SBCF Seacoast Banking Corporation of Florida

815 Colorado Avenue
Stuart, Florida 34994
(772) 287-4000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Dennis S. Hudson, III
Chief Executive Officer
Seacoast Banking Corporation of Florida
815 Colorado Avenue
Stuart, Florida 34994
(772) 287-4000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the proposed merger described herein have been satisfied or waived.

If the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of  “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 7(a)(2)(B) of the Securities Act. ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 14e-4(i) (Cross-Border Issuer Tender Offer) ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-party Tender Offer) ☐

The information in this preliminary proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON           , 2020

To the Shareholders of Fourth Street Banking Company:

Fourth Street Banking Company (“Fourth Street”) will hold a special meeting of shareholders at       local time, on          , 2020, at           , Saint Petersburg, Florida         , for the following purposes:

•

for holders of Fourth Street common stock to consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of January 23, 2020, by and among Seacoast Banking Corporation of Florida, Seacoast National Bank, Fourth Street Banking Company and Freedom Bank, pursuant to which Fourth Street will merge with and into Seacoast Banking Corporation of Florida and Freedom Bank will merge with and into Seacoast National Bank, as more fully described in the attached proxy statement/prospectus;

​

•

for holders of Fourth Street common stock to consider and vote upon a proposal, which we refer to as the 280G proposal, to approve a portion of certain compensatory payments or benefits that certain Fourth Street directors are or may be entitled to receive in connection with the merger or certain subsequent events in order to avoid any potential adverse federal tax consequences for Fourth Street and such individuals under Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended; and

​

•

for holders of Fourth Street common stock to consider and vote upon a proposal to adjourn the Fourth Street special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the merger agreement or the 280G proposal.

​

We have fixed the close of business on           , 2020 as the record date for the Fourth Street special meeting. Only holders of record of Fourth Street common stock at that time are entitled to notice of, and to vote at, the Fourth Street special meeting, or any adjournment or postponement of the Fourth Street special meeting. In order for the merger agreement to be approved, at least a majority of the outstanding shares of Fourth Street common stock must be voted in favor of the proposal to approve the merger agreement. In order for the 280G proposal to be approved, more than 75% of the outstanding shares of Fourth Street common stock must be voted in favor of the proposal to approve the merger agreement (excluding shares held by the individuals whose compensatory payments are subject to the vote and certain related parties, collectively referred to as ineligible shareholders). The special meeting may be adjourned from time to time upon approval of holders of Fourth Street common stock without notice other than by announcement at the meeting of the adjournment thereof, and any and all business for which notices hereby given may be transacted at such adjourned meeting.

We intend to hold our special meeting in person. However, we are actively monitoring the coronavirus (COVID-19) situation. We are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments have and may continue to impose. If it is not possible or advisable to hold our special meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our website at www.freedombank.com for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, we encourage you to vote your shares prior to the special meeting.

Fourth Street shareholders have appraisal rights under Florida state law entitling them to obtain payment in cash for the fair value of their shares, provided they comply with each of the requirements under Florida law, including not voting in favor of the merger agreement and providing notice to Fourth Street. For more information regarding appraisal rights, please see “The Merger — Appraisal Rights for Fourth Street Shareholders” beginning on page .

 

 

Your vote is very important. We cannot complete the merger unless Fourth Street’s shareholders approve the merger agreement.

Regardless of whether you plan to attend the Fourth Street special meeting, please vote as soon as possible. If you hold stock in your name as a shareholder of record, please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid return envelope as described on the proxy card. If you hold your stock in “street name” through a bank or broker, please follow the instructions on the voting instruction card furnished by the record holder.

The enclosed proxy statement/prospectus provides a detailed description of the special meeting, the merger, the documents related to the merger, including the merger agreement, and other related matters. We urge you to read the proxy statement/prospectus, including any documents incorporated in the proxy statement/prospectus by reference, and its appendices carefully and in their entirety. If you have any questions concerning the merger or the proxy statement/prospectus, would like additional copies of the proxy statement/​prospectus or need help voting your shares of Fourth Street common stock, please contact Cathy Swanson, Chief Executive Officer, at 727-820-8600.

Fourth Street’s board of directors has determined and declared that the merger agreement, the merger and the transactions contemplated by the merger agreement, and the 280G proposal are advisable and in the best interests of Fourth Street and its shareholders, has unanimously authorized, adopted and approved the merger agreement, the merger and the transactions contemplated by the merger agreement and the 280G proposal and recommends that Fourth Street shareholders vote “FOR” the proposal to approve the merger agreement, “FOR” the 280G proposal, and “FOR” the proposal to adjourn the Fourth Street special meeting, if necessary or appropriate, to solicit additional proxies in favor of the approval of the merger agreement and the 280G proposal. Because certain compensatory payments or benefits for certain Fourth Street directors are subject to the 280G proposal, such directors abstained from the recommendation regarding the 280G proposal.

By Order of the Board of Directors,

Cathy Swanson
Chief Executive Officer

Saint Petersburg, Florida
              , 2020

 

 

 

the merger or Seacoast or Fourth Street that differs from, or adds to, the information in this proxy statement/​prospectus or in documents that are incorporated by reference herein and publicly filed with the SEC. Therefore, if anyone does give you different or additional information, you should not rely on it. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than the date of this proxy statement/prospectus, and you should not assume that any information incorporated by reference into this document is accurate as of any date other than the date of such other document, and neither the mailing of this proxy statement/prospectus to Fourth Street shareholders nor the issuance of Seacoast common stock in the merger shall create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this proxy statement/prospectus, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction.

 

ii

 

 

 

iv

 

We have not authorized any person to give any information or make any representation about the merger or Seacoast Banking Corporation of Florida or Fourth Street Banking Company that differs from, or adds to, the information in this proxy statement/prospectus or in documents that are publicly filed with the SEC. Therefore, if anyone does give you different or additional information, you should not rely on it.

 

v

 

 

Q:

Will the value of the merger consideration change between the date of this proxy statement/prospectus and the time the merger is completed?

​

A:

Yes, the value of the merger consideration will fluctuate between the date of this proxy statement/​prospectus and the completion of the merger based upon the market value of Seacoast common stock and certain other adjustments. Any fluctuation in the market price of Seacoast common stock after the date of this proxy statement/prospectus will change the value of the shares of Seacoast common stock that Fourth Street shareholders will receive.

​

Q:

Will the payments to the Fourth Street directors that are subject to the 280G proposal affect the amount of merger consideration to be paid to Fourth Street shareholders?

​

A:

No. The outcome of the vote on the 280G proposal, whether approved or not, will not affect the amount of the merger consideration that a Fourth Street shareholder will receive if the merger is completed. In addition, approval of the 280G proposal is not a condition to the completion of the merger. You can approve all of the proposals, none of the proposals, or some combination of voting for or against the proposals.

​

Q:

How does Fourth Street’s board of directors recommend that I vote at the special meeting?

​

A:

Fourth Street’s board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement, “FOR” the 280G proposal and “FOR” the adjournment proposal. Because compensatory payments or benefits for certain Fourth Street directors are subject to the 280G proposal, such directors abstained from the recommendation regarding the 280G proposal.

​

Q:

When and where is the special meeting?

​

A:

The Fourth Street special meeting will be held at          , Saint Petersburg, Florida, on          , 2020, at     local time.

​

Q:

Who can vote at the special meeting of shareholders?

​

A:

Holders of record of Fourth Street common stock at the close of business on          , 2020, which is the date that the Fourth Street board of directors has fixed as the record date for the special meeting, are entitled to vote at the special meeting.

​

Q:

What do I need to do now?

​

A:

After you have carefully read this proxy statement/prospectus and have decided how you wish to vote your shares, please vote your shares promptly so that your shares are represented and voted at the special meeting. You must complete, sign, date and mail your proxy card in the enclosed postage-paid return envelope as soon as possible. If you hold your shares in your name as a shareholder of record, you must complete, sign, date and mail your proxy card in the enclosed postage-paid return envelope as soon as possible. If you hold your shares in “street name” through a bank, broker or other nominee, you must direct your bank, broker or other nominee how to vote in accordance with the instructions you have received from your bank, broker or other nominee. “Street name” shareholders who wish to vote in person at the special meeting will need to obtain a proxy form from the institution that holds their shares.

​

Q:

What constitutes a quorum for the special meeting?

​

A:

The presence at the special meeting, in person or by proxy, of holders of a majority of the outstanding shares of Fourth Street common stock will constitute a quorum for the transaction of business. Abstentions, if any, will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum.

​

Q:

What is the vote required to approve each proposal?

​

A:

Approval of the merger agreement requires the affirmative vote of a majority of the outstanding shares of Fourth Street common stock entitled to vote on the merger agreement as of the close of business on           , 2020, the record date for the special meeting. The 280G proposal requires the affirmative vote of more than 75% of the outstanding shares of Fourth Street common stock as of the record

​

 

2

 

date (excluding shares held by the individuals whose compensatory payments are subject to the vote and certain related parties, collectively referred to as ineligible shareholders). The adjournment proposal will be approved if the votes of Fourth Street common stock cast in favor of the adjournment proposal exceed the votes cast against the adjournment proposal. If you (1) fail to submit a proxy or vote in person at the special meeting, (2) mark “ABSTAIN” on your proxy, or (3) fail to instruct your bank, broker, or other nominee how to vote with respect to the proposal to approve the merger agreement, it will have the same effect as a vote “AGAINST” the merger proposal and the 280G proposal and no effect on the adjournment proposal.

Q:

What would happen if the 280G proposal is not approved by Fourth Street shareholders?

​

A:

Each of Frederick Bickley, Kern Davis, William McQueen, Christopher Moench, Christian Ruppel, John Savage, and Richard Wilkes will execute a waiver. In the event the merger proposal is approved, but the requisite approval for the 280G proposal is not obtained, the waiver would operate to limit amounts payable in connection with the consummation of the merger (or certain subsequent events) to three times the individual’s “base amount” as determined in connection with Section 280G of the Code minus $1.00, which we refer to as the “safe harbor amount.”

​

Q:

Why is my vote important?

​

A:

If you do not submit a proxy or vote in person, it may be more difficult for Fourth Street to obtain the necessary quorum to hold its special meeting. In addition, your failure to submit a proxy or vote in person, or abstention will have the same effect as a vote against approval of the merger agreement and the 280G proposal. The merger agreement must be approved by the affirmative vote of a majority of the outstanding shares of Fourth Street common stock entitled to vote on the merger agreement. Fourth Street’s board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement. The 280G proposal requires the affirmative vote of more than 75% of the outstanding shares of Fourth Street common stock as of the record date (excluding shares held by ineligible shareholders). Fourth Street’s board of directors unanimously recommends that you vote “FOR” the 280G proposal. Because certain compensatory payments and benefits for certain Fourth Street directors are subject to the 280G proposal such directors abstained from the recommendation regarding the 280G proposal.

​

Q:

How many votes do I have?

​

A:

You are entitled to one vote for each share of Fourth Street common stock that you owned as of the close of business on the record date. As of the close of business on the record date,      shares of Fourth Street common stock were outstanding and entitled to vote at the Fourth Street special meeting. Ineligible shareholders may not vote their shares on the 280G proposal.

​

Q:

Do Fourth Street directors and executive officers have interests in the merger that are different from, or in addition to, my interests?

​

A:

Yes. In considering the recommendation of the Fourth Street’s board of directors with respect to the merger agreement, you should be aware that some of Fourth Street’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of Fourth Street’s shareholders generally. Interests of certain officers and directors that may be different from or in addition to the interests of Fourth Street’s shareholders include but are not limited to, the receipt of continued indemnification and insurance coverage under the merger agreement, the acceleration of the vesting of Fourth Street stock options and the receipt of cash payment in exchange for their cancellation, the payment of change in control payments to certain executives and the entry into agreements with Seacoast by certain executives.

​

Q:

If my shares are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote my shares for me?

​

A:

No. Your bank, broker, or other nominee cannot vote your shares without instructions from you. You should instruct your bank, broker, or other nominee how to vote your shares in accordance with the instructions provided to you. Please check the voting form used by your bank, broker, or other nominee.

​

 

3

 

Q:

What if I abstain from voting or fail to instruct my bank, broker, or other nominee?

​

A:

If you (1) fail to submit a proxy or vote in person at the special meeting, (2) mark “ABSTAIN” on your proxy, or (3) fail to instruct your bank, broker, or other nominee how to vote with respect to the proposal to approve the merger agreement, it will have the same effect as a vote “AGAINST” the merger proposal and the 280G proposal. If you fail to submit a proxy or vote in person at the special meeting or mark “ABSTAIN” on your proxy with respect to the adjournment proposal, it will have no effect on such proposal.

​

Q:

Can I attend the special meeting and vote my shares in person?

​

A:

Yes. All Fourth Street shareholders, including shareholders of record and shareholders who hold their shares through nominees or any other holder of record, are invited to attend the special meeting. Holders of record of Fourth Street common stock can vote in person at the special meeting. If you are not a shareholder of record, you must obtain a proxy, executed in your favor, from the record holder of your shares to be able to vote in person at the special meeting. If you plan to attend the special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted. Fourth Street reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the special meeting is prohibited without Fourth Street’s express written consent.

​

Q:

Can I change my vote?

​

A:

Yes. If you are a holder of record of Fourth Street common stock, you may revoke any proxy at any time before it is voted by (1) signing and returning a proxy card with a later date, (2) delivering a written revocation letter to Fourth Street’s Chief Executive Officer or (3) attending the special meeting in person, notifying the corporate secretary and voting by ballot at the special meeting. Attendance at the special meeting will not automatically revoke your proxy. A revocation or later-dated proxy received by Fourth Street’s after the vote will not affect the vote. Fourth Street’s Chief Executive Officer’s mailing address is: Fourth Street Banking Company, 1200 Fourth Street, North, Saint Petersburg, Florida 33701.

​

Q:

What are the U.S. federal income tax consequences of the merger to holders of Fourth Street common stock?

​

A:

The merger is expected to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the “Code.” Holders of Fourth Street common stock are not expected to recognize any gain or loss for U.S. federal income tax purposes on the shares of Seacoast common stock they receive in the merger. However, holders of Fourth Street common stock may recognize gain or loss on any cash received instead of a fractional share of Seacoast common stock assuming that the cash received is not treated as a dividend.

​

For further information, see “The Merger — Material U.S. Federal Income Tax Consequences of the Merger.”

The U.S. federal income tax consequences described above may not apply to all holders of Fourth Street stock. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your own tax advisor to determine the particular tax consequences of the merger to you.

Q:

Are Fourth Street shareholders entitled to appraisal rights?

​

A:

Yes. If a Fourth Street shareholder wants to exercise appraisal rights and receive the fair value of shares of Fourth Street common stock in cash instead of the merger consideration, then you must file a written objection with Fourth Street prior to the special meeting stating, among other things, that you will exercise your right to dissent if the merger is completed. Also, you may not vote in favor of the merger agreement and must follow other procedures, both before and after the special meeting, as described in Appendix C to this proxy statement/prospectus. Note that if you return a signed proxy card without voting instructions or with instructions to vote “FOR” the merger agreement, then your

​

 

4

 

shares will automatically be voted in favor of the merger agreement and you will lose all appraisal rights available under Florida law. A summary of these provisions can be found under “The Merger — Appraisal Rights for Fourth Street Shareholders” beginning on page      and detailed information about the special meeting can be found under “Information About the Special Meeting” on page      . Due to the complexity of the procedures for exercising the right to seek appraisal, Fourth Street shareholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the applicable Florida law provisions will result in the loss of the right of appraisal.

Q:

What should I do if I hold my shares of Fourth Street stock in book-entry form?

​

A:

You are not required to take any specific actions if your shares of Fourth Street stock are held in book-entry form. After the completion of the merger, shares of Fourth Street stock held in book-entry form automatically will be exchanged for the per share stock consideration, including shares of Seacoast common stock in book-entry form, the per share cash consideration and any cash to be paid in exchange for fractional shares in the merger, as applicable.

​

Q:

If I am a Fourth Street shareholder, should I send in my stock certificates now?

​

A:

No. Please do not send in your Fourth Street stock certificates with your proxy. Seacoast’s transfer agent, Continental Stock Transfer and Trust Company, will send you instructions for exchanging Fourth Street stock certificates for the applicable merger consideration. See “The Merger Agreement — Procedures for Converting Shares of Fourth Street Common Stock into Merger Consideration” beginning on page   of this proxy statement/prospectus.

​

Q:

Whom may I contact if I cannot locate my Fourth Street stock certificate(s)?

​

A:

If you are unable to locate your original Fourth Street stock certificate(s), you should contact Cathy P. Swanson at 727-820-8600. Following the merger, any inquiries should be directed to Seacoast’s transfer agent, Continental Stock Transfer and Trust Company at 17 Battery Place, 8th Floor, New York, New York 10004, or at (800) 509-5586.

​

Q:

When do you expect to complete the merger?

​

A:

Seacoast and Fourth Street expect to complete the merger in the second quarter of 2020. However, neither Seacoast nor Fourth Street can assure you when or if the merger will occur. Fourth Street must first obtain the approval of Fourth Street shareholders for the merger and Seacoast must receive the necessary regulatory approvals.

​

Q:

Whom should I call with questions?

​

A:

If you have any questions concerning the merger or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus or need help voting your shares of Fourth Street common stock, please contact: Cathy P. Swanson, Chief Executive Officer, 1200 Fourth Street, North, Saint Petersburg, Florida 33701 at 727-820-8600.

​

 

5

 

 

7

 

Date

​

​

Seacoast closing sale price

​

​

Equivalent Fourth Street per share value

​

January 22, 2020

​

​

​

$

29.39

​

​

​

​

$

3.75

​

​

, 2020

​

​

​

$

​

​

​

​

$

​

​

​

8

 

​

9

 

​

10

 

​

11

 

12

 

13

 

​

​

​

Seacoast Common Stock

​

​

​

​

High

​

​

Low

​

​

Dividends

​

2018

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

First Quarter

​

​

​

$

28.44

​

​

​

​

$

23.96

​

​

​

​

$

—

​

​

Second Quarter

​

​

​

$

33.51

​

​

​

​

$

25.61

​

​

​

​

$

—

​

​

Third Quarter

​

​

​

$

34.95

​

​

​

​

$

28.30

​

​

​

​

​

​

​

​

Fourth Quarter

​

​

​

$

29.86

​

​

​

​

$

21.74

​

​

​

​

​

​

​

​

2019

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

First Quarter

​

​

​

$

29.75

​

​

​

​

$

24.45

​

​

​

​

$

—

​

​

Second Quarter

​

​

​

$

28.78

​

​

​

​

$

22.99

​

​

​

​

$

—

​

​

Third Quarter

​

​

​

$

27.64

​

​

​

​

$

22.35

​

​

​

​

$

—

​

​

Fourth Quarter

​

​

​

$

31.02

​

​

​

​

$

24.70

​

​

​

​

$

—

​

​

2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

First Quarter

​

​

​

$

30.55

​

​

​

​

$

14.64

​

​

​

​

$

—

​

​

Second Quarter (through            , 2020)

​

​

​

$

​

​

​

​

$

​

​

​

​

$

—

​

​

14

 

 

investing in securities, are sensitive to general business and economic conditions in the United States. Uncertainty about federal fiscal monetary and related policies, the medium and long-term fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers and investors in the United States. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond the control of Seacoast, Fourth Street and the combined company. In addition, economic, social and political conditions in foreign countries, including global political hostilities or public health outbreaks and uncertainty over the stability of foreign currencies, could affect the stability of global financial markets, which could hinder domestic economic growth.

