10-Q 1 csfl-10q_20170630.htm 10-Q csfl-10q_20170630.htm

 

 

U.S. SECURTIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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.)

1101 First Street South, Suite 202

Winter Haven, Florida 33880

(Address of Principal Executive Offices)

(863) 293-4710

(Issuer’s Telephone Number, Including Area Code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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      No  

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      No  

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  (Do not check if a small reporting company)

  

Small reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

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

 

 

 

60,026,741 shares

 

(class)

 

Outstanding at July 28, 2017

 

 

 

 

 


 

CENTERSTATE BANKS, INC. AND SUBSIDIARIES

INDEX

 

 

 

Page

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

 

 

 

Condensed consolidated balance sheets (unaudited) at June 30, 2017 and December 31, 2016

 

3

 

Condensed consolidated statements of income and comprehensive income for the three and six months ended June 30, 2017 and 2016 (unaudited)

 

4

 

Condensed consolidated statements of changes in stockholders’ equity for the six months ended June 30, 2017 and 2016 (unaudited)

 

6

 

Condensed consolidated statements of cash flows for the six months ended June 30, 2017 and 2016 (unaudited)

 

7

 

Notes to condensed consolidated financial statements (unaudited)

 

9

 

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

 

43

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

66

 

Item 4. Controls and Procedures

 

66

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

 

67

 

Item 1A. Risk Factors

 

67

 

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

 

67

 

Item 3. Defaults Upon Senior Securities

 

67

 

Item 4. [Removed and Reserved]

 

67

 

Item 5. Other Information

 

67

 

Item 6. Exhibits

 

67

 

SIGNATURES

 

68

 

CERTIFICATIONS

 

 

 

 

 

 

2


 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands of dollars, except per share data)

 

 

 

June 30, 2017

 

 

December 31, 2016

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

87,277

 

 

$

66,368

 

Federal funds sold and Federal Reserve Bank deposits

 

 

211,037

 

 

 

109,286

 

Deposits in other financial institutions (restricted cash)

 

 

21,337

 

 

 

 

    Cash and cash equivalents

 

 

319,651

 

 

 

175,654

 

Trading securities, at fair value

 

 

1,934

 

 

 

12,383

 

Investment securities available for sale, at fair value

 

 

868,334

 

 

 

740,702

 

Investment securities held to maturity (fair value of $239,726 and $242,693

 

 

 

 

 

 

 

 

    at June 30, 2017 and December 31, 2016, respectively)

 

 

238,798

 

 

 

250,543

 

Loans held for sale

 

 

8,959

 

 

 

2,285

 

 

 

 

 

 

 

 

 

 

Loans, excluding purchased credit impaired

 

 

4,467,169

 

 

 

3,243,823

 

Purchased credit impaired loans

 

 

179,364

 

 

 

185,924

 

Allowance for loan losses

 

 

(30,132

)

 

 

(27,041

)

     Net Loans

 

 

4,616,401

 

 

 

3,402,706

 

 

 

 

 

 

 

 

 

 

Bank premises and equipment, net

 

 

140,820

 

 

 

114,815

 

Accrued interest receivable

 

 

15,432

 

 

 

12,112

 

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

 

 

19,199

 

 

 

17,669

 

Goodwill

 

 

257,683

 

 

 

106,028

 

Core deposit intangible, net

 

 

26,217

 

 

 

15,510

 

Other intangible assets, net

 

 

1,011

 

 

 

784

 

Bank owned life insurance

 

 

115,234

 

 

 

98,424

 

Other repossessed real estate owned

 

 

6,422

 

 

 

7,090

 

Deferred income tax asset, net

 

 

58,841

 

 

 

63,208

 

Bank property held for sale

 

 

13,526

 

 

 

8,599

 

Interest rate swap derivatives, at fair value

 

 

39,958

 

 

 

31,817

 

Prepaid expense and other assets

 

 

19,059

 

 

 

18,230

 

TOTAL ASSETS

 

$

6,767,479

 

 

$

5,078,559

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

     Demand - non-interest bearing

 

$

1,926,047

 

 

$

1,426,624

 

     Demand - interest bearing

 

 

990,242

 

 

 

917,004

 

     Savings and money market accounts

 

 

1,698,073

 

 

 

1,263,479

 

     Time deposits

 

 

861,093

 

 

 

545,437

 

Total deposits

 

 

5,475,455

 

 

 

4,152,544

 

 

 

 

 

 

 

 

 

 

Securities sold under agreement to repurchase

 

 

47,014

 

