10-Q 1 csfl-10q_20160630.htm FORM 10-Q csfl-10q_20160630.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 June 30, 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

 

 

 

48,005,596 shares

 

(class)

 

Outstanding at July 29, 2016

 

 

 

 

 


 

CENTERSTATE BANKS, INC. AND SUBSIDIARIES

INDEX

 

 

 

Page

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

 

 

 

Condensed consolidated balance sheets (unaudited) at June 30, 2016  and December 31, 2015

 

3

 

Condensed consolidated statements of earnings and comprehensive income (loss) for the three and six months ended June 30, 2016 and 2015 (unaudited)

 

4

 

Condensed consolidated statements of changes in stockholders’ equity for the six months ended June 30, 2016 and 2015 (unaudited)

 

6

 

Condensed consolidated statements of cash flows for the six months ended June 30, 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

 

40

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

59

 

Item 4. Controls and Procedures

 

59

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

 

60

 

Item 1A. Risk Factors

 

60

 

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

 

60

 

Item 3. Defaults Upon Senior Securities

 

60

 

Item 4. [Removed and Reserved]

 

60

 

Item 5. Other Information

 

60

 

Item 6. Exhibits

 

60

 

SIGNATURES

 

61

 

CERTIFICATIONS

 

 

 

 

 

 

2


 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands of dollars, except per share data)

 

 

 

June 30, 2016

 

 

December 31, 2015

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

60,522

 

 

$

50,902

 

Federal funds sold and Federal Reserve Bank deposits

 

 

223,533

 

 

 

101,580

 

    Cash and cash equivalents

 

 

284,055

 

 

 

152,482

 

Trading securities, at fair value

 

 

-

 

 

 

2,107

 

Investment securities available for sale, at fair value

 

 

744,575

 

 

 

604,739

 

Investment securities held to maturity (fair value of $275,076 and $273,983

 

 

 

 

 

 

 

 

    at June 30, 2016 and December 31, 2015, respectively)

 

 

267,082

 

 

 

272,840

 

Loans held for sale

 

 

4,329

 

 

 

1,529

 

 

 

 

 

 

 

 

 

 

Loans, excluding purchased credit impaired

 

 

2,978,108

 

 

 

2,383,248

 

Purchased credit impaired loans

 

 

216,859

 

 

 

210,528

 

Allowance for loan losses

 

 

(24,172

)

 

 

(22,264

)

     Net Loans

 

 

3,170,795

 

 

 

2,571,512

 

 

 

 

 

 

 

 

 

 

Bank premises and equipment, net

 

 

116,129

 

 

 

101,821

 

Accrued interest receivable

 

 

10,990

 

 

 

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

 

 

17,023

 

 

 

12,164

 

Trust intangible, net

 

 

768

 

 

 

837

 

Bank owned life insurance

 

 

97,109

 

 

 

85,890

 

Other repossessed real estate owned covered by FDIC loss share agreements

 

 

-

 

 

 

9,629

 

Other repossessed real estate owned

 

 

12,311

 

 

 

1,567

 

FDIC indemnification asset

 

 

-

 

 

 

25,795

 

Deferred income tax asset, net

 

 

62,774

 

 

 

46,220

 

Bank property held for sale

 

 

8,107

 

 

 

1,665

 

Interest rate swap derivatives

 

 

64,737

 

 

 

18,619

 

Prepaid expense and other assets

 

 

12,010

 

 

 

12,235

 

TOTAL ASSETS

 

$

4,995,289

 

 

$

4,022,717

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

     Demand - non-interest bearing

 

$

1,486,600

 

 

$

1,133,138

 

     Demand - interest bearing

 

 

763,614

 

 

 

679,714

 

     Savings and money market accounts

 

 

1,275,628

 

 

 

979,906

 

     Time deposits

 

 

606,294

 

 

 

422,420

 

Total deposits

 

 

4,132,136

 

 

 

3,215,178

 

 

 

 

 

 

 

 

 

 

Securities sold under agreement to repurchase

 

 

30,591

 

 

 

27,472

 

Federal funds purchased

 

 

174,116

 

 

 

200,250

 

Other borrowed funds

 

 

-

 

 

 

25,000

 

Corporate debentures

 

 

25,841

 

 

 

24,093

 

Accrued interest payable

 

 

932

 

 

 

218

 

Interest rate swap derivatives

 

 

66,741

 

 

 

19,822

 

Payables and accrued expenses

 

 

26,961

 

 

 

20,170

 

     Total liabilities

 

 

4,457,318

 

 

 

3,532,203

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

     authorized; 47,996,281 and 45,459,195  shares issued and outstanding

 

