CenterState Bank Corp - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - CenterState Bank Corp	d338509d8k.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

April 23, 2012

CenterState Banks, Inc. Announces

First Quarter 2012 Operating Results

(All dollar amounts are in thousands, except per share information)

DAVENPORT, FL. – April 23, 2012 - CenterState Banks, Inc. (NASDAQ: CSFL) reported earnings per share of $0.04 on net income of $1,289 for the first quarter of 2012. The primary contributing factors were: 1) higher net interest margin, both in terms of volume and rate; 2) lower loan loss provision; 3) higher revenue from the correspondent banking segment; and 4) gain on sale of securities available for sale. The Company also reported bargain purchase gain from bank acquisition of $453 and acquisition related expenses of $1,868.


				per average diluted share
Net income, gaap	$	1,289		$	0.04
The following items are shown net of income tax, non gaap:
Gain on sale of available for sale securities		(438	)	($	0.015	)
Bargain purchase gain on bank acquisition		(330	)	($	0.011	)
Bank acquisition related expenses		1,359		$	0.045

Net income, excluding items listed above	$	1,880		$	0.06

The Company’s net interest income increased by $2,337 or 12.6% between sequential quarters due to a 25 basis point (“bps”) increase in net interest margin (“NIM”) as well as an increase in volume. The volume increase was due to the two FDIC assisted bank acquisitions Central Florida State Bank (“Central FL”) and First Guaranty Bank and Trust of Jacksonville (“FGB”) in January, and the November 2011 acquisition of Federal Trust Bank, which was outstanding during the full first quarter of 2012 versus two months during the fourth quarter of 2011. The increase in NIM was due to the increase in yield on interest earning assets, due primarily to the additional covered loans acquired, and the decrease in cost of interest bearing liabilities, which was primarily related to the decrease in cost of interest bearing deposits.

The Company’s total allowance for loan losses decreased from $27,944 at December 31, 2011 to $26,010, due to a decrease in the specific reserves on impaired loans. The general allowance on non-impaired loans (excluding FDIC covered loans and loans with put back options) increased from $24,281, or 2.96% of the related loan balances at December 31, 2011 to $24,536, or 2.99% of the related loan balances at March 31, 2012. The specific allowances decreased primarily due to charge-offs during the period.

The Company continued its focus on operating efficiencies. Three of the four branch locations acquired in the January FDIC assisted acquisition of Central FL in Belleview, Florida were closed and consolidated into nearby existing CenterState branches during March. The Company exercised its option not to purchase the related branch real estate from the FDIC. The fourth Central FL branch acquired will be consolidated into a nearby existing CenterState branch during the second quarter. In addition to the Central FL branches, the Company also closed and consolidated a small branch office in leased facilities located in Clewiston, Florida during February.

The Company expects to close six of the eight branch locations acquired in the January FDIC assisted acquisition of FGB during the second quarter, subject to regulatory approval. The Company plans to exercise its option not to purchase the branch real estate related to the six branches and expects to purchase the real estate related to the remaining two branches at fair value as determined by a current appraisal pursuant to the terms of the FDIC purchase and assumption agreement. Approximately 75% of the acquired deposits are associated with the two core branch locations the Company plans to retain.

The Company continues to evaluate other existing branches as well as staffing and other back room operations as it works toward greater efficiency and reductions in operating expenses. Quarterly condensed consolidated income statements (unaudited) are shown below for the periods indicated.


Quarterly Condensed Consolidated Statements of Operations (unaudited)
For the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Interest income	$	23,414		$	21,324		$	19,837		$	20,705		$	20,377
Interest expense		2,510			2,757			2,881			3,166			3,403

Net interest income		20,904			18,567			16,956			17,539			16,974
Provision for loan losses		(2,732	)		(18,065	)		(5,005	)		(11,645	)		(11,276	)

Net interest income after loan loss provision		18,172			502			11,951			5,894			5,698
Income from correspondent banking and bond sales division		7,784			6,661			7,999			5,759			4,470
Gain on sale of securities available for sale		602			130			205			3,120			9
Bargain purchase gains on bank acquisitions		453			45,891			—			—			11,129
All other non-interest income		4,847			2,921			4,041			4,339			5,298
Credit related expenses		(1,591	)		(3,306	)		(2,966	)		(2,862	)		(3,561	)
Acquisition related expenses		(1,868	)		(6,246	)		(579	)		(469	)		(401	)
Correspondent banking division expenses		(6,968	)		(6,373	)		(6,806	)		(5,732	)		(4,978	)
All other non-interest expense		(19,659	)		(18,799	)		(16,436	)		(17,466	)		(17,709	)

Income (loss) before income tax		1,772			21,381			(2,591	)		(7,417	)		(45	)
Income tax (provision) benefit		(483	)		(7,299	)		599			3,071			210

NET INCOME (LOSS)	$	1,289		$	14,082		$	(1,992	)	$	(4,346	)	$	165

Earnings (loss) per share (basic)	$	0.04		$	0.47		$	(0.07	)	$	(0.14	)	$	0.01
Earnings (loss) per share (diluted)	$	0.04		$	0.47		$	(0.07	)	$	(0.14	)	$	0.01
Average common shares outstanding (basic)		30,065,631			30,041,089			30,039,329			30,037,556			30,020,035
Average common shares outstanding (diluted)		30,088,188			30,041,089			30,039,329			30,037,556			30,047,618
Common shares outstanding at period end		30,071,127			30,055,499			30,039,332			30,039,092			30,035,292

PTPP earnings (note 2)	$	6,908		$	2,977		$	5,754		$	4,439		$	4,055
PTPP earnings per share (diluted) (note 1)	$	0.23		$	0.10		$	0.19		$	0.15		$	0.13


Note 1:		PTPP earnings per share means, PTPP as defined in note 2 below divided by the average number of diluted common shares outstanding.
Note 2:		Pre-tax pre-provision earnings (“PTPP”) is a non-GAAP measure that if defined as income (loss) before income tax excluding the provision for loan losses and gain on sale of available for sale (“AFS”) securities. In addition the Company also excludes other credit related costs including losses on repossessed real estate and other assets, and other foreclosure related expenses. It also excludes non-recurring items as listed in the table below.


