 Agreement and Plan of Merger

Dated November 3, 2016, by and among the Company, Seacoast Bank, GulfShoreGulfshore Bancshares, Inc. and GulfShoreGulfshore Bank, incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed Novembe rNovember 9, 2016.

Exhibit 10.19 Agreement and Plan of Merger

Dated May 4, 2017, by and among the Company, Seacoast Bank, Palm Beach Community Bank, incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed May 9, 2017.

Exhibit 10.20 Agreement and Plan of Merger

Dated May 8, 2017, by and among the Company, Seacoast Bank, and NorthStar Banking Corporation and NorthStar Bank incorporated herein by reference from Exhibit 2.1 to the Company’s Form 8-K, filed May 24, 2017.

Exhibit 10.21 Amendment to Employment Agreement with Dennis S. Hudson, III

Incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K, filed June 27, 2017.

Exhibit 21 Subsidiaries of Registrant

Exhibit 23.1 Consent of Independent Registered Public Accounting Firm

Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1** Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 111 the Emergency Economic Stability Act, as amended

Exhibit 32.2** Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 111 the Emergency Economic Stability Act, as amended

Exhibit 101 Interactive Data File

(b)       Exhibits

The response to this portion of Item 15 is submitted under item (a)(3) above.

(c)       Financial Statement Schedules

None.

Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 14, 2017February 28, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Item 7. 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 (the “Company”) and their results of operations during 2017, 2016 2015 and 2014.2015. Nearly all of the Company’s operations are contained in its banking subsidiary, Seacoast Bank (“Seacoast Bank” or the “Bank”). This discussion and analysis is intended to highlight and supplement information presented elsewhere in the annual report on Form 10-K, particularly the consolidated financial statements and related notes appearing in Item 8. For purposes of the following discussion, the words the “Company,” “we,” “us,” and “our” refer to the combined entities of Seacoast Banking Corporation of Florida and its direct and indirect wholly owned subsidiaries.

Overview – Strategy and Results

Seacoast continuesBanking Corporation of Florida (“Seacoast” or the “Company”), a bank holding company, incorporated in Florida in 1983, and registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), is one of the largest community banks in Florida with approximately $5.8 billion in assets and $4.6 billion in deposits as of December 31, 2017. The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to execute oncustomers through advanced banking solutions, 51 traditional branches of its plan to grow our core business organically, innovate to build our franchiselocally-branded wholly-owned subsidiary bank, Seacoast National Bank, a national banking association (“Seacoast Bank”) and increase efficiency, and grow through mergers and acquisitions. We believe that these investments in growth, efficiency and digital transformation better position us to grow shareholder value today and prospectively. Highlights of our performance in 2016 included:five commercial banking centers.

We introduced Seacoast’s Accelerate commercial banking model in 2011, strategically openingThe Company’s offices in the larger metropolitan markets we serve, including Orlando,stretch from Ft. Lauderdale, Boca Raton and Ft. Lauderdale. The commercial lending offices provide our customers with talented, results-oriented staff, specializing in loans to businesses with revenues above $5 million in specific industries. From their tenureWest Palm Beach north through the Daytona Beach area, into Orlando and Central Florida, and the adjacent Tampa market experience, our bankers are familiar with the multitude of challenges the small business customer faces. Through this investment, the Company continues to focus on reaching customers in unique ways, creating a path to achieve higher customer engagement.as well as Okeechobee and surrounding counties.

In addition, Seacoast is executing a balanced growth strategy, combining both organic growth with strategic acquisitions in growing urban markets. The Company delivers integrated banking services, combining traditional retail locations with online and mobile technology and a 365 day a year 24/7 call center.

Seacoast has built a fully integrated distribution platform across all channels to provide our customers with the ability to choose their path of convenience to satisfy their banking needs, and which provides us an opportunity to reach our customers through a variety of sales channels. For 2016, Seacoast’s debit card spend was up 17% year-over-year, a new high,2017, the number of deposit accounts opened through our website and 24/7 customer support center grew by 12% year over year. The customer support center also originated $32.7 million in consumer loans sold to existing customers increased 62% and 37%small business loans. Non-teller transactions surpassed teller transactions during 2017, with 41% of check deposits were madechecks now deposited outside the branch. Expansion of our 24/7/365 call center in early 2017, further enhances our distribution system, with over 11% of our deposit relationships and nearly 16% of our consumer loan production originated through this channel during 2016. Taken together, we have proactively positioned our business for growth. Excluding the acquisitions, loan growth reached $377 million or 18%,branch network, compared to $218 million or 12% growth for 2015.37% a year ago in December. This shift in customer preference is expected to continue, requiring our continued focus on building and enhancing our digitally integrated business model.

We believe our digital delivery and products have contributedare contributing to growing our franchise. As of December 31, 2016, approximately 70% of our online customers adopted mobile product offerings and2017, the total number of services utilized by Seacoast’s retail customercustomers averaged 4.44.3 per household, primarily due to increases in debit card activation, direct deposit and mobile banking users. Personal and business mobile banking has grown from 21,587 users at December 31, 2014, to 32,305 users at December 31, 2015, to 47,131 users at December 31, 2016. The growth in new households, a deepening of relationships with current households, and better retention overall is creating stronger value in our core customer franchise.

Our brand reflects our forward-looking strategy and our intent2016, to benefit from continued investments in analytics, digital servicing capabilities and technology, and reduce overhead. Embracing technology, especially electronic delivery channels, has helped us improve efficiency. During 2016, we added 24 branches, but we were also successful in closing 20 branches. This has allowed us to improve deposits per facility, with total deposits per branch increasing to $75 million62,516 users at December 31, 2016,2017. There were 83,881 online users at year-end 2017, increasing almost 25% from $66 million one year earlier. We expect to continue consolidating our more expensive, traditional banking facilities, and related personnel costs, as digital and call center channels expand dramatically.December 31, 2016.

