Loans | Loans Loans held for investment are categorized into the following segments: • Construction and land development: Loans are extended to both commercial and consumer customers which are collateralized by and for the purpose of funding land development and construction projects, including 1-4 family residential construction, multi-family property and non-farm residential property where the primary source of repayment is from proceeds of the sale, refinancing or permanent financing of the property. • Commercial real estate - owner-occupied: Loans are extended to commercial customers for the purpose of acquiring real estate to be occupied by the borrower's business. These loans are collateralized by the subject property and the repayment of these loans is largely dependent on the performance of the company occupying the property. • Commercial real estate - non owner-occupied: Loans are extended to commercial customers for the purpose of acquiring commercial property where occupancy by the borrower is not their primary intent. These loans are viewed primarily as cash flow loans, collateralized by the subject property, and the repayment of these loans is largely dependent on rental income from the successful operation of the property. • Residential real estate: Loans are extended to consumer customers and collateralized primarily by 1-4 family residential properties and include fixed and variable rate mortgages, home equity mortgages, and home equity lines of credit. Loans are primarily written based on conventional loan agency guidelines, including loans that exceed agency value limitations. Sources of repayment may be from the occupant of the residential property or from cash flows on rental income from the successful operation of the property. • Commercial and financial: Loans are extended to commercial customers. The purpose of the loans can be working capital, physical asset expansion, asset acquisition or other business purposes. Loans may be collateralized by assets owned by the borrower or the borrower's business. Commercial loans are based primarily on the historical and projected cash flow of the borrower's business and secondarily on the capacity of credit enhancements, guarantees and underlying collateral provided by the borrower. • Consumer: Loans are extended to consumer customers. The segment includes both installment loans and lines of credit which may be collateralized or non-collateralized. • Paycheck Protection Program ("PPP"): Loans originated under a temporary program established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and extended by the Economic Aid Act. Under the terms of the program, balances may be forgiven if the borrower uses the funds in a manner consistent with the program guidelines, and repayment is guaranteed by the U.S. government. The following tables present net loan balances by segment as of: September 30, 2021 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 190,344 $ 37,067 $ 48 $ 227,459 Commercial real estate - owner-occupied 951,119 218,128 32,089 1,201,336 Commercial real estate - non owner-occupied 1,166,220 428,095 79,272 1,673,587 Residential real estate 1,278,138 181,344 7,847 1,467,329 Commercial and financial 865,064 97,642 19,846 982,552 Consumer 157,916 5,092 11 163,019 Paycheck Protection Program 153,842 36,760 — 190,602 Totals $ 4,762,643 $ 1,004,128 $ 139,113 $ 5,905,884 December 31, 2020 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 216,420 $ 26,250 $ 2,438 $ 245,108 Commercial real estate - owner occupied 854,769 247,090 39,451 1,141,310 Commercial real estate - non-owner occupied 1,043,459 323,273 29,122 1,395,854 Residential