 

 

 

 

 

 

 

    at June 30, 2016 and December 31, 2015, respectively

 

 

480

 

 

 

455

 

Additional paid-in capital

 

 

427,685

 

 

 

393,191

 

Retained earnings

 

 

102,522

 

 

 

95,430

 

Accumulated other comprehensive income

 

 

7,284

 

 

 

1,438

 

Total stockholders' equity

 

 

537,971

 

 

 

490,514

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

4,995,289

 

 

$

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

 

 

Six months ended

 

 

 

June 30, 2016

 

 

June 30, 2015

 

 

June 30, 2016

 

 

June 30, 2015

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

40,977

 

 

$

36,786

 

 

$

78,095

 

 

$

71,054

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

4,768

 

 

 

3,803

 

 

 

9,830

 

 

 

8,085

 

Tax-exempt

 

 

942

 

 

 

667

 

 

 

1,722

 

 

 

1,206

 

Federal funds sold and other

 

 

622

 

 

 

369

 

 

 

1,160

 

 

 

765

 

 

 

 

47,309

 

 

 

41,625

 

 

 

90,807

 

 

 

81,110

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

1,740

 

 

 

1,369

 

 

 

3,221

 

 

 

2,816

 

Securities sold under agreement to repurchase

 

 

28

 

 

 

54

 

 

 

55

 

 

 

103

 

Federal funds purchased

 

 

250

 

 

 

154

 

 

 

521

 

 

 

286

 

Corporate debentures

 

 

294

 

 

 

241

 

 

 

538

 

 

 

478

 

 

 

 

2,312

 

 

 

1,818

 

 

 

4,335

 

 

 

3,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

44,997

 

 

 

39,807

 

 

 

86,472

 

 

 

77,427

 

Provision for loan losses

 

 

911

 

 

 

2,308

 

 

 

1,421

 

 

 

3,950

 

Net interest income after loan loss provision

 

 

44,086

 

 

 

37,499

 

 

 

85,051

 

 

 

73,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Correspondent banking capital markets revenue

 

 

8,049

 

 

 

7,334

 

 

 

15,420

 

 

 

13,028

 

Other correspondent banking related  revenue

 

 

1,242

 

 

 

1,253

 

 

 

2,646

 

 

 

2,359

 

Service charges on deposit accounts

 

 

3,329

 

 

 

2,420

 

 

 

6,065

 

 

 

4,681

 

Debit, prepaid, ATM and merchant card related fees

 

 

2,182

 

 

 

1,823

 

 

 

4,228

 

 

 

3,524

 

Wealth management related revenue

 

 

795

 

 

 

990

 

 

 

1,530

 

 

 

1,960

 

FDIC indemnification income

 

 

-

 

 

 

359

 

 

 

96

 

 

 

1,026

 

FDIC indemnification asset amortization

 

 

-

 

 

 

(4,649

)

 

 

(1,166

)

 

 

(8,999

)

Bank owned life insurance income

 

 

654

 

 

 

599

 

 

 

1,219

 

 

 

1,192

 

Other service charges and fees

 

 

720

 

 

 

444

 

 

 

1,494

 

 

 

883

 

Total other income

 

 

16,971

 

 

 

10,573

 

 

 

31,532

 

 

 

19,654

 

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

 

 

Six months ended

 

 

 

June 30, 2016

 

 

June 30, 2015

 

 

June 30, 2016

 

 

 

 

June 30, 2015

 

Non interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

22,959

 

 

 

19,925

 

 

 

44,414

 

 

 

 

 

39,505

 

Occupancy expense

 

 

2,477

 

 

 

2,566

 

 

 

4,624

 

 

 

 

 

5,011

 

Depreciation of premises and equipment

 

 

1,588

 

 

 

1,403

 

 

 

3,085

 

 

 

 

 

2,836

 

Supplies, stationary and printing

 

 

380

 

 

 

351

 

 

 

679

 

 

 

 

 

716

 

Marketing expenses

 

 

826

 

 

 

481

 

 

 

1,516

 

 

 

 

 

1,019

 

Data processing expense

 

 

1,765

 

 

 

1,127

 

 

 

3,292

 

 

 

 

 

2,457

 

Legal, audit and other professional fees

 

 

949

 

 

 

690

 

 

 

1,852

 

 

 

 

 

1,425

 

Core deposit intangible ("CDI") amortization

 

 

780

 

 

 

603

 

 

 

1,423

 

 

 

 

 

1,231

 

Postage and delivery

 

 

486

 

 

 

336

 

 

 