 

 

28,427

 

Federal funds purchased

 

 

256,611

 

 

 

261,986

 

Corporate debentures

 

 

26,075

 

 

 

25,958

 

Accrued interest payable

 

 

1,064

 

 

 

851

 

Interest rate swap derivatives, at fair value

 

 

40,852

 

 

 

32,691

 

Payables and accrued expenses

 

 

30,150

 

 

 

23,645

 

     Total liabilities

 

 

5,877,221

 

 

 

4,526,102

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

     authorized; 60,002,604 and 48,146,981  shares issued and outstanding

 

 

 

 

 

 

 

 

    at June 30, 2017 and December 31, 2016, respectively

 

 

600

 

 

 

482

 

Additional paid-in capital

 

 

734,059

 

 

 

430,459

 

Retained earnings

 

 

155,257

 

 

 

130,090

 

Accumulated other comprehensive gain (loss)

 

 

342

 

 

 

(8,574

)

Total stockholders' equity

 

 

890,258

 

 

 

552,457

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

6,767,479

 

 

$

5,078,559

 

See notes to the accompanying condensed consolidated financial statements

 

3


 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

(in thousands of dollars, except per share data)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

56,619

 

 

$

40,977

 

 

$

100,868

 

 

$

78,095

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

5,961

 

 

 

4,768

 

 

 

10,836

 

 

 

9,830

 

Tax-exempt

 

 

1,328

 

 

 

942

 

 

 

2,656

 

 

 

1,722

 

Federal funds sold and other

 

 

836

 

 

 

622

 

 

 

1,487

 

 

 

1,160

 

 

 

 

64,744

 

 

 

47,309

 

 

 

115,847

 

 

 

90,807

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,619

 

 

 

1,740

 

 

 

4,516

 

 

 

3,221

 

Securities sold under agreement to repurchase

 

 

47

 

 

 

28

 

 

 

77

 

 

 

55

 

Federal funds purchased

 

 

728

 

 

 

250

 

 

 

1,265

 

 

 

521

 

Corporate debentures

 

 

333

 

 

 

294

 

 

 

651

 

 

 

538

 

 

 

 

3,727

 

 

 

2,312

 

 

 

6,509

 

 

 

4,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

61,017

 

 

 

44,997

 

 

 

109,338

 

 

 

86,472

 

Provision for loan losses

 

 

1,899

 

 

 

911

 

 

 

2,894

 

 

 

1,421

 

Net interest income after loan loss provision

 

 

59,118

 

 

 

44,086

 

 

 

106,444

 

 

 

85,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Correspondent banking capital markets revenue

 

 

6,868

 

 

 

8,049

 

 

 

12,244

 

 

 

15,420

 

Other correspondent banking related  revenue

 

 

1,195

 

 

 

1,242

 

 

 

2,268

 

 

 

2,646

 

Service charges on deposit accounts

 

 

3,822

 

 

 

3,329

 

 

 

7,397

 

 

 

6,065

 

Debit, prepaid, ATM and merchant card related fees

 

 

2,324

 

 

 

2,182

 

 

 

4,589

 

 

 

4,228

 

Wealth management related revenue

 

 

891

 

 

 

795

 

 

 

1,784

 

 

 

1,530

 

FDIC indemnification income

 

 

 

 

 

 

 

 

 

 

 

96

 

FDIC indemnification asset amortization

 

 

 

 

 

 

 

 

 

 

 

(1,166

)

Bank owned life insurance income

 

 

694

 

 

 

654

 

 

 

1,335

 

 

 

1,219

 

Other non interest income

 

 

1,180

 

 

 

720

 

 

 

1,859

 

 

 

1,494

 

Total other income

 

 

16,974

 

 

 

16,971

 

 

 

31,476

 

 

 

31,532

 

See notes to the accompanying condensed consolidated financial statements.

 

 

 

4


 

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

(in thousands of dollars, except per share data)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

 

 

2016

 

Non interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

28,317

 

 

 

22,959

 

 

 

51,199

 

 

 

 

 

44,414

 

Occupancy expense

 

 

3,069

 

 

 

2,477

 

 

 

5,818

 

 

 

 

 

4,624

 

Depreciation of premises and equipment

 

 

1,837

 

 

 

1,588

 

 

 

3,521

 

 

 

 

 

3,085

 

Supplies, stationary and printing

 

 

434

 

 

 

380

 

 

 

788

 

 

 

 

 

679

 

Marketing expenses

 

 

1,078

 

 

 

826

 

 

 

