10-Q 1 csfl-10q_20160331.htm 10-Q csfl-10q_20160331.htm

 

 

 

U.S. SECURTIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

Form 10-Q

 

(Mark One)

x

Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2016

¨

Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from              to             

Commission file number 000-32017

 

CENTERSTATE BANKS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Florida

 

59-3606741

(State or Other Jurisdiction
of Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

42745 U.S. Highway 27

Davenport, Florida 33837

(Address of Principal Executive Offices)

(863) 419-7750

(Issuer’s Telephone Number, Including Area Code)

 

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

YES  x    NO  ¨

Check whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company.

 

Large accelerated filer

¨

Accelerated filer

x

Non-accelerated filer

¨

Smaller reporting company

¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES  x    NO  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

YES  ¨    NO  x

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

 

Common stock, par value $.01 per share

 

 

 

47,958,486 shares

 

(class)

 

Outstanding at April 28, 2016

 

 

 

 

 

 


 

CENTERSTATE BANKS, INC. AND SUBSIDIARIES

INDEX

 

 

 

Page

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

 

 

 

Condensed consolidated balance sheets (unaudited) at March 31, 2016  and December 31, 2015

 

3

 

Condensed consolidated statements of earnings and comprehensive income (loss) for the three months ended March 31, 2016 and 2015 (unaudited)

 

4

 

Condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31, 2016 and 2015 (unaudited)

 

6

 

Condensed consolidated statements of cash flows for the three months ended March 31, 2016 and 2015 (unaudited)

 

7

 

Notes to condensed consolidated financial statements (unaudited)

 

9

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

35

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

51

 

Item 4. Controls and Procedures

 

51

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

 

52

 

Item 1A. Risk Factors

 

52

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

52

 

Item 3. Defaults Upon Senior Securities

 

52

 

Item 4. [Removed and Reserved]

 

52

 

Item 5. Other Information

 

52

 

Item 6. Exhibits

 

52

 

SIGNATURES

 

53

 

CERTIFICATIONS

 

 

 

 

 

 

2


 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands of dollars, except per share data)

 

 

 

March 31, 2016

 

 

December 31, 2015

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

65,560

 

 

$

50,902

 

Federal funds sold and Federal Reserve Bank deposits

 

 

296,459

 

 

 

101,580

 

    Cash and cash equivalents

 

 

362,019

 

 

 

152,482

 

Trading securities, at fair value

 

 

2,719

 

 

 

2,107

 

Investment securities available for sale, at fair value

 

 

707,573

 

 

 

604,739

 

Investment securities held to maturity (fair value of $259,599 and $273,983

 

 

 

 

 

 

 

 

    at March 31, 2016 and December 31, 2015, respectively)

 

 

256,849

 

 

 

272,840

 

Loans held for sale

 

 

2,186

 

 

 

1,529

 

 

 

 

 

 

 

 

 

 

Loans, excluding purchased credit impaired

 

 

2,911,705

 

 

 

2,383,248

 

Purchased credit impaired loans

 

 

236,516

 

 

 

210,528

 

Allowance for loan losses

 

 

(23,122

)

 

 

(22,264

)

     Net Loans

 

 

3,125,099

 

 

 

2,571,512

 

 

 

 

 

 

 

 

 

 

Bank premises and equipment, net

 

 

116,734

 

 

 

101,821

 

Accrued interest receivable

 

 

11,677

 

 

 

10,286

 

Federal Home Loan Bank and Federal Reserve Bank stock, at cost

 

 

17,003

 

 

 

14,041

 

Goodwill

 

 

105,492

 

 

 

76,739

 

Core deposit intangible, net

 

 

17,803

 

 

 

12,164

 

Trust intangible, net

 

 

802

 

 

 

837

 

Bank owned life insurance

 

 

86,455

 

 

 

85,890

 

Other repossessed real estate owned covered by FDIC loss share agreements

 

 

-

 

 

 

9,629

 

Other repossessed real estate owned

 

 

15,937

 

 

 

1,567

 

FDIC indemnification asset

 

 

-

 

 

 

25,795

 

Deferred income tax asset, net

 

 

69,470

 

 

 

46,220

 

Bank property held for sale

 

 

8,069

 

 

 

1,665

 

Prepaid expense and other assets

 

 

63,768

 

 

 

30,854

 

TOTAL ASSETS

 

$

4,969,655

 

 

$

4,022,717

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

     Demand - non-interest bearing

 

$

1,489,530

 

 

$

1,133,138

 

     Demand - interest bearing

 

 

756,129

 

 

 

679,714

 

     Savings and money market accounts

 

 

1,214,083

 

 

 

979,906

 

     Time deposits

 

 

632,425

 

 

 

422,420

 

Total deposits

 

 

4,092,167

 

 

 

3,215,178

 

 

 

 

 

 

 

