Attached files
| file | filename |
|---|---|
| 8-K - 8-K - CenterState Bank Corp | csfl-8k_20150421.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
April 21, 2015
CenterState Banks, Inc. Announces
First Quarter 2015 Operating Results
DAVENPORT, FL. – April 21, 2015 - CenterState Banks, Inc. (NASDAQ: CSFL) reported earnings per share of $0.20 ($0.20 per share net operating income, a non-gaap measurement described below) on net income of $9,148 for the first quarter of 2015, compared to $0.16 per share ($0.17 per share net operating income) on net income of $7,281 reported during the prior quarter. All amounts are in thousands, except per share information, and all earnings per share amounts are reported on a diluted basis unless otherwise noted.
A comparison of current quarter earnings and prior quarter is presented in the table below:
|
|
1Q15 |
4Q14 |
|
Earnings per share (GAAP) |
$0.20 |
$0.16 |
|
Net operating income per share (Non-GAAP) |
$0.20 |
$0.17 |
Net operating income is a non-gaap financial measurement used by management to evaluate and monitor financial results of operations excluding certain items. Net operating income for the first quarter of 2015 and the fourth quarter of 2014 excluded certain items net of tax of $28 and $270, respectively. See the reconciliation table and description of items on page 18, Explanation of Certain Unaudited Non-GAAP Financial Measures.
Current quarter highlights
|
· |
Net operating ROA 0.97%, compared to 0.81% for the previous quarter. |
|
· |
Efficiency ratio 65.5%, reflecting the realization of the cost saves resulting from the First Southern Bank (“FSB”) integration. |
|
· |
Loans increased by an annualized rate of 9% during the current quarter (excluding PCI loans), reflecting the continuing improving Florida economy and real estate market and a record quarterly production of $192 million. |
|
· |
Core deposits increased by an annualized rate of 13% during the current quarter (i.e. total deposits excluding time deposits) primarily due to commercial checking account growth. |
|
· |
Net interest margin (“NIM”) increased 4bps to 4.53% |
|
· |
On April 8, 2015, the Company closed on a $25 million Holding Company revolving line of credit which is another available resource for management as various capital management strategies are considered. |
1
Quarterly condensed consolidated income statements (unaudited) are shown below for the periods indicated. See notes 1 and 2 below for a discussion related to FDIC revenue and amortization (negative accretion) included in non-interest income.
|
Quarterly Condensed Consolidated Statements of Operations (unaudited) |
|||||
|
For the quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Interest income |
$ 39,485 |
$ 38,019 |
$ 37,347 |
$ 33,079 |
$ 29,782 |
|
Interest expense |
1,865 |
1,848 |
2,097 |
1,822 |
1,589 |
|
Net interest income |
37,620 |
36,171 |
35,250 |
31,257 |
28,193 |
|
Provision (recovery) for loan losses |
1,941 |
210 |
1,108 |
117 |
(464) |
|
Provision (recovery) for loan losses- PCI loans |
(299) |
(192) |
(153) |
(223) |
423 |
|
Net interest income after loan loss provision |
35,978 |
36,153 |
34,295 |
31,363 |
28,234 |
|
|
|
|
|
|
|
|
Correspondent banking and capital markets division- income |
6,800 |
5,795 |
5,142 |
5,285 |
3,931 |
|
Gain on sale of securities available for sale |
--- |
--- |
--- |
46 |
--- |
|
FDIC- IA amortization (negative accretion) (1) |
(4,350) |
(5,599) |
(4,953) |
(5,006) |
(5,185) |
|
FDIC- revenue (2) |
667 |
1,080 |
213 |
421 |
1,268 |
|
All other non-interest income |
5,964 |
6,259 |
6,157 |
5,626 |
5,746 |
|
Total non interest income |
9,081 |
7,535 |
6,559 |
6,372 |
5,760 |
|
|
|
|
|
|
|
|
Credit related expenses |
50 |
299 |
624 |
1,239 |
523 |
|
FDIC credit related expenses |
(567) |
369 |
(209) |
1,136 |
1,301 |
|
Correspondent banking and capital markets division-expense |
5,595 |
4,993 |
5,036 |
5,063 |
4,378 |
|
Merger and acquisition related expenses |
--- |
848 |
3,450 |
4,897 |
2,347 |
|
Branch closure and efficiency initiatives |
--- |
(417) |
(6) |
29 |
3,158 |
|
All other non-interest expense |
25,525 |
25,999 |
26,639 |
23,789 |
20,696 |
|
Total non interest expense |
30,603 |
32,091 |
35,534 |
36,153 |
32,403 |
|
|
|
|
|
|
|
|
Income before income tax |
14,456 |
11,597 |
5,320 |
1,582 |
1,591 |
|
Income tax provision |
5,308 |
4,316 |
1,727 |
545 |
538 |
|
NET INCOME |
$ 9,148 |
$ 7,281 |
$ 3,593 |
$ 1,037 |
$ 1,053 |
|
|
|
|
|
|
|
|
Earnings per share (basic) (GAAP) |
$ 0.20 |
$ 0.16 |
$ 0.08 |
$ 0.03 |
$ 0.03 |
|
Earnings per share (diluted) (GAAP) |
$ 0.20 |
$ 0.16 |
$ 0.08 |
$ 0.03 |
$ 0.03 |
|
Net operating income per share (Non-GAAP) (3) |
$ 0.20 |
$ 0.17 |
$ 0.13 |
$ 0.11 |
$ 0.13 |
|
|
|
|
|
|
|
|
Average common shares outstanding (basic) |
45,128 |
45,264 |
45,061 |
38,665 |
34,465 |
|
Average common shares outstanding (diluted) |
45,658 |
45,698 |
45,413 |
39,051 |
34,863 |
|
Common shares outstanding at period end |
45,409 |
45,324 |
45,209 |
45,023 |
35,536 |
|
note 1: |
On the date of an FDIC acquisition (with loss share), the Company estimates expected future losses and the timing of those losses by loan pool. The related reimbursements from the FDIC, pursuant to the specific loss share agreement, of those losses are recorded as a receivable from the FDIC, referred to as indemnification asset or “IA.” The Company updates its estimate of future losses and the timing of the losses each quarter. To the extent management estimates that future losses are less than prior expected future losses, management adjusts its estimates of future expected cash flows and this increase is accreted to interest income over the remaining life of those specific loan pools, increasing the yield on loans. Because management no longer expects these incremental future losses on the loan pool(s), then the expected future reimbursements from the FDIC for the related percentage of loss share are also reduced. Instead of immediately charging down the IA for expected future FDIC reimbursements, the IA is written down over the shorter of the loss share period or the life of the related loan pool(s) by negative accretion (amortization) in this line item. |
2
|
note 2: |
Two FDIC related revenue items are included in this line item. The first item is FDIC reimbursement income from the sale of OREO. When OREO (those covered by loss share agreements) is sold for a loss, the FDIC covered portion of the loss is recognized as income and included in this line item per the coverage breakdown in the table on page 10, Selected Credit Quality Ratios. Second, when a loan pool (with loss share) is impaired, the impairment expense is included in provision for loan losses, and the percentage of the loss that is reimbursable from the FDIC is recognized as income from FDIC reimbursement, and included in this line item as well. |
|
note 3: |
This non-gaap metric represents gaap net income excluding certain income and expense items net of the effective tax rate for the period presented. Items excluded are gains on sales of securities held for sale, acquisition and merger related expenses and one time charges related to the Company’s efficiency and profitability initiatives announced in January 2014, which include impairment charges on the real estate of several of the branches closed during April 2014, divided by the average diluted common shares outstanding. A reconciliation table is presented on page 18, Explanation of Certain Unaudited Non-GAAP Financial Measures. |
The condensed quarterly results of the Company’s correspondent banking and capital markets segment are presented below.
