FILED BY HCBF HOLDING COMPANY, INC.
PURSUANT TO RULE 425 UNDER THE SECURITIES ACT OF 1933, AS AMENDED
AND DEEMED FILED PURSUANT TO RULE 14a-12
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
SUBJECT COMPANY: HCBF HOLDING COMPANY, INC.
COMMISSION FILE NO. 333-217395
HCBF Holding Company, Inc.
200 South Indian River Drive, Suite 101 — Fort Pierce, Florida 34950 — (772) 409-2270
August 21, 2017
Dear Fellow Shareholders:
As most of you know, on August 14th, we announced the signing of a definitive agreement to merge with CenterState Bank (CSFL) based in Winter Haven, Florida. At the same time, CenterState also announced an agreement to merge with Sunshine Bancorp, Inc. based in Plant City, Florida. When these transactions are completed, CenterState will have assets in excess of $10 billion and be the largest community bank in Florida. CenterState is already a high performing bank, but these two transactions will enhance its footprint in the state and will enable us to provide a broader range of services to our customers while still remaining a community bank.
Harbor's shareholders will receive 0.675 of a share of CSFL common stock and $1.925 in cash consideration for each outstanding share of Harbor common stock. Regulatory approval and an affirmative vote of shareholders of HCBF and CSFL will be needed in order to complete the merger. The decision to go forward with this transaction was taken very seriously by our Board of Directors. We believe that the culture of CenterState is very similar to our own and the timing was right for both of the banks. We are excited and will keep you advised as the process goes forward. Now, I will review the enclosed unaudited financial statements of HCBF for the quarter ending 06/30/17 and discuss our most recent acquisition.
| · | Consolidated assets of HCBF were $1.88 billion as of 06/30/17 as compared to $1.78 billion at 06/30/16. The growth of approximately $105 million (a 6% increase) came without the benefit of any acquisition in the 12 month period. |
| · | Income for HCBF, on a consolidated basis for the quarter ending 06/30/17 was $1.84 million as compared to $1.96 million for the 06/30/16 quarter. For the six months ending 06/30/17, net income was $4.43 million up from $3.22 million for the 06/30/16 quarter. The prime reason for the approximately $120 thousand reduction in the 06/30/17 quarterly income from the 06/30/16 quarterly period was the approximately $1.3 million increase in provision for Loan Loss, somewhat offset by an almost $800 thousand increase in net interest income. The favorable comparison for the six month periods ending 06/30/17 and 06/30/16 showed an $800 thousand increase in net interest income, little change in Loan Loss provision, an almost $800 thousand increase in non-interest income and flat non-interest expense for and after tax increase in net income of over $1.2 million. |
| · | Residential originations for the 06/30/17 quarter were approximately $41 million, up from $28.5 million for the 03/31/17 quarter. Originations for the six months ending 06/30/17 were $69.3 million, down slightly from $75.7 for the six months ending 06/30/16. We believe that originations for the second six months of 2017 should equal or exceed the results for the first six months. We continue to sell a significant portion of this 1-4 family production to the secondary market. |
| · | Commercial loan originations for the 06/30/17 quarter were approximately $42 million, down from $46 million the prior quarter. Originations for the six months ending 06/30/17 were $88.6 million up from $78.5 million for the first six months of 2016. The loans are primarily backed by real estate and spread throughout our various markets, although the region producing the greatest volume continues to be the Treasure Coast. |
| · | Deposits for the second quarter of 2017 continue to grow into the summer season with growth of $9 million. Growth of deposits for the first six months of 2017 was approximately $86 million. We continue to be pleased with the mix of deposits, as we have a 32% of deposits in non-interest bearing accounts. |
| · | Harbor continues to make progress in reducing non-performing assets, primarily acquired in various acquisitions. Non-performing assets were a little over $20 million at 06/30/17, down approximately $7 million since 12/31/16. |
Finally, on 07/28/17, we were successful in completing our acquisition of Jefferson Bankshares in the Tampa area. With Jefferson, we have approximately $2.2 billion in assets and have an entry into an excellent market on Florida's West Coast. Jefferson has a talented staff, a clean balance sheet and a quality group of loan producers. We are confident that they will be a great addition to the Harbor organization. As a result of the S-4 Registration Statement filed for the Jefferson acquisition, our first 10-Q SEC filing can be found atwww.sec.gov/edgar/under the company filings for HCBF.