Quarterly condensed PTPP reconciliation (unaudited)
For the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Income (loss) before income tax	$	1,772		$	21,381		$	(2,591	)	$	(7,417	)	$	(45	)
exclude provision for loan losses		2,732			18,065			5,005			11,645			11,276
exclude other credit related costs		1,591			3,306			2,966			2,862			3,561
exclude gain on sale of AFS securities		(602	)		(130	)		(205	)		(3,120	)		(9	)
exclude non-recurring items:
bargain purchase gain		(453	)		(45,891	)		—			—			(11,129	)
acquisition related expenses		1,868			6,246			579			469			401

PTPP earnings	$	6,908		$	2,977		$	5,754		$	4,439		$	4,055

The condensed quarterly results of the Company’s correspondent banking and bond sales segment are presented below.


Quarterly Condensed Segment Information - Correspondent banking and bond sales division (unaudited)
For the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Net interest income	$	1,178		$	965		$	1,082		$	1,113		$	662
Total non-interest income (note 3)		8,354			7,203			8,574			6,305			4,984
Total non-interest expense (note 4)		(6,968	)		(6,373	)		(6,806	)		(5,732	)		(4,978	)
Income tax provision		(965	)		(675	)		(1,073	)		(634	)		(251	)

Net income	$	1,599		$	1,120		$	1,777		$	1,052		$	417

Contribution to diluted earnings per share	$	0.05		$	0.04		$	0.06		$	0.04		$	0.01


Note 3:		The primary component in this line item is gross commissions earned on bond sales (“income from correspondent banking and bond sales division”) which was $7,784, $6,661, $7,999, $5,759, and $4,470 for 1Q12, 4Q11, 3Q11, 2Q11 and 1Q11, respectively. The remaining non interest income items in this category include fees from safe-keeping activities, bond accounting services, asset/liability consulting related activities, international wires, clearing and corporate checking account services, and other correspondent banking related revenue and fees.
Note 4:		The majority of these expenses are variable in nature and are a derivative of the income from correspondent banking and bond sales division. The amounts do not include any indirect support allocation costs.

Net Interest Margin (“NIM”)

The NIM increased by 25 bps between sequential quarters, primarily due to a shift in the mix of average interest earning assets (“IEA”). Total average loans represented approximately 63.8% of IEA during the fourth quarter of 2011 compared to 67.2% during the first quarter of 2012. The 12 bps decrease in interest bearing liabilities between sequential quarters, which was primarily due to the lower cost of interest bearing deposits, also contributed to the NIM increase.

The tables 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. The second table below also lists selected financial ratios for the last five quarters.

Yield and cost table (unaudited)


	1Q12							4Q11							1Q11
	average		interest		avg			average		interest		avg			average		interest		avg
	balance		inc/exp		rate			Balance		inc/exp		rate			balance		inc/exp		rate
Loans (TEY)* (note 1)	$	1,116,804	$	14,521		5.23	%	$	1,099,754	$	14,434		5.21	%	$	1,018,009	$	13,161		5.24	%
Covered loans (note 2)		309,435		5,189		6.74	%		167,512		2,873		6.80	%		194,503		3,232		6.74	%
Taxable securities		529,951		3,368		2.56	%		528,673		3,650		2.74	%		506,699		3,569		2.86	%
Tax -exempt securities (TEY)		37,487		521		5.59	%		37,644		562		5.92	%		33,902		509		6.09	%
Fed funds sold and other		128,479		151		0.47	%		152,550		146		0.38	%		143,464		134		0.38	%

Tot. interest earning assets(TEY)	$	2,122,156	$	23,750		4.50	%	$	1,986,133	$	21,665		4.33	%	$	1,896,577	$	20,605		4.41	%


Interest bearing deposits	$	1,610,176	$	2,232		0.56	%	$	1,456,253	$	2,576		0.70	%	$	1,422,934	$	3,209		0.91	%
Fed funds purchased		68,842		8		0.05	%		57,049		8		0.06	%		77,311		19		0.10	%
Other borrowings		26,292		106		1.62	%		17,145		34		0.79	%		24,671		72		1.18	%
Corporate debentures		16,948		164		3.89	%		14,704		139		3.75	%		12,500		103		3.34	%

Total interest bearing liabilities	$	1,722,258	$	2,510		0.59	%	$	1,545,151	$	2,757		0.71	%	$	1,537,416	$	3,403		0.90	%


Net Interest Spread (TEY)						3.91	%						3.62	%						3.51	%

Net Interest Margin (TEY)						4.03	%						3.78	%						3.68	%

* TEY = tax equivalent yield


Note 1:		loans not covered by FDIC loss share agreements
Note 2:		loans covered by FDIC loss share agreements, and accounted for pursuant to ASC Topic 310-30.


