WINTER HAVEN, Fla., Jan. 27, 2020 /PRNewswire/ -- CenterState Bank Corporation (Nasdaq: CSFL) (the "Company" or "CenterState") announced  fourth quarter 2019 results.  Highlights for the period ended December 31, 2019 and selected performance metrics are set forth below.

  • Returns and Capital Management: 
    • Return on Average Common Equity: 9.8% in the fourth quarter 2019 compared to 7.6% in the previous quarter; Return on Tangible Average Common Equity ("ROTCE") (non-GAAP(1)) and adjusted ROTCE (non-GAAP(1)) of 18.8% and 19.1%, respectively, for the fourth quarter 2019 compared to 14.6% and 17.8%, respectively, for the previous quarter
    • Book Value per Share: increased to $23.14 per share compared to $20.60 at December 31, 2018; tangible book value per share (non-GAAP(1)) increased to $12.76 per share, an 11.0% increase compared to December 31, 2018, during a year in which the company repurchased 4.6% of its shares and closed its acquisition of National Commerce Corporation; tangible equity to tangible assets (non-GAAP(1)) ended the year at 10.1%
    • Approval of Dividend Increase and Share Repurchase Plan: as announced on January 16, 2020, the Company's Board approved a 27.3% increase in its quarterly dividend to $0.14 per share and a repurchase authorization of up to 6.5 million shares
  • Net Income Growth:
    • Diluted Earnings per Share ("EPS"): $0.56 in the fourth quarter 2019 compared to $0.43 in the previous quarter; adjusted EPS (non-GAAP(1)) of $0.57 in the fourth quarter 2019 compared to $0.53 in the previous quarter
    • Return on Average Assets ("ROAA"): ROAA and adjusted ROAA (non-GAAP(1)) of 1.63% and 1.66%, respectively, for the fourth quarter 2019 compared to 1.27% and 1.57%, respectively, for the previous quarter
    • Efficiency Ratio (Non-GAAP(1)):  54.3% reported, 52.1% adjusted for the fourth quarter 2019 compared to 62.3% and 51.9% in the previous quarter
  • Revenue Growth(2): 
    • Revenue: $208.3 million in the fourth quarter 2019, an increase of $4.8 million or 2.4%, from the previous quarter
    • Net Interest Margin, tax equivalent ("NIM") (Non-GAAP(1)): NIM increased 6 bps to 4.25%; excluding all loan accretion, core NIM declined 0.06% from the previous quarter
    • Reduction in Deposit Costs: cost of deposits declined to 0.67% during the fourth quarter, a 0.07% decline from the prior quarter
    • Non-interest income(3): 1.15% of average assets for the current quarter and 1.05% for the year, exceeding the Company's 1.0% target in spite of the Durbin impact beginning in the 2019 third quarter

 























Three Months Ended December 31,

Twelve Months Ended December 31,



2019

2018

2019

2018



 

Reported

Adjusted (4)
 (Non-
GAAP)

 

Reported

Adjusted (4)
(Non-
GAAP)

 

Reported

Adjusted (4)
(Non-
GAAP)

 

Reported

Adjusted (4)
(Non-
GAAP)















Net income

$71,132

$72,231

$50,651

$51,913

$225,396

$256,220

$156,435

$182,571

Return on average assets

1.63%

1.66%

1.64%

1.68%

1.42%

1.61%

1.43%

1.67%

Return on average tangible equity (Non-GAAP)(1)

18.8%

19.1%

19.8%

20.2%

16.2%

18.4%

17.7%

20.5%

Earnings per share diluted

$0.56

$0.57

$0.52

$0.54

$1.87

$2.13

$1.76

$2.06

Efficiency ratio, tax equivalent (Non-GAAP)(1)

54.3%

52.1%

53.4%

50.3%

59.3%

51.9%

60.0%

51.4%
























(1)

See reconciliation tables starting on page 9, Explanation of Certain Unaudited Non-GAAP Financial Measures.

(2)

Revenue is defined as net interest income plus non-interest income.

(3)

Non-interest income excludes gain or loss on sale of available for sale securities.

(4)

Performance metrics presented above are adjusted for gain or loss on sale of available for sale securities, merger-related expenses, deferred tax asset write down, gain on sale of deposits and amortization of intangible assets, which for the three and twelve months ended December 31, 2019, represent direct severance, system terminations, and legal and professional fees, that are not duplicative of current operations, and other items.  See reconciliation tables starting on page 9, Explanation of Certain Unaudited Non-GAAP Financial Measures.

 

Condensed Consolidated Income Statement (unaudited)

Condensed consolidated income statements (unaudited) are shown below for the periods indicated.








Three Months Ended

Twelve Months Ended


Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Dec. 31, 2019

Dec. 31, 2018

Interest income














Loans

$167,685

$166,479

$167,676

$116,285

$116,754

$618,125

$405,881

Investment securities

13,404

13,472

14,453

14,002

13,516

55,331

49,122

Federal Funds sold and other

2,783

3,974

3,124

1,995

1,911

11,876

5,629

Total interest income

183,872

183,925

185,253

132,282

132,181

685,332

460,632

Interest expense














Deposits

22,276

24,463

23,037

13,323

12,360

83,099

33,260

Securities sold under agreement to repurchase

278

293

299

236

203

1,106

632

Other borrowed funds

2,880

3,680

2,679

3,978

3,289

13,217

11,445

Corporate debentures

513

542

557

570

647

2,182

2,213

Interest expense

25,947

28,978

26,572

18,107

16,499

99,604

47,550

Net interest income

157,925

154,947

158,681

114,175

115,682

585,728

413,082

Provision for loan losses

3,048

3,692

2,792

1,053

2,100

10,585

8,283

Net interest income after loan loss provision

154,877

151,255

155,889

113,122

113,582

575,143

404,799
















Gain (loss) on sale of securities available for sale

13

—

(5)