Acquisitions – Enhancing Our Success

Enhancing our

The Company enhanced its footprint werewith the acquisitions of GulfShore, NorthStar and PBCB in 2017, Floridian and BMO offices in 2016, and Grand in 2015 and BANKshares late in 2014 (see “Note S – Business Combinations”). During 2017, our acquisitions of GulfShore and NorthStar allowed the expansion of the Seacoast franchise into the Tampa market. We look forward to significant opportunities in the fast-growing, business rich Tampa market. Our primary reasons for theseapproach to the Tampa market uses lessons learned from our successful build in the fast-growing Orlando marketplace during 2016. We are now the largest Florida-based bank in Orlando and a top-10 bank in that market overall. At year-end 2017, Orlando and Tampa represent 29% and 9% of our franchise, respectively, measured by deposits. The PBCB, Floridian, BMO and Grand transactions were to further solidifysolidified our market share in the attractive Palm Beach and Central Florida markets, expandexpanded our customer base and leverageleveraged operating costs through economies of scale. TheseAll of these acquisitions not only increased our households, but opened markets and customer bases where our convenience offering resonates. These acquisitionsresonates and were immediately accretive in the first year (excluding merger charges).to earnings. In aggregate, the GulfShore, NorthStar and PBCB acquisitions added $736 million in total deposits and $660 million in loans to our balance sheet. The Floridian and BMO acquisitions contributed $651 million in total deposits and $328 million in loans to our balance sheet, thesheet. The Grand acquisition provided $188 million in total deposits and $111 million in loans to our balance sheet, and the BANKshares acquisition added $516 million in total deposits and $365 million in loans. MergerTotal merger related charges for 2017, 2016 and 2015 and 2014 summed to $8.7were $12.9 million, $4.3$9.0 million and $4.3$4.7 million, respectively, primarily impactingconsisting of salaries and wages, outsourced data processing costs, and legal and professional fees.

During the fourth quarter of 2016, we announced our acquisition of GulfShore, jumpstarting our entry into the Tampa market. We look forward to a significant opportunity in the fast-growing, business rich Tampa market in the second quarter of 2017. As we approach this market we plan to use lessons learned from our successful build in the fast-growing Orlando marketplace. We are now the largest Florida-based bank in Orlando and a top-10 bank in this market overall. At year-end 2016, Orlando represents 37% of our franchise, measured by deposits. Regulatory approval for the GulfShore transaction has been received and we are waiting for shareholder approval, with the close of the GulfShore acquisition expected on April 7, 2017, subject to customary closing conditions (see “Note S – Business Combinations”).

The Company will likely continue to consider strategic acquisitions as part of the Company’s overall future growth plans.

The Florida Economy

Florida’s economic recovery is now well established, with solid job growth, declining unemployment, and higher consumer confidence fueling improvements in our markets. Florida’s economic indicators continue to show strength for the state. We believe the Florida economy will further strengthen in 2017, as the state continues to attract population inflows. Florida’s housing markets, manufacturing base, tourism and services industries provide a diversified base for our economy. The residential real estate market is becoming stronger as pricing and sales volumes continue to increase. Our primary competitors now are the mega-banks, and many of these large institutions are struggling with higher capital requirements and new restrictions and regulations that are requiring difficult choices regarding their business models. We continue to believe we have entered a period of opportunity to achieve meaningful market share gains.

The Florida economy continues to amplify our success and the state of Florida remains an attractive market in which to live and work. There are many positive indications that Florida’s economy will continue to improve. expand.

During 2017, we also successfully renegotiated our agreement with a key technology and digital services provider. The agreement expands digital banking capabilities, improves service level agreements, and increases our ability to scale. We have also on-boarded key talent in the areas of data analysis, digital marketing, business-to-business marketing and compliance. During the first quarter of 2018, a Chief Technology Officer has been added to our executive team. These changes and additions support and position Seacoast for prospective growth. In 2018, we plan to invest a portion of the additional financial resources provided by the tax savings associated with Tax Cuts and Jobs Act of 2017 to accelerate the achievement of our operating model, and improving the digital customer experience.

Highlights of our performance in 2017 included:

Results of Operations

Earnings Summary

The Company has steadily improved results over the past three years. Net income for 2017 totaled $42.9 million or $0.99 diluted earnings per share, compared to $29.2 million or $0.78 diluted earnings per share for 2016, and $22.1 million or $0.66 diluted earnings per share for 2015. Return on average assets (“ROA”) increased to 0.91% during the fourth quarter of 2017, and return on average equity (“ROE”) to 7.87% for the same period.

Adjusted net income¹ totaled $55.3 million and was $16.3 million or 42% higher year-over-year for the twelve months ended December 31, 2017. In comparison, adjusted net income¹ increased $12.8 million or 49% during 2016, reportcompared to 2015. Adjusted diluted earnings per share¹increased to $1.28 for 2017, compared to $1.04 for 2016 and $0.78 for 2015.

¹ See page 59, Explanation of Certain Unaudited Non-GAAP Financial Measures.

Net Interest Income and Margin

Net interest income (on a fully taxable equivalent basis) for 2017 totaled $177.0 million, increasing $36.5 million or 26% as compared to 2016’s net interest income of $140.5 million, which increased by $30.5 million or 28% compared to 2015. The Company’s net interest margin increased 10 basis points to 3.73% during 2017 from Wells Fargo Securities Economics Group stated, “The recently updated state (Florida) GDP data2016, and decreased one basis point to 3.63% during 2016 from 2015.

