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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to

Commission file number: 001-36539

SUNSHINE BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland

30-0831760

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

102 West Baker Street, Plant City, Florida 33563

(Address of principal executive offices; Zip Code)

(813) 752-6193

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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.

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 Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each issuer’s classes of common equity, as of the latest practicable date:

As of May 10, 2017, there were issued and outstanding 8,018,917 shares of the Registrant’s Common Stock with a par value of $0.01 per share.

SUNSHINE BANCORP, INC. AND SUBSIDIARY

March 31, 2017 Form 10-Q

Index


		Page Number
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2017 (Unaudited) and December 31, 2016		3

	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2017 and 2016 (Unaudited)		4

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016 (Unaudited)		5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2017 and 2016 (Unaudited)		6

	Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2017 and 2016 (Unaudited)		7

	Notes to Condensed Consolidated Financial Statements (Unaudited)		8-22

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23-29

Item 3.	Quantitative and Qualitative Disclosure About Market Risk		30

Item 4.	Controls and Procedures		30

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings		31

Item 1A.	Risk Factors		31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		31

Item 3.	Defaults Upon Senior Securities		31

Item 4.	Mine Safety Disclosures		31

Item 5.	Other Information		31

Item 6.	Exhibits		31

SIGNATURES			32

SUNSHINE BANCORP, INC. AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

(In thousands)


	As of March 31, 2017			As of December 31, 2016
	(unaudited)
Assets
Cash and due from banks	$	29,860		$	16,562
Interest-earning deposits with banks		30,628			21,386
Federal funds sold		10,430			12,325

Cash and cash equivalents		70,918			50,273
Time deposits with banks		2,794			2,794
Securities available for sale		109,943			109,668
Loans held for sale		865			443
Loans, net of allowance for loan losses of $3,643 and $3,274		689,656			683,784
Premises and equipment, net		25,627			25,920
Federal Home Loan Bank stock, at cost		2,750			3,478
Cash surrender value of bank-owned life insurance		22,618			22,462
Deferred income tax asset		5,665			6,660
Goodwill and other intangibles		22,069			22,308
Accrued interest receivable		1,869			2,077
Other real estate owned		32			32
Other assets		1,572			1,536

Total assets	$	956,378		$	931,435

Liabilities and Stockholders’ Equity
Liabilities:
Noninterest-bearing demand accounts	$	243,313		$	217,418
Interest-bearing demand and savings accounts		377,045			354,327
Time deposits		150,810			158,204

Total deposits		771,168			729,949
Other borrowings		54,179			71,867
Subordinated notes		11,000			11,000
Other liabilities		5,977			6,518

Total liabilities		842,324			819,334

Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 authorized; none outstanding		—			—
Common stock, $0.01 par value, 50,000,000 shares authorized; issued and outstanding of 8,018,696 and 7,986,074 shares		80			80
Additional paid in capital		94,478			94,302
Retained income		23,433			21,803
Unearned employee stock ownership plan (“ESOP”) shares		(3,047	)		(3,047	)
Accumulated other comprehensive loss		(890	)		(1,037	)

Total stockholders’ equity		114,054			112,101

Total liabilities and stockholders’ equity	$	956,378		$	931,435

See Accompany Notes to Condensed Consolidated Financial Statements

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share amounts)


	Three Months Ended
	March 31,
	2017		2016
Interest income:
Loans	$	7,930	$	4,055
Securities		427		221
Other		131		78

Total interest income		8,488		4,354

Interest Expense:
Deposits		588		315
Borrowed funds		263		25

Total interest expense		851		340

Net interest income		7,637		4,014
Provision for loan losses		—		—

Net interest income after provision for loan losses		7,637		4,014

Noninterest income:
Fees and service charges on deposit accounts		465		326
Mortgage Broker Fees		59		47
Gain on sale of securities		—		26
Income from bank-owned life insurance		182		95
Other		369		173

Total noninterest income		1,075		667

Noninterest expenses:
Salaries and employee benefits		3,649		2,576
Occupancy and equipment		724		576
Data and item processing services		540		341
Professional fees		213		171
Advertising and promotion		6		45
Stationery and supplies		47		46
FDIC Deposit insurance		75		102
Other		859		621

