Press Release

CenterState Bank Corporation Announces Fourth Quarter 2019 Results

(all amounts are in thousands, except per share data, or unless otherwise noted)

Company Release - 1/27/2020 7:35 AM ET

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

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

 


























Three Months Ended December 31,



Twelve Months Ended December 31,





2019



2018



2019



2018





 

Reported


Adjusted (4)
 (Non-
GAAP)



 

Reported


Adjusted (4)
(Non-
GAAP)



 

Reported


Adjusted (4)
(Non-
GAAP)



 

Reported


Adjusted (4)
(Non-
GAAP)

















Net income


$71,132


$72,231



$50,651


$51,913



$225,396


$256,220



$156,435


$182,571



Return on average assets


1.63%


1.66%



1.64%


1.68%



1.42%


1.61%



1.43%


1.67%



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


18.8%


19.1%



19.8%


20.2%



16.2%


18.4%



17.7%


20.5%



Earnings per share diluted


$0.56


$0.57



$0.52


$0.54



$1.87


$2.13



$1.76


$2.06



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


54.3%


52.1%



53.4%


50.3%



59.3%


51.9%



60.0%


51.4%


























(1)

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

(2)

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

(3)

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

(4)

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

 

Condensed Consolidated Income Statement(unaudited)


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









Three Months Ended



Twelve Months Ended



Dec. 31, 2019


Sep. 30, 2019


Jun. 30, 2019


Mar. 31, 2019


Dec. 31, 2018



Dec. 31, 2019


Dec. 31, 2018

Interest income
















Loans


$167,685


$166,479


$167,676


$116,285


$116,754



$618,125


$405,881

Investment securities


13,404


13,472


14,453


14,002


13,516



55,331


49,122

Federal Funds sold and other


2,783


3,974


3,124


1,995


1,911



11,876


5,629

Total interest income


183,872


183,925


185,253


132,282


132,181



685,332


460,632

Interest expense
















Deposits


22,276


24,463


23,037


13,323


12,360



83,099


33,260

Securities sold under agreement to repurchase


278


293


299


236


203



1,106


632

Other borrowed funds


2,880


3,680


2,679


3,978


3,289



13,217


11,445

Corporate debentures


513


542


557


570


647



2,182


2,213

Interest expense


25,947


28,978


26,572


18,107


16,499



99,604


47,550

Net interest income


157,925


154,947


158,681


114,175


115,682



585,728


413,082

Provision for loan losses


3,048


3,692


2,792


1,053


2,100



10,585


8,283

Net interest income after loan loss provision


154,877


151,255


155,889


113,122


113,582



575,143


404,799

















Gain (loss) on sale of securities available for sale


13



(5)


17




25


(22)

Gain on sale of deposits









611

All other non-interest income


50,316


48,488


37,948


29,283


32,396



166,035


104,538

Total non-interest income


50,329


48,488


37,943


29,300


32,396



166,060


105,127

















Merger related expenses


159


16,994


15,739


6,365


1,668



39,257


34,912

All other non-interest expense


113,250


110,042


106,250


78,108


77,852



407,650


277,555

Total non-interest expense


113,409


127,036


121,989


84,473


79,520



446,907


312,467

















Income before income tax


91,797


72,707


71,843


57,949


66,458



294,296


197,459

Income tax provision


20,665


17,006


16,721


13,306


15,807



67,698


41,024

Net income before earnings attributable to noncontrolling interest


71,132


55,701


55,122


44,643


50,651



226,598


156,435

Earnings attributable to noncontrolling interest



603


599





1,202


Net income


$71,132


$55,098


$54,523


$44,643


$50,651



$225,396


$156,435

Net income attributable to CenterState Bank Corporation


$71,109


$55,077


$54,502


$44,620


$50,619



$225,308


$156,319

















Earnings per share - Basic


$0.57


$0.43


$0.42


$0.47


$0.53



$1.88


$1.78

Earnings per share - Diluted


$0.56


$0.43


$0.42


$0.46


$0.52



$1.87


$1.76

Dividends per share


$0.11


$0.11


$0.11


$0.11


$0.10



$0.44


$0.40

Average common shares outstanding (basic)