Loan growth, balance sheet mix and yield/cost management have been the primary forces affecting net interest income and net interest margin results. Acquisitions have further accelerated these trends. Organic loan growth (excluding acquisitions) year-over-year was $278 million, or 10%. GulfShore loans and deposits added $251 million and $285 million, respectively, NorthStar loans and deposits added $137 million and $182 million, respectively, and PBCB loans and deposits added $272 million and $269 million, respectively, and were contributors to net interest income improvement year-over-year for 2017, compared to 2016. The same full-year income growth dynamic occurred in 2016 compared to 2015, with the acquisition of Floridian adding $266 million in loans, $67 million in securities and $337 million in deposits, and the Quarterly Censuspurchase of Employmentinvestment securities ahead of the BMO acquisition, which added $314 million in deposits and Wages (“QCEW”) provide additional insight into Florida’s recent strong economic performance. Florida’s economy grew 2.9% year-over-year$63 million in Q2, far exceeding the nation’s 1.2% growth.” Their November report forecasted, “We look for Florida’s strong run of economic growth to carry over into 2017, albeit at a slightly more modest pace. Real GDP should grow 3.3% next year and nonfarm payrolls should add around 235,000 new jobs. Homebuilding shouldloans. We expect 2018’s net interest income will continue to gain momentum, as stronger jobsbenefit from the full year impact of acquisitions completed in 2017.

The increase in margin in 2017 compared to 2016 reflects significantly improved yields on investment securities, and income growth boosts household formationfederal funds sold and encourages more job seekersother investments, up 35 basis points and 118 basis points, respectively. Lower non-cash related loan accretion associated with acquisitions limited the increase in yield on loans to moveone basis point for 2017, compared to Florida.”

Florida’s residential real estate market remains solid. Recent Florida REALTORS reports indicate2016. The slight decrease in margin for 2016 year over year increase in closed sales and median sales price, with timefrom 2015 reflected decreased loan yields, due to contract continuing a shortening trend.the lower interest rate environment, but was partially offset by an improved balance sheet mix.

Our BusinessTable 2 presents the Company’s average balance sheets, interest income and expenses, and yields and rates, for the past three years.

The Company isfollowing table details the trend for net interest income and margin results (on a single-bank holding companytax equivalent basis)(1), and yield on earning assets and rate on interest bearing liabilities that has changed nominally for the past five quarters. The second quarter of 2017 benefited from accretion of $1.5 million associated with operationsearly payoffs on Florida’s southeast coast (ranging from Browardsecurities and Palm Beach Countyacquired loans, which added 13 basis points to the margin for that period.

(1) On tax equivalent basis, a non-GAAP measure. See "Non-GAAP Measures regarding Net Interest Income and Margin."

Looking forward and inclusive of the NorthStar and PBCB acquisitions, we expect the net interest margin to be in the southmid-3.70s and to Brevardincrease to the high 3.70’s by the second quarter of 2018, assuming no change in long-term rates.

Total average loans increased $739.0 million or 29% during 2017, compared to 2016, and Volusia County in the north)increased $599.8 million or 30% during 2016 compared to 2015. Our average investment securities also increased $144.9 million or 12% during 2017 versus 2016, and $238.3 million or 25% during 2016.

For 2017, average loans (the highest yielding component of earning assets) as well as Florida’s interior around Lake Okeechobeea percentage of average earning assets totaled 70.1%, compared to 66.8% a year ago and up through Orlando (including Orange, Seminole65.6% for 2015 while interest earning deposits and Lake County). Additionally,other investments decreased to 1.5%, compared to 2.2% in 2016 we beganand 2.5% in 2015, reflecting the Company’s continuing efforts to servereduce excess liquidity. As average total loans as a percentage of earning assets increased, the attractive Tampa market and announced the GulfShore acquisitionmix of loans has remained fairly stable, with volumes related to fortify our presence. The Company had 47 full service officescommercial real estate representing 47.9% of total loans at December 31, 2017 (compared to 50.2% at December 31, 2016 an increase of four offices fromand 49.8% at December 31, 2015.

The Company operates both a full retail banking strategy in its core markets, which are some2015). Residential loan balances with individuals (including home equity loans and lines, and personal construction loans) represented 31.2% of Florida’s wealthiest, as well as a commercial banking strategy serving small- to mid-sized businesses. The Company, through its bank subsidiary, provides a broad range of community banking services to commercial, small business and retail customers, offering a variety of transaction and savings deposit products, treasury management services, brokerage, and secured and unsecured loan products, including revolving credit facilities, letters of credit and similar financial guarantees, and asset based financing. Seacoast also provides trust and investment management services to retirement plans, corporations and individuals.

Loan Growth and Lending Policies

For 2016, balances in the loan portfolio increased 34%, compared with an increase of 18% for 2015, reflecting strong business production and the acquisitions of Floridian, BMO, Grand and BANKshares. Adjusting for thetotal loans acquired through acquisitions, the loan portfolio grew 18% and 12% during 2016 and 2015, respectively.

Loan production improved during 2016 and 2015 and growth continued across all business lines. For 2016, $432 million in commercial/commercial real estate loans were originated, compared to $299 million for 2015. Our loan pipeline for commercial/commercial real estate loans totaled $89 millionat December 31, 2017 (versus 31.6% at December 31, 2016 versus $106 millionand 35.7% at December 31, 2015. The Company also closed $4032015) (see “Loan Portfolio”).

