Toggle SGML Header (+)


Section 1: 10-K (10-K)

csfl-10k_20181231.htm
false FY CenterState Bank Corporation CSFL 0001102266 --12-31 Yes Yes No Large Accelerated Filer false false false P3Y P3Y P3Y us-gaap:CollateralPledgedMember us-gaap:CollateralPledgedMember us-gaap:CollateralPledgedMember us-gaap:CollateralPledgedMember 0.10 P12Y 2019-01-28 three month LIBOR plus 160 bps P3Y7M6D P2Y 0.3333 0.3333 0.3333 P10Y P10Y 0.3333 0.3333 0.3333 0.08 0.06 0.045 0.04 0.08 0.060 0.045 0.04 0.08 0.06 0.045 0.04 0.080 0.060 0.045 0.040 0.10 0.08 0.065 0.05 0.100 0.080 0.065 0.050 P11Y P11Y 0001102266 2018-01-01 2018-12-31 xbrli:shares 0001102266 2019-02-26 iso4217:USD 0001102266 2018-06-30 0001102266 2018-12-31 0001102266 2017-12-31 iso4217:USD xbrli:shares 0001102266 2017-01-01 2017-12-31 0001102266 2016-01-01 2016-12-31 0001102266 us-gaap:MortgageBankingMember 2018-01-01 2018-12-31 0001102266 us-gaap:MortgageBankingMember 2017-01-01 2017-12-31 0001102266 us-gaap:MortgageBankingMember 2016-01-01 2016-12-31 0001102266 csfl:ServiceChargesOnDepositAccountMember 2018-01-01 2018-12-31 0001102266 csfl:ServiceChargesOnDepositAccountMember 2017-01-01 2017-12-31 0001102266 csfl:ServiceChargesOnDepositAccountMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommonStockMember 2015-12-31 0001102266 us-gaap:AdditionalPaidInCapitalMember 2015-12-31 0001102266 us-gaap:RetainedEarningsMember 2015-12-31 0001102266 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2015-12-31 0001102266 2015-12-31 0001102266 us-gaap:RetainedEarningsMember 2016-01-01 2016-12-31 0001102266 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommonStockMember 2016-01-01 2016-12-31 0001102266 us-gaap:AdditionalPaidInCapitalMember 2016-01-01 2016-12-31 0001102266 csfl:CommunityBankOfSouthFloridaIncMember us-gaap:CommonStockMember 2016-01-01 2016-12-31 0001102266 csfl:CommunityBankOfSouthFloridaIncMember us-gaap:AdditionalPaidInCapitalMember 2016-01-01 2016-12-31 0001102266 csfl:CommunityBankOfSouthFloridaIncMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommonStockMember 2016-12-31 0001102266 us-gaap:AdditionalPaidInCapitalMember 2016-12-31 0001102266 us-gaap:RetainedEarningsMember 2016-12-31 0001102266 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-12-31 0001102266 2016-12-31 0001102266 us-gaap:RetainedEarningsMember 2017-01-01 2017-12-31 0001102266 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-01-01 2017-12-31 0001102266 us-gaap:CommonStockMember 2017-01-01 2017-12-31 0001102266 us-gaap:AdditionalPaidInCapitalMember 2017-01-01 2017-12-31 0001102266 csfl:PlatinumBankHoldingCompanyMember us-gaap:CommonStockMember 2017-01-01 2017-12-31 0001102266 csfl:PlatinumBankHoldingCompanyMember us-gaap:AdditionalPaidInCapitalMember 2017-01-01 2017-12-31 0001102266 csfl:PlatinumBankHoldingCompanyMember 2017-01-01 2017-12-31 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember us-gaap:CommonStockMember 2017-01-01 2017-12-31 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember us-gaap:AdditionalPaidInCapitalMember 2017-01-01 2017-12-31 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-01-01 2017-12-31 0001102266 us-gaap:CommonStockMember 2017-12-31 0001102266 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001102266 us-gaap:RetainedEarningsMember 2017-12-31 0001102266 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001102266 us-gaap:RetainedEarningsMember 2018-01-01 2018-12-31 0001102266 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-12-31 0001102266 us-gaap:CommonStockMember 2018-01-01 2018-12-31 0001102266 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-12-31 0001102266 csfl:SunshineCompanyMember us-gaap:CommonStockMember 2018-01-01 2018-12-31 0001102266 csfl:SunshineCompanyMember us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-12-31 0001102266 csfl:SunshineCompanyMember 2018-01-01 2018-12-31 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:CommonStockMember 2018-01-01 2018-12-31 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-12-31 0001102266 csfl:HCBFHoldingCompanyIncMember 2018-01-01 2018-12-31 0001102266 csfl:CharterFinancialCorporationMember us-gaap:CommonStockMember 2018-01-01 2018-12-31 0001102266 csfl:CharterFinancialCorporationMember us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-12-31 0001102266 csfl:CharterFinancialCorporationMember 2018-01-01 2018-12-31 0001102266 us-gaap:CommonStockMember 2018-12-31 0001102266 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001102266 us-gaap:RetainedEarningsMember 2018-12-31 0001102266 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001102266 us-gaap:AvailableforsaleSecuritiesMember 2018-01-01 2018-12-31 0001102266 us-gaap:HeldtomaturitySecuritiesMember 2018-01-01 2018-12-31 0001102266 us-gaap:RestrictedStockMember 2018-01-01 2018-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-12-31 0001102266 csfl:PlatinumBankHoldingCompanyMember 2018-01-01 2018-12-31 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember 2018-01-01 2018-12-31 0001102266 csfl:SunshineBancorpIncMember 2018-01-01 2018-12-31 csfl:CommunityBankClient 0001102266 srt:MinimumMember 2018-12-31 csfl:Segments 0001102266 srt:MinimumMember 2018-01-01 2018-12-31 0001102266 srt:MaximumMember 2018-01-01 2018-12-31 0001102266 csfl:GulfStreamBancsharesIncMember 2018-01-01 2018-12-31 0001102266 us-gaap:BuildingMember 2018-01-01 2018-12-31 0001102266 us-gaap:FurnitureAndFixturesMember srt:MinimumMember 2018-01-01 2018-12-31 0001102266 us-gaap:FurnitureAndFixturesMember srt:MaximumMember 2018-01-01 2018-12-31 0001102266 us-gaap:CoreDepositsMember 2018-01-01 2018-12-31 csfl:Bank 0001102266 2010-01-01 2010-12-31 0001102266 2012-01-01 2012-12-31 0001102266 csfl:FirstSouthernBankMember 2014-01-01 2014-12-31 xbrli:pure 0001102266 srt:MinimumMember 2010-01-01 2010-12-31 0001102266 srt:MaximumMember 2010-01-01 2010-12-31 0001102266 us-gaap:AccountingStandardsUpdate201602Member 2018-12-31 0001102266 us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0001102266 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2018-12-31 0001102266 us-gaap:MortgageBackedSecuritiesMember 2018-12-31 0001102266 us-gaap:USStatesAndPoliticalSubdivisionsMember 2018-12-31 0001102266 us-gaap:USTreasurySecuritiesMember 2017-12-31 0001102266 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2017-12-31 0001102266 us-gaap:MortgageBackedSecuritiesMember 2017-12-31 0001102266 us-gaap:USStatesAndPoliticalSubdivisionsMember 2017-12-31 csfl:Security 0001102266 us-gaap:HeldtomaturitySecuritiesMember 2017-01-01 2017-12-31 0001102266 us-gaap:HeldtomaturitySecuritiesMember 2018-12-31 0001102266 csfl:MortgageBankingDerivativesMember 2018-01-01 2018-12-31 0001102266 csfl:LoansHeldForSaleMember us-gaap:InterestRateLockCommitmentsMember 2018-12-31 0001102266 csfl:LoansHeldForSaleMember csfl:BestEffortsForwardTradesMember 2018-12-31 0001102266 csfl:LoansHeldForSaleMember csfl:MBSForwardTradesMember 2018-12-31 0001102266 csfl:LoansHeldForSaleMember 2018-12-31 0001102266 csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-12-31 0001102266 csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-12-31 0001102266 csfl:PurchasedCreditImpairedLoansMember 2018-12-31 0001102266 csfl:PurchasedCreditImpairedLoansMember 2017-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2018-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-12-31 0001102266 csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2015-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2015-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2015-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2015-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2015-12-31 0001102266 csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2015-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 csfl:LoansExcludingPurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:PurchasedCreditImpairedLoansMember 2017-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2017-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 csfl:PurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:PurchasedCreditImpairedLoansMember 2018-01-01 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:PurchasedCreditImpairedLoansMember 2018-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2018-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2016-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2016-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:PurchasedCreditImpairedLoansMember 2016-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2016-12-31 0001102266 csfl:PurchasedCreditImpairedLoansMember 2016-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 csfl:PurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:PurchasedCreditImpairedLoansMember 2017-01-01 2017-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2015-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:PurchasedCreditImpairedLoansMember 2015-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2015-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2015-12-31 0001102266 csfl:PurchasedCreditImpairedLoansMember 2015-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember csfl:PurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 csfl:PurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember csfl:PurchasedCreditImpairedLoansMember 2016-01-01 2016-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember 2018-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember 2018-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember 2017-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember 2017-12-31 0001102266 us-gaap:PerformingFinancingReceivableMember 2018-12-31 0001102266 us-gaap:PerformingFinancingReceivableMember 2017-12-31 0001102266 us-gaap:NonperformingFinancingReceivableMember 2018-12-31 0001102266 us-gaap:NonperformingFinancingReceivableMember 2017-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember us-gaap:PerformingFinancingReceivableMember 2018-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:PerformingFinancingReceivableMember 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember us-gaap:PerformingFinancingReceivableMember 2018-12-31 0001102266 us-gaap:PerformingFinancingReceivableMember us-gaap:RealEstateLoanMember 2018-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember us-gaap:PerformingFinancingReceivableMember 2018-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember us-gaap:PerformingFinancingReceivableMember 2018-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember us-gaap:NonperformingFinancingReceivableMember 2018-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:NonperformingFinancingReceivableMember 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember us-gaap:NonperformingFinancingReceivableMember 2018-12-31 0001102266 us-gaap:NonperformingFinancingReceivableMember us-gaap:RealEstateLoanMember 2018-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember us-gaap:NonperformingFinancingReceivableMember 2018-12-31 0001102266 us-gaap:RealEstateLoanMember 2018-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember us-gaap:PerformingFinancingReceivableMember 2017-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:PerformingFinancingReceivableMember 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember us-gaap:PerformingFinancingReceivableMember 2017-12-31 0001102266 us-gaap:PerformingFinancingReceivableMember us-gaap:RealEstateLoanMember 2017-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember us-gaap:PerformingFinancingReceivableMember 2017-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember us-gaap:PerformingFinancingReceivableMember 2017-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember us-gaap:NonperformingFinancingReceivableMember 2017-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:NonperformingFinancingReceivableMember 2017-12-31 0001102266 us-gaap:NonperformingFinancingReceivableMember us-gaap:RealEstateLoanMember 2017-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember us-gaap:NonperformingFinancingReceivableMember 2017-12-31 0001102266 us-gaap:RealEstateLoanMember 2017-12-31 csfl:SecurityLoan 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember 2018-01-01 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember 2018-01-01 2018-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember 2017-01-01 2017-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember 2016-01-01 2016-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember 2018-01-01 2018-12-31 0001102266 us-gaap:RealEstateLoanMember 2018-01-01 2018-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember 2018-01-01 2018-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember 2018-01-01 2018-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember 2017-01-01 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember 2017-01-01 2017-12-31 0001102266 us-gaap:RealEstateLoanMember 2017-01-01 2017-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember 2017-01-01 2017-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember 2017-01-01 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember 2016-01-01 2016-12-31 0001102266 us-gaap:RealEstateLoanMember 2016-01-01 2016-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember 2016-01-01 2016-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember 2016-01-01 2016-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0001102266 us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0001102266 us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2017-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2017-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2017-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2017-12-31 0001102266 us-gaap:FinancingReceivables30To59DaysPastDueMember 2017-12-31 0001102266 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2017-12-31 0001102266 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2017-12-31 0001102266 csfl:ConstructionDevelopmentAndLandMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2017-12-31 0001102266 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2017-12-31 0001102266 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2017-12-31 0001102266 us-gaap:FinancingReceivables60To89DaysPastDueMember 2017-12-31 0001102266 us-gaap:PassMember us-gaap:ResidentialPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:PassMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2018-12-31 0001102266 us-gaap:PassMember csfl:ConstructionDevelopmentAndLandMember 2018-12-31 0001102266 us-gaap:PassMember us-gaap:CommercialPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:PassMember us-gaap:ConsumerPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:PassMember 2018-12-31 0001102266 us-gaap:SpecialMentionMember us-gaap:ResidentialPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:SpecialMentionMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2018-12-31 0001102266 us-gaap:SpecialMentionMember csfl:ConstructionDevelopmentAndLandMember 2018-12-31 0001102266 us-gaap:SpecialMentionMember us-gaap:CommercialPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:SpecialMentionMember us-gaap:ConsumerPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:SpecialMentionMember 2018-12-31 0001102266 us-gaap:SubstandardMember us-gaap:ResidentialPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:SubstandardMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2018-12-31 0001102266 us-gaap:SubstandardMember csfl:ConstructionDevelopmentAndLandMember 2018-12-31 0001102266 us-gaap:SubstandardMember us-gaap:CommercialPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember 2018-12-31 0001102266 us-gaap:SubstandardMember 2018-12-31 0001102266 us-gaap:PassMember us-gaap:ResidentialPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:PassMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2017-12-31 0001102266 us-gaap:PassMember csfl:ConstructionDevelopmentAndLandMember 2017-12-31 0001102266 us-gaap:PassMember us-gaap:CommercialPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:PassMember us-gaap:ConsumerPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:PassMember 2017-12-31 0001102266 us-gaap:SpecialMentionMember us-gaap:ResidentialPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:SpecialMentionMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2017-12-31 0001102266 us-gaap:SpecialMentionMember csfl:ConstructionDevelopmentAndLandMember 2017-12-31 0001102266 us-gaap:SpecialMentionMember us-gaap:CommercialPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:SpecialMentionMember us-gaap:ConsumerPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:SpecialMentionMember 2017-12-31 0001102266 us-gaap:SubstandardMember us-gaap:ResidentialPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:SubstandardMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2017-12-31 0001102266 us-gaap:SubstandardMember csfl:ConstructionDevelopmentAndLandMember 2017-12-31 0001102266 us-gaap:SubstandardMember us-gaap:CommercialPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember 2017-12-31 0001102266 us-gaap:SubstandardMember 2017-12-31 0001102266 csfl:ContractuallyRequiredPrincipalAndInterestMember 2017-12-31 0001102266 csfl:NonAccretableDifferenceMember 2017-12-31 0001102266 csfl:CashFlowsExpectedMember 2017-12-31 0001102266 csfl:AccretableYieldMember 2017-12-31 0001102266 csfl:CarryingValueOfAcquiredLoansMember 2017-12-31 0001102266 csfl:ContractuallyRequiredPrincipalAndInterestMember 2016-12-31 0001102266 csfl:NonAccretableDifferenceMember 2016-12-31 0001102266 csfl:CashFlowsExpectedMember 2016-12-31 0001102266 csfl:AccretableYieldMember 2016-12-31 0001102266 csfl:CarryingValueOfAcquiredLoansMember 2016-12-31 0001102266 csfl:ContractuallyRequiredPrincipalAndInterestMember 2015-12-31 0001102266 csfl:NonAccretableDifferenceMember 2015-12-31 0001102266 csfl:CashFlowsExpectedMember 2015-12-31 0001102266 csfl:AccretableYieldMember 2015-12-31 0001102266 csfl:CarryingValueOfAcquiredLoansMember 2015-12-31 0001102266 csfl:ContractuallyRequiredPrincipalAndInterestMember 2018-01-01 2018-12-31 0001102266 csfl:NonAccretableDifferenceMember 2018-01-01 2018-12-31 0001102266 csfl:CashFlowsExpectedMember 2018-01-01 2018-12-31 0001102266 csfl:AccretableYieldMember 2018-01-01 2018-12-31 0001102266 csfl:CarryingValueOfAcquiredLoansMember 2018-01-01 2018-12-31 0001102266 csfl:ContractuallyRequiredPrincipalAndInterestMember 2017-01-01 2017-12-31 0001102266 csfl:NonAccretableDifferenceMember 2017-01-01 2017-12-31 0001102266 csfl:CashFlowsExpectedMember 2017-01-01 2017-12-31 0001102266 csfl:AccretableYieldMember 2017-01-01 2017-12-31 0001102266 csfl:CarryingValueOfAcquiredLoansMember 2017-01-01 2017-12-31 0001102266 csfl:ContractuallyRequiredPrincipalAndInterestMember 2016-01-01 2016-12-31 0001102266 csfl:NonAccretableDifferenceMember 2016-01-01 2016-12-31 0001102266 csfl:CashFlowsExpectedMember 2016-01-01 2016-12-31 0001102266 csfl:AccretableYieldMember 2016-01-01 2016-12-31 0001102266 csfl:CarryingValueOfAcquiredLoansMember 2016-01-01 2016-12-31 0001102266 csfl:ContractuallyRequiredPrincipalAndInterestMember 2018-12-31 0001102266 csfl:NonAccretableDifferenceMember 2018-12-31 0001102266 csfl:CashFlowsExpectedMember 2018-12-31 0001102266 csfl:AccretableYieldMember 2018-12-31 0001102266 csfl:CarryingValueOfAcquiredLoansMember 2018-12-31 0001102266 srt:MaximumMember 2018-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2018-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2018-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2018-12-31 0001102266 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasurySecuritiesMember 2017-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2017-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2017-12-31 0001102266 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0001102266 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2017-12-31 0001102266 us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001102266 us-gaap:FairValueMeasurementsNonrecurringMember 2017-12-31 0001102266 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001102266 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2017-12-31 0001102266 csfl:ImpairedLoansMember 2018-01-01 2018-12-31 0001102266 csfl:ImpairedLoansMember 2017-01-01 2017-12-31 0001102266 us-gaap:FairValueInputsLevel1Member 2018-12-31 0001102266 us-gaap:FairValueInputsLevel2Member 2018-12-31 0001102266 us-gaap:FairValueInputsLevel3Member 2018-12-31 0001102266 us-gaap:FairValueInputsLevel1Member 2017-12-31 0001102266 us-gaap:FairValueInputsLevel2Member 2017-12-31 0001102266 us-gaap:FairValueInputsLevel3Member 2017-12-31 0001102266 us-gaap:LandMember 2018-12-31 0001102266 us-gaap:LandMember 2017-12-31 0001102266 us-gaap:LandImprovementsMember 2018-12-31 0001102266 us-gaap:LandImprovementsMember 2017-12-31 0001102266 us-gaap:BuildingMember 2018-12-31 0001102266 us-gaap:BuildingMember 2017-12-31 0001102266 us-gaap:LeaseholdImprovementsMember 2018-12-31 0001102266 us-gaap:LeaseholdImprovementsMember 2017-12-31 0001102266 us-gaap:FurnitureAndFixturesMember 2018-12-31 0001102266 us-gaap:FurnitureAndFixturesMember 2017-12-31 0001102266 us-gaap:ConstructionInProgressMember 2018-12-31 0001102266 us-gaap:ConstructionInProgressMember 2017-12-31 0001102266 us-gaap:CoreDepositsMember 2017-01-01 2017-12-31 0001102266 us-gaap:CoreDepositsMember 2016-01-01 2016-12-31 0001102266 csfl:CoreDepositsIntangibleAndTrustIntangibleMember 2018-01-01 2018-12-31 0001102266 csfl:CoreDepositsIntangibleAndTrustIntangibleMember 2017-01-01 2017-12-31 0001102266 csfl:CoreDepositsIntangibleAndTrustIntangibleMember 2016-01-01 2016-12-31 0001102266 us-gaap:CoreDepositsMember 2018-12-31 0001102266 us-gaap:CoreDepositsMember 2017-12-31 0001102266 2018-09-01 0001102266 2018-08-31 2018-09-01 0001102266 csfl:MortgageServicingAssetMember 2018-01-01 2018-12-31 0001102266 csfl:MortgageServicingAssetMember 2018-12-31 0001102266 srt:MinimumMember us-gaap:MeasurementInputDiscountRateMember 2018-12-31 0001102266 srt:MaximumMember us-gaap:MeasurementInputDiscountRateMember 2018-12-31 0001102266 srt:MinimumMember us-gaap:MeasurementInputPrepaymentRateMember 2018-12-31 0001102266 srt:MaximumMember us-gaap:MeasurementInputPrepaymentRateMember 2018-12-31 0001102266 srt:MinimumMember us-gaap:MeasurementInputDefaultRateMember 2018-12-31 0001102266 srt:MaximumMember us-gaap:MeasurementInputDefaultRateMember 2018-12-31 0001102266 csfl:SmallBusinessAdministrationMember 2018-01-01 2018-12-31 0001102266 csfl:SmallBusinessAdministrationMember 2018-12-31 0001102266 csfl:SmallBusinessAdministrationMember 2017-12-31 