The recent global coronavirus outbreak could harm the business, financial condition and results of operations of each of Seacoast, Fourth Street and the combined company during the time the merger is pending and following the completion of the merger. In December 2019, COVID-19 was reported in Wuhan, China. The coronavirus has since spread rapidly to other countries, including the United States, and the World Health Organization formally declared the coronavirus outbreak a pandemic in March 2020.

Global health concerns relating to the coronavirus pandemic have been weighing on the macroeconomic environment, leading to lower interest rates, depressed equity market valuations, heightened financial market volatility and significant disruption in banking and other financial activity in the areas in which Seacoast and Fourth Street operate and in a broad range of industries in which the customers of Seacoast and Fourth Street operate. The financial performance of each of Seacoast and Fourth Street generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services that each company offers and whose success it relies on to drive growth, is highly dependent upon the business environment in the primary markets in which it operates and in the United States as a whole. Unfavorable market conditions and uncertainty due to the coronavirus pandemic may result in a deterioration in the credit quality of borrowers, an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for loan losses, adverse asset values of the collateral securing loans and an overall material adverse effect on the quality of the loan portfolio of each of Seacoast and Fourth Street and the combined company following the completion of the merger. In addition, following the coronavirus outbreak in December 2019 and January 2020, market interest rates have declined significantly. On March 3, 2020, the Federal Open Market Committee (“FOMC”) reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%. Subsequently on March 16, 2020, the FOMC further reduced the target federal funds rate by an additional 100 basis points to 0.00% to 0.25%. These reductions in interest rates, and continued fluctuations in the interest rate environment as a result of changes in monetary policies of the Federal Reserve Board, including in connection with efforts to address the economic fallout from the coronavirus outbreak, could have significant adverse effects on the earnings, financial condition and results of operations of Seacoast, Fourth Street and the combined company following the completion of the merger. In addition, recent actions by US federal, state and foreign governments to address the pandemic, including travel bans and school, business and entertainment venue closures, “shelter in place” policies, and lock downs may also have a significant adverse effect on the markets in which Seacoast and Fourth Street conduct their businesses.

The extent to which the coronavirus impacts the businesses of Seacoast and Fourth Street will depend on future developments in the United States and around the world, which are highly uncertain, changing rapidly, and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions required to contain and treat it, among others. There can be no assurance that efforts by each of Seacoast and Fourth Street and the combined company following the completion of the merger to address the adverse impacts of the coronavirus will be effective. If Seacoast or Fourth Street are unable to recover from a business disruption or a long-term business down-turn on a timely basis, the combined company’s business, financial condition and results of operations will be adversely affected. The coronavirus outbreak could also delay, increase the costs of, or otherwise adversely affect, the integration of the businesses of the two companies following the completion of the merger and make it more difficult for the combined company to realize anticipated synergies and cost savings in the amounts estimated or in the time frame contemplated or at all.

Because the sale price of Seacoast common stock will fluctuate, including as a result of COVID-19, you cannot be sure of the value of the per share stock consideration that you will receive in the merger until the closing.

Under the terms of the merger agreement, each share of Fourth Street common stock outstanding immediately prior to the effective time of the merger (excluding shares of Fourth Street common stock

 

16

 

owned by Fourth Street, Seacoast or SNB or the dissenting shares) will be converted into the right to receive 0.1275 shares of Seacoast common stock (plus cash in lieu of fractional shares), which is subject to adjustment based on the value of Fourth Street’s consolidated tangible shareholders’ equity. The value of the shares of Seacoast common stock to be issued to Fourth Street shareholders in the merger will fluctuate between now and the closing date of the merger due to a variety of factors, including general market and economic conditions, changes in the parties’ respective businesses, operations and prospects, the recent outbreak of a novel strain of coronavirus, COVID-19, and regulatory considerations, among other things. Many of these factors are beyond the control of Seacoast and Fourth Street. We make no assurances as to whether or when the merger will be completed. Fourth Street shareholders should obtain current sale prices for shares of Seacoast common stock before voting their shares of Fourth Street common stock at the special meeting.

The merger will not be completed unless important conditions are satisfied or waived, including approval by Fourth Street shareholders.

Specified conditions set forth in the merger agreement must be satisfied or waived to complete the merger. If the conditions are not satisfied or waived, to the extent permitted by law or stock exchange rules, the merger will not occur or will be delayed and each of Seacoast and Fourth Street may lose some or all of the intended benefits of the merger. The following conditions, in addition to other closing conditions, must be satisfied or waived, if permissible, before Seacoast and Fourth Street are obligated to complete the merger:

•

The merger agreement and the transactions contemplated thereby must have been approved by the affirmative vote of a majority of the outstanding shares of Fourth Street common stock;

​

•

All regulatory consents required to consummate the transactions contemplated by the merger agreement must have been obtained and all waiting periods required by law must have expired and such consents must not be subject to any condition or consequence that would have a material adverse effect on Seacoast or any of its subsidiaries, including Fourth Street, after the effective time of the merger;

​

•

No order issued by any governmental authority preventing the consummation of the merger shall be in effect and no law or order shall have been enacted, entered, promulgated or enforced by any governmental authority that prohibits, restrains or makes illegal the consummation of the merger;

​

•

The registration statement (of which this proxy statement/prospectus is a part) registering shares of Seacoast common stock to be issued in the merger must have been declared effective, no stop order may have been issued by the SEC and no action, suit, proceeding or investigation by the SEC to suspend the effectiveness of the registration statement shall have been initiated and continuing;

​

•

The holders of no more than 5% of Fourth Street common stock shall have taken the actions required by the FBCA to qualify their common stock as dissenting shares;

​

•

Since the date of the merger agreement, no fact, circumstance or event shall have occurred that has had or is reasonably likely to have a material adverse effect on either party;

​

•

Certain Fourth Street employees shall have entered into claims letters and/or restrictive covenant agreements;

​

•

Fourth Street’s consolidated tangible shareholders’ equity as of the close of business on the 5th business day prior to the closing date shall not be less than $25,250,000 and Freedom Bank’s general allowance for loan and lease losses shall not be less than 1.12% of total loans and leases outstanding;

​

•

All outstanding Fourth Street equity awards shall have been terminated and cashed out and Fourth Street’s board of directors and shareholders shall have taken all action necessary to terminate the Fourth Street stock plans;

​

•

Each party shall have received from its tax counsel or accounting firm a U.S. federal income tax opinion that the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code; and

​

 

17

 

•

The shares of Seacoast common stock to be issued pursuant to the merger shall have been approved for listing on the NASDAQ.

​

For a more detailed description of the conditions set forth in the merger agreement that must be satisfied or waived to complete the merger, see “The Merger Agreement  —  Conditions to Completion of the Merger” beginning on page   .

Shares of Seacoast common stock to be received by holders of Fourth Street common stock as a result of the merger will have rights different from the shares of Fourth Street common stock.

Upon completion of the merger, the rights of former Fourth Street shareholders will be governed by the articles of incorporation, as amended, and bylaws of Seacoast. The rights associated with Fourth Street common stock are different from the rights associated with Seacoast common stock, although both companies are organized under Florida law. See “Comparison of Shareholders’ Rights” beginning on page   for a discussion of the different rights associated with Seacoast common stock.

Fourth Street shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

Fourth Street shareholders currently have the right to vote in the election of the board of directors of Fourth Street and on other matters affecting Fourth Street. Upon the completion of the merger, Fourth Street’s shareholders will be shareholders of Seacoast with a percentage ownership of Seacoast that is smaller than such shareholders’ current percentage ownership of Fourth Street. It is currently expected that the former shareholders of Fourth Street as a group will receive shares in the merger constituting approximately 4.1% of the outstanding shares of the combined company’s common stock immediately after the merger. Because of this, Fourth Street shareholders will have less influence on the management and policies of the combined company than they now have on the management and policies of Fourth Street.

If a Fourth Street shareholder exercises statutory dissenters’ rights, the value such shareholder receives could be less than the value of the merger consideration such shareholder would otherwise receive pursuant to the merger agreement.

Pursuant to the FBCA, a Fourth Street shareholder who perfects dissenters’ rights as provided in such section is entitled to receive payment in cash of the value of each share of Fourth Street common stock held by such shareholder. The value of the share of Fourth Street common stock, as determined in accordance with the Florida statutes, may be less than the value of a share of the Fourth Street common stock such shareholder would otherwise receive pursuant to the merger agreement. See “The Merger  —  Dissenters’ Rights for Fourth Street Shareholders.”

In the event that holders of Fourth Street subordinated debentures elect not to convert their debentures into shares of Fourth Street common stock, Fourth Street may be required to receive regulatory approval to redeem the debentures.

The merger agreement requires Fourth Street to cause certain subordinated debentures to be converted into Fourth Street common stock or repaid in full or otherwise terminated prior to the effective time of the merger. In the event that the value of the conversion exercise price for the subordinated debentures exceeds the value of the merger consideration to be received in exchange for shares of Fourth Street common stock, debenture holders may not elect to convert their debentures to shares of Fourth Street common stock. In this event, Fourth Street would need to redeem the debentures in cash. In order to have sufficient cash to fund such redemption, Fourth Street may need to make a special dividend request of both the Florida Office of Financial Regulation and the FDIC for Freedom Bank to distribute proceeds to Fourth Street. Such approvals required in connection with the cash dividend from Freedom Bank to Fourth Street may not be received or may be subject to unfavorable terms.

Seacoast and Fourth Street will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees, customers, suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of Fourth Street and Seacoast.

 

18

 

These uncertainties may impair Seacoast’s or Fourth Street’s ability to attract, retain and motivate key personnel, depositors and borrowers pending the consummation of the merger, as such personnel, depositors and borrowers may experience uncertainty about their future roles following the consummation of the merger. Additionally, these uncertainties could cause customers (including depositors and borrowers), suppliers, vendors and others who deal with Seacoast or Fourth Street to seek to change existing business relationships with Seacoast or Fourth Street or fail to extend an existing relationship. In addition, competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the merger.

Seacoast and Fourth Street have a small number of key personnel. The pursuit of the merger and the preparation for the integration may place a burden on each company’s management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on each company’s business, financial condition and results of operations.

In addition, the merger agreement restricts Fourth Street from taking certain actions without Seacoast’s consent while the merger is pending. These restrictions may, among other matters, prevent Fourth Street from pursuing otherwise attractive business opportunities, selling assets, incurring indebtedness, engaging in significant capital expenditures in excess of certain limits set forth in the merger agreement, entering into other transactions or making other changes to Fourth Street’s business prior to consummation of the merger or termination of the merger agreement. These restrictions could have a material adverse effect on Fourth Street’s business, financial condition and results of operations. Please see the section entitled “The Merger Agreement — Conduct of Business Pending the Merger” beginning on page   for a description of the covenants applicable to Fourth Street and Seacoast.

Seacoast may fail to realize the cost savings estimated for the merger.

Although Seacoast estimates that it will realize cost savings from the merger when fully phased in, it is possible that the estimates of the potential cost savings could turn out to be incorrect. For example, the combined purchasing power may not be as strong as expected, and therefore the cost savings could be reduced. In addition, unanticipated growth in Seacoast’s business may require Seacoast to continue to operate or maintain some facilities or support functions that are currently expected to be combined or reduced. The cost savings estimates also depend on Seacoast’s ability to combine the businesses of Seacoast and Fourth Street in a manner that permits those costs savings to be realized. If the estimates turn out to be incorrect or Seacoast is not able to combine the two companies successfully, the anticipated cost savings may not be fully realized or realized at all, or may take longer to realize than expected.

The combined company expects to incur substantial expenses related to the merger.

The combined company expects to incur substantial expenses in connection with completing the merger and combining the business, operations, networks, systems, technologies, policies and procedures of Seacoast and Fourth Street. Although Seacoast and Fourth Street have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the completion of the merger. In addition, prior to completion of the merger, each of Fourth Street and Seacoast will incur or have incurred substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement. If the merger is not completed, Seacoast and Fourth Street would have to recognize these expenses without realizing the anticipated benefits of the merger.

Seacoast and Fourth Street may waive one or more of the conditions to the merger.

Prior to or at the effective time of the merger, either party has the right to waive any default in the performance of any term of the merger agreement by the other party, to waive or extend the time for the

 

19

 

compliance or fulfillment by the other party of any and all of such other party’s obligations under the merger agreement, and to waive any or all of the conditions to its obligations under the merger agreement.

The merger is expected to qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

It is expected that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and the obligation of Seacoast to complete the merger is conditioned upon the receipt of a U.S. federal income tax opinion to that effect from Seacoast’s tax counsel. This tax opinion represents the legal judgment of counsel rendering the opinion and is not binding on the Internal Revenue Service or the courts. If the merger does not qualify as a tax-free reorganization, then the holders of shares of Fourth Street common stock will recognize any gain with respect to the entire consideration received in the merger, including any shares of Seacoast stock received as well as any cash received in lieu of fractional shares of Seacoast common stock. The consequences of the merger to any particular Fourth Street shareholder will depend on that shareholder’s individual situation. We strongly urge you to consult your own tax advisor to determine the particular tax consequences of the merger to you.

The fairness opinion of Fourth Street’s financial advisor will not reflect changes in circumstances between the date of the opinion and the completion of the merger.

Fourth Street’s board of directors received an opinion from its financial advisor to address the fairness of the merger consideration, from a financial point of view, to the holders of Fourth Street’s common stock and stock options as of January 23, 2020. Subsequent changes in the operation and prospects of Seacoast or Fourth Street, general market and economic conditions and other factors that may be beyond the control of Seacoast or Fourth Street, including the recent pandemic of coronavirus (COVID-19) that has caused higher than normal volatility in the financial markets generally, and on which Fourth Street’s financial advisor’s opinion was based, may significantly alter the value of Seacoast or the price of the shares of Seacoast common stock by the time the merger is completed. Because Fourth Street does not anticipate asking its advisor to update its opinion, the opinion will not address the fairness of the merger consideration from a financial point of view at the time the merger is completed, or as of any other date other than the date of such opinion. For a description of the opinion that Fourth Street received from its financial advisor, please refer to the sections entitled “The Merger — Opinion of Fourth Street’s Financial Advisor” beginning on page    .

Fourth Street’s executive officers and directors have financial interests in the merger that are different from, or in addition to, the interests of Fourth Street shareholders.

Executive officers and the board of directors of Fourth Street negotiated the terms of the merger agreement with Seacoast, and the Fourth Street board of directors unanimously approved and recommended that Fourth Street shareholders vote to approve the merger agreement. In considering these facts and the other information contained in this proxy statement/prospectus, you should be aware that certain Fourth Street executive officers and directors have financial interests in the merger that are different from, or in addition to, the interests of Fourth Street shareholders generally. See “The Merger — Interests of Fourth Street Directors and Executive Officers in the Merger” on page    for information about these financial interests.

The termination fees and the restrictions on third party acquisition proposals set forth in the merger agreement may discourage others from trying to acquire Fourth Street.

Until the completion of the merger, with some limited exceptions, Fourth Street is prohibited from soliciting, initiating, encouraging or participating in any discussion concerning a proposal to acquire Fourth Street, such as a merger or other business combination transaction, with any person other than Seacoast. In addition, Fourth Street has agreed to pay to Seacoast in certain circumstances a termination fee equal to $2,900,000. These provisions could discourage other companies from trying to acquire Fourth Street even though those other companies might be willing to offer greater value to Fourth Street shareholders than Seacoast has offered in the merger. The payment of any termination fee could also have an adverse effect on Fourth Street’s financial condition. See “The Merger Agreement — Third Party Proposals” beginning on page    and “The Merger Agreement — Termination Fee” beginning on page    .

 

20

 

Failure of the merger to be completed, the termination of the merger agreement or a significant delay in the consummation of the merger could negatively impact Seacoast and Fourth Street.

If the merger is not consummated, the ongoing business, financial condition and results of operations of each party may be materially adversely affected and the market price of each party’s common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the merger will be consummated. If the consummation of the merger is delayed, the business, financial condition and results of operations of each company may be materially adversely affected. If the merger agreement is terminated and a party’s board of directors seeks another merger or business combination, such party’s shareholders cannot be certain that such party will be able to find a party willing to engage in a transaction on more attractive terms than the merger.

If the merger is not completed, Seacoast and Fourth Street will have incurred substantial expenses without realizing the expected benefits of the merger.

Each of Seacoast and Fourth Street has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of filing, printing, and mailing this proxy statements/prospectus, and all filing and other fees paid to the SEC in connection with the merger. If the merger is not completed, Seacoast and Fourth Street would have to recognize these expenses without realizing the expected benefits of the merger.

Some of the performing loans in the Fourth Street loan portfolio being acquired by Seacoast may be under collateralized, which could affect Seacoast’s ability to collect all of the loan amount due.

In an acquisition transaction, the purchasing financial institution may be acquiring under-collateralized loans from the seller. Under-collateralized loans are risks that are inherent in any acquisition transaction and are mitigated through the loan due diligence process that the purchaser performs and the estimated fair market value adjustment that the purchaser places on the seller’s loan portfolio. The year a loan was originated can impact the current value of the collateral. Many Florida banks have performing loans that are under-collateralized because of the decline in real estate values during the 2006 through 2010 economic downturn. While real estate values generally commenced stabilizing in 2011, and in some markets began to increase in recent years, nonetheless like other financial services institutions, Fourth Street’s and Seacoast’s loan portfolios may have under-collateralized loans that are still performing.

 

21

 

 

•

the sale price of Seacoast common stock could decline before the completion of the merger, including as a result of the financial performance of Seacoast or Fourth Street or more generally due to broader stock market movements and the performance of financial companies and peer group companies;

​

•

the continuation of the historically low short-term interest rate environment, other changes in interest rates, deposit flows, loan demand and real estate values; and

​

•

changes in general business, economic and market conditions.

​

For additional information concerning factors that could cause actual conditions, events or results to materially differ from those described in the forward-looking statements, please refer to the “Risk Factors” section of this proxy statement/prospectus, as well as the factors set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Seacoast’s most recent Form 10-K report and to Seacoast’s most recent Form 10-Q and 8-K reports, which are available online at www.sec.gov, and are incorporated by reference herein. No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of Seacoast or Fourth Street. The forward-looking statements are made as of the date of this proxy statement/prospectus or the date of the applicable document incorporated by reference into this proxy statement/prospectus. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

23

 

 

 

Any dividends paid on Seacoast’s common stock would be declared and paid at the discretion of its board of directors and would be dependent upon Seacoast’s liquidity, financial condition, results of operations, capital requirements and such other factors as the board of directors may deem relevant. Fourth Street does not pay dividends to its common shareholders.

 

26

 

INFORMATION ABOUT THE FOURTH STREET SPECIAL MEETING

This section contains information about the special meeting that Fourth Street has called to allow Fourth Street shareholders to vote on the approval of the merger agreement and the 280G proposal. The Fourth Street board of directors is mailing this proxy statement/prospectus to you, as a Fourth Street shareholder, on or about     , 2020. Together with this proxy statement/prospectus, the Fourth Street board of directors is also sending you a notice of the special meeting of Fourth Street shareholders and a form of proxy that the Fourth Street board of directors is soliciting for use at the special meeting and at any adjournments or postponements of the special meeting.