Commercial and commercial real estate loan production for 2017 totaled $483 million, in residential loans during 2016, compared to $272production for all of 2016 and 2015 of $432 million in 2015. The residential loan pipeline at December 31, 2016 totaled $73and $299 million, versus $30 million a year ago. Increasing home values and lower interest rates have bolstered consumer interest in borrowing.respectively. Consumer and small business originations improved as well, totalingreached $354 million during 2017, compared to $302 million during 2016 compared toand $203 million during 2015. Closed residential loan production totaled $488 million compared to production for all of 2016 and 2015 of $403 million and $272 million, respectively. During 2017, an additional $43 million pool of whole loan adjustable rate residential mortgages with a weighted average yield of 3.2% and average FICO score of 751 was acquired and added to our portfolio, offset by $86.3 million in sales of two seasoned pools of portfolio residential mortgages. The sales were deemed opportunities given the Treasury yield curve at the time, and to manage interest rate risk, adjust loan mix to permit growth in construction lending and to manage liquidity. During 2016, an additional $63.5 million of residential mortgage and $19.2 million of marine loan pools were purchased, and partially offset by $70.6 million in sales of seasoned pools of portfolio residential mortgages. The following chart details the trend for commercial and residential loans closed and pipelines for the past three years:

* Includes sales of previously retained seasoned production of $86.3 million for 2017 and $70.6 million for 2016.

Pipelines (loans in underwriting and approval or approved and not yet closed) reflect the lingering effects of the fall hurricanes. At December 31, 2017, pipelines were $119 million in commercial, $49 million in residential mortgages, and $39 million in consumer and small business. Commercial pipelines increased $30 million or 34%, over 2016, mortgage pipelines were $24 million or 33% lower, compared to 2016, and consumer and small business pipelines decreased from 2016 by $7 million, or 16%.

The Company expects more loan growth opportunitiesaddition of the GulfShore team into our lending business in the second quarter of 2017 supplemented the commercial pipeline and commercial loans closed during the third and fourth quarters of 2017, and the addition of NorthStar and PBCB during the fourth quarter of 2017 provide an additional opportunity to further grow our balance sheet prospectively.

The average securities portfolio grew in size but was a smaller percentage of average earning assets, 28.4% for all types2017 compared to 31.1% for 2016. However, careful portfolio management has resulted in increased securities yields. For 2017 our securities yielded 2.66%, up from 2.31% in 2016 and 2.21% in 2015.

For 2017, the cost of lending in 2017. We will continueaverage interest-bearing liabilities increased 15 basis points to expand0.46% from 2016. For 2016, this cost decreased 2 basis points to 0.31% from 2015. The cost of our business banking teams, adding new, seasoned, commercial loan officers where market opportunities arise,funding reflects the low interest rate environment and improving service through electronic and digital means. In addition, receivables factoring provides another vehicle to better serve customers. We believethe Company’s successful core deposit focus that achieving our loan growth objectives, together with the prudent management of credit risk will provide us with the potential to make further, meaningful improvements to our earnings in 2017.

Ourproduced strong growth is accompanied by sound risk management procedures. Our lending policies contain numerous guardrails that pertain to lending by typein core deposit customer relationships over the past several years. Excluding higher cost certificates of collateral and purpose, along with limits regarding loan concentrations and the dollar amount (size) of loans. With a disciplined approach, we have benefited from having loan production and loan pipelines that are diverse, de-risking our balance sheet. For example, in recent years the Company increased its focus and monitoring of its exposure to residential land, acquisition and development loans. Overall, the Company has reduced its exposure to commercial developers of residential land, acquisition and development loans from its peak of $352 million or 20% of total loans in early 2007 to $30 million or 1%deposit (CDs), core deposits including noninterest bearing demand deposits at December 31, 2016. Our exposure2017 represent 30.5% of total deposits. The cost of average total deposits (including noninterest bearing demand deposits) for the fourth quarter of 2017 was 0.29%, compared to commercial real estate lending is significantly below regulatory limits (see “Loan Concentrations”).0.15% and 0.12% for the fourth quarters of 2016 and 2015.

Deposit Growth, Mix and CostsThe following table provides trend detail on the ending balance components of our customer relationship funding as of:

The Company’s focus on convenience, with high quality customer service, expanded digital offerings and distribution channels provides stable, low cost core deposit funding for the company.Company. Over the past several years, the Company has strengthened its retail deposit franchise using new strategies and product offerings, while maintaining a focus on growing customer relationships. We believe that digital product offerings are central to core deposit growth as access via these distribution channels is required by customers. During the last two years,2017 and 2016, we have significantly grown our average transaction deposits (noninterest and interest bearing demand), with significant increases of $370.8 million or 20% in 2017 and $379.3 million or 26% in 2016 and $375.8 million or 35% in 2015.2016. Along with new relationships, our deposit programs and digital sales have improved our market share and increased average services per household.

Our growth in core deposits has also provided low funding costs. The Company’s deposit mix remains favorable, with 9083 percent of average deposit balances comprised of savings, money market, and demand deposits in the fourth quarter of 2016.2017. The Company’s average cost of deposits, including noninterest bearing demand deposits, was 0.14%0.21% for 2016,2017, slightly above 2015’s2016’s rate of 0.13%0.14%, as acquired deposits marginally increased the Company’s cost of deposits.

During 2016, total deposits increased $679 million or 24% andShort-term borrowings (principally comprised of sweep repurchase agreements grew $32with customers of Seacoast Bank) decreased $15.9 million or 8% to average $171.7 million during 2017, after increasing $19.4 million or 12% to average $187.6 million for 2016, as compared to 2015. With balances typically peaking during the fourth and first quarters each year, public fund clients with larger balances have the most significant influence on average sweep repurchase agreement balances outstanding during the year. The average rate on customer repurchase accounts was 0.46% for 2017. No federal funds sold were utilized at December 31, 2017 and 2016.