real estate 1,155,914 176,105 10,609 1,342,628 Commercial and financial 743,846 94,627 16,280 854,753 Consumer 181,797 6,660 278 188,735 Paycheck Protection Program 515,532 51,429 — 566,961 Totals $ 4,711,737 $ 925,434 $ 98,178 $ 5,735,349 The amortized cost basis of loans at September 30, 2021 included net deferred costs of $32.1 million on non-PPP portfolio loans and net deferred fees of $5.4 million on PPP loans. At December 31, 2020, the amortized cost basis included net deferred costs of $22.6 million on non-PPP portfolio loans and net deferred fees of $9.5 million on PPP loans. At September 30, 2021, the remaining fair value adjustments on acquired loans were $26.6 million, or 2.3%, of the outstanding acquired loan balances, compared to $30.2 million, or 2.9%, of the acquired loan balances at December 31, 2020. These amounts are accreted into interest income over the remaining lives of the related loans on a level yield basis. Accrued interest receivable is included within Other Assets and was $15.2 million and $25.8 million at September 30, 2021 and December 31, 2020, respectively. The following tables present the status of net loan balances as of September 30, 2021 and December 31, 2020. Loans on short-term payment deferral at the reporting date are reported as current. September 30, 2021 (In thousands) Current Accruing Accruing Accruing Nonaccrual Total Portfolio Loans Construction and land development $ 190,310 $ — $ — $ — $ 34 $ 190,344 Commercial real estate - owner-occupied 949,282 671 — — 1,166 951,119 Commercial real estate - non owner-occupied 1,164,458 — — — 1,762 1,166,220 Residential real estate 1,267,081 340 35 — 10,682 1,278,138 Commercial and financial 856,579 1,179 99 1,814 5,393 865,064 Consumer 157,468 269 34 — 145 157,916 Paycheck Protection Program 1 153,484 358 — — — 153,842 Total Portfolio Loans $ 4,738,662 $ 2,817 $ 168 $ 1,814 $ 19,182 $ 4,762,643 Acquired Non-PCD Loans Construction and land development $ 37,067 $ — $ — $ — $ — $ 37,067 Commercial real estate - owner-occupied 217,436 — 692 — — 218,128 Commercial real estate - non owner-occupied 427,170 — — — 925 428,095 Residential real estate 178,504 300 — — 2,540 181,344 Commercial and financial 96,799 334 — — 509 97,642 Consumer 4,639 15 — — 438 5,092 Paycheck Protection Program 1 36,760 — — — — 36,760 Total Acquired Non-PCD Loans $ 998,375 $ 649 $ 692 $ — $ 4,412 $ 1,004,128 PCD Loans Construction and land development $ 42 $ — $ — $ — $ 6 $ 48 Commercial real estate - owner-occupied 28,739 — — — 3,350 32,089 Commercial real estate - non owner-occupied 76,768 — — — 2,504 79,272 Residential real estate 6,007 24 — — 1,816 7,847 Commercial and financial 17,678 743 83 — 1,342 19,846 Consumer 11 — — 11 Total PCD Loans $ 129,245 $ 767 $ 83 $ — $ 9,018 $ 139,113 Total Loans $ 5,866,282 $ 4,233 $ 943 $ 1,814 $ 32,612 $ 5,905,884 1 Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government. December 31, 2020 (In thousands) Current Accruing Accruing Accruing Nonaccrual Total Portfolio Loans Construction and land development $ 216,262 $ — $ — $ — $ 158 $ 216,420 Commercial real estate - owner occupied 851,222 1,076 — — 2,471 854,769 Commercial real estate - non-owner occupied 1,041,306 — — — 2,153 1,043,459 Residential real estate 1,142,893 3,002 1,427 61 8,531 1,155,914 Commercial and financial 737,362 135 1,967 — 4,382 743,846 Consumer 180,879 203 138 2 575 181,797 Paycheck Protection Program 515,532 — — — — 515,532 Total Portfolio Loans $ 4,685,456 $ 4,416 $ 3,532 $ 63 $ 18,270 $ 4,711,737 Acquired Non-PCD Loans Construction and land development $ 26,250 $ — $ — $ — $ — $ 26,250 Commercial real estate - owner occupied 244,486 — — — 2,604 247,090 Commercial real estate - non-owner occupied 322,264 — — — 1,009 323,273 Residential real estate 171,507 1,605 104 — 2,889 176,105 Commercial and financial 93,223 216 — — 1,188 94,627 Consumer 6,640 20 — — — 6,660 Paycheck Protection Program 51,429 — — — — 51,429 Total Acquired Non-PCD Loans $ 915,799 $ 1,841 $ 104 $ — $ 7,690 $ 925,434 PCD Loans Construction and land development $ 2,429 $ — $ — $ — $ 9 $ 2,438 Commercial real estate - owner occupied 36,345 — — — 3,106 39,451 Commercial real estate - non-owner occupied 24,200 — — — 4,922 29,122 Residential real estate 9,537 — — — 1,072 10,609 Commercial and financial 15,121 125 — — 1,034 16,280 Consumer 271 — — — 7 278 Total PCD Loans $ 87,903 $ 125 $ — $ — $ 10,150 $ 98,178 Total Loans $ 5,689,158 $ 6,382 $ 3,636 $ 63 $ 36,110 $ 5,735,349 All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest subsequently received on such loans is accounted for under the cost-recovery method, whereby interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and future payments are reasonably assured. The Company recognized $0.3 million and $0.1 million in interest income on nonaccrual loans during the three months ended September 30, 2021 and 2020, respectively. The Company recognized $0.9 million and $0.5 million in interest income on nonaccrual loans during the nine months ended September 30, 2021 and 2020, respectively. The following tables present net balances of loans on nonaccrual status and the related allowance for credit losses, if any, as of: September 30, 2021 (In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses Construction and land development $ 40 $ — $ 40 $ — Commercial real estate - owner-occupied 3,490 1,026 4,516 417 Commercial real estate - non owner-occupied 3,739 1,452 5,191 95 Residential real estate 14,345 693 15,038 362 Commercial and financial 3,443 3,801 7,244 2,658 Consumer 33 550 583 550 Totals $ 25,090 $ 7,522 $ 32,612 $ 4,082 December 31, 2020 (In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses Construction and land development $ 148 $ 19 $ 167 $ 8 Commercial real estate - owner-occupied 7,893 288 8,181 287 Commercial real estate - non owner-occupied 5,666 2,418 8,084 1,640 Residential real estate 9,520 2,972 12,492 1,587 Commercial and financial 3,175 3,429 6,604 2,235 Consumer 222 360 582 75 Totals $ 26,624 $ 9,486 $ 36,110 $ 5,832 Collateral-Dependent Loans Loans are considered collateral-dependent when the repayment, based on the Company's assessment as of the reporting date, is expected to be provided substantially through the operation or sale of the underlying collateral and there are no other available and reliable sources of repayment. The following table presents collateral-dependent loans as of: (In thousands) September 30, 2021 December 31, 2020 Construction and land development $ 31 $ 189 Commercial real estate - owner-occupied 5,152 11,992 Commercial real estate - non owner-occupied 5,190 7,285 Residential real estate 15,039 16,652 Commercial and financial 9,302 11,198 Consumer 583 586 Totals $ 35,297 $ 47,902 Loans by Risk Rating The Company utilizes an internal asset classification system as a means of identifying problem and potential problem loans. The following classifications are used to categorize loans under the internal classification system: • Pass: Loans that are not problem loans or potential problem loans are considered to be pass-rated. • Special Mention: Loans that do not currently expose the Company to sufficient risk to warrant classification in the Substandard or Doubtful categories, but possess weaknesses that deserve management's close attention are deemed to be Special