Selected financial ratios (unaudited)
As of or for the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Return on average assets (annualized)		0.21	%		2.49	%		(0.37	)%		(0.80	)%		0.03	%
Return on average equity (annualized)		1.97	%		21.57	%		(3.17	)%		(6.87	)%		0.27	%
Yield on average loans (note 1)		5.56	%		5.42	%		5.54	%		5.41	%		5.48	%
Yield on average investments (note 1)		2.33	%		2.41	%		2.21	%		2.63	%		2.50	%
Yield on average interest earning assets		4.44	%		4.26	%		4.24	%		4.33	%		4.36	%
Yield on average interest earning assets (note 1)		4.50	%		4.33	%		4.30	%		4.39	%		4.41	%
Cost of average interest bearing deposits		0.56	%		0.70	%		0.80	%		0.85	%		0.91	%
Cost of average borrowings		1.00	%		0.81	%		0.60	%		0.62	%		0.69	%
Cost of average interest bearing liabilities (note 2)		0.59	%		0.71	%		0.79	%		0.84	%		0.90	%
Net interest margin (note 1)		4.03	%		3.78	%		3.69	%		3.73	%		3.68	%
Loan / deposit ratio		68.3	%		66.9	%		64.9	%		67.6	%		67.2	%
Stockholders’ equity (to total assets)		10.4	%		11.5	%		11.6	%		11.6	%		11.4	%
Common tangible equity (to total tangible assets)		8.4	%		9.8	%		9.8	%		9.8	%		9.6	%
Tier 1 capital (to average assets)		9.0	%		10.5	%		10.3	%		10.1	%		10.0	%
Efficiency ratio (note 3)		84	%		101	%		90	%		94	%		98	%
Common equity per common share	$	8.77		$	8.74		$	8.32		$	8.33		$	8.42
Common tangible equity per common share	$	6.93		$	7.30		$	6.92		$	6.92		$	7.00


note 1:		Tax equivalent basis.
note 2:		Does not include non-interest bearing checking accounts.
note 3:		Efficiency ratio is equal to (non-interest expense less nonrecurring items) divided by (net interest income plus non-interest income less nonrecurring items). Gain on the sale of available for sale securities is considered a nonrecurring item for the purposes of this ratio in the above table.

Loan portfolio mix and covered loans

Approximately 23.9% of the Company’s loans, or $347,793, are covered by FDIC loss sharing agreements related to the acquisition of three failed financial institutions during the third quarter of 2010 and two during the first quarter of 2012. Pursuant to the terms of the loss sharing agreements, the FDIC is obligated to reimburse the Company for 80% of losses with respect to the covered loans beginning with the first dollar of loss incurred, subject to the terms of the agreements. The Company will reimburse the FDIC for its share of recoveries with respect to the covered loans. The loss sharing agreements applicable to single family residential mortgage loans provide for FDIC loss sharing and the Company reimbursement to the FDIC for recoveries for ten years. The loss sharing agreements applicable to commercial loans provides for FDIC loss sharing for five years and Company reimbursement to the FDIC for a total of eight years for recoveries. All of the covered loans acquired are accounted for pursuant to ASC Topic 310-30.

Approximately 5.6% of the Company’s loans, or $81,189, are subject to a two year put back option, commencing January 20, 2011, with TD Bank, N.A., such that if any of these loans becomes 30 days past due or are adversely classified pursuant to bank regulatory guidelines, the Company has the option to put back the loan to TD Bank, N.A.

Approximately 10.5% of the Company’s loans, or $152,723, are subject to a one year put back option, commencing November 1, 2011, with The Hartford Insurance Group (“Hartford”), such that if any of these loans becomes 30 days past due or are adversely classified pursuant to bank regulatory guidelines, the Company has the option to put back the loan to Hartford.

Approximately 60% of the Company’s loans, or $875,093, is not covered by FDIC loss sharing agreements or subject to a put back option with TD Bank, N.A. or Hartford.

The table below summarizes the Company’s loan mix over the most recent five quarter ends.


Loan mix (unaudited)
At quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Loans not covered by FDIC loss share agreements
Real estate loans
Residential	$	413,626		$	405,923		$	259,829		$	261,773		$	259,327
Commercial		440,183			447,459			466,860			484,897			500,512
Land, development and construction loans		80,295			89,517			95,894			101,606			107,179

Total real estate loans		934,104			942,899			822,583			848,276			867,018
Commercial loans		125,752			126,064			117,900			113,030			116,424
Consumer and other loans, (note 1)		1,759			1,392			1,633			2,287			2,599
Consumer and other loans		48,122			49,999			50,283			51,287			53,990

Total loans before unearned fees and costs		1,109,737			1,120,354			992,399			1,014,880			1,040,031
Unearned fees and costs		(732	)		(639	)		(674	)		(665	)		(720	)

Total loans not covered by FDIC loss share agreements		1,109,005			1,119,715			991,725			1,014,215			1,039,311

Loans covered by FDIC loss share agreements
Real estate loans
Residential		157,601			99,270			102,852			105,249			106,655
Commercial		159,324			54,184			56,839			58,867			65,975
Land, development and construction loans		20,557			8,231			8,686			11,771			12,217

Total real estate loans		337,482			161,685			168,377			175,887			184,847
Commercial loans		10,311			2,366			2,816			4,095			4,861

Total loans covered by FDIC loss share agreements		347,793			164,051			171,193			179,982			189,708


Total Loans	$	1,456,798		$	1,283,766		$	1,162,918		$	1,194,197		$	1,229,019


Note 1:		Consumer loans acquired pursuant to five FDIC assisted transactions of failed financial institutions during the third quarter of 2010 and first quarter of 2012. These loans are not covered by an FDIC loss share agreement and are being accounted for pursuant to ASC Topic 310-30.

Credit quality and allowance for loan losses

During the quarter, excluding loans covered by FDIC loss share agreements, the Company recorded a charge of $2,650 to loan loss provision (expense). Charge-offs (net of recoveries) were $4,666 of which $2,271 was related to net charge-offs of previously established specific reserves on impaired loans, decreasing specific allowance on impaired loans from $3,304 at December 31, 2011 to $1,033 at March 31, 2012.

With regard to loans covered by FDIC loss share agreements, the Company recorded a charge of $82 to loan loss provision (expense). See the table “Allowance for loan losses” on page 10 for additional information.

The allowance for loan losses (“ALLL”) was $26,010 at March 31, 2012 compared to $27,944 at December 31, 2011, a decrease of $1,934. This decrease is the result of the aggregate effect of a $255 increase in general loan loss allowance, a $2,271 decrease in the specific loan loss allowance related to impaired loans and a $82 increase in the loan loss allowance related to certain loan pools of FDIC covered loans accounted for pursuant to ASC Topic 310-30. The changes in the Company’s ALLL components between March 31, 2012 and December 31, 2011 are summarized in the table below.