17

—

25

(22)

Gain on sale of deposits

—

—

—

—

—

—

611

All other non-interest income

50,316

48,488

37,948

29,283

32,396

166,035

104,538

Total non-interest income

50,329

48,488

37,943

29,300

32,396

166,060

105,127
















Merger related expenses

159

16,994

15,739

6,365

1,668

39,257

34,912

All other non-interest expense

113,250

110,042

106,250

78,108

77,852

407,650

277,555

Total non-interest expense

113,409

127,036

121,989

84,473

79,520

446,907

312,467
















Income before income tax

91,797

72,707

71,843

57,949

66,458

294,296

197,459

Income tax provision

20,665

17,006

16,721

13,306

15,807

67,698

41,024

Net income before earnings attributable to noncontrolling interest

71,132

55,701

55,122

44,643

50,651

226,598

156,435

Earnings attributable to noncontrolling interest

—

603

599

—

—

1,202

—

Net income

$71,132

$55,098

$54,523

$44,643

$50,651

$225,396

$156,435

Net income attributable to CenterState Bank Corporation

$71,109

$55,077

$54,502

$44,620

$50,619

$225,308

$156,319
















Earnings per share - Basic

$0.57

$0.43

$0.42

$0.47

$0.53

$1.88

$1.78

Earnings per share - Diluted

$0.56

$0.43

$0.42

$0.46

$0.52

$1.87

$1.76

Dividends per share

$0.11

$0.11

$0.11

$0.11

$0.10

$0.44

$0.40

Average common shares outstanding (basic)

125,147

127,840

129,848

95,741

95,603

119,747

87,641

Average common shares outstanding (diluted)

126,082

128,739

130,768

96,501

96,450

120,604

88,759

Common shares outstanding at period end

125,174

126,037

129,006

95,913

95,680

125,174

95,680

Effective tax rate

22.51%

23.59%

23.47%

22.96%

23.78%

23.10%

20.78%

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

Presented below are condensed consolidated balance sheets for the periods indicated.





Ending Balance

Condensed Consolidated Balance Sheets

Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Assets









Cash and due from banks

$326,168

$598,808

$399,952

$256,580

$135,352

Fed funds sold and Fed Reserve Bank deposits

163,890

238,470

437,386

339,223

231,981

Trading securities

4,987

4,273

651

—

1,737

Investment securities:









  Available for sale

1,886,724

1,779,956

1,792,757

1,701,396

1,727,348

  Held to maturity

202,903

207,209

210,756

214,240

216,833

Total investment securities

2,089,627

1,987,165

2,003,513

1,915,636

1,944,181

Loans held for sale

142,801

125,182

95,108

49,474

40,399

Loans:









  Originated loans

5,922,879

5,494,738

4,888,357

4,349,627

4,108,656

  Acquired loans

5,925,596

6,278,686

6,667,101

3,850,312

4,072,877

  Purchased Credit Impaired ("PCI") loans

135,468

142,982

157,303

149,456

158,971

   Total gross loans

11,983,943

11,916,406

11,712,761

8,349,395

8,340,504

   Allowance for loan losses

(40,655)

(41,991)

(40,653)

(40,052)

(39,770)

Loans, net of allowance

11,943,288

11,874,415

11,672,108

8,309,343

8,300,734

Premises, equipment and right of use assets, net

328,869

327,977

324,974

248,625

227,454

Goodwill

1,204,417

1,204,417

1,204,417

802,880

802,880

Core deposit intangible

91,157

95,175

99,200

63,511

66,225

Bank owned life insurance

330,155

328,736

326,689

269,144

267,820

OREO

5,092

6,558

5,881

5,981

2,909

Deferred income tax asset, net

28,786

37,921

44,637

38,030

51,462

Other assets

482,788

591,279

422,081

289,210

264,454

Total Assets

$17,142,025

$17,420,376

$17,036,597

$12,587,637

$12,337,588











Liabilities and Equity









Deposits:









     Non-interest bearing

$3,929,183

$4,081,078

$3,990,883

$3,152,251

$2,923,640

     Interest bearing

2,613,933

2,430,149

2,493,870

1,813,028

1,811,006

  Total checking accounts

6,543,116

6,511,227

6,484,753

4,965,279

4,734,646

  Money market accounts

3,525,571

3,648,449

3,569,025

2,156,667

2,216,571

  Savings deposits

811,150

780,052

725,124

703,949

704,159

  Time deposits

2,256,555

2,423,335

2,433,183

1,921,130

1,821,960

Total deposits

13,136,392

13,363,063

13,212,085

9,747,025

9,477,336

Federal funds purchased

379,193

259,077

276,963

303,017

294,360

Other borrowings

325,484

423,662

310,595

302,534

451,187

Other liabilities

404,238

516,872

346,442

207,509

143,361

Stockholders' equity:









Common stockholders' equity

2,896,718

2,857,702

2,878,377

2,027,552

1,971,344

Noncontrolling interest

—

—

12,135

—

—

Total equity

2,896,718

2,857,702

2,890,512

2,027,552

1,971,344











Total Liabilities and Equity

$17,142,025

$17,420,376

$17,036,597

$12,587,637

$12,337,588

 

SELECTED CONSOLIDATED FINANCIAL DATA

The table below summarizes selected financial data for the periods presented.