FHLB borrowings, maturing in 30 days or less (along with $7.0 million of FHLB borrowings acquired from PBCB maturing in 2018 and 2019), totaled $211.0 million at December 31, 2017, with an average rate of 1.39% at year-end, compared to $415.0 million a year ago with an average rate of 0.61%. Advances from the FHLB of $50.0 million at a fixed rate of 3.22% to mature in late 2017 were redeemed early in April 2016 with an early redemption penalty of $1.8 million incurred. FHLB borrowings averaged $377.4 million for 2017, up from $198.3 million for 2016 and $64.7 million for 2015 (see “Note I – Borrowings” to the Company’s consolidated financial statements).

For 2017, average subordinated debt of $70.4 million related to trust preferred securities issued by subsidiary trusts of the Company (including subordinated debt for Grand and BANKshares assumed on July 17, 2015 and October 1, 2014, respectively) carried an average cost of 3.47%.

We have a positive interest rate gap and our net interest margin will benefit from rising interest rates. During 2017 and 2016, the Federal Reserve increased its overnight interest rate by 75 basis points and 25 basis points, respectively. Further increases in interest rates are currently expected for 2018 (see “Interest Rate Sensitivity”).

Fully taxable equivalent net interest income is a common term and measure used in the banking industry but is not a term used under GAAP. We believe that these presentations of tax-equivalent net interest income and tax equivalent net interest margin aid in the comparability of net interest income arising from both taxable and tax-exempt sources over the periods presented. We further believe these non-GAAP measures enhance investors’ understanding of the Company’s business and performance, and facilitate an understanding of performance trends and comparisons with the performance of other financial institutions. The limitations associated with these measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently, including as a result of using different assumed tax rates. These disclosures should not be considered as an alternative to GAAP. The following information is provided to reconcile GAAP measures and tax equivalent net interest income and net interest margin on a tax equivalent basis.

TE = Tax Equivalent, a non-GAAP measure.

Noninterest Income

Noninterest income (excluding securities gains and gain on sale of Class B Visa stock) totaled $43.2 million for 2017, an increase of $5.8 million or 16% compared to 2016. The gain on sale of Class B Visa stock totaled $15.2 million and was recorded in the fourth quarter of 2017. The Visa shares were purchased early in 2017. For 2016, noninterest income (excluding securities gains) totaled $37.4 million, $5.4 million or 17% higher than for 2015. For 2015, noninterest income (excluding securities gains and bargain purchase gain) of $32.0 million was 29% higher than for 2014. Noninterest income accounted for 19.1% of total revenue (net interest income plus noninterest income, excluding securities gains, and the gain on sale of Class B Visa stock), compared to 21.1% in 2016 and 22.6% for 2015 (on the same basis) as net interest income growth, helped by expanding net interest margin, outpaced a strong increase in noninterest income. Analytics driven product marketing and service delivery, combined with organic and acquisition-related household growth, were primary factors contributing to the growth in noninterest income during 2017, 2016 and 2015.

Table 4 provides detail regarding noninterest income components for the past three years.

For 2017, most categories of service fee income showed strong year over year growth compared to 2016, with service charges on deposit accounts increasing $0.4 million or 4% to $10.0 million, interchange income up $1.4 million or 15% to $10.6 million, while other deposit based EFT charges were generally flat year over year. These increases reflect continued strength in customer acquisition and cross sell and benefits from acquisition activity. Overdraft fees represent 57% of total service charges on deposits for 2017, versus 60% for 2016. Overdraft fees totaled $5.7 million during 2017, decreasing $0.1 million from 2016, in part due to third quarter 2017’s post-hurricane Irma accommodations for customers including waivers of fees where circumstance were appropriate. Regulators continue to review banking industry’s practices for overdraft programs and additional regulation could reduce fee income for the Company’s overdraft services. Interchange revenue is dependent upon business volumes transacted, as well as the fees permitted by VISA^® and MasterCard^®.

Wealth management, including brokerage commissions and fees, and trust income, decreased during 2017, declining by $0.4 million or 8%. Growth in trust revenues of $0.3 million or 8% was entirely offset by a decline in the Company’s brokerage fees of $0.7 million, a result of our shifting to fee-based accounts and an investment management model. We expect wealth management revenues to grow over time.

Mortgage production was higher during 2017 (see “Loan Portfolio”), with mortgage banking activity generating fees of $6.4 million, which were $0.6 million or 10% higher, compared to 2016. Originated residential mortgage loans are processed by commissioned employees of Seacoast, with many mortgage loans referred by the Company’s branch personnel. Fee income opportunities were more limited during 2017, a result of shifting consumer demand to construction products and low inventory levels of homes for sale. During 2017, two pools of seasoned portfolio mortgages were sold, generating gains of $1.3 million. During 2016, two pools of seasoned portfolio mortgages were sold, generating gains of $0.9 million.

Seacoast chose to sell a larger portion of its marine financing originations during 2017. Marine lending business volumes sold were higher in 2017, reflecting stronger demand for marine vessels and favorably impacting fees from marine financing, which grew $0.2 million or 35% from 2016 levels. In addition to our principal office in Ft. Lauderdale, Florida, we continue to use third party independent contractors in Texas and on the West coast of the United States to assist in generating marine loans.

During 2017, BOLI income totaled $3.4 million, up from $2.2 million for 2016. An additional purchase of $30 million of BOLI in the third quarter of 2017. At December 31, 2017, the BOLI asset totaled $124.0 million.