841

 

 

 

 

 

704

 

ATM and debit card related expenses

 

 

816

 

 

 

450

 

 

 

1,412

 

 

 

 

 

883

 

Bank regulatory expenses

 

 

968

 

 

 

883

 

 

 

1,778

 

 

 

 

 

1,793

 

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

 

 

(554

)

 

 

27

 

 

 

(712

)

 

 

 

 

(1,501

)

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

 

 

392

 

 

 

390

 

 

 

414

 

 

 

 

 

779

 

Loss (gain) on repossessed assets other than real estate

 

 

31

 

 

 

-

 

 

 

37

 

 

 

 

 

(1

)

Foreclosure related expenses

 

 

742

 

 

 

730

 

 

 

1,231

 

 

 

 

 

1,319

 

Merger and acquisition related expenses

 

 

-

 

 

 

-

 

 

 

11,172

 

 

 

 

 

-

 

Branch closure and efficiency initiatives

 

 

(38

)

 

 

-

 

 

 

418

 

 

 

 

 

-

 

Loss from termination of FDIC loss share agreements

 

 

-

 

 

 

-

 

 

 

17,560

 

 

 

 

 

-

 

Other expenses

 

 

2,482

 

 

 

2,576

 

 

 

4,866

 

 

 

 

 

4,965

 

Total other expenses

 

 

37,049

 

 

 

32,538

 

 

 

99,902

 

 

 

 

 

63,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

 

24,008

 

 

 

15,534

 

 

 

16,681

 

 

 

 

 

29,990

 

Provision for income taxes

 

 

8,274

 

 

 

5,656

 

 

 

5,751

 

 

 

 

 

10,964

 

Net income

 

$

15,734

 

 

$

9,878

 

 

$

10,930

 

 

 

 

$

19,026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized securities holding gain (loss), net of income taxes

 

$

3,277

 

 

$

(3,536

)

 

$

5,846

 

 

 

 

$

(2,522

)

Less: reclassified adjustments for gain included in net income,

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

-

 

Net unrealized gain (loss) on available for sale securities,

    net of income taxes

 

$

3,277

 

 

$

(3,536

)

 

$

5,846

 

 

 

 

$

(2,522

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

19,011

 

 

$

6,342

 

 

$

16,776

 

 

 

 

$

16,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.33

 

 

$

0.22

 

 

$

0.23

 

 

 

 

$

0.42

 

Diluted

 

$

0.32

 

 

$

0.21

 

 

$

0.23

 

 

 

 

$

0.41

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (1)

 

 

47,781,994

 

 

 

45,161,374

 

 

 

46,968,000

 

 

 

 

 

45,145,164

 

Diluted (1)

 

 

48,453,912

 

 

 

45,737,295

 

 

 

47,620,315

 

 

 

 

 

45,694,693

 

 

 

(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 six months ended June 30, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,026

 

 

 

 

 

 

 

19,026

 

Unrealized holding loss on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   available for sale securities, net of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

deferred income tax of $1,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,522

)

 

 

(2,522

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid - common ($0.03 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,363

)

 

 

 

 

 

 

(1,363

)

Stock grants issued

 

 

62,672

 

 

 

1

 

 

 

933

 

 

 

 

 

 

 

 

 

 

 

934

 

Stock based compensation expense

 

 

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

 

 

 

 

 

110

 

Stock options exercised, including tax benefit

 

 

100,511

 

 

 

1

 

 

 

571

 

 

 

 

 

 

 

 

 

 

 

572

 

Stock repurchase

 

 

(65,265

)

 

 

(1

)

 

 

(797

)

 

 

 

 

 

 

 

 

 

 

(798

)

Balances at June 30, 2015

 

 

45,421,471

 

 

$

454

 

 

$

389,515

 

 

$

76,936

 

 

$

1,531

 

 

$

468,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2016

 

 

45,459,195

 

 

$

455

 

 

$

393,191

 

 

$

95,430

 

 

$

1,438

 

 

$

490,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,930

 

 

 

 

 

 

 

10,930

 

Unrealized holding gain on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   available for sale securities, net of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

deferred income tax of $3,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,846

 

 

 

5,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid - common ($0.08 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,838

)

 

 

 

 

 

 

(3,838

)

Stock grants issued

 

 

188,826

 

 

 

2

 

 

 

198

 

 

 

 

 

 

 

 

 

 

 

200

 

Stock based compensation expense

 

 

 

 

 

 

 

 

 

 

2,142

 

 

 

 

 

 

 

 

 

 

 

2,142

 

Stock options exercised, including tax benefit

 

 

97,555