Three Months Ended

Twelve Months Ended


Dec. 31,
2019

Sep. 30,
2019

Jun. 30,
2019

Mar. 31,
2019

Dec. 31,
2018

Dec. 31,
2019

Dec. 31,
2018

Selected financial data














Return on average assets (annualized)

1.63%

1.27%

1.30%

1.47%

1.64%

1.42%

1.43%

Adjusted return on average assets (annualized) (Non-GAAP) (1)

1.66%

1.57%

1.59%

1.63%

1.68%

1.61%

1.67%
















Return on average common equity (annualized)

9.80%

7.56%

7.63%

9.05%

10.38%

8.47%

9.41%

Adjusted return on average common equity (annualized) (Non-GAAP) (1)

9.95%

9.34%

9.31%

10.03%

10.64%

9.63%

10.98%
















Return on average tangible equity (annualized) (Non-GAAP) (1)

18.77%

14.61%

14.95%

16.80%

19.78%

16.25%

17.68%

Adjusted return on average tangible equity (annualized) (Non-GAAP) (1)

19.05%

17.85%

18.04%

18.54%

20.25%

18.36%

20.49%
















Efficiency ratio (tax equivalent) (Non-GAAP) (1)

54.3%

62.3%

61.9%

58.7%

53.4%

59.3%

60.0%

Adjusted efficiency ratio, tax equivalent (Non-GAAP) (1)

52.1%

51.9%

51.7%

52.3%

50.3%

51.9%

51.4%
















Dividend payout

19.6%

25.6%

26.2%

23.9%

19.2%

23.5%

22.7%

Loan / deposit ratio

91.2%

89.2%

88.7%

85.7%

88.0%




Common stockholders' equity (to total assets)

16.9%

16.4%

16.9%

16.1%

16.0%




Common equity per common share

$23.14

$22.67

$22.31

$21.14

$20.60




Common tangible equity per common share (Non-GAAP) (1)

$12.76

$12.32

$12.17

$12.08

$11.49




Common tangible equity (to total tangible assets) (Non-GAAP) (1)

10.1%

9.6%

10.0%

9.9%

9.6%




Tier 1 capital (to average assets)

9.7%

9.5%

9.9%

10.3%

10.1%






(1)

  See reconciliation tables starting on page 9, Explanation of Certain Unaudited Non-GAAP Financial Measures.

 

ESTIMATED IMPACT OF ADOPTION OF CURRENT EXPECTED CREDIT LOSSES ("CECL")

The Company continues to evaluate the impact of the adoption of CECL.  Based on the most recent analysis, the Company expects the Allowance for Loan Losses ("ALLL") as a percentage of total loans to increase in the range of 50 bps to 70 bps, as a result of the adoption of CECL.  This increase includes the reclassification of the credit mark on Purchased Credit Deteriorated ("PCD") loans from loan discount to Allowance for Credit Losses ("ACL").  In addition, the Company estimates a reserve for potential losses on unfunded commitments to be in the range of $5 to $10 million, which will be recorded as a liability.  Based on these ranges, the impact to retained earnings, net of deferred taxes, for the increase in ACL, reserve for the unfunded commitments and expected credit losses on debt securities is estimated to be in the range of $35 to $60 million, resulting in a range of 20 bps to 35 bps reduction in tangible common equity as a percentage of total tangible assets.  The estimates on the potential impact of the adoption of CECL on the Company's financial statements are based on ongoing analyses, current expectations and forecasted economic conditions.  These estimates are contingent upon continued refinement of assumptions, methodologies and judgments, which the Company will finalize in the first quarter 2020.

 

LOAN PORTFOLIO

The table below summarizes the Company's loan portfolio over the most recent five-quarter ends.





Ending Balance


Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Real estate loans









     Residential

$2,558,339

$2,530,119

$2,536,324

$1,818,228

$1,760,918

     Commercial

6,406,684

6,297,425

6,153,379

4,481,375

4,541,434

     Land, development and construction loans

1,004,578

1,061,701

1,057,532

658,373

642,590

Total real estate loans

9,969,601

9,889,245

9,747,235

6,957,976

6,944,942

Commercial loans

1,762,416

1,772,266

1,714,121

1,181,628

1,188,974

Consumer and other loans

247,407

250,225

247,049

206,754

203,895

Total loans before unearned fees and costs

11,979,424

11,911,736

11,708,405

8,346,358

8,337,811

Unearned fees and costs

4,519

4,670

4,356

3,037

2,693











Total Loans

$11,983,943

$11,916,406

$11,712,761

$8,349,395

$8,340,504

 

LOAN PRODUCTION

 

DEPOSITS





Ending Balance

Deposit mix

Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Checking accounts









     Non-interest bearing

$3,929,183

$4,081,078

$3,990,883

$3,152,251

$2,923,640

     Interest bearing

2,613,933

2,430,149

2,493,870

1,813,028

1,811,006

Savings deposits

811,150

780,052

725,124

703,949

704,159

Money market accounts

3,525,571

3,648,449

3,569,025

2,156,667

2,216,571

Time deposits

2,256,555

2,423,335

2,433,183

1,921,130

1,821,960

Total deposits

$13,136,392

$13,363,063

$13,212,085

$9,747,025

$9,477,336











Non time deposits as percentage of total deposits

83%

82%

82%

80%

81%

Time deposits as percentage of total deposits

17%

18%

18%

20%

19%

Total deposits

100%

100%

100%

100%

100%

NET INTEREST MARGIN

The Company's NIM increased 6 bps from 4.19% in the previous quarter to 4.25% during the current quarter, primarily as a result of higher accretion income due to an increase in payoffs on acquired loans and a decline in the cost of interest bearing liabilities due to Federal Reserve rate cuts and a reduction in LIBOR rates.  The tax equivalent yield on the originated loan portfolio decreased by 24 bps from the prior quarter to 4.85%.  The tax equivalent yield on the securities portfolio decreased by 7 bps from 2.74% in the prior quarter to 2.67% during the current quarter.  The total decrease in yield for the tax equivalent originated loan and securities, however, was offset by an increase in fourth quarter 2019 loan accretion to $18,093, which increased NIM by 48 bps, as compared with the previous quarter's $13,569, which increased NIM by 36 bps.  The NIM was positively impacted by a 71 bps decrease in the cost of federal funds purchased as well as a 7 bps decrease in the cost of total deposits, a result of the Company's focus on reducing the cost of rate-sensitive deposits.    