125,147


127,840


129,848


95,741


95,603



119,747


87,641

Average common shares outstanding (diluted)


126,082


128,739


130,768


96,501


96,450



120,604


88,759

Common shares outstanding at period end


125,174


126,037


129,006


95,913


95,680



125,174


95,680

Effective tax rate


22.51%


23.59%


23.47%


22.96%


23.78%



23.10%


20.78%

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


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






Ending Balance

Condensed Consolidated Balance Sheets


Dec. 31, 2019


Sep. 30, 2019


Jun. 30, 2019


Mar. 31, 2019


Dec. 31, 2018

Assets











Cash and due from banks


$326,168


$598,808


$399,952


$256,580


$135,352

Fed funds sold and Fed Reserve Bank deposits


163,890


238,470


437,386


339,223


231,981

Trading securities


4,987


4,273


651



1,737

Investment securities:











  Available for sale


1,886,724


1,779,956


1,792,757


1,701,396


1,727,348

  Held to maturity


202,903


207,209


210,756


214,240


216,833

Total investment securities


2,089,627


1,987,165


2,003,513


1,915,636


1,944,181

Loans held for sale


142,801


125,182


95,108


49,474


40,399

Loans:











  Originated loans


5,922,879


5,494,738


4,888,357


4,349,627


4,108,656

  Acquired loans


5,925,596


6,278,686


6,667,101


3,850,312


4,072,877

  Purchased Credit Impaired ("PCI") loans


135,468


142,982


157,303


149,456


158,971

   Total gross loans


11,983,943


11,916,406


11,712,761


8,349,395


8,340,504

   Allowance for loan losses


(40,655)


(41,991)


(40,653)


(40,052)


(39,770)

Loans, net of allowance


11,943,288


11,874,415


11,672,108


8,309,343


8,300,734

Premises, equipment and right of use assets, net


328,869


327,977


324,974


248,625


227,454

Goodwill


1,204,417


1,204,417


1,204,417


802,880


802,880

Core deposit intangible


91,157


95,175


99,200


63,511


66,225

Bank owned life insurance


330,155


328,736


326,689


269,144


267,820

OREO


5,092


6,558


5,881


5,981


2,909

Deferred income tax asset, net


28,786


37,921


44,637


38,030


51,462

Other assets


482,788


591,279


422,081


289,210


264,454

Total Assets


$17,142,025


$17,420,376


$17,036,597


$12,587,637


$12,337,588












Liabilities and Equity











Deposits:











     Non-interest bearing


$3,929,183


$4,081,078


$3,990,883


$3,152,251


$2,923,640

     Interest bearing


2,613,933


2,430,149


2,493,870


1,813,028


1,811,006

  Total checking accounts


6,543,116


6,511,227


6,484,753


4,965,279


4,734,646

  Money market accounts


3,525,571


3,648,449


3,569,025


2,156,667


2,216,571

  Savings deposits


811,150


780,052


725,124


703,949


704,159

  Time deposits


2,256,555


2,423,335


2,433,183


1,921,130


1,821,960

Total deposits


13,136,392


13,363,063


13,212,085


9,747,025


9,477,336

Federal funds purchased


379,193


259,077


276,963


303,017


294,360

Other borrowings


325,484


423,662


310,595


302,534


451,187

Other liabilities


404,238


516,872


346,442


207,509


143,361

Stockholders' equity:











Common stockholders' equity


2,896,718


2,857,702


2,878,377


2,027,552


1,971,344

Noncontrolling interest




12,135



Total equity


2,896,718


2,857,702


2,890,512


2,027,552


1,971,344












Total Liabilities and Equity


$17,142,025


$17,420,376


$17,036,597


$12,587,637


$12,337,588

 