0001102266 csfl:SmallBusinessAdministrationMember 2017-01-01 2017-12-31 0001102266 csfl:SmallBusinessAdministrationMember 2018-08-31 2018-09-01 0001102266 csfl:FederalDepositInsuranceCorporationMember 2018-12-31 0001102266 csfl:FederalDepositInsuranceCorporationMember 2017-12-31 0001102266 us-gaap:MortgageBackedSecuritiesMember 2018-12-31 0001102266 us-gaap:USStatesAndPoliticalSubdivisionsMember 2018-12-31 0001102266 us-gaap:MortgageBackedSecuritiesMember 2017-12-31 0001102266 us-gaap:USStatesAndPoliticalSubdivisionsMember 2017-12-31 0001102266 us-gaap:MaturityOvernightMember 2017-12-31 0001102266 srt:MinimumMember 2017-12-31 0001102266 srt:MaximumMember 2017-12-31 0001102266 csfl:RevolvingLineOfCreditMember 2017-12-31 0001102266 csfl:RevolvingLineOfCreditMember 2018-12-31 0001102266 csfl:RevolvingLineOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-01-01 2018-12-31 0001102266 csfl:SunshineCompanyMember 2016-02-29 2016-03-31 0001102266 csfl:SunshineCompanyMember 2016-03-31 0001102266 csfl:TrustMember 2003-09-21 2003-09-22 0001102266 csfl:TrustMember 2018-01-01 2018-12-31 0001102266 csfl:TrustMember 2003-09-22 0001102266 2003-09-21 2003-09-22 0001102266 csfl:ValricoBancorpMember 2004-09-08 2004-09-09 0001102266 csfl:ValricoBancorpMember csfl:ValricoTrustMember 2004-09-08 2004-09-09 0001102266 csfl:ValricoBancorpMember 2018-01-01 2018-12-31 0001102266 csfl:ValricoBancorpMember csfl:ValricoTrustMember 2004-09-09 0001102266 csfl:FederalTrustStatutoryIMember 2003-09-16 2003-09-17 0001102266 csfl:FederalTrustStatutoryIMember 2011-11-01 2011-11-30 0001102266 csfl:FederalTrustStatutoryIMember 2018-01-01 2018-12-31 0001102266 csfl:FederalTrustStatutoryIMember 2011-11-01 0001102266 csfl:GulfStreamBancsharesIncMember 2004-12-01 2004-12-01 0001102266 csfl:GulfstreamBancsharesCapitalTrustIMember 2004-12-01 2004-12-01 0001102266 csfl:GulfstreamBancsharesCapitalTrustIMember 2018-01-01 2018-12-31 0001102266 csfl:GulfstreamBancsharesCapitalTrustIMember 2016-01-01 2016-03-31 0001102266 csfl:GulfstreamBancsharesCapitalTrustIIMember 2006-12-28 2006-12-28 0001102266 csfl:GulfstreamBancsharesCapitalTrustIIMember 2018-01-01 2018-12-31 0001102266 csfl:HomesteadStatutoryTrustIMember 2006-07-17 2006-07-17 0001102266 csfl:HomesteadStatutoryTrustIMember 2018-01-01 2018-12-31 0001102266 csfl:HomesteadStatutoryTrustIMember 2016-03-16 2016-03-16 0001102266 csfl:BSAFinancialStatutoryTrustIMember 2018-01-01 2018-01-31 0001102266 csfl:MRCBStatutoryTrustIIMember 2018-01-01 2018-01-31 0001102266 csfl:BSAFinancialStatutoryTrustIMember 2018-01-01 2018-12-31 0001102266 csfl:MRCBStatutoryTrustIIMember 2018-01-01 2018-12-31 0001102266 csfl:BSAFinancialStatutoryTrustIMember 2018-01-31 0001102266 csfl:MRCBStatutoryTrustIIMember 2018-01-31 0001102266 csfl:CBSFinancialCapitalTrustIMember 2018-08-31 2018-09-30 0001102266 csfl:CBSFinancialCapitalTrustIMember 2018-12-01 2018-12-31 0001102266 csfl:CBSFinancialCapitalTrustIIMember 2018-08-31 2018-09-30 0001102266 csfl:CBSFinancialCapitalTrustIIMember 2018-12-01 2018-12-31 0001102266 csfl:FirstSouthernBankIncMember 2014-06-01 0001102266 csfl:CommunityBankOfSouthFloridaIncMember 2016-03-01 0001102266 csfl:HometownOfHomesteadBankingCompanyMember 2016-03-01 0001102266 csfl:AccretableYieldMember 2017-05-01 0001102266 csfl:SunshineCompanyMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember 2018-01-01 0001102266 csfl:CharterFinancialCorporationMember 2018-09-01 0001102266 2018-01-01 2018-01-01 0001102266 csfl:TaxYearOneMember 2018-12-31 0001102266 csfl:TaxYearTwoMember 2018-12-31 0001102266 csfl:TaxYearThreeMember 2018-12-31 0001102266 csfl:TaxYearFourMember 2018-12-31 0001102266 csfl:TaxYearFiveMember 2018-12-31 0001102266 csfl:TaxYearSixMember 2018-12-31 0001102266 csfl:TaxYearSevenMember 2018-12-31 0001102266 csfl:TaxYearEightMember 2018-12-31 0001102266 csfl:PrincipalOfficersDirectorsAndTheirAffiliatesMember 2017-12-31 0001102266 csfl:PrincipalOfficersDirectorsAndTheirAffiliatesMember 2016-12-31 0001102266 csfl:PrincipalOfficersDirectorsAndTheirAffiliatesMember 2018-01-01 2018-12-31 0001102266 csfl:PrincipalOfficersDirectorsAndTheirAffiliatesMember 2017-01-01 2017-12-31 0001102266 csfl:PrincipalOfficersDirectorsAndTheirAffiliatesMember 2018-12-31 0001102266 2018-01-02 0001102266 us-gaap:SubsequentEventMember 2019-01-01 0001102266 csfl:CenterStateBankOfFloridaMember 2018-12-31 0001102266 csfl:CenterStateBankOfFloridaMember 2017-12-31 0001102266 csfl:CenterStateBankOfFloridaMember srt:MinimumMember 2018-12-31 0001102266 csfl:CenterStateBankOfFloridaMember srt:MinimumMember 2017-12-31 0001102266 csfl:TwoThousandFifteenEquityIncentivePlanMember us-gaap:EmployeeStockOptionMember 2018-01-01 0001102266 csfl:TwoThousandFifteenEquityIncentivePlanMember us-gaap:EmployeeStockOptionMember 2018-12-31 0001102266 csfl:TwoThousandFifteenEquityIncentivePlanMember us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandTenAmendedAndRestatedStockIncentivePlanMember us-gaap:EmployeeStockOptionMember 2018-01-01 0001102266 csfl:TwoThousandTenAmendedAndRestatedStockIncentivePlanMember us-gaap:EmployeeStockOptionMember 2018-12-31 0001102266 csfl:TwoThousandTenAmendedAndRestatedStockIncentivePlanMember us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0001102266 us-gaap:EmployeeStockOptionMember csfl:GatewayPlansMember 2017-05-01 0001102266 us-gaap:EmployeeStockOptionMember csfl:GatewayPlansMember 2018-12-31 0001102266 us-gaap:EmployeeStockOptionMember csfl:GatewayPlansMember 2018-01-01 2018-12-31 0001102266 us-gaap:EmployeeStockOptionMember csfl:Gulfstream2009StockOptionPlanMember 2014-01-17 0001102266 us-gaap:EmployeeStockOptionMember csfl:Gulfstream2009StockOptionPlanMember 2018-12-31 0001102266 us-gaap:EmployeeStockOptionMember csfl:Gulfstream2009StockOptionPlanMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember 2018-04-26 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember 2018-04-25 2018-04-26 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember us-gaap:DirectorMember srt:MaximumMember 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember csfl:EmployeeMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember us-gaap:RestrictedStockMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember us-gaap:RestrictedStockMember srt:MinimumMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember us-gaap:RestrictedStockMember srt:MaximumMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember us-gaap:PerformanceSharesMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember us-gaap:PerformanceSharesMember srt:MinimumMember 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember us-gaap:PerformanceSharesMember srt:MaximumMember 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember us-gaap:PerformanceSharesMember 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2018-01-01 2018-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2018-01-01 2018-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheThreeMember 2018-01-01 2018-12-31 0001102266 us-gaap:DirectorMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandEighteenEquityIncentivePlanMember 2018-12-31 0001102266 csfl:TwoThousandThirteenEquityIncentivePlanMember 2013-04-25 0001102266 csfl:TwoThousandThirteenEquityIncentivePlanMember csfl:EmployeeMember 2018-01-01 2018-12-31 0001102266 csfl:TwoThousandSevenEquityIncentivePlanMember 2007-04-24 0001102266 csfl:TwoThousandSevenEquityIncentivePlanMember csfl:EmployeeMember 2018-01-01 2018-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember 2017-01-01 2017-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember 2016-01-01 2016-12-31 0001102266 csfl:QualifiedIncentiveStockOptionsMember 2018-01-01 2018-12-31 0001102266 csfl:RestrictedStockRestrictedUnitsPerformanceSharesMember 2018-01-01 2018-12-31 0001102266 csfl:RestrictedStockRestrictedUnitsPerformanceSharesMember 2017-01-01 2017-12-31 0001102266 csfl:RestrictedStockRestrictedUnitsPerformanceSharesMember 2016-01-01 2016-12-31 0001102266 csfl:NonQualifiedIncentiveStockOptionsMember 2018-01-01 2018-12-31 0001102266 csfl:NonQualifiedIncentiveStockOptionsMember 2017-01-01 2017-12-31 0001102266 csfl:NonQualifiedIncentiveStockOptionsMember 2016-01-01 2016-12-31 0001102266 us-gaap:EmployeeStockOptionMember 2018-12-31 0001102266 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0001102266 srt:WeightedAverageMember us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0001102266 us-gaap:RestrictedStockMember 2018-12-31 0001102266 srt:WeightedAverageMember us-gaap:RestrictedStockMember 2018-01-01 2018-12-31 0001102266 us-gaap:PerformanceSharesMember 2018-12-31 0001102266 us-gaap:PerformanceSharesMember 2018-01-01 2018-12-31 0001102266 us-gaap:PerformanceSharesMember srt:WeightedAverageMember 2018-01-01 2018-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember 2018-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember srt:WeightedAverageMember 2018-01-01 2018-12-31 0001102266 csfl:UnderlyingSharesIssuedMember us-gaap:RestrictedStockMember 2018-12-31 0001102266 csfl:UnderlyingSharesNotIssuedMember us-gaap:RestrictedStockMember 2018-12-31 0001102266 csfl:UnderlyingSharesNotIssuedMember us-gaap:RestrictedStockMember 2017-12-31 0001102266 csfl:UnderlyingSharesIssuedMember us-gaap:RestrictedStockMember 2017-12-31 0001102266 us-gaap:RestrictedStockMember 2017-12-31 0001102266 csfl:UnderlyingSharesNotIssuedMember us-gaap:RestrictedStockMember 2016-12-31 0001102266 csfl:UnderlyingSharesIssuedMember us-gaap:RestrictedStockMember 2016-12-31 0001102266 us-gaap:RestrictedStockMember 2016-12-31 0001102266 csfl:UnderlyingSharesNotIssuedMember us-gaap:RestrictedStockMember 2015-12-31 0001102266 csfl:UnderlyingSharesIssuedMember us-gaap:RestrictedStockMember 2015-12-31 0001102266 us-gaap:RestrictedStockMember 2015-12-31 0001102266 csfl:UnderlyingSharesNotIssuedMember us-gaap:RestrictedStockMember 2018-01-01 2018-12-31 0001102266 csfl:UnderlyingSharesNotIssuedMember us-gaap:RestrictedStockMember 2017-01-01 2017-12-31 0001102266 us-gaap:RestrictedStockMember 2017-01-01 2017-12-31 0001102266 csfl:UnderlyingSharesNotIssuedMember us-gaap:RestrictedStockMember 2016-01-01 2016-12-31 0001102266 us-gaap:RestrictedStockMember 2016-01-01 2016-12-31 0001102266 csfl:UnderlyingSharesIssuedMember us-gaap:RestrictedStockMember 2018-01-01 2018-12-31 0001102266 csfl:UnderlyingSharesIssuedMember us-gaap:RestrictedStockMember 2017-01-01 2017-12-31 0001102266 csfl:UnderlyingSharesIssuedMember us-gaap:RestrictedStockMember 2016-01-01 2016-12-31 0001102266 us-gaap:PerformanceSharesMember csfl:GrantYear2015Member 2015-09-30 0001102266 us-gaap:PerformanceSharesMember csfl:GrantYear2016Member 2016-09-30 0001102266 us-gaap:PerformanceSharesMember csfl:GrantYearTwoThousandAndSeventeenMember 2017-09-30 0001102266 us-gaap:PerformanceSharesMember csfl:GrantYearTwoThousandAndEighteenMember 2018-09-30 0001102266 csfl:PerformanceShareUnitsDivisionMember csfl:GrantYear2016Member 2016-09-30 0001102266 csfl:PerformanceShareUnitsDivisionMember csfl:GrantYear2016Member 2018-01-01 2018-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember csfl:GrantYear2015Member 2015-09-30 0001102266 us-gaap:RestrictedStockUnitsRSUMember csfl:GrantYear2016Member 2016-09-30 0001102266 us-gaap:RestrictedStockUnitsRSUMember csfl:GrantYearTwoThousandAndSeventeenMember 2017-09-30 0001102266 us-gaap:RestrictedStockUnitsRSUMember csfl:GrantYearTwoThousandAndEighteenMember 2018-09-30 0001102266 us-gaap:RestrictedStockUnitsRSUMember csfl:GrantYear2016Member 2016-01-01 2016-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember 2017-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember 2016-12-31 0001102266 us-gaap:RestrictedStockUnitsRSUMember 2015-12-31 csfl:Officers 0001102266 2007-01-01 2007-12-31 0001102266 srt:ParentCompanyMember 2018-12-31 0001102266 srt:ParentCompanyMember 2017-12-31 0001102266 srt:ParentCompanyMember 2018-01-01 2018-12-31 0001102266 srt:ParentCompanyMember 2017-01-01 2017-12-31 0001102266 srt:ParentCompanyMember 2016-01-01 2016-12-31 0001102266 srt:ParentCompanyMember 2016-12-31 0001102266 srt:ParentCompanyMember 2015-12-31 0001102266 us-gaap:StandbyLettersOfCreditMember 2018-12-31 0001102266 us-gaap:StandbyLettersOfCreditMember 2017-12-31 0001102266 us-gaap:UnusedLinesOfCreditMember 2018-12-31 0001102266 us-gaap:UnusedLinesOfCreditMember 2017-12-31 0001102266 csfl:UnfundedLoansCommitmentsFixedRatesMember 2018-12-31 0001102266 csfl:UnfundedLoansCommitmentsFixedRatesMember 2017-12-31 0001102266 csfl:UnfundedLoansCommitmentsVariableRatesMember 2018-12-31 0001102266 csfl:UnfundedLoansCommitmentsVariableRatesMember 2017-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CommercialAndRetailBankingMember 2018-01-01 2018-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CorrespondentBankingAndCapitalMarketsDivisionMember 2018-01-01 2018-12-31 0001102266 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CommercialAndRetailBankingMember 2018-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CorrespondentBankingAndCapitalMarketsDivisionMember 2018-12-31 0001102266 us-gaap:CorporateNonSegmentMember 2018-12-31 0001102266 us-gaap:IntersegmentEliminationMember 2018-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CommercialAndRetailBankingMember 2017-01-01 2017-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CorrespondentBankingAndCapitalMarketsDivisionMember 2017-01-01 2017-12-31 0001102266 us-gaap:CorporateNonSegmentMember 2017-01-01 2017-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CommercialAndRetailBankingMember 2017-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CorrespondentBankingAndCapitalMarketsDivisionMember 2017-12-31 0001102266 us-gaap:CorporateNonSegmentMember 2017-12-31 0001102266 us-gaap:IntersegmentEliminationMember 2017-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CommercialAndRetailBankingMember 2016-01-01 2016-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CorrespondentBankingAndCapitalMarketsDivisionMember 2016-01-01 2016-12-31 0001102266 us-gaap:CorporateNonSegmentMember 2016-01-01 2016-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CommercialAndRetailBankingMember 2016-12-31 0001102266 us-gaap:OperatingSegmentsMember csfl:CorrespondentBankingAndCapitalMarketsDivisionMember 2016-12-31 0001102266 us-gaap:CorporateNonSegmentMember 2016-12-31 0001102266 us-gaap:IntersegmentEliminationMember 2016-12-31 0001102266 csfl:PlatinumBankHoldingCompanyMember 2017-03-31 2017-04-01 0001102266 csfl:PlatinumBankHoldingCompanyMember 2016-01-01 2016-12-31 0001102266 csfl:PlatinumBankHoldingCompanyMember 2017-04-01 0001102266 csfl:PlatinumBankHoldingCompanyMember us-gaap:CommonStockMember 2017-03-31 2017-04-01 0001102266 csfl:PlatinumBankHoldingCompanyMember 2016-12-31 0001102266 csfl:PlatinumBankHoldingCompanyMember csfl:PurchasedCreditImpairedMember 2017-04-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember us-gaap:ResidentialPortfolioSegmentMember 2017-04-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember us-gaap:ResidentialPortfolioSegmentMember 2017-04-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2017-04-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2017-04-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember csfl:ConstructionDevelopmentAndLandMember 2017-04-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember csfl:ConstructionDevelopmentAndLandMember 2017-04-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember us-gaap:CommercialPortfolioSegmentMember 2017-04-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember us-gaap:CommercialPortfolioSegmentMember 2017-04-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember us-gaap:ConsumerPortfolioSegmentMember 2017-04-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember us-gaap:ConsumerPortfolioSegmentMember 2017-04-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember csfl:PurchasedCreditImpairedMember 2017-04-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember csfl:PurchasedCreditImpairedMember 2017-04-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember 2017-04-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:PlatinumBankHoldingCompanyMember 2017-04-01 0001102266 csfl:PlatinumBankHoldingCompanyMember us-gaap:CoreDepositsMember 2017-04-01 0001102266 csfl:PlatinumBankHoldingCompanyMember us-gaap:CoreDepositsMember srt:MaximumMember 2018-01-01 2018-12-31 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-04-30 2017-05-01 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember 2016-01-01 2016-12-31 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember us-gaap:CommonStockMember 2017-04-30 2017-05-01 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember 2016-12-31 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember csfl:PurchasedCreditImpairedMember 2017-05-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:ResidentialPortfolioSegmentMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:ResidentialPortfolioSegmentMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:ConstructionDevelopmentAndLandMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:ConstructionDevelopmentAndLandMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:CommercialPortfolioSegmentMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:CommercialPortfolioSegmentMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:ConsumerPortfolioSegmentMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:ConsumerPortfolioSegmentMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:PurchasedCreditImpairedMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:PurchasedCreditImpairedMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:GatewayFinancialHoldingsOfFloridaIncMember 2017-05-01 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember us-gaap:CoreDepositsMember 2017-05-01 0001102266 csfl:GatewayFinancialHoldingsOfFloridaIncMember us-gaap:CoreDepositsMember srt:MaximumMember 2018-01-01 2018-12-31 0001102266 csfl:SunshineBancorpIncMember 2018-01-01 2018-01-01 0001102266 csfl:SunshineBancorpIncMember 2017-01-01 2017-12-31 0001102266 csfl:SunshineBancorpIncMember 2018-01-01 0001102266 csfl:SunshineBancorpIncMember us-gaap:CommonStockMember 2018-01-01 2018-01-01 0001102266 csfl:SunshineBancorpIncMember 2017-12-31 0001102266 csfl:SunshineBancorpIncMember csfl:PurchasedCreditImpairedMember 2018-01-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:ResidentialPortfolioSegmentMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:ResidentialPortfolioSegmentMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:CommercialRealEstatePortfolioSegmentMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:ConstructionDevelopmentAndLandMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:ConstructionDevelopmentAndLandMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:CommercialPortfolioSegmentMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:CommercialPortfolioSegmentMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:ConsumerPortfolioSegmentMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:ConsumerPortfolioSegmentMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:PurchasedCreditImpairedLoansMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:PurchasedCreditImpairedLoansMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:CarryingReportedAmountFairValueDisclosureMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 us-gaap:EstimateOfFairValueFairValueDisclosureMember csfl:SunshineBancorpIncMember 2018-01-01 0001102266 csfl:SunshineBancorpIncMember us-gaap:CoreDepositsMember 2018-01-01 0001102266 csfl:SunshineBancorpIncMember us-gaap:CoreDepositsMember srt:MaximumMember 2018-01-01 2018-12-31 0001102266 csfl:HCBFHoldingCompanyIncMember 2018-01-01 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember 2017-01-01 2017-12-31 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:CommonStockMember 2018-01-01 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember 2017-12-31 0001102266 csfl:HCBFHoldingCompanyIncMember csfl:PurchasedCreditImpairedMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember csfl:ConstructionDevelopmentAndLandMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember csfl:ConstructionDevelopmentAndLandMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:CommercialPortfolioSegmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:CommercialPortfolioSegmentMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember csfl:PurchasedCreditImpairedLoansMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember csfl:PurchasedCreditImpairedLoansMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:CoreDepositsMember 2018-01-01 0001102266 csfl:HCBFHoldingCompanyIncMember us-gaap:CoreDepositsMember srt:MaximumMember 2018-01-01 2018-12-31 0001102266 csfl:CharterFinancialCorporationMember 2018-08-31 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:CommonStockMember 2018-08-31 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember 2017-12-31 0001102266 csfl:CharterFinancialCorporationMember csfl:PurchasedCreditImpairedMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember csfl:ConstructionDevelopmentAndLandMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember csfl:ConstructionDevelopmentAndLandMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:CommercialPortfolioSegmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:CommercialPortfolioSegmentMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember csfl:PurchasedCreditImpairedLoansMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember csfl:PurchasedCreditImpairedLoansMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:CoreDepositsMember 2018-09-01 0001102266 csfl:CharterFinancialCorporationMember us-gaap:CoreDepositsMember srt:MaximumMember 2018-01-01 2018-12-31 0001102266 csfl:NationalCommerceCorporationMember 2018-11-23 csfl:Location 0001102266 csfl:NationalCommerceCorporationMember 2018-01-01 2018-12-31 0001102266 csfl:NationalCommerceCorporationMember 2018-12-31 0001102266 us-gaap:InterestRateSwapMember us-gaap:NondesignatedMember 2018-12-31 0001102266 us-gaap:InterestRateSwapMember us-gaap:NondesignatedMember 2017-12-31 0001102266 us-gaap:InterestRateSwapMember us-gaap:NondesignatedMember 2018-01-01 2018-12-31 0001102266 us-gaap:InterestRateSwapMember us-gaap:NondesignatedMember 2017-01-01 2017-12-31 0001102266 us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member us-gaap:AccountingStandardsUpdate201409Member 2018-12-31 0001102266 us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member us-gaap:AccountingStandardsUpdate201409Member 2018-01-01 2018-12-31 0001102266 2017-01-12 2017-01-13 0001102266 2017-01-13