The table below summarizes yields and costs by various interest earning asset and interest bearing liability account types for the current quarter, the previous calendar quarter and the same quarter last year. 

Three Months Ended

Dec. 31, 2019

Sep. 30, 2019

Dec. 31, 2018

Average

Balance

Interest

Inc/Exp

Average

Rate

Average

Balance

Interest

Inc/Exp

Average

Rate

Average

Balance

Interest

Inc/Exp

Average

Rate












Originated loans (1)

$5,819,393

$71,101

4.85%

$5,301,936

$67,989

5.09%

$3,997,730

$48,036

4.77%

Acquired loans (1)

6,115,107

88,716

5.76%

6,482,939

91,127

5.58%

4,170,721

59,720

5.68%

PCI loans

138,584

8,224

23.54%

147,099

7,652

20.64%

162,813

9,448

23.02%

Taxable securities

1,803,467

11,664

2.57%

1,759,629

11,741

2.65%

1,665,809

11,833

2.82%

Tax-exempt securities (1)

221,438

1,948

3.49%

220,026

1,933

3.49%

216,936

1,964

3.59%

Fed funds sold and other

681,768

2,783

1.62%

790,635

3,974

1.99%

343,049

1,911

2.21%

Total interest earning assets (1)

$14,779,757

$184,436

4.95%

$14,702,264

$184,416

4.98%

$10,557,058

$132,912

4.99%





















Non-interest earnings assets

2,531,319





2,490,042





1,681,312




Total assets

$17,311,076





$17,192,306





$12,238,370

























Interest bearing deposits

$9,207,290

$22,275

0.96%

$9,166,386

$24,464

1.06%

$6,456,452

$12,360

0.76%

Fed funds purchased

304,489

1,330

1.73%

289,821

1,781

2.44%

235,696

1,499

2.52%

Other borrowings

310,436

1,829

2.34%

367,481

2,191

2.37%

326,337

1,993

2.42%

Corporate debentures

32,711

513

6.22%

32,622

542

6.59%

39,816

647

6.45%

Total interest bearing liabilities

$9,854,926

$25,947

1.04%

$9,856,310

$28,978

1.17%

$7,058,301

$16,499

0.93%





















Non-interest bearing deposits

4,081,634





4,004,554





3,091,289




All other liabilities

494,914





429,109





153,628




Total equity

2,879,602





2,902,333





1,935,152




Total liabilities and equity

$17,311,076





$17,192,306





$12,238,370

























Net Interest Spread (1)



3.91%





3.81%





4.06%

Net Interest Margin (1)



4.25%





4.19%





4.37%





















Cost of Total Deposits



0.67%





0.74%





0.51%


(1)

Tax equivalent yield (Non-GAAP); see reconciliation tables starting on page 9, Explanation of Certain Unaudited Non-GAAP Financial Measures.

The table below summarizes accretion income for the periods presented.

Three Months Ended

Twelve Months
Ended

Dec. 31,
2019

Sep. 30,
2019

Jun. 30,
2019

Mar. 31,
2019

Dec. 31,
2018

Dec. 31,
2019

Dec. 31,
2018

PCI accretion

$5,908

$5,418

$5,248

$7,904

$7,187

$24,478

$26,381

Non-PCI accretion

12,185

8,151

10,335

4,951

6,177

35,622

22,390

Total loan accretion

$18,093

$13,569

$15,583

$12,855

$13,364

$60,100

$48,771

The table below compares the unpaid principal balance and the carrying balance (book balance) of the Company's total Acquired and PCI loans at December 31, 2019. 

Principal

Balance

Carrying

Balance

Total Loan

Discount

 

Percentage






Acquired Loans

$5,977,548

$5,925,596

($51,952)

0.9%

PCI loans

196,409

135,468

(60,941)

(1)

31.0%

Total purchased loans

$6,173,957

$6,061,064

($112,893)

1.8%


(1)

Represents a credit discount of $18,109 and a non-credit discount of $42,832.

NON-INTEREST INCOME

Non-interest income increased $1,841 to $50,329 during the current quarter compared to $48,488 in the previous quarter.  The increase is mainly attributable to an increase in correspondent banking revenue due to higher interest rate swap revenue in the correspondent banking division and an increase in SBA revenue, offset by approximately $841 decrease in merchant card related fees primarily due to the impact of the Durbin Amendment.  The table below summarizes the Company's non-interest income for the periods indicated. 