Time, Date, and Place

The special meeting is scheduled to be held on            , 2020 at       , local time, at      , Saint Petersburg, Florida.

We intend to hold our special meeting in person. However, we are actively monitoring the coronavirus (COVID-19) situation. We are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments have and may continue to impose. If it is not possible or advisable to hold our special meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our website at www.freedombank.com for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, we encourage you to vote your shares prior to the special meeting.

Matters to be Considered at the Meeting

At the special meeting, Fourth Street shareholders will be asked to consider and vote on:

•

a proposal to approve the merger agreement, which we refer to as the merger proposal;

​

•

a proposal, which we refer to as the 280G proposal, to approve a portion of certain compensatory payments or benefits that certain Fourth Street directors are or may be entitled to receive in connection with the merger or certain subsequent events in order to avoid any potential adverse federal tax consequences for Fourth Street and such individuals under Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended;

​

•

a proposal of the Fourth Street board of directors to adjourn or postpone the special meeting, if necessary or appropriate, including to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement and the 280G proposal, which we refer to as the adjournment proposal; and

​

•

any other matters as may properly be brought before the special meeting or any adjournment or postponement of the special meeting.

​

At this time, the Fourth Street board of directors is unaware of any other matters that may be presented for action at the special meeting. If any other matters are properly presented, however, and you have completed, signed and submitted your proxy, the person(s) named as proxy will have the authority to vote your shares in accordance with his or her judgment with respect to such matters. A copy of the merger agreement is included in this proxy statement/prospectus as Appendix A, and we encourage you to read it carefully in its entirety.

Recommendation of the Fourth Street Board of Directors

The Fourth Street board of directors recommends that Fourth Street shareholders vote “FOR” the merger proposal, “FOR” the 280G proposal, and “FOR” the adjournment proposal. See “The Merger — Fourth Street’s Reasons for the Merger and Recommendations of the Fourth Street Board of Directors.”

Record Date and Quorum

           , 2020 has been fixed as the record date for the determination of Fourth Street shareholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. At

 

27

 

the close of business on the record date, there were          shares of Fourth Street common stock outstanding and entitled to vote at the special meeting, held by approximately          holders of record.

A quorum is necessary to transact business at the special meeting. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Fourth Street common stock entitled to vote at the meeting is necessary to constitute a quorum. Shares of Fourth Street common stock represented at the special meeting but not voted, including shares that a shareholder abstains from voting, will be counted for purposes of establishing a quorum. Once a share of Fourth Street common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum not only at the special meeting but also at any adjournment or postponement of the special meeting. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed.

Required Vote

The affirmative vote of a majority of the outstanding shares of Fourth Street common stock must vote in favor of the proposal to approve the merger agreement. If you vote to “ABSTAIN” with respect to the merger proposal or if you fail to vote on the merger proposal, this will have the same effect as voting “AGAINST” the merger proposal.

Approving the 280G proposal requires the affirmative vote of more than 75% of the issued and outstanding shares of Fourth Street common stock entitled to vote (excluding shares held by ineligible shareholders). If you vote to “ABSTAIN” with respect to the 280G proposal or if you fail to vote on the 280G proposal, this will have the same effect as voting “AGAINST” the 280G proposal.

The adjournment proposal will be approved if the votes of Fourth Street common stock cast in favor of the adjournment proposal exceed the votes cast against the adjournment proposal. If you vote to “ABSTAIN” with respect to the adjournment proposal or if you fail to vote on the adjournment proposal, this will have no effect on the outcome of the vote on the adjournment proposal.

Each share of Fourth Street common stock you own as of the record date for the special meeting entitles you to one vote at the special meeting on all matters properly presented at the meeting.

How to Vote — Shareholders of Record

Voting in Person.   If you are a shareholder of record, you can vote in person by submitting a ballot at the special meeting. Nevertheless, we recommend that you vote by proxy as promptly as possible, even if you plan to attend the special meeting. This will ensure that your vote is received. If you attend the special meeting, you may vote by ballot, thereby canceling any proxy previously submitted.

Voting by Proxy.   Your proxy card includes instructions on how to vote by mailing in the proxy card. If you choose to vote by proxy, please mark each proxy card you receive, sign and date it, and promptly return it in the envelope enclosed with the proxy card. If you sign and return your proxy without instruction on how to vote your shares, your shares will be voted “FOR” the merger proposal and “FOR” the adjournment proposal. At this time, the Fourth Street board of directors is unaware of any other matters that may be presented for action at the special meeting. If any other matters are properly presented, however, and you have signed and returned your proxy card, the person(s) named as proxy will have the authority to vote your shares in accordance with his or her judgment with respect to such matters. Please do not send in your stock certificates with your proxy card. If the merger is completed, then you will receive a separate letter of transmittal and instructions on how to surrender your Fourth Street stock certificates for the merger consideration.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. SHAREHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.

 

28

 

Revocation of Proxies

You can revoke your proxy at any time before your shares are voted. If you are a shareholder of record, then you can revoke your proxy by:

•

submitting another valid proxy card bearing a later date;

​

•

attending the special meeting and voting your shares in person; or

​

•

delivering prior to the special meeting a written notice of revocation to Fourth Street’s Chief Executive Officer at the following address: Fourth Street Banking Company, 1200 Fourth Street, North, Saint Petersburg, Florida 33701.

​

If you choose to send a completed proxy card bearing a later date or a notice of revocation, the new proxy card or notice of revocation must be received before the beginning of the special meeting. Attendance at the special meeting will not, in and of itself, constitute revocation of a proxy. If you hold your shares in street name with a bank, broker or other nominee, you must follow the directions you receive from your bank, broker or other nominee to change your vote. Your last vote will be the vote that is counted.

Shares Subject to Support Agreement; Shares Held by Directors and Executive Officers

As of the record date, directors and executive officers of Fourth Street and their affiliates owned and were entitled to vote shares of Fourth Street common stock, representing approximately 30.07% of the outstanding shares of Fourth Street common stock entitled to vote on that date.

A total of 3,373,609 shares of Fourth Street common stock, representing approximately 30.07% of the outstanding shares of Fourth Street common stock entitled to vote at the special meeting, are subject to a voting agreement between Seacoast and each of Fourth Street and Fourth Street Bank’s directors who held shares of Fourth Street common stock as of the date of the merger agreement, and each beneficial holder of 5% or more of Fourth Street’s outstanding shares of common stock. Pursuant to the voting agreement, each director of Fourth Street and Fourth Street Bank who held shares of Fourth Street common stock as of the date of the merger agreement, and each beneficial holder of 5% or more of Fourth Street’s outstanding shares of common stock have agreed to, at any meeting of Fourth Street shareholders, however called, or any adjournment or postponement thereof  (and subject to certain exceptions):

•

vote (or cause to be voted) all shares of Fourth Street’s common stock beneficially owned by such director or holder, as applicable, and which such director or holder has the right to vote in favor of the approval of the merger agreement, the merger and each of the transactions contemplated by the merger agreement;

​

•

not vote or grant any proxies to any third party, except where such proxies are directed to vote in favor of the merger agreement, the merger and the transactions contemplated by the merger agreement; and

​

•

vote (or cause to be voted) his shares against any competing transaction.

​

Pursuant to the voting agreement, without the prior written consent of Seacoast, each director has further agreed not to sell or otherwise transfer any shares of Fourth Street common stock. The foregoing summary of the voting entered into by Fourth Street and Fourth Street Bank’s directors who held shares of Fourth Street common stock as of the date of the merger agreement, and each beneficial holder of 5% or more of Fourth Street’s outstanding shares of common stock does not purport to be complete, and is qualified in its entirety by reference to the form of voting agreement attached as Exhibit B to the merger agreement, which is attached as Appendix A to this document.

For more information about the beneficial ownership of Fourth Street common stock by each 5% or greater beneficial owner, each director and executive officer and executive officers as a group, see “Fourth Street Banking Company — Security Ownership of Certain Beneficial Owners and Management.”

Solicitation of Proxies

The proxy for the special meeting is being solicited on behalf of the Fourth Street board of directors. Fourth Street will bear the entire cost of soliciting proxies from you. Fourth Street will reimburse brokerage

 

29

 

firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of Fourth Street stock. Proxies will be solicited principally by mail, but may also be solicited by the directors, officers, and other employees of Fourth Street in person or by telephone, facsimile or other means of electronic communication. Directors, officers and employees will receive no compensation for these activities in addition to their regular compensation, but may be reimbursed for out-of-pocket expenses in connection with such solicitation.

Attending the Meeting

All holders of Fourth Street common stock, including shareholders of record and shareholders who hold their shares in street name through banks, brokers or other nominees, are cordially invited to attend the special meeting. Shareholders of record can vote in person at the special meeting. If you are not a shareholder of record and would like to vote in person at the special meeting, you must produce a legal proxy executed in your favor by the record holder of your shares. In addition, you must bring a form of personal photo identification with you in order to be admitted at the special meeting. We reserve the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the special meeting is prohibited without Fourth Street’s express written consent.

Questions and Additional Information

If you have more questions about the merger or how to submit your proxy or vote, or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card or voting instructions, please contact Fourth Street at:

Fourth Street Banking Company
1200 Fourth Street, North
St. Petersburg, Florida 33701
Telephone: (727) 820-8600
Attn: Cathy P. Swanson, Chief Executive Officer

 

30

 

 

During the remainder of November and into December 2019, Seacoast conducted a formal due diligence review of Fourth Street, which included credit review and management meetings, and the parties began to discuss and negotiate the terms of a definitive agreement. Also in December, Seacoast indicated its desire to have several key Freedom Bank executives enter into noncompetition and nonsolicitation agreements. These executives did not have existing employment agreements or noncompete or nonsolicitation agreements with Freedom Bank. Due to the additional cost that Seacoast would incur to have these executives enter into the agreements, the exchange ratio was reduced to 0.1275 per share.

In early January 2020, Hovde conducted a reverse due diligence review of Seacoast.

On January 13, 2020, Fourth Street and Seacoast executed an agreement extending the exclusivity period to January 24, 2020.

Also in January 2020, additional discussions were held between Seacoast and Fourth Street representatives concerning the negotiation of definitive transaction agreements, and the parties exchanged and discussed drafts of agreements. During the third week of January 2020, representatives of Fourth Street and Seacoast continued to negotiate and finalize the definitive transaction agreements, including the merger agreement, voting agreements for directors, noncompetition agreements for directors and officers, claims letters for directors, and agreements with executive officers of Freedom Bank.

On January 22, 2020, Seacoast’s board of directors met in special session to review and consider the merger agreement and the transactions and agreements contemplated by it. The management team made a presentation relating to the strategic and financial considerations and rationale of the transaction. Further to this discussion, a representative of Sandler O’Neill reviewed the principal terms of the proposed transaction and the financial impacts of the merger on Seacoast and provided comparable transaction analysis for Florida and national bank mergers. At the meeting, Alston & Bird reviewed for the directors the terms and conditions of the merger agreement, the merger and the various agreements to be signed in connection with the merger agreement, and engaged in discussions with the board members on such matters. After additional discussion and deliberation, the Seacoast board of directors adopted and approved the draft merger agreement and the transactions and agreements contemplated by it (subject to no material terms or conditions being revised) and determined that the merger agreement and the transactions contemplated by it were in the best interests of Seacoast and its shareholders.

On January 23, 2020, the boards of directors of Fourth Street and Freedom Bank held a special meeting with representatives of Hovde and legal counsel. The directors reviewed with their advisors the terms of the merger agreement and the merger, and other relevant information. At the meeting, a Hovde representative reviewed with the Fourth Street board Hovde’s financial analysis summarized below under “— Opinion of Fourth Street’s Financial Advisor” and delivered to the Fourth Street board the written opinion of Hovde, which is attached to this proxy statement/prospectus as Appendix B, that, based upon and subject to the various considerations set forth in such opinion, the value of the merger consideration to be received by shareholders of Fourth Street in the merger pursuant to the merger agreement is fair from a financial point of view. In addition, legal counsel reviewed with the directors of Fourth Street and Freedom Bank the most recent draft of the proposed merger agreement and related transaction documents, and the legal standards applicable to the Fourth Street board’s decisions and actions with respect to the proposed transaction. Following a discussion of these matters and other factors listed under “— Recommendation of the Fourth Street Board of Directors and reasons for the Merger” below, the boards of directors of Fourth Street and Freedom Bank concluded that the merger of Fourth Street with and into Seacoast and the merger of Freedom Bank with and into Seacoast National Bank were fair to and in the best interest of Fourth Street and its shareholders and unanimously approved and adopted the merger agreement and the transactions contemplated thereby and recommended the Fourth Street’s shareholders approve the merger agreement.

On January 23, 2020, the parties signed the merger agreement and the related agreements and a press release announcing the transaction was issued. A conference call to discuss the merger was held the next morning on January 24, 2020.

 

32

 

Fourth Street’s Reasons for the Merger and Recommendation of the Fourth Street Board of Directors

After careful consideration, Fourth Street’s board of directors, at a meeting held on January 23, 2020, determined that the merger agreement is advisable, fair to and in the best interests of Fourth Street and its shareholders. Accordingly, Fourth Street’s board of directors adopted and approved the merger agreement and the merger and the other transactions contemplated by the merger agreement and recommends that Fourth Street shareholders vote “FOR” the approval of the merger agreement. In reaching its decision to adopt and approve the merger agreement and the merger and the other transactions contemplated by the merger agreement, and to recommend that its shareholders approve the merger agreement, the Fourth Street board of directors evaluated the merger and the merger agreement in consultation with Fourth Street’s management, as well as its financial and legal advisors, and considered a number of factors, including the following material factors:

•

each of Fourth Street’s, Seacoast’s and the combined company’s business, operations, financial condition, asset quality, earnings and prospects. In reviewing these factors, the Fourth Street board of directors considered its view that Seacoast’s business and operations complement those of Fourth Street and that the merger would result in a combined company with diversified revenue sources, a well-balanced loan portfolio and an attractive funding base, as evidenced by a significant portion of core deposit funding;

​

•

its understanding of the current and prospective environment in which Fourth Street and Seacoast operate, including national and local economic conditions, the interest rate environment, increasing operating costs resulting from regulatory initiatives and compliance mandates, the competitive environment for financial institutions generally, and the likely effect of these factors on Fourth Street both with and without the proposed transaction;

​

•

the reduction in the number of financial institutions with an interest in acquiring Florida banks as a result of the continued consolidation in the banking industry and the acquisition by other financial institutions of several of the banks that were historically active in acquiring Florida banks;

​

•

the exchange ratio is fixed so that if the market price of Seacoast common stock is higher at the time of the closing of the merger, the economic value of the merger consideration to be received by Fourth Street shareholders in exchange for their shares of Fourth Street common stock will also be higher;

​

•

the results that Fourth Street could expect to achieve operating independently, and the likely risks and benefits to Fourth Street shareholders of that course of action, as compared to the value of the merger consideration to be received from Seacoast;

​

•

its view that the size of the institution and related economies of scale were becoming increasingly important to continued success in the current financial services environment, including the increased expenses of regulatory compliance, and that a merger with a larger bank holding company could provide those economies of scale, increase efficiencies of operations and enhance customer products and services;

​

•

its review and discussions with Fourth Street’s management regarding strategic alternatives available to Fourth Street for enhancing value over the long term and the potential risks, rewards and uncertainties associated with such alternatives and the benefits of an acquisition by Seacoast compared to such other alternatives;

​

•

the complementary nature of the cultures of the two companies, which management believes should facilitate integration and implementation of the transaction;

​

•

management’s expectation that the combined company will have a strong capital position upon completion of the transaction;

​

•

its belief that the transaction is likely to provide substantial value to Fourth Street’s shareholders;

​

•

the periodic financial presentations of Hovde Group, LLC (“Hovde”), Fourth Street’s financial advisor, to the Fourth Street board of directors and the oral opinion delivered to Fourth Street’s board of directors on January 23, 2020, which was confirmed by delivery of a written opinion dated January 23, 2020, to the effect that, as of the date of such opinion, and subject to the procedures

​

 

33

 

followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Hovde as set forth in its opinion, the merger consideration to be paid pursuant to the merger agreement to Fourth Street shareholders and option holders was fair, from a financial point of view, as more fully described in the section entitled “The Merger — Opinion of Fourth Street’s Financial Advisor”;

•

the financial and other terms of the merger agreement, the expected tax treatment and deal protection provisions, including the ability of Fourth Street’s board of directors, under certain circumstances, to withdraw or materially adversely modify its recommendation to Fourth Street shareholders that they approve the merger agreement (subject to payment of a termination fee), each of which it reviewed with its outside financial and legal advisors;

​

•

the fact that the merger consideration will consist of shares of Seacoast common stock, which would allow Fourth Street shareholders to participate in a significant portion of the future performance of the combined Fourth Street and Seacoast business and synergies resulting from the merger, and the value to Fourth Street shareholders represented by that consideration;

​

•

the historical performance of Seacoast’s common stock;

​

•

that Fourth Street’s directors and executive officers have financial interests in the merger in addition to their interests as Fourth Street shareholders, including financial interests that are the result of compensation arrangements with Fourth Street, and the manner in which such interests would be affected by the merger;

​

•

the regulatory and other approvals required in connection with the merger and the expectation that such regulatory approvals will be received in a timely manner and without the imposition of unacceptable conditions;

​

•

the merger consideration will generally be tax-free to Fourth Street shareholders based on the expected tax treatment of the merger as a “reorganization” for U.S. federal income tax purposes, as further described under “The Merger — U.S. Federal Income Tax Consequences of the Merger”; and

​

•

the greater liquidity in the trading market for Seacoast common stock relative to the market for Fourth Street common stock due to the listing of Seacoast’s shares on the Nasdaq Global Select Market.

​

The Fourth Street board of directors also considered a number of potential risks and uncertainties associated with the merger in connection with its deliberation of the proposed transaction, including, without limitation, the following:

•

the risk that the merger may not be consummated or that the closing may be unduly delated, including as a result of factors outside either party’s control;

​

•

the potential risk of diverting management attention and resources from the operation of Fourth Street’s business and towards the completion of the merger and the possibility of employee attrition or adverse effects on client and business relationships as a result of the announcement and pendency of the merger;

​

•

the requirement that Fourth Street conduct its business in the ordinary course and the other restrictions on the conduct of Fourth Street’s business prior to the completion of the merger, which may delay or prevent Fourth Street from undertaking business opportunities that may arise pending completion of the merger;

​

•

that under the merger agreement, subject to certain exceptions, Fourth Street cannot solicit competing acquisition proposals;

​

•

the potential risks associated with achieving anticipated cost synergies and savings and successfully integrating Fourth Street’s business, operations and workforce with those of Seacoast and the risk of not realizing all of the anticipated benefits of the merger or not realizing them in the expected timeframe;

​

•

the possibility that Fourth Street will have to pay a $2.9 million termination fee to Seacoast if the merger agreement is terminated under certain circumstances;

​

 

34

 

•

that the exchange ratio is fixed so that if the market price of Seacoast common stock is lower at the time of the closing of the merger, the economic value of the merger consideration to be received by Fourth Street shareholders in exchange for their shares of common stock will also be lower; and

​

•

the other risks under the sections entitled “Cautionary Statement About Forward-Looking Statements” and “Risk Factors.”