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2018

OR

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

Commission File Number 000-32017

 

CENTERSTATE BANK CORPORATION

(Name of registrant as specified in its charter)

 

 

Florida

 

59-3606741

(State or Other Jurisdiction
of Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

1101 First Street South, Suite 202, Winter Haven, Florida

 

33880

(Address of principal executive offices)

 

(Zip Code)

Issuer’s telephone number, including area code:

(863) 293-4710

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01 per share

Securities registered pursuant to Section 12(g) of the Act:

None

 

The registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES      NO  

The registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES      NO  

Check whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES      NO  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  

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

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

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

The aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant (65,699,770 shares) on June 30, 2018, was approximately $1,959,167,000.  The aggregate market value was computed by reference to the last sale of the Common Stock of the registrant at $29.82 per share on June 30, 2018.  For the purposes of this response, directors, executive officers and holders of 5% or more of the registrant’s Common Stock are considered the affiliates of the issuer at that date.

As of February 26, 2019 there were outstanding 95,803,337 shares of the registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on April 25, 2019 to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the registrant’s fiscal year end are incorporated by reference into Part III, of this Annual Report on Form 10-K.

 


 

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

 

PART I

 

 

 

 

Item 1.

 

Business

 

1

 

 

General

 

1

 

 

Lending Activities

 

2

 

 

Deposit Activities

 

3

 

 

Investments

 

3

 

 

Correspondent Banking

 

4

 

 

Acquisition Strategy

 

4

 

 

Data Processing

 

4

 

 

Effect of Governmental Policies

 

4

 

 

Supervision and Regulation

 

5

 

 

Competition

 

13

 

 

Employees

 

13

 

 

Statistical Profile and Other Financial Data

 

13

 

 

Availability of Reports Furnished or Filed with SEC

 

13

Item 1A

 

Risk Factors

 

14

Item 1B

 

Unresolved Staff Comments

 

29

Item 2.

 

Properties

 

29

Item 3.

 

Legal Proceedings

 

29

Item 4.

 

[Removed and Reserved]

 

29

 

 

 

 

 

PART II

 

 

 

 

Item 5.

 

Market for Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

 

30

Item 6.

 

Selected  Consolidated Financial Data

 

32

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

38

Item 7A.

 

Quantitative and Qualitative Disclosures about Market Risks

 

67

Item 8.

 

Financial Statements and Supplementary Data

 

67

Item 9.

 

Changes in and Disagreements With Accountants on Accounting and  Financial Disclosure

 

67

Item 9A.

 

Controls and Procedures

 

68

Item 9B.

 

Other Information

 

68

 

 

 

 

 

PART III

 

 

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

69

Item 11.

 

Executive Compensation

 

69

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and  Related Shareholder Matters

 

69

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

69

Item 14.

 

Principal Accountant Fees and Services

 

69

Item 15.

 

Exhibits and Financial Statement Schedules

 

69

 

 

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

72

 

 

 

SIGNATURES

 

148

 

 

 

 

 

 

 


 

PART I

Some of the statements in this report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. These statements related to future events, other future financial performance or business strategies, and include statements containing 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 from the results anticipated in these forward looking statements, due to a variety of factors, including, without limitation:  the impact on failing to implement our business strategy, including our growth and acquisition strategy; the ability to successfully integrate our acquisitions; additional capital requirements due to our growth plans; the impact of an increase in our asset size to over $10 billion; the ability to implement our mortgage and SBA lines of business; the risks of changes in interest rates and the level and composition of deposits, loan demand, the credit and other risks in our loan portfolio and the values of loan collateral; the impact of us not being able to manage our risk; the impact on a loss of management or other experienced employees; the impact if we failed to maintain our culture and attract and retain skilled people; risks related to pending or future litigation; the risk of changes in technology and customer preferences; the impact of any material failure or breach in our infrastructure or the infrastructure of third parties on which we rely including as a result of cyber-attacks; or material regulatory liability in areas such as BSA or consumer protection; the effects of future economic and political conditions; reputational risks from such failures or liabilities or other events; adverse weather or manmade events; governmental monetary and fiscal policies, as well as legislative and regulatory changes; the effects of competition from technological change and other commercial banks, thrifts, consumer finance companies, and other financial institutions operating in our market area and elsewhere; her factors disclosed in this Annual Report on Form 10-K, including, among others, those disclosed in Part I, Item 1A. “Risk Factors.”  All forward looking statements attributable to our Company are expressly qualified in their entirety by these cautionary statements.  We disclaim any intent or obligation to update these forward looking statements, whether as a result of new information, future events or otherwise.  There is no assurance that future results, levels of activity, performance or goals will be achieved.  

Item 1.

Business

General

CenterState Bank Corporation (“We,” “Our,”  “CenterState,” “CSFL,” or the “Company”) is a financial holding company incorporated in September 20, 1999 under the laws of the State of Florida. Through our national bank subsidiary, CenterState Bank, N.A. (“CenterState Bank” or the “Bank”), we provide a full range of consumer and commercial banking services to individuals, businesses and industries through our headquarters branch in Winter Haven, Florida and, as of December 31, 2018, a 126 bank branch network located throughout Florida, Georgia and Alabama, as well as one loan production office in Florida and one loan production office in Macon, Georgia.  CenterState is among the largest Florida-based community banking organizations in terms of publicly available deposit data as of December 31, 2018.  