Total noninterest expenses		6,113		4,478

Income before income taxes		2,599		203
Income tax expense		969		49

Net income	$	1,630	$	154

Basic and Diluted earnings per share	$	0.21	$	0.03

See Accompany Notes to Condensed Consolidated Financial Statements

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)


	Three Months Ended
	March 31,
	2017			2016
Net income	$	1,630		$	154

Other comprehensive income:
Change in unrealized loss on securities:
Unrealized gain arising during the period		235			308
Reclassification adjustment for realized gains		—			(26	)

Net change in unrealized loss		235			282
Deferred income taxes on above change		(88	)		(106	)

Total other comprehensive income		147			176

Comprehensive income	$	1,777		$	330

See Accompany Notes to Condensed Consolidated Financial Statements

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity

($ In thousands)

Three Months Ended March 31, 2017 and 2016


	Common Stock				Additional Paid In		Retained		Unearned ESOP			Accumulated Other Comprehensive			Total Stockholder’s
	Shares		Amount		Capital		Income		Shares			Income (Loss)			Equity
Balance, December 31, 2015		5,259,321	$	53	$	52,763	$	21,846	$	(3,160	)	$	(108	)	$	71,394

Net income(unaudited)		—		—		—		154		—			—			154

Issuance of common stock under share-based awards plan, net(unaudited)		6,629		—		—		—		—			—			—

Stock based compensation(unaudited)		—		—		212		—		—			—			212

Net change in unrealized loss on Securities available for sale, net of taxes(unaudited)		—		—		—		—		—			176			176

Balance, March 31, 2016(unaudited)		5,265,950	$	53	$	52,975	$	22,000	$	(3,160	)	$	68		$	71,936

Balance, December 31, 2016		7,986,074	$	80	$	94,302	$	21,803	$	(3,047	)	$	(1,037	)	$	112,101

Net income(unaudited)		—		—		—		1,630		—			—			1,630

Issuance of common stock under share-based awards plan, net(unaudited)		32,622		—		—		—		—			—			—

Stock based compensation(unaudited)		—		—		176		—		—			—			176

Net change in unrealized loss on Securities available for sale, net of taxes(unaudited)		—		—		—		—		—			147			147

Balance, March 31, 2017(unaudited)		8,018,696	$	80	$	94,478	$	23,433	$	(3,047	)	$	(890	)	$	114,054

See Accompany Notes to Condensed Consolidated Financial Statements

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Three months Ended March 31,
	2017			2016
Cash flows from operating activities:
Net income	$	1,630		$	154
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, Amortization, Accretion, net		671			429
Gain on sale of loans originated for sale		(59	)		(47	)
Proceeds from the sale of loans originated for sale		1,412			1,199
Loans originated as for sale		(1,775	)		(815	)
Income from bank-owned life insurance, net		(156	)		(81	)
Gain on sale of securities available for sale		—			(26	)
Decrease (Increase) in accrued interest receivable		208			(2	)
Decrease in deferred tax assets		907			48
(Increase) Decrease in other assets		(36	)		834
Stock options and restricted stock compensation expense		176			212
Decrease in other liabilities		(541	)		(4,140	)

Net cash provided by (used in) operating activities		2,437			(2,235	)

Cash flows from investing activities:
Maturities of time deposits with banks		—			490
Proceeds from sale of securities available for sale		—			4,048
Purchases of securities available for sale		( 4,996	)		(15,630	)
Calls, repayments, and maturities of securities available for sale		4,850			7,686
Net increase in loans		(5,905	)		(11,506	)
Purchases of premises and equipment, net		—			(269	)
Redemption of Federal Home Loan Bank stock		728			291

Net cash used in by investing activities		( 5,323	)		(14,890	)

Cash flows from financing activities:
Net increase in deposits		41,219			16,089
Net decrease in Other Borrowings		(17,688	)		(7,689	)
Net increase in Subordinated Notes		—			11,000

Net cash provided by financing activities		23,531			19,400

Increase in cash and cash equivalents		20,645			2,275
Cash and cash equivalents at beginning of period		50,273			59,344

Cash and cash equivalents at end of period	$	70,918		$	61,619

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	668		$	339

Noncash transactions:
Accumulated other comprehensive loss, net change in unrealized loss on securities available for sale, net of taxes	$	147		$	176