	Mar 31, 2012							Dec 31, 2011							increase (decrease)
	loan balance		ALLL Balance		%			loan balance		ALLL balance		%			loan balance			ALLL balance
Impaired loans	$	53,705	$	1,033		1.92	%	$	53,668	$	3,304		6.16	%	$	37		$	(2,271	)	-424bps
Non impaired loans		821,388		24,536		2.99	%		819,767		24,281		2.96	%		1,621			255		3 bps
TD loans (note 1)		81,189		—					90,457		—					(9,268	)		—
FTB loans (note 2)		152,723		—					155,823		—					(3,100	)		—

Loans (note 3)		1,109,005		25,569		2.31	%		1,119,715		27,585		2.46	%		(10,710	)		(2,016	)	-15 bps
Covered loans (note 4)		347,793		441					164,051		359					183,742			82

Total loans	$	1,456,798	$	26,010		1.79	%	$	1,283,766	$	27,944		2.18	%	$	173,032		$	(1,934	)	-39 bps


Note 1:		Performing loans purchased from TD Bank subject to a two year put back option commencing on January 20, 2011, such that if any of these loans becomes 30 days past due or are adversely classified pursuant to bank regulatory guidelines, the Company has the option to put back the loans to TD Bank.
Note 2:		Performing loans purchased from Hartford’s wholly owned bank, FTB subject to a one year put back option commencing on November 1, 2011, such that if any of these loans becomes 30 days past due or are adversely classified pursuant to bank regulatory guidelines, the Company has the option to put back the loans to Hartford.
Note 3:		Total loans not covered by FDIC loss share agreements.
Note 4:		Loans covered by FDIC loss share agreements. Eighty percent of any losses in this portfolio will be reimbursed by the FDIC and recognized as FDIC Indemnification income and included in non-interest income within the Company’s condensed consolidated statement of operations.

The general loan loss allowance (non-impaired loans) increased by $255, or 3 bps to 2.99% of non-impaired loan balance outstanding as of the end of the current period as compared to 2.96% at the end of the previous period. This is a result of changes in historical charge off rates, changes in current environmental factors and changes in the loan portfolio mix. Currently, there is no general loan loss allowance associated with the performing loans purchased from TD Bank and for the FTB performing loans purchased from Hartford for the reasons described in notes 1 and 2 above.

The specific loan loss allowance (impaired loans) is the aggregate of the results of individual analyses prepared for each one of the impaired loans not covered by an FDIC loss sharing agreement on a loan by loan basis. The primary reason for the decrease in specific allowance was due to net charge-offs against previously recorded specific allowances.

The Company recorded partial charge offs in lieu of specific allowance for a number of the impaired loans. The Company’s impaired loans have been written down by $8,176 to $53,705 ($52,672 when the $1,033 specific allowance is considered) from their legal unpaid principal balance outstanding of $61,881. As such, in the aggregate, our total impaired loans have been written down to approximately 85% of their legal unpaid principal balance. The Company’s total non-performing loans (non-accrual loans plus loans past due greater than 90 days and still accruing) have been written down to approximately 79% of their legal unpaid principal balance.

Any losses in loans covered by FDIC loss share agreements, as described in note 3 above, are reimbursable from the FDIC to the extent of 80% of any losses. These loans are being accounted for pursuant to ASC Topic 310-30. Loan pools in this portfolio are evaluated for impairment each quarter. If a pool is impaired, an allowance for potential loan loss is recorded.

Management believes the Company’s allowance for loan losses is adequate at March 31, 2012. However, management recognizes that many factors can adversely impact various segments of the Company’s market and customers, and therefore there is no assurance as to the amount of losses or probable losses which may develop in the future. The table below summarizes the changes in allowance for loan losses during the previous five quarters.


Allowance for loan losses (unaudited)
as of or for the quarter ending	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Loans not covered by FDIC loss share agreements
Allowance at beginning of period	$	27,585		$	25,879		$	27,418		$	28,245		$	26,267
Charge-offs		(4,826	)		(5,487	)		(7,186	)		(9,811	)		(9,458	)
Charge-offs related to loan sales		—			(11,971	)		—			(2,492	)		—
Recoveries		160			1,145			662			124			160

Net charge-offs		(4,666	)		(16,313	)		(6,524	)		(12,179	)		(9,298	)
Provision for loan losses		2,650			18,019			4,985			11,352			11,276

Allowance at end of period for loans not covered by FDIC loss share agreements	$	25,569		$	27,585		$	25,879		$	27,418		$	28,245


Loans covered by FDIC loss share agreements
Allowance at beginning of period	$	359		$	313		$	—		$	—		$	—
Charge-offs		—			—			—			(293	)		—
Recoveries		—			—			293			—			—

Net charge-offs		—			—			293			(293	)		—
Provision for loan losses		82			46			20			293			—

Allowance at end of period for loans covered by FDIC loss share agreements	$	441		$	359		$	313		$	—		$	—


Total allowance at end of period	$	26,010		$	27,944		$	26,192		$	27,418		$	28,245

The Company defines non-performing loans (“NPL”) as non-accrual loans plus loans past due 90 days or more and still accruing interest. NPLs do not include loans covered by FDIC loss share agreements, which are accounted for pursuant to ASC Topic 310-30. NPLs as a percentage of total loans not covered by FDIC loss share agreements were 3.85% at March 31, 2012 compared to 3.48% at December 31, 2011.