|
Quarterly Condensed Segment Information - Correspondent banking and capital markets division (unaudited) |
|||||
|
For the quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Net interest income |
$1,602 |
$991 |
$801 |
$740 |
$707 |
|
Provision for loan losses |
(131) |
--- |
--- |
--- |
--- |
|
Total non-interest income (note 1) |
6,800 |
5,795 |
5,142 |
5,285 |
3,931 |
|
Total non-interest expense (note 2) |
(5,595) |
(4,993) |
(5,036) |
(5,063) |
(4,378) |
|
Income tax provision |
(1,032) |
(692) |
(350) |
(371) |
(100) |
|
Net income |
$ 1,644 |
$ 1,101 |
$ 557 |
$ 591 |
$ 160 |
|
Contribution to diluted earnings per share |
$ 0.04 |
$ 0.02 |
$ 0.01 |
$ 0.02 |
$ ---- |
|
|
|
|
|
|
|
|
Allocation of indirect expense net of |
|
|
|
|
|
|
inter-company earnings credit, net of |
|
|
|
|
|
|
income tax benefit (note 3) |
$(276) |
$(163) |
$(284) |
$(120) |
$(150) |
|
Contribution to diluted earnings per share after |
|
|
|
|
|
|
deduction of allocated indirect expenses |
$ 0.03 |
$ 0.02 |
$ 0.01 |
$ 0.01 |
$ ---- |
|
note 1: |
The primary component in this line item is gross commissions earned on bond sales, fees from hedging services, loan brokering fees and related consulting fees which were $5,694, $4,876, $4,184, $4,192 and $3,148 for 1Q15, 4Q14, 3Q14, 2Q14 and 1Q14 respectively. The fee income in this category is based on sales volume in any particular period and is therefore volatile between comparable periods. The remaining non interest income items in this category, which are less volatile, 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 2: |
A significant portion of these expenses are variable in nature and are a derivative of the income from bond sales, hedging services, brokering loans sales and related consulting services identified in note 1 above. The variable expenses related to these fees identified in note 1 above were $2,938, $2,149, $2,336, $2,308 and $1,713 for 1Q15, 4Q14, 3Q14, 2Q14 and 1Q14 respectively. Expenses in this line item do not include any indirect support allocation costs. |
|
note 3: |
A portion of the cost of the Company’s indirect departments such as human resources, accounting, deposit operations, item processing, information technology, compliance and others have been allocated to the correspondent banking and capital markets division based on management’s estimates. In addition, an inter-company earnings credit is allocated to the segment for services provided to the commercial bank segment, also based on management’s estimates and judgment. |
3
Loan production
Loans (excluding purchased credit impaired (“PCI”) loans) increased $48,636 during the current quarter, an annualized growth rate of approximately 9%. Total new loans originated during the quarter approximated $191.7 million, of which $144.2 million were funded. The weighted average interest rate on funded loans was approximately 4%. About 54% of funded loan origination was commercial real estate (“CRE”), 15% commercial and industrial (“C&I”), 20% single family residential, 6% land, development & construction and 5% were all other.
The mix of floating, adjustable and fixed rate funded loan production during the current quarter is expected to result in an estimated duration of approximately 2.7 years. The loan origination pipeline is approximately $308 million at March 31, 2015 compared to $285 million at December 31, 2014. The graph below summarizes total loan production and funded loan production over the past twelve quarters.
Loan portfolio mix, PCI loans, FDIC covered loans and the related Indemnification Asset (“IA”)
Total PCI loans at March 31, 2015 is equal to $263,268 of which $223,551(85%) are covered by FDIC loss sharing agreements. The Company acquired both covered and non-covered PCI loans in its acquisition of FSB. It also acquired FDIC covered loans that are not included in the PCI loan portfolio. In addition, the Company also acquired non-covered PCI loans from the GSB acquisition. The table below compares the Company’s total FDIC covered loans and its PCI loan portfolio at March 31, 2015.
|
|
PCI loans |
Non-PCI |
Total loans |
|
FDIC covered |
$ 223,551 |
$ 38,463 |
$ 262,014 |
|
not covered |
39,717 |
2,162,932 |
2,202,649 |
|
Total |
$ 263,268 |
$ 2,201,395 |
$ 2,464,663 |
4
The Company has fourteen loss share agreements with the FDIC. Seven have ten year terms and generally include single family residential loans and the other seven have five year terms and generally include non-single family residential loans. The table below summarizes the covered loans by acquired bank and by term of the related loss share period at March 31, 2015.
|
|
|
|
|
|
|
est rem |
percentage |
|
|
|
|
Loss |
Unpaid |
|
|
|
life of |
of losses |
end of |
|
|
|
Share |
Principal |
Carrying |
Difference(2) |
loans in |
reimbursable |
loss share |
|
|
|
|
Term |
Balance |
Balance |
$ |
% |
years(1) |
from FDIC |
period |
IA |
|
Olde Cypress |
5 yrs |
$9,043 |
$7,415 |
($1,628) |
18% |
4.9 |
80% |
Jul-15 |
$358 |
|
Comm Bank Bartow |
5 yrs |
3,384 |
2,674 |
(710) |
21% |
2.8 |
80% |
Aug-15 |
172 |
|
Independent Nat'l Bank |
5 yrs |
16,272 |
13,945 |
(2,327) |
14% |
1.9 |
80% |
Aug-15 |
412 |
|
Haven Trust Bank |
5 yrs |
23,365 |
19,900 |
(3,465) |
15% |
3.6 |
70%/0%/70% |
Sep-15 |
--- |
|
First Commercial Bank |
5 yrs |
83,804 |
70,327 |
(13,477) |
16% |
2.0 |
70%/30%/75% |
Jan-16 |
1,510 |
|
First Guaranty Bank |
5 yrs |
58,577 |
38,715 |
(19,862) |
34% |
2.3 |
80% |
Jan-17 |
12,516 |
|
Central FL State Bank |
5 yrs |
11,567 |
8,302 |
(3,265) |
28% |
1.6 |
80% |
Jan-17 |
2,222 |
|
Subtotal |
|
206,012 |
161,278 |
(44,734) |
22% |
2.4 |
|
|
17,190 |
|
|
|
|
|
|
|
|
|
|
|
|
Olde Cypress |
10 yrs |
33,351 |
25,354 |
(7,997) |
24% |
5.6 |
80% |
Jul-20 |
8,126 |
|
Comm Bank Bartow |
10 yrs |
14,957 |
10,988 |
(3,969) |
27% |
8.1 |
80% |
Aug-20 |
2,949 |
|
Independent Nat'l Bank |
10 yrs |
18,843 |
14,539 |
(4,304) |
23% |
6.2 |
80% |
Aug-20 |
3,346 |
|
Haven Trust Bank |
10 yrs |
4,447 |
3,536 |
(911) |
20% |
6.3 |
70%/0%/70% |
Sep-20 |
563 |
|
First Commercial Bank |
10 yrs |
9,694 |
8,671 |
(1,023) |
11% |
3.7 |
70%/30%/75% |
Jan-21 |
1,050 |
|
First Guaranty Bank |
10 yrs |
42,414 |
33,157 |
(9,257) |
22% |
7.0 |
80% |
Jan-22 |
7,469 |
|
Central FL State Bank |
10 yrs |
5,781 |
4,491 |
(1,290) |
22% |
5.1 |
80% |
Jan-22 |
901 |
|
Subtotal |
|
129,487 |
100,736 |
(28,751) |
22% |
6.2 |
|
|
24,404 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$335,499 |
$262,014 |
($73,485) |
22% |
3.9 |
|
|
$41,594 |
|
(1) |
This represents an estimate of the weighted average remaining life or timing of the estimated future cash flows as of March 31, 2015. |
|
(2) |
Represents the dollar amount difference between the carrying value, or book value, of the loans and the unpaid principal balance (“UPB”), and the dollar amount difference as a percentage of the UPB. |
As shown in the table above, the Company’s total IA at March 31, 2015 was $41,594 of which $14,904 represents a receivable from the FDIC for estimated future loss reimbursements, and $26,690 represents previously estimated loss reimbursements that are no longer expected. This amount is now expected to be paid (and/or has been paid) by the borrower (or realized upon the sale of OREO) instead of a reimbursement from the FDIC. At March 31, 2015, the $26,690 previously estimated reimbursements from the FDIC is expected to be written off as amortization expense (negative accretion) in the Company’s non-interest income as summarized below.