See Accompany Notes to Condensed Consolidated Financial Statements

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(1)

Organization and Significant Accounting Policies

Organization. Sunshine Bancorp, Inc., a Maryland corporation (the “Holding Company”), was formed on March 7, 2014 to serve as the savings and loan holding company for Sunshine Bank, a federal savings bank (the “Bank”). The Holding Company was formed as part of the Bank’s mutual-to-stock conversion (the “Conversion”). Collectively, the Bank and Holding Company are referred to as the “Company.” On July 14, 2014, the Conversion was completed and the Holding Company became the parent holding company for the Bank.

Sunshine Bank is a federal stock savings bank. It was first organized in 1954 as a federal mutual savings and loan association under the name First Federal Savings and Loan Association of Plant City. In 1975, the Bank changed its name to Sunshine State Federal Savings and Loan Association. In 2014, the Bank changed its name to Sunshine Bank. The Bank through its eighteen full service banking offices provides a variety of retail community banking services to individuals and businesses primarily in Hillsborough, Polk, Manatee, Sarasota, Pasco, Orange, Brevard, Osceola, and Seminole Counties, Florida.

Our accounting and reporting policies conform to Accounting Principles Generally Accepted in the United States of America (“GAAP”) and general practices within the banking industry and are described in note 1 to the audited consolidated financial statements in our 2016 Annual Report on Form 10-K, as updated by information in this Form 10-Q. These condensed consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q, and accordingly, certain information and disclosures normally included in audited consolidated financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of management, the accompanying condensed consolidated financial statements of the Company contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at March 31, 2017, and the results of operations for the three month periods ended March 31, 2017 and 2016. The results of operations for the three month periods ended March 31, 2017, are not necessarily indicative of the results to be expected for the full year or any other period.

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts in the consolidated financial statements and notes. While management believes the sources utilized to arrive at the estimates are reliable, different sources or methods could have yielded different estimates. Such different value estimates could affect future earnings through different values being utilized for the disposition or amortization of the underlying assets and liabilities acquired. Material estimates that are particularly susceptible to significant changes include the allowance for loan losses, the valuation of goodwill and other intangibles, deferred income taxes, and purchase accounting related adjustments.

Principles of Consolidation. The condensed consolidated financial statements include the accounts of the Holding Company and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements in this report have not been audited except for information derived from our audited 2016 financial statements.

Share-based Compensation. The Company expenses the fair value of any stock options or restricted stock granted. The Company recognizes share-based compensation in operations as the awards vest.

Comprehensive Income. GAAP generally require that recognized revenue, expenses, gains and losses be included in operations. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the consolidated balance sheet, such items along with net income, are components of comprehensive income.

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(1)

Organization and Significant Accounting Policies, continued

Recent Accounting Standards Update.

During March 2017, the FASB issued new guidance related to Premium Amortization on Purchased Callable Debt Securities. The new guidance shortens the amortization period for certain callable debt securities held at a premium to require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments are effective for public business entities for annual periods beginning after December 15, 2018 for emerging growth companies who elect not to use the extended transition period. The adoption of this guidance is not expected to be material to the consolidated financial statements.

During January 2017, the FASB issued new guidance related to, Simplifying the Test for Goodwill Impairment. The new guidance eliminates Step 2 of the goodwill impairment test. An entity may still perform the optional qualitative assessment for a reporting unit to determine if it is more likely than not that goodwill is impaired. However, the requirement to perform a qualitative assessment for any reporting unit with a zero or negative carrying amount is eliminated. The amendments are effective for public business entities for annual periods beginning after December 15, 2019 for emerging growth companies who elect not to use the extended transition period. The adoption of this guidance is not expected to be material to the consolidated financial statements.