Non-performing assets (“NPA”) (which the Company defines as NPLs, as defined above, plus (a) OREO (i.e. real estate acquired through foreclosure, in-substance foreclosure, or deed in lieu of foreclosure), excluding OREO covered by FDIC loss share agreement; and (b) other repossessed assets that are not real estate, and are not covered by FDIC loss share agreement), were $51,278 at March 31, 2012, compared to $49,309 at December 31, 2011. NPAs as a percentage of total assets was 2.02% at March 31, 2012 compared to 2.16% at December 31, 2011. NPAs as a percentage of loans plus OREO and other repossessed assets, excluding loans and OREO covered by FDIC loss share agreements, was 4.59% at March 31, 2012 compared to 4.36% at December 31, 2011.

NPA inflows for the quarter were approximately $10,519. Outflows were approximately $8,550. Outflows consist primarily of net charge offs, loan sales, OREO sales, and OREO valuation write downs. Inflows consist primarily of additions of new nonaccrual loans net of any prior nonaccrual loans returning to accrual status and also net of any principal pay-downs or pay-offs.

The table below summarizes the approximate NPA inflows and outflows during the quarters presented.


	1Q12			4Q11			3Q11			2Q11			1Q11			4Q10			3Q10			2Q10
Inflows	$	10,519		$	11,584		$	7,220		$	14,828		$	16,927		$	20,560		$	28,871		$	9,945
Outflows		(8,550	)		(38,260	)		(9,264	)		(19,133	)		(13,117	)		(10,863	)		(23,887	)		(5,642	)

net change incr(decre)	$	1,969		($	26,676	)	($	2,044	)	($	4,305	)	$	3,810		$	9,697		$	4,984		$	4,303

NPA balance qrt end	$	51,278		$	49,309		$	75,985		$	78,029		$	82,334		$	78,524		$	68,827		$	63,843

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


Selected credit quality ratios (unaudited)
As of or for the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Non-accrual loans (note 1)	$	42,598		$	38,858		$	61,990		$	65,658		$	71,631
Past due loans 90 days or more and still accruing interest (note 1)		127			120			207			301			—

Total non-performing loans (“NPLs”) (note 1)		42,725			38,978			62,197			65,959			71,631
Other real estate owned (OREO) (note 1)		6,726			8,712			12,061			11,284			10,222
Repossessed assets other than real estate (note 1)		1,827			1,619			1,727			786			481

Total non-performing assets (“NPAs”) (note 1)	$	51,278		$	49,309		$	75,985		$	78,029		$	82,334
Non-performing loans as percentage of total loans not covered by FDIC loss share agreements		3.85	%		3.48	%		6.27	%		6.50	%		6.89	%
Non-performing assets as percentage of total assets		2.02	%		2.16	%		3.53	%		3.62	%		3.70	%
Non-performing assets as percentage of loans and OREO plus other repossessed assets (note 1)		4.59	%		4.36	%		7.56	%		7.60	%		7.84	%
Net charge-offs (recoveries)	$	4,666		$	16,313		$	6,231		$	12,472		$	9,298
Net charge-offs (recoveries) (note 1)	$	4,666		$	16,313		$	6,524		$	12,179		$	9,298
Net charge-offs as a percentage of average loans for the period (note 1)		0.42	%		1.48	%		0.66	%		1.18	%		0.91	%
Net charge-offs as a percentage of average loans for the period on an annualized basis (note 1)		1.64	%		5.92	%		2.64	%		4.72	%		3.64	%
Loans past due 30 thru 89 days and accruing interest as a percentage of total loans (note 1)		0.68	%		1.45	%		0.83	%		0.99	%		1.66	%
Allowance for loan losses as percentage of NPLs (note 1)		60	%		71	%		42	%		42	%		39	%

Troubled debt restructure (“TDRs”) (note 2)	$	11,666		$	12,361		$	16,243		$	18,603		$	21,176
Impaired loans that were not TDRs		42,039			41,307			58,437			54,704			62,626

Total impaired loans		53,705			53,668			74,680			73,307			83,802
Loans acquired pursuant to TD transaction (note 3)		81,189			90,457			97,048			104,772			114,737
Loans acquired pursuant to FTB transaction (note 4)		152,723			155,823			—			—			—
All other non impaired loans		821,388			819,767			819,997			836,136			840,772

Total loans not covered by FDIC loss share agreements		1,109,005			1,119,715			991,725			1,014,215			1,039,311
Total loans covered by FDIC loss share agreements		347,793			164,051			171,193			179,982			189,708

Total loans	$	1,456,798		$	1,283,766		$	1,162,918		$	1,194,197		$	1,229,019


As of or for the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Allowance for loan losses for loans not covered by FDIC loss share agreements
Specific loan loss allowance- impaired loans	$	1,033		$	3,304		$	2,049		$	3,519		$	5,738
General loan loss allowance- TD transaction (note 3)		—			—			—			—			—
General loan loss allowance- FTB transaction (note 4)		—			—			—			—			—
General loan loss allowance- all other non impaired		24,536			24,281			23,830			23,899			22,507

Total allowance for loan losses	$	25,569		$	27,585		$	25,879		$	27,418		$	28,245

Allowance for loan loss percentage of period end loans:
Impaired loans (note 1)		1.92	%		6.16	%		2.74	%		4.80	%		6.85	%
Loans acquired pursuant to TD transaction (note 3)		—			—			—			—			—
Loans acquired pursuant to FTB transaction (note 4)		—			—			—			—			—
All other non impaired loans (note 1)		2.99	%		2.96	%		2.91	%		2.86	%		2.68	%

Total loans (note 1)		2.31	%		2.46	%		2.61	%		2.70	%		2.72	%


Note 1:		Excludes loans, OREO and other repossessed assets covered by FDIC loss share agreements.
Note 2:		We have approximately $11,666 of TDRs. Of this amount $6,726 are performing pursuant to their modified terms, and $4,940 are not performing and have been placed on non-accrual status and included in our non performing loans (“NPLs”). Current accounting standards require TDRs to be included in our impaired loans, whether they are performing or not performing. Only non performing TDRs are included in our NPLs.
Note 3:		Performing loans purchased from TD Bank, N.A. during the first quarter of 2011. The performing loans were selected by CenterState and are subject to a two year put back option. If any loan in this category becomes past due 30 days or is adversely classified pursuant to bank regulatory guidelines, CenterState has the option to put it back to TD Bank, N.A. anytime during a two year period beginning as of the January 20, 2011 purchase date. The Company has not allocated any loan loss allowance to this group of loans.
Note 4:		Performing loans purchased from Hartford’s wholly owned bank FTB during the fourth quarter of 2011. The performing loans were selected by CenterState and are subject to a one year put back option. If any loan in this category becomes past due 30 days or is adversely classified pursuant to bank regulatory guidelines, CenterState has the option to put it back to Hartford anytime during a one year period beginning as of the November 1, 2011 purchase date. The Company has not allocated any loan loss allowance to this group of loans.