​

In considering the recommendation of the Fourth Street board of directors, you should be aware that certain directors and officers of Fourth Street may have interests in the merger that are different from, or in addition to, interests of Fourth Street shareholders generally and may create potential conflicts of interest. The Fourth Street board of directors was aware of these interests and considered them when evaluating and negotiating the merger agreement, the merger and the other transactions contemplated by the merger agreement, and in recommending to Fourth Street’s shareholders that they vote in favor of the proposal to approve the merger agreement. See “Interests of Fourth Street Executive Officers and Directors in the Merger.”

The foregoing discussion of the factors considered by the Fourth Street board of directors is not intended to be exhaustive, but, rather, includes the material factors considered by the Fourth Street board of directors. In reaching its decision to adopt and approve the merger agreement and the merger and the other transactions contemplated by the merger agreement, the Fourth Street board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Fourth Street board of directors considered all these factors as a whole, including discussions with, and questioning of, Fourth Street’s management and Fourth Street’s financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

For the reasons set forth above, the Fourth Street board of directors has adopted and approved the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the merger proposal, “FOR” the 280G proposal and “FOR” the adjournment proposal.

Each of the directors of Fourth Street has entered into a voting agreement with Seacoast, pursuant to which they have agreed to vote in favor of the merger proposal and the other proposals to be voted on at the Fourth Street special meeting. The voting agreements are discussed in more detail in the section entitled “Information About the Fourth Street Special Meeting — Shares Subject to Voting Agreements; Shares Held by Directors and Executive Officers.”

Seacoast’s Reasons for the Merger

As a part of Seacoast’s growth strategy, Seacoast routinely evaluates opportunities to acquire financial institutions. The acquisition of Fourth Street is consistent with Seacoast’s expansion strategy. Seacoast’s board of directors and senior management reviewed the business, financial condition, results of operations and prospects for Fourth Street, the market condition of the market area in which Fourth Street conducts business, the compatibility of the management and the proposed financial terms of the merger. In addition, management of Seacoast believes that the merger will expand Seacoast’s presence in the attractive Tampa-St. Petersburg market, provide opportunities for future growth and provide the potential to realize cost savings. Seacoast’s board of directors also considered the financial condition and valuation for both Fourth Street and Seacoast as well as the financial and other effects the merger would have on Seacoast’s shareholders. The board considered the fact that the acquisition would increase Seacoast’s existing footprint in the Tampa-St. Petersburg market, that market overlap would drive cost savings, and that cultural similarities supported the probability of an efficient, low risk integration with minimal customer attrition. In addition, the board of directors also considered the analysis and presentations from its outside financial advisor, Piper Sandler.

While management of Seacoast believes that revenue opportunities will be achieved and costs savings will be obtained following the merger, Seacoast has not quantified the amount of enhancements or projected the areas of operation in which such enhancements will occur.

In view of the variety of factors considered in connection with its evaluation of the merger, the Seacoast board did not find it useful to and did not attempt to quantify, rank or otherwise assign relative

 

35

 

weights to factors it considered. Further, individual directors may have given differing weights to different factors. In addition, the Seacoast board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination. Rather, the board conducted an overall analysis of the factors it considered material, including thorough discussions with, and questioning of, Seacoast’s management.

Opinion of Fourth Street’s Financial Advisor

The fairness opinion and a summary of the underlying financial analyses of Fourth Street’s financial advisor, Hovde Group, LLC, are described below. The summary and description contains projections, estimates and other forward-looking statements about the future earnings or other measures of the future performance of Fourth Street. The projections were based on numerous variables and assumptions, which are inherently uncertain, including factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in the projections. You should not rely on any of these statements as having been made or adopted by Fourth Street, Freedom Bank, Seacoast or SNB. You should review the copy of the fairness opinion, which is attached as Appendix B.

Hovde acted as Fourth Street’s financial advisor in connection with the proposed merger. Hovde is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger and is familiar with Fourth Street and its operations. As part of its investment banking business, Hovde is continually engaged in the valuation of businesses and their securities in connection with, among other things, mergers and acquisitions. Hovde has experience in, and knowledge of, banks, thrifts and their respective holding companies and is familiar with Fourth Street. Fourth Street’s board of directors selected Hovde to act as Fourth Street’s financial advisor in connection with the merger on the basis of the firm’s reputation and expertise in transactions such as the merger.

Hovde reviewed the financial aspects of the proposed merger with Fourth Street’s board of directors and, on January 23, 2020, delivered a written opinion to Fourth Street’s board of directors that, subject to the review, assumptions and limitations set forth in the opinion, the merger consideration to be received by Fourth Street shareholders and option holders pursuant to the merger agreement is fair, from a financial point of view. In requesting Hovde’s advice and opinion, no limitations were imposed by Fourth Street upon Hovde with respect to the investigations made or procedures followed by Hovde in rendering its opinion.

The full text of Hovde’s written opinion is included in this proxy statement/​prospectus as Appendix B and is incorporated herein by reference. You are urged to read the opinion in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Hovde. The summary of Hovde’s opinion included in this proxy statement/​prospectus is qualified in its entirety by reference to the full text of such opinion.

Hovde’s opinion was directed to Fourth Street’s board of directors and addresses only the fairness of the value of the merger consideration to be received by the shareholders and option holders of Fourth Street pursuant to the merger agreement in connection with the merger. Hovde did not opine on any individual stock, cash, or other components of consideration payable in connection with the merger. Hovde’s opinion did not constitute a recommendation to Fourth Street as to whether or not Fourth Street should enter into the merger agreement or to any shareholders of Fourth Street as to how such shareholders should vote at any meetings of shareholders called to consider and vote upon the merger. Hovde’s opinion does not address the underlying business decision to proceed with the merger or the fairness of the amount or nature of the compensation, if any, to be received by any of the officers, directors or employees of Fourth Street relative to the amount of consideration to be paid with respect to the merger. Hovde’s opinion should not be construed as implying that the value of the merger consideration is necessarily the highest or best price that could be obtained by Fourth Street in a sale, merger, or combination transaction with a third party. Other than as specifically set forth in the opinion, Hovde is not expressing any opinion with respect to the terms and provisions of the merger agreement or the enforceability of any such terms or provisions. Hovde’s opinion is not a solvency opinion and does not in any way address the solvency or financial condition of Fourth Street or Seacoast.

Fourth Street engaged Hovde on July 26, 2019, to serve as a financial advisor to Fourth Street in connection with the proposed merger and to issue a fairness opinion to Fourth Street’s board of directors in

 

36

 

connection with the proposed transaction. Pursuant to Fourth Street’s engagement agreement with Hovde, Hovde received from Fourth Street a fairness opinion fee due upon the delivery of the fairness opinion to Fourth Street and will receive a completion fee. upon the consummation of the merger. In addition to Hovde’s fees, and regardless of whether the merger is consummated, Fourth Street has agreed to reimburse Hovde for certain of its reasonable out-of-pocket expenses. Fourth Street has also agreed to indemnify Hovde and its affiliates for certain liabilities that may arise out of Hovde’s engagement.

Other than in connection with this present engagement, during the two years preceding the date of its opinion, Hovde has not provided investment banking or financial advisory services to Fourth Street. During the two years preceding the date of its opinion Hovde has not provided any investment banking or financial advisory services to Seacoast for which it received a fee. Hovde or its affiliates may presently or in the future seek or receive compensation from Seacoast in connection with future transactions, or in connection with potential advisory services and corporate transactions, although to Hovde’s knowledge none are expected at this time. In the ordinary course of its business as a broker, Hovde may from time to time purchase securities from, and sell securities to, Fourth Street or Seacoast or their affiliates. Except for the foregoing, during the two years preceding the date of this opinion there have not been, and there currently are no mutual understandings contemplating in the future, any material relationships between Hovde and Fourth Street or Seacoast.

Pursuant to the merger agreement, at the effective time Fourth Street shall be merged with and into Seacoast, which we refer to as the merger, in accordance with the provisions of the FBCA. Seacoast shall be the surviving corporation resulting from the merger and the separate corporate existence of Fourth Street shall thereupon cease. Seacoast shall continue to be governed by the laws of the State of Florida, and the separate corporate existence of Seacoast shall continue unaffected by the merger. Prior to the effective time, the boards of directors of SNB and Freedom Bank will execute the bank merger agreement. Subject to the terms and conditions of the merger agreement and the bank merger agreement, Freedom Bank shall be merged with and into SNB, which we refer to as the bank merger. SNB shall be the surviving bank resulting from the bank merger and the separate existence of the Bank shall thereupon cease. SNB shall continue to be governed by the Laws of the United States, and the separate existence of SNB shall continue unaffected by the bank merger. Subject to the satisfaction of the conditions to closing set forth in the bank merger agreement, the bank merger shall occur immediately following the merger unless otherwise determined by Seacoast in its discretion.

Pursuant to the merger agreement, at the effective time, by virtue of the merger and without any action on the part of the parties or the holder thereof, each share of Fourth Street common stock, except for dissenting shares and cancelled shares, that is issued and outstanding immediately prior to the effective time shall be converted into the right to receive (i) 0.1275, which we refer to as the exchange ratio, of a share of Seacoast common stock, which we refer to as the merger consideration; and (ii) cash in lieu of fractional shares as specified pursuant to Section 1.5(c) of the merger agreement. Subject to the provisions of Section 5.2(i) of the merger agreement, the merger consideration may be adjusted as described herein below. The consideration which all of Fourth Street shareholders and option holders are entitled to receive pursuant to the merger agreement is collectively referred to as the aggregate merger consideration.

Hovde notes that Section 1.7 of the merger agreement provides that Fourth Street shall take all actions necessary to cause each Fourth Street equity award issued and outstanding immediately prior to the effective time to be terminated in exchange for an amount in cash, without interest, equal to the product of  (x) the aggregate number of shares of Fourth Street common stock subject to such Fourth Street equity award immediately prior to its termination, multiplied by (y) the excess, if any, of the value of the average closing price multiplied by the exchange ratio, as finally determined as of the effective time, over the exercise price per share of the Fourth Street equity award. Hovde was informed by Fourth Street that as of January 22, 2020 there were 616,500 Fourth Street equity awards outstanding with a weighted average exercise price of  $1.64 per share of Fourth Street common stock.

Section 4.22 of the merger agreement stipulates that Fourth Street shall, and shall cause its subsidiaries to, use commercially reasonable efforts to cause its and their representatives to, take all actions necessary, appropriate or advisable to either (i) redeem all issued and outstanding subordinated debentures due 2026 of Fourth Street, or the debentures, or (ii) facilitate and cause the holders of the debentures to convert such debentures into Fourth Street common stock, effective as of, and subject to and conditioned upon the

 

37

 

occurrence of, the closing, in accordance with the debentures and such other governing instruments and applicable law. With Fourth Street’s consent and for purposes of its analysis and opinion, Hovde assumed that all debentures are converted which would result in the issuance of 5,405,405 shares of Fourth Street common stock as a result of the conversion.

Additionally, Hovde notes that Section 5.2 of the merger agreement provides that the merger agreement may be terminated by Seacoast upon the occurrence of certain conditions including (i) if the Fourth Street consolidated tangible shareholders’ equity (as defined by Section 7.1 of the merger agreement) is less than $25,250,000 as of the close of business on the fifth business day prior to the closing date and (ii) if Freedom Bank’s general allowance for loan and lease losses is less than 1.12% of total loans and leases outstanding. In the event the conditions set forth in Section 5.2(i) of the merger agreement are not satisfied, Seacoast shall have the option to adjust the merger consideration downward by an amount that with Fourth Street’s good faith agreement with the calculation equals the difference between the Fourth Street consolidated tangible shareholders’ equity and the Fourth Street target consolidated tangible shareholders’ equity and waive the satisfaction of such condition set forth in Section 5.2(i). If, instead of adjusting the merger consideration, Seacoast elects to not close the transaction and terminate the merger agreement in accordance with Article VI of the merger agreement, Seacoast agrees that it will also waive any breach of Section 4.2(v) of the merger agreement.

Pursuant to Section 6.1(h), the merger agreement may be terminated by Fourth Street at any time during the five (5) day period commencing with the determination date, if both of the following conditions are satisfied:

(A)

the number obtained by dividing the Seacoast average closing price by $29.39, which we refer to as the buyer ratio, is less than 0.85; and

​

(B)

the buyer ratio shall be less than the number obtained by (A) dividing the average NASDAQ bank index prices for the ten (10) consecutive trading days ending on the trading day prior to the determination date, which we call the final index price, by the average of the NASDAQ bank index prices for the ten (10) consecutive trading days ending on the last trading day immediately preceding the date of the first public announcement of entry into the merger agreement which we call the initial index price and (b) subtracting 0.20 from such quotient (the “index ratio”).

​

If Fourth Street elects to exercise the termination right pursuant to Section 6.1(h), it shall give written notice to Seacoast not later than the aforementioned five (5) day period. During the five (5) day period commencing with its receipt of such notice, Seacoast shall have the option to adjust the merger consideration (calculated to the fourth decimal) to equal the lesser of:

(i)

the quotient (rounded to the fourth decimal) of  (A) the product of the Seacoast starting price of $29.39 multiplied by 0.85, and further multiplied by the merger C consideration (as then in effect), divided by (B) the Seacoast average closing price; or

​

(ii)

the quotient (rounded to the fourth decimal) of  (A) the product of the index ratio multiplied by the merger consideration (as then in effect), divided by (B) the buyer ratio.

​

If Seacoast so elects within such five (5) day period, it shall give prompt written notice to Fourth Street of such election and the revised merger consideration.

Additionally, the merger agreement may be terminated and the merger and the bank merger abandoned at any time prior to the effective time if any of the conditions of section 6.1 of the merger agreement are met. The event the merger agreement is terminated pursuant to section 6.1, Fourth Street shall pay Seacoast a termination fee in the amount of  $2,900,000.

With Fourth Street’s knowledge and consent and for purposes of its analysis and opinion Hovde assumed (i) the closing price of Seacoast common stock on January 22, 2020 is $29.39 per share; (ii) the exchange ratio is 0.1275 and has not been adjusted as provided in the merger agreement; (iii) there are 11,219,850 shares of Fourth Street common stock outstanding as of January 22, 2020; and (iv) the Fourth Street debentures outstanding as of January 22, 2020 will be fully converted resulting in the issuance of 5,405,405 shares of Fourth Street common stock and a total of 16,625,255 fully converted shares of

 

38

 

Fourth Street common stock outstanding as of the closing date. Based upon 16,625,255 fully converted shares of Fourth Street common stock outstanding as of the closing date the total value of the merger consideration is $62,298,571. Hovde also assumed that all 616,500 Fourth Street equity awards with a weighted average exercise price of  $1.64 are exercised resulting in the total Fourth Street Stock Award payment of $1,301,570 thereby resulting in the value of the aggregate merger consideration being $63,600,141.

The following is a summary of the analyses performed and matters considered by Hovde in connection with its fairness opinion. The summary set forth below does not purport to be a complete description of all of the analyses performed by Hovde in rendering its opinion, but it does summarize all of the material analyses performed by Hovde. During the course of its engagement and for the purposes of its fairness opinion, Hovde:

(i)

reviewed a draft of the merger agreement dated January 2, 2020 as provided to Hovde by Fourth Street;

​

(ii)

reviewed unaudited financial statements for Fourth Street for the year ended December 31, 2019;

​

(iii)

reviewed certain historical annual reports of Fourth Street, including Fourth Street’s audited annual report for the years ended December 31, 2018 and 2017;

​

(iv)

reviewed certain historical publicly available business and financial information concerning Fourth Street;

​

(v)

reviewed certain internal financial statements and other financial and operating data concerning Fourth Street;

​

(vi)

reviewed financial projections prepared by certain members of senior management of Fourth Street;

​

(vii)

discussed with certain members of senior management of Fourth Street the business, financial condition, results of operations and future prospects of Fourth Street; the history and past and current operations of Fourth Street; and Fourth Street’s and Seacoast’s assessment of the rationale for the merger;

​

(viii)

assessed current general economic, market and financial conditions;

​

(ix)

reviewed the terms of recent merger, acquisition and control investment transactions, to the extent publicly available, involving financial institutions and financial institution holding companies that Hovde considered relevant;

​

(x)

took into consideration Hovde’s experience in other similar transactions and securities valuations as well as Hovde’s knowledge of the banking and financial services industry;

​

(xi)

reviewed certain publicly available financial and stock market data relating to selected public companies that Hovde deemed relevant to its analysis; and

​

(xii)

performed such other analyses and considered such other factors as Hovde deemed appropriate.

​

Hovde assumed, without investigation, that there have been, and from the date of its opinion through the effective time will be, no material changes in the financial condition and results of operations of Fourth Street since the date of the latest financial information described above. Hovde further assumed, without independent verification, that the representations and financial and other information included in the merger agreement and all other related documents and instruments that are referred to therein or were otherwise provided to Hovde by Fourth Street and Seacoast are true and complete. Hovde relied upon the management of Fourth Street as to the reasonableness and achievability of the financial forecasts, projections and other forward-looking information provided to Hovde by Fourth Street and Fourth Street’s professionals, and Hovde assumed such forecasts, projections and other forward-looking information were reasonably prepared by Fourth Street and Fourth Street’s professionals on a basis reflecting the best currently available information and Fourth Street’s and Fourth Street’s professionals judgments and estimates. Hovde assumed that such forecasts, projections and other forward-looking information would be realized in the amounts and at the times contemplated thereby, and Hovde does not assume any responsibility for the accuracy or

 

39

 

reasonableness thereof. Hovde was authorized by Fourth Street to rely upon such forecasts, projections and other information and data, and Hovde expresses no view as to any such forecasts, projections or other forward-looking information or data, or the bases or assumptions on which they were prepared.

In performing its review, Hovde assumed and relied upon the accuracy and completeness of all of the financial and other information that was available to Hovde from public sources, that was provided to Hovde by Fourth Street or Seacoast or their respective Representatives or that was otherwise reviewed by Hovde for purposes of rendering its opinion. Hovde further relied on the assurances of the respective managements of Fourth Street and Seacoast that they were not aware of any facts or circumstances that would make any of such information inaccurate or misleading. Hovde was not asked to undertake, and did not undertake, an independent verification of any of such information, and Hovde does not assume any responsibility or liability for the accuracy or completeness thereof. Hovde assumed that each Party to the merger agreement would advise Hovde promptly if any information previously provided to Hovde became inaccurate or was required to be updated during the period of its review.

Hovde is not expert in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto. Hovde assumed that such allowances for Fourth Street and Seacoast are, in the aggregate, adequate to cover such losses and will be adequate on a pro forma basis for the combined entity. Hovde was not requested to make, and did not make, an independent evaluation, physical inspection or appraisal of the assets, properties, facilities, or liabilities (contingent or otherwise) of Fourth Street or Seacoast, the collateral securing any such assets or liabilities, or the collectability of any such assets, and Hovde was not furnished with any such evaluations or appraisals; nor did Hovde review any loan or credit files of Fourth Street or Seacoast.