During June 2016, the FASB issued new guidance related to Credit Losses. The new guidance requires the Company to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Additionally, the guidance amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 for emerging growth companies who elect not to use the extended transition period. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

During March 2016, the FASB issued new guidance related to Compensation-Stock Compensation. The new guidance is intended to simplify the accounting for stock compensation by requiring all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) to be recognized as income tax expense or benefit in the income statement. The guidance also clarifies that cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity. The guidance provides an optional accounting policy election (with limited exceptions), to be applied on an entity-wide basis, to either estimate the number of awards that are expected to vest (consistent with existing U.S. GAAP) or account for forfeitures when they occur. The amendments are effective for public business entities for annual periods beginning after December 15, 2016 for emerging growth companies who elect not to use the extended transition period. The adoption of this guidance is not expected to be material to the consolidated financial statements.

During February 2016, the FASB issued new guidance related to Leases. The new guidance requires lessees to recognize assets and liabilities related to certain operating leases on the balance sheet. The new guidance also requires additional disclosures by lessees and contains targeted changes to accounting by lessors. This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years for emerging growth companies who elect not to use the extended transition period. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

During January 2016, the FASB issued new guidance related to Financial Instruments. The new guidance requires equity investments to be measured at fair value with changes in fair value recognized in net income, excluding equity investments that are consolidated or accounted for under the equity method of accounting. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years for emerging growth companies who elect not to use the extended transition period. The adoption of this guidance is not expected to be material to the consolidated financial statements.

Reclassifications. Certain amounts reported in the prior periods, condensed consolidated financial statements may have been reclassified to conform to the current presentation. These reclassifications have no effect on previously reported net income or stockholders’ equity.

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(2)

Business Combinations

Acquisition of Florida Bank of Commerce. On October 31, 2016, pursuant to an Agreement and Plan of Merger entered into May 9, 2016, the Company completed its acquisition of FBC Bancorp, Inc. (“FBC”) and its wholly-owned subsidiary Florida Bank of Commerce (the “Merger”). At the effective time of the Merger, each share of common stock of FBC was converted into 0.88 of a share of common stock of the Company. The Company acquired these assets and liabilities to expand its market presence in the Greater Orlando Metropolitan Statistical Area (“MSA”) and to further its strategy of capitalizing on opportunities along the demographically attractive I-4 corridor. With the acquisition the Company entered Brevard, Osceola, and Seminole Counties, Florida.

Results of operations for FBC Bancorp, Inc. prior to the acquisition date are not included in the Consolidated Statement of Income for the three month period ended March 31, 2016. The table presents unaudited pro forma information as if the acquisition of had occurred on January 1, 2016. The tables below have been prepared for comparative purposes only and are not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented. (in thousands, except per share amounts)


Unaudited pro forma information
	Three months ended
	March 31, 2016
Net interest income	$	7,073

Net income	$	1,195

Basic and Diluted Pro forma Earnings per share	$	0.15

(3)

Securities

Securities have been classified according to management intent. On March 19, 2015 the Company transferred all securities classified as held to maturity to available for sale at a fair market value of $69.7 million. The transfer was performed to enhance the interest rate risk position of the Company and provide liquidity for future loan growth. As a result of the transfer, the Company was precluded from classifying securities as held to maturity until March 2017. The amortized cost and fair values of securities are as follows (in thousands):


*Securities Available for Sale:*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss			Fair Value
*March 31, 2017:*
Federal Home Loan Bank obligations	$	1,000		—		—		$	1,000
U.S. Government enterprise and agency obligations		20,480		12		(97	)		20,395
Agency Mortgage-backed securities		89,890		16		(1,358	)		88,548

Total	$	111,370		28		(1,455	)	$	109,943

*December 31, 2016:*
Federal Home Loan Bank obligations	$	3,000		2		—		$	3,002
U.S. Government enterprise and agency obligations		15,347		5		(99	)		15,253
Agency Mortgage-backed securities		92,983		12		(1,582	)		91,413

Total	$	111,330		19		(1,681	)	$	109,668

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(3)

Securities, continued

The amortized cost and fair value of securities at March 31, 2017 by contractual maturity, are shown below. Actual maturities may differ from contractual maturities due to call or prepayment rights. Securities not due at a single maturity date, primarily mortgage backed securities, are shown separately. (in thousands)


	Securities Available for sale
	Amortized Cost		Fair Value
Due in one year or less	$	11,003	$	10,998
Due from one year to five years		10,477		10,397
Agency Mortgage-backed securities		89,890		88,548

	$	111,370	$	109,943

Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows (in thousands):