SELECTED CONSOLIDATED FINANCIAL DATA


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









Three Months Ended



Twelve Months Ended



Dec. 31,
2019


Sep. 30,
2019


Jun. 30,
2019


Mar. 31,
2019


Dec. 31,
2018



Dec. 31,
2019


Dec. 31,
2018

Selected financial data
















Return on average assets (annualized)


1.63%


1.27%


1.30%


1.47%


1.64%



1.42%


1.43%

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


1.66%


1.57%


1.59%


1.63%


1.68%



1.61%


1.67%

















Return on average common equity (annualized)


9.80%


7.56%


7.63%


9.05%


10.38%



8.47%


9.41%

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


9.95%


9.34%


9.31%


10.03%


10.64%



9.63%


10.98%

















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


18.77%


14.61%


14.95%


16.80%


19.78%



16.25%


17.68%

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


19.05%


17.85%


18.04%


18.54%


20.25%



18.36%


20.49%

















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


54.3%


62.3%


61.9%


58.7%


53.4%



59.3%


60.0%

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


52.1%


51.9%


51.7%


52.3%


50.3%



51.9%


51.4%

















Dividend payout


19.6%


25.6%


26.2%


23.9%


19.2%



23.5%


22.7%

Loan / deposit ratio


91.2%


89.2%


88.7%


85.7%


88.0%






Common stockholders' equity (to total assets)


16.9%


16.4%


16.9%


16.1%


16.0%






Common equity per common share


$23.14


$22.67


$22.31


$21.14


$20.60






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


$12.76


$12.32


$12.17


$12.08


$11.49






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


10.1%


9.6%


10.0%


9.9%


9.6%






Tier 1 capital (to average assets)


9.7%


9.5%


9.9%


10.3%


10.1%








(1)

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

 

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

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

 

LOAN PORTFOLIO


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






Ending Balance



Dec. 31, 2019


Sep. 30, 2019


Jun. 30, 2019


Mar. 31, 2019


Dec. 31, 2018

Real estate loans











     Residential


$2,558,339


$2,530,119


$2,536,324


$1,818,228


$1,760,918

     Commercial


6,406,684


6,297,425


6,153,379


4,481,375


4,541,434

     Land, development and construction loans


1,004,578


1,061,701


1,057,532


658,373


642,590

Total real estate loans


9,969,601


9,889,245


9,747,235


6,957,976


6,944,942

Commercial loans


1,762,416


1,772,266


1,714,121


1,181,628


1,188,974

Consumer and other loans


247,407


250,225


247,049


206,754


203,895

Total loans before unearned fees and costs


11,979,424


11,911,736


11,708,405


8,346,358


8,337,811

Unearned fees and costs


4,519


4,670


4,356


3,037


2,693












Total Loans


$11,983,943


$11,916,406


$11,712,761


$8,349,395


$8,340,504

 

LOAN PRODUCTION

 

DEPOSITS






Ending Balance

Deposit mix


Dec. 31, 2019


Sep. 30, 2019


Jun. 30, 2019


Mar. 31, 2019


Dec. 31, 2018

Checking accounts











     Non-interest bearing


$3,929,183


$4,081,078


$3,990,883


$3,152,251


$2,923,640

     Interest bearing


2,613,933


2,430,149


2,493,870


1,813,028


1,811,006

Savings deposits


811,150


780,052


725,124


703,949


704,159

Money market accounts


3,525,571


3,648,449


3,569,025


2,156,667


2,216,571

Time deposits


2,256,555


2,423,335


2,433,183


1,921,130


1,821,960

Total deposits


$13,136,392


$13,363,063


$13,212,085


$9,747,025


$9,477,336












Non time deposits as percentage of total deposits


83%


82%


82%


80%


81%

Time deposits as percentage of total deposits


17%


18%


18%


20%


19%

Total deposits


100%


100%


100%


100%


100%

NET INTEREST MARGIN

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

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


Three Months Ended


Dec. 31, 2019



Sep. 30, 2019



Dec. 31, 2018



Average

Balance


Interest

Inc/Exp


Average

Rate



Average

Balance


Interest

Inc/Exp


Average

Rate



Average

Balance


Interest

Inc/Exp


Average

Rate














Originated loans (1)