Hovde undertook no independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities to which Fourth Street or Seacoast was or is a party or may be subject, and Hovde’s opinion made no assumption concerning, and therefore does not consider, the possible assertion of claims, outcomes or damages arising out of any such matters. Hovde also assumed, with Fourth Street’s consent, that Fourth Street and Seacoast were not parties to any material pending transaction not already disclosed, including without limitation any financing, recapitalization, acquisition or merger, divestiture or spin-off, other than the merger contemplated by the merger agreement.

Hovde relied upon and assumed, with Fourth Street’s consent and without independent verification, that the merger will be consummated substantially in accordance with the terms set forth in the merger agreement, without any waiver of material terms or conditions by Fourth Street, Seacoast or any other party to the merger agreement and that the final agreement will not differ materially from the draft Hovde reviewed. Hovde assumed that the merger will be consummated in compliance with all applicable laws and regulations. Fourth Street advised Hovde that they were not aware of any factors that would impede any necessary regulatory or governmental approval of the merger. Hovde assumed that the necessary regulatory and governmental approvals as granted would not be subject to any conditions that would be unduly burdensome on Fourth Street or Seacoast or would have a material adverse effect on the contemplated benefits of the merger.

Hovde’s opinion does not consider, include or address: (i) any legal, tax, accounting, or regulatory consequences of the merger on Fourth Street or its shareholders; (ii) any advice or opinions provided by any other advisor to the board of directors of Fourth Street or Fourth Street; (iii) any other strategic alternatives that might be available to Fourth Street; or (iv) whether Seacoast has sufficient cash or other sources of funds to enable it to pay the consideration contemplated by the merger.

Hovde’s opinion was based solely upon the information available to Hovde and described above, and the economic, market and other circumstances as they existed as of the date thereof. Events occurring and information that becomes available after the date thereof could materially affect the assumptions and analyses used in preparing its opinion. Hovde has not undertaken to update, revise, reaffirm or withdraw its opinion or to otherwise comment upon events occurring or information that becomes available after the date thereof.

In arriving at its opinion, Hovde did not attribute any particular weight to any single analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis

 

40

 

and factor. Accordingly, Hovde believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses, would create an incomplete view of the process underlying its opinion.

The following is a summary of the material analyses prepared by Hovde and delivered to Fourth Street’s board of directors on January 23, 2020 in connection with the delivery of its fairness opinion. This summary is not a complete description of all the analyses underlying the fairness opinion or the presentation prepared by Hovde, but it summarizes the material analyses performed and presented in connection with such opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis, and the application of those methods to the particular circumstances of the contemplated merger. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Hovde did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses summarized below include information presented in tabular format. The analyses and the summary of the analyses must be considered as a whole, and selecting portions of the analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying the analyses and opinion of Hovde. The tables alone are not a complete description of the financial analyses.

Market Approach — Comparable Merger and Acquisition Transactions.   As part of its analysis, Hovde reviewed publicly available information related to two comparable groups (a “Regional Group” and a “Nationwide Group”) of select acquisition transactions of banks. The Regional Group consisted of acquisition transactions where targets were headquartered in Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia announced since January 1, 2017, in which the targets’ total assets were between $250 million and $750 million, last-twelve-months return on average assets was greater than 0.90% and nonperforming assets to total assets was less than 1.50%. The Nationwide Group consisted of acquisition transactions of banks in the United States announced since January 1, 2018, in which the targets’ total assets were between $300 million and $500 million, last-twelve-months return on average assets was between 1.10% and 1.80% and nonperforming assets to total assets was less than 1.50%. In each case, for which financial information was available, no transaction that fit the above selection criteria was excluded. Information for the target institutions was based on balance sheet data as of, and income statement data for, the twelve months preceding the most recent quarter prior to announcement of the transactions. The resulting two groups consisted of the following precedent transactions (15 transactions for the Regional Group and 17 transactions for the Nationwide Group):

 

41

 

For each precedent transaction, Hovde compared the implied ratio of the aggregate merger consideration to certain financial characteristics of Fourth Street as follows:

•

the multiple of the value of the aggregate merger consideration to the acquired company’s LTM net earnings per share (the “Price-to-LTM Earnings Multiple”);

​

•

the multiple of the value of the aggregate merger consideration to the acquired company’s common tangible book value (the “Price-to-Common Tangible Book Value Multiple”); and

​

•

the multiple of the value of the aggregate merger consideration to the acquired company’s adjusted common tangible book value (the “Price-to-Adjusted Common Tangible Book Value Multiple”); and

​

•

the multiple of the difference between the value of the aggregate merger consideration and the acquired company’s common tangible book value to the acquired company’s core deposits (the “Premium-to-Core Deposits Multiple”).

​

The results of the analysis are set forth in the table below. Transaction multiples for the merger were based upon the value of the aggregate merger consideration assumed by Hovde of  $63,600,141 and were based on December 31, 2019 financial results for Fourth Street.

 

42

 

(1)

Fourth Street’s common tangible book value has been adjusted to reflect the assumed conversion of its debentures based on their net carrying value of  $9,969,086 as of December 31, 2019.

​

(2)

Price-to-Adjusted common tangible book value equals the adjusted purchase price divided by core capital where: (a) core capital equals total tangible assets multiplied by 8%; (b) excess capital equals total common tangible book value less core capital; and (c) adjusted purchase price equals the value of aggregate merger consideration less excess capital (assumes dollar-for-dollar payment on excess capital).

​

(3)

Represents the premium of the implied merger value over common tangible book value, expressed as a percentage of core deposits. Core deposits are defined as total deposits less foreign deposits and time deposit accounts greater than $100,000.

​

Using publicly available information, Hovde compared the financial performance of Fourth Street with that of the median of the precedent merger and acquisition transactions from both the Regional and Nationwide Groups. The performance highlights are based on December 31, 2019 financial results of Fourth Street.

(1)

Core deposits exclude foreign deposits and time deposit accounts greater than $100,000.

​

(2)

LTM ROAA and LTM ROAE are shown tax-affected for S Corporations.

​

(3)

Nonperforming assets as a percentage of total assets (includes restructured loans and leases).

​

(4)

Loan Loss Reserve (“LLR”) as a percentage of nonperforming loans (“NPLs”).

​

(5)

Fourth Street’s equity, and thereby related ratios based thereon, has been adjusted to reflect the assumed conversion of its debentures based on their net carrying value of  $9,969,086 as of December 31, 2019.

​

No company or transaction used as a comparison in the above transaction analyses is identical to Fourth Street, and no transaction was consummated on terms identical to the terms of the merger agreement. Accordingly, an analysis of these results is not strictly mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies. The resulting values of the precedent transactions Regional Group using the median values for the four valuation metrics set forth above indicated an implied aggregate valuation ranging between

 

43

 

$62.6 million and $69.4 million with a four factor valuation average of  $64.9 million compared to the value of the aggregate merger consideration assumed by Hovde of  $63.6 million. The resulting values of the precedent transactions Nationwide Group using the median values for the four valuation metrics set forth above indicated an implied aggregate valuation ranging between $63.2 million and $64.7 million with a four factor valuation average of  $63.9 million compared to the value of the aggregate merger consideration assumed by Hovde of  $63.6 million.

Income Approach — Discounted Cash Flow Analysis.   Taking into account various factors including, but not limited to, Fourth Street’s recent performance, the current banking environment and the local economy in which Fourth Street operates, Hovde determined, in consultation with and based on information provided by management of Fourth Street, net income estimates for Fourth Street over a forward looking five year period, and in consultation with Fourth Street management, developed the forward-looking projections and key assumptions which formed the basis for the discounted cash flow analyses. The resulting projected Fourth Street net income numbers used for the analysis were $4.8 million for 2020, $5.4 million for 2021, $6.3 million for 2022, $7.0 million for 2023 and $7.7 million for 2024. No dividends were assumed to be paid by Fourth Street over the projection period.

To determine present values of Fourth Street based on these projections, Hovde utilized two discounted cash flow models, each of which capitalized terminal values using different multiples: (1) terminal price/​earnings multiple (“DCF Terminal P/E Multiple”); and, (2) terminal price/​adjusted common tangible book value multiple (“DCF Terminal P/Adj. TBV Multiple”).

In the DCF Terminal P/E Multiple analysis, an estimated value of Fourth Street common stock was calculated based on the present value of Fourth Street’s net income based on Fourth Street management’s forward-looking projections over the five year projection period. The projected 2024 net income amount was $7.7 million and served as the basis of the terminal earnings value in the DCF. Hovde utilized a terminal value at the end of 2024 by applying a five point range of price-to-earnings multiples of 13.7x to 17.7x, which is based around the median price-to-earnings multiple derived from transactions in the Regional Group of 15.7x. The present value of Fourth Street’s projected terminal value was then calculated assuming a range of discount rates between 13.60% and 15.60%, with a midpoint of 14.60% discounted over a period of 4.94 years. This range of discount rates was chosen to reflect different assumptions regarding the required rates of return of holders or prospective holders of Fourth Street common stock. The range of discount rates utilized the buildup method to determine such required rates of return and was based upon the risk-free interest rate, an equity risk premium, an industry risk premium and a size premium which resulted in a discount rate of 14.60% used as the midpoint of the five point range of discount rates of 13.60% to 15.60%. The resulting aggregate values of Fourth Street common stock based on the DCF Terminal P/E Multiple applied to the 2024 projected earnings of  $7.7 million and then discounted over a 4.94 year period utilizing the five point range of discount rates set forth above resulted in implied aggregate values between $51.5 million and $72.5 million with a midpoint of  $61.6 million compared to the value of the aggregate merger consideration assumed by Hovde of  $63.6 million.

In the DCF Terminal P/Adj. TBV Multiple model, the same earnings estimates and projected net income were used as in the preceding DCF Terminal P/E Multiple analysis to determine the projected adjusted common tangible book value for Fourth Street as of December 31, 2024 of  $47.1 million with excess tangible book value of  $20.7 million. For purposes of the analysis, projected adjusted tangible book value was assumed to be equal to total tangible assets multiplied by 8.0%. In arriving at the terminal value at the end of 2024, Hovde applied a five point range of price-to-adjusted common tangible book value multiples of 1.83x to 2.03x utilizing as a midpoint of the range the median price-to-adjusted common tangible book value multiple derived from precedent transactions in the Regional Group of 1.93x and assumed dollar-for-dollar payment on excess tangible book value. The present value of the projected terminal value was then calculated assuming the range of discount rates between 13.60% and 15.60%, with a midpoint of 14.60% discounted over a period of 4.94 years as was applied in the DCF Terminal P/E Multiple analysis set forth above. The resulting implied aggregate values of Fourth Street common stock based on the DCF Terminal P/Adj. TBV Multiple analysis ranged between $52.4 million and $62.1 million with a midpoint of  $57.1 million compared to the value of the aggregate merger consideration assumed by Hovde of  $63.6 million.

 

44

 

These analyses and their underlying assumptions yielded a range of implied multiple values for Fourth Street common stock which are outlined in the table below:

(1)

Pricing multiples based on the value of the aggregate merger consideration assumed by Hovde of $63,600,141; DCF Analysis — Terminal P/E Multiple median Merger value of  $61,610,161; and a DCF Analysis — Terminal P/Adj. TBV Multiple median deal value of  $57,054,133.

​

(2)

Fourth Street’s common tangible book value has been adjusted to reflect the assumed conversion of its debentures based on their net carrying value of  $9,969,086 as of December 31, 2019.

​

(3)

Price-to-Adjusted Common Tangible Book Value equals the adjusted purchase price divided by core capital where: (a) core capital equals total tangible assets multiplied by 8%; (b) excess capital equals total common tangible book value less core capital; and (c) adjusted purchase price equals the value of aggregate merger consideration less excess capital (assumes dollar-for-dollar payment on excess capital).

​

(4)

Represents the premium of the implied merger value over common tangible book value, expressed as a percentage of core deposits. Core deposits are defined as total deposits less foreign deposits and time deposit accounts greater than $100,000.

​

Hovde noted that while the discounted cash flow present value analysis is a widely used valuation methodology, it relies on numerous assumptions, including asset and earnings growth rates, projected dividend payouts, terminal values and discount rates. Hovde’s analysis does not purport to be indicative of the actual values or expected aggregate values of Fourth Street common stock.

The table below summarizes the analyses performed under the market approach and the income approach described above.

Summary of Valuation Methodologies(1):

Assumed Value of the Aggregate Merger Consideration: $63,600

Four Factor Average Implied Merger Value(2): $61,861

(1)

All values in thousands and are rounded to the nearest thousand.

​

 

45

 

(2)

Rounded to the nearest thousand; reflects the average of the two implied merger values (4 factor average) from the two comparable M&A transactions groups and the two DCF present values calculated using the two terminal median valuation multiples and a 14.60% annual discount rate over a period of 4.94 years.

​

(3)

Values represent the minimum, average and maximum implied values (using the median acquisition multiples derived from the comparable M&A transactions groups) and the minimum and maximum implied values of the range of terminal multiples and discount rates in the DCF analyses.

​

Seacoast Comparable Companies Analysis:   Hovde used publicly available information to compare selected financial and trading information for Seacoast and a group of 14 publicly-traded financial institutions selected by Hovde which was based on publicly-traded banks headquartered in Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia with total assets between $3.0 billion and $15.0 billion. The following publicly-traded financial institutions comprised the comparable peer group:

The analysis compared publicly available financial and market trading information for Seacoast and the data for the 14 financial institutions identified above as of and for the most recent twelve-month period which was publicly available. The table below compares the data for Seacoast and the median data for the 14 financial institutions identified above, with pricing data as of January 22, 2020.

Seacoast fell within the range of pricing metrics of comparable companies. No company used as a comparison in the above analyses is identical to Seacoast. Accordingly, an analysis of these results is not strictly mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies.

Other Factors and Analyses.   Hovde took into consideration various other factors and analyses, including but not limited to: current market environment; merger and acquisition environment; movements in the common stock valuations of selected publicly-traded banking companies; and movements in the Russell 3000 Index.

Conclusion.   Based upon the foregoing analyses and other investigations and assumptions as set forth in its opinion, without giving specific weightings to any one factor, analysis or comparison, Hovde determined that, as of the date of its opinion, subject to the review, assumptions and limitations set forth in the opinion, the merger consideration to be received by Fourth Street shareholders and option holders pursuant to the merger agreement is fair, from a financial point of view.

Each Fourth Street shareholder is encouraged to read Hovde’s fairness opinion in its entirety. The full text of this fairness opinion is included as Appendix B to this proxy statement/prospectus.

Material U.S. Federal Income Tax Consequences of the Merger

The following discussion describes the anticipated material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of Fourth Street common stock that exchange their shares of

 

46

 

Fourth Street common stock for shares of Seacoast common stock in the merger. This summary is based upon the Code, Treasury regulations promulgated thereunder, judicial authorities, published positions of the Internal Revenue Service and other applicable authorities, all as currently in effect as of the date hereof, and all of which are subject to change, possibly with retroactive effect. Any such change could affect the accuracy of the statements and conclusions set forth in this discussion.

For purposes of this discussion, a “U.S. holder” means a beneficial owner of Fourth Street common stock that is for U.S. federal income tax purposes (i) an individual citizen or resident of the U.S., (ii) a corporation, or entity treated as a corporation, organized in or under the laws of the U.S. or any state or political subdivision thereof or the District of Columbia, (iii) a trust if   (a) a court within the U.S. is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) such trust has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes, or (iv) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source. This discussion addresses only U.S. holders of Fourth Street common stock.

This discussion addresses only those Fourth Street common stockholders that hold their shares of Fourth Street common stock as a capital asset within the meaning of Section 1221 of the Code (generally, stock held for investment). Further, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to you in light of your particular circumstances or if you are subject to special treatment under the U.S. federal income tax laws, including if you are:

•

a financial institution;

​

•

a tax-exempt organization;

​

•

an S corporation or other pass-through entity (or an investor in an S corporation or other pass-through entity);

​

•

retirement plans, individual retirement accounts or other tax-deferred accounts;

​

•

an insurance company;

​

•

a regulated investment company;

​

•

a real estate investment trust;

​

•

a dealer or broker in stocks and securities, commodities or currencies;

​

•

a trader in securities that elects the mark-to-market method of accounting;

​

•

a holder of Fourth Street stock that received such stock through the exercise of an employee stock option, through a tax qualified retirement plan or otherwise as compensation;

​

•

a person that is not a U.S. holder (as defined above);

​

•

a person that has a functional currency other than the U.S. dollar;

​

•

a holder of Fourth Street stock that holds such stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction; or

​

•

a U.S. expatriate.

​

In addition, the discussion does not address any alternative minimum tax or any state, local or foreign tax consequences of the merger and it does not address any other U.S. federal tax consequences (such as gift or estate taxes or the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010). The actual tax consequences of the merger to you may be complex. These consequences will depend on your individual situation. Holders of Fourth Street common stock are urged to consult with their own tax advisors as to the tax consequences of the merger in their particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local or foreign and other tax laws and of any changes in those laws.

If a partnership (including for this purpose any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Fourth Street common stock, the tax treatment of a partner generally

 

47

 

will depend on the status of the partner and the activities of the partnership. Partners in a partnership holding Fourth Street common stock should consult their own tax advisors.

Tax Consequences of the Merger Generally

The parties intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to the parties’ obligation to complete the merger that Seacoast receive an opinion from Alston & Bird LLP, dated the closing date of the merger, to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The opinion of Alston & Bird LLP provided on behalf of Seacoast will be based on representation letters provided by Seacoast and Fourth Street and on customary factual assumptions. The opinion described above will not be binding on the Internal Revenue Service or any court. Fourth Street and Seacoast have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger. There can be no assurance that the Internal Revenue Service will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth in this discussion. In addition, if any of the representations or assumptions upon which these opinions are based are inconsistent with the actual facts, the U.S. federal income tax consequences of the merger could be adversely affected.

Provided the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, each of Seacoast and Fourth Street will be a party to such reorganization within the meaning of Section 368(b) of the Code, and neither Seacoast nor Fourth Street will recognize any gain or loss as a result of the merger.

Provided the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, as a U.S. holder of Fourth Street common stock that exchanges all of your Fourth Street common stock for Seacoast common stock, you will not recognize income, gain or loss for U.S. federal income tax purposes, except, as discussed below, with respect to cash received in lieu of fractional shares of Seacoast common stock.

The aggregate tax basis of the Seacoast common stock you receive in the merger (including any fractional shares deemed received and redeemed for cash as described below) will be the same as the aggregate tax basis of the Fourth Street common stock surrendered in exchange therefor, reduced by any basis allocable to a fractional share of Seacoast common stock for which cash is received. The holding period of the Seacoast common stock received (including any fractional shares deemed received and sold for cash as described below) will include the holding period of the Fourth Street shares surrendered.

If a U.S. holder acquired different blocks of Fourth Street common stock at different times or at different prices, the Seacoast common stock such holder receives will be allocated pro rata to each block of Fourth Street common stock, and the basis and holding period of each block of Seacoast common stock such holder receives will be determined on a block-for-block basis depending on the basis and holding period of the blocks of Fourth Street common stock exchanged for such block of Seacoast common stock.