|
Period |
|
|
Year |
|
|
2Q15 |
$ 3,943 |
|
2017 |
$ 2,998 |
|
3Q15 |
3,223 |
|
2018 |
2,217 |
|
4Q15 |
2,595 |
|
2019 |
1,869 |
|
Year 2016 |
8,017 |
|
2020 thru 2022 |
1,828 |
|
|
|
|
Total |
$ 26,690 |
5
The table above is based on the Company’s most recent quarterly updated projections of estimated future losses, cash flows and timing of cash flows. The above amounts are subject to change, and have changed in past quarters, primarily due to the FDIC covered loan pools performing better than previously estimated. A summary of the activity in the Company’s IA account during the three month period ending March 31, 2015 is presented in the table below.
|
Balance at 12/31/14 |
$49,054 |
|
Amortization, net (excludes clawback) |
(4,316) |
|
Indemnification revenue |
906 |
|
Indemnification of foreclosure expenses |
(157) |
|
Proceeds received from FDIC |
(3,654) |
|
Net recovery of loan pool(s) impairments |
(239) |
|
Balance 3/31/15 |
$41,594 |
The table below summarizes the Company’s loan mix over the most recent five quarter ends.
|
Loan mix (unaudited) |
|
|
|
|
|
|
At quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Loans |
|
|
|
|
|
|
Real estate loans |
|
|
|
|
|
|
Residential |
$604,811 |
$589,068 |
$572,244 |
$563,293 |
$495,450 |
|
Commercial |
1,154,682 |
1,132,933 |
1,136,595 |
1,091,660 |
736,406 |
|
Land, development and construction loans |
85,186 |
79,002 |
78,514 |
78,444 |
60,726 |
|
Total real estate loans |
1,844,679 |
1,801,003 |
1,787,353 |
1,733,397 |
1,292,582 |
|
Commercial loans |
297,442 |
294,493 |
282,753 |
251,741 |
217,482 |
|
Consumer and other loans |
58,484 |
56,334 |
55,527 |
56,191 |
54,205 |
|
Total loans before unearned fees and costs |
2,200,605 |
2,151,830 |
2,125,633 |
2,041,329 |
1,564,269 |
|
Unearned fees and costs |
790 |
929 |
856 |
820 |
565 |
|
Total Non-PCI loans (note 1) |
2,201,395 |
2,152,759 |
2,126,489 |
2,042,149 |
1,564,834 |
|
PCI loans |
|
|
|
|
|
|
Real estate loans |
|
|
|
|
|
|
Residential |
101,365 |
102,009 |
106,335 |
119,005 |
117,879 |
|
Commercial |
131,270 |
140,977 |
165,006 |
195,157 |
112,558 |
|
Land, development and construction loans |
24,294 |
24,032 |
26,250 |
27,885 |
11,144 |
|
Total real estate loans |
256,929 |
267,018 |
297,591 |
342,047 |
241,581 |
|
Commercial loans |
5,615 |
8,953 |
11,226 |
10,759 |
8,118 |
|
Consumer and other loans |
724 |
795 |
821 |
1,064 |
1,101 |
|
Total PCI loans (note 2) |
263,268 |
276,766 |
309,638 |
353,870 |
250,800 |
|
|
|
|
|
|
|
|
Total Loans |
$2,464,663 |
$2,429,525 |
$2,436,127 |
$2,396,019 |
$1,815,634 |
|
note 1: |
Included in the $2,201,395 Non-PCI loans at March 31, 2015 are $38,463 that are covered by FDIC loss sharing agreements the Company acquired pursuant to its June 1, 2014 acquisition of FSB. |
|
note 2: |
Included in the $263,268 PCI loans at March 31, 2015 are $223,551 of loans that are covered by FDIC loss sharing agreements and $39,717 are not covered. |
Credit quality and allowance for loan losses
During the quarter, excluding PCI loans, the Company recorded a loan loss provision expense of $1,941 and charge-offs net of recoveries of $483, resulting in an increase in the allowance for loan losses (excluding PCI loans) of $1,458 as shown in the table below.
6
With regard to PCI loans, the Company recorded a negative loan loss provision of $299 and a charge-off of $77, resulting in a decrease in the allowance for loan losses on PCI loans of $376. See the table “Allowance for loan losses” for additional information.
The allowance for loan losses (“ALLL") was $20,980 at March 31, 2015 compared to $19,898 at December 31, 2014, an increase of $1,082. This increase is the result of the aggregate effect of a $1,472 increase in general loan loss allowance, a $14 decrease in the specific loan loss allowance related to impaired loans and a $376 decrease in the loan loss allowance related to PCI loans accounted for pursuant to ASC Topic 310-30. The changes in the Company’s ALLL components between March 31, 2015 and December 31, 2014 are summarized in the table below.
|
|
Mar 31, 2015 |
|
Dec 31, 2014 |
|
increase (decrease) |
||||||
|
|
loan |
ALLL |
|
|
loan |
ALLL |
|
|
loan |
ALLL |
|
|
|
balance |
balance |
% |
|
balance |
balance |
% |
|
balance |
balance |
|
|
Non impaired loans |
$1,488,536 |
$ 16,745 |
1.12% |
|
$1,407,781 |
$ 16,587 |
1.18% |
|
$ 80,755 |
$ 158 |
-6 bps |
|
Gulfstream loans (note 1) |
269,918 |
1,944 |
0.72% |
|
280,331 |
1,682 |
0.60% |
|
(10,413) |
262 |
12 bps |
|
First Southern loans (note 2) |
420,759 |
1,052 |
0.25% |
|
439,397 |
--- |
---% |
|
(18,638) |
1,052 |
25 bps |
|
Impaired loans |
22,182 |
1,101 |
4.96% |
|
25,250 |
1,115 |
4.42% |
|
(3,068) |
(14) |
54 bps |
|
Non-PCI loans |
2,201,395 |
20,842 |
0.95% |
|
2,152,759 |
19,384 |
0.90% |
|
48,636 |
1,458 |
5 bps |
|
PCI loans (note 3) |
263,268 |
138 |
|
|
276,766 |
514 |
|
|
(13,498) |
(376) |
|
|
Total loans |
$2,464,663 |
$20,980 |
0.85% |
|
$2,429,525 |
$19,898 |
0.82% |
|
$ 35,138 |
$1,082 |
3 bps |
|
note 1: |
Loans acquired in the Company’s January 17, 2014 acquisition of Gulfstream Business Bank (“GSB”) that are not PCI loans. These are performing loans recorded at estimated fair value at the acquisition date. The fair value adjustment at the acquisition date was approximately $7,680, or approximately 2.3% of the outstanding aggregate loan balances. This amount is accreted into interest income over the remaining lives of the related loans on a level yield basis. During the current quarter, management evaluated the performance of this group of loans over the period subsequent to the acquisition date and based on this evaluation has estimated a probable incurred loss amount at March 31, 2015 as listed in the table above. |
|
note 2: |
Loans acquired in the Company’s June 1, 2014 acquisition of FSB that are not PCI loans. These are performing loans recorded at estimated fair value at the acquisition date. The fair value adjustment at the acquisition date was approximately $10,081, or approximately 2% of the outstanding aggregate loan balances. This amount is accreted into interest income over the remaining lives of the related loans on a level yield basis. During the current quarter, management evaluated the performance of this group of loans over the period subsequent to the acquisition date and based on this evaluation has estimated a probable incurred loss amount at March 31, 2015 as listed in the table above. |
|
note 3: |
Included in the $263,268 PCI loans at March 31, 2015 are $223,551 of loans that are covered by FDIC loss sharing agreements. |
The general loan loss allowance (non-impaired loans, which includes GSB and FSB acquired loans) increased by a net amount of $1,472. Excluding GSB and FSB loans, the general loan loss allowance increased by $158 resulting primarily from an increase in loans outstanding less a decrease in the loss factors due to the continued improvement in the local economy and real estate market, and the continued decline in the Company’s two year charge-off history.