$5,819,393


$71,101


4.85%



$5,301,936


$67,989


5.09%



$3,997,730


$48,036


4.77%


Acquired loans (1)

6,115,107


88,716


5.76%



6,482,939


91,127


5.58%



4,170,721


59,720


5.68%


PCI loans

138,584


8,224


23.54%



147,099


7,652


20.64%



162,813


9,448


23.02%


Taxable securities

1,803,467


11,664


2.57%



1,759,629


11,741


2.65%



1,665,809


11,833


2.82%


Tax-exempt securities (1)

221,438


1,948


3.49%



220,026


1,933


3.49%



216,936


1,964


3.59%


Fed funds sold and other

681,768


2,783


1.62%



790,635


3,974


1.99%



343,049


1,911


2.21%


Total interest earning assets (1)

$14,779,757


$184,436


4.95%



$14,702,264


$184,416


4.98%



$10,557,058


$132,912


4.99%























Non-interest earnings assets

2,531,319







2,490,042







1,681,312






Total assets

$17,311,076







$17,192,306







$12,238,370



























Interest bearing deposits

$9,207,290


$22,275


0.96%



$9,166,386


$24,464


1.06%



$6,456,452


$12,360


0.76%


Fed funds purchased

304,489


1,330


1.73%



289,821


1,781


2.44%



235,696


1,499


2.52%


Other borrowings

310,436


1,829


2.34%



367,481


2,191


2.37%



326,337


1,993


2.42%


Corporate debentures

32,711


513


6.22%



32,622


542


6.59%



39,816


647


6.45%


Total interest bearing liabilities

$9,854,926


$25,947


1.04%



$9,856,310


$28,978


1.17%



$7,058,301


$16,499


0.93%























Non-interest bearing deposits

4,081,634







4,004,554







3,091,289






All other liabilities

494,914







429,109







153,628






Total equity

2,879,602







2,902,333







1,935,152






Total liabilities and equity

$17,311,076







$17,192,306







$12,238,370



























Net Interest Spread (1)





3.91%







3.81%







4.06%


Net Interest Margin (1)





4.25%







4.19%







4.37%























Cost of Total Deposits





0.67%







0.74%







0.51%




(1)

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

The table below summarizes accretion income for the periods presented.


Three Months Ended



Twelve Months
Ended


Dec. 31,
2019


Sep. 30,
2019


Jun. 30,
2019


Mar. 31,
2019


Dec. 31,
2018



Dec. 31,
2019


Dec. 31,
2018

PCI accretion

$5,908


$5,418


$5,248


$7,904


$7,187



$24,478


$26,381

Non-PCI accretion

12,185


8,151


10,335


4,951


6,177



35,622


22,390

Total loan accretion

$18,093


$13,569


$15,583


$12,855


$13,364



$60,100


$48,771

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




Principal

Balance


Carrying

Balance


Total Loan

Discount



 

Percentage







Acquired Loans


$5,977,548


$5,925,596


($51,952)



0.9%

PCI loans


196,409


135,468


(60,941)

(1)


31.0%

Total purchased loans


$6,173,957


$6,061,064


($112,893)



1.8%



(1)

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

NON-INTEREST INCOME

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

Condensed Consolidated Non-Interest Income (unaudited)