Mention. • Substandard: Loans with the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. • Substandard Impaired: Loans typically placed on nonaccrual and considered to be collateral-dependent or accruing TDRs. • Doubtful: Loans that have all the weaknesses inherent in those classified Substandard with the added characteristic that the weakness present makes collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are likely to be charged off. The following tables present the risk rating of loans by year of origination as of: September 30, 2021 (In thousands) 2021 2020 2019 2018 2017 Prior Revolving Total Construction and Land Development Risk Ratings: Pass $ 62,879 $ 38,326 $ 38,517 $ 26,344 $ 4,771 $ 20,952 $ 35,590 $ 227,379 Special Mention — — — — — — — — Substandard — — — — — — — — Substandard Impaired — — — — — 80 — 80 Doubtful — — — — — — — — Total $ 62,879 $ 38,326 $ 38,517 $ 26,344 $ 4,771 $ 21,032 $ 35,590 $ 227,459 Commercial real estate - owner-occupied Risk Ratings: Pass $ 155,499 $ 159,752 $ 186,442 $ 142,027 $ 132,413 $ 385,244 $ 8,951 $ 1,170,328 Special Mention — 6,588 5,416 655 220 5,690 — 18,569 Substandard — — — 77 3,903 2,770 — 6,750 Substandard Impaired — — 2,811 256 1,104 1,518 — 5,689 Doubtful — — — — — — — — Total $ 155,499 $ 166,340 $ 194,669 $ 143,015 $ 137,640 $ 395,222 $ 8,951 $ 1,201,336 Commercial real estate - non owner-occupied Risk Ratings: Pass $ 248,842 $ 201,940 $ 303,903 $ 202,400 $ 123,851 $ 513,792 $ 7,203 $ 1,601,931 Special Mention — — 2,363 — 1,620 8,397 — 12,380 Substandard — 4,798 3,856 24,078 1,907 19,446 — 54,085 Substandard Impaired — — 1,052 — — 4,139 — 5,191 Doubtful — — — — — — — — Total $ 248,842 $ 206,738 $ 311,174 $ 226,478 $ 127,378 $ 545,774 $ 7,203 $ 1,673,587 Residential real estate Risk Ratings: Pass $ 364,563 $ 119,039 $ 110,560 $ 136,044 $ 132,151 $ 243,005 $ 342,581 $ 1,447,943 Special Mention — — — 47 — 205 285 537 Substandard — — — — — 160 35 195 Substandard Impaired — 488 728 40 5,358 9,335 2,705 18,654 Doubtful — — — — — — — — Total $ 364,563 $ 119,527 $ 111,288 $ 136,131 $ 137,509 $ 252,705 $ 345,606 $ 1,467,329 September 30, 2021 (In thousands) 2021 2020 2019 2018 2017 Prior Revolving Total Commercial and financial Risk Ratings: Pass $ 229,168 $ 187,063 $ 107,743 $ 83,267 $ 45,562 $ 60,048 $ 222,822 $ 935,673 Special Mention 563 16,137 219 247 275 149 406 17,996 Substandard — 388 4,502 3,666 1,491 3,333 25 13,405 Substandard Impaired — — 5,394 4,335 1,698 3,389 662 15,478 Doubtful — — — — — — — — Total $ 229,731 $ 203,588 $ 117,858 $ 91,515 $ 49,026 $ 66,919 $ 223,915 $ 982,552 Consumer Risk Ratings: Pass $ 32,239 $ 34,927 $ 30,164 $ 19,961 $ 12,050 $ 18,097 $ 12,838 $ 160,276 Special Mention — 38 90 57 42 50 1,477 1,754 Substandard — — — 11 35 — 198 244 Substandard Impaired — 15 59 25 79 129 438 745 Doubtful — — — — — — — — Total $ 32,239 $ 34,980 $ 30,313 $ 20,054 $ 12,206 $ 18,276 $ 14,951 $ 163,019 Paycheck Protection Program Risk Ratings: Pass $ 182,082 $ 8,520 $ — $ — $ — $ — $ — $ 190,602 Total $ 182,082 $ 8,520 $ — $ — $ — $ — $ — $ 190,602 Consolidated Risk Ratings: Pass $ 1,275,272 $ 749,567 $ 777,329 $ 610,043 $ 450,798 $ 1,241,138 $ 629,985 $ 5,734,132 Special Mention 563 22,763 8,088 1,006 2,157 14,491 2,168 51,236 Substandard — 5,186 8,358 27,832 7,336 25,709 258 74,679 Substandard Impaired — 503 10,044 4,656 8,239 18,590 3,805 45,837 Doubtful — — — — — — — — Total $ 1,275,835 $ 778,019 $ 803,819 $ 643,537 $ 468,530 $ 1,299,928 $ 636,216 $ 5,905,884 December 31, 2020 (In thousands) 2020 2019 2018 2017 2016 Prior Revolving Total Construction and Land Development Risk Ratings: Pass $ 62,107 $ 52,384 $ 46,067 $ 15,873 $ 7,335 $ 17,873 $ 35,324 $ 236,963 Special Mention 206 245 5,918 — — 1,449 — 7,818 Substandard — — — — — 51 — 51 Substandard Impaired — — — 37 — 239 — 276 Doubtful — — — — — — — — Total $ 62,313 $ 52,629 $ 51,985 $ 15,910 $ 7,335 $ 19,612 $ 35,324 $ 245,108 Commercial real estate - owner-occupied Risk Ratings: Pass $ 155,953 $ 198,559 $ 156,276 $ 138,341 $ 148,389 $ 287,772 $ 14,255 $ 1,099,545 Special Mention 5,773 1,858 3,305 — 4,471 4,050 2 19,459 Substandard — — — 4,709 1,955 5,508 — 12,172 Substandard Impaired — 3,151 747 1,362 — 4,874 — 10,134 Doubtful — — — — — — — — Total $ 161,726 $ 203,568 $ 160,328 $ 144,412 $ 154,815 $ 302,204 $ 14,257 $ 1,141,310 December 31, 2020 (In thousands) 2020 2019 2018 2017 2016 Prior Revolving Total Commercial real estate - non owner-occupied Risk Ratings: Pass $ 159,299 $ 313,287 $ 201,112 $ 123,357 $ 175,623 $ 356,943 $ 8,596 $ 1,338,217 Special Mention — 431 9,487 7,580 10,240 114 — 27,852 Substandard — — 9,709 — 8,311 3,682 — 21,702 Substandard Impaired — 2,418 — — 125 5,540 — 8,083 Doubtful — — — — — — — — Total $ 159,299 $ 316,136 $ 220,308 $ 130,937 $ 194,299 $ 366,279 $ 8,596 $ 1,395,854 Residential real estate Risk Ratings: Pass $ 96,819 $ 144,329 $ 204,077 $ 205,046 $ 160,612 $ 159,742 $ 350,502 $ 1,321,127 Special Mention — — 33 720 — 966 479 2,198 Substandard 350 — — 896 — 1,452 100 2,798 Substandard Impaired 109 726 1,520 1,762 715 9,671 2,002 16,505 Doubtful — — — — — — — — Total $ 97,278 $ 145,055 $ 205,630 $ 208,424 $ 161,327 $ 171,831 $ 353,083 $ 1,342,628 Commercial and financial Risk Ratings: Pass $ 214,774 $ 146,511 $ 103,769 $ 60,782 $ 39,692 $ 53,758 $ 204,304 $ 823,590 Special Mention 71 946 965 5,612 67 635 209 8,505 Substandard 154 41 3,016 1,609 553 3,239 764 9,376 Substandard Impaired 317 4,595 3,199 2,292 2,074 704 81 13,262 Doubtful 1 — — — — — — 20 20 Total $ 215,316 $ 152,093 $ 110,949 $ 70,295 $ 42,386 $ 58,336 $ 205,378 $ 854,753 Consumer Risk Ratings: Pass $ 46,476 $ 43,143 $ 30,433 $ 18,937 $ 21,880 $ 9,488 $ 15,089 $ 185,446 Special Mention 58 27 14 41 42 21 1,854 2,057 Substandard — — — 42 4 151 228 425 Substandard Impaired 7 50 193 24 329 183 21 807 Doubtful — — — — — — — — Total $ 46,541 $ 43,220 $ 30,640 $ 19,044 $ 22,255 $ 9,843 $ 17,192 $ 188,735 Paycheck Protection Program Risk Ratings: Pass $ 566,961 $ — $ — $ — $ — $ — $ — $ 566,961 Total $ 566,961 $ — $ — $ — $ — $ — $ — $ 566,961 Consolidated Risk Ratings: Pass $ 1,302,389 $ 898,213 $ 741,734 $ 562,336 $ 553,531 $ 885,576 $ 628,070 $ 5,571,849 Special Mention 6,108 3,507 19,722 13,953 14,820 7,235 2,544 67,889 Substandard 504 41 12,725 7,256 10,823 14,083 1,092 46,524 Substandard Impaired 433 10,940 5,659 5,477 3,243 21,211 2,104 49,067 Doubtful 1 — — — — — — 20 20 Total $ 1,309,434 $ 912,701 $ 779,840 $ 589,022 $ 582,417 $ 928,105 $ 633,830 $ 5,735,349 1 Loans classified as doubtful are fully reserved at December 31, 2020. Loans Modified in Connection with COVID-19 Pandemic The CARES Act, which was signed into law on March 27, 2020, and amended by the Consolidated Appropriations Act on December 27, 2020, encourages financial institutions to practice prudent efforts to work with borrowers financially impacted by the COVID-19 pandemic by providing an option to exclude from TDR consideration certain loan modifications that might otherwise be categorized as TDRs under ASC 310-40. This option is available for modifications that are deemed to be COVID-related, where the borrower was not more than 30 days past due on December 31, 2019, and the modification is executed between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency. Federal banking regulators issued similar guidance that also