As of the end of the current quarter, the Company has a 14 month history with the performing loans acquired from GSB as discussed in note 1 above. Management evaluated the performance of this group of loans over the period subsequent to the acquisition date and based on this evaluation has estimated a probable incurred loss amount at March 31, 2015 as listed in the table above. Management considered the levels of and trends in non-performing loans, past-due loans, adverse loan grade classification changes, net charge-offs and impaired loans in arriving at its estimate.
7
As of the end of the current quarter, the Company has a 10 month history with the performing loans acquired from FSB as discussed in note 2 above. The Company estimated the probable incurred losses in this group of loans and this estimate exceeded the fair value discount at March 31, 2015. As a result, an initial general loan loss allowance of $1,052 was recorded at March 31, 2015. Management considered the levels of and trends in non-performing loans, past-due loans, adverse loan grade classification changes, net charge-offs, impaired loans, and those loans that were covered by FDIC loss share agreements and those loans guaranteed by the California State University System in arriving at its estimate.
The specific loan loss allowance (impaired loans) is the aggregate of the results of individual analyses prepared for each one of the impaired loans, excluding PCI loans. 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 $1,417 to $22,182 ($21,081 when the $1,101 specific allowance is considered) from their legal unpaid principal balance outstanding of $23,599. In the aggregate, total impaired loans have been written down to approximately 89% of their legal unpaid principal balance, and non-performing impaired loans have been written down to approximately 81% 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, $26,857 at March 31, 2015) have been written down to approximately 86% of their legal unpaid principal balance, when the related specific allowance is also considered.
Approximately $13,638 of the Company’s impaired loans (61%) are accruing performing loans. This group of impaired loans is not included in the Company’s non-performing loans or non-performing assets categories.
PCI loans, including those covered by FDIC loss sharing agreements, are accounted for pursuant to ASC Topic 310-30. PCI loan pools are evaluated for impairment each quarter. If a pool is impaired, an allowance for loan loss is recorded.
8
Management believes the Company’s allowance for loan losses is adequate at March 31, 2015. 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.
|
|
|
|
|
|
|
|
as of or for the quarter ending |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Loans, excluding PCI loans |
|
|
|
|
|
|
Allowance at beginning of period |
$ 19,384 |
$ 19,035 |
$ 18,240 |
$ 18,913 |
$ 19,694 |
|
Charge-offs |
(949) |
(506) |
(869) |
(902) |
(1,160) |
|
Recoveries |
466 |
645 |
556 |
112 |
843 |
|
Net (charge-offs) recoveries |
(483) |
139 |
(313) |
(790) |
(317) |
|
Provision (recovery) for loan losses |
1,941 |
210 |
1,108 |
117 |
(464) |
|
Allowance at end of period for loans |
|
|
|
|
|
|
other than PCI loans |
$ 20,842 |
$ 19,384 |
$ 19,035 |
$ 18,240 |
$ 18,913 |
|
|
|
|
|
|
|
|
PCI loans |
|
|
|
|
|
|
Allowance at beginning of period |
$ 514 |
$ 807 |
$ 960 |
$ 1,183 |
$ 760 |
|
Charge-offs |
(77) |
(101) |
--- |
--- |
--- |
|
Recoveries |
--- |
--- |
--- |
--- |
--- |
|
Net charge-offs |
(77) |
(101) |
--- |
--- |
--- |
|
(Recovery) provision for loan losses |
(299) |
(192) |
(153) |
(223) |
423 |
|
Allowance at end of period for |
|
|
|
|
|
|
PCI loans |
$ 138 |
$ 514 |
$ 807 |
$ 960 |
$ 1,183 |
|
Total allowance at end of period |
$ 20,980 |
$ 19,898 |
$ 19,842 |
$ 19,200 |
$ 20,096 |
9
The following table summarizes the Company’s loan portfolio and related allowance for loan losses as a percentage of the loan portfolio segment presented as of the end of the previous five quarters.
|
(unaudited) |
|
|
|
|
|
|
For the quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Troubled debt restructure (“TDRs”) (note 1) |
$ 14,666 |
$ 15,066 |
$ 15,006 |
$ 14,940 |
$ 14,986 |
|
Impaired loans that were not TDRs |
7,516 |
10,184 |
11,689 |
12,323 |
11,569 |
|
Total impaired loans |
22,182 |
25,250 |
26,695 |
27,263 |
26,555 |
|
Acquired GSB loans |
269,918 |
280,331 |
291,140 |
299,823 |
319,665 |
|
Acquired FSB loans |
420,759 |
439,397 |
458,958 |
474,979 |
--- |
|
All other non-impaired loans |
1,488,536 |
1,407,781 |
1,349,696 |
1,240,084 |
1,218,614 |
|
Total Non-PCI loans |
2,201,395 |
2,152,759 |
2,126,489 |
2,042,149 |
1,564,834 |
|
Total PCI loans |
263,268 |
276,766 |
309,638 |
353,870 |
250,800 |
|
Total loans |
$2,464,663 |
$2,429,525 |
$2,436,127 |
$2,396,019 |
$1,815,634 |
|
ALLL for Non-PCI loans |
|
|
|
||
|
Specific loan loss allowance- impaired loans |
$ 1,101 |
$ 1,115 |
$ 1,977 |
$ 1,857 |
$ 1,919 |
|
General loan loss allowance- GSB loans |
1,944 |
1,682 |
--- |
--- |
--- |
|
General loan loss allowance- FSB loans |
1,052 |
--- |
--- |
--- |
n/a |
|
General loan loss allowance- non impaired |
16,745 |
16,587 |
17,058 |
16,383 |
16,994 |
|
Total allowance for loan losses (note 2) |
$ 20,842 |
$ 19,384 |
$ 19,035 |
$ 18,240 |
$ 18,913 |
|
ALLL as a percentage of period end loans: |
|
|
|
|
|
|
Impaired loans |
4.96% |
4.42% |
7.41% |
6.81% |
7.23% |
|
Acquired GSB loans |
0.72% |
0.60% |
---% |
---% |
---% |
|
Acquired FSB loans |
0.25% |
---% |
---% |
---% |
n/a |
|
All other non impaired loans |
1.12% |
1.18% |
1.26% |
1.32% |
1.39% |
|
Total loans (note 2) |
0.95% |
0.90% |
0.90% |
0.89% |
1.21% |
|
note 1: |
The Company has approximately $14,666 of TDRs. Of this amount $10,617 are performing pursuant to their modified terms, and $4,049 are not performing and have been placed on non-accrual status and included in 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 NPLs. |
|
note 2: |
Excludes PCI loans. |
The Company defines non-performing loans (“NPLs”) as non-accrual loans plus loans past due 90 days or more and still accruing interest. NPLs do not include PCI loans. PCI loans are accounted for pursuant to ASC Topic 310-30. NPLs as a percentage of total Non-PCI loans were 1.22% at March 31, 2015 compared to 1.19% at December 31, 2014.
Non-performing assets (“NPAs”) (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 $34,582 at March 31, 2015, compared to $34,578 at December 31, 2014. NPAs as a percentage of total assets was 0.89% at March 31, 2015 compared to 0.92% at December 31, 2014. NPAs as a percentage of loans plus OREO and other repossessed assets, excluding PCI loans and OREO covered by FDIC loss share agreements, was 1.57% at March 31, 2015 compared to 1.60% at December 31, 2014.