We also operate, through our Bank, a correspondent banking and capital markets service division for over 600 small and medium sized community banks throughout the United States. Based primarily in Atlanta, Georgia and Birmingham, Alabama, this division earns commissions on fixed income security sales, fees from hedging services, loan brokerage fees and consulting fees for services related to these activities.

We have grown primarily through a series of acquisitions, starting in June 2000 through 2018. Our most recent acquisitions include:

  

 

 

Gulfstream Bancshares, Inc. (“Gulfstream”), in January 2014, which added approximately $479 million in deposits;  

 

 

 

 

 

 

First Southern Bancorp, Inc. (“First Southern”), in June 2014, which added approximately $853 million in deposits;

 

 

 

 

 

 

Community Bank of South Florida, Inc. (“Community”), in March 2016, which added approximately $453 million in deposits;  

 

 

 

Hometown of Homestead Banking Company (“Hometown”), in March 2016, which added approximately $253 million in deposits;

 

 

 

 

 

 

Platinum Bank Holding Company (“Platinum”), in April 2017, which added approximately $520 million in deposits;

 

 

 

 

 

 

Gateway Financial Holdings of Florida, Inc. (“Gateway”) in May 2017, which added approximately $708 million in deposits;

 

 

 

HCBF Holding Company, Inc. (“HCBF”), in January 2018, which added approximately $719 million in deposits;

 

 

 


 

 

 

Sunshine Bancorp, Inc. (“Sunshine”), also in January 2018, which added approximately $1.8 billion in deposits; and

 

 

 

Charter Financial Corporation (“Charter”), in September 2018, which added approximately $1.3 billion in deposits.

On November 23, 2018, CenterState entered into an Agreement and Plan of Merger with National Commerce Corporation (“NCC”), a financial holding company headquartered in Birmingham, Alabama, which engages in the business of banking through National Bank of Commerce (“NBC”). NBC operates branches throughout Florida (including under the trade names United Legacy Bank, Reunion Bank of Florida, Patriot Bank, Premier Bank and FirstAtlantic Bank), in the Atlanta, Georgia area (including under the trade names First Landmark Bank, Private Bank of Buckhead, Private Bank of Decatur and PrivatePlus Mortgage) and in Birmingham, Huntsville, Auburn-Opelika and Baldwin County, Alabama.  NCC also engages in the business of factoring commercial receivables of transportation companies and automotive parts and service providers through the United States and parts of Canada through a subsidiary, CBI Holding Company, LLC, and its subsidiary Corporate Billing, LLC. Upon completion of the merger, which is subject to receipt of regulatory and shareholder approvals and other customary closing conditions, CenterState will have on a pro forma basis, excluding purchase accounting adjustments, assets of $16.4 billion, deposits of $12.8 billion, loans of $11.5 billion and total shareholders’ equity of $2.9 billion.

We also own R4ALL, Inc. (“R4ALL”), which acquires and disposes troubled assets, and CSFL Insurance Corp. (“CSFL IC”), which operates a captive insurance subsidiary pursuant to section 831(b) of the U.S. Tax Code.  

At December 31, 2018, we had total consolidated assets of $12.3 billion, total consolidated loans of $8.3 billion, total consolidated deposits of $9.5 billion, and total consolidated shareholders’ equity of $2.0 billion.

Our revenue is primarily derived from interest on, and fees received in connection with, real estate and other loans, interest and dividends from investment securities and short-term investments, and commissions on bond sales.  The principal sources of funds for our lending activities are customer deposits, repayment of loans, and the sale and maturity of investment securities.  Our principal expenses are interest paid on deposits, and operating and general administrative expenses.

As is the case with banking institutions generally, our operations are materially and significantly influenced by the real estate market, general economic conditions, and by the tax, monetary and fiscal policies of the U.S. and state government and regulatory agencies, including the Board of Governors of the Federal Reserve System (the “Federal Reserve”).  Deposit flows and costs of funds are influenced by interest rates on competing investments and general market rates of interest.  Lending activities are affected by the demand for financing of real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered and other factors affecting local demand and availability of funds, including tax rates and regulatory structure.  We face strong competition in the attraction of deposits (our primary source of lendable funds) and in the origination of loans.  See “Competition.”

Lending Activities

We offer a range of lending services, including real estate, consumer and commercial loans, to individuals and small businesses and other organizations that are located in or conduct a substantial portion of their business in our market area.  Our consolidated loans at December 31, 2018 and 2017 were $8.3 billion, or 68% and $4.8 billion, or 67%, respectively, of total consolidated assets.  The interest rates charged on loans vary with the degree of risk, maturity, and amount of the loan, and are further subject to competitive pressures, money market rates, availability of funds, and government regulations.  We have no foreign loans or loans for highly leveraged transactions.  We do have immaterial amounts of loans with foreigners on property located within our Florida market area, primarily vacation and second homes.

Our loans are concentrated in three major areas: real estate loans, commercial loans and consumer loans.  A majority of our loans are made on a secured basis.  As of December 31, 2018, approximately 84% of our consolidated loan portfolio consisted of loans secured by mortgages on real estate, 14% of the loan portfolio consisted of commercial loans (not secured by real estate) and 2% of our loan portfolio consisted of consumer and other loans.

Our real estate loans are secured by mortgages and consist primarily of loans to individuals and businesses for the purchase, improvement of or investment in real estate, for the construction of single-family residential and commercial units, and for the development of single-family residential building lots. These real estate loans may be made at fixed or variable interest rates.  Generally, we do not make fixed-rate commercial real estate loans for terms exceeding five years.  Loans in excess of five years are generally made at adjustable interest rates.  Our residential real estate loans generally are repayable in monthly installments based on up to a 15-year or a 30-year amortization schedule with variable or fixed interest rates.

Our commercial loan portfolio consists primarily of loans to small-to-medium sized businesses located primarily in our market area for working capital, equipment purchases, and various other business purposes.  A majority of commercial loans are secured by equipment or similar assets, but these loans may also be made on an unsecured basis.  Commercial loans may be made at variable or fixed rates of interest.  Commercial lines of credit are typically granted on a one-year basis, with loan covenants and monetary thresholds.  Other commercial loans with terms or amortization schedules of longer than one year will normally carry interest rates which vary with the prime lending rate and will become payable in full and are generally refinanced in three to five

2

 


 

years.  Commercial and agricultural loans not secured by real estate amounted to approximately 14% and 15% of our Company’s total loan portfolio as of December 31, 2018 and 2017, respectively.

Our consumer loan portfolio consists primarily of loans to individuals for various consumer purposes, but includes some business purpose loans which are payable on an installment basis.  The majority of these loans are for terms of less than five years and are secured by liens on various personal assets of the borrowers, but consumer loans may also be made on an unsecured basis.  Consumer loans are made at fixed and variable interest rates, and are often based on up to a five-year amortization schedule.

At December 31, 2018, approximately 44% of our total non-PCI (“Purchased Credit-Impaired”) loan portfolio is fixed rate, 14% is floating rate and 42% is variable rate other than floating.

Loan originations are derived primarily from employee loan officers within our local market areas, but can also be attributed to referrals from existing customers and borrowers, advertising, or walk-in customers.

Certain credit risks are inherent in making loans.  These include prepayment risks, risks resulting from uncertainties in the future value of collateral, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual borrowers.  In particular, longer maturities increase the risk that economic conditions will change and adversely affect collectability.  We attempt to minimize credit losses through various means.  In particular, on larger credits, we generally rely on the cash flow of a debtor as the source of repayment and secondarily on the value of the underlying collateral.  In addition, we attempt to employ shorter loan terms in order to reduce the risk of a decline in the value of such collateral.

In addition, we have a mortgage line of business which originates single-family home loans and sells a majority of those mortgages into the secondary market of which the majority are sold with servicing rights released. We also have a SBA 7(a) line of business whereby we routinely sell the government guaranteed portion of the SBA loans to investors with the unguaranteed portion of the loan and the servicing rights retained.

For additional information regarding our loan portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Deposit Activities

Deposits are the major source of our funds for lending and other investment activities.  We consider the majority of our regular savings, demand, negotiable order of withdrawal or NOW, and money market deposit accounts to be core deposits.  These accounts comprised approximately 81% and 85% of our consolidated total deposits at December 31, 2018 and 2017, respectively.  Approximately 19% and 15% of our consolidated deposits at December 31, 2018 and December 31, 2017, respectively, were certificates of deposit.  Generally, we attempt to maintain the rates paid on our deposits at a competitive level.  Time deposits of $100,000 and over made up approximately 10% and 8% of consolidated total deposits at December 31, 2018 and 2017, respectively.  The majority of the deposits are generated from market areas where we conduct business.  Generally, we do not solicit deposits on a national level.  We obtain substantially all of our deposits from customers in our local markets.  For additional information regarding the Company’s deposit accounts, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Deposits.”

Investments

Our available for sale investment debt securities portfolio was $1.7 billion and $1.1 billion at December 31, 2018 and 2017, respectively, representing 14% and 15% of our total consolidated assets.  At December 31, 2018, approximately 92% of this portfolio was invested in U.S. government mortgage backed securities (“MBS”), specifically residential Fannie Mae, Freddie Mac and Ginnie Mae MBS.  We have selected these types of investments because such securities generally represent what we believe to be a minimal investment risk.  We do not own any private label MBSs.  Approximately 5%, or $88.8 million, of this portfolio is invested in municipal securities.  Our investments are managed in relation to loan demand and deposit growth, and are generally used to provide for the investment of excess funds at acceptable risks levels while providing liquidity to fund increases in loan demand or to offset fluctuations in deposits.  Investment debt securities available for sale are recorded on our balance sheet at market value at each balance sheet date.  Any change in market value is recorded directly in our shareholders’ equity account and is not recognized in our income statement unless the security is sold or unless it is impaired and the impairment is other than temporary.  During 2018, we sold approximately $23.1 million of these securities and recognized a net loss on the sales of approximately $22,000.  In addition, we sold approximately $332.6 million of securities acquired from the purchase of Harbor and Sunshine on January 1, 2018.  These securities were marked to fair value and subsequently sold soon after the acquisition date and thus no gains or losses were recognized.  

Occasionally, we may purchase certificates of deposits of national and state banks.  These investments may exceed $250,000 in any one institution (the limit of FDIC insurance for deposit accounts).  Federal funds sold, money market accounts and interest bearing deposits held at the Federal Reserve Bank represent the excess cash we have available over and above daily cash needs.  Federal funds sold and money market funds are invested on an overnight basis with approved correspondent banks.

3

 


 

We monitor changes in financial markets.  In addition to investments for our portfolio, we monitor daily cash positions to ensure that all available funds earn interest at the earliest possible date.  A portion of the investment account is invested in liquid securities that can be readily converted to cash with minimum risk of market loss.  These investments usually consist of obligations of U.S. government agencies, mortgage backed securities and federal funds.  The remainder of the investment account may be placed in investment securities of different type and/or longer maturity.  Daily surplus funds are sold in the federal funds market for one business day.  We attempt to stagger the maturities of our securities so as to produce a steady cash-flow in the event cash is needed, or economic conditions change.

We also have a trading securities portfolio managed at our Bank.  For this portfolio, realized and unrealized gains and losses are included in trading securities revenue, a component of Non-interest Income in our Consolidated Statements of Income and Comprehensive Income.  Securities purchased for this portfolio have primarily been municipal securities and are held for short periods of time.  During 2018, we purchased approximately $254.6 million of securities for this portfolio and sold $259.7 million, recognizing a net realized gain on sale of approximately $20,000.  At December 31, 2018 we had $1.7 million of securities in our trading portfolio.

Our held to maturity debt securities portfolio was $216.8 million and $232.4 million at December 31, 2018 and December 31, 2017, respectively, representing 2% and 3% our total consolidated assets.  These securities had unrecognized net losses of approximately $4.7 million and $784,000, resulting in estimated fair values of $212.2 million and $231.6 million at December 31, 2018 and 2017, respectively.  At December 31, 2018, approximately 39% of this portfolio is invested in MBS and 61% in municipal securities.  It is anticipated that this portfolio will generally hold longer term securities for the primary purpose of yield.  This classification was chosen to minimize temporary effects on our tangible equity and tangible equity ratio due to increases and decreases in general market interest rates.

Correspondent Banking

Our correspondent banking and capital markets segment operates as a division within our Bank.  Its primary revenue generating activities are related to the capital markets division which includes commissions earned on fixed income security sales, fees from hedging services, loan brokerage fees and consulting fees for services related to these activities.  Income generated related to the correspondent banking services includes spread income earned on correspondent bank deposits (i.e. federal funds purchased) and fees generated from safe-keeping activities, bond accounting services, asset/liability consulting services, international wires, clearing and corporate checking account services and other correspondent banking related services.  The fees derived from the correspondent banking services are less volatile than those generated through the capital markets group. The customer base includes small to medium size financial institutions located throughout the United States.

Acquisition Strategy

Our business growth, profitability and market share have been enhanced by us engaging in strategic mergers and acquisitions either within or contiguous to our existing footprint.  Our acquisition strategy focuses on banking institutions that:

 

are a good fit with our culture;

are strategically attractive by enhancing our footprint, allowing for cost savings and economies of scale, or providing market diversification, or otherwise may be strategically compelling;

 

 

have been determined to meet our risk appetite and profile; and

meet our financial criteria.

 

We expect to continue to assess future opportunities of financial companies using these criteria, based on market and other conditions.  

Data Processing

We use a single in-house core data processing solution.  The core data processing system provides deposit processing, loan processing and overall accounting services.  

The Bank provides item processing services and certain other information technology (“IT”) services for itself and the Company overall.  These services include: sorting, encoding, processing, and imaging checks and rendering checking and other deposit statements to commercial and retail customers, as well as providing IT services, including intranet and internet services for our Bank and the Company overall.

Effect of Governmental Policies

Our earnings and business are and will be affected by the policies of various regulatory authorities of the United States, especially the Federal Reserve.  The Federal Reserve, among other things, seeks to influence interest rates and the supply of money

4

 


 

and credit within the United States.  Among the traditional methods that have been used to achieve this objective are open market operations in U.S. government securities, changes in the discount rate for bank borrowings, expanded access to funds for non-banks and changes in reserve requirements against bank deposits. The Federal Reserve has, as a response to the financial crisis, steeply increased the size of its balance sheet by buying securities and has paid interest on excess reserves held by banks at the Federal Reserve.  Both the traditional and more recent methods are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, interest rates on loans and securities, and rates paid for deposits.  The monetary policies of the Federal Reserve have had a significant effect on the operating results of commercial banks and are expected to continue to do so in the future.  The monetary policies of the Federal Reserve are influenced by various factors, including inflation, unemployment, and short-term and long-term changes in the international trade balance and in the fiscal policies of the U.S. Government.  Following a prolonged period in which the federal funds rate was stable or decreasing, the Federal Reserve has begun to increase this benchmark rate. In addition, after an extended period during which the Federal Reserve increased the size of its balance sheet substantially above historical levels through the purchase of debt securities, the Federal Reserve has begun to reduce the size of its balance sheet from these elevated levels, which might also affect interest rates.  Future monetary policies, including whether the Federal Reserve will continue to increase the federal funds rate and whether or at what pace it will continue to reduce the size of its balance sheet, and the effect of such policies on the future business and earnings of the Company and our subsidiary bank cannot be predicted.

Supervision and Regulation

We are extensively regulated under federal and state law.  The following is a brief summary of certain aspects of that regulation which are material to us, and does not purport to be a complete description of all regulations that affect us or all aspects of those regulations. To the extent particular statutory and regulatory provisions are described, the description is qualified in its entirety by reference to the particular statute or regulation.  Proposals to change the laws and regulations governing the banking industry are frequently raised at both the state and federal levels.  The likelihood and timing of any changes in these laws and regulations, and the impact such changes may have on the Company and the Bank, are difficult to ascertain.  In addition to laws and regulations, bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance applicable to the Company or the Bank.  A change in applicable laws, regulations or regulatory guidance, or in the manner such laws, regulations or regulatory guidance are interpreted by regulatory agencies or courts, may have a material adverse effect on the Company’s and the Bank’s business, operations, and earnings.  Supervision, regulation, and examination of banks by regulatory agencies are intended primarily for the protection of depositors and customers, the deposit insurance fund and the U.S. banking and financial system rather than shareholders.

Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased in recent years in response to the financial crisis, as well as other factors such as technological and market changes. As described in further detail below, the Company and the Bank will become subject to additional regulatory requirements in the future as a result of the growth of their assets. Regulatory enforcement and fines have also increased across the banking and financial services sector. Many of these changes have occurred as a result of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and its implementing regulations.  While there has been some changes in the post financial crisis framework applicable to the Company, primarily relating to stress testing, the Company expects that its business will remain subject to extensive regulation and supervision.