Cash In Lieu of Fractional Shares

If you receive cash in lieu of a fractional share of Seacoast common stock, you will be treated as having received the fractional share of Seacoast common stock pursuant to the merger and then as having sold that fractional share of Seacoast common stock for cash in a redemption by Seacoast. As a result, assuming that the cash received is not treated as a dividend, you generally will recognize gain or loss equal to the difference between the amount of cash received and the tax basis allocated to such fractional share. This gain or loss generally will be capital gain or loss and generally will be long-term capital gain or loss if, as of the effective date of the merger, your holding period for the shares (including the holding period of the Fourth Street common stock deemed surrendered in exchange for a fractional share of Seacoast common stock) is greater than one year. The deductibility of capital losses is subject to limitations.

Information Reporting and Backup Withholding

In certain instances, you may be subject to information reporting and backup withholding (currently at a rate of 24%) on any cash payments you receive. You generally will not be subject to backup withholding, however, if you:

 

48

 

•

furnish a correct taxpayer identification number, certify that you are not subject to backup withholding on the substitute Form W-9 or successor form included in the letter of transmittal you will receive and otherwise comply with all the applicable requirements of the backup withholding rules; or

​

•

provide proof that you are otherwise exempt from backup withholding.

​

Any amounts withheld under the backup withholding rules are not additional tax and will generally be allowed as a refund or credit against your U.S. federal income tax liability, provided you timely furnish the required information to the Internal Revenue Service.

A Fourth Street shareholder who receives Seacoast common stock as a result of the merger will be required to retain records pertaining to the merger. Each Fourth Street shareholder who is required to file a U.S. federal income tax return and who is a “significant holder” that receives Seacoast common stock in the merger will be required to file a statement with such U.S. federal income tax return in accordance with Treasury regulations Section 1.368-3 setting forth information regarding the parties to the merger, the date of the merger, such Fourth Street shareholder’s basis in the Fourth Street common stock surrendered and the fair market value of the Seacoast common stock received in the merger. A “significant holder” is a holder of Fourth Street common stock who, immediately before the merger, owned at least 1% (by vote or value) of the outstanding stock of Fourth Street or securities of Fourth Street with a basis for U.S. federal income tax purposes of at least $1 million.

Accounting Treatment

The merger will be accounted for using the acquisition method of accounting with Seacoast treated as the acquiror. Under this method of accounting, Fourth Street’s assets and liabilities will be recorded by Seacoast at their respective fair values as of the date of completion of the merger. Financial statements of Seacoast issued after the merger will reflect these values and will not be restated retroactively to reflect the historical financial position or results of operations of Seacoast.

Regulatory Approvals

Under federal law, the merger must be approved by the Federal Reserve and the bank merger must be approved by the OCC. Once the Federal Reserve approves the merger (unless such requirement for approval has been waived), the parties must wait for up to 30 days before completing the merger. With the concurrence of the U.S. Department of Justice and permission from the Federal Reserve, however, the merger may be completed on or after the fifteenth day after approval from the Federal Reserve (unless such requirement for approval has been waived). Similarly, after receipt of approval of the bank merger from the OCC, the parties must wait for up to 30 days before completing the bank merger. If, however, there are no adverse comments from the U.S. Department of Justice and Seacoast receives permission from the OCC to do so, the bank merger may be completed on or after the fifteenth (15th) day after approval from the OCC.

As of the date of this proxy statement/prospectus, all of the required regulatory applications have been obtained.

Appraisal Rights for Fourth Street Shareholders

Holders of Fourth Street common stock as of the record date are entitled to appraisal rights under the FBCA. Pursuant to Section 607.1302 of the FBCA, a Fourth Street shareholder who does not wish to accept the merger consideration to be received pursuant to the terms of the merger agreement may dissent from the merger and elect to receive the fair value of his or her shares of Fourth Street common stock immediately prior to the consummation of the merger, excluding any appreciation or depreciation in anticipation of the merger unless exclusion would be inequitable. Under the terms of the merger agreement, if 5% or more of the outstanding shares of Fourth Street common stock validly exercise their appraisal rights, then Seacoast will not be obligated to complete the merger.

In order to exercise appraisal rights, a dissenting Fourth Street shareholder must strictly comply with the statutory procedures of Sections 607.1301 through 607.1340 of the FBCA, which are summarized below.

 

49

 

A copy of the full text of those Sections is included as Appendix C to this proxy statement/prospectus. Fourth Street shareholders are urged to read Appendix C in its entirety and to consult with their legal advisors. Each Fourth Street shareholder who desires to assert his or her appraisal rights is cautioned that failure on his or her part to adhere strictly to the requirements of Florida law in any regard will cause a forfeiture of any appraisal rights.

Procedures for Exercising Dissenters’ Rights of Appraisal.   The following summary of Florida law is qualified in its entirety by reference to the full text of the applicable provisions of the FBCA, a copy of which is included as Appendix C to this proxy statement/prospectus.

A dissenting shareholder who desires to exercise his or her appraisal rights must file with Fourth Street, prior to the taking of the vote on the merger agreement, a written notice of intent to demand payment for his or her shares if the merger is effectuated. A vote against the merger agreement will not alone be deemed to be the written notice of intent to demand payment and will not be deemed to satisfy the notice requirements under the FBCA. A dissenting shareholder need not vote against the merger agreement, but cannot vote, or allow any nominee who holds such shares for the dissenting shareholder to vote, any of his or her shares of Fourth Street common stock in favor of the merger agreement. A vote in favor of the merger agreement will constitute a waiver of the shareholder’s appraisal rights. A shareholder’s failure to vote against the merger agreement will not constitute a waiver of such shareholder’s dissenters’ rights. Such written notification should be delivered either in person or by mail (certified mail, return receipt requested, being the recommended form of transmittal) to:

Fourth Street Banking Company
1200 Fourth Street, North
Saint Petersburg, Florida 33701
Attn: Cathy P. Swanson, Chief Executive Officer

All such notices must be signed in the same manner as the shares are registered on the books of Fourth Street. If a Fourth Street shareholder has not provided written notice of intent to demand fair value before the vote on the proposal to approve the merger agreement is taken at the special meeting, then the Fourth Street shareholder will be deemed to have waived his or her appraisal rights.

Within 10 days after the completion of the merger, Seacoast must provide to each Fourth Street shareholder who filed a notice of intent to demand payment for his or her shares a written appraisal notice and an election form that specifies, among other things:

•

the date of the completion of the merger;

​

•

Seacoast’s estimate of the fair value of the shares of Fourth Street common stock;

​

•

where to return the completed appraisal election form and the shareholder’s stock certificates and the date by which each must be received by Seacoast or its agent, which date with respect to the receipt of the appraisal election form may not be fewer than 40, nor more than 60, days after the date Seacoast sent the appraisal election form to the shareholder (and shall state that the shareholder shall have waived the right to demand appraisal with respect to the shares unless such form is received by Seacoast by such specified date) and which with respect to the return of stock certificates must not be earlier than the date for receiving the appraisal election form;

​

•

that, if requested in writing, Seacoast will provide to the shareholder so requesting, within 10 days after the date set for receipt by Seacoast of the appraisal election form, the number of shareholders who return the forms by such date and the total number of shares owned by them; and

​

•

the date by which a notice from the Fourth Street shareholder of his or her desire to withdraw his or her appraisal election must be received by Seacoast, which date must be within 20 days after the date set for receipt by Seacoast of the appraisal election form from the Fourth Street shareholder.

​

The form must also contain Seacoast’s offer to pay to the Fourth Street shareholder the amount that it has estimated as the fair value of the shares of Fourth Street common stock and include Fourth Street’s financial statements, consisting of a balance sheet as of the end of the fiscal year ending not more than 15 months prior to the date of the corporation’s appraisal notice, an income statement for that year, a cash

 

50

 

flow statement for that year, and the latest applicable interim financial statements if any, and a copy of Section 607.1301-607.1333, and request certain information from the Fourth Street shareholder, including:

•

the shareholder’s name and address;

​

•

the number of shares as to which the shareholder is asserting appraisal rights;

​

•

that the shareholder did not vote for the merger;

​

•

whether the shareholder accepts the offer of Seacoast to pay its estimate of the fair value of the shares of Fourth Street common stock to the shareholder; and

​

•

if the shareholder does not accept the offer of Seacoast, the shareholder’s estimated fair value of the shares of Fourth Street common stock and a demand for payment of the shareholder’s estimated value plus interest.

​

A dissenting shareholder must execute the appraisal election form and submit it together with the certificate(s) representing his or her shares, in the case of certificated shares, by the date specified in the notice. Any dissenting shareholder failing to return a properly completed appraisal election form and his or her stock certificates within the period stated in the form will lose his or her appraisal rights and be bound by the terms of the merger agreement. Upon returning the appraisal election form, a dissenting shareholder will be entitled only to payment pursuant to the procedure set forth in the applicable sections of the FBCA and will not be entitled to vote or to exercise any other rights of a shareholder, unless the dissenting shareholder withdraws his or her demand for appraisal within the time period specified in the appraisal election form.

A dissenting shareholder who has delivered the appraisal election form and his or her Fourth Street common stock certificates may decline to exercise appraisal rights and withdraw from the appraisal process by giving written notice to Seacoast within the time period specified in the appraisal election form. Thereafter, a dissenting shareholder may not withdraw from the appraisal process without the written consent of Seacoast. Upon such withdrawal, the right of the dissenting shareholder to be paid the fair value of his or her shares will cease, and he or she will be reinstated as a shareholder and will be entitled to receive the merger consideration.

If the dissenting shareholder accepts the offer of Seacoast in the appraisal election form to pay Seacoast’s estimate of the fair value of the shares of Fourth Street common stock, payment for the shares of the dissenting shareholder is to be made within 90 days after the receipt of the appraisal election form by Seacoast or its agent. Upon payment of the agreed value, the dissenting shareholder will cease to have any right to receive any further consideration with respect to such shares.

A shareholder who is dissatisfied with Seacoast’s estimate of the fair value of the shares of Seacoast common stock must notify Seacoast of the shareholder’s estimate of the fair value of the shares and demand payment of that estimate plus accrued interest in the appraisal election form within the time period specified in the form. A shareholder who fails to notify Seacoast in writing of the shareholder’s demand to be paid its stated estimate of the fair value of the shares plus accrued interest within the required time period waives the right to demand payment and will be entitled only to the payment offered by Seacoast in the appraisal election form.

A shareholder must demand appraisal rights with respect to all of the shares registered in his or her name, except that a record shareholder may assert appraisal rights as to fewer than all of the shares registered in the record shareholder’s name but which are owned by a beneficial shareholder or a voting trust beneficial owner, if the record shareholder objects with respect to all shares owned by the beneficial shareholder or a voting trust beneficial owner. A record shareholder must notify Fourth Street in writing of the name and address of each beneficial shareholder on whose behalf appraisal rights are being asserted. A beneficial shareholder and a voting trust beneficial owner may assert appraisal rights as to any shares held on behalf of the shareholder only if the beneficial shareholder submits to Fourth Street the record shareholder’s written consent to the assertion of such rights before the date specified in the appraisal election form, and does so with respect to all shares that are beneficially owned by the beneficial shareholder or a voting trust beneficial owner.

 

51

 

Section 607.1330 of the FBCA addresses what should occur if a dissenting shareholder fails to accept the offer of Seacoast to pay the value of the shares as estimated by Seacoast, and Seacoast fails to comply with the demand of the dissenting shareholder to pay the value of the shares as estimated by the dissenting shareholder, plus accrued interest.

If a dissenting shareholder refuses to accept the offer of Seacoast to pay the value of the shares as estimated by Seacoast, and Seacoast fails to comply with the demand of the dissenting shareholder to pay the value of the shares as estimated by the dissenting shareholder, plus accrued interest, then within 60 days after receipt of a written demand from any dissenting shareholder, Seacoast shall file an action in any court of competent jurisdiction in the county in Florida where the registered office of Seacoast, maintained pursuant to Florida law, is located requesting that the fair value of such shares be determined by the court.

If Seacoast fails to institute a proceeding within the above-prescribed period, any dissenting shareholder may do so in the name of Seacoast. All dissenting shareholders whose demands remain unsettled shall be made parties to the proceeding as in an action against their shares and a copy of the initial pleading will be served on each dissenting shareholder as provided by law. The shareholders demanding appraisal rights are entitled to the same discovery rights as parties in other civil proceedings. There shall be no right to a jury trial.

Seacoast is required to pay each dissenting shareholder the amount of the fair value of such shareholder’s shares plus accrued interest, as found by the court, within 10 days after final determination of the proceedings. Upon payment of the judgment, the dissenting shareholder ceases to have any rights to receive any further consideration with respect to such shares other than any amounts ordered to be paid for court costs and attorneys fees under Section 607.1331 of the FBCA.

Section 607.1331 of the FBCA provides that the costs of a court appraisal proceeding, including reasonable compensation for, and expenses of, appraisers appointed by the court, will be determined by the court and assessed against Seacoast, except that the court may assess costs against all or some of the dissenting shareholders, in amounts the court finds equitable, to the extent that the court finds such shareholders acted arbitrarily, vexatiously or not in good faith with respect to their appraisal rights. The court also may assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable, against: (i) Seacoast and in favor of any or all dissenting shareholders if the court finds Seacoast did not substantially comply with the notification provisions set forth in Sections 607.1320 and 607.1322 of the FBCA; or (ii) either Seacoast or a dissenting shareholder, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the appraisal rights. If the court in an appraisal proceeding finds that the services of counsel for any dissenting shareholder were of substantial benefit to other dissenting shareholders, and that the fees for those services should not be assessed against Seacoast, the court may award to such counsel reasonable fees to be paid out of the amounts awarded the dissenting shareholders who were benefited. To the extent that Seacoast fails to make a required payment when a dissenting shareholder accepts Seacoast’s offer to pay the value of the shares as estimated by Seacoast, the dissenting shareholder may sue directly for the amount owed and, to the extent successful, shall be entitled to recover from Seacoast all costs and expenses of the suit, including attorneys fees.

A shareholder entitled to appraisal rights may not challenge a completed corporate action for which appraisal rights are available unless such corporate action was either:

•

not authorized and approved in accordance with the applicable provisions of Florida law; or

​

•

procured as a result of fraud, material representation, or an omission of a material fact necessary to make statements made, in light of the circumstances in which they were made, not misleading.

​

Also, nothing in the dissenters’ rights statutes operates to override or supersede the provisions of Florida law relating to conflict of interest transactions.

For a discussion of tax consequences with respect to dissenting shares, see “The Merger — Material U.S. Federal Income Tax Consequences of the Merger.”

 

52

 

BECAUSE OF THE COMPLEXITY OF THE PROVISIONS OF FLORIDA LAW RELATING TO DISSENTERS’ APPRAISAL RIGHTS, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE MERGER ARE URGED TO CONSULT THEIR OWN LEGAL ADVISORS.

Board of Directors and Management of SNB Following the Merger

The members of the board of directors and officers of SNB immediately prior to the effective time of the merger will be the directors and officers of the surviving bank and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

Information regarding the executive officers and directors of SNB is contained in documents filed by Seacoast with the SEC and incorporated by reference into this proxy statement/prospectus, including Seacoast’s Annual Report on Form 10-K for the year ended December 31, 2019 and its definitive proxy statement on Schedule 14A for its 2020 annual meeting, filed with the SEC on February 27, 2020 and [•], 2020, respectively. See “Where You Can Find More Information” and “Documents Incorporated by Reference.”

Interests of Fourth Street Directors and Executive Officers in the Merger

In the merger, the directors and executive officers of Fourth Street will receive the same merger consideration for their Fourth Street shares as the other Fourth Street shareholders. In considering the recommendation of the Fourth Street board of directors that you vote to approve the merger agreement, you should be aware that some of the executive officers and directors of Fourth Street may have interests in the merger and may have arrangements, as described below, that may be considered to be different from, or in addition to, those of Fourth Street shareholders generally. The Fourth Street board of directors was aware of these interests and considered them, among other matters, in reaching its decision to adopt and approve the merger agreement and to recommend that Fourth Street shareholders vote in favor of approving the merger agreement. See “The Merger — Background of the Merger” and “The Merger — Fourth Street’s Reasons for the Merger and Recommendations of the Fourth Street Board of Directors.” Fourth Street’s shareholders should take these interests into account in deciding whether to vote “FOR” the proposal to adopt the merger agreement. These interests are described in more detail below, and certain of them are quantified in the narrative below.

Entry into New Employment Agreements

Cathy P. Swanson (Chief Executive Officer of Fourth Street) has entered into an employment agreement with SNB, which will be effective upon completion of the merger. The employment agreement has a term of two years (unless extended) commencing upon the closing of the merger. Pursuant to the employment agreement, Ms. Swanson will serve as Senior Vice President, Market President, Pinellas County of SNB, with an annual salary of  $248,000. She will be eligible to receive stock-based awards under SNB’s long-term incentive plan and will be eligible to participate in SNB’s annual incentive program which will provide her a bonus opportunity for 2020 of at least up to 50% of her annual salary (prorated for 2020 based upon the number of days between the closing of the merger and the end of 2020). If she remains employed by SNB on the first anniversary of the merger closing, SNB will pay her a lump sum retention bonus of  $87,500 and, if she remains employed by SNB on the second anniversary of the merger closing, SNB will pay to her an additional lump sum retention bonus of  $87,500. She will be entitled to reimbursement of reasonable business expenses incurred in connection with her employment, and she will be eligible to participate in the medical, disability, and life insurance plans applicable to similarly situated officers of SNB. If Ms. Swanson is terminated by SNB without “cause” or resigns for “good reason” (as such terms are defined in the employment agreement) prior to the expiration of the term, she will continue to receive salary payments over the remainder of the term, and she will receive cash severance payments equal to 18 months’ of salary payable in 16 equal monthly installments, payment of any annual incentive compensation or retention bonuses earned but not yet paid, and payments equal to the cost of group health care premiums under COBRA in excess of the normal employee rate for 18 months following termination of employment (or until she becomes eligible to receive group health benefits by a subsequent employer). The employment agreement contains confidentiality covenants, as well as covenants regarding the non-solicitation of customers and employees that apply for the later of  (i) the third anniversary of the effective date of the agreement and (ii) one year following the executive’s termination of employment. The employment agreement also provides that for

 

53

 

three years following the closing of the merger, Ms. Swanson will not engage in certain competitive business activities with certain organizations in any county in Florida where SNB operated a banking office during the term of her employment.

Ms. Swanson will receive an award of  $50,000 in restricted shares with a three-year vesting schedule pursuant to Seacoast’s incentive plan (which will be awarded on the first business day of the quarter following her employment date with SNB). SNB also has agreed to assume Freedom Bank’s obligations under a Split Dollar Life Insurance Agreement between Freedom Bank and Ms. Swanson and to reimburse Ms. Swanson for certain dues and expenses.