Three Months Ended



Twelve Months Ended



Dec. 31,
2019


Sep. 30,
2019


Jun. 30,
2019


Mar. 31,
2019


Dec. 31,
2018



Dec. 31,
2019


Dec. 31,
2018

Correspondent banking revenue


$23,346


$21,018


$11,534


$9,000


$9,893



$64,898


$33,388

Mortgage banking revenue


9,113


9,444


6,803


4,193


4,204



29,553


12,610

SBA revenue


1,785


1,411


1,252


688


497



5,136


3,532

Wealth management related revenue


878


801


875


607


725



3,161


2,657

Service charges on deposit accounts


7,993


7,990


7,507


6,678


7,349



30,168


22,831

Debit, prepaid, ATM and merchant card related fees


3,082


3,923


6,376


5,018


5,149



18,399


16,243

Other non-interest income


4,119


3,901


3,601


3,099


4,579



14,720


13,277

Subtotal


$50,316


$48,488


$37,948


$29,283


$32,396



$166,035


$104,538

Gain (loss) on sale of securities available for sale


13



(5)


17




25


(22)

Gain on sale of deposits









611

Total Non-Interest Income


$50,329


$48,488


$37,943


$29,300


$32,396



$166,060


$105,127



Note: 

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

NON-INTEREST EXPENSES

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

Condensed Consolidated Non-Interest Expense (unaudited)









Three Months Ended



Twelve Months Ended



Dec. 31,
2019


Sep. 30,
2019


Jun. 30,
2019


Mar. 31,
2019


Dec. 31,
2018



Dec. 31, 2019


Dec. 31, 2018

Salaries, wages and employee benefits


$72,973


$71,352


$67,516


$48,393


$48,044



$260,234


$172,318

Occupancy expense


7,267


7,729


7,752


5,602


5,633



28,350


20,897

Depreciation of premises and equipment


4,151


3,887


3,550


2,850


2,752



14,438


9,788

Marketing expenses


1,958


1,765


1,797


2,020


1,903



7,540


6,235

Data processing expenses


5,242


5,182


5,525


3,656


3,621



19,605


14,308

Legal, auditing and other professional fees


2,958


2,364


2,106


1,442


2,599



8,870


6,163

Bank regulatory related expenses


723


635


2,074


1,616


1,299



5,048


4,885

Debit, ATM and merchant card related expenses


1,362


1,382


1,304


1,453


1,657



5,501


4,253

Credit related expenses


879


795


760


729


165



3,163


1,502

Amortization of intangibles


4,552


4,229


4,435


2,814


2,989



16,030


10,018

Impairment on bank property held for sale


808


506


315


107


80



1,736


2,667

Other expenses


10,377


10,216


9,116


7,426


7,110



37,135


24,521

Subtotal


$113,250


$110,042


$106,250


$78,108


$77,852



$407,650


$277,555

Merger-related expenses


159


16,994


15,739


6,365


1,668



39,257


34,912

Total Non-Interest Expense


$113,409


$127,036


$121,989


$84,473


$79,520



$446,907


$312,467



Note: 

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

CREDIT QUALITY AND ALLOWANCE FOR LOAN LOSSES

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

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



Ending Balance






Non-Performing Assets (1)


Dec. 31, 2019


Sep. 30, 2019


Jun. 30, 2019


Mar. 31, 2019


Dec. 31, 2018






Non-accrual loans


$36,916


$39,048


$26,334


$35,181


$23,567






Past due loans 90 days or more and still accruing interest


 

1,692


 

473


 


 


 











Total non-performing loans ("NPLs")


38,608


39,521


26,334


35,181


23,567






Other real estate owned ("OREO")


5,092


6,558


5,881


5,981


2,909






Repossessed assets other than real estate


170


258


236


313


350






Total non-performing assets


$43,870


$46,337


$32,451


$41,475


$26,826
























Three Months Ended



Twelve Months Ended

Asset Quality Ratios (1)


Dec. 31, 2019


Sep. 30, 2019


Jun. 30, 2019


Mar. 31, 2019


Dec. 31, 2018



Dec. 31, 2019


Dec. 31, 2018

Non-performing loans as percentage of total loans


0.33%


0.34%


0.23%


0.43%


0.29%






Non-performing assets as percentage of total assets


0.26%


0.27%


0.19%


0.33%


0.22%






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


 

0.37%


 

0.39%


 

0.28%


 

0.51%


 

0.33%










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


0.48%


 

0.52%


 

0.44%


 

0.42%


 

0.45%











Allowance for loan losses as percentage of NPLs


105%


106%


154%


113%


168%






Net charge-offs


$4,384


$2,354


$2,191


$771


$1,131



$9,700


$1,403

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


 

0.15%


 

0.08%


 

0.08%


 

0.04%


 

0.05%



 

0.09%


 

0.02%



(1)

  Excludes PCI loans.