Condensed Consolidated Non-Interest Income (unaudited)








Three Months Ended

Twelve Months Ended


Dec. 31,
2019

Sep. 30,
2019

Jun. 30,
2019

Mar. 31,
2019

Dec. 31,
2018

Dec. 31,
2019

Dec. 31,
2018

Correspondent banking revenue

$23,346

$21,018

$11,534

$9,000

$9,893

$64,898

$33,388

Mortgage banking revenue

9,113

9,444

6,803

4,193

4,204

29,553

12,610

SBA revenue

1,785

1,411

1,252

688

497

5,136

3,532

Wealth management related revenue

878

801

875

607

725

3,161

2,657

Service charges on deposit accounts

7,993

7,990

7,507

6,678

7,349

30,168

22,831

Debit, prepaid, ATM and merchant card related fees

3,082

3,923

6,376

5,018

5,149

18,399

16,243

Other non-interest income

4,119

3,901

3,601

3,099

4,579

14,720

13,277

Subtotal

$50,316

$48,488

$37,948

$29,283

$32,396

$166,035

$104,538

Gain (loss) on sale of securities available for sale

13

—

(5)

17

—

25

(22)

Gain on sale of deposits

—

—

—

—

—

—

611

Total Non-Interest Income

$50,329

$48,488

$37,943

$29,300

$32,396

$166,060

$105,127


Note: 

Certain prior period amounts have been reclassified to conform to the current period presentation format.

NON-INTEREST EXPENSES

Excluding merger-related expenses, non-interest expense increased $3,208 in the fourth quarter to $113,250 compared to the previous quarter, primarily driven by higher compensation expense associated with performance in the correspondent banking division and the Company's overall performance, higher professional fees and an overall higher intangible and fixed assets related expenses.  The table below summarizes the Company's non-interest expense for the periods indicated.

Condensed Consolidated Non-Interest Expense (unaudited)








Three Months Ended

Twelve Months Ended


Dec. 31,
2019

Sep. 30,
2019

Jun. 30,
2019

Mar. 31,
2019

Dec. 31,
2018

Dec. 31, 2019

Dec. 31, 2018

Salaries, wages and employee benefits

$72,973

$71,352

$67,516

$48,393

$48,044

$260,234

$172,318

Occupancy expense

7,267

7,729

7,752

5,602

5,633

28,350

20,897

Depreciation of premises and equipment

4,151

3,887

3,550

2,850

2,752

14,438

9,788

Marketing expenses

1,958

1,765

1,797

2,020

1,903

7,540

6,235

Data processing expenses

5,242

5,182

5,525

3,656

3,621

19,605

14,308

Legal, auditing and other professional fees

2,958

2,364

2,106

1,442

2,599

8,870

6,163

Bank regulatory related expenses

723

635

2,074

1,616

1,299

5,048

4,885

Debit, ATM and merchant card related expenses

1,362

1,382

1,304

1,453

1,657

5,501

4,253

Credit related expenses

879

795

760

729

165

3,163

1,502

Amortization of intangibles

4,552

4,229

4,435

2,814

2,989

16,030

10,018

Impairment on bank property held for sale

808

506

315

107

80

1,736

2,667

Other expenses

10,377

10,216

9,116

7,426

7,110

37,135

24,521

Subtotal

$113,250

$110,042

$106,250

$78,108

$77,852

$407,650

$277,555

Merger-related expenses

159

16,994

15,739

6,365

1,668

39,257

34,912

Total Non-Interest Expense

$113,409

$127,036

$121,989

$84,473

$79,520

$446,907

$312,467


Note: 

Certain prior period amounts have been reclassified to conform to the current period presentation format.

CREDIT QUALITY AND ALLOWANCE FOR LOAN LOSSES

Non-performing assets ("NPAs") totaled $43,870 at December 31, 2019, compared to $46,337 at September 30, 2019.  NPAs as a percentage of total assets decreased to 0.26% at December 31, 2019, compared to 0.27% at September 30, 2019 and compared to 0.22% at December 31, 2018.

The table below summarizes selected credit quality data for the periods indicated. 

Ending Balance




Non-Performing Assets (1)

Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018




Non-accrual loans

$36,916

$39,048

$26,334

$35,181

$23,567




Past due loans 90 days or more and still accruing interest

 

1,692

 

473

 

—

 

—

 

—









Total non-performing loans ("NPLs")

38,608

39,521

26,334

35,181

23,567




Other real estate owned ("OREO")

5,092

6,558

5,881

5,981

2,909




Repossessed assets other than real estate

170

258

236

313

350




Total non-performing assets

$43,870

$46,337

$32,451

$41,475

$26,826






















Three Months Ended

Twelve Months Ended

Asset Quality Ratios (1)

Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Dec. 31, 2019

Dec. 31, 2018

Non-performing loans as percentage of total loans

0.33%

0.34%

0.23%

0.43%

0.29%




Non-performing assets as percentage of total assets

0.26%

0.27%

0.19%

0.33%

0.22%




Non-performing assets as percentage of loans and OREO plus other repossessed assets

 

0.37%

 

0.39%

 

0.28%

 

0.51%

 

0.33%








Loans past due 30 thru 89 days and accruing interest as a percentage of total loans

0.48%

 

0.52%

 

0.44%

 

0.42%

 

0.45%









Allowance for loan losses as percentage of NPLs

105%

106%

154%

113%

168%




Net charge-offs

$4,384

$2,354

$2,191

$771

$1,131

$9,700

$1,403

Net charge-offs as a percentage of average loans for the period on an annualized basis

 

0.15%

 

0.08%

 

0.08%

 

0.04%

 

0.05%

 

0.09%

 

0.02%


(1)

  Excludes PCI loans.

The ALLL totaled $40,655 at December 31, 2019, compared to $41,991 at September 30, 2019, a decrease of $1,336 due to loan loss provision expense of $3,048 and net charge-offs of $4,384.  Of the fourth quarter charge-offs, $2,010 represented specific reserve allocations that had been identified and reserved in prior periods.  The changes in the Company's ALLL components between December 31 and September 30, 2019 are summarized in the table below (unaudited).