	Less Than Twelve Months					Twelve Months or Greater
	Gross Unrealized Loss			Fair Value		Gross Unrealized Loss		Fair Value
*Securities Available for sale:*
At March 31, 2017
US Government enterprise and agency obligations	$	(97	)	$	13,387	$	—	$	—
Agency Mortgage-backed securities		(1,358	)		78,121		—	$	—

Totals	$	(1,455	)	$	91,508	$	—	$	—


	Less Than Twelve Months					More than Twelve Months
	Gross Unrealized Loss			Fair Value		Gross Unrealized Loss		Fair Value
*Securities Available for sale:*
At December 31, 2016
US Government enterprise and agency obligations	$	(99	)	$	9,387	$	—	$	—
Agency Mortgage-backed securities		(1,582	)		77,800		—	$	—

Totals	$	(1,681	)	$	87,187	$	—	$	—

At March 31, 2017 there were thirty-four securities in a loss position. In considering the credit quality of the issuers, the nature and cause of the unrealized loss, the severity and length of time in an unrealized loss position, and other factors, it is expected that the securities would not be settled at a price less than the par value of the investments. Management determined that the decline in fair value is attributable to fluctuations in interest rates and other market conditions and not a deterioration of the credit quality of the issuers. Because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

The Company pledged securities with a fair market value of approximately $37.8 million at March 31, 2017 and $22.1 million at December 31, 2016 to secure public funds and other borrowings.

Securities available for sale sold, are summarized as follows (in thousands):


	For the three months ended
	March 31, 2017		March 31, 2016
Proceeds received from sale	$	—	$	4,048

Gross Gains on sale	$	—	$	26

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(4)

Loans

The loan portfolio segments and classes are as follows (in thousands):


	At March 31, 2017			At December 31, 2016
Real estate loans:
One-to-four-family residential	$	139,754		$	155,262
Commercial and multi-family		367,370			356,788
Construction and land		58,491			51,520
Home equity		21,519			21,902

Total real estate loans		587,134			585,472

Commercial loans		105,124			100,239
Consumer loans		1,230			1,478

Total loans		693,488			687,189

Deduct:
Deferred loan fees, net		(189	)		(131	)
Allowance for loan losses		(3,643	)		(3,274	)

Loans, net	$	689,656		$	683,784

The Company has divided the loan portfolio into three portfolio segments, each with different risk characteristics and methodologies for assessing risk. All loans are underwritten in accordance with policies set forth and approved by the Company’s Board of Directors. The portfolio segments identified by the Company are as follows:

Real Estate Loans. Real estate loans are typically segmented into four classes: one-to-four-family residential, commercial and multi-family, construction and land, and home equity.

One-to-four-family residential real estate loans are underwritten based on the borrower’s repayment capacity and source, value of the underlying property, credit history and stability.

Commercial and multifamily real estate loans are secured by the subject property and are underwritten based on loan to value limits, cash flow coverage and general creditworthiness of the obligors. These loans are generally considered to have more credit risk than traditional one-to-four-family residential loans because these loans tend to involve larger loan balances and their repayment is typically dependent upon the successful operation and management of the underlying real estate.

Construction and Land loans are to finance the construction of owner-occupied and lease properties. These loans are categorized as construction loans during the construction period, later converting to commercial or one-to- four-family residential loans after the construction is complete and amortization of the loan begins. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Construction loan funds are disbursed periodically based on the percentage of construction or development completed. The Company carefully monitors these loans with on-site inspections and requires the receipt of lien waivers on funds advanced. Construction and land loans are typically secured by the properties under development or construction, and personal guarantees are typically obtained. Further, to assure that reliance is not placed solely on the value of the underlying property, the Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, cost estimates and pre-construction sale information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for the future development for either commercial or residential use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(4)

Loans, Continued

Home equity loans consists of either revolving line of credit, term, or second mortgage loans secured by one-to-four residential real estate. These loans have similar risk characteristics to one-to-four family loans and are secured by a first or second mortgage on the borrower’s principal residence or their second/vacation home (excluding investment/rental property). There are minimum credit score standards, maximum debt to income ratios and credit requirements on each home equity product. Home equity lines of credit are variable rate based on an index of Wall Street Journal prime rate with a margin.