 

 

 

Securities sold under agreement to repurchase

 

 

31,474

 

 

 

27,472

 

Federal funds purchased

 

 

225,298

 

 

 

200,250

 

Other borrowed funds

 

 

650

 

 

 

25,000

 

Corporate debentures

 

 

25,782

 

 

 

24,093

 

Accrued interest payable

 

 

1,056

 

 

 

218

 

Payables and accrued expenses

 

 

73,767

 

 

 

39,992

 

     Total liabilities

 

 

4,450,194

 

 

 

3,532,203

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $.01 par value: 100,000,000 shares

 

 

 

 

 

 

 

 

     authorized; 47,942,643 and 45,459,195  shares issued and outstanding

 

 

 

 

 

 

 

 

    at March 31, 2016 and December 31, 2015, respectively

 

 

479

 

 

 

455

 

Additional paid-in capital

 

 

426,267

 

 

 

393,191

 

Retained earnings

 

 

88,708

 

 

 

95,430

 

Accumulated other comprehensive income

 

 

4,007

 

 

 

1,438

 

Total stockholders' equity

 

 

519,461

 

 

 

490,514

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

4,969,655

 

 

$

4,022,717

 

See notes to the accompanying condensed consolidated financial statements

 

3


 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (LOSS) (unaudited)

(in thousands of dollars, except per share data)

 

 

 

Three months ended

 

 

 

March 31, 2016

 

 

March 31, 2015

 

Interest income:

 

 

 

 

 

 

 

 

Loans

 

$

37,118

 

 

$

34,268

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

Taxable

 

 

5,062

 

 

 

4,282

 

Tax-exempt

 

 

780

 

 

 

539

 

Federal funds sold and other

 

 

538

 

 

 

396

 

 

 

 

43,498

 

 

 

39,485

 

Interest expense:

 

 

 

 

 

 

 

 

Deposits

 

 

1,481

 

 

 

1,447

 

Securities sold under agreement to repurchase

 

 

27

 

 

 

49

 

Federal funds purchased

 

 

267

 

 

 

132

 

Corporate debentures

 

 

248

 

 

 

237

 

 

 

 

2,023

 

 

 

1,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

41,475

 

 

 

37,620

 

Provision for loan losses

 

 

510

 

 

 

1,642

 

Net interest income after loan loss provision

 

 

40,965

 

 

 

35,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non interest income:

 

 

 

 

 

 

 

 

Correspondent banking capital markets revenue

 

 

7,371

 

 

 

5,694

 

Other correspondent banking related  revenue

 

 

1,404

 

 

 

1,106

 

Service charges on deposit accounts

 

 

2,736

 

 

 

2,261

 

Debit, prepaid, ATM and merchant card related fees

 

 

2,046

 

 

 

1,701

 

Wealth management related revenue

 

 

735

 

 

 

970

 

FDIC indemnification income

 

 

96

 

 

 

667

 

FDIC indemnification asset amortization

 

 

(1,166

)

 

 

(4,350

)

Bank owned life insurance income

 

 

565

 

 

 

593

 

Other service charges and fees

 

 

774

 

 

 

439

 

Total other income

 

 

14,561

 

 

 

9,081

 

See notes to the accompanying condensed consolidated financial statements.

 

 

 

 

4


 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (LOSS) (unaudited)

(in thousands of dollars, except per share data)

 

 

 

Three months ended

 

 

 

March 31, 2016

 

 

March 31, 2015

 

Non interest expense:

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

21,455

 

 

 

19,580

 

Occupancy expense

 

 

2,147

 

 

 

2,080

 

Depreciation of premises and equipment

 

 

1,497

 

 

 

1,433

 

Supplies, stationary and printing

 

 

299

 

 

 

365

 

Marketing expenses

 

 

690

 

 

 

538

 

Data processing expense

 

 

1,527

 

 

 

1,695

 

Legal, audit and other professional fees

 

 

903

 

 

 

735

 

Core deposit intangible ("CDI") amortization

 

 

643

 

 

 

628

 

Postage and delivery

 

 

355

 

 

 

368

 

ATM and debit card related expenses

 

 

596

 

 

 

433

 

Bank regulatory expenses

 

 

810

 

 

 

910

 

Gain on sale of repossessed real estate (“OREO”)

 

 

(158

)

 

 

(1,528

)

Valuation write down of repossessed real estate (“OREO”)

 

 

22

 

 

 

389

 

Loss (gain) on repossessed assets other than real estate

 

 

6

 

 

 

(1

)

Foreclosure related expenses

 

 

489

 

 

 

589

 

Merger and acquisition related expenses

 

 

11,172

 

 

 

-

 

Branch closure and efficiency initiatives

 

 

456

 

 

 

-

 

Loss from termination of FDIC loss share agreements

 

 

17,560

 

 

 

-

 