December 31, 2019

September 30, 2019

Increase (Decrease)


Loan

Balance

ALLL

Balance

 

%

Loan

Balance

ALLL

Balance

%

Loan

Balance

ALLL

Balance





Originated loans

$5,907,801

$37,151

0.63%

$5,479,813

$36,921

0.67%

$427,988

$230

(4) bps

Impaired originated loans

15,078

842

5.58%

14,925

1,204

8.07%

153

(362)

(249) bps

Total originated loans

5,922,879

37,993

0.64%

5,494,738

38,125

0.69%

428,141

(132)

(5) bps













Acquired loans (1)

5,914,534

1,400

0.02%

6,263,910

1,538

0.02%

(349,376)

(138)

– bps

Impaired acquired loans (2)

11,062

1,036

9.37%

14,776

2,095

14.18%

(3,714)

(1,059)

(481) bps

Total acquired loans

5,925,596

2,436

0.04%

6,278,686

3,633

0.06%

(353,090)

(1,197)

(2) bps













Total non-PCI loans

11,848,475

40,429

11,773,424

41,758

75,051

(1,329)

PCI loans

135,468

226

142,982

233

(7,514)

(7)

Total loans

$11,983,943

$40,655

$11,916,406

$41,991

$67,537

$(1,336)


(1)

Performing acquired loans recorded at estimated fair value on the related acquisition dates.  The total net unamortized fair value adjustment at December 31, 2019 was approximately $51,855 or 0.87% of the aggregate outstanding related loan balances. 

(2)

These are loans that were acquired as performing loans that subsequently became impaired.

EXPLANATION OF CERTAIN UNAUDITED NON-GAAP FINANCIAL MEASURES

This press release contains financial information determined by methods other than U.S. Generally Accepted Accounting Principles ("GAAP"), including adjusted net income, adjusted net income per share diluted, adjusted return on average assets, adjusted return on average equity, return on average tangible equity, adjusted return on average tangible equity, adjusted efficiency ratio, adjusted non-interest income, adjusted non-interest expense, adjusted net-interest income, tangible common equity, tangible common equity to tangible assets, common tangible equity per common share, tax equivalent yields on loans, securities and earning assets, and tax equivalent net interest spread and margin, which we refer to "Non-GAAP financial measures." The tables below provide reconciliations between these Non-GAAP measures and net income, interest income, net interest income and tax equivalent basis interest income and net interest income, return on average assets, return on average equity, the efficiency ratio, total stockholders' equity and tangible common equity, as applicable.  

Management uses these Non-GAAP financial measures in its analysis of the Company's performance and believes these presentations provide useful supplemental information, and enhance investors' understanding of the Company's core business and performance without the impact of merger-related expenses. Accordingly, management believes it is appropriate to exclude merger-related expenses because those costs are specific to each acquisition, vary based upon the size, complexity and other specifics of each acquisition, and are not indicative of the costs to operate the Company's core business. 

Non-GAAP measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently. The Company provides reconciliations between GAAP and these Non-GAAP measures.  These disclosures should not be considered an alternative to GAAP.

Reconciliation of GAAP to non-GAAP Measures (unaudited):








Three months ended

Twelve Months Ended


Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Dec. 31, 2019

Dec. 31, 2018

Adjusted net income (Non-GAAP)














Net income (GAAP)

$71,132

$55,098

$54,523

$44,643

$50,651

$225,396

$156,435

(Gain) loss on sale of securities available for sale, net of tax

(10)

—

4

(13)

—

(19)

17

Gain on sale of deposits, net of tax

—

—

—

—

—

—

(465)

Merger-related expenses, net of tax

122

12,939

11,962

4,833

1,262

29,856

26,584

Deferred tax asset write down

987

—

—

—

—

987

—

Adjusted net income (Non-GAAP)

$72,231

$68,037

$66,489

$49,463

$51,913

$256,220

$182,571
















Adjusted net income per share - Diluted














Earnings per share - Diluted (GAAP)

$0.56

$0.43

$0.42

$0.46

$0.52

$1.87

$1.76

Effect to adjust for gain on sale of deposits, net of tax

—

—

—

—

—

—

(0.01)

Effect to adjust for merger-related expenses, net of tax

—

0.10

0.09

0.05

0.02

0.25

0.31

Effect to adjust for deferred tax asset write down

0.01

—

—

—

—

0.01

—

Adjusted net income per share - Diluted (Non-GAAP)

$0.57

$0.53

$0.51

$0.51

$0.54

$2.13

$2.06
















Adjusted return on average assets (Non-GAAP)














Return on average assets (GAAP)

1.63%

1.27%

1.30%

1.47%

1.64%

1.42%

1.43%

Effect to adjust for merger-related expenses, net of tax

—

0.30%

0.29%

0.16%

0.04%

0.18%

0.24%

Effect to adjust for deferred tax asset write down

0.03%

—

—

—

—

0.01%

—

Adjusted return on average assets (Non-GAAP)

1.66%

1.57%

1.59%

1.63%

1.68%

1.61%

1.67%

 

 

 

Explanation of Certain Unaudited Non-GAAP Financial Measures (continued)








Three months ended

Twelve Months Ended


Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Dec. 31, 2019

Dec. 31, 2018

Adjusted return on average equity (Non-GAAP)














Return on average equity (GAAP)

9.80%

7.56%

7.63%

9.05%

10.38%

8.47%

9.41%

Effect to adjust for gain on sale of deposits, net of tax

—

—

—

—

—

—

(0.03%)