We are also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, both as administered by the SEC, as well as the rules of Nasdaq that apply to companies with securities listed on the Nasdaq Global Select Market.

Regulation of the Company

We are registered as a bank holding company with the Federal Reserve under the Bank Holding Company Act of 1956 (the “BHC Act”) and have elected to be a financial holding company. As a financial holding company, we are subject to comprehensive regulation, examination and supervision by the Federal Reserve and are subject to its regulatory reporting requirements.  Federal law subjects financial holding companies, such as the Company, to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.

As a financial holding company, we are permitted to engage in, and be affiliated with companies engaging in, a broader range of activities than those permitted for a bank holding company. Bank holding companies are generally restricted to engaging in the business of banking, managing or controlling banks and certain other activities determined by the Federal Reserve to be closely related to banking. Financial holding companies may also engage in activities that are considered to be financial in nature, as well as those incidental or complementary to financial activities, including certain insurance underwriting activities.  We and the Bank must each remain “well-capitalized” and “well-managed” and the Bank must receive a Community Reinvestment Act (“CRA”) rating of at least “Satisfactory” at its most recent examination in order for us to maintain our status as a financial holding company. In addition, the Federal Reserve has the power to order a financial holding company or its subsidiaries to terminate any activity or terminate its ownership or control of any subsidiary, when it has reasonable cause to believe that continuation of such activity or such ownership or

5

 


 

control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that financial holding company.  

A financial holding company is required to act as a source of financial and managerial strength to its subsidiary bank and to maintain resources adequate to support its bank. The term “source of financial strength” has been defined as the ability of a company to provide financial assistance to its insured depository institution subsidiaries in the event of financial distress.  The appropriate federal banking agency for the depository institution (in this case the Office of the Comptroller of the Currency or OCC) may require reports from the Company to assess its ability to serve as a source of strength and to enforce compliance with the source-of-strength requirements by requiring the holding company to provide financial assistance to the Bank if its capital were to become impaired.   If the Company fails to provide such assistance within three months, it could be ordered to sell its stock of the Bank to cover the deficiency.  Any capital loans by the Company to the Bank would be subordinate in right of payment to deposits and certain other debts of the Bank. In the event of the Company’s bankruptcy, any commitment by the Company to a federal bank regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee and entitled to a priority of payment.

The BHC Act requires that a financial holding company obtain the prior approval of the Federal Reserve before (i) acquiring direct or indirect ownership or control of more than 5% of the voting shares of any additional bank or bank holding company, (ii) taking any action that causes an additional bank or bank holding company to become a subsidiary of the financial holding company, or (iii) merging or consolidating with any other bank holding company.  The Federal Reserve may not approve any such transaction that would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any section of the United States, or the effect of which may be substantially to lessen competition or to tend to create a monopoly in any section of the country, or that in any other manner would be in restraint of trade, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve is also required to consider (1) the financial and managerial resources of the companies involved, including pro forma capital ratios; (2) the risk to the stability of the United States banking or financial system; (3) the convenience and needs of the communities to be served, including the companies’ performance under the CRA; and (4) the effectiveness of the companies in combatting money laundering.  We are permitted under applicable federal and state law to make out of state acquisitions and mergers of other banks and bank holding companies, subject to the requirements summarized above.

Federal law restricts the amount of voting stock of a bank holding company and a bank that a person may acquire without the prior approval of banking regulators. The overall effect of such laws is to make it more difficult to acquire a bank holding company and a bank by tender offer or similar means than it might be to acquire control of another type of corporation. Consequently, shareholders of the Company may be less likely to benefit from the rapid increases in stock prices that may result from tender offers or similar efforts to acquire control of other companies. Federal law also imposes restrictions on acquisitions of stock in a bank holding company or a national bank.  Under the federal Change in Bank Control Act and the regulations thereunder, a person or group must give advance notice to the Federal Reserve before acquiring control of any bank holding company, such as the Company, and the OCC before acquiring control of any national bank, such as the Bank. Upon receipt of such notice, the bank regulatory agencies may approve or disapprove the acquisition.  The Change in Bank Control Act creates a rebuttable presumption of control if a member or group acquires a certain percentage or more of a bank holding company’s or banks voting stock, or if one or more other control factors set forth in the Act are present. As a result, a person or entity generally must provide prior notice to the Federal Reserve before acquiring the power to vote 10% or more of our outstanding common stock.  Investors should be aware of these requirements when acquiring shares of our stock.

Regulation of the Bank

CenterState Bank is a national bank subject to comprehensive regulation, examination and supervision by the OCC and is subject to its regulatory reporting requirements. The deposits of the Bank are insured by the FDIC and, accordingly, the Bank is also subject to certain FDIC regulations and the FDIC has backup examination authority and some enforcement powers over the Bank.  The Bank also is subject to certain Federal Reserve regulations.  These regulations include limitations on loans to a single borrower and to its directors, officers and employees; restrictions on the opening and closing of branch offices; the maintenance of required capital and liquidity ratios; the granting of credit under equal and fair conditions; the disclosure of the costs and terms of such credit, requirements to maintain reserves against deposits and loans, limitation on the types of investment that may be made and requirements governing risk management practices.

The Bank also is subject to restrictions on its ability to lend to and engage in other transactions with the Company and the Bank’s other affiliates.  Under these provisions, individual loans or other extensions of credit between the Bank and the Company or any nonbank affiliate generally are limited to 10% of the Bank’s capital and surplus, and all such transactions between the Bank and either the Company or any nonbank affiliate are limited to 20% of the Bank’s capital and surplus. Loans and other extensions of credit from the Bank to any affiliate generally are required to be secured by eligible collateral in specified amounts. In addition, any transaction between the Bank and any affiliate are required to be on arm’s length terms and conditions. The definition of “extension of credit” for these purposes includes credit exposures arising from a derivative transaction, a repurchase or reverse repurchase agreement and a securities lending or borrowing transaction.  Federal banking laws also place similar restrictions on loans and other

6

 


 

extensions of credit by FDIC-insured banks, such as the Bank, to their directors, executive officers and principal shareholders.  These restrictions have not had a material impact on the Company or the Bank.

Federal Reserve rules require depository institutions, such as the Bank, to maintain reserves against their transaction accounts, primarily NOW and regular checking accounts. For 2018, the first $16 million of covered balances are exempt from the reserve requirement, aggregate balances between $16 million and $122.3 million are subject to a 3% reserve requirement and aggregate balances above $122.3 million are subject to a 10% reserve requirement. These reserve requirements are subject to annual adjustment by the Federal Reserve.

The Bank is permitted under federal law to branch on a de novo basis across state lines where the laws of that state would permit a bank chartered by that state to open a de novo branch.

Supervision, Examination and Enforcement

The Federal Reserve, OCC and FDIC have broad supervisory, examination and enforcement authority with regard to bank holding companies and banks, including the power to impose nonpublic supervisory agreements, issue cease and desist or removal orders, impose fines and other civil and criminal penalties, initiate injunctive actions, terminate deposit insurance and appoint a conservator or receiver.  In general, these actions may be initiated for violations of laws and regulations, as well as engagement in unsafe and unsound practices, and certain of these actions also may be taken against an “institution affiliated party” as defined in the law. Specifically, the regulators may direct a bank holding company or bank to, among other things, increase its capital, sell subsidiaries or other assets, limit its dividends and distributions, restrict its growth or remove officers and directors. Supervision and examinations are confidential, and the outcomes of these actions may not be made public.

Changes to our Regulation and Supervision in Crossing $10 Billion in Assets Threshold

As a result of having assets that exceed $10 billion in total consolidated assets as of start of four quarters, certain changes will occur in our supervision effective July 1, 2019, which is the date following the fourth consecutive quarter (plus any applicable phase-in period) in which the Company or the Bank’s total consolidated assets exceeded that $10 billion threshold:  

 

 

 

 

The calculation of the Bank’s FDIC deposit insurance assessment base will be changed and will utilize the performance score and a loss-severity score system as summarized under “FDIC Insurance Assessments.”

 

 

The Consumer Financial Protection Bureau (“CFPB”) will become our supervisor with respect to consumer protection laws and regulations and will have examination authority following the fourth consecutive quarter in which the Bank’s total assets exceed $10 billion. Currently, the Bank is subject to regulations adopted by the CFPB, but the OCC is primarily responsible for examining our compliance with consumer protection laws and regulations.

In addition, beginning on July 1, 2019, the Bank will become subject to the cap on debit card interchange fees imposed by the so-called Durbin Amendment. Under the Durbin Amendment and the Federal Reserve’s implementing regulations, bank issuers who are not exempt may only receive an interchange fee from merchants that is reasonable and proportional to the cost of clearing the transaction.  The maximum permissible interchange fee is equal to no more than $0.21 plus 5 basis points of the transaction value for many types of debit interchange transactions.  A debit card issuer may also recover $0.01 per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements required by the Federal Reserve.  In addition, the Federal Reserve has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.  The impact of this change is expected to reduce the Bank’s fee income by approximately $3.5 million in year 2019 and $7 million annually, afterwards.

FDIC Insurance Assessments and Depositor Preference  

The deposits of the Bank are insured by the FDIC up to the limits under applicable law, which currently are set at $250,000 for accounts under the same name and title. The Bank is subject to deposit insurance premium assessments. The FDIC imposes a risk-based deposit premium assessment system. Under this system, the assessment rates for an insured depository institution vary according to the level of risk incurred in its activities. To arrive at an assessment rate for a banking institution, the FDIC places it in one of four risk categories determined by reference to its capital levels and supervisory ratings. In the case of those institutions in the lowest risk category, the FDIC further determines its assessment rate based on certain specified financial ratios or, if applicable, long-term debt ratings. The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits. Under the current system, premiums are assessed quarterly. The FDIC has published guidelines on the adjustment of assessment rates for certain institutions. In addition, insured depository institutions have been required to pay a pro rata portion of the interest due on the obligations issued by the Financing Corporation to fund the closing and disposal of failed thrift institutions by the Resolution Trust Corporation.

The assessment base on which the Bank’s deposit insurance premiums is paid to the FDIC is now calculated based on its average consolidated total assets less its average equity. However, effective as of July 1, 2019, the FDIC will use a performance score

7

 


 

and loss-severity score to calculate the Bank’s initial FDIC assessment rate.  In calculating these scores, the FDIC will use the Bank’s capital level and regulatory supervisory ratings and certain financial measures to assess the Bank’s ability to withstand asset-related and funding related stress, and make certain adjustments based on risk factors that are not adequately captured in these calculations.  

Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a bank’s federal regulatory agency.  Deposits and certain claims for administrative expenses and employee compensation against insured depository institutions are afforded a priority over other general unsecured claims against the institution, including federal funds and letters of credit, in the liquidation or other resolution of that institution by any receiver appointed by federal authorities. These priority creditors include the FDIC.

Dividend Restrictions  

The Company is a legal entity separate and distinct from its banking and other subsidiaries and has in the past relied on dividends from the Bank as its primary source of liquidity. There are limitations on the payment of dividends by the Bank to the Company, as well as by the Company to its shareholders.  

The OCC has the general authority to limit the dividends paid by the Bank if such payment may be deemed to constitute an unsafe and unsound practice.  The Bank may not pay dividends from its paid-in surplus.  All dividends must be paid out of undivided profits then on hand, after deducting expenses, including reserves for losses and bad debts.  In addition, a national bank, such as the Bank, is prohibited from declaring a dividend on its shares of common stock until its surplus equals its stated capital, unless there has been transferred to surplus no less than one/tenth of the bank’s net profits of the preceding two consecutive half-year periods (in the case of an annual dividend).   The approval of the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus.

We and the Bank must maintain the applicable common equity Tier 1 or CET1 capital conservation buffer of 2.5% to avoid becoming subject to restrictions on capital distributions, including dividends.  For more information on the CET1 capital conservation buffer, see Part I Item 1. Supervision and Regulation – Capital Requirements.

In addition, Federal Reserve policy provides that bank holding companies, such as the Company, should generally pay dividends to shareholders only if (i) the organization’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends ; (ii) the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition and (iii) the organization will continue to meet minimum capital adequacy ratios.  The policy also provides that a bank holding company should inform the Federal Reserve reasonably in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the bank holding company’s capital structure. Bank holding companies also are required to consult with the Federal Reserve before increasing dividends or redeeming or repurchasing capital instruments. Additionally, the Federal Reserve could prohibit or limit the payment of dividends by a bank holding company if it determines that payment of the dividend would constitute an unsafe or unsound practice.

Capital Requirements

We are required under federal law to maintain certain minimum capital levels at each of the Company and the Bank. The federal banking agencies have issued substantially similar risk-based and leverage capital requirements to banking organizations they supervise. Under these requirements, the Company and the Bank are required to maintain certain capital standards based on ratios of capital to total assets and capital to risk-weighted assets. The requirements also define the weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules. The required capital ratios are minimums, and the Federal Reserve and OCC may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy.

Under the applicable capital rules, the Company and the Bank are subject to the following risk-based capital ratios: a common equity Tier 1 ("CET1") risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total capital ratio, which includes Tier 1 and Tier 2 capital.  CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock, retained earnings, and certain qualifying minority interests, less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, tier 1 minority interests and grandfathered trust preferred securities. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt, other preferred stock and certain hybrid capital instruments, and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. For institutions, such as us,

8

 


 

that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values are also included in Tier 2 capital. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, “high volatility” commercial real estate, past due assets, structured securities and equity holdings.

In addition, in December 2018, the U.S. federal banking agencies finalized rules that would permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new current expected credit loss accounting rule on retained earnings over a period of three years. For further discussion of the new current expected credit loss accounting rule, see Note 1 of the “Notes to Consolidated Financial Statements.”

The capital rules require a minimum CET1 risk-based capital ratio of 4.5%, a minimum overall Tier 1 risk-based capital ratio of 6.0%, and a total risk-based capital ratio of 8.0%. In addition, the capital rules require a capital conservation buffer of up to 2.5% above each of the minimum capital ratio requirements (CET1, Tier 1, and total risk-based capital) which must be met for a bank or bank holding company to be able to pay dividends, engage in share buybacks or make discretionary bonus payments to executive management without restriction. This capital conservation buffer was phased in over a four-year period that began on January 1, 2016, was 1.25% as of January 1, 2017, 1.875% as of January 1, 2018, and is 2.50% as of January 1, 2019, so that a banking organization now needs to maintain a CET1 capital ratio of at least 7%, a total Tier 1 capital ratio of at least 8.5% and a total risk-based capital ratio of at least 10.5% or it would be subject to restrictions on capital distributions and discretionary bonus payments to its executive management.

The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average total assets, less goodwill and other disallowed intangible assets. The required minimum leverage ratio for all banks and bank holding companies is 4%.

 

To be well-capitalized, the Bank must maintain the following capital ratios:

 

CET1 risk-based capital ratio of 6.5% or greater;

 

Tier 1 risk-based capital ratio of 8.0% or greater;

 

Total risk-based capital ratio of 10.0% or greater; and

 

Tier 1 leverage ratio of 5.0% or greater.

 

The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital requirements imposed under the current capital rules. For purposes of the Federal Reserve’s Regulation Y, including determining whether a bank holding company meets the requirements to be a financial holding company, bank holding companies, such as the Company, must maintain a Tier 1 risk-based capital ratio of 6.0% or greater and a total risk-based capital ratio of 10.0% or greater to be well-capitalized. If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to the Bank, the Company’s capital ratios as of December 31, 2017 would exceed such revised well-capitalized standard. The Federal Reserve may require bank holding companies, including the Company, to maintain capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a bank holding company’s particular condition, risk profile and growth plans.

Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. For example, only a well-capitalized depository institution may accept brokered deposits without prior regulatory approval. Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Company’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.

The table below summarizes the capital requirements that the Company and the Bank must satisfy to avoid limitations on capital distributions and certain discretionary bonus payments (i.e., the required minimum capital ratios plus the capital conservation buffer) during the remaining transition period for the capital conservation buffer:

 

 

Minimum Applicable Regulatory Capital Ratio Plus Capital Conservation Buffer

 

January 1,

2017

 

January 1,

2018

 

January 1,

2019

CET1 risk-based capital ratio

5.75

%

 

6.375

%

 

7.0

%

Tier 1 risk-based capital ratio

7.25

 

 

7.875

 

 

8.5

 

Total risk-based capital ratio

9.25

 

 

9.875

 

 

10.5

 

 

9

 


 

As of December 31, 2018, the Company’s and the Bank’s regulatory capital ratios were above the well-capitalized standards and met both the then-applicable and fully phased-in capital conservation buffer.   Please refer to the table below for a summary of the Company’s and the Bank’s regulatory capital ratios as of December 31, 2018 and 2017, calculated using the regulatory capital methodology applicable to us during 2018.