SNB also has entered into an employment offer letter with Adam Curtis (Chief Lending Officer of Freedom Bank) which provides for him to serve as Senior Vice President, Commercial Banking Producing Manager with SNB’s Commercial Banking Team effective upon the closing of the merger. Mr. Curtis will be entitled to a semi-monthly base salary of  $7,725, an award of  $40,000 in restricted shares with a three-year vesting schedule pursuant to Seacoast’s incentive plan (which will be awarded on the first business day of the quarter following his employment date with SNB), a cash incentive in the amount of  $90,000 for his first year of employment, participation eligibility in SNB’s Commercial Lending Incentive Plan, and other SNB benefits. If, within the first three years of his employment with SNB, SNB terminates his employment for any reason other than “cause” (as defined in his offer letter) or disability, he will be entitled to a severance payment in the amount of one times his annual base salary. The offer letter contains a non-solicitation provision which provides that during his employment with SNB and for a period of 12 months thereafter, Mr. Curtis may not call upon, solicit or do business with (other than for a business which does not compete with SNB) any SNB customer or potential SNB customer with whom he interacted, became acquainted, or learned of through access to SNB information during his employment with SNB. The offer letter is not a contract of employment for any fixed period of time. Rather, Mr. Curtis’ employment with SNB will be as an “at-will” employee, with either party maintaining the right to terminate the employment at any time.

Change in Control Agreements and Payments

Fourth Street has entered into change in control agreements with each of Cathy P. Swanson (Chief Executive Officer), Susan Blackburn (President), C. Peter Bardin (Chief Financial Officer), and Adam Curtis (Chief Lending Officer) which provide for the payment on the closing of the merger of  $375,000 to Ms. Swanson, $175,000 to Ms. Blackburn, $175,000 to Mr. Bardin, and $600,000 to Mr. Curtis.

Treatment of Fourth Street Equity Awards

The merger agreement requires Fourth Street to take all actions necessary to cause each Fourth Street equity award issued and outstanding immediately prior to the effective time to be terminated in exchange for an amount in cash, without interest, equal to the product of  (i) the aggregate number of shares of Fourth Street common stock subject to such equity award immediately prior to its termination, multiplied by (ii) the excess, if any, of the value of the average of the volume weighted average price of Seacoast common stock during the ten trading days ending on the trading day prior to the determination date multiplied by the exchange ratio, as finally determined as of the effective time, over the exercise price per share of the Fourth Street equity award. As of April 3, 2020, Fourth Street’s directors and executive officers hold an aggregate of 281,122 stock options that are exercisable and 265,378 stock options that are unvested. For information as to the exercisable stock options held by Fourth Street’s director and executive officers, see “Fourth Street Banking Company — Security Ownership of Certain Beneficial Owners and Management.”

Director Restrictive Covenant Agreement; Claims Letters

Certain directors who are executive officers of Fourth Street have entered into a restrictive covenant agreement, covering a two year period commencing with the effective time of the merger, with Seacoast in the form attached as Exhibit C to the merger agreement attached as Appendix A to this document and certain directors who are not executive officers of Fourth Street have entered into a restrictive covenant agreement, covering a three year period commencing with the effective time of the merger, with Seacoast in the form attached as Exhibit C to the merger agreement attached as Appendix A to this document. In addition, certain officers and directors of Fourth Street have entered into a claims letter in the form attached as Exhibit B

 

54

 

to the merger agreement attached as Appendix A to this document, by which they have agreed to release certain claims against Fourth Street, effective as of the effective time of the merger.

Indemnification and Insurance

As described under “The Merger Agreement — Indemnification and Directors’ and Officers’ Insurance,” after the effective time of the merger, Seacoast will indemnify and defend the present and former directors, officers and employees of Fourth Street and its subsidiaries against claims pertaining to matters occurring at or prior to the closing of the merger as permitted by Fourth Street’s articles of incorporation, bylaws and the FBCA. Seacoast also has agreed, for a period of no less than six years after the effective time of the merger, to provide coverage to present and former directors and officers of Fourth Street pursuant to Fourth Street’s existing directors’ and officers’ liability insurance. This insurance policy may be substituted, but must contain at least the same coverage and amounts, and contain terms no less advantageous than the coverage currently provided by Fourth Street. In no event shall Seacoast be required to expend for the tail insurance an aggregate premium amount in excess of  $25,000.

 

55

 

PROPOSAL 2: THE 280G PROPOSAL

Fourth Street shareholders are being asked to approve the 280G proposal in order that Fourth Street and certain Fourth Street directors may avoid any potential adverse tax consequences for Fourth Street and such individuals under Sections 280G and 4999 of the Code.

In connection with the merger, certain Fourth Street directors who own shares of Fourth Street stock that represent more than 1% of the fair market value of the outstanding shares of Fourth Street Stock may receive certain compensatory payments or benefits that could have had adverse tax consequences for Fourth Street and such individuals under Sections 280G and 4999 of the Code and the regulations promulgated and rulings thereunder, collectively referred to as the golden parachute rules, if they do not execute waivers (as more fully explained and defined below). Fourth Street is asking its shareholders to approve the acceleration of vesting of stock options held by such directors in connection with the merger as further described below.

Golden Parachute Excise Tax

Under the golden parachute rules, payments of compensation that are made to specified “disqualified individuals,” including officers, certain highly compensated individuals, and certain significant shareholders and equity holders, that (i) are treated as contingent on a change in control of a corporation and (ii) in aggregate exceed three times the individual’s “base amount” as determined in accordance with the golden parachute rules minus one dollar, which we refer to as such individual’s safe harbor amount, may be characterized as “parachute payments” subject to adverse tax treatment. The base amount is generally an individual’s average annual taxable compensation from the corporation (or a related corporation) for the five years preceding the year of the change in control (or for the period of employment with the payor corporation if less than five years). All parachute payments in excess of one times the base amount are referred to as “excess parachute payments.” Due to the number of shares of Fourth Street stock they hold, the following directors are considered to be disqualified individuals: Frederick Bickley, Kern Davis, William McQueen, Christopher Moench, Christian Ruppel, John Savage, and Richard Wilkes.

Shareholder Vote Exception for Privately Held Corporations

In general, excess parachute payments are nondeductible by the payor corporation and subject to a 20% excise tax on the disqualified individual (in addition to any regular income taxes due with respect to such payments). However, an exception to the foregoing treatment applies in the case of payments made by non-publicly traded corporations like Fourth Street if a disqualified individual’s receipt or retention of the payments is approved by a separate vote of shareholders possessing more than 75% of the voting power of all outstanding stock of the corporation (excluding from both the numerator and the denominator in such calculation shares held by ineligible shareholders), and prior to such vote, there is adequate disclosure to all shareholders entitled to vote of the material facts concerning such payments. Fourth Street is seeking shareholder approval with respect to the portions of the payments or benefits to each of the disqualified individuals that exceed each of their respective safe harbor amounts. We refer to these excess portions as excess amounts. This vote will be conducted on a “slate” basis. This means you must vote to approve or disapprove the excess amounts of all of the disqualified individuals — you may not vote on the excess amounts separately for each disqualified individual.

Valuation of the Payments

The discussion below sets forth the material facts of the payments to the disqualified individuals and Fourth Street’s estimate of the value of the payments under the valuation rules set forth in the golden parachute rules, which value we refer to as the estimated Section 280G value. The calculation of the estimated Section 280G value of the payments under the golden parachute rules is highly complex, and issues often arise for which there is no authoritative guidance. Final values may only be determined after the merger has been consummated or upon other subsequent events. Accordingly, it is not certain if all of the payments described below would in fact constitute excess parachute payments.

In applying the valuation principles of the golden parachute rules, Fourth Street has made assumptions and judgments that it believes to be conservative so as to result in the payments having an estimated

 

56

 

Section 280G value at the high end of the range of values reasonably determinable under the golden parachute rules based on information available as of the date of this proxy statement/prospectus. It is important to note that the actual Section 280G valuation of the payments under the golden parachute rules may turn out to be higher or lower than the estimates provided below. As a result, the 280G proposal, if approved, will be in respect of the excess amounts as finally determined, rather than the estimated amounts described below.

Effect of Shareholder Vote

Each of the disqualified individuals will execute an irrevocable waiver that provides that if the Fourth Street shareholders do not approve the 280G proposal, each disqualified individual forfeits his or her right to receive and/or retain his or her excess amounts, as applicable, in accordance with the terms of the disqualified individual’s waiver. If the Fourth Street shareholders approve the 280G proposal, each disqualified individual will be entitled to retain and/or receive the entire amount of his or her payments (including any excess amounts). Each waiver will be void in the event the merger proposal is not approved by the shareholders or the merger agreement is terminated pursuant to its terms.

The vote to approve the 280G proposal is entirely separate from, and not contingent or otherwise conditioned on, the vote to approve the merger proposal, and, while they may do so, shareholders that approve the merger proposal are not required to approve the 280G proposal. The ineligible shareholders (the seven disqualified individuals and shareholders whose holdings would be attributed to such individuals) hold [•] shares of Fourth Street common stock as of the date of this proxy statement/prospectus. These shares will not count in the voting with respect to the 280G proposal and will be disregarded in both the numerator and denominator in determining whether more than 75% of shares are voted in favor of the 280G proposal.

For purposes of the shareholder approval rules discussed above, any Fourth Street shareholder that is an entity shareholder may exercise its vote through any person authorized by such entity shareholder to approve the payment. But if the individual authorized to vote the entity shareholder’s shares is a disqualified individual, the entity must designate someone who is not a disqualified individual to vote the shares. Moreover, if a substantial portion of the assets of an entity shareholder consists (directly or indirectly) of the stock of Fourth Street (i.e., the fair market value of the Fourth Street common stock equals or exceeds 1/3 of the total gross fair market value of all of the assets of the entity shareholder) and the value of such stock is greater than 1% of the total value of the outstanding common stock of Fourth Street, the payments must be approved by separate vote of the persons who, immediately before the change in control, own more than 75% of the voting power of the entity shareholder in accordance with the normal voting rules of such entity shareholder.

Description of the Payments

Stock Option Acceleration

Each of the disqualified individuals hold outstanding options to purchase shares of Fourth Street common stock. The vesting of the options will be accelerated prior to the effective time of the merger, and the options will be terminated in exchange for an amount in cash, without interest, equal to the product of (i) the aggregate number of shares of Fourth Street common stock subject to such equity award immediately prior to its termination, multiplied by (ii) the excess, if any, of the value of the average of the volume weighted average price of Seacoast common stock during the ten trading days ending on the trading day prior to the determination date multiplied by the exchange ratio, as finally determined as of the effective time, over the exercise price per share of the Fourth Street equity award. Because the vesting of the options will occur in connection with the merger, a portion of the value could be treated as a parachute payment for purposes of the golden parachute rules. The table below lists the total estimated Section 280G value that could be attributable to the stock option acceleration. Because the potential parachute payment value can only be determined at the time of the closing of the merger, the actual parachute payment value attributable to the stock option acceleration cannot be determined at this time. The table below lists the total estimated Section 280G value that could be attributable to the stock option acceleration, which value is calculated

 

57

 

assuming that the closing of the merger occurs on June 5, 2020, and the fair market value of Seacoast common stock on the vesting date is $       per share.

If the Fourth Street shareholders approve the 280G proposal as required under the golden parachute rules, each disqualified individual will retain his or her right to receive the full amount of his or her payments under the terms and conditions described above, and neither the payor nor the disqualified individual will be subject to the adverse tax consequences described above. If the Fourth Street shareholders do not approve the 280G proposal as required under the golden parachute rules, then the excess amounts will not be paid to or retained by the disqualified individuals.

In order to approve the 280G proposal, the holders of more than 75% of the outstanding shares of Fourth Street common stock (excluding shares held by ineligible shareholders) must vote in favor of the proposal.

THE FOURTH STREET BOARD OF DIRECTORS RECOMMENDS THAT FOURTH STREET SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE 280G PROPOSAL.

 

58

 

PROPOSAL 3: ADJOURNMENT OF THE FOURTH STREET SPECIAL MEETING

Fourth Street shareholders are being asked to approve the adjournment proposal.

If this adjournment proposal is approved, the Fourth Street special meeting could be adjourned to any date. If the Fourth Street special meeting is adjourned, Fourth Street shareholders who have already submitted their proxies will be able to revoke them at any time prior to their use. If you sign and return a proxy and do not indicate how you wish to vote on the adjournment proposal, your shares of Fourth Street common stock will be voted in favor of the adjournment proposal.

The adjournment proposal will be approved if the votes of Fourth Street common stock cast in favor of the adjournment proposal exceed the votes cast against the adjournment proposal.

THE FOURTH STREET BOARD OF DIRECTORS RECOMMENDS THAT FOURTH STREET SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.

 

59

 

 

the determination date less (iii) applicable withholding taxes. No such holder of fractional shares will be entitled to dividends, voting rights or any other rights as a shareholder in respect of any fractional shares.

A Fourth Street shareholder also has the right to obtain the fair value of his or her shares of Fourth Street common stock in lieu of receiving the merger consideration by strictly following the appraisal procedures under the FBCA. Shares of Fourth Street common stock outstanding immediately prior to the effective time of the merger and which are held by a shareholder who does not vote to approve the merger agreement and who properly demands the fair value of such shares pursuant to, and who complies with, the appraisal procedures under the FBCA are referred to as “dissenting shares.” Dissenting shares shall not be entitled to receive the applicable merger consideration unless and until such shareholder shall have failed to perfect or shall have effectively withdrawn or lost such holder’s right to dissent from the merger under the FBCA. See “The Merger — Appraisal Rights for Fourth Street Shareholders.”

If Seacoast or Fourth Street change the number of shares of Seacoast common stock or Fourth Street common stock outstanding prior to the effective time of the merger as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or similar recapitalization with respect to the Seacoast common stock or Fourth Street common stock, then the merger consideration shall be appropriately and proportionately adjusted.

Based upon the closing sale price of the Seacoast common stock on the NASDAQ Global Select Market of  $        on            , 2020, the last practicable trading date prior to the printing of this proxy statement/prospectus, each share of Fourth Street common stock will be entitled to be exchanged for total merger consideration with a value equal to approximately $        per share.

The value of the shares of Seacoast common stock to be issued to Fourth Street shareholders in the merger will fluctuate between now and the closing date of the merger. We make no assurances as to whether or when the merger will be completed, and you are advised to obtain current sale prices for the Seacoast common stock. See “Risk Factors — Because the sale price of the Seacoast common stock will fluctuate, you cannot be sure of the value of the stock consideration that you will receive in the merger until the closing.”

Treatment of Fourth Street Equity Awards

The merger agreement requires Fourth Street to take all actions necessary to cause each Fourth Street equity award issued and outstanding immediately prior to the effective time to be terminated in exchange for an amount in cash, without interest, equal to the product of  (i) the aggregate number of shares of Fourth Street common stock subject to such equity award immediately prior to its termination, multiplied by (ii) the excess, if any, of the value of the average of the volume weighted average price of Seacoast common stock during the ten trading days ending on the trading day prior to the determination date multiplied by the exchange ratio, over the exercise price per share of the Fourth Street equity award.

Exchange Procedures

Seacoast has appointed as the exchange agent under the merger agreement its transfer agent, Continental Stock Transfer and Trust Company. Any holder of book-entry shares will not be required to deliver a certificate or an executed letter of transmittal to receive the merger consideration. Instead, a holder of book-entry shares will automatically at the effective time of the merger be entitled to receive the merger consideration, which will be paid as soon as practicable by the exchange agent.

Subject to applicable abandoned property, escheat or similar laws, following payment of the merger consideration in respect of book-entry shares, the holder of the book-entry shares will be entitled to receive, without interest: (i) the amount of unpaid dividends or other distributions with a record date after the effective time of the merger payable with respect to the whole shares of Seacoast common stock represented by such book-entry shares; and (ii) at the appropriate payment date, the amount of dividends or other distributions payable with respect to shares of Seacoast common stock represented by such book-entry shares with a record date after the effective time of the merger and with a payment date subsequent to the issuance of the shares of Seacoast common stock issuable in exchange for such book-entry shares.

After the effective time of the merger, there will be no transfers on the stock transfer books of Fourth Street other than to settle transfers of shares of Fourth Street common stock that occurred prior to the effective time of the merger.

 

61

 

Organizational Documents of Surviving Holding Company and Surviving Bank; Directors and Officers

The organizational documents of Seacoast in effect immediately prior to the effective time of the merger shall be the organizational documents of the surviving company after the effective time of the merger, and the directors and officers of Seacoast immediately prior to the effective time of the merger shall continue as the directors and officers of Seacoast following the effective time of the merger.

In addition, the organizational documents of SNB in effect immediately prior to the effective time of the bank merger shall be the organizational documents of the surviving bank after the effective time of the bank merger. The directors and officers of SNB immediately prior to the effective time of the bank merger shall continue as the directors and officers of the surviving bank following the effective time of the bank merger.

Conduct of Business Pending the Merger

Pursuant to the merger agreement, Fourth Street has agreed to certain restrictions on its activities until the effective time of the merger. In general, Fourth Street has agreed that, except as otherwise contemplated or permitted by the merger agreement, it will:

•

conduct its business in the ordinary course consistent with past practice;

​

•

use commercially reasonable efforts to maintain and preserve intact its business organization, employees and advantageous business relationships; and

​

•

maintain its books, accounts and records in the usual manner on a basis consistent with that previously employed.

​

Both Seacoast and Fourth Street have agreed to take no action that would adversely affect or delay (i) the receipt of regulatory or governmental approvals required for the transactions contemplated by the merger agreement, (ii) the performance of their respective covenants and agreements or (iii) the consummation of the transactions contemplated by the merger agreement.