Effect to adjust for merger and acquisition related expenses, net of tax

0.02%

1.78%

1.68%

0.98%

0.26%

1.12%

1.60%

Effect to adjust for deferred tax asset write down

0.13%

—

—

—

—

0.04%

—

Adjusted return on average equity (Non-GAAP)

9.95%

9.34%

9.31%

10.03%

10.64%

9.63%

10.98%
















Return on average tangible equity (non-GAAP)














Net income (GAAP)

$71,132

$55,098

$54,523

$44,643

$50,651

$225,396

$156,435

Amortization of intangibles, net of tax

3,491

3,220

3,371

2,136

2,278

12,221

7,937

Adjusted net income for average tangible equity (Non-GAAP)

$74,623

$58,318

$57,894

$46,779

$52,929

$237,617

$164,372
















Average stockholders' equity (GAAP)

$2,879,606

$2,902,333

$2,876,244

$2,000,411

$1,935,152

$2,667,709

$1,662,815

Average noncontrolling interest

—

(11,723)

(11,844)

—

—

(5,909)

—

Average goodwill

(1,204,417)

(1,204,417)

(1,203,052)

(802,880)

(802,880)

(1,105,068)

(673,115)

Average core deposit intangible

(93,355)

(97,483)

(103,369)

(65,116)

(67,648)

(89,929)

(58,463)

Average other intangibles

(4,644)

(4,682)

(4,602)

(2,934)

(2,947)

(4,222)

(1,504)

Average tangible equity (Non-GAAP)

$1,577,190

$1,584,028

$1,553,377

$1,129,481

$1,061,677

$1,462,581

$929,733
















Return on average tangible equity (annualized) (Non-GAAP)

18.77%

14.61%

14.95%

16.80%

19.78%

16.25%

17.68%
















Adjusted return on average tangible equity (non-GAAP)














Return on average tangible equity (Non-GAAP)

18.77%

14.61%

14.95%

16.80%

19.78%

16.25%

17.68%

Effect to adjust for gain on sale of deposits, net of tax

—

—

—

—

—

—

(0.05%)

Effect to adjust for merger-related expenses, net of tax

0.03%

3.24%

3.09%

1.74%

0.47%

2.04%

2.86%

Effect to adjust for deferred tax asset write down

0.25%

—

—

—

—

0.07%

—

Adjusted return on average tangible equity (Non-GAAP)

19.05%

17.85%

18.04%

18.54%

20.25%

18.36%

20.49%
















Efficiency ratio (tax equivalent) (Non-GAAP)














Non-interest income (GAAP)

$50,329

$48,488

$37,943

$29,300

$32,396

$166,060

$105,127

Gain on sale of deposits

—

—

—

—

—

—

(611)

Adjusted non-interest income (Non-GAAP)

$50,329

$48,488

$37,943

$29,300

$32,396

$166,060

$104,516
















Net interest income before provision (GAAP)

$157,925

$154,947

$158,681

$114,175

$115,682

$585,728

$413,082

Total tax equivalent adjustment

564

491

495

547

731

2,063

2,521

Adjusted net interest income (Non-GAAP)

$158,489

$155,438

$159,176

$114,722

$116,413

$587,791

$415,603
















Non-interest expense (GAAP)

$113,409

$127,036

$121,989

$84,473

$79,520

$446,907

$312,467

Amortization of intangibles

(4,552)

(4,229)

(4,435)

(2,814)

(2,989)

(16,030)

(10,018)

Merger and acquisition related expenses

(159)

(16,994)

(15,739)

(6,365)

(1,668)

(39,257)

(34,912)

Adjusted non-interest expense (Non-GAAP)

$108,698

$105,813

$101,815

$75,294

$74,863

$391,620

$267,537
















Efficiency ratio (tax equivalent) (Non-GAAP)

54.3%

62.3%

61.9%

58.7%

53.4%

59.3%

60.0%
















Adjusted efficiency ratio, tax equivalent (Non-GAAP)

52.1%

51.9%

51.7%

52.3%

50.3%

51.9%

51.4%

 


Explanation of Certain Unaudited Non-GAAP Financial Measures (continued)





Ending Balance


Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Tangible common equity (Non-GAAP)









Total common stockholders' equity (GAAP)

$2,896,718

$2,857,702

$2,878,377

$2,027,552

$1,971,344

Goodwill

(1,204,417)

(1,204,417)

(1,204,417)

(802,880)

(802,880)

Core deposit intangible

(91,157)

(95,175)

(99,200)

(63,511)

(66,225)

Other intangibles

(4,507)

(4,700)

(4,620)

(2,996)

(2,953)

Common tangible equity (Non-GAAP)

$1,596,637

$1,553,410

$1,570,140

$1,158,165

$1,099,286











Total assets (GAAP)

$17,142,025

$17,420,376

$17,036,597

$12,587,637

$12,337,588

Goodwill

(1,204,417)

(1,204,417)

(1,204,417)

(802,880)

(802,880)

Core deposit intangible

(91,157)

(95,175)

(99,200)

(63,511)

(66,225)

Other intangibles

(4,507)

(4,700)

(4,620)

(2,996)

(2,953)

Total tangible assets (Non-GAAP)

$15,841,944

$16,116,084

$15,728,360

$11,718,250

$11,465,530











Common tangible equity to tangible assets (Non-GAAP)

10.1%

9.6%

10.0%

9.9%

9.6%

Common tangible equity per common share (Non-GAAP)

$12.76

$12.32

$12.17

$12.08

$11.49













Three months ended





Dec. 31, 2019

Sep. 30, 2019

Dec. 31, 2018



Tax equivalent yields (Non-GAAP)