 

 

 

 

Minimum Regulatory Capital Ratio

 

 

Minimum Ratio + Capital Conservation Buffer (1)

 

 

Well- Capitalized Minimums (2)

 

 

Actual

 

 

Capital Above Minimums (3)

 

As of December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage ratio

 

Consolidated

 

4.00

%

 

N/A

 

 

N/A

 

 

 

10.04

%

 

$

687,898

 

 

 

Bank

 

4.00

%

 

N/A

 

 

 

5.00

%

 

 

9.99

%

 

$

567,921

 

CET1 risk-based capital ratio

 

Consolidated

 

4.50

%

 

 

6.375

%

 

N/A

 

 

 

11.86

%

 

$

510,855

 

 

 

Bank

 

4.50

%

 

 

6.375

%

 

 

6.50

%

 

 

12.21

%

 

$

532,000

 

Tier 1 risk-based capital ratio

 

Consolidated

 

6.00

%

 

 

7.875

%

 

 

6.00

%

 

 

12.27

%

 

$

409,565

 

 

 

Bank

 

6.00

%

 

 

7.875

%

 

 

8.00

%

 

 

12.21

%

 

$

392,312

 

Total risk-based capital ratio

 

Consolidated

 

8.00

%

 

 

9.875

%

 

 

10.00

%

 

 

12.70

%

 

$

251,300

 

 

 

Bank

 

8.00

%

 

 

9.875

%

 

 

10.00

%

 

 

12.64

%

 

$

245,828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage ratio

 

Consolidated

 

4.00

%

 

N/A

 

 

N/A

 

 

 

9.82

%

 

$

384,734

 

 

 

Bank

 

4.00

%

 

N/A

 

 

 

5.00

%

 

 

9.39

%

 

$

290,478

 

CET1 risk-based capital ratio

 

Consolidated

 

4.50

%

 

 

5.75

%

 

N/A

 

 

 

11.46

%

 

$

309,843

 

 

 

Bank

 

4.50

%

 

 

5.75

%

 

 

6.50

%

 

 

11.54

%

 

$

271,368

 

Tier 1 risk-based capital ratio

 

Consolidated

 

6.00

%

 

 

7.25

%

 

 

6.00

%

 

 

11.96

%

 

$

255,816

 

 

 

Bank

 

6.00

%

 

 

7.25

%

 

 

8.00

%

 

 

11.54

%

 

$

190,638

 

Total risk-based capital ratio

 

Consolidated

 

8.00

%

 

 

9.25

%

 

 

10.00

%

 

 

12.57

%

 

$

139,369

 

 

 

Bank

 

8.00

%

 

 

9.25

%

 

 

10.00

%

 

 

12.15

%

 

$

115,816

 

 

(1)

 

Reflects the capital conservation buffer of 1.875% applicable during 2018. The Company and the Bank already meet the capital conservation buffer at the fully phased-in level of 2.5%.

(2)

Reflects the well-capitalized standard applicable to the Bank and the well-capitalized standard applicable to the Company under Federal Reserve Regulation Y.

(3)

Amount greater than the highest of the minimum regulatory capital ratio, the minimum regulatory capital ratio plus the capital conservation buffer and the well-capitalized minimum, as applicable.

Safety and Soundness Guidelines

The federal banking agencies have adopted guidelines prescribing safety and soundness standards relating to internal controls, risk management, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. These guidelines in general require appropriate systems and practices to identify and manage specified risks and exposures. The guidelines prohibit excessive compensation as an unsafe and unsound practice and characterize compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer or employee, director or principal shareholder. In addition, the agencies have adopted regulations that authorize but do not require an agency to order an institution that has been given notice by the agency that it is not in compliance with any of the safety and soundness standards to submit a compliance plan. If after being so notified, an institution fails to submit an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types, including those that may limit growth or capital distributions.

Lending Standards and Guidance

The federal banking agencies have adopted uniform regulations prescribing standards for extensions of credit that are secured by liens or interests in real estate or made for the purpose of financing permanent improvements to real estate. Under these regulations, all insured depository institutions, such as the Bank, must adopt and maintain written policies establishing appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose of financing permanent improvements to real estate. These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures, and documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the federal bank regulators’ Interagency Guidelines for Real Estate Lending Policies.

The federal banking agencies have also jointly issued guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”), which defines commercial real estate loans as exposures secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or a

10

 


 

significant source of repayment is derived from rental income associated with the property (that is, loans for which 50% or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. The Guidance requires that appropriate processes be in place to identify, monitor and control risks associated with real estate lending concentrations. If a concentration is present, management must employ heightened risk management practices that address key elements, including board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of increased capital levels as needed to support the level of commercial real estate lending. The required heightened risk management practices could include enhanced strategic planning, underwriting policies, risk management, internal controls, portfolio stress testing and risk exposure limits as well as appropriately designed compensation and incentive programs. Higher allowances for loan losses and capital levels may also be required. The Guidance states that the following metrics may indicate a concentration of commercial real estate loans, but that these metrics are neither limits nor a safe harbor: (1) total reported loans for construction, land development, and other land represent 100% or more of total risk-based capital; or (2) total reported loans secured by multi-family properties, non-farm non-residential properties (excluding those that are owner-occupied), and loans for construction, land development, and other land represent 300% or more of total risk-based capital and the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months. As of December 31, 2018, our total reported loans for construction, land development, and other land were 55% of the Bank’s total risk based capital and our total reported loans secured by multifamily and non-farm nonresidential properties and loans for construction, land development, and other land were 279% of the Bank’s total risk based capital.

Consumer Protection Laws

The Bank is subject to a number of federal laws designed to protect its customers. These consumer protection laws apply to a broad range of our activities and to various aspects of our business and include laws relating to interest rates, fair lending, disclosures of credit terms and estimated transaction costs to consumer borrowers, debt collection practices, the use of and the provision of information to consumer reporting agencies, and the prohibition of unfair, deceptive or abusive acts or practices in connection with the offer, sale or provision of consumer financial products and services. Administration of many of these consumer protection rules are the responsibility of the CFPB, which has exclusive supervisory authority over insured depository institutions with more than $10 billion in total assets and any affiliates thereof. The CFPB also has authority to define and prevent unfair, deceptive and abusive practices in the consumer financial area, and expanded data collecting powers for purposes of determining bank compliance with the fair lending laws. Because our insured depository institution, the Bank, has had less than $10 billion in total assets, we have been supervised in these areas by the OCC. The CFPB will become our exclusive supervisor in these areas following the fourth consecutive quarter where the Bank’s total assets exceed $10 billion or as of the second quarter of 2019.

The CFPB has promulgated many mortgage-related final rules, including rules related to the ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, Home Mortgage Disclosure Act  requirements and appraisal and escrow standards for higher priced mortgages. In addition, several proposed revisions to mortgage-related rules are pending finalization. The mortgage-related final rules issued by the CFPB have materially restructured the origination, servicing and securitization of residential mortgages in the United States. These rules have impacted, and will continue to impact, the business practices of mortgage lenders, including the Company. For example, under the CFPB’s Ability to Repay and Qualified Mortgage rule, before making a mortgage loan, a lender must establish that a borrower has the ability to repay the mortgage. “Qualified mortgages”, as defined in the rule, are presumed to comply with this requirement and, as a result, present less litigation risk to lenders. For a loan to qualify as a qualified mortgage, the loan must satisfy certain limits on terms and conditions, pricing and a maximum debt-to-income ratio. Loans eligible for purchase, guarantee or insurance by a government agency or government-sponsored enterprise are exempt from some of these requirements. Satisfying the qualified mortgage standards, ensuring correct calculations are made for individual loans, recordkeeping and monitoring, as well as understanding the effect of the qualified mortgage standards on CRA obligations, impose significant new compliance obligations on, and involve compliance costs for, mortgage lenders, including the Company.

Community Reinvestment Act

The CRA requires the appropriate federal banking agency, in connection with its examination of a bank, to assess the bank’s record in meeting the credit needs of the communities served by the institution, including low and moderate income neighborhoods. Furthermore, the relevant federal bank regulatory agency is required to consider a bank’s CRA assessment when considering the bank’s application to, among other things, merge or consolidate with or acquire the assets or assume the liabilities of an insured depository institution or open or relocate a branch office. In the case of a bank holding company, the Federal Reserve Board is required to assess the CRA record of each subsidiary bank of any bank holding company that applies to acquire a bank or bank holding company in connection with the application. Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “unsatisfactory.” The Bank received an "outstanding” rating at its most recent CRA evaluation.

Anti-Money Laundering Rules

11

 


 

The Bank Secrecy Act, the USA PATRIOT Act of 2001, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering (“AML”) program and file suspicious activity and currency transaction reports when appropriate. Among other things, these laws and regulations require the Bank to take steps to prevent the use of the Bank to facilitate the flow of illegal or illicit money, to report large currency transactions and to file suspicious activity reports. The Bank also is required to develop and implement a comprehensive AML compliance program.  Banks must also have in place appropriate “know your customer” policies and procedures.

Violations of these requirements can result in substantial civil and criminal sanctions, and the federal banking agencies are required to consider the effectiveness of a financial institution’s AML activities when reviewing bank mergers and bank holding company acquisitions. In addition to other bank regulatory agencies, the federal Financial Crimes Enforcement Network of the Department of the Treasury is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the state and federal banking regulators, as well as the U.S. Department of Justice, CFPB, Drug Enforcement Administration, and Internal Revenue Service.

OFAC Regulation

The Office of Foreign Assets Control or OFAC is responsible for administering economic sanctions that affect transactions with designated foreign countries, nationals and others, as defined by various Executive Orders and in various legislation. OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) a blocking of assets in which the government or “specially designated nationals” of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction, including property in the possession or control of U.S. persons. OFAC also publishes lists of persons, organizations and countries suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. Blocked assets, for example property and bank deposits, cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. If we or our Bank find a name on any transaction, account or wire transfer that is on an OFAC list, we or our Bank must freeze or block such account or transaction, file a suspicious activity report and notify the appropriate authorities. Failure to comply with these sanctions could have serious legal and reputational consequences.

Data Privacy

Federal and state law contains extensive consumer privacy protection provisions. The Gramm-Leach-Bliley Act of 1999 requires financial institutions to periodically disclose their privacy policies and practices relating to sharing such information and enables retail customers to opt out of our ability to share information with unaffiliated third parties under certain circumstances. Other federal and state laws and regulations impact our ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. The Gramm-Leach-Bliley Act also requires financial institutions to implement a comprehensive information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer records and information. These security and privacy policies and procedures for the protection of personal and confidential information are in effect across all businesses and geographic locations. Federal law also makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.

Data privacy and data protection are areas of increasing state legislative focus. For example, in June of 2018, the Governor of California signed into law the California Consumer Privacy Act of 2018 (“CCPA”). The CCPA, which becomes effective on January 1, 2020, applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds. The CCPA will give consumers the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of the consumer’s personal information, and the right not to be discriminated against for exercising these rights. The CCPA contains several exemptions, including an exemption applicable to information that is collected, processed, sold or disclosed pursuant to the Gramm-Leach-Bliley Act. The California Attorney General has not yet proposed or adopted regulations implementing the CCPA, and the California State Legislature has amended the Act since its passage. The impact of the CCPA on our business is yet to be determined.  In addition, similar laws may be adopted by other states where we do business. The federal government may also pass data privacy or data protection legislation.

Like other lenders, the Bank uses credit bureau data in their underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act, which also regulates reporting information to credit bureaus, prescreening individuals for credit offers, sharing of information between affiliates, and using affiliate data for marketing purposes. Similar state laws may impose additional requirements on us and our subsidiaries.

 

Future Legislation and Regulation

12

 


 

Banking statutes, regulations and policies are continually under review by Congress, state legislatures and federal and state regulatory agencies. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance applicable to us and our subsidiaries. We cannot predict the substance or impact of pending or future legislation or regulation or the application of those laws or regulations, although enactment of any significant proposal could affect how we operate and could significantly increase our costs, impede the efficiency of internal business processes or limit our ability to pursue business opportunities in an efficient manner, any of which could materially and adversely affect our business, financial condition and results of operations.

Competition

We encounter strong competition both in making loans and in attracting deposits.  In one or more aspects of its business, our Company competes with other local, regional and national financial service providers, including commercial banks, savings and loan associations, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking companies, and other financial intermediaries located both within and outside our market area. Most of these competitors, some of which are affiliated with bank holding companies, have substantially greater resources and lending limits, and may offer certain services that we do not currently provide.

Technological advances have made it possible for our non-bank competitors to offer products and services that traditionally were banking products and for financial institutions and other companies to provide electronic and internet-based financial solutions, including online deposit accounts, electronic payment processing and marketplace lending, without having a physical presence where their customers are located. In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks.  Legislation has continued to heighten the competitive environment in which financial institutions must conduct their business, and the potential for competition among financial institutions of all types has increased significantly.

To compete, we rely upon specialized services, responsive handling of customer needs, and personal contacts by its officers, directors, and staff. Large multi-branch banking competitors tend to compete primarily by rate and the number and location of branches while smaller, independent financial institutions tend to compete primarily by rate and personal service.

Employees

As of December 31, 2018, we had a total of  2,113 full-time equivalent employees. The employees are not represented by a collective bargaining unit. We consider relations with employees to be good.

Statistical Profile and Other Financial Data

Reference is hereby made to the statistical and financial data contained in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for statistical and financial data providing a review of our Company’s business activities.

Availability of Reports Furnished or Filed with the Securities and Exchange Commission

We make available at no cost all of our reports filed electronically with the United States Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and the annual proxy statement, as well as amendments to those reports, through our website at www.centerstatebanks.com. These filings are also accessible on the SEC’s website at www.sec.gov.

We also will provide without charge a copy of our Annual Report on Form 10-K to any shareholder by mail. Requests should be sent to CenterState Bank Corporation, Attention: Corporate Secretary, 1101 1st Street South, Winter Haven, FL 33880.

We have adopted a Code of Ethics, which is available on our website at www.centerstatebanks.com under Investor Relations/Governance Documents, and encourage our employees to take initiative and be responsible for their actions.  The importance of maintaining our culture and communicating our core values to our stakeholders, including our employees and mentoring and training our employees as we grow is such that in 2018 we established a Board Culture Committee,  designed to tap the expertise and leadership experience of two Board members who are expert in employee engagement, training and brand development in developing a service oriented culture, committed to employee diversity, recruitment, training and motivation.  We also have adopted a formal corporate governance policy, a copy of which is available on our website at www.centerstatebanks.com.

 

 

13

 


 

Item 1A.

Risk Factors  

An investment in our common stock is subject to risks inherent in our business. The following discussion highlights the risks that management believes are material for our Company, but do not necessarily include all the risks that we may face. You should carefully consider the risk factors and uncertainties described below and elsewhere in this Annual Report on Form 10-K ("Report") in evaluating an investment in our common stock.

Risks relating to our Business and Business Strategy

Our business strategy includes continued growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

We intend to continue pursuing a growth strategy for our business.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in significant growth stages of development.  Our ability to continue to grow successfully will depend on a variety of factors including economic conditions in the markets in which we operate as well as in the U.S. and globally, continued availability of desirable business opportunities, the competitive responses from other financial and non-financial institution competitors in our market areas, our ability to continue to  implement and improve our operational, credit, financial, management and other risks controls and processes and our reporting systems and procedures to manage a growing number of client relationships, and our ability to integrate our acquisitions and develop consistent policies throughout our various businesses.  While we believe we have the management and other resources and internal systems in place to successfully manage our future growth, and we are expanding those resources and systems as we continue to grow, there can be no assurance growth opportunities will be available or growth will be successfully managed.  In addition, if we are unable to manage future expansion in our operations, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth, any of which could adversely affect our business.  Particularly in light of prevailing economic and competitive conditions, we cannot assure you we will be able to expand our market presence in our existing markets or successfully enter new markets or that any such expansion will not adversely affect our results of operations.  Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition or results of operations, and could adversely affect our ability to successfully implement our business strategy.  Also, if our growth occurs more slowly than anticipated or declines, our operating results could be materially adversely affected.

We may face risks with respect to future expansion.

