BANK MANAGEMENT CONFERENCE

Transcription

1 THIS ISSUE: CENTERSTATE BANK NEWSLETTER CenterState Bank Update Bank Management Conference Employee Spotlight International Services Market Research New Customers Atlanta Office Relocation CONTACT INFORMATION CENTERSTATE BANK UPDATE S P R I N G E D I T I O N 2012 Atlanta Office 400 Interstate North Parkway Suite 1200 Atlanta, GA Direct: (770) Toll Free: (888) Fax: (770) Birmingham Office During January 2012 CenterState Bank of Florida announced two FDIC-assisted bank acquisitions, the Bank s fifth and sixth acquisitions of this kind since The Bank entered into purchase and assumption agreements with loss share arrangements with the FDIC to assume all the deposits and certain other liabilities and purchase certain assets of Central Florida State Bank (January 20, 2012) in Belleview, Florida and First Guaranty Bank and Trust Company (January 27, 2012) in Jacksonville, Florida. As of December 31, 2011 CenterState Banks, Inc., the Holding Company for CenterState Bank of Florida and Valrcio State Bank, held approximately $2.3 billion in assets, with a 19.1% total risk-based capital ratio and 49% of assets with third party protection. The acquisitions of Central Florida State Bank and First Guaranty Bank and Trust Company elevate the company s size to approximately $2.7 billion in assets Colonnade Parkway Suite 210 Birmingham, AL Direct: (205) Toll Free: (800) Fax: (205) Nashville Office 1616 Westgate Circle Brentwood, TN Direct: (615) Toll Free: (888) Fax: (615) Winston-Salem Office 120 Club Oaks Court Suite 150 Winston-Salem, NC Direct: (336) Toll Free: (877) Fax: (336) BANK MANAGEMENT CONFERENCE 2012 is a pivotal year in our Country and within our industry. Professional and political decisions made will have long-term impact on our business. CenterState Bank s 2012 Bank Management Conference, July at Amelia Island, Florida, has been designed to present timely information on The Challenges and Opportunities Facing Today s Community Bank. The program will provide a forum for community bank CEOs, senior officers, and directors to gain strategic information while networking with peers. A diverse group of speakers and panelists will provide insight into the economic, political and regulatory climates that influence our industry s future. General Session topics will include an economic commentary and forecast, along with an update on the landscape of southeastern banking, addressing merger and acquisition activity in our region, with a focus on positioning your community bank to survive and thrive during a slow economic recovery. In addition, a panel including a community banker, regulator, and a banking association leader will discuss the community banking environment beyond 2012 and review important government relations issues facing our banks. Breakout Sessions are scheduled, where attendees will take away successful investments and portfolio strategies; understand the multiple benefits of Bank Owned Life Insurance (BOLI); receive guidance on the real estate appraisal process; and review the most current compliance issues and corresponding solutions available. For more information on the 2012 Bank Management Conference, please contact your Business Development Officer or call Dana Townsend at (770)

2 EMPLOYEE SPOTLIGHT: NORTH CAROLINA-BASED TEAM CenterState Bank s Correspondent effort in North Carolina, South Carolina, Virginia and West Virginia is led by an experienced group of Capital Markets and Business Development individuals. The team, which joined CenterState Bank in 2009 and is locally based in our Winston-Salem and Charlotte offices, currently serves over 150 customer banks in the region. With 153 years of combined banking experience, diverse backgrounds within our industry are represented, including experience in bank data processing as well as commercial and retail banking. The team has enjoyed many years together and have provided a consistent approach to our business, expanding existing customer relationships and continuing to establish new opportunities along the way. For more information or to speak with one of our North Carolina-based team members, please call (877) In Winston-Salem, Rick Alspaugh and Jim Bigger are celebrating their 30 th year working together in correspondent banking, while Pam Todd has been an integral part of their team for the past 19 years. Parker Grubbs joined the trio 14 years ago. Rick, Jim, and Parker are responsible for developing fixed-income investment relationships and strategies for their community financial institution clients. Jim Gatherum, a veteran of 40 years in the industry, rounded out the local team 10 years ago when he joined as a Business Development Officer while all were working with another correspondent bank. Additionally, Erik Bagwell and Chris Wright, two seasoned Business Development Officers, provide coverage support for banks in South Carolina. From left to right: Jim Gatherum, Parker Grubbs, Pam Todd, Jim Bigger and Rick Alspaugh