Other income was $2.5 million or 64% higher for 2017 compared to a year ago, with additional fees of $0.8 million for swap related income with loan customers, $0.5 million for secondary market activities with the Small Business Administration (“SBA”), $0.2 million for distributions from CRA investments, $0.2 million for check cashing fees, $0.1 million for wire transfer activity, $0.1 million for credit card related fees, and $0.1 million for income generated by factoring fees related to asset lending. A general increase in other fee categories also occurred year over year, the result of pricing increases implemented across the franchise on a number of services offered.

For 2016, Seacoast’s noninterest income (excluding securities gains) was $5.4 million or 17% higher compared to 2015. While service charges on deposit accounts, interchange income and other EFT charges grew $1.1 million or 13%, $1.5 million or 20% and $0.1 million or 20%, respectively, reflecting successful household growth, wealth management fee income and mortgage banking income were higher as well, by $0.2 million or 4% and $1.6 million or 38%, respectively. For 2016, BOLI income increased $0.8 million from 2015, and included an additional death benefit of $0.5 million and the benefit of a purchase of new BOLI in the fourth quarter of 2016. Marine lending business volumes sold were lower in 2016, negatively impacting fees from marine financing which declined $0.5 million or 42% from 2015 levels.

Noninterest income in the fourth quarter of 2015 included a bargain purchase gain of $0.4 million from the acquisition of Grand, that arose from unanticipated recoveries and resulting adjustments to loans and other real estate owned realized during the fourth quarter. Seacoast also benefited from a gain on a participated loan of $0.7 million that was realized during the second quarter of 2015. Accounting treatment for this gain, related to a discount accreted on a BANKshares loan that was participated during the second quarter of 2015, required this income to be included in other operating income rather than recognition through the margin.

Noninterest Expense

Table 5 provides detail of noninterest expense components for the years ending December 31, 2017, 2016 and 2015.

Seacoast management expects its efficiency ratios to improve in 2018. The Company expects its digital servicing capabilities and technology to support better, more efficient channel integration allowing consumers to choose their path of convenience to satisfy their banking needs, resulting in organic growth of our products and services as well as related revenue, in addition to increased efficiency in how we serve our customers. Acquisition activity added to noninterest expenses with acquisition related costs for GulfShore, NorthStar and PBCB in 2017, Floridian and BMO in 2016, and Grand in 2015 of approximately $12.9 million, $9.0 million and $4.7 million, respectively, as well as ongoing costs related to this growth. The Company anticipates making investments totaling approximately $4.5 million in 2018 to improve our processes and tools for commercial banking, invest in talent and tools for our enterprise risk management and technology functions, and further upgrade our analytics and digital marketing capabilities. These investments will help to scale our organization appropriately, and we believe will set the stage for sustainable earnings growth in 2019 and beyond.

For 2017, our efficiency ratio defined as noninterest expense less foreclosed property expense and amortization of intangibles divided by net operating revenue (net interest income on a fully tax equivalent basis plus noninterest income excluding securities gains, the gain on sale of Visa stock and bargain purchase gain) was 66.7%, compared to 72.1% for 2016 and 71.6% for 2015. Adjusted noninterest expense¹ (a non-GAAP measure, see table below for a reconciliation to noninterest expense, the most comparable GAAP number) was $129.0 million for 2017, compared to $114.2 million for 2016 and $97.4 million for 2015. Noninterest expense includes the addition during the second and fourth quarters of 2017 of additional personnel and expenses associated with our acquisitions. Outsourced data processing costs reflect the value of our renegotiated contract with our core processing vendor. The adjusted efficiency ratio¹ for 2017 steadily improved over the course of the year, from 64.7% for the first quarter, to 61.2% for the second quarter, to 57.7% for the third quarter, and to 52.5% for the fourth quarter of 2017.

Salaries and wages totaling $65.7 million were $11.6 million or 21% higher for 2017, than for 2016, including $8.5 million in expenses related to mergers and other non-routine items. Base salaries were $6.9 million or 15% higher during 2017, reflecting the full-year impact of additional personnel retained as part of first quarter 2016’s acquisition of Floridian, second quarter 2016’s purchase of BMO’s Orlando operations, second quarter 2017’s purchase of GulfShore, and fourth quarter 2017’s acquisitions of NorthStar and PBCB. Improved revenue generation and lending production, among other factors, resulted in commissions, cash and stock incentives (aggregated) that were $3.5 million higher for 2017, compared to 2016. Temporary services and severance costs increased $1.1 million and $1.8 million, respectively, in 2017. Deferred loan origination costs (a contra expense), increased $1.7 million, reflecting a greater number of loans produced during 2017.

Similarly, salaries and wages for 2016 were $13.0 million or 32% higher than for 2015. A significant portion of the increase was for base salaries that were $7.3 million or 19%, greater, reflecting the full-year impact of additional Grand personnel and retained personnel from first quarter 2016’s acquisition of Floridian and second quarter 2016’s purchase of BMO’s Orlando operations. Commissions, cash and stock incentives (aggregated) were $4.9 million higher for 2016 compared to 2015, and deferred loan origination costs were lower by $0.5 million, reflecting a greater number of loans produced but at a more efficient cost per loan.

During 2017, employee benefits costs (group health insurance, defined contribution plan, payroll taxes, as well as unemployment compensation) increased $1.8 million or 19% to $11.7 million from 2016, and compared to a $0.3 million or 4% increase in 2016, versus 2015 expenditures. These costs reflect the increased staffing and salary costs, discussed above. Our self-funded health care plan comprises the largest portion of employee benefits, totaling $5.3 million for 2017, and payroll taxes totaling $4.4 million were the second largest category. The Company offers competitively priced health coverage to all of its associates that qualify for benefits, to attract the best professional talent to the Company, at a reasonable cost and competitive with other businesses in the Florida markets where we conduct business.