We thank all of our shareholders for their support.
| Sincerely, | |
| /s/ Michael J. Brown, Sr. | |
| Michael J. Brown, Sr. | |
| Chairman / CEO |
HCBF Holding Company, Inc. and Subsidiary Consolidated Balance Sheet Unaudited 6/30/2017 |
| Consolidated June 30, 2017 | Consolidated December 31, 2016 | |||||||
| ASSETS | ||||||||
| Cash and due from banks | $ | 32,752,073 | 33,956,671 | |||||
| Interest-earning deposits with banks | 30,233,682 | 10,601,087 | ||||||
| Federal funds sold | - | - | ||||||
| Cash and cash equivalents | 62,985,754 | 44,557,758 | ||||||
| Securities available for sale | 433,047,271 | 346,633,379 | ||||||
| Securities held to maturity, fair value of $175,517,000 and $176,286,000, respectively | 176,882,200 | 178,232,140 | ||||||
| Loans held for sale | 6,440,882 | 8,383,818 | ||||||
| Loans, net of allowance for loan losses of $7,119,578 and $7,637,961, respectively | 1,057,360,946 | 1,058,299,824 | ||||||
| Federal Home Loan Bank stock | 4,848,700 | 4,584,200 | ||||||
| Premises and equipment, net | 50,186,728 | 51,441,846 | ||||||
| Other real estate owned | 8,665,463 | 9,018,258 | ||||||
| Goodwill | 12,286,241 | 12,286,241 | ||||||
| Other intangible assets, net | 11,404,933 | 12,548,352 | ||||||
| Bank-owned life insurance | 38,577,787 | 38,053,803 | ||||||
| Deferred tax asset | 13,288,495 | 15,022,326 | ||||||
| FDIC indemnification asset | 0 | 526,052 | ||||||
| Accrued interest receivable | 4,683,443 | 4,545,239 | ||||||
| Other assets | 5,734,308 | 5,756,703 | ||||||
| Total assets | $ | 1,886,393,150 | 1,789,889,939 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Liabilities: | ||||||||
| Non-interest bearing demand deposits | 478,527,127 | 444,744,995 | ||||||
| Money-market, NOW and savings deposits | 747,657,532 | 681,902,702 | ||||||
| Time deposits | 334,913,642 | 352,159,874 | ||||||
| Total deposits | 1,561,098,301 | 1,478,807,571 | ||||||
| Federal Home Loan Bank advance | 76,445,649 | 71,622,019 | ||||||
| Junior subordinated debt | 5,991,687 | 5,942,906 | ||||||
| Capitalized lease obligation | 743,295 | 769,174 | ||||||
| Official checks | 6,074,996 | 5,247,793 | ||||||
| Accrued interest payable and other liabilities | 12,748,940 | 9,807,476 | ||||||
| Total Liabilities | 1,663,102,868 | 1,572,196,939 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $.001 par value, 5,000,000 authorized, none issued or outstanding | - | - | ||||||
| Common stock, voting, $.001 par value, 40,000,000 authorized, at June 30, 2017 18,827,833 shares issued and outstanding and at December 31, 2016 18,827,833 shares issued and outstanding | 18,828 | 18,828 | ||||||
| Common stock, non-voting, $.001 par value, 10,000,000 authorized, at June 30, 2017 1,224,997 shares issued and outstanding and at December 31, 2016 1,224,997 shares issued and outstanding | 1,225 | 1,225 | ||||||
| Additional paid-in capital | 202,611,408 | 202,369,465 | ||||||
| Retained earnings (loss) | 23,204,253 | 18,771,913 | ||||||
| Accumulated other comprehensive income | (2,545,432 | ) | (3,468,431 | ) | ||||
| Total stockholders' equity | 223,290,282 | 217,693,000 | ||||||
| Total liabilities and stockholders' equity | $ | 1,886,393,150 | 1,789,889,939 | |||||
| Stated book value | $ | 11.14 | $ | 10.86 | ||||
| Tangible book value | $ | 9.95 | $ | 9.62 | ||||
| Fully Diluted Tangible book value | $ | 9.98 | $ | 9.67 | ||||
HCBF Holding Company, Inc. and Subsidiary Consolidated Statement of Operations Unaudited 6/30/2017 |
| Consolidated Three Months Ended Jun 30, 2017 | Consolidated Three months Ended Jun 30, 2016 | Consolidated Six Months Ended Jun 30, 2017 | Consolidated Six months Ended Jun 30, 2016 | |||||||||||||