10
The table below summarizes selected credit quality data for the periods indicated. The quarter ended March 31, 2014 and subsequent quarters were impacted by the GSB acquisition. The quarter ended June 30, 2014 and subsequent quarters were impacted by the GSB acquisition and the FSB acquisition.
|
Selected credit quality ratios (unaudited) |
|
|
|
|
|
|
As of or for the quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Non-accrual loans (note 1) |
$26,857 |
$25,595 |
$31,067 |
$29,667 |
$30,689 |
|
Past due loans 90 days or more |
|
|
|
|
|
|
and still accruing interest (note 1) |
--- |
--- |
--- |
--- |
--- |
|
Total non-performing loans (“NPLs”) (note 1) |
26,857 |
25,595 |
31,067 |
29,667 |
30,689 |
|
Other real estate owned (“OREO”) (note 2) |
7,586 |
8,896 |
10,899 |
12,123 |
9,895 |
|
Repossessed assets other than real estate (note 1) |
139 |
87 |
150 |
133 |
135 |
|
Total non-performing assets (“NPAs”) (note 2) |
$34,582 |
$34,578 |
$42,116 |
$41,923 |
$40,719 |
|
OREO covered by FDIC loss share agreements: |
|
|
|
|
|
|
80% covered |
4,716 |
7,264 |
9,732 |
10,423 |
13,892 |
|
75% covered |
--- |
606 |
606 |
1,052 |
--- |
|
70% covered |
249 |
1,755 |
--- |
--- |
--- |
|
30% covered |
8,563 |
9,779 |
12,580 |
16,349 |
--- |
|
0% covered |
--- |
--- |
2,534 |
2,874 |
--- |
|
Total non-performing assets including |
|
|
|
|
|
|
FDIC covered OREO |
$48,110 |
$53,982 |
$67,568 |
$72,621 |
$54,611 |
|
Non-performing loans as percentage of total |
|
|
|
|
|
|
loans excluding PCI loans |
1.22% |
1.19% |
1.46% |
1.45% |
1.96% |
|
Non-performing assets as percentage of total assets |
|
|
|
|
|
|
Excluding FDIC covered OREO |
0.89% |
0.92% |
1.16% |
1.07% |
1.35% |
|
Including FDIC covered OREO |
1.24% |
1.43% |
1.86% |
1.86% |
1.82% |
|
Non-performing assets as percentage of loans and |
|
|
|
|
|
|
OREO plus other repossessed assets (note 1) |
|
|
|
|
|
|
Excluding FDIC covered OREO |
1.57% |
1.60% |
1.97% |
2.04% |
2.59% |
|
Including FDIC covered OREO |
2.16% |
2.47% |
3.12% |
3.48% |
3.44% |
|
Loans past due 30 thru 89 days and accruing interest |
|
|
|
|
|
|
as a percentage of total loans (note 1) |
0.61% |
0.61% |
0.55% |
0.64% |
0.77% |
|
Net charge-offs (recovery) (note 1) |
$483 |
$(139) |
$313 |
$790 |
$317 |
|
Net charge-offs (recovery) as a percentage |
|
|
|
|
|
|
of average loans for the period (note 1) |
0.02% |
(0.01%) |
0.01% |
0.05% |
0.02% |
|
Net charge-offs (recovery) as a percentage of average |
|
|
|
|
|
|
loans for the period on an annualized basis (note 1) |
0.09% |
(0.03%) |
0.06% |
0.18% |
0.08% |
|
Allowance for loan losses as percentage of NPLs (note 1) |
78% |
76% |
61% |
61% |
62% |
|
note 1: |
Excludes PCI loans. |
|
note 2: |
Excludes OREO covered by FDIC loss share agreements. |
Net Interest Margin (“NIM”)
The Company’s NIM increased from 4.49% in 4Q14 to 4.53% in 1Q15. The primary reason for this increase results from the favorable yields of the PCI loans, which increased from 11.70% in 4Q14 to 14.85% in 1Q15.
11
The PCI loans historically have performed better than previously expected. Initial loss expectations have been adjusted downward during subsequent quarterly estimates of future cash flows. The results have been higher yields over the remaining life of the related loan pools. If the PCI loans were producing a yield similar to the Company’s non-PCI loans, the NIM during the current quarter would have been approximately 3.71% (compared to 3.85% during the previous quarter) resulting in net interest income (TEY basis) of $31,169 versus actual net interest income (TEY basis) of $38,044 for the current quarter. A difference of $6,875.
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.
Yield and cost table (unaudited)
|
|
|
1Q15 |
|
|
|
4Q14 |
|
|
|
1Q14 |
|
|
|
average |
interest |
avg |
|
average |
interest |
avg |
|
average |
interest |
avg |
|
|
balance |
inc/exp |
rate |
|
balance |
inc/exp |
rate |
|
balance |
inc/exp |
rate |
|
Loans (TEY)* |
$ 2,172,621 |
$24,482 |
4.57% |
|
$ 2,139,263 |
$25,055 |
4.65% |
|
$ 1,513,060 |
$17,727 |
4.75% |
|
PCI loans |
271,135 |
9,930 |
14.85% |
|
291,862 |
8,607 |
11.70% |
|
251,587 |
8,231 |
13.27% |
|
Taxable securities |
688,027 |
4,282 |
2.52% |
|
569,045 |
3,623 |
2.53% |
|
492,766 |
3,478 |
2.86% |
|
Tax -exempt securities (TEY) |
63,792 |
819 |
5.21% |
|
54,636 |
656 |
4.76% |
|
39,280 |
511 |
5.28% |
|
Fed funds sold and other |
211,247 |
396 |
0.76% |
|
177,391 |
459 |
1.03% |
|
197,915 |
239 |
0.49% |
|
Tot. interest earning assets(TEY) |
$3,406,822 |
$39,909 |
4.75% |
|
$3,232,197 |
$38,400 |
4.71% |
|
$2,494,608 |
$30,186 |
4.91% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$2,034,864 |
$1,447 |
0.29% |
|
$2,033,431 |
$1,523 |
0.30% |
|
$1,653,806 |
$1,337 |
0.33% |
|
Fed funds purchased |
176,109 |
132 |
0.30% |
|
71,545 |
34 |
0.19% |
|
41,999 |
6 |
0.06% |
|
Other borrowings |
30,744 |
49 |
0.65% |
|
27,849 |
50 |
0.71% |
|
29,768 |
23 |
0.31% |
|
Corporate debentures |
23,939 |
237 |
4.02% |
|
23,891 |
241 |
4.00% |
|
22,573 |
223 |
4.01% |
|
Total interest bearing liabilities |
$2,265,656 |
$1,865 |
0.33% |
|
$2,156,716 |
$1,848 |
0.34% |
|
$1,748,146 |
$1,589 |
0.38% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Spread (TEY) |
|
|
4.42% |
|
|
|
4.37% |
|
|
|
4.54% |
|
Net Interest Margin (TEY) |
|
|
4.53% |
|
|
|
4.49% |
|
|
|
4.65% |
*TEY = tax equivalent yield
The table below summarizes the Company’s yields on interest earning assets and costs of interest bearing liabilities over the prior five quarters.