Other expenses

 

 

2,384

 

 

 

2,389

 

Total other expenses

 

 

62,853

 

 

 

30,603

 

 

 

 

 

 

 

 

 

 

(Loss) income before provision for income taxes

 

 

(7,327

)

 

 

14,456

 

(Benefit) provision for income taxes

 

 

(2,523

)

 

 

5,308

 

Net (loss) income

 

$

(4,804

)

 

$

9,148

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Unrealized securities holding gain, net of income taxes

 

$

2,569

 

 

$

1,014

 

Less: reclassified adjustments for gain included in net income, net of

    income taxes, of $0, and $0 ,respectively

 

 

-

 

 

 

-

 

Net unrealized gain on available for sale securities,

    net of income taxes

 

$

2,569

 

 

$

1,014

 

 

 

 

 

 

 

 

 

 

Total comprehensive (loss) income

 

$

(2,235

)

 

$

10,162

 

 

 

 

 

 

 

 

 

 

(Loss) earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.10

)

 

$

0.20

 

Diluted

 

$

(0.10

)

 

$

0.20

 

Common shares used in the calculation of (loss) earnings per share:

 

 

 

 

 

 

 

 

Basic (1)

 

 

46,343,033

 

 

 

45,127,940

 

Diluted (1)

 

 

46,343,033

 

 

 

45,657,624

 

 

 

(1)

Excludes participating shares.

See notes to the accompanying condensed consolidated financial statements

 

 

 

 

5


 

 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the three months ended March 31, 2016 and 2015 (unaudited)

(in thousands of dollars, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Number of

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

Total

 

 

 

common

 

 

Common

 

 

paid in

 

 

Retained

 

 

comprehensive

 

 

stockholders'

 

 

 

shares

 

 

stock

 

 

capital

 

 

earnings

 

 

income

 

 

equity

 

Balances at January 1, 2015

 

 

45,323,553

 

 

$

453

 

 

$

388,698

 

 

$

59,273

 

 

$

4,053

 

 

$

452,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,148

 

 

 

 

 

 

 

9,148

 

Unrealized holding gain on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   available for sale securities, net of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

deferred income tax of $637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,014

 

 

 

1,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid - common ($0.01 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(455

)

 

 

 

 

 

 

(455

)

Stock grants issued

 

 

45,053

 

 

 

1

 

 

 

607

 

 

 

 

 

 

 

 

 

 

 

608

 

Stock based compensation expense

 

 

 

 

 

 

 

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

56

 

Stock options exercised, including tax benefit

 

 

40,318

 

 

 

-

 

 

 

217

 

 

 

 

 

 

 

 

 

 

 

217

 

Balances at March 31, 2015

 

 

45,408,924

 

 

$

454

 

 

$

389,578

 

 

$

67,966

 

 

$

5,067

 

 

$

463,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2016

 

 

45,459,195

 

 

$

455

 

 

$

393,191

 

 

$

95,430

 

 

$

1,438

 

 

$

490,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,804

)

 

 

 

 

 

 

(4,804

)

Unrealized holding gain on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   available for sale securities, net of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

deferred income tax of $1,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,569

 

 

 

2,569

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid - common ($0.04 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,918

)

 

 

 

 

 

 

(1,918

)

Stock grants issued

 

 

171,709

 

 

 

1

 

 

 

198

 

 

 

 

 

 

 

 

 

 

 

199

 

Stock based compensation expense

 

 

 

 

 

 

 

 

 

 

1,080

 

 

 

 

 

 

 

 

 

 

 

1,080

 

Stock options exercised, including tax benefit

 

 

59,980

 

 

 

1

 

 

 

302

 

 

 

 

 

 

 

 

 

 

 

303

 

Stock repurchase

 

 

(24,283

)

 

 

(1

)

 

 

(346

)

 

 

 

 

 

 

 

 

 

 

(347

)

Stock issued pursuant to Community Bank acquisition

 

 

2,276,042

 

 

 

23

 

 

 

31,842

 

 

 

 

 

 

 

 

 

 

 

31,865

 

Balances at March 31, 2016

 

 

47,942,643

 

 

$

479

 

 

$

426,267

 

 

$

88,708

 

 

$

4,007

 

 

$

519,461

 

See notes to the accompanying condensed consolidated financial statements

 

 

 

 

6


 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands of dollars, except per share data)

 

 

 

Three months ended March 31,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

   Net (loss) income

 

$

(4,804

)

 

$

9,148

 

   Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

      Provision for loan losses

 

 

510

 

 

 

1,642

 

      Depreciation of premises and equipment

 

 

1,497

 

 

 

1,433

 

      Accretion of purchase accounting adjustments

 

 

(9,523

)

 

 

(10,523

)

      Net amortization of investment securities

 

 

2,061

 

 

 

2,013

 