3 MARKET RESEARCH Tom Fitzgerald is Director of Research and Strategy for Capital Markets with CenterState Bank. In this capacity he works extensively with community banks throughout the southeast in developing comprehensive investment portfolio recommendations and strategies to enhance earnings, optimize liquidity and address asset-liability issues. He also writes topical research pieces and economic commentary of interest to community bank managers. FHA MORTGAGE INSURANCE PREMIUM CHANGES COULD IMPACT GNMA REPAYMENTS Thomas R. Fitzgerald Director, Research & Strategy Recently, the Federal Housing Authority (FHA) announced changes to mortgage insurance premiums (MIPs) in the FHA loan program. For those unfamiliar with FHA loans, the MIP is analogous to private mortgage insurance (PMI) that conventional lenders typically charge on loans with less than a 20% down payment. The FHA premium, however, consists of two parts: an upfront, one-time fee (currently 1.00% of the loan amount) and an annual premium (currently 1.15%). What s new for borrowers and investors is a change to the upfront fee for pre-june 2009 borrowers looking to refinance, as well as a grandfathering of the annual fee for those same borrowers. Instead of facing a 1.00% upfront fee, pre-june 2009 borrowers will enjoy a negligible 0.01% upfront payment. In addition, these borrowers will get to keep their 55 basis point annual MIP fee in a refinance instead of being forced to pay the existing annual fee of 1.15%. This change enhances the refinance incentive of pre- June 2009 loans, whereas post-may 2009 loans could experience an increase in annual premiums by as much as 70bps if they were to refinance. As mentioned above, pre-june 2009 borrowers pay a 55bps annual fee and as a result would enjoy considerable savings in any grandfathering scheme. Coupled with their generally higher coupon levels (see Chart 1), this would seem to offer a strong refinance incentive. One question is why the pre-june 2009 cut-off? It aligns with the HARP 2.0 refinancing program for conventional loans, bringing consistency across all housing-related agencies. In addition, when looking at loan balances over the various coupons, pre-june 2009 loans dominate the outstanding balances in pools with coupons in the 5% and higher range and thus represent a higher risk to the FHA insurance pool. At the same time that the pre-june 2009 cut-off further incents those higher coupon borrowers to refinance, it limits some of the potential damage to GNMA investors stemming from accelerated prepayments if the grandfathering of the fee were across-the-board. Post- May 2009 borrowers could experience up to a 70bps increase in the annual premium over what they currently pay. Coupled with their generally lower coupons this may sufficiently suppress their refinance incentive and thus limit prepayments in the post-may 2009 vintages. The chart below details the percentage of balances across various coupons represented by pre- June 2009 loans. As the chart shows, this vintage of loans dominates the outstanding balances of 5% and higher coupons. Chart 1 - Percentage of Outstanding Balances For Various Coupons Represented by Pre-June 2009 Loans

4 MARKET RESEARCH FHA MORTGAGE INSURANCE PREMIUM CHANGES COULD IMPACT GNMA REPAYMENTS continued from previous page One complication for investors is determining what fee level borrowers are paying. The table below shows the meandering path of both the upfront and annual premium charge over the years for FHA loans. For loans originated prior to June 2009, because of the subsequent increase in the annual fee, the disincentive to refinance prior to the program changes was substantial, owing to the 60bps increase in the insurance fee since September 2010 (and soon to be 70bps). Given the announced grandfathering of the existing fee on pre-june 2009 loans, these borrowers will instantly have a stronger refinance incentive as they get to keep their current 55bps fee. On the other hand, the incentive to refinance for all other borrowers actually declines by 10bps as the current fee is set to increase another 10bps on April 1 st as shown below. Based on the program announcement and prevailing fee structures, we recommend investors that are considering GNMA pools to look to lower coupon securities (4.5% and lower) with loans issued after May 2009 and, ideally, prior to October As highlighted in Chart 2, those above this cross-section of loans will not see their existing low fees grandfathered and therefore would face a 60 to 70bps increase in annual insurance charges, dimming the refinance incentive for these borrowers. Therefore, prepayments from this group of borrowers should be less than pools with pre-june 2009 loans and somewhat less than post-september 2010 loans. Finally, for nearly a year we ve pointed out the price advantage of conventional pools to GNMA s, but now this gap has narrowed considerably. GNMA versus FNMA premiums narrowed about 8-10 ticks since the news broke earlier of the program changes and from their all-time highs in early January. Prices are tighter by half a point on 5% and three-quarters of a point on 5.5% coupons. The narrowing in pricing, however, has come more from conventional pools richening, while to a lesser extent from cheapening in GNMA pools. As result of the expected two-tiered premium set-up we are less negative to neutral on GNMA 4.5% coupons and below versus their conventional counterparts, but we are still negative on higher coupon (4.5% 5.5% coupons) vs. conventional pools. Chart 2 - The Meandering Path of FHA Up-Front and Annual Premium Charges This information does not constitute either an offer to sell or a solicitation to buy any of the securities referred to herein. This information may include certain assumptions and no representation is made that it is accurate or complete or that any returns indicated will be achieved. Prices and availability are subject to change without notice. Past performance is no guarantee of future results. Please contact your investment representative if you have any questions or are in need of funding or investment services.

5 CORE VALUES Local Market Driven Our business structure is designed to value the unique character of the communities we serve and to encourage decision making by the banker that is closest to the action. A Long Term Horizon We approach business decisions with an emphasis on long term growth, sustainable profits and the career development of our CENTERSTATE WELCOMES NEW CUSTOMER BANKS CenterState Bank is proudly serving 566 community bank customers. We would like to thank the following banks that became a new customer of the Correspondent Division during December 2011, January and February First National Bank of Hartford Hartford AL Kingstree Federal Savings & Loan Kingstree SC Magnolia State Bank Bay Springs MS Peoples Bank of the South Lafollette TN Southeast Financial Credit Union Franklin TN The Bank of Fayette County Moscow TN The Citizens Bank Enterprise AL officers and staff. We will not sacrifice credit quality for short term gain. World Class Service ATLANTA OFFICE RELOCATION We will exceed our clients expectations by anticipating their needs and responding with a sense of urgency. Each of us has the freedom, authority and responsibility to do the right thing for our clients. Relationship Banking Our bank is built on life-long friendships. We communicate with candor and transparency. We believe that the relationship is more valuable than the transaction. Faith and Family Commitment to our faith and families is fundamental to the overall culture of our institution.