|
Five quarter trend of yields and costs (unaudited) |
|
|
|
|
|
|
For the quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Yield on loans (TEY)* |
4.57% |
4.65% |
4.67% |
4.77% |
4.75% |
|
Yield on PCI loans |
14.85% |
11.70% |
10.89% |
11.57% |
13.27% |
|
Yield on securities (TEY) |
2.75% |
2.72% |
2.62% |
2.84% |
3.04% |
|
Yield on fed funds sold and other |
0.76% |
1.03% |
0.45% |
0.60% |
0.49% |
|
Yield on total interest earning assets |
4.70% |
4.67% |
4.44% |
4.57% |
4.84% |
|
Yield on total interest earning assets (TEY) |
4.75% |
4.71% |
4.48% |
4.62% |
4.91% |
|
Cost of interest bearing deposits |
0.29% |
0.30% |
0.33% |
0.32% |
0.33% |
|
Cost of fed funds purchased |
0.30% |
0.19% |
0.06% |
0.04% |
0.06% |
|
Cost of other borrowings |
0.65% |
0.71% |
0.66% |
0.69% |
0.31% |
|
Cost of corporate debentures |
4.02% |
4.00% |
3.99% |
4.00% |
4.01% |
|
Cost of interest bearing liabilities |
0.33% |
0.34% |
0.36% |
0.37% |
0.37% |
|
Net interest margin (TEY) |
4.53% |
4.49% |
4.23% |
4.37% |
4.65% |
|
Cost of total deposits |
0.19% |
0.19% |
0.22% |
0.22% |
0.22% |
*TEY = tax equivalent yield
12
The table below summarizes selected financial ratios over the prior five quarters.
|
Selected financial ratios (unaudited) |
|
|
|
|
|
|
As of or for the quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Return on average assets (annualized) |
0.96% |
0.78% |
0.37% |
0.13% |
0.15% |
|
Return on average equity (annualized) |
8.10% |
6.46% |
3.24% |
1.18% |
1.32% |
|
Net operating income return on |
|
|
|
|
|
|
average assets (annualized) |
0.97% |
0.81% |
0.62% |
0.52% |
0.66% |
|
Loan / deposit ratio |
78.3% |
78.6% |
79.5% |
72.4% |
71.0% |
|
Stockholders’ equity (to total assets) |
11.9% |
12.0% |
12.2% |
11.3% |
11.1% |
|
Common tangible equity (to total tangible assets) |
9.8% |
9.8% |
9.8% |
9.1% |
8.5% |
|
Tier 1 capital (to average assets) |
10.0% |
10.1% |
9.4% |
10.8% |
10.0% |
|
Efficiency ratio, including correspondent banking (note 1) |
65.5% |
70.5% |
73.8% |
75.3% |
74.6% |
|
Efficiency ratio, excluding correspondent banking (note 2) |
64.0 % |
69.4 % |
70.7% |
73.1% |
70.6% |
|
Common equity per common share |
$10.20 |
$9.98 |
$9.78 |
$9.76 |
$9.38 |
|
Common tangible equity per common share |
$8.18 |
$7.95 |
$7.73 |
$7.68 |
$6.95 |
|
note 1: |
Numerator equals non-interest expense less non-recurring expenses (e.g. merger costs, bank property impairment, etc.) less intangible amortization (both CDI and Trust intangible) less credit related expenses. Denominator equals net interest income on a taxable equivalent yield basis (“TEY”) before the provision for loan losses plus non-interest income less non-recurring income (e.g. gain on sale of securities available for sale, etc.) less FDIC income related to losses on the sales of covered OREO properties and impairment of loan pool(s) covered by FDIC loss share arrangements. |
|
note 2: |
Numerator starts with the same numerator as in “note 1”, less correspondent bank non-interest expense, including indirect expense allocations. Denominator starts with the same denominator as in “note 1”, less correspondent bank net interest income and less correspondent bank non-interest income. |
Deposit activity
During the quarter, the Company’s total deposits increased by $57,332. Time deposits decreased by $28,777 and non-time deposits increased by $86,109. Most of the increase in non-time deposits were in non-interest bearing checking account, primarily commercial checking. The cost of interest bearing deposits in the current quarter decreased by 1bp to 29bps compared to the prior quarter. The overall cost of total deposits (i.e. includes non-interest bearing checking accounts) was 0.19% for the current quarter which was the same as the prior quarter. The table below summarizes the Company’s deposit mix over the periods indicated.
|
Deposit mix (unaudited) |
|
|
|
|
|
|
For the quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Checking accounts |
|
|
|
|
|
|
Non-interest bearing |
$1,112,282 |
$1,048,874 |
$1,043,083 |
$1,023,285 |
$838,764 |
|
Interest bearing |
623,370 |
607,359 |
575,020 |
589,573 |
558,845 |
|
Savings deposits |
242,782 |
231,039 |
232,255 |
234,492 |
234,908 |
|
Money market accounts |
711,903 |
716,956 |
727,798 |
747,680 |
482,133 |
|
Time deposits |
459,035 |
487,812 |
488,074 |
526,313 |
444,054 |
|
Total deposits excluding held for sale |
3,149,372 |
3,092,040 |
3,066,230 |
3,121,343 |
2,558,704 |
|
Deposits held for sale |
--- |
--- |
--- |
185,646 |
--- |
|
Total deposits |
$3,149,372 |
$3,092,040 |
$3,066,230 |
$3,306,989 |
$2,558,704 |
|
|
|
|
|
|
|
|
Non time deposits as percentage of total deposits |
85% |
84% |
84% |
83% |
83% |
|
Time deposits as percentage of total deposits |
15% |
16% |
16% |
17% |
17% |
|
Total deposits excluding held for sale |
100% |
100% |
100% |
100% |
100% |
13
Presented below are condensed consolidated balance sheets and average balance sheets for the periods indicated.
|
Condensed Consolidated Balance Sheets (unaudited) |
|
|
|
||
|
For the quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Cash and due from banks |
$ 59,295 |
$ 52,067 |
$ 48,528 |
$ 25,043 |
$ 29,862 |
|
Fed funds sold and Fed Res Bank deposits |
197,046 |
106,346 |
162,038 |
490,966 |
190,399 |
|
Trading securities |
1,017 |
3,420 |
656 |
89 |
--- |
|
Investment securities, available for sale |
520,247 |
517,457 |
535,767 |
542,149 |
617,143 |
|
Investment securities, held to maturity |
228,870 |
237,362 |
5,372 |
--- |
--- |
|
Loans held for sale |
522 |
1,251 |
522 |
1,596 |
1,017 |
|
263,268 |
276,766 |
309,638 |
353,870 |
250,800 |
|
|
Loans |
2,201,395 |
2,152,759 |
2,126,489 |
2,042,149 |
1,564,834 |
|
Allowance for loan losses |
(20,980) |
(19,898) |
(19,842) |
(19,200) |
(20,096) |
|
FDIC indemnification assets |
41,594 |
49,054 |
54,032 |
61,311 |
65,183 |
|
Premises and equipment, net |
100,526 |
98,848 |
98,972 |
98,623 |
95,103 |
|
Goodwill |
76,739 |
76,739 |
76,981 |
76,981 |
76,440 |
|
Core deposit intangible |
13,789 |
14,417 |
15,068 |
15,724 |
8,800 |
|
Bank owned life insurance |
84,137 |
83,544 |
82,936 |
57,485 |
54,574 |
|
OREO covered by FDIC loss share agreements |
13,528 |
19,404 |
25,452 |
30,698 |
13,892 |
|
OREO not covered by FDIC loss share agreements |
7,586 |
8,896 |
10,899 |
12,123 |
9,895 |
|
Deferred income tax asset, net |
48,502 |
49,587 |
56,640 |
53,175 |
7,910 |
|
Other assets |
51,491 |
48,850 |
48,995 |
58,800 |
40,405 |
|
TOTAL ASSETS |
$ 3,888,572 |
$ 3,776,869 |
$ 3,639,143 |
$ 3,901,582 |
$ 3,006,161 |
|
|
|
|
|
|
|
|
Deposits |
$ 3,149,372 |
$ 3,092,040 |
$ 3,066,230 |
$ 3,306,989 |
$ 2,558,704 |
|
Federal funds purchased |
187,443 |
151,992 |
42,070 |
43,080 |
45,183 |
|
Other borrowings |
55,032 |