| Interest income: | ||||||||||||||||
| Loans | $ | 13,884,465 | 13,823,078 | $ | 27,670,779 | 27,744,108 | ||||||||||
| Securities | 3,221,851 | 2,319,268 | 5,875,461 | 4,638,848 | ||||||||||||
| Federal funds sold and other | 156,401 | 111,099 | 257,841 | 240,468 | ||||||||||||
| Total Interest Income: | 17,262,717 | 16,253,444 | 33,804,081 | 32,623,425 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Deposits | 1,341,586 | 1,113,180 | 2,587,788 | 2,199,029 | ||||||||||||
| Federal Home Loan Bank advances | 212,640 | 227,440 | 363,775 | 461,863 | ||||||||||||
| Subordinated debt and other | 91,522 | 57,443 | 180,139 | 112,990 | ||||||||||||
| Total Interest expense: | 1,645,748 | 1,398,062 | 3,131,702 | 2,773,882 | ||||||||||||
| Net interest income: | 15,616,970 | 14,855,381 | 30,672,379 | 29,849,543 | ||||||||||||
| Provision for loan losses: | 1,646,032 | 330,442 | 1,563,195 | 1,494,445 | ||||||||||||
| Net interest income after provision for loan losses | 13,970,938 | 14,524,939 | 29,109,184 | 28,355,098 | ||||||||||||
| Non-interest income: | ||||||||||||||||
| Service charges on deposit accounts | 766,464 | 576,083 | 1,563,791 | 1,209,512 | ||||||||||||
| ATM and interchange income | 774,998 | 722,761 | 1,557,453 | 1,436,734 | ||||||||||||
| Gain (loss) on sale of loans held for sale | 957,802 | 981,562 | 1,761,010 | 1,648,292 | ||||||||||||
| Gain (loss) on sale of securities available for sale | 14,091 | 5,346 | 14,091 | 5,346 | ||||||||||||
| Bank owned life insurance income | 258,305 | 225,653 | 523,984 | 425,607 | ||||||||||||
| FDIC indemnification asset amortization, net | (137,206 | ) | (116,290 | ) | (310,629 | ) | (216,753 | ) | ||||||||
| SOP Loan Recoveries | 166,402 | 421,849 | 466,640 | 440,687 | ||||||||||||
| Bargain purchase gain | - | - | - | - | ||||||||||||
| Other | 378,000 | 127,029 | 681,593 | 532,860 | ||||||||||||
| Total non-interest income | 3,178,855 | 2,943,993 | 6,257,933 | 5,482,285 | ||||||||||||
| Non-interest expenses: | ||||||||||||||||
| Salaries and employee benefits | 7,183,010 | 7,058,695 | 14,567,065 | 14,335,967 | ||||||||||||
| Occupancy and equipment | 1,951,935 | 2,130,664 | 3,887,409 | 4,305,757 | ||||||||||||
| Data processing | 1,420,522 | 1,581,548 | 2,877,661 | 3,028,517 | ||||||||||||
| Regulatory assessments | 202,358 | 401,271 | 430,082 | 786,743 | ||||||||||||
| Professional fees | 419,683 | 362,825 | 981,249 | 729,896 | ||||||||||||
| Office expenses and supplies | 309,699 | 351,912 | 648,508 | 806,046 | ||||||||||||
| Foreclosed real estate expense | 820,897 | 276,686 | 803,804 | 588,173 | ||||||||||||
| Advertising | 162,805 | 174,213 | 334,827 | 401,892 | ||||||||||||
| Intangible amortization | 567,241 | 570,868 | 1,143,419 | 1,323,282 | ||||||||||||
| Acquisition and conversion expenses | 232,678 | 82,883 | 379,584 | 189,297 | ||||||||||||
| Other | 982,077 | 1,014,890 | 2,340,281 | 1,895,374 | ||||||||||||
| Total non-interest expense | 14,252,906 | 14,006,455 | 28,393,888 | 28,390,945 | ||||||||||||
| Earnings (loss) before income tax | 2,896,887 | 3,462,477 | 6,973,229 | 5,446,438 | ||||||||||||
| Income tax expense (benefit) | 1,060,385 | 1,504,990 | 2,540,888 | 2,224,901 | ||||||||||||
| Net income (loss): | $ | 1,836,502 | 1,957,487 | $ | 4,432,341 | 3,221,538 | ||||||||||
| Earnings per share: | ||||||||||||||||
| Basic | 0.09 | 0.10 | 0.22 | 0.16 | ||||||||||||
| Diluted | 0.08 | 0.09 | 0.20 | 0.15 | ||||||||||||
HCBF Holding Company, Inc. and Subsidiary
Consolidated
Statement of Stockholders' Equity
Unaudited
6/30/2017
| Other | Total | |||||||||||||||||||||||||||||||||||||||
| Common stock | Common stock | Additional | Compre- | Stock- | ||||||||||||||||||||||||||||||||||||