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



December 31, 2019


September 30, 2019


Increase (Decrease)



Loan

Balance

ALLL

Balance

 

%


Loan

Balance

ALLL

Balance

%


Loan

Balance

ALLL

Balance







Originated loans


$5,907,801

$37,151

0.63%


$5,479,813

$36,921

0.67%


$427,988

$230

(4) bps

Impaired originated loans


15,078

842

5.58%


14,925

1,204

8.07%


153

(362)

(249) bps

Total originated loans


5,922,879

37,993

0.64%


5,494,738

38,125

0.69%


428,141

(132)

(5) bps














Acquired loans (1)


5,914,534

1,400

0.02%


6,263,910

1,538

0.02%


(349,376)

(138)

– bps

Impaired acquired loans (2)


11,062

1,036

9.37%


14,776

2,095

14.18%


(3,714)

(1,059)

(481) bps

Total acquired loans


5,925,596

2,436

0.04%


6,278,686

3,633

0.06%


(353,090)

(1,197)

(2) bps














Total non-PCI loans


11,848,475

40,429



11,773,424

41,758



75,051

(1,329)


PCI loans


135,468

226



142,982

233



(7,514)

(7)


Total loans


$11,983,943

$40,655



$11,916,406

$41,991



$67,537

$(1,336)




(1)

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

(2)

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


EXPLANATION OF CERTAIN UNAUDITED NON-GAAP FINANCIAL MEASURES

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

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

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

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









Three months ended



Twelve Months Ended



Dec. 31, 2019


Sep. 30, 2019


Jun. 30, 2019


Mar. 31, 2019


Dec. 31, 2018



Dec. 31, 2019


Dec. 31, 2018

Adjusted net income (Non-GAAP)
















Net income (GAAP)


$71,132


$55,098


$54,523


$44,643


$50,651



$225,396


$156,435

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


(10)



4


(13)




(19)


17

Gain on sale of deposits, net of tax









(465)

Merger-related expenses, net of tax


122


12,939


11,962


4,833


1,262



29,856


26,584

Deferred tax asset write down


987







987


Adjusted net income (Non-GAAP)


$72,231


$68,037


$66,489


$49,463


$51,913



$256,220


$182,571

















Adjusted net income per share - Diluted
















Earnings per share - Diluted (GAAP)


$0.56


$0.43


$0.42


$0.46


$0.52



$1.87


$1.76

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









(0.01)

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



0.10


0.09


0.05


0.02



0.25


0.31

Effect to adjust for deferred tax asset write down


0.01







0.01


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


$0.57


$0.53


$0.51


$0.51


$0.54



$2.13


$2.06

















Adjusted return on average assets (Non-GAAP)
















Return on average assets (GAAP)


1.63%


1.27%


1.30%


1.47%


1.64%



1.42%


1.43%

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



0.30%


0.29%


0.16%


0.04%



0.18%


0.24%

Effect to adjust for deferred tax asset write down


0.03%







0.01%


Adjusted return on average assets (Non-GAAP)


1.66%


1.57%


1.59%


1.63%


1.68%



1.61%


1.67%

 

 

 

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









Three months ended



Twelve Months Ended



Dec. 31, 2019


Sep. 30, 2019


Jun. 30, 2019


Mar. 31, 2019


Dec. 31, 2018



Dec. 31, 2019


Dec. 31, 2018

Adjusted return on average equity (Non-GAAP)
















Return on average equity (GAAP)


9.80%


7.56%


7.63%


9.05%


10.38%



8.47%


9.41%

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









(0.03%)