Our business growth, profitability and market share has been enhanced by us engaging in strategic mergers and acquisitions and de novo branching either within or contiguous to our existing footprint.  We may acquire other financial institutions or parts of those institutions in the future and engage in additional de novo branching.  We may also consider and enter into or acquire new lines of business or offer new products or services.  As part of our acquisition strategy, we seek companies that are culturally similar to us, have experienced management and are in markets in which we operate or close to those markets so we can achieve economies of scale.  We also may receive future inquiries and have discussions with potential acquirers of us or potential companies in which we may engage in a so-called “merger of equals.” Acquisitions and mergers involve a number of risks, including:

 

the time and costs associated with identifying and evaluating potential acquisitions and merger partners;

 

inaccurate estimates and judgments regarding credit, operations, management and market risks of the target institution;

 

the time and costs of evaluating new markets, hiring experienced local management and opening new offices, and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion;

 

our ability to receive regulatory approvals on terms that are acceptable to us;

 

our ability to finance an acquisition and possible dilution to our existing shareholders;

 

the diversion of our management’s attention to the negotiation of a transaction, and the integration of the operations and personnel of the combining businesses;

 

entry into new markets where we lack experience;

 

the strain of growth on our infrastructure, staff, internal controls and management, which may require additional personnel, time and expenditures;

 

exposure to potential asset quality issues with acquired institutions;

 

the introduction of new products and services into our business;

 

the possibility of unknown or contingent liabilities;

 

the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations; and

14

 


 

 

the risk of loss of key employees and customers.

We also face litigation risks with respect to potential mergers and acquisitions.  Such litigation is common.  After the mailing of the joint proxy statement/prospectus on February 4, 2019 in connection with our proposed merger with NCC, two lawsuits by purported NCC stockholders (Paul Parshall v. National Commerce Corporation, et al., No. 1:19-cv-00355-UNA (D. Del.)) and Stephen Bushansky v. National Commerce Corporation, et al., No. 1:19-cv-00379 (D. Del.)) were filed in the United States District Court, District of Delaware against NCC and its directors, alleging inadequate disclosures in the joint proxy statement/prospectus and associated violations of the Securities Exchange Act of 1934.  These complaints generally seek, among other things, an injunction enjoining the stockholder vote and the closing of the proposed transaction, rescission of the proposed merger if it closes, or an award of rescissory damages, an order directing the NCC board of directors to disseminate a new joint proxy statement/prospectus, a declaration that the defendants violated the securities laws and an award of the plaintiffs’ costs of the actions including a reasonable allowance for the plaintiffs’ attorneys' and experts' fees.  CenterState and NCC believe that the claims in these complaints are without merit and intend to defend these actions vigorously.

We expect to continue to evaluate merger and acquisition opportunities that are presented to us in our current and expected markets and conduct due diligence related to those opportunities, as well as negotiate to acquire or merge with other institutions.  If we announce a transaction, we may issue equity securities, including common stock and securities convertible into shares of our common stock  in connection with future acquisitions.  We also may issue debt to finance one or more transactions, including subordinated debt issuances.  Generally, acquisitions of financial institution involve the payment of a premium over book and market values, resulting in dilution of our book value and fully diluted earnings per share, as well as dilution to our existing shareholders.   We may incur substantial costs to expand, and we can give no assurance such expansion will result in the levels of profits we seek.  There is no assurance that, following any future mergers or acquisitions, our integration efforts will be successful or our company, after giving effect to the acquisition, will achieve increased revenues comparable to or better than our historical experience, and failure to .realize such expected revenue increases, cost savings, increases in market presence or other benefits could have a material adverse effect on our financial conditions and results of operations.

Attractive acquisition opportunities may not be available to us in the future.

While we seek continued organic growth, we anticipate continuing to evaluate merger and acquisition opportunities presented to us in our core markets and beyond.  The number of financial institutions headquartered in Florida, Georgia, Alabama, else ware in the Southeastern United States, and across the country continues to decline through merger and other activity.  We expect that other banking and financial companies, many of which have significantly greater resources, will compete with us to acquire financial services businesses.  This competition, as the number of appropriate merger targets decreases, could increase prices for potential acquisitions which could reduce our potential returns, and reduce the attractiveness of these opportunities to us.  Also, acquisitions are subject to various regulatory approvals. If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests.  Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance, including with respect to AML obligations, consumer protection laws and CRA obligations and levels of goodwill and intangibles when considering acquisition and expansion proposals. Any acquisition could be dilutive to our earnings and shareholders’ equity per share of our common stock.

We may not be able to successfully integrate our latest mergers or to realize the anticipated benefits of them.

We completed the acquisitions of HCBF and Sunshine on January 1, 2018, and completed the acquisition of Charter on September 1, 2018. In addition, we entered into an Agreement and Plan of Merger with NCC on November 23, 2018, which, if completed, would be the largest merger undertaken by CenterState as of this date.  We integrated the systems of Sunshine in February 2018, the systems of Jefferson (which was previously acquired by HCBF) in April 2018, the systems of HCBF in May 2018, and the systems of Charter in February 2019.  If the proposed merger with NCC is completed, we will also integrate the systems and operations of NCC, including by combining the executive management teams of CenterState and NCC.

A successful integration of these banks' operations with our operations so that the Company operates as one entity will depend substantially on our ability to successfully consolidate operations, management teams, corporate cultures, systems and procedures and to eliminate redundancies and costs. While we have substantial experience in successfully integrating institutions we have acquired, we may encounter difficulties during integration, such as:

 

the loss of key employees and customers;

 

the disruption of operations and businesses;

 

inability to maintain and increase competitive presence;

 

loan and deposit attrition, customer loss and revenue loss;

 

inconsistencies in standards, control procedures and policies;

 

unexpected issues with expected branch closures;

15

 


 

 

unexpected issues with costs, operations, personnel, technology and credit; and/or

 

problems with the assimilation of new operations, sites or personnel, which could divert resources from  regular banking operations;

all of which could divert resources from regular banking operations.  Additionally, general market and economic conditions or governmental actions affecting the financial industry generally may inhibit our successful integration of these entities.  

In addition, the attention and effort devoted to the integration of NCC with CenterState’s existing operations, to the continued integration of Charter with CenterState, or to the continued integration of Landmark and Premier with NCC or the combined company, may divert management’s attention away from one merger integration to another, or away from other important issues, each of which could seriously harm the combined company’s business.

Further, we acquired HCBF, Sunshine and Charter and are proposing to acquire NCC with the expectation that these mergers will result in various benefits including, among other things, benefits relating to enhanced revenues, a strengthened market position for the combined company, cross selling opportunities, technology, cost savings and operating efficiencies. Achieving the anticipated benefits of these mergers is subject to a number of uncertainties, including whether we integrate these institutions in an efficient and effective manner, and general competitive factors in the marketplace. Failure to achieve these anticipated benefits could result in a reduction in the price of our shares as well as in increased costs, decreases in the amount of expected revenues and diversion of management's time and energy and could materially and adversely affect our business, financial condition and operating results.

The loss of any member of our management team may adversely affect us.

We have a management team that has substantial experience in banking and financial services in the markets we serve.  We rely on our management team to achieve and sustain our profitability.  This management team anticipated to be expanded as part of the NCC merger, which includes the addition of Richard Murray, IV, the current Chairman and CEO of NCC, becoming Chief Executive Officer of CenterState Bank, William E. Matthews, V, the current President and CFO of National Bank of Commerce, becoming Chief Financial Officer of CenterState and CenterState Bank, and Jennifer L. Idell (CenterState’s current Chief Financial Officer) becoming the Chief Administrative Officer of CenterState. Our future success and profitability are substantially dependent upon this management and banking abilities of our senior executives.  Although we currently have employment agreements in place with our executive management team and our regional presidents, and have negotiated employment agreements with Messrs. Murry and Matthews that will become effective upon completion of the NCC merger, we cannot guarantee that our executives will remain with us. Changes in key personnel and their responsibilities may be disruptive to our business because of their skills, customer relationship and/or the potential difficulty of promptly replacing them with successors.

The continued implementation of our mortgage and SBA lines of business may subject us to additional risk.

We continue to build our mortgage line of business in 2018, and in so doing, invested significant time and resources to continue to expand the mortgage business within our market areas in both Florida and Georgia, including by acquiring a team of lenders from State Bank in Georgia, and in launching a third party origination or TPO channel.  We also continued to build our SBA business in 2018 by continuing to hire experienced SBA lenders and support personnel.  Our price and profitability targets for these businesses may not prove feasible, due to unexpected delays in the continued implementation of these strategies, as well as external factors, such as compliance with regulations, competitive alternatives, changing tax rates and strategies, interest rates, economic conditions, and shifting market preferences, which could impact the profitability of these lines of business and have a material adverse effect on our businesses, and, in turn, our financial condition and results of operations.  

The implementation of other new lines of business or new products and services may subject us to additional risk.

We continuously evaluate our service offerings and may implement new lines of business or offer new products and services within existing lines of business in the future. There are substantial risks and uncertainties associated with these efforts.  In developing and marketing new lines of business and/or new products and services, we undergo a new product process to assess the risks of and resources needed for the initiative, and invest significant time and resources to build internal controls, policies and procedures to mitigate those risks, including hiring experienced management to oversee the implementation of the initiative.  Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business and/or a new product or service. Furthermore, any new line of business and/or new product or service could require the establishment of new key and other controls and have a significant impact on our existing system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business and/or new products or services could have a material adverse effect on our business and, in turn, our financial condition and results of operations.


16

 


 

Our size and continued pace of growth may require us to raise additional capital in the future, but that capital may not be available when it is needed.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations.  These capital requirements disallow the Company’s trust preferred securities from qualifying as Tier 1 capital once the Company exceeds $15 billion in assets, which the Company will do upon completion of its merger with NCC.  While we have successfully raised approximately $63 million in capital in January 2017, our ability to raise capital, if needed, in the future to meet capital requirements or otherwise will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance.  Accordingly, there is no assurance as to our ability to raise additional capital if needed on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired.

Our total consolidated assets increased to over $10 billion during 2018, which will reduce our revenue due to the Durbin Amendment limits on interchange, and increase our costs due to increased regulatory expectations and FDIC insurance assessment increases, and that will impact our earnings.

As of December 31, 2018, the Company and the Bank had total assets of approximately $12 billion and $12 billion, respectively.  

Beginning on July 1, 2019, the Bank will be subject to certain limits on the amounts of interchange fees. In addition, as of January 1, 2019, the Bank became subject to a different calculation methodology for deposit insurance assessments, and the CFPB also became our federal supervisor with respect to federal consumer protection laws.

Anticipating that we would cross the $10 billion threshold, since 2017, we have expended and will continue to expend resources to meet increased regulatory expectations. Increased deposit insurance assessments could result in increased expense related to our use of deposits as a funding source. Likewise, a reduction in the amount of interchange fees we receive for electronic debit interchange will reduce our revenues.

Our recent results may not be indicative of our future results.

We may not be able to sustain our historical rate of growth or may not even be able to grow our business at all. In addition, our recent growth may distort some of our historical financial ratios and statistics. Various factors, such as economic conditions, regulatory and legislative considerations and competition, may also impede or prohibit our ability to expand our market presence. If we experience a significant decrease in our historical rate of growth, our results of operations and financial condition may be adversely affected due to a high percentage of our operating costs being fixed expenses.

A significant portion of our loan portfolio is secured by real estate, substantially all of which is located in Florida, and events that negatively impact the real estate market could hurt our resultant business.

A substantial majority of our loans are concentrated in Florida and subject to the volatility of the state’s economy and real estate market. With our loans concentrated in Florida, declines in local economic conditions will adversely affect the values of our real estate collateral. Consequently, a decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of other financial institutions whose real estate loan portfolios are more geographically diverse.

In addition to relying on the financial strength and cash flow characteristics of the borrower in each case, we often secure loans with real estate collateral. At December 31, 2018, approximately 84% of our loans have real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower but may deteriorate in value during the time credit is extended. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected.

Our loan portfolio includes commercial and commercial real estate loans that may have higher risks.

Our commercial and commercial real estate loans at December 31, 2018 and 2017 were $5.64 billion and $3.24 billion, respectively, or 69% and 70% of total loans, excluding purchased credit-impaired loans. Commercial and commercial real estate loans generally carry larger loan balances and can involve a greater degree of financial and credit risk than other loans. The increased financial and credit risk associated with these types of loans are a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the size of loan balances, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans.

As a result, banking regulators give greater scrutiny to lenders with a high concentration of commercial real estate loans in their portfolios, and such lenders are expected to implement stricter underwriting, internal controls, risk management policies and portfolio stress testing, as well as maintain higher capital levels and loss allowances. The Guidance states that the following metrics may indicate a concentration of commercial real estate loans, but that these metrics are neither limits nor a safe harbor:

17

 


 

 

1)

total reported loans for construction, land development, and other land equal 100% or more of  total risk based capital (as of December 31, 2018, our consolidated ratio was 55%); and

 

2)

total reported loans secured by multifamily and non-farm nonresidential properties and loans for construction, land development, and other land equal 300% or more of total risk-based capital (as of December 31, 2018, our consolidated ratio was 279%).

Regulators may require banks to maintain elevated levels of capital or liquidity due to commercial real estate loan concentrations, and could do so, especially if there is a downturn in our local real estate markets. See Part I Item 1. “Supervision and Regulation – Lending Standards and Guidance” for further details on the Guidance.

Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related real estate or commercial project. If the cash flows from the project are reduced, a borrower’s ability to repay the loan may be impaired. This cash flow shortage may result in the failure to make loan payments. In such cases, we may be compelled to modify the terms of the loan. In addition, the nature of these loans is such that they are generally less predictable and more difficult to evaluate and monitor. As a result, repayment of these loans may, to a greater extent than residential loans, be subject to adverse conditions in the real estate market or economy.

Our profitability is vulnerable to interest rate fluctuations.

Our profitability depends substantially upon our net interest income.  That net interest income is the difference between the interest earned on assets (such as loans and securities held in our investment portfolio) and the interest paid for liabilities (such as interest paid on savings and money market accounts and time deposits).  Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions. Conditions such as inflation, deflation, recession, unemployment, money supply, and other factors beyond our control may also affect interest rates. In addition, during 2018m the Federal Reserve has started to reduce the size of its balance sheet by selling securities, which might also affect interest rates.

Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by fluctuations in interest rates.  The magnitude and duration of changes in interest rates are events over which we have no control, and such changes may have an adverse effect on our net interest income.  Prepayment and early withdrawal levels, which are also impacted by changes in interest rates, can significantly affect our assets and liabilities.

For example, an increase in interest rates could, among other things, reduce the demand for loans and decrease loan repayment rates.  Such an increase could also adversely affect the ability of our floating-rate borrowers to meet their payment obligations, which could in turn lead to an increase in non-performing assets and net charge-offs.  Conversely, a decrease in the general level of interest rates could affect us by, among other things, leading to greater competition for deposits and incentivizing borrowers to prepay or refinance their loans more quickly or frequently than they otherwise would.  Generally, interest rates on our interest-earning assets and interest-bearing liabilities do not change at the same rate, to the same extent or on the same basis.  Even assets and liabilities with similar maturities or repricing periods may react in different degrees to changes in market interest rates.  Interest rates on certain types of assets and liabilities may fluctuate in advance of changes in general market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in general market rates.  Certain assets, such as fixed and adjustable rate mortgage loans, have features that limit changes in interest rates on a short-term basis and over the life of the asset.  

We have ongoing policies and procedures designed to manage the risks associated with changes in market interest rates, including prepayment risks, and we model expected customer behavior based on historical experience of other interest rate cycles. Notwithstanding these policies and procedures, our customers may not react to changes in interest rates in the same manner in which they historically have reacted, resulting in a larger outflow of deposits or a higher level of loan prepayments than we expect. Such reaction could require us to increase interest rates to retain or acquire deposits, or lower loan rates to retain or attract loans. In either case, our deposit costs may increase and our loan interest income may decline, either or both of which may have an adverse effect on our financial results.  

The results of our most recent credit stress tests may not accurately predict the impact on our financial condition if the economy were to deteriorate.

 We perform credit stress testing on our capital position no less than annually, using the economic data and stress testing assumptions provided by the regulators for the CCAR stress tests. Under the stress test, we estimate our loan losses (loan charge-offs), resources available to absorb those losses and any necessary additions to capital that would be required under the “more adverse” stress test scenario. The results of these stress tests involve many assumptions about the economy and future loan losses and default rates, and may not accurately reflect the impact on our financial condition if the economy were to deteriorate. Any deterioration of the economy could result in credit losses significantly higher, with a corresponding impact on our financial condition and capital, than those predicted by our internal stress test.

18

 


 

Our processes for managing risk may not be effective in mitigating risk or losses to us.