As shown in the table on the previous page, the largest component of non-performing assets is non-accrual loans. The Company’s non-accrual loans increased from 221 loans with an aggregated balance of $38,858 at December 31, 2011 to 247 loans with an aggregate balance of $42,598 at March 31, 2012. Non-accrual loans at March 31, 2012 are further delineated by collateral category and number of loans in the table below.


			percentage			number of
			of total			non-accrual
			non-accrual			loans in
collateral category (unaudited)	total amount		loans			category
Residential real estate loans	$	14,652		34	%		104
Commercial real estate loans		13,701		32	%		39
Land, development, construction loans		8,077		19	%		45
Non real estate commercial loans		5,713		14	%		32
Non real estate consumer and other loans		455		1	%		27

Total non-accrual loans at March 31, 2012	$	42,598		100	%		247

The second largest component of non-performing assets after non-accrual loans is OREO, excluding OREO covered by FDIC loss share agreements. At March 31, 2012, total OREO was $36,660. Of this amount, $29,934 was acquired pursuant to the acquisition of five failed financial institutions. The acquired OREO is covered by FDIC loss sharing agreements. Pursuant to the terms of the loss sharing

agreements, the FDIC is obligated to reimburse the Company for 80% of losses with respect to the covered OREO beginning with the first dollar of loss incurred, subject to the terms of the agreements. The Company will reimburse the FDIC for its share of recoveries with respect to the covered OREO. The loss sharing agreements applicable to single family residential mortgage loans provide for FDIC loss sharing and the Company reimbursement to the FDIC for recoveries for ten years. The loss sharing agreements applicable to commercial loans provide for FDIC loss sharing for five years and Company reimbursement to the FDIC for a total of eight years for recoveries.

OREO not covered by FDIC loss share agreements is $6,726 at March 31, 2012. OREO is carried at the lower of cost or market less the estimated cost to sell. Further declines in real estate values can affect the market value of these assets. Any further decline in market value beyond its cost basis is recorded as a current expense in the Company’s Statement of Operations. The current carrying value represents approximately 45% of the unpaid legal balance of the related loan when the asset was repossessed. OREO is further delineated in the table below.


(unaudited) Description of repossessed real estate	carrying amount at Mar 31, 2012
17 single family homes	$	1,489
1 mobile home with land		126
37 residential building lots		1,467
7 commercial buildings		1,603
Land / various acreages		2,041

Total, excluding OREO covered by FDIC loss share agreements	$	6,726

Deposit activity

During the quarter, total deposits increased by $213,019 (time deposits increased by $22,388 and non time deposits increased by $190,631) primarily due to the $418,308 of deposits acquired in the Central FL and FGB acquisitions during January 2012. The Company assumed $127,856 of internet time deposits in the FGB acquisition. The Company exercised its option, pursuant to the FDIC purchase and assumption agreement, to immediately reprice this group of time deposits subsequent to the acquisition date to estimated market rates. Pursuant to the FDIC purchase and assumption agreement, if the Company chooses to reprice any time deposits, the customer has the option of withdrawing their deposit any time prior to maturity without penalty. All of the internet time deposits have been withdrawn early. In addition, the Company also repriced approximately $10,673 of additional time deposits to current market rates subsequent to the acquisition date. All other deposits assumed have been marked to estimated fair value in the Company’s financial statements. The table below summarizes the changes in deposits assumed from Central FL and FGB between the acquisition dates (January 20 and January 27, 2012) and March 31, 2012.


	at acquisition				increase
	dates		3/31/12		(decrease)
Non time deposits	$	155,870	$	156,356	$	486
Time deposits		262,438		115,636		(146,802	)

Total deposits	$	418,308	$	271,992	$	(146,316	)

The cost of interest bearing deposits decreased 14 bps to 0.56% in the current quarter compared to 0.70% in the prior quarter. The primary reason for the decrease was the cost of time deposits which decreased 32 bps to 1.09% in the current quarter compared to 1.41% in the prior quarter. The overall cost of total deposits (i.e. includes non-interest bearing checking accounts) decreased by 12 bps from 0.55% during the fourth quarter of 2011 to 0.43% during the first quarter of 2012.


Deposit mix (unaudited)
For the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Checking accounts
Non-interest bearing	$	500,683		$	423,128		$	402,683		$	395,775		$	378,395
Interest bearing		400,492			344,303			310,723			310,533			310,660
Savings deposits		247,442			205,387			206,053			209,966			209,690
Money market accounts		354,885			340,053			288,892			238,381			275,729
Time deposits		629,306			606,918			583,587			611,280			653,428

Total deposits	$	2,132,808		$	1,919,789		$	1,791,938		$	1,765,935		$	1,827,902


Non time deposits as percentage of total deposits		70	%		68	%		67	%		65	%		64	%
Time deposits as percentage of total deposits		30	%		32	%		33	%		35	%		36	%