50,939 |
54,329 |
57,448 |
49,901 |
|
Other liabilities |
33,660 |
29,421 |
34,152 |
54,607 |
19,209 |
|
Common stockholders’ equity |
463,065 |
452,477 |
442,362 |
439,458 |
333,164 |
|
TOTAL LIABILITIES AND |
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
$ 3,888,572 |
$ 3,776,869 |
$ 3,639,143 |
$ 3,901,582 |
$ 3,006,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Average Balance Sheets (unaudited) |
|
|
|
||
|
For quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Federal funds sold and other |
$ 211,247 |
$ 177,391 |
$ 371,026 |
$ 284,895 |
$ 197,915 |
|
Security investments |
751,819 |
623,681 |
543,235 |
610,925 |
532,046 |
|
PCI loans |
271,135 |
291,862 |
331,567 |
285,270 |
251,587 |
|
Loans |
2,172,621 |
2,139,263 |
2,094,522 |
1,723,242 |
1,513,060 |
|
Allowance for loan losses |
(20,980) |
(20,406) |
(21,329) |
(20,052) |
(20,970) |
|
All other assets |
468,645 |
501,143 |
492,214 |
386,383 |
396,123 |
|
TOTAL ASSETS |
$ 3,854,487 |
$ 3,712,934 |
$ 3,811,235 |
$ 3,270,663 |
$ 2,869,761 |
|
|
|
|
|
|
|
|
Deposits- interest bearing |
$ 2,034,864 |
$ 2,033,431 |
$ 2,192,653 |
$ 1,882,384 |
$ 1,653,806 |
|
Deposits- non interest bearing |
1,098,236 |
1,074,288 |
1,043,279 |
906,746 |
767,926 |
|
Federal funds purchased |
176,109 |
71,545 |
39,419 |
46,426 |
41,999 |
|
Other borrowings |
54,683 |
51,740 |
55,117 |
56,245 |
52,341 |
|
Other liabilities |
32,373 |
35,024 |
40,395 |
25,040 |
30,389 |
|
Stockholders’ equity |
458,222 |
446,906 |
440,372 |
353,822 |
323,300 |
|
TOTAL LIABILITIES AND |
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
$ 3,854,487 |
$ 3,712,934 |
$ 3,811,235 |
$ 3,270,663 |
$ 2,869,761 |
14
|
Condensed Consolidated Earnings Statement (unaudited) |
|||||
|
For quarter ended: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
Loans |
$34,268 |
$33,505 |
$33,519 |
$28,509 |
$25,729 |
|
Investments |
4,821 |
4,055 |
3,411 |
4,146 |
3,814 |
|
Federal funds sold and other |
396 |
459 |
417 |
424 |
239 |
|
Total interest income |
39,485 |
38,019 |
37,347 |
33,079 |
29,782 |
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
Deposits |
1,447 |
1,523 |
1,799 |
1,523 |
1,337 |
|
Securities sold under agreement to repurchase |
49 |
50 |
52 |
56 |
23 |
|
Federal funds purchased |
132 |
34 |
6 |
5 |
6 |
|
Corporate debentures |
237 |
241 |
240 |
238 |
223 |
|
Total interest expense |
1,865 |
1,848 |
2,097 |
1,822 |
1,589 |
|
|
|
|
|
|
|
|
Net interest income |
37,620 |
36,171 |
35,250 |
31,257 |
28,193 |
|
Provision (recovery) for loan losses |
1,642 |
18 |
955 |
(106) |
(41) |
|
Net interest income after loan loss provision |
35,978 |
36,153 |
34,295 |
31,363 |
28,234 |
|
|
|
|
|
|
|
|
Non interest income (see page 16) |
9,081 |
7,535 |
6,559 |
6,372 |
5,760 |
|
|
|
|
|
|
|
|
Non interest expense: |
|
|
|
|
|
|
Salaries, wages and employee benefits |
19,580 |
18,710 |
18,799 |
17,185 |
15,681 |
|
Occupancy expense |
2,445 |
2,686 |
3,038 |
2,479 |
1,960 |
|
Depreciation of premises and equipment |
1,433 |
1,483 |
1,542 |
1,563 |
1,478 |
|
Data processing expense |
1,330 |
1,466 |
1,673 |
1,306 |
1,039 |
|
Legal, audit and other professional fees |
735 |
816 |
1,099 |
1,376 |
775 |
|
Amortization of intangibles |
666 |
694 |
699 |
515 |
376 |
|
Credit related expense (see page 17) |
50 |
299 |
624 |
1,239 |
523 |
|
FDIC credit related expenses (see page 17) |
(567) |
369 |
(209) |
1,136 |
1,301 |
|
Merger and acquisition related expenses |
--- |
848 |
3,450 |
4,897 |
2,347 |
|
Branch closure and efficiency initiatives |
--- |
(417) |
(6) |
29 |
3,158 |
|
Impairment/sales bank property held for sale, net |
641 |
--- |
--- |
--- |
--- |
|
Lease termination recovery |
(597) |
--- |
--- |
--- |
--- |
|
All other expenses |
4,887 |
5,137 |
4,825 |
4,428 |
3,765 |
|
Total non interest expenses |
30,603 |
32,091 |
35,534 |
36,153 |
32,403 |
|
|
|
|
|
|
|
|
Income before provision for income taxes |
14,456 |
11,597 |
5,320 |
1,582 |
1,591 |
|
Provision for income taxes |
5,308 |
4,316 |
1,727 |
545 |
538 |
|
Net income |
$9,148 |
$7,281 |
$3,593 |
$1,037 |
$1,053 |
|
|
|
|
|
|
|
|
Earnings per share (diluted) |
$0.20 |
$0.16 |
$0.08 |
$0.03 |
$0.03 |
15
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: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Correspondent banking and capital markets division (1) |
$ 5,694 |
$ 4,876 |
$ 4,184 |
$ 4,192 |
$ 3,148 |
|
Other correspondent banking related revenue (2) |
1,106 |
919 |
958 |
1,093 |
783 |
|
Wealth management related revenue |
970 |
925 |
993 |
1,104 |
1,217 |
|
Service charges on deposit accounts |
2,261 |
2,451 |
2,496 |
2,333 |
2,262 |
|
Debit, prepaid, ATM and merchant card related fees |
1,701 |
1,637 |
1,612 |
1,495 |
1,506 |
|
BOLI income |
593 |
608 |
451 |
356 |
352 |
|
Other service charges and fees |
439 |
638 |
605 |
338 |
409 |
|
Gain on sale of securities available for sale |
--- |
--- |
--- |
46 |
--- |
|
Subtotal |
$12,764 |
$12,054 |
$11,299 |
$10,957 |
$9,677 |
|
FDIC indemnification asset – amortization (see explanation below) |
(4,350) |
(5,599) |
(4,953) |
(5,006) |
(5,185) |
|
FDIC indemnification income |
667 |
1,080 |
213 |
421 |
1,268 |
|
Total non-interest income |
$9,081 |
$7,535 |
$6,559 |
$6,372 |
$5,760 |
|
note 1: |
Includes gross commissions earned on bond sales, fees from hedging services, loan brokering fees and related consulting fees. The fee income in this category is based on sales volume in any particular period and is therefore volatile between comparable periods. |
|
note 2: |
Includes fees from safe-keeping activities, bond accounting services, asset/liability consulting services, international wires, clearing and corporate checking account services and other correspondent banking related revenue and fees. The fees included in this category are less volatile than those described above in note 1. |
The FDIC indemnification asset (“IA”) is producing amortization (versus accretion) due to reductions in the estimated losses in the FDIC covered PCI loan portfolio. To the extent current projected losses in the covered PCI loan portfolio are less than originally projected losses, the related projected reimbursements from the FDIC contemplated in the IA are less, which produces a negative income accretion in non-interest income. This event generally corresponds to the increase in yields in the FDIC covered PCI loan portfolio, although there is not perfect correlation. Higher expected cash flows (i.e. less expected future losses) on the loan side of the equation is accreted into interest income over the life of the related loan pool. The lower expected reimbursement from the FDIC is amortized over the lesser of the remaining life of the related loan pool(s) or the remaining term of the loss share period.