Seacoast Bank utilizes third parties for its core data processing systems and outsourced data processing costs are directly related to the number of transactions processed. Outsourced data processing costs totaled $14.1 million for 2017, an increase of $0.6 million or 4% from 2016, and were $3.4 million higher for 2016 versus 2015. In comparison, total depositsData processing costs include one-time charges for conversion activity related to our acquisitions. We continue to improve and enhance our mobile and other digital products and services through our core data processor, which may increase our outsourced data processing costs as customers adopt improvements and products and as the Company’s business volumes grow.

Telephone and data line expenditures, including electronic communications with customers and between branch locations and personnel, as well as third party data processors, increased $428$0.2 million or 9% to $2.3 million for 2017 when compared to 2016, and were $0.3 million or 17% higher in 2016 compared to 2015. Additional activity for acquired GulfShore, NorthStar and PBCB locations in 2017, and Floridian and BMO locations in 2016, and locations closed during 2017 and 2016, as well as additional customers from the acquisitions, were the primary contributors to the increases in telephone and data line expenses for each year.

Total occupancy, furniture and equipment expense for 2017 increased $1.5 million or 8% (on an aggregate basis) to $19.4 million year over year. For 2016, these costs were $5.7 million or 47% higher than in 2015. For 2017 and 2016, the increases were primarily driven by the 10 offices acquired from GulfShore, NorthStar and PBCB and the 24 offices acquired from the Floridian and BMO acquisitions. Seacoast Bank consolidated 6 offices and 20 offices, respectively, during the 2017 and 2016 calendar years. Lease payments were higher by $0.5 million or 9% and $1.1 million or 27% for 2017 and 2016, respectively, and include recurring payments for many of the closed offices. Depreciation was also $0.5 million or 11% greater for 2017 than 2016. Write downs totaling $2.3 million were incurred during both 2017 and 2016 for closed offices. We believe branches are still valuable to our customers for more complex transactions, but simple tasks, such as depositing and withdrawing funds, are rapidly migrating to a digital world. Our goal at the beginning of 2017 was to close 20% of our locations over the next 24 to 36 months. Some of the operational expense savings will be invested into technology and talent to deliver products and services in more convenient ways. Branch consolidations will continue for the Company and the banking industry in general (see “Item 2, Properties” for a complete description of our banking offices).

For 2017, marketing expenses (including sales promotion costs, ad agency production and printing costs, digital, newspaper, TV and radio advertising, and other public relations costs) increased by $1.2 million or 32% to $4.8 million, compared to 2016. For 2016, these costs were $0.8 million or 18% lower, versus 2015. Incremental use of outdoor media, digital media and sweep repurchase agreements increased $18 million or 12% during 2015, versus 2014. Deposits for 2016 included acquired balances from Floridiandirect mail to connect and BMO that aggregatedsolidify customer acquisition and corporate brand awareness within the new Tampa footprint contributed to over $651 million and deposits for 2015 included acquired deposits of nearly $189 million from Grand. Most of the increase in sweep repurchase agreements2017. Primary to the decrease during 2016 was an effort to utilize digital media as a primary source for brand awareness rather than more costly, traditional venues such as newspaper, radio and TV advertising, with the savings utilized for more direct mail and customer incentives.

Legal and professional fees for 2017 were higher by $1.4 million or 15% from 2016, and were $1.6 million higher for 2016 versus 2015. Included were acquisition related fees that totaled $1.9 million for 2017 and $1.5 million for 2016. Regulatory examination fees increased as total assets increased (the basis for examination fee calculation).

Growth in total assets (both organic and through acquisitions) increased the basis for calculating our FDIC premiums. The Company’s total assets and equity have increased during the past three years and Seacoast expects increases prospectively. FDIC rates declined for financial institutions under $10 billion in total assets during 2016 as FDIC insurance pools achieved higher amounts specified by the U.S. Congress. FDIC assessments were $2.3 million, $2.4 million and $2.2 million for 2017, 2016 and 2015, was in public funds, principally from higher seasonal tax collector receipts from property owners.respectively.

As nonperforming assets have declined so have associated costs (see “Nonperforming Loans, Troubled Debt Restructurings, Other Real Estate Owned, and Credit Quality”).  For the last three years, asset disposition costs and net (gains) losses on other real estate owned and repossessed assets on an aggregated basis have been stable or declined, from $0.7 million for 2015 to zero for 2016 to a gain of ($0.3) million for 2017.

Included in noninterest expenses for 2016 was an early redemption cost of $1.8 million for Federal Home Loan Bank advances that was paid in April. Two $25 million advances with a combined fixed rate of 3.22% and maturing in November 2017 were redeemed (see “Note I – Borrowings”).

Other expenses were higher by $2.0 million or 15% for 2017 compared to 2016, totaling $13.5 million. For 2016, other expenses were $1.3 million or 11% higher, compared to 2015. Contributing to the $2.0 million increase for 2017 were the following: miscellaneous losses and charge-offs (up $0.4 million from 2016), travel related expenses (up $0.4 million), bank meetings costs (rising $0.2 million compared to 2016), robberies (rising $0.1 million from 2016), director fees (higher by $0.1 million), employee placement fees (increasing $0.1 million), and armored car services (higher by $0.1 million). Larger increases during 2016 were driven by a full-year and partial-year impacts of acquisitions and variable costs related to our successful lending activity.