Total deposits		100	%		100	%		100	%		100	%		100	%

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


Condensed Consolidated Balance Sheets (unaudited)
For the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Cash and due from banks	$	31,471		$	17,893		$	19,119		$	19,176		$	19,542
Fed funds sold and Fed Res Bank deposits		103,427			133,202			163,745			230,322			146,275
Trading securities		552			—			—			1,249			2,192
Investments securities, available for sale		545,559			591,164			557,129			455,131			575,098
Loans held for sale		298			3,741			664			899			168
Loans covered by FDIC loss share agreements		347,793			164,051			171,193			179,982			189,708
Loans not covered by FDIC loss share agreements		1,109,005			1,119,715			991,725			1,014,215			1,039,311
Allowance for loan losses		(26,010	)		(27,944	)		(26,192	)		(27,418	)		(28,245	)
FDIC indemnification assets		142,245			50,642			53,820			58,544			60,122
Premises and equipment, net		97,060			94,358			88,995			88,015			86,652
Goodwill		46,779			38,035			38,035			38,035			38,035
Core deposit intangible		6,821			5,203			4,187			4,382			4,582
Bank owned life insurance		46,878			36,520			28,141			27,914			27,678
OREO covered by FDIC loss share agreements		29,934			9,469			9,634			9,696			11,332
OREO not covered by FDIC loss share agreements		6,726			8,712			12,061			11,284			10,222
Other assets		44,565			39,698			41,549			45,100			42,839

TOTAL ASSETS	$	2,533,103		$	2,284,459		$	2,153,805		$	2,156,526		$	2,225,511


Deposits	$	2,132,808		$	1,919,789		$	1,791,938		$	1,765,935		$	1,827,902
Federal funds purchased		74,459			54,624			61,343			87,435			92,111
Other borrowings		48,126			31,597			29,982			34,152			34,022
Other liabilities		14,107			15,816			20,506			18,718			18,489
Common stockholders’ equity		263,603			262,633			250,036			250,286			252,987

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,533,103		$	2,284,459		$	2,153,805		$	2,156,526		$	2,225,511


Condensed Consolidated Average Balance Sheets (unaudited)
For quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Federal funds sold and other	$	128,479		$	152,550		$	230,716		$	153,840		$	143,464
Security investments		567,438			566,317			458,870			548,264			540,601
Loans covered by FDIC loss share agreements		309,435			167,512			176,275			184,413			194,503
Loans not covered by FDIC loss share agreements		1,116,804			1,099,754			991,217			1,032,592			1,018,009
Allowance for loan losses		(28,421	)		(26,866	)		(29,009	)		(26,549	)		(26,614	)
All other assets		402,294			286,824			287,483			286,908			294,991

TOTAL ASSETS	$	2,496,029		$	2,246,091		$	2,115,552		$	2,179,468		$	2,164,954


Deposits- interest bearing	$	1,610,176		$	1,456,253		$	1,353,164		$	1,399,653		$	1,422,934
Deposits- non interest bearing		494,898			418,373			406,455			392,504			354,036
Federal funds purchased		68,842			57,049			67,540			82,118			77,311
Other borrowings		43,240			31,849			31,027			36,113			37,171
Other liabilities		15,665			23,592			8,374			15,172			21,814
Stockholders’ equity		263,208			258,975			248,992			253,908			251,688

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,496,029		$	2,246,091		$	2,115,552		$	2,179,468		$	2,164,954

Non interest income and non interest expense

The table below summarizes the Company’s non-interest income for the periods indicated.


Quarterly Condensed Consolidated Non Interest Income (unaudited)
For the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Service charges on deposit accounts	$	1,483		$	1,713		$	1,629		$	1,417		$	1,556
Income from correspondent banking and bond sales division		7,784			6,661			7,999			5,759			4,470
Commissions from sale of mutual funds and annuities		660			487			557			322			439
Debit card and ATM fees		915			769			713			714			656
Loan related fees		200			77			199			306			165
BOLI income		358			266			227			235			239
Trading securities revenue		144			88			130			106			161
Gain on sale of securities available for sale		602			130			205			3,120			9
FDIC indemnification asset – amortization of discount rate		(496	)		(699	)		(225	)		(47	)		468
FDIC indemnification income		564			(845	)		256			585			1,136
Other correspondent banking related fees		426			489			434			430			339
Trust fees		208			—			—			—			—
Other service charges and fees		385			579			121			271			139

Subtotal	$	13,233		$	9,712		$	12,245		$	13,218		$	9,777
Bargain purchase gains related to acquisitions		453			45,891			—			—			11,129

Total non-interest income	$	13,686		$	55,603		$	12,245		$	13,218		$	20,906

The FDIC indemnification asset (“IA”) discount amortization is producing negative amortization due to adjustments in the FDIC covered loan portfolio. That is, to the extent current adjusted projected losses in the covered loan portfolio are less than originally projected losses and therefore future loan accretion yields increase, the related projected reimbursements from the FDIC contemplated in the IA is less, which produces a negative income accretion in non-interest income. This event corresponds to the increase in yields in the FDIC covered loan portfolio.

When a FDIC covered OREO property is sold at a loss (i.e. difference between carrying value and proceeds received), the loss is included in non-interest expense as loss on sale of OREO, and eighty percent of the loss is recorded as FDIC indemnification income and included in non-interest income. Eighty percent of any related loan pool impairments also are reflected in this account.

The Company acquired a Trust department in its FDIC assisted acquisition of FGB. The fees indicated in the table above for the first quarter of 2012 represent approximately two months of activity subsequent to the January 27, 2012 acquisition date.

Excluding credit related expenses, which are approximately $1,715 less this quarter compared to the prior quarter ($1,591 compared to $3,306) and excluding correspondent banking division expenses and merger/acquisition related expenses, the Company’s remaining non-interest expenses (i.e. operating expenses) increased approximately $860 on a sequential quarter basis. The primary reason for the increase was the January 20 acquisition of Central FL and the January 27 acquisition of FGB. The table below summarizes the Company’s non-interest expense for the periods indicated.