Commercial Loans. Commercial loans are primarily underwritten on the basis of the borrowers’ ability to service such debt from income. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. As a general practice, the Company takes as collateral a security interest in any equipment, or other chattel, although loans may also be made on an unsecured basis. Collateralized working capital loans typically are secured by short-term assets whereas long-term loans are primarily secured by long-term assets.

Consumer Loans. Consumer loans are extended for various purposes, including purchases of automobiles, recreational vehicles, and boats. The Company also offers lines of credit, personal loans, and deposit account collateralized loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Loans to consumers are extended after a credit evaluation, including the creditworthiness of the borrower(s), the purpose of the credit, and the secondary source of repayment. Consumer loans are made at fixed and variable interest rates and may be made on terms of up to ten years. Risk is mitigated by the fact that the loans are of smaller individual amounts.

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(4)

Loans, Continued

An analysis of the change in the allowance for loan losses follows (in thousands):


	Real Estate Loans		Commercial Loans			Consumer Loans			Unallocated			Total
*Three Months Ended March 31, 2017:*
Beginning balance	$	2,473		469			6			326		$	3,274
Provision (Credit) for loan losses		8		98			1			(107	)		—
Charge-offs		—		—			—			—			—
Recoveries		350		19			—			—			369

Ending balance	$	2,831		586			7			219		$	3,643

*Three Months Ended March 31, 2016:*
Beginning balance	$	1,354		583			23			551		$	2,511
(Credit) Provision for loan losses		—		—			—			—			—
Charge-offs		—		(11	)		(2	)		—			(13	)
Recoveries		14		19			1			—			34

Ending balance	$	1,368		591			22			551		$	2,532

*At March 31, 2017:*
Individually evaluated for impairment:
Recorded investment	$	928		489			39			—		$	1,456

Balance in allowance for loan losses		16		—			—			—			16

Collectively evaluated for impairment:
Recorded investment	$	289,959		66,037			440			—		$	356,436

Balance in allowance for loan losses	$	2,109		500			5			219		$	2,833

Recorded investment in loans accounted for under ASC 310-20 Loan Receivables	$	293,088		38,598			751			—		$	332,437

Balance in allowance for loan losses	$	706		86			2			—		$	794

Recorded investment in loans accounted for under ASC 310-30 Loans Acquired with Deteriorated Credit Quality	$	3,159		—			—			—		$	3,159

Balance in allowance for loan losses		—		—			—			—			—

*At December 31, 2016:*
Individually evaluated for impairment:
Recorded investment	$	1,035		500			36			—		$	1,571

Balance in allowance for loan losses		21		9			1			—			31

Collectively evaluated for impairment:
Recorded investment	$	274,513		59,586			608			—		$	334,707

Balance in allowance for loan losses	$	1,687		378			4			326		$	2,395

Recorded investment in loans accounted for under ASC 310-20 Loan Receivables	$	307,605		40,153			834			—		$	348,592

Balance in allowance for loan losses	$	765		82			1			—		$	848

Recorded investment in loans accounted for under ASC 310-30 Loans Acquired with Deteriorated Credit Quality	$	2,319		—			—			—		$	2,319

Balance in allowance for loan losses		—		—			—			—			—

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(4)

Loans, Continued

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.

The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if they are appropriately classified and whether there is any impairment. All loans are graded upon initial issuance. Further, commercial, multi-family and commercial real estate loans are generally reviewed periodically to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well as if a loan becomes past due, the Company will determine the appropriate loan grade.

Loans excluded from the review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of a deterioration in the credit worthiness of the borrower; or (c) the borrower contacts the Company for a modification. In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or even charged-off. The Company uses the following definitions for risk ratings:

Pass – A Pass loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary.