When a FDIC covered OREO property is sold at a loss, the loss is included in non-interest expense as loss on sale of OREO, and the reimbursement for the respective loss share percentage is recorded as FDIC indemnification income and included in non-interest income. In addition, the FDIC loss share reimbursement percentage of any related loan pool impairments also are reflected in this non-interest income account.
16
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: |
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Employee salaries and wages |
$14,535 |
$13,866 |
$14,966 |
$13,234 |
$11,873 |
|
Employee incentive/bonus compensation accrued |
1,200 |
1,578 |
1,252 |
1,125 |
1,081 |
|
Employee equity based compensation expense |
830 |
542 |
358 |
333 |
344 |
|
Deferred compensation expense |
161 |
157 |
156 |
160 |
107 |
|
Health insurance and other employee benefits |
1,330 |
1,556 |
1,349 |
1,180 |
987 |
|
Payroll taxes |
1,403 |
785 |
1,005 |
913 |
1,120 |
|
401K employer contributions |
435 |
319 |
345 |
374 |
360 |
|
Other employee related expenses |
238 |
438 |
160 |
401 |
258 |
|
Incremental direct cost of loan origination |
(552) |
(531) |
(792) |
(535) |
(449) |
|
Total salaries, wages and employee benefits |
19,580 |
18,710 |
18,799 |
17,185 |
15,681 |
|
|
|
|
|
|
|
|
(Gain) loss on sale of OREO |
(547) |
(126) |
31 |
58 |
(30) |
|
(Gain) loss on sale of FDIC covered OREO |
(981) |
(541) |
(608) |
321 |
107 |
|
Valuation write down of OREO |
61 |
313 |
157 |
445 |
70 |
|
Valuation write down of FDIC covered OREO |
328 |
703 |
172 |
440 |
950 |
|
(Gain) loss on repossessed assets other than real estate |
(1) |
11 |
17 |
19 |
(2) |
|
Foreclosure and repossession related expenses |
537 |
101 |
419 |
717 |
485 |
|
Foreclosure and repo expense, FDIC (note 1) |
86 |
207 |
227 |
375 |
244 |
|
Total credit related expenses |
(517) |
668 |
415 |
2,375 |
1,824 |
|
|
|
|
|
|
|
|
Occupancy expense |
2,445 |
2,686 |
3,038 |
2,479 |
1,960 |
|
Depreciation of premises and equipment |
1,433 |
1,483 |
1,542 |
1,563 |
1,478 |
|
Supplies, stationary and printing |
365 |
383 |
375 |
334 |
227 |
|
Marketing expenses |
538 |
746 |
746 |
619 |
620 |
|
Data processing expenses |
1,330 |
1,466 |
1,673 |
1,306 |
1,039 |
|
Legal, auditing and other professional fees |
735 |
816 |
1,099 |
1,376 |
775 |
|
Bank regulatory related expenses |
910 |
909 |
916 |
753 |
631 |
|
Postage and delivery |
368 |
394 |
386 |
365 |
268 |
|
ATM and debit card related expenses |
433 |
510 |
466 |
468 |
474 |
|
Amortization of intangibles |
666 |
694 |
699 |
515 |
376 |
|
Internet and telephone banking |
534 |
493 |
412 |
415 |
378 |
|
Correspondent account and Federal Reserve charges |
168 |
163 |
191 |
152 |
135 |
|
Conferences, seminars, education and training |
117 |
132 |
79 |
98 |
100 |
|
Director fees |
179 |
244 |
147 |
95 |
115 |
|
Travel expenses |
84 |
99 |
126 |
106 |
65 |
|
Other expenses |
1,191 |
1,064 |
981 |
1,023 |
752 |
|
Subtotal |
30,559 |
31,660 |
32,090 |
31,227 |
26,898 |
|
Impairment/sales bank property held for sale |
641 |
--- |
--- |
--- |
--- |
|
Lease termination recovery |
(597) |
--- |
--- |
--- |
--- |
|
Merger and acquisition related expenses |
--- |
848 |
3,450 |
4,897 |
2,347 |
|
Branch closure and efficiency initiatives |
--- |
(417) |
(6) |
29 |
3,158 |
|
Total non- interest expense |
$30,603 |
$32,091 |
$35,534 |
$36,153 |
$32,403 |
|
note 1: |
These are foreclosure and repossession related expenses related to FDIC covered assets, and are shown net of FDIC reimbursable amounts pursuant to FDIC loss share agreements. |
17
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. It also reconciles net income and net operating income. 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. All amounts are in thousands except per share data (unaudited): |
|||||
|
|
|||||
|
|
1Q15 |
4Q14 |
1Q14 |
|
|
|
|
|
|
|
|
|
|
Interest income, as reported (GAAP) |
$39,485 |
$38,019 |
$29,782 |
|
|
|
tax equivalent adjustments |
424 |
381 |
404 |
|
|
|
Interest income (tax equivalent) |
$39,909 |
$38,400 |
$30,186 |
|
|
|
|
|
|
|
|
|
|
Net interest income, as reported (GAAP) |
$37,620 |
$36,171 |
$28,193 |
|
|
|
tax equivalent adjustments |
424 |
381 |
404 |
|
|
|
Net interest income (tax equivalent) |
$38,044 |
$36,552 |
$28,597 |
|
|
|
|
|
|
|
|
|
|
|
3/31/15 |
12/31/14 |
9/30/14 |
6/30/14 |
3/31/14 |
|
Total stockholders' equity (GAAP) |
$463,065 |
$452,477 |
$442,362 |
$439,458 |
$333,164 |
|
Goodwill |
(76,739) |
(76,739) |
(76,981) |
(76,981) |
(76,440) |
|
Core deposit intangible |
(13,789) |
(14,417) |
(15,068) |
(15,724) |
(8,800) |
|
Trust intangible |
(946) |
(984) |
(1,027) |
(1,070) |
(1,113) |
|
Tangible common equity |
$371,591 |
$360,337 |
$349,286 |
$345,683 |
$246,811 |
|
|
1Q15 |
4Q14 |
3Q14 |
2Q14 |
1Q14 |
|
Net income (GAAP) |
$9,148 |
$7,281 |
$3,593 |
$1,037 |
$1,053 |
|
Exclude gain on sale of AFS securities |
--- |
--- |
--- |
(46) |
--- |
|
Add back merger and acquisition |
|
|
|
|
|
|
related expenses |
--- |
848 |
3,450 |
4,897 |
2,347 |
|
Add back branch closure and |
|
|
|
|
|
|
efficiency initiatives |
--- |
(417) |
(6) |
29 |
3,158 |
|
Add back impairment/sales relating to |
|
|
|
|
|
|
bank property held for sale, net |
641 |
--- |
--- |
--- |
--- |
|
Subtract lease termination recovery |
(597) |
--- |
--- |
--- |
--- |
|
Tax effected using the effective tax |
|
|
|
|
|
|
rate for the period presented |
(16) |
(161) |
(1,118) |
(1,680) |
(1,862) |
|
Net operating income |
$9,176 |
$7,551 |
$5,919 |
$4,237 |
$4,696 |
|
Average diluted shares outstanding |
|
|
|
|
|
|
during the period presented |
45,658 |
45,698 |
45,413 |
39,051 |
34,863 |
|
Net operating income per share |
$0.20 |
$0.17 |
$0.13 |
$0.11 |
$0.13 |
18
About CenterState Banks, Inc.
The Company, headquartered in Davenport, Florida, between Orlando and Tampa, is a bank holding company whose single subsidiary bank operates 58 full service branch banking locations in 20 counties throughout Florida. Its subsidiary bank 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, the Company also operates a correspondent banking and bond sales division. The division is integrated with and part of the Company’s 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 southeastern United States.
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, 2014, and otherwise in our SEC reports and filings.
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