Fourth Street has also agreed that except as otherwise permitted by the merger agreement, as required by applicable laws or a governmental entity, or with the prior written consent of Seacoast (not to be unreasonably withheld or delayed) it will not, and will not permit any of its subsidiaries, to do any of the following:

•

amend its organizational documents or any resolution or agreement concerning indemnification of its directors or officers;

​

•

adjust, split, combine, subdivide or reclassify any capital stock;

​

•

make, declare, set aside or pay any dividend or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares its capital stock;

​

•

grant any securities or obligations convertible into or exercisable for or giving any person any right to subscribe for or acquire, or any options, calls, restricted stock, deferred stock awards, stock units, phantom awards, dividend equivalents, or commitments relating to, or any stock appreciation right or other instrument;

​

•

issue, sell, pledge, dispose of, grant, transfer, lease, license, guarantee, encumber or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee or encumbrance of, any shares of its capital stock, except pursuant to the exercise of Fourth Street Equity Awards outstanding as of the date of the merger agreement;

​

•

make any change in any instrument or contract governing the terms of any of its securities;

​

•

make any investment in any other person, other than in the ordinary course of business;

​

•

charge off or sell (except in the ordinary course of business consistent with past practices or as required by GAAP) any of its portfolio of loans, discounts or financing leases or sell any asset held as other real estate owned (“OREO”) or other foreclosed assets for an amount less than its book value;

​

 

62

 

•

terminate or allow to be terminated any of the policies of insurance maintained on its business or property, cancel any material indebtedness owing to it or any claim that it may possess or waive any right of substantial value or discharge or satisfy any material noncurrent liability;

​

•

enter into any new line of business or change its lending, investment, underwriting, risk and asset liability management and other banking and operating policies other than as required by law or any regulatory agreement or order;

​

•

lend any money or pledge any of its credit in connection with any aspect of its business (except in the ordinary course of business consistent with past practices);

​

•

mortgage or otherwise subject to any lien, encumbrance or other liability any of its assets (except in the ordinary course of business consistent with past practices);

​

•

sell, assign or transfer any of its assets in excess of  $50,000 in the aggregate (except in the ordinary course of business consistent with past practices and except for property held as OREO);

​

•

incur any material liability, commitment, indebtedness or obligation or cancel, release or assign any indebtedness of any person or any claims against any person (except (i) in the ordinary course of business consistent with past practice or (ii) pursuant to contracts in force as of the date of the merger agreement and disclosed in the disclosure schedules attached thereto);

​

•

transfer, agree to transfer or grant, or agree to grant a license to, any of its material intellectual property (other than in the ordinary course of business consistent with past practice);

​

•

except in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money (other than short-term indebtedness incurred to refinance short term indebtedness) or assume, guarantee, endorse or otherwise become responsible for the obligations of any other person;

​

•

other than purchases of investment securities in the ordinary course of business or in consultation with Seacoast, restructure or change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported;

​

•

terminate or waive any material provision of any contract other than normal renewals of contracts without materially adverse changes of terms or otherwise amend or modify any material contract;

​

•

other than in the ordinary course of business and consistent with past practice or as required by benefit plans and contracts in effect as of the date of the merger agreement, (i) increase in any manner the compensation or fringe benefits of, or grant any bonuses to, any director, officer or employee, whether under a benefit plan or otherwise, (ii) pay any pension or retirement allowance not required by any existing benefit plan or contract to any director, officer or employee, (iii) become a party to, amend or commit itself to any benefit plan or contract (or any individual contracts evidencing grants or awards) or employment agreement, retention agreement or severance arrangement with or for the benefit of any director, officer or employee, (iv) accelerate the vesting of, or the lapsing of restrictions with respect to, rights pursuant to any Fourth Street stock plan, (v) make any changes to a benefit plan that are not required by law, or (vi) hire or terminate the employment of a chief executive officer, president, chief financial officer, chief risk officer, chief credit officer, internal auditor, general counsel or other officer holding the position of senior vice president or above or any employee with annual base salary and incentive compensation that is reasonably anticipated to exceed $100,000;

​

•

settle any litigation, except in the ordinary course of business;

​

•

revalue any of its assets or change any method of accounting or accounting practice used by it, other than changes required by GAAP or the FDIC or any regulatory authority;

​

•

file or amend any tax return except in the ordinary course of business or settle or compromise any tax liability or make, change or revoke any tax election or change any method of tax accounting, except as required by applicable law;

​

•

enter into any closing agreement as described in Section 7121 of the Internal Revenue Code or surrender any claim for a refund of taxes or consent to any extension or waiver of the limitations period applicable to any claim or assessment with respect to taxes;

​

 

63

 

•

knowingly take, or knowingly omit to take, any action that is reasonably likely to result in any of the conditions to the merger not being satisfied, except as may be required by applicable law;

​

•

merge or consolidate with any other person;

​

•

acquire assets outside of the ordinary course of business consistent with past practices from any other person with a value or purchase price in the aggregate in excess of  $50,000, other than purchase obligations pursuant to contracts in effect prior to the execution of the merger agreement and set forth in the disclosure schedules attached to the merger agreement;

​

•

enter into any contract that is material and would have been material had it been entered into prior the execution of the merger agreement;

​

•

make any adverse changes in the mix, rates, terms or maturities of its deposits or other liabilities, other than in the ordinary course of business and consistent with past practices;

​

•

close or relocate any existing branch or facility;

​

•

make any extension of credit that, when added to all other extensions of credit to a borrower and its affiliates, would exceed its applicable regulatory limits;

​

•

take any action or fail to take any action that will cause Fourth Street’s consolidated tangible shareholders’ equity to be less than $25.25 million at the effective time of the merger;

​

•

make any loans, or enter into any commitments to make loans, which vary other than in immaterial respects from its written loan policies (subject to certain exceptions and thresholds, provided that Freedom Bank may extend or renew credit or loans in the ordinary course of business consistent with past lending practices or in connection with the workout or renegotiation of current loans);

​

•

take any action that at the time of taking such action is reasonably likely to prevent, or would materially interfere with, the consummation of the merger;

​

•

knowingly take any action that would prevent or impede the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; or

​

•

agree or commit to take any of the actions set forth above.

​

Company Shareholder Approval

Fourth Street has agreed to call a meeting of its shareholders as soon as reasonably practicable after the Registration Statement on Form S-4 is declared effective by the SEC for the purpose of obtaining the approval of the merger agreement by the holders of at least a majority of the outstanding shares of Fourth Street common stock and such other matters as the Fourth Street board of directors may direct.

Regulatory Matters

This proxy statement/prospectus forms part of a Registration Statement on Form S-4 which Seacoast has filed with the SEC. Seacoast has agreed to use all reasonable efforts to cause the Registration Statement to be declared effective.

Each of Seacoast and Fourth Street has agreed to use all reasonable best efforts to obtain all permits required by the securities laws, including state securities law or “blue sky” permits, necessary to carry out the transactions contemplated by the merger agreement and each of Seacoast and Fourth Street has agreed to furnish all information concerning it and the holders of its capital stock as may be reasonably requested in connection with any such action.

Seacoast and Fourth Street have agreed to use all respective reasonable best efforts to take, or cause to be taken, in good faith, all actions and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, to permit the consummation of the merger as promptly as practicable.

Seacoast and Fourth Street will consult with each other with respect to the obtaining of all regulatory consents and other material consents advisable to consummate the transactions contemplated by the merger agreement, and each party will keep the other apprised of the status of material matters relating to the completion of the transactions contemplated by the merger agreement.

 

64

 

Seacoast and Fourth Street have agreed to promptly furnish to each other copies of applications filed with all governmental authorities and copies of written communications received by such party from any governmental authorities with respect to the transactions contemplated by the merger agreement. Additionally, each of Seacoast and Fourth Street has agreed to cooperate fully with and furnish information to the other party, and obtain all consents of, and give all notices to and making all filings with, all governmental authorities and other third parties that may be or become necessary for the performance of its obligations under the merger agreement and the consummation of the other transactions contemplated by the merger agreement.

In connection with seeking regulatory approval for the merger, Seacoast is not required to agree to any condition or consequence that would, after the effective time of the merger, have a material adverse effect on Seacoast or any its subsidiaries, including Fourth Street.

NASDAQ Listing

Seacoast has agreed to cause the shares of Seacoast common stock to be issued to the holders of Fourth Street common stock in the merger to be authorized for listing on the NASDAQ Global Select Market, subject to official notice of issuance, prior to the effective time of the merger.

Employee Matters

Following the effective time of the merger, Seacoast has agreed to maintain employee benefit plans and compensation opportunities for full-time active employees of Fourth Street on the closing date of the merger (referred to below as “covered employees”) that provide employee benefits and compensation opportunities which, in the aggregate, are substantially comparable to the employee benefits and compensation opportunities that are available on a uniform and non-discriminatory basis to similarly situated employees of Seacoast or its subsidiaries (provided that in no event are covered employees eligible to participate in any closed or frozen plan of Seacoast or its subsidiaries and provided further that in no event is Seacoast required to take into account any retention arrangements or equity compensation when determining whether employee benefits are substantially comparable). Seacoast will give the covered employees full credit for their prior service with Fourth Street for purposes of eligibility (including initial participation and eligibility for current benefits) and vesting under any qualified or non-qualified employee benefit plan maintained by Seacoast in which covered employees may be eligible to participate and for all purposes under any welfare benefit plans, vacation plans, and similar arrangements maintained by Seacoast.

With respect to any Seacoast health, dental, vision or other welfare plan in which any covered employee is eligible to participate following the closing date of the merger, Seacoast or its applicable subsidiary must use its commercially reasonable best efforts to (i) cause any pre-existing condition limitations or eligibility waiting periods under such plan to be waived with respect to the covered employee to the extent the condition was, or would have been, covered under the Fourth Street benefit plan in which the covered employee participated immediately prior to the effective time of the merger; and (ii) recognize any health, dental, vision or other welfare expenses incurred by the covered employee in the year that includes the closing date of the merger for purposes of any applicable deductible and annual out-of-pocket expense requirements.

If, within 6 months after the effective time of the merger, any covered employee (other than those who receive certain payments or retention benefits pursuant to agreements with Fourth Street) is terminated by Seacoast or its subsidiaries other than “for cause” or as a result of a death, disability or unsatisfactory job performance, then Seacoast will pay severance to the covered employee in an amount equal to its severance policies.

Indemnification and Directors’ and Officers’ Insurance

From and after the effective time of the merger, Seacoast has agreed to indemnify, defend and hold harmless the present and former directors and officers of Fourth Street against any liability, judgments, fines and amounts paid in settlement in connection with any threatened or actual claim, action, suit, proceeding or investigation arising in whole or in part out of, or pertaining to the fact that such person is or was a director, officer or employee of Fourth Street or its subsidiaries, or the merger agreement or any of the transactions contemplated by the merger agreement, to the same extent as such persons are indemnified

 

65

 

or have the right to advancement of expenses pursuant to the organizational documents of Fourth Street and the FBCA. All existing rights to indemnification and all existing limitations on liability existing in favor of the directors, officers and employees of Fourth Street as provided in its organizational documents shall survive the merger and continue in full force and effect and shall be honored by Seacoast.

For a period of no less than six years after the effective time of the merger, Seacoast will provide director’s and officer’s liability insurance that serves to reimburse the officers and directors of Fourth Street at or prior to the effective time of the merger with respect to claims against them arising from facts or events occurring at or before the effective time of the merger (including the transactions contemplated by the merger agreement). The directors’ and officers’ liability insurance will contain at least the same coverage and amounts, and contain terms and conditions no less advantageous to the indemnified person as the coverage currently provided by Fourth Street provided, however, that Seacoast may substitute policies of at least the same coverage and amounts containing terms and conditions that are not less advantageous than such Fourth Street policy. In no event shall Seacoast be required to expend for the tail insurance aggregate premiums in excess of  $25,000 for such insurance.

Third Party Proposals

Fourth Street has agreed that it will not, and will cause its directors, officers, employees and representatives and affiliates not to: initiate, solicit, encourage or knowingly facilitate inquiries or proposals with respect to, or engage or participate in any negotiations concerning, or provide to any person any confidential or nonpublic information or data or have or participate in any discussions with any person relating to, any (i) merger, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving Fourth Street or its subsidiaries, (ii) tender or exchange offer, that if consummated, would result in any third-party owning 25% or more of any class of equity or voting securities of Fourth Street or Freedom Bank, (iii) acquisition or purchase, direct or indirect, of 25% or more of the consolidated assets of Fourth Street and its subsidiaries or 25% or more of any class of equity or voting securities of Fourth Street or Freedom Bank, or (iv) other transaction the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the merger or that could reasonably be expected to dilute materially the benefits to Seacoast of the transactions contemplated by the merger agreement (items (i)-(iv) collectively referred to as an “acquisition proposal”).

However, the merger agreement provides that at any time prior to the approval of the merger agreement by the Fourth Street shareholders, if Fourth Street receives an unsolicited acquisition proposal that does not violate the “no shop” provisions in the merger agreement and Fourth Street board of directors concludes in good faith that there is a reasonable likelihood that such proposal constitutes or is reasonably likely to result in a superior proposal (as defined below), then Fourth Street may furnish non-public information or data to the third party making the acquisition proposal and participate in such negotiations or discussions with the third party making the acquisition proposal regarding such proposal, if the Fourth Street board of directors determines in good faith (and based upon the written advice of its outside counsel) that failure to take such actions would constitute, or would reasonably be likely to result in, a breach of its fiduciary obligations to the Fourth Street shareholders under applicable law and if Fourth Street enters into a confidentiality agreement with such third party. Fourth Street must promptly advise Seacoast within two (2) business days following receipt of any acquisition proposal and the substance of such proposal and must keep Seacoast apprised of any related developments, discussions and negotiations on a current basis.

A “superior proposal” means any bona fide, unsolicited, written “acquisition proposal” for at least a majority of the outstanding shares of Fourth Street common stock on terms that the Fourth Street board of directors concludes in good faith to be more favorable to the shareholders from a financial point of view than the merger and the other transactions contemplated by the merger agreement (including taking into account the terms, if any, proposed by Seacoast to amend or modify the terms of the transactions contemplated by the merger agreement in response to such proposal), (i) after receiving the written advice of its financial advisor, (ii) after taking into account the likelihood of consummation of such transaction on the terms set forth therein and (iii) after taking into account all legal (with the written advice of outside counsel), financial (including the financing terms of any such proposal), regulatory and other aspects of the proposal and any other relevant factors permitted under applicable law.

 

66

 

The merger agreement generally prohibits Fourth Street’s board of directors from making a change in recommendation (i.e., from withdrawing or modifying in a manner adverse to Seacoast the recommendation of the Fourth Street board of directors set forth in this proxy statement/prospectus that the Fourth Street shareholders vote to approve the merger agreement, or from making or causing to be made any third party or public communication proposing or announcing an intention to withdraw or modify in a manner adverse to Seacoast such recommendation). At any time prior to the approval of the merger agreement by the Fourth Street shareholders, however, the Fourth Street board of directors may effect a change in recommendation in response to a bona fide written unsolicited acquisition proposal that the Fourth Street board of directors concludes in good faith (and based upon the written advice of its outside counsel and after consultation with its financial advisor) constitutes a superior proposal and if the board concludes that the failure to accept such superior proposal would result in a violation of its fiduciary obligations to shareholders then the board may terminate the merger agreement and enter into a definitive agreement with respect to such superior proposal.

The Fourth Street board of directors may not make a change in recommendation, or terminate the merger agreement to pursue a superior proposal, unless: (i) Fourth Street has not breached any of the provisions of the merger agreement relating to third party acquisition proposals in any respect; (ii) the Fourth Street board of directors determines in good faith (after consultation with counsel and its financial advisors) that such superior proposal continues to be a superior proposal (after taking into account all adjustments to the terms of the merger agreement offered by Seacoast); (iii) Fourth Street has given Seacoast at least 4 business days’ prior written notice of its intention to take such action (which notice shall specify the material terms and conditions of any superior proposal including the identity of the person making such superior proposal) and has contemporaneously provided an unredacted copy of the relevant proposed transaction agreements with the person making such superior proposal; and (iv) before effecting such change in recommendation, Fourth Street has negotiated in good faith with Seacoast during the notice period (to the extent Seacoast wishes to negotiate) to enable Seacoast to revise the terms of the merger agreement so that such superior proposal no longer constitutes a superior proposal. In the event of any material change to the terms of a superior proposal, Fourth Street shall be required to deliver a new notice to Seacoast and the four business day negotiation period with Seacoast shall have recommenced.

If the Fourth Street board of directors makes a change in recommendation, or if Fourth Street terminates the merger agreement to enter into an agreement with respect to a superior proposal, Fourth Street could be required to pay Seacoast a termination fee of  $2,900,000 in cash. See “The Merger Agreement — Termination,” and “The Merger Agreement — Termination Fee.”

Approval of 280G Payments

In the event that the execution of the merger agreement and the consummation of the transactions contemplated thereby would entitle any person who is a “disqualified individual” to a “parachute payment” (as such terms are defined in Section 280G of the Internal Revenue Code and the regulations promulgated thereunder) absent approval by the Fourth Street shareholders, then Fourth Street has agreed to take all necessary actions (including obtaining any required waivers or consents from each disqualified individual) to submit to a shareholder vote in a manner that satisfies the stockholder approval requirements for exemption under Section 280G of the Internal Revenue Code and the regulations promulgated thereunder, the right of each disqualified individual to receive or retain, as applicable, any payments and benefits to the extent necessary so that no payment or benefit received by such disqualified person shall be deemed a parachute payment. Such vote will establish the disqualified individual’s right to the payment or benefits.

Systems Integration; Operating Functions

From and after the date of the merger agreement, Fourth Street shall and shall cause its directors, officers and employees to and shall make all commercially reasonable best efforts (without undue disruption to their business) to cause Freedom Bank’s data processing consultants and software providers to, cooperate and assist Fourth Street and Seacoast in connection with an electronic and systems conversion of all applicable data of Fourth Street and Freedom Bank to the Seacoast systems, including the training of Fourth Street and Freedom Bank employees during normal banking hours. Additionally, Fourth Street shall provide Seacoast access to its data files to facilitate the conversion process, including but not limited to (i) sample

 

67

 

data files with data dictionary no later than 30 days following the date of the merger agreement, (ii) a full set of data files, including electronic banking and online bill payment data, for mapping and mock conversion no later than 90 days prior to the targeted conversion date as determined by Seacoast, (iii) a second full set of data files from which to establish CIS records, deposit shells, electronic banking accounts, bill payment, payees and order debit cards no later than 21 days prior to the targeted conversion date, and (iv) a final set of data files no later than the date of the targeted conversion date. Fourth Street shall cooperate with Seacoast in connection with the planning for the efficient and orderly combination of the parties and the operation of SNB after the merger, and in preparing for the consolidation of appropriate operating functions to be effective at the effective time of the merger, or such later time as may be decided by Seacoast. Fourth Street shall provide office space and support services in connection with the foregoing, and senior officers of Fourth Street and Seacoast shall meet from time to time as Fourth Street or Seacoast my reasonably request, to review the financial and operational affairs of Fourth Street and its subsidiaries, and Fourth Street shall give due consideration to Seacoast’s input on such matters, with the understanding that, neither Seacoast nor SNB will be permitted to exercise control of Fourth Street or Freedom Bank prior to the effective time of the merger and Fourth Street and Freedom Bank shall not be under any obligation to act in a manner that could reasonably be deemed to constitute anti-competitive behavior under federal or state antitrust laws.

Representations and Warranties

The merger agreement contains generally customary representations and warranties of Seacoast and Fourth Street relating to their respective businesses. The representations and warranties of each of Seacoast and Fourth Street have been made solely for the benefit of the other party, and these representations and warranties should not be relied on by any other person. In addition, these representations and warranties:

•

have been qualified by information set forth in confidential disclosure schedules in connection with signing the merger agreement — the information contained in these schedules modifies, qualifies and creates exceptions to the representations and warranties in the merger agreement;

​

•

will not survive consummation of the merger;

​

•

may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties to the merger agreement if those statements turn out to be inaccurate;

​

•

are in some cases subject to a materiality standard described in the merger agreement which may differ from what may be viewed as material by you; and

​

•

were made only as of the date of the merger agreement or such other date as is specified in the merger agreement.

​

The representations and warranties made by Seacoast and Fourth Street to each other primarily relate to:

•

corporate organization, existence, power and standing;

​

•

capitalization;

​

•

ownership of subsidiaries;

​

•

corporate authorization to enter into the merger agreement and to consummate the merger;

​

•

absence of any breach of organizational documents, violation of law or breach of agreements as a result of the merger;

​

•

regulatory approvals required in connection with the merger;

​

•

reports filed with governmental entities, including, in the case of Seacoast, the SEC;

​

•

financial statements;

​

•

compliance with laws and the absence of regulatory agreements;

​

•

accuracy of the information supplied by each party for inclusion or incorporation by reference in this proxy statement/prospectus;

​

•

fees paid to financial advisors;

​

 

68

 

•

litigation; and

​

•

Community Reinvestment Act compliance.

​

Fourth Street has also made representations and warranties to Seacoast with respect to:

•

absence of a material adverse effect on Fourth Street since January 1, 2019;

​

•

tax matters;

​

•

the inapplicability to the merger of state takeover laws;

​

•

employee benefit plans and labor matters;

​

•

material contracts;

​

•

environmental matters;

​

•