      Net deferred loan origination fees

 

 

(77

)

 

 

139

 

      Trading securities revenue

 

 

(354

)

 

 

(174

)

      Purchases of trading securities

 

 

(47,734

)

 

 

(38,082

)

      Proceeds from sale of trading securities

 

 

47,476

 

 

 

40,659

 

      Repossessed real estate owned valuation write down

 

 

22

 

 

 

389

 

      Gain on sale of repossessed real estate owned

 

 

(158

)

 

 

(1,528

)

      Loss (gain) on repossessed assets other than real estate

 

 

6

 

 

 

(1

)

      Gain on sale of loans held for sale

 

 

(98

)

 

 

(164

)

      Loans originated and held for sale

 

 

(5,425

)

 

 

(7,431

)

      Proceeds from sale of loans held for sale

 

 

5,598

 

 

 

8,324

 

      Gain on disposal of bank property held for sale

 

 

(2

)

 

 

(41

)

      Impairment on bank property held for sale

 

 

458

 

 

 

682

 

      Deferred income taxes

 

 

(9,979

)

 

 

452

 

      Stock based compensation expense

 

 

1,080

 

 

 

830

 

      Bank owned life insurance income

 

 

(565

)

 

 

(593

)

      FDIC indemnification asset amortization

 

 

1,166

 

 

 

4,350

 

      Loss from termination of FDIC loss share agreements

 

 

17,560

 

 

 

-

 

      Net cash from changes in:

 

 

 

 

 

 

 

 

         Net changes in accrued interest receivable, prepaid expenses, and other assets

 

 

(28,966

)

 

 

(4,177

)

         Net change in accrued interest payable, accrued expense, and other liabilities

 

 

31,180

 

 

 

3,804

 

            Net cash provided by operating activities

 

$

929

 

 

 

11,151

 

See notes to the accompanying condensed consolidated financial statements.

 

 

 

 

7


 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands of dollars, except per share data)

(continued)

 

 

 

Three months ended March 31,

 

 

 

2016

 

 

2015

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Available for sale securities:

 

 

 

 

 

 

 

 

   Purchases of investment securities

 

$

-

 

 

$

(1,004

)

   Purchases of mortgage backed securities

 

 

(122,807

)

 

 

(22,306

)

   Proceeds from pay-downs of mortgage backed securities

 

 

21,486

 

 

 

20,554

 

   Proceeds from sales of investment securities

 

 

79,297

 

 

 

-

 

   Proceeds from sales of mortgage backed securities

 

 

62,418

 

 

 

-

 

Proceeds from called investment securities

 

 

920

 

 

 

-

 

Held to maturity securities:

 

 

 

 

 

 

 

 

   Purchases of investment securities

 

 

(11,149

)

 

 

(37,882

)

   Purchases of mortgage backed securities

 

 

-

 

 

 

-

 

   Proceeds from called investment securities

 

 

20,600

 

 

 

37,110

 

   Proceeds from pay-downs of mortgage backed securities

 

 

6,227

 

 

 

8,868

 

Purchases of FHLB and FRB stock

 

 

-

 

 

 

-

 

   Proceeds from sales of FHLB and FRB stock

 

 

29

 

 

 

208

 

   Net (increase) decrease in loans

 

 

(32,123

)

 

 

(28,103

)

   Cash received from FDIC loss sharing agreements

 

 

5,482

 

 

 

3,654

 

   Purchases of premises and equipment, net

 

 

(1,604

)

 

 

(3,111

)

   Proceeds from sale of repossessed real estate

 

 

4,541

 

 

 

11,589

 

   Proceeds from sale of fixed assets

 

 

-

 

 

 

-

 

   Proceeds from sale of bank property held for sale

 

 

690

 

 

 

555

 

   Net cash from bank acquisitions

 

 

41,885

 

 

 

-

 

            Net cash provided by (used in) investing activities

 

$

75,892

 

 

$

(9,868

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

   Net increase in deposits

 

 

171,278

 

 

 

57,567

 

   Net increase in securities sold under agreement to repurchase

 

 

3,458

 

 

 

4,049

 

   Net increase in federal funds purchased

 

 

25,048

 

 

 

35,451

 

   Net decrease in other borrowings

 

 

(56,768

)

 

 

-

 

Extinguishment of debt

 

 

(8,680

)

 

 

-

 

   Net (decrease) increase in payable to shareholders for acquisitions

 

 

342

 

 

 

(184

)

   Stock options exercised, including tax benefit

 

 

303

 

 

 

217

 

   Stock repurchased

 

 

(347

)

 

 

-

 

   Dividends paid

 

 

(1,918

)

 

 

(455

)

            Net cash provided by financing activities

 

$

132,716

 

 

$

96,645

 

 

 

 

 

 

 

 

 

 

            Net increase in cash and cash equivalents

 

 

209,537