The objectives of our risk management processes are to mitigate risk and loss to our organization. We have established procedures that are intended to identify, measure, monitor report and analyze the types of risks to which we are subject, including liquidity risk, credit risk, market risk, interest rate risk, operational risk, cybersecurity risk, corporate governance and legal risk, compliance risk, and reputational risk, among others. However, as with any risk management processes, there are inherent limitations to our risk management strategies as there may exist, or develop in the future, risks that we have not appropriately anticipated or identified. The ongoing developments in the financial institutions industry continue to highlight both the importance and some of the limitations of managing unanticipated risks. If our risk management processes prove ineffective, we could suffer unexpected losses and could be materially adversely affected.

We are subject to environmental risks in our lending activities.  

Since a significant portion of our loan portfolio is secured by real property, we may foreclose upon and take title to such property in the ordinary course of business.  If hazardous substances were discovered on any of these properties, we may be liable to governmental agencies or third parties for the costs of remediation of the hazard, as well as for personal injury and property damage.  Environmental laws might require us to incur substantial expenses, materially reduce the property’s value, or limit our ability to use or sell the property.  Although our management has policies requiring environmental reviews before loans secured by real property are made and before foreclosure is commenced, it is still possible that environmental risks might not be detected and that the associated costs might have a material adverse effect on our financial condition and results of operations.  Many environmental laws can impose liability regardless of whether the Company knew of, or were responsible for, the contamination.

An inadequate allowance for loan losses would reduce our earnings.

The risk of credit losses on loans varies with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the value and marketability of the collateral for the loan. Management maintains an allowance for loan losses based upon, among other things, historical experience, an evaluation of economic conditions and regular reviews of delinquencies and loan portfolio quality. Based upon such factors, management makes various assumptions and judgments about the ultimate collectability of the loan portfolio and provides an allowance for loan losses based upon a percentage of the outstanding balances and for specific loans when their ultimate collectability is considered questionable. In June 2016, the FASB issued a new current expected credit loss rule, which will be effective for us in 2020 and which will change our accounting for credit losses by requiring us to record, at the time of origination, credit losses expected throughout the life of loans, held-to-maturity securities, and certain other assets and off-balance sheet credit exposures as opposed to the current practice of recording losses when it is probable that a loss event has occurred.  We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but has not yet determined the magnitude of any such one-time adjustment or the overall impact on our Financial Statements.

If management’s assumptions and judgments prove to be incorrect and the allowance for loan losses is inadequate to absorb losses, or if bank regulatory authorities require us to increase the allowance for loan losses as a part of their examination process, our earnings and capital could be significantly and adversely affected.

The uncertainty in the amount and timing of the resolution of purchase impaired loans may create a negative impact on our profitability.

As required by applicable accounting standards, we have accounted for our purchased impaired loan portfolio under ASC 310-30, which requires us to periodically re-estimate the expected cash flow of these loans.  Lower expected cash flow, whether due to changes in projected cash flow estimates, reduction in payoffs due to rising interest rates, increases in loss estimates, or defaults, may result in impairment of the carrying value of these loans. Any such impairment must be taken in the period in which the change in cash flow estimate occurs.  Any such impairment will reduce our earnings and results of operations.   

We will realize future losses if the proceeds we receive upon liquidation of non-performing assets (“NPAs”) are less than the carrying value of such assets.

We record our NPAs on our financial statements at the estimated net realizable valuable that we expect to receive from ultimately disposing of these assets. We could realize losses in the future as a result of deteriorating market conditions if the proceeds we receive upon disposition of the NPAs are less than our carrying value of such assets.


19

 


 

While we use appraisals in deciding whether to make a loan that is secured by real estate, they do not ensure the value of the real property collateral.

In deciding whether to make a loan secured by real property, we generally require an appraisal. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made. If the appraised amount does not reflect the amount that may be obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property.

A lack of liquidity could affect our operations and jeopardize our financial condition.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our funding sources include core deposits, federal funds purchased, securities sold under repurchase agreements, non-core deposits, and short- and long-term debt. There are other sources of liquidity available to us should they be needed, including our ability to acquire additional non-core deposits, the issuance and sale of debt securities, a secured line of credit we have with NexBank, and the issuance and sale of preferred or common securities in public or private transactions. Our access to funding sources in amounts adequate to finance or capitalize our activities or on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general. Our ability to borrow could be impaired by factors that are not specific to us, such as further disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of the recent turmoil faced by banking organizations and the continued deterioration in credit markets.

Uncertainty about the future of LIBOR may adversely affect our business.

In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it intended to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. The announcement indicates that the continuation of LIBOR on the current basis cannot be guaranteed after 2021.  While there is no consensus on what rate or rates may become accepted alternatives to LIBOR, a group of large banks, the Alternative Reference Rate Committee (ARRC), selected and the Federal Reserve Bank of New York started in April 2018 to publish the Secured Overnight Finance Rate or SOFR as an alternative to LIBOR.  SOFR is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, given the depth and robustness of the U.S. Treasury repurchase market.  Furthermore, the Bank of England has commenced publication of a reformed Sterling Overnight Index Average (SONIA), comprised of a broader set of overnight Sterling money market transactions, as of April 23, 2018. The SONIA has been recommended as the alternative to Sterling LIBOR by the Working Group on Sterling Risk-Free Reference Rates. At this time, it is impossible to predict whether SOFR and SONIA will become accepted alternatives to LIBOR.

The market transition away from LIBOR to an alternative reference rate, including SOFR or SONIA, is complex and could have a range of adverse effects on our business, financial condition and results of operations.  In particular, any such transition could:

 

adversely impact the value of LIBOR-based securities, including certain of our floating rate corporate debentures or our hedging instruments, or other securities or financial arrangements given LIBOR’s role in determining market interest rates globally;

 

although the Bank has implemented language in in its hedging and loan documents to accommodate a change from LIBOR to an alternative pricing benchmark, including SOFR or SONIA, we may be required to make further changes to existing LIBOR-based products;

 

prompt inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with an alternative reference rate;

 

result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of certain fallback language in LIBOR-based securities; and

 

require the transition and/or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on the applicable alternative pricing benchmark, such as SOFR or SONIA.

The manner and impact of this transition, as well as the effect of these developments on our funding costs, loan and investment and trading securities portfolios, asset-liability management, and business, is uncertain.

Our business could suffer if we fail to maintain our culture and attract and retain skilled people.

Our success depends, in large part, on our ability to attract and retain competent, experienced people.  Our strategic goals in particular require that we be able to attract qualified and experienced retail and commercial lending officers, mortgage loan officers, and SBA lenders in our existing markets as well as those markets in which we may want to expand who share our relationship banking philosophy and have those customer relationships that will allow us to successfully expand.  We also need to attract and retain

20

 


 

qualified and experienced technology, risk and back-office personnel to operate our business.  Many of our competitors are pursuing the same relationship banking strategy in our markets, and also are looking to hire and retain qualified technology, risk and back-office personnel, which increases the competition to identify, hire and retain talented employees.  

We have focused our strategic attention on our employees and our corporate culture, including on enhancing our employee orientation, ongoing general and management training, mentoring and employee work environment as well as diversity and employee advancement.  Our failure to maintain our culture and attractive working environment, through competitive compensation packages that reward initiative, as well as mentoring, training, and advancement opportunities in order to successfully compete for experienced, qualified employees may have an adverse effect on our ability to meet our financial goals and thus adversely affect our future results of operations.

If we are unable to offer our key management personnel long‑term incentive compensation, including restricted stock units and performance share units, as part of their total compensation package, we may have difficulty retaining such personnel, which would adversely affect our operations and financial performance.

We have historically granted equity awards under an equity compensation plan, which includes granting performance share units and restricted stock awards or restricted stock units, to key management personnel as part of a competitive compensation package. Our ability to grant these awards has been vital to attracting, retaining and aligning shareholder interest with a talented management team in a highly competitive marketplace.  

Shareholder advisory groups have implemented guidelines and issued voting recommendations related to how much equity companies should be able to grant to employees. The factors used to formulate these guidelines and voting recommendations include the volatility of a company’s share price and are influenced by broader macro‑economic conditions that can change year to year. The variables used by shareholder advisory groups to formulate equity plan recommendations may limit our ability to adopt new equity plans in the future. In addition, the federal banking regulators have issued guidance on executive compensation and have also, along with the SEC, proposed rules that would prohibit certain incentive compensation arrangements. We do not believe that the guidance or proposal will impact our current compensation arrangements.

If we are limited in our ability to grant equity compensation awards, we would need to explore offering other compelling alternatives to supplement our compensation, including long‑term cash compensation plans or significantly increased short‑term cash compensation, in order to continue to attract and retain key management personnel. If we used these alternatives to long‑term equity awards, our compensation costs could increase and our financial performance could be adversely affected. If we are unable to offer key management personnel long‑term incentive compensation, including stock options, restricted stock or restricted stock units, or performance share units, as part of their total compensation package, we may have difficulty attracting and retaining such personnel, which would adversely affect our operations and financial performance.

Technological changes, including online and mobile banking, have the potential of disrupting our business model, and we may have fewer resources than many competitors to invest in technological improvements.

The financial services industry continues to undergo rapid technological changes with frequent introductions of new technology-driven products and services, including mobile and online banking services.  Changes in customer behaviors have increased the need to offer these options to our customers.  In addition to serving clients better, the effective use of technology may increase efficiency and may enable financial institutions to reduce costs. Our future success will depend, in part, upon our ability to invest in and use technology to provide products and services that provide convenience to customers and to create additional efficiencies in operations. One of our 2019 strategic goals is to focus on technological change and digital transformation of our product and service channels, which will impact how we deliver our products and services in the future.  We will need to make significant additional capital investments in technology to implement this strategic goal, and we may not be able to effectively implement new technology-driven products and services in a timely manner in response to changes in customer behaviors, thus adversely impacting our operations. Many competitors have substantially greater resources to invest in technological improvements than the Company.

We rely on other companies to provide key components of our business infrastructure.

Third parties provide key components of our business infrastructure, such as our loan and deposit documents, underwriting software, compliance software, product and service offerings, core processing, and internet connections and network access. Any disruption in such services provided by these third parties or any failure of these third parties to handle currently or higher volumes of use could adversely affect our ability to deliver products and services to our clients and otherwise to conduct business. Technological or financial difficulties of one or our third party service providers or their sub-contractors could adversely affect our business to the extent those difficulties result in the interruption or discontinuation of services provided by that party.  In addition, one or more of our third party service providers may become subject to cyber-attacks or information security breaches that could result could result in the unauthorized release, gathering, monitoring, misuse, loss of destruction of our or our client’s confidential, proprietary and other information, or otherwise disrupt our or our clients’ or other third parties’ business operations. While we have processes in place to

21

 


 

monitor our third party service providers’ data and information security safeguards, we do not control such service providers’ day to day operations and a successful attack or security breach at one or more of such third party service providers is not within our control.  The occurrence of any such breaches or failures could damage our reputation, result in a loss of customer business, and expose us to additional regulatory scrutiny, civil litigation, and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations. Further, in some instances we may responsible for the failure of such third parties to comply with government regulations. We may not be insured against all types of losses as a result of third party failures and our insurance coverage may not be inadequate to cover all losses resulting from system failures, third party breaches, or other disruptions. Failures in our business structure or in the structure of one or more of our third party service providers could interrupt the operations or increase the cost of doing business.

A failure and/or breach of our operational or securities systems or infrastructure, or those of our third party vendors and other service providers, including as a result of cyber-attacks, could disrupt our business, result in a disclosure or misuse of confidential or propriety information, damage our reputation, increase our costs and cause losses.

The potential for operational risk exposure exists throughout our business and, as a result of our interactions with, and reliance on, third parties, is not limited to our own internal operational functions. We depend on our ability to process, record and monitor a large number of client transactions on a continuous basis. As client, public and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions and breakdowns. Our business, financial, accounting, data processing, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control. Although we have data security, business continuity plans and other safeguards in place, our business operations may be adversely affected by significant and widespread disruption to our physical infrastructure or operating systems that support our businesses and clients.

We rely on our employees and third parties in our day-to-day and ongoing operations, who may, as a result of human error, misconduct, malfeasance or failure, or breach of our or of third-party systems or infrastructure, expose us to risk. For example, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact or upon whom we rely. In addition, our ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect to our own systems. Our financial, accounting, data processing, backup or other operating or security systems and infrastructure may fail to operate properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control, which could adversely affect our ability to process transactions or provide services. Such events may include sudden increases in customer transaction volume; electrical, telecommunications or other major physical infrastructure outages; natural disasters such as earthquakes, tornadoes, hurricanes and floods; disease pandemics; and events arising from local or larger scale political or social matters, including wars and terrorist acts. In addition, we may need to take our systems offline if they become infected with malware or a computer virus or as a result of another form of cyber-attack. In the event that backup systems are utilized, they may not process data as quickly as our primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or permanent loss of such data. We frequently update our systems to support our operations and growth and to remain compliant with all applicable laws, rules and regulations. This updating entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones, including business interruptions. Implementation and testing of controls related to our computer systems, security monitoring and retaining and training personnel required to operate our systems also entail significant costs. Operational risk exposures could adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption.

Any failure or interruption in the operation of our communications and information systems could impair or prevent the effective operation of our customer relationship management, general ledger, deposit, lending or other functions.  While we have policies and procedures designed to prevent or limit the effect of a failure or interruption in the operation of our information systems, there could be no assurance that any such failures or interruptions will not occur or, if they do, that they will be adequately addressed.  The occurrence of any failures or interruptions impacting our information systems could damage our reputation, result in a loss of customer business, and expose us to additional regulatory scrutiny, civil litigation, and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and customers, malware intrusion or data corruption attempts, and identity theft that could result in the disclosure of confidential information, adversely affect our business or reputation, and create significant legal and financial exposure.

Our computer systems and network infrastructure and those of third parties, on which we are highly dependent, are subject to security risks and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft.  Our business relies on the secure processing, transmission, storage and retrieval of confidential, proprietary and other information in our computer and data management systems and networks, and in the computer and data management systems and networks of third parties. In addition, to access our network, products and services, our customers and other third parties may use personal mobile devices or computing devices that are outside of our network environment and are subject to their own cybersecurity risks.  

22

 


 

We, our customers, regulators and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to, and are likely to continue to be the target of, cyber-attacks. These cyber-attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information, ransomware, improper access by employees or vendors, attacks on personal email of employees, ransom demands to not expose security vulnerabilities in our systems or the systems of third parties or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers or of third parties, damage our systems or otherwise materially disrupt our or our customers’ or other third parties’ network access or business operations. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents. Despite efforts to ensure the integrity of our systems and implement controls, processes, policies and other protective measures, we may not be able to anticipate all security breaches, nor may we be able to implement guaranteed preventive measures against such security breaches. Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, and the use of the internet and telecommunications technologies to conduct financial transactions. For example, cybersecurity risks may increase in the future as we continue to increase our mobile-payment and other internet-based product offerings and expand our internal usage of web-based products and applications. In addition, cybersecurity risks have significantly increased in recent years in part due to the increased sophistication and activities of organized crime affiliates, terrorist organizations, hostile foreign governments, disgruntled employees or vendors, activists and other external parties, including those involved in corporate espionage. Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks and "spear phishing" attacks are becoming more sophisticated and are extremely difficult to prevent. In such an attack, an attacker will attempt to fraudulently induce colleagues, customers or other users of our systems to disclose sensitive information in order to gain access to its data or that of its clients. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cyber criminals change frequently, may not be recognized until launched and may not be recognized until well after a breach has occurred. The risk of a security breach caused by a cyber-attack at a vendor or by unauthorized vendor access has also increased in recent years. Additionally, the existence of cyber-attacks or security breaches at third-party vendors with access to our data may not be disclosed to us in a timely manner.

We also face indirect technology, cybersecurity and operational risks relating to the customers, clients and other third parties with whom we do business or upon whom we rely to facilitate or enable our business activities, including, for example, financial counterparties, regulators and providers of critical infrastructure such as internet access and electrical power. As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure, cyber-attack or other information or security breach that significantly degrades, deletes or compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including us. This consolidation, interconnectivity and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis. Any third-party technology failure, cyber-attack or other information or security breach, termination or constraint could, among other things, adversely affect our ability to effect transactions, service our clients, manage our exposure to risk or expand our business. In addition, we, our employees and our customers, are increasingly transitioning our and their computing infrastructure to cloud-based computing, storage, data processing, networking and other services, which may increase these security risks.

Cyber-attacks or other information or security breaches, whether directed at us or third parties, may result in a material loss or have material consequences. Furthermore, the public perception that a cyber-attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business. Hacking of personal information and identity theft risks, in particular, could cause serious reputational harm. A successful penetration or circumvention of system security could cause us serious negative consequences, including our loss of customers and business opportunities, significant business disruption to our operations and business, misappropriation or destruction of our confidential information and/or that of our customers, or damage to our or our customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, additional compliance costs, and could adversely impact our results of operations, liquidity and financial condition.