Quarterly Condensed Consolidated Non Interest Expense (unaudited)
For the quarter ended:	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Employee salaries and wages	$	13,919		$	12,711		$	12,621		$	11,246		$	10,572
Employee incentive/bonus compensation accrued		762			1,024			600			594			612
Employee stock based compensation expense		160			170			158			182			195
Deferred compensation expense		123			115			114			115			116
Health insurance and other employee benefits		1,021			1,068			483			831			833
Payroll taxes		1,093			644			618			649			933
401K employer contributions		337			243			231			230			279
Other employee related expenses		186			158			231			104			92
Incremental direct cost of loan origination		(140	)		(158	)		(112	)		(131	)		(126	)

Total salaries, wages and employee benefits	$	17,461		$	15,975		$	14,944		$	13,820		$	13,506

Occupancy expense		2,061			2,027			2,036			2,114			2,094
Depreciation of premises and equipment		1,267			1,196			1,016			996			999
Supplies, stationary and printing		315			301			314			366			304
Marketing expenses		584			692			611			760			728
Data processing expenses		1,005			915			848			1,625			1,292
Legal, auditing and other professional fees		620			853			559			623			694
Bank regulatory related expenses		700			559			617			645			800
Postage and delivery		323			206			293			200			231
ATM and debit card related expenses		262			556			335			424			316
Amortization of CDI		278			219			194			201			190
Loss (gain) on sale of repossessed real estate (“OREO”)		272			183			307			(463	)		518
Valuation write down of repossessed real estate (“OREO”)		255			2,092			1,389			1,235			2,035
Loss on repossessed assets other than real estate		98			56			218			82			21
Foreclosure and repossession related expenses		966			975			1,052			2,008			987
Internet and telephone banking		277			243			324			282			156
Visa/Mastercard processing expenses		40			35			35			35			35
Put back option amortization expense		182			158			109			110			73
Operational write-offs and losses		142			146			166			120			121
Correspondent account and Federal Reserve charges		133			115			118			120			118
Conferences, seminars, education and training		130			168			134			122			74
Director fees		91			89			71			66			68
Travel expenses		28			27			30			40			37
Other expenses		728			692			488			529			851

Subtotal	$	28,218		$	28,478		$	26,208		$	26,060		$	26,248
Merger, acquisition and conversion related expenses		1,868			6,246			579			469			401

Total non- interest expense	$	30,086		$	34,724		$	26,787		$	26,529		$	26,649

Explanation of Certain Unaudited Non-GAAP Financial Measures

This press release contains financial information determined by methods other than Generally Accepted Accounting Principles (“GAAP”). The financial highlights provide reconciliations between GAAP interest income, net interest income and tax equivalent basis interest income and net interest income, as well as total stockholders’ equity and tangible common equity. Management uses these non-GAAP financial measures in its analysis of the Company’s performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company’s performance. The Company believes the non-GAAP measures enhance investors’ understanding of the Company’s business and performance. These 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):


	1Q12		4Q11		1Q11

Interest income, as reported (GAAP)	$	23,414	$	21,324	$	20,377
tax equivalent adjustments		336		341		228

Interest income (tax equivalent)	$	23,750	$	21,665	$	20,605


Net interest income, as reported (GAAP)	$	20,904	$	18,567	$	16,974
tax equivalent adjustments		336		341		228

Net interest income (tax equivalent)	$	21,240	$	18,908	$	17,202


	3/31/12			12/31/11			9/30/11			6/30/11			3/31/11
Total stockholders’ equity (GAAP)	$	263,603		$	262,633		$	250,036		$	250,286		$	252,987
Goodwill		(46,779	)		(38,035	)		(38,035	)		(38,035	)		(38,035	)
Core deposit intangible		(6,821	)		(5,203	)		(4,187	)		(4,382	)		(4,582	)
Trust intangible		(1,541	)		—			—			—			—

Tangible common equity	$	208,462		$	219,395		$	207,814		$	207,869		$	210,370

About CenterState Banks, Inc.

The Company, headquartered in Davenport, Florida, between Orlando and Tampa, is a multi-bank holding company that was formed in June 2000 as part of a merger of three independent commercial banks. Currently, the Company operates through its two subsidiary banks with 65 full service branch banking locations in 18 counties throughout central Florida. Through its subsidiary banks, the Company provides a range of consumer and commercial banking services to individuals, businesses and industries.

In addition to providing traditional deposit and lending products and services to its commercial and retail customers in central Florida, the Company also operates a correspondent banking and bond sales division. The division is integrated with and part of the lead subsidiary bank located in Winter Haven, Florida, although the majority of the bond salesmen, traders and operations personnel are physically housed in leased facilities located in Birmingham, Alabama, Atlanta, Georgia and Winston-Salem,

North Carolina. The customer base includes small to medium size financial institutions primarily located in Florida, Alabama, Georgia, North Carolina, South Carolina, Tennessee, Virginia and West Virginia.

For additional information contact Ernest S. Pinner, CEO, John C. Corbett, EVP, or James J. Antal, CFO, at 863-419-7750.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:

Some of the statements in this report constitute forward-looking statements, within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These statements related to future events, other future financial and operating performance, costs, revenues, economic conditions in our markets, loan performance, credit risks, collateral values and credit conditions, or business strategies, including expansion and acquisition activities and may be identified by terminology such as “may,” “will,” “should,” “expects,” “scheduled,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “potential,” or “continue” or the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should specifically consider the factors described throughout this report. We cannot assure you that future results, levels of activity, performance or goals will be achieved, and actual results may differ from those set forth in the forward looking statements.

Forward-looking statements, with respect to our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance or achievements of the Company or the Bank to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. You should not expect us to update any forward-looking statements. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our annual report on Form 10-K for the year ended December 31, 2011, and otherwise in our SEC reports and filings.

CenterState Bank Corp - FORM 8-K - EX-99.1 - PRESS RELEASE - April 23, 2012

Attached files

CenterState Bank Corp Reports