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


0.02%


1.78%


1.68%


0.98%


0.26%



1.12%


1.60%

Effect to adjust for deferred tax asset write down


0.13%







0.04%


Adjusted return on average equity (Non-GAAP)


9.95%


9.34%


9.31%


10.03%


10.64%



9.63%


10.98%

















Return on average tangible equity (non-GAAP)
















Net income (GAAP)


$71,132


$55,098


$54,523


$44,643


$50,651



$225,396


$156,435

Amortization of intangibles, net of tax


3,491


3,220


3,371


2,136


2,278



12,221


7,937

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


$74,623


$58,318


$57,894


$46,779


$52,929



$237,617


$164,372

















Average stockholders' equity (GAAP)


$2,879,606


$2,902,333


$2,876,244


$2,000,411


$1,935,152



$2,667,709


$1,662,815

Average noncontrolling interest



(11,723)


(11,844)





(5,909)


Average goodwill


(1,204,417)


(1,204,417)


(1,203,052)


(802,880)


(802,880)



(1,105,068)


(673,115)

Average core deposit intangible


(93,355)


(97,483)


(103,369)


(65,116)


(67,648)



(89,929)


(58,463)

Average other intangibles


(4,644)


(4,682)


(4,602)


(2,934)


(2,947)



(4,222)


(1,504)

Average tangible equity (Non-GAAP)


$1,577,190


$1,584,028


$1,553,377


$1,129,481


$1,061,677



$1,462,581


$929,733

















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


18.77%


14.61%


14.95%


16.80%


19.78%



16.25%


17.68%

















Adjusted return on average tangible equity (non-GAAP)
















Return on average tangible equity (Non-GAAP)


18.77%


14.61%


14.95%


16.80%


19.78%



16.25%


17.68%

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









(0.05%)

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


0.03%


3.24%


3.09%


1.74%


0.47%



2.04%


2.86%

Effect to adjust for deferred tax asset write down


0.25%







0.07%


Adjusted return on average tangible equity (Non-GAAP)


19.05%


17.85%


18.04%


18.54%


20.25%



18.36%


20.49%

















Efficiency ratio (tax equivalent) (Non-GAAP)
















Non-interest income (GAAP)


$50,329


$48,488


$37,943


$29,300


$32,396



$166,060


$105,127

Gain on sale of deposits









(611)

Adjusted non-interest income (Non-GAAP)


$50,329


$48,488


$37,943


$29,300


$32,396



$166,060


$104,516

















Net interest income before provision (GAAP)


$157,925


$154,947


$158,681


$114,175


$115,682



$585,728


$413,082

Total tax equivalent adjustment


564


491


495


547


731



2,063


2,521

Adjusted net interest income (Non-GAAP)


$158,489


$155,438


$159,176


$114,722


$116,413



$587,791


$415,603

















Non-interest expense (GAAP)


$113,409


$127,036


$121,989


$84,473


$79,520



$446,907


$312,467

Amortization of intangibles


(4,552)


(4,229)


(4,435)


(2,814)


(2,989)



(16,030)


(10,018)

Merger and acquisition related expenses


(159)


(16,994)


(15,739)


(6,365)


(1,668)



(39,257)


(34,912)

Adjusted non-interest expense (Non-GAAP)


$108,698


$105,813


$101,815


$75,294


$74,863



$391,620


$267,537

















Efficiency ratio (tax equivalent) (Non-GAAP)


54.3%


62.3%


61.9%


58.7%


53.4%



59.3%


60.0%

















Adjusted efficiency ratio, tax equivalent (Non-GAAP)


52.1%


51.9%


51.7%


52.3%


50.3%



51.9%


51.4%

 


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






Ending Balance



Dec. 31, 2019


Sep. 30, 2019


Jun. 30, 2019


Mar. 31, 2019


Dec. 31, 2018

Tangible common equity (Non-GAAP)











Total common stockholders' equity (GAAP)