allows lenders to conclude that short-term modifications for borrowers affected by the pandemic should not be considered TDRs if the borrower was current at the time of modification. Seacoast has provided financially impacted borrowers with loan accommodations, primarily consisting of payment deferrals of up to six months. At its peak on June 30, 2020, loans on deferral represented $1.1 billion, or 21%, of total non-PPP loans. In the second half of 2020, the large majority of these borrowers successfully resumed making contractual payments, and the level of loans with accommodations has decreased to $2.2 million, or 0.04%, of total non-PPP loans as of September 30, 2021. Types of accommodations have included a combination of one or more of the following: full payment deferral, partial payment deferral, reduction of interest rate, extension of the original maturity date, or re-amortization of the facility. The following table presents the balance of loans with active payment accommodations at the specified dates, excluding PPP loans: (In thousands) September 30, 2021 December 31, 2020 Construction and land development $ — $ 1,032 Commercial real estate - owner-occupied 582 14,248 Commercial real estate - non owner-occupied — 32,549 Residential real estate 610 12,839 Commercial and financial 624 11,915 Consumer 338 1,479 Totals $ 2,154 $ 74,062 Troubled Debt Restructured Loans The Company’s TDR concessions granted to certain borrowers generally do not include forgiveness of principal balances, but may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a limited period of time. Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements. The following table presents loans that were modified in a troubled debt restructuring during the three and nine months ended: Three Months Ended September 30, 2021 2020 (In thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Construction and land development — $ — $ — — $ — $ — Commercial real estate - owner-occupied — — — — — — Commercial real estate - non owner-occupied — — — — — — Residential real estate 1 152 152 — — — Commercial and financial — — — — — — Consumer — — — 1 41 41 Totals 1 $ 152 $ 152 1 $ 41 $ 41 Nine Months Ended September 30, 2021 2020 (In thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Construction and land development — $ — $ — — $ — $ — Commercial real estate - owner-occupied — — — — — — Commercial real estate - non owner-occupied — — — — — — Residential real estate 4 231 231 1 45 45 Commercial and financial 1 142 142 4 437 437 Consumer — — — 3 88 88 Totals 5 $ 373 $ 373 8 $ 570 $ 570 The TDRs described above resulted in a specific allowance for credit losses of $0.2 million as of September 30, 2021 and September 30, 2020. During the nine months ended September 30, 2021, there were two defaults totaling $0.1 million of loans that had been modified in TDRs within the preceding twelve months. During the nine months ended September 30, 2020, there were four defaults totaling $1.4 million of loans that had been modified to a TDR within the preceding twelve months. The Company considers a loan to have defaulted when it becomes 90 days or more delinquent under the modified terms, has been transferred to nonaccrual status, is charged off or has been transferred to other real estate owned. For loans measured based on the present value of expected future cash flows, $9,000 and $19,000 for the three months ended September 30, 2021, and 2020, respectively, and $20,000 and $65,000 for the nine months ended September 30, 2021, and 2020, respectively, was included in interest income and represents the change in present value attributable to the passage of time. |