Income Taxes

The Tax Cuts and Jobs Act of 2017, enacted by the U.S. Congress and signed by the President of the United States near the end of December 2017, had a significant impact on our deferred tax position and provision for taxes at year-end 2017. For 2017, 2016 and 2015, provision for income taxes totaled $36.3 million, and $14.9 million and $13.5 million, respectively. The new legislation resulted in additional provisioning of $8.6 million during the fourth quarter of 2017. This estimate is subject to additional procedures which could result in further adjustments in future periods.

While various tax strategies have been implemented to reduce the Company’s overall effective tax rate, the additional provisioning for taxes related to this enactment resulted in a rate of 45.9% for 2017, an increase from 33.8% in 2016 and 37.9% in 2015. Without the additional provision from the legislation, the effective rate for 2017 was 35.1%. For 2017, 2016 and 2015, a portion of investment banking fees, and legal and professional fees expended and related to the acquisitions were not deductible for tax purposes. Additionally, the adoption of ASU 2016-09 provided a tax benefit of $1.1 million for 2017 and $0.8 million for 2016 after the standard’s adoption in the third quarter of that year (see “Note A- Significant Accounting Policies”).

Management believes all of the future tax benefits of the Company’s deferred tax assets can be realized and no valuation allowance is required (see “Note L – Income Taxes”).

Fourth Quarter Review

Earnings highlights for the fourth quarter 2017:

⁽¹⁾ See page 59, Explanation of Certain Unaudited Non-GAAP Financial Measures.

Net interest income (on a tax-equivalent basis, a non-GAAP measure) for the fourth quarter 2017 totaled $48.4 million, a $10.8 million or 29% increase from the fourth quarter 2016 and $2.5 million higher than third quarter 2017. Net interest margin (on a tax-equivalent basis) increased to 3.71%, a 15 basis point increase from 2016, and 3 basis points lower than third quarter 2017. Year-over-year net interest income growth was amplified by the acquisitions of GulfShore, NorthStar and PBCB. The margin increase year over year reflects increased loan and securities yields, reflecting the rising interest rate environment, and improved balance sheet mix. Linked quarter results reflect higher rates on deposits and lower non-cash related loan accretion associated with prior acquisitions.

Noninterest income (excluding securities gains and gain on sale of Class B Visa stock) totaled $11.4 million for the fourth quarter of 2017, an increase of $1.5 million or 15% from fourth quarter 2016 and compared to $11.5 million in the third quarter 2017. Interchange income and BOLI income increased the most year-over-year, each increasing $0.5 million, respectively, as well as other income that was higher by $0.7 million. Interchange income reflects continued growth and benefits from our acquisition activity, including the GulfShore, NorthStar and PBCB acquisitions in the second and fourth quarters of 2017. BOLI income was 80% higher, with additional purchases of BOLI during 2017 and the BOLI asset totaling $124.0 million at year-end. The increase in other income year over year for the fourth quarter included income from interest rate swaps with customers of $0.3 million and SBA gains on sold guarantees of $0.3 million.

Noninterest expenses for the fourth quarter 2017 totaled $39.2 million, up 29% from 2016 and 14% higher than third quarter 2017. Of the $8.9 million increase year-over-year for fourth quarter 2017, salaries, wages and employee benefits increased $3.8 million, outsourced data processing grew $1.1 million, and occupancy and furniture and equipment costs (aggregated) were $1.0 million higher. The acquisitions of GulfShore, NorthStar and PBCB were the primary cause and incremental, although for 2017 the Company added only four more branch offices, compared to year-end 2016. Fourth quarter 2017 expense also reflected merger related charges of $6.8 million from our acquisitions, including related severance. The most significant factor impacting the fourth quarter 2016’s noninterest expense was also merger related charges, totaling $0.6 million from acquisitions, and including related severance.

A provision for loan losses of $2.3 million and $1.0 million was recorded in the fourth quarter of 2017 and 2016, respectively. Third quarter 2017’s provision for loan losses totaled $0.7 million. Our fourth quarter 2017 provisioning reflects the effect of higher charge-offs, including a $0.6 million charge-off related to one customer whose business exporting to the Caribbean was significantly impacted by the hurricanes of 2017. For the fourth quarter of 2017, net charge-offs totaled $1.3 million, compared to $0.2 million for fourth quarter 2016. The allowance for loan losses to portfolio loans outstanding ratio at December 31, 2017 was 0.90%, compared to 0.96% a year earlier, and the coverage ratio (the allowance for loan losses to nonaccrual loans) was 150.3% at December 31, 2017 compared to 125.10% at December 31, 2016, reflecting improvement in credit quality.

Update on Vision 2020

Our Vision 2020 objectives were introduced at our investor day in early 2017. These targets are reiterated below. The enactment of the Tax Cuts and Jobs Act of 2017 is expected to have a significant positive impact on our Florida markets, and creates an opportunity for us to accelerate the achievement of our Vision 2020 objectives. As the impact of this new legislation on our operating markets materializes, we will provide further updates on our progress and updated objectives.

Explanation of Certain Unaudited Non-GAAP Financial Measures

This report contains financial information determined by methods other than Generally Accepted Accounting Principles (“GAAP”), including adjusted net income tax, tax equivalent net interest income and margin, and adjusted noninterest expense and efficiency ratios. The most directly comparable GAAP measures are net income, net interest income, net interest margin, noninterest expense, and efficiency 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 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.

The tables below provide reconciliation between GAAP net income and adjusted net income. Effective in the first quarter of 2017, adjusted net income and adjusted noninterest expense exclude the effect of amortization of acquisition-related intangibles. Prior periods have been revised to conform to the current period presentation.