| Preferred Stock | Voting | Non-Voting | Paid in | Retained | hensive | holders' | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Earnings | Income | Equity | |||||||||||||||||||||||||||||||
| Balance at December 31, 2016 | - | $ | - | 18,827,833 | $ | 18,828 | 1,224,997 | $ | 1,225 | 202,369,465 | 18,771,912.60 | (3,468,431 | ) | 217,693,000 | ||||||||||||||||||||||||||
| Net earnings | - | - | 4,432,341 | 4,432,341 | ||||||||||||||||||||||||||||||||||||
| Net change in unrealized loss on securities available for sale, net of income taxes | - | - | 922,999 | 922,999 | ||||||||||||||||||||||||||||||||||||
| Proceeds from excercised stock options | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Proceeds from issuance of common stock voting | - | - | ||||||||||||||||||||||||||||||||||||||
| Proceeds from issuance of common stock non-voting | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | 241,943 | 241,943 | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2017 | - | $ | - | 18,827,833 | $ | 18,828 | 1,224,997 | $ | 1,225 | 202,611,408 | 23,204,253 | (2,545,432 | ) | 223,290,282 | ||||||||||||||||||||||||||
HCBF Holding Company, Inc. and Subsidiary Consolidated Statement of Cash Flow Unaudited 6/30/2017 |
| Consolidated Six months ending June 30, 2017 | ||||
| OPERATING ACTIVITIES | ||||
| Net Income | $ | 4,432,341 | ||
| Adjustment to reconcile net income to net cash provided by operating activities: | ||||
| Provision for loan losses | 1,563,195 | |||
| Depreciation and amortization of premises and equipment | 1,387,791 | |||
| Net accretion of purchase accounting adjustments | (884,549 | ) | ||
| Net amortization of investment securities | 2,417,561 | |||
| Net deferred loan origination fees | (153,645 | ) | ||
| (Gain) loss on securities available for sale | (14,091 | ) | ||
| Origination of loans held for sale | (42,771,033 | ) | ||
| Proceeds from sale of loans held for sale | 45,420,385 | |||
| Gain on loans held for sale | (1,761,010 | ) | ||
| (Gain) Loss on sale of real estate owned | (189,642 | ) | ||
| Provision for real estate owned | 708,102 | |||
| FDIC indemnification expense (income), net | 310,629 | |||
| Stock-based compensation expense | 241,943 | |||
| Increase in cash surrender value of bank owned life insurance | (523,984 | ) | ||
| Deferred income tax expense | 1,640,134 | |||
| Net change in accrued interest receivable and other assets | 110,613 | |||
| Net change in accrued interest payable and other liabilities | 3,799,076 | |||
| Net cash provided by operating activities | 15,733,816 | |||
| INVESTING ACTIVITIES | ||||
| Available for sale securities: | ||||
| Purchases | (119,783,773 | ) | ||
| Maturities, calls and prepayments | 34,091,905 | |||
| Sales | 1,618,736 | |||
| Held to maturity securities: | ||||
| Purchases | (10,280,292 | ) | ||
| Maturities, calls and prepayments | 7,809,000 | |||
| Loan originations and repayments, net | (361,615 | ) | ||
| Purchase of premises and equipment | (132,673 | ) | ||
| Purchase of Federal Home Loan bank stock, net | (264,500 | ) | ||
| Proceeds from sale of real estate owned | 2,577,199 | |||
| Cash received from FDIC loss sharing agreement | 82,700 | |||
| Net cash used in investing activities | (84,643,312 | ) | ||
| FINANCING ACTIVITIES | ||||
| Net change in deposits | 82,383,025 | |||
| Proceeds from Federal Home Loan Bank advances and other debt | 53,000,000 | |||
| Repayments on Federal Home Loan Bank advances and other debt | (48,045,533 | ) | ||
| Proceeds from issuance of common stock - voting | - | |||
| Proceeds from issuance of common stock - non voting | - | |||