$2,896,718


$2,857,702


$2,878,377


$2,027,552


$1,971,344

Goodwill


(1,204,417)


(1,204,417)


(1,204,417)


(802,880)


(802,880)

Core deposit intangible


(91,157)


(95,175)


(99,200)


(63,511)


(66,225)

Other intangibles


(4,507)


(4,700)


(4,620)


(2,996)


(2,953)

Common tangible equity (Non-GAAP)


$1,596,637


$1,553,410


$1,570,140


$1,158,165


$1,099,286












Total assets (GAAP)


$17,142,025


$17,420,376


$17,036,597


$12,587,637


$12,337,588

Goodwill


(1,204,417)


(1,204,417)


(1,204,417)


(802,880)


(802,880)

Core deposit intangible


(91,157)


(95,175)


(99,200)


(63,511)


(66,225)

Other intangibles


(4,507)


(4,700)


(4,620)


(2,996)


(2,953)

Total tangible assets (Non-GAAP)


$15,841,944


$16,116,084


$15,728,360


$11,718,250


$11,465,530












Common tangible equity to tangible assets (Non-GAAP)


10.1%


9.6%


10.0%


9.9%


9.6%

Common tangible equity per common share (Non-GAAP)


$12.76


$12.32


$12.17


$12.08


$11.49














Three months ended







Dec. 31, 2019


Sep. 30, 2019


Dec. 31, 2018





Tax equivalent yields (Non-GAAP)











Originated loans


$70,784


$67,723


$47,624





Acquired loans


88,677


91,104


59,682





PCI loans


8,224


7,652


9,448





Taxable securities


11,665


11,740


11,834





Tax-exempt securities


1,739


1,732


1,682





Fed funds sold and other


2,783


3,974


1,911





Interest income (GAAP)


$183,872


$183,925


$132,181





Tax equivalent adjustment for originated loans


316


266


411





Tax equivalent adjustment for acquired loans


39


23


38





Tax equivalent adjustment for tax-exempt securities


209


202


282





Tax equivalent adjustments


564


491


731





Interest income (tax equivalent) (Non-GAAP)


$184,436


$184,416


$132,912
















Net interest income (GAAP)


$157,925


$154,947


$115,682





Tax equivalent adjustments


564


491


731





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


$158,489


$155,438


$116,413
















Yield on originated loans


4.83%


5.07%


4.73%





Effect from tax equivalent adjustment


0.02%


0.02%


0.04%





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


4.85%


5.09%


4.77%
















Yield on acquired loans


5.76%


5.58%


5.68%





Effect from tax equivalent adjustment








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


5.76%


5.58%


5.68%
















Yield on tax exempted securities


3.12%


3.12%


3.07%





Effect from tax equivalent adjustment


0.37%


0.37%


0.52%





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


3.49%


3.49%


3.59%
















Yield on interest earning assets (GAAP)


4.94%


4.96%


4.96%





Effect from tax equivalent adjustments


0.01%


0.02%


0.03%





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


4.95%


4.98%


4.99%
















Net interest spread (GAAP)


3.90%


3.79%


4.03%





Effect for tax equivalent adjustments


0.01%


0.02%


0.03%





Net interest spread (Non-GAAP)


3.91%


3.81%


4.06%
















Net interest margin (GAAP)


4.24%


4.18%


4.35%





Effect from tax equivalent adjustments


0.01%


0.01%


0.02%





Net interest margin - tax equivalent (Non-GAAP)


4.25%


4.19%


4.37%
















Net interest margin - tax equivalent (Non-GAAP)


4.25%


4.19%


4.37%





Effect of loan accretion


(0.48%)


(0.36%)


(0.50%)





Net interest margin excluding loan accretion (Non-GAAP)


3.77%


3.83%


3.87%





About CenterState Bank Corporation

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

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

Forward Looking Statements

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

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/centerstate-bank-corporation-announces-fourth-quarter-2019-results-300993412.html

SOURCE CenterState Bank Corporation