Originated loans

$70,784

$67,723

$47,624



Acquired loans

88,677

91,104

59,682



PCI loans

8,224

7,652

9,448



Taxable securities

11,665

11,740

11,834



Tax-exempt securities

1,739

1,732

1,682



Fed funds sold and other

2,783

3,974

1,911



Interest income (GAAP)

$183,872

$183,925

$132,181



Tax equivalent adjustment for originated loans

316

266

411



Tax equivalent adjustment for acquired loans

39

23

38



Tax equivalent adjustment for tax-exempt securities

209

202

282



Tax equivalent adjustments

564

491

731



Interest income (tax equivalent) (Non-GAAP)

$184,436

$184,416

$132,912














Net interest income (GAAP)

$157,925

$154,947

$115,682



Tax equivalent adjustments

564

491

731



Net interest income (tax equivalent) (Non-GAAP)

$158,489

$155,438

$116,413














Yield on originated loans

4.83%

5.07%

4.73%



Effect from tax equivalent adjustment

0.02%

0.02%

0.04%



Yield on originated loans - tax equivalent (Non-GAAP)

4.85%

5.09%

4.77%














Yield on acquired loans

5.76%

5.58%

5.68%



Effect from tax equivalent adjustment

—

—

—



Yield on acquired loans - tax equivalent (Non-GAAP)

5.76%

5.58%

5.68%














Yield on tax exempted securities

3.12%

3.12%

3.07%



Effect from tax equivalent adjustment

0.37%

0.37%

0.52%



Yield on tax exempted securities - tax equivalent (Non-GAAP)

3.49%

3.49%

3.59%














Yield on interest earning assets (GAAP)

4.94%

4.96%

4.96%



Effect from tax equivalent adjustments

0.01%

0.02%

0.03%



Yield on interest earning assets - tax equivalent (Non-GAAP)

4.95%

4.98%

4.99%














Net interest spread (GAAP)

3.90%

3.79%

4.03%



Effect for tax equivalent adjustments

0.01%

0.02%

0.03%



Net interest spread (Non-GAAP)

3.91%

3.81%

4.06%














Net interest margin (GAAP)

4.24%

4.18%

4.35%



Effect from tax equivalent adjustments

0.01%

0.01%

0.02%



Net interest margin - tax equivalent (Non-GAAP)

4.25%

4.19%

4.37%














Net interest margin - tax equivalent (Non-GAAP)

4.25%

4.19%

4.37%



Effect of loan accretion

(0.48%)

(0.36%)

(0.50%)



Net interest margin excluding loan accretion (Non-GAAP)

3.77%

3.83%

3.87%



About CenterState Bank Corporation

CenterState operates as one of the leading Southeastern regional bank franchises headquartered in the state of Florida.  Both CenterState and its nationally chartered bank subsidiary, CenterState Bank, N.A. (the "Bank"), are based in Winter Haven, Florida, between Orlando and Tampa.  With over $17 billion in assets, the Bank provides traditional retail, commercial, mortgage, wealth management and SBA services throughout its Florida, Georgia and Alabama branch network and customer relationships in neighboring states.  The Bank also has a national footprint, serving clients coast to coast through its correspondent banking division.

For additional information contact John C. Corbett (CEO), Stephen D. Young (COO) or William E. Matthews (CFO) at 863-293-4710.

Forward Looking Statements

Information in this press release, other than statements of historical facts, may constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements include, but are not limited to, CenterState's plans, objectives, expectations and intentions, and other statements that are not historical facts.  Forward-looking statements may be identified by terminology such as "may," "will," "should," "scheduled," "plans," "intends," "anticipates," "expects," "believes," estimates," "potential," or "continue" or negative of such terms or other comparable terminology.  All forward-looking statements are subject to risks, uncertainties and other facts that may cause the actual results, performance or achievements of CenterState to differ materially from any results expressed or implied by such forward-looking statements.  Such factors include, among others, the impact on failing to implement our business strategy, including our growth and acquisition strategy, including the merger with NCOM and its integration; the ability to successfully integrate our acquisitions, including that of NCOM; additional capital requirements due to our growth plans; the impact of an increase in our asset size to over $10 billion; the risks of changes in interest rates and the level and composition of deposits; loan demand, the credit and other risks in our loan portfolio and the values of loan collateral; the impact of us not being able to manage our risk; the impact on a loss of management or other experienced employees; the impact if we failed to maintain our culture and attract and retain skilled people; the risk of changes in technology and customer preferences; the impact of any material failure or breach in our infrastructure or the infrastructure of third parties on which we rely including as a result of cyber-attacks; or material regulatory liability in areas such as BSA or consumer protection; or other areas of legal or other liability as a result of law suits, other legal proceedings, or information-gathering requests, investigations and other proceedings by government and self-regulatory agencies, reputational risks from such failures or liabilities or other events; legislative and regulatory changes; general competitive, political, legal, economic and market conditions and developments; financial market conditions and the results of financing efforts; changes in commodity prices and interest rates; weather, natural disasters and other catastrophic events that may or may not be caused by climate change; and other factors discussed in our filings with the Securities and Exchange Commission under the Exchange Act.  Additional factors that could cause results to differ materially from those contemplated by forward-looking statements can be found in CenterState's Annual Report on Form 10-K for the year ended December 31, 2018, and otherwise in our SEC reports and filings, which are available in the "Investor Relations" section of CenterState's website, http://www.centerstatebanks.com.  Forward-looking statements speak only as of the date they are made. You should not expect us to update any forward-looking statements.

 

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