| Proceeds from exercising of stock options | - | |||
| Net cash provided by financing activities | 87,337,492 | |||
| Net change in cash and cash equivalents | 18,427,996 | |||
| Beginning cash and cash equivalents | 44,557,758 | |||
| Ending cash and cash equivalents | $ | 62,985,754 | ||
Additional Information for Shareholders
Communications in this document do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger, CenterState Banks, Inc. (“CSFL”) will file with the SEC a Registration Statement on Form S-4 that will include a Proxy Statement of CSFL and HCBF Holding Company, Inc. (“HCBF”) and a Prospectus of CSFL, as well as other relevant documents concerning the proposed transaction. Shareholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the merger when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about CSFL and HCBF, may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from CSFL at www.centerstatebanks.com or from HCBF by requesting them in writing to HCBF Holding Company, Inc., Attention: Secretary, 200 S. Indian River Drive, Suite 101, Fort Pierce, FL 34950.
CSFL and HCBF and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of CSFL and HCBF in connection with the proposed merger. Information about the directors and executive officers of CSFL is set forth in the proxy statement for CSFL’s 2017 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 2, 2017. Information about the directors and executive officers of HCBF is set forth in the Registration Statement on Form S-4, as filed with the SEC on April 20, 2017 and amended on June 7, 2017. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.
Forward-Looking Statements
This document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about the expected timing, completion, financial benefits and other effects of the proposed merger between CSFL and HCBF. Forward-looking statements can be identified by the use of the words “anticipate,” “believe,” “expect,” “intend,” “could” and “should,” and other words of similar meaning. These forward-looking statements express management’s current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: expected cost savings, synergies and other financial benefits from the proposed merger might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; the requisite shareholder and regulatory approvals for the proposed merger might not be obtained; satisfaction of other closing conditions; delay in closing the proposed merger; the reaction to the transaction of the companies’ customers and employees; market, economic, operational, liquidity, credit and interest rate risks associated with CSFL’s and HCBF’s businesses; competition; government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related regulations); ability of CSFL and HCBF to execute their respective business plans (including integrating the CSFL and HCBF businesses); changes in the economy which could materially impact credit quality trends and the ability to generate loans and gather deposits; failure or circumvention of our internal controls; failure or disruption of our information systems; significant changes in accounting, tax or regulatory practices or requirements; new legal obligations or liabilities or unfavorable resolutions of litigations; other matters discussed in this document and other factors identified in CSFL’s Annual Report on Form 10-K, HCBF’s Quarterly Reports on Form 10-Q and Registration Statement on Form S-4 and other periodic filings with the SEC. These forward-looking statements are made only as of the date of this document, and neither CSFL nor HCBF undertakes an obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this document.