1,930

 

 

 

 

 

1,516

 

Data processing expense

 

 

2,419

 

 

 

1,765

 

 

 

4,245

 

 

 

 

 

3,292

 

Legal, audit and other professional fees

 

 

932

 

 

 

949

 

 

 

1,820

 

 

 

 

 

1,852

 

Amortization of intangible assets

 

 

1,042

 

 

 

814

 

 

 

1,804

 

 

 

 

 

1,492

 

Postage and delivery

 

 

491

 

 

 

486

 

 

 

919

 

 

 

 

 

841

 

ATM and debit card related expenses

 

 

863

 

 

 

816

 

 

 

1,569

 

 

 

 

 

1,412

 

Bank regulatory expenses

 

 

891

 

 

 

968

 

 

 

1,618

 

 

 

 

 

1,778

 

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

 

 

(58

)

 

 

(554

)

 

 

(162

)

 

 

 

 

(712

)

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

 

 

310

 

 

 

392

 

 

 

471

 

 

 

 

 

414

 

Loss (gain) on repossessed assets other than real estate

 

 

1

 

 

 

31

 

 

 

(6

)

 

 

 

 

37

 

Foreclosure related expenses

 

 

623

 

 

 

742

 

 

 

1,228

 

 

 

 

 

1,231

 

Merger and acquisition related expenses

 

 

9,458

 

 

 

 

 

 

10,328

 

 

 

 

 

11,172

 

Branch closure and efficiency initiatives

 

 

430

 

 

 

(38

)

 

 

507

 

 

 

 

 

418

 

Loss from termination of FDIC loss share agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

17,560

 

Other expenses

 

 

2,672

 

 

 

2,448

 

 

 

5,255

 

 

 

 

 

4,797

 

Total other expenses

 

 

54,809

 

 

 

37,049

 

 

 

92,852

 

 

 

 

 

99,902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

 

21,283

 

 

 

24,008

 

 

 

45,068

 

 

 

 

 

16,681

 

Provision for income taxes

 

 

6,050

 

 

 

8,274

 

 

 

13,235

 

 

 

 

 

5,751

 

Net income

 

$

15,233

 

 

$

15,734

 

 

$

31,833

 

 

 

 

$

10,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized securities holding gain, net of income taxes

 

$

5,717

 

 

$

3,277

 

 

$

8,916

 

 

 

 

$

5,846

 

Less: reclassified adjustments for gain included in net income,

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gain on available for sale securities,

    net of income taxes

 

$

5,717

 

 

$

3,277

 

 

$

8,916

 

 

 

 

$

5,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

20,950

 

 

$

19,011

 

 

$

40,749

 

 

 

 

$

16,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.26

 

 

$

0.33

 

 

$

0.58

 

 

 

 

$

0.23

 

Diluted

 

$

0.26

 

 

$

0.32

 

 

$

0.57

 

 

 

 

$

0.23

 

Common shares used in the calculation of earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (1)

 

 

58,306,562

 

 

 

47,781,994

 

 

 

54,490,488

 

 

 

 

 

46,968,000

 

Diluted (1)

 

 

59,369,636

 

 

 

48,453,912

 

 

 

55,396,988

 

 

 

 

 

47,620,315

 

 

 

(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, 2017 and 2016 (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 (loss)

 

 

equity

 

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

 

 

 

1

 

 

 

675

 

 

 

 

 

 

 

 

 

 

 

676

 

Stock repurchase

 

 

(25,337

)

 

 

(1

)

 

 

(363

)

 

 

 

 

 

 

 

 

 

 

(364

)

Stock issued pursuant to Community Bank acquisition

 

 

2,276,042

 

 

 

23

 

 

 

31,842

 

 

 

 

 

 

 

 

 

 

 

31,865

 

Balances at June 30, 2016

 

 

47,996,281

 

 

$

480

 

 

$

427,685

 

 

$

102,522

 

 

$

7,284

 

 

$

537,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2017

 

 

48,146,981

 

 

$

482

 

 

$

430,459

 

 

$

130,090

 

 

$

(8,574

)

 

$

552,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31,833

 

 

 

 

 

 

 

31,833

 

Unrealized holding gain on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   available for sale securities, net of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

deferred income tax of $5,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,916

 

 

 

8,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid - common ($0.12 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,666

)

 

 

 

 

 

 

(6,666

)

Stock grants issued

 

 

217,434

 

 

 

2

 

 

 

218

 

 

 

 

 

 

 

 

 

 

 

220

 

Stock based compensation expense