Special Mention – A Special Mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard – A Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – A loan classified Doubtful has all the weaknesses inherent in a loan classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss – A loan classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(4)

Loans, Continued

The following summarizes the loan credit quality (in thousands):


	Real Estate Loans
	One-to		Commercial		Construction
	Four-Family		and		and		Home
	Residential		Multi Family		Land		Equity		Commercial		Consumer		Total
*Credit Risk Profile by Internally Assigned Grade:*
*At March 31, 2017:*
Grade:
Pass	$	138,922	$	364,086	$	58,128	$	21,142	$	103,510	$	1,221	$	687,009
Special mention		486		1,125		357		31		606		—		2,605
Substandard		346		2,159		6		346		1,008		9		3,874

Total	$	139,754	$	367,370	$	58,491	$	21,519	$	105,124	$	1,230	$	693,488

*At December 31, 2016:*
Grade:
Pass	$	153,965	$	351,096	$	49,901	$	21,902	$	98,714	$	1,442	$	677,020
Special mention		490		730		543		—		79		—		1,842
Substandard		807		4,962		1,076		—		1,446		36		8,327

Total	$	155,262	$	356,788	$	51,520	$	21,902	$	100,239	$	1,478	$	687,189

Age analysis of past-due loans is as follows (in thousands):


	Accruing Loans
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
*At March 31, 2017:*
Real estate mortgage loans:
One-to-four family residential	$	1,348		989		—		2,337		137,071		346	$	139,754
Commercial Real Estate and Multifamily		413		—		—		413		366,785		172		367,370
Construction and Land		74		86		—		160		58,331		—		58,491
Home Equity		—		—		—		—		21,489		30		21,519
Commercial loans		109		—		—		109		105,015		—		105,124
Consumer loans		11		—		—		11		1,180		39		1,230

Total	$	1,955		1,075		—		3,030	$	689,871		587	$	693,488

*At December 31, 2016:*
Real estate mortgage loans:
One-to-four family residential	$	501		274		—		775		154,487		—	$	155,262
Commercial Real Estate and Multifamily		778		—		—		778		355,755		255		356,788
Construction and Land		1,519		—		—		1,519		50,001		—		51,520
Home Equity		22		—		—		22		21,880		—		21,902
Commercial loans		217		—		—		217		100,022		—		100,239
Consumer loans		10		—		—		10		1,432		36		1,478

Total	$	3,047		274		—		3,321	$	683,577		291	$	687,189

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(4)

Loans, Continued

The following summarizes the amount of impaired loans (in thousands):


	With No Related Allowance Recorded				With an Allowance Recorded						Total
	Recorded Investment		Unpaid Principal Balance		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
*March 31, 2017*
Real estate mortgage loans:
One-to-four-family residential	$	346	$	346	$	313	$	313	$	16	$	659	$	659	$	16
Commercial and Multifamily		239		647		—		—		—		239		647		—
Home Equity		30		30		—		—		—		30		30		—
Commercial loans		489		525		—		—		—		489		525		—
Consumer Loans		39		39		—		—		—		39		39		—

	$	1,143	$	1,587	$	313	$	313	$	16	$	1,456	$	1,900	$	16

*December 31, 2016:*
Real estate mortgage loans:
One-to-four-family residential	$	—	$	—	$	448	$	448	$	21	$	448	$	448	$	21
Commercial and Multifamily		587		1,568		—		—		—		587		1,568		—
Commercial loans		427		457		73		77		9		500		534		9
Consumer Loans		—		—		36		36		1		36		36		1

	$	1,014	$	2,025	$	557	$	561	$	31	$	1,571	$	2,586	$	31

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(4)

Loans, Continued

The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands):


	Three Months Ended March 31,
	2017						2016
	Average Recorded Investment		Interest Income Recognized		Interest Income Received		Average Recorded Investment		Interest Income Recognized		Interest Income Received
Real estate mortgage loans:
One-to-four-family residential	$	314		6		4		458		9		7
Commercial real estate and Multifamily		187		8		7		891		19		26
Land and construction		—		—		—		157		—		2
Commercial loans		492		9		9		533		12		12

Total	$	933		23		20		2,039		40		47

During the three months ended March 31, 2017 and 2016, the Company did not enter into any debt restructurings and the Company had no loans restructured as troubled debt restructurings that subsequently defaulted that had been modified in the previous twelve month period. As of March 31, 2017 the Company had remaining approximately $436,000 in accruing TDRs and $76,000 of non-accruing TDRs.

At March 31, 2017 the contractually required principal of Purchased Credit Impaired (“PCI”) loans acquired was $3.6 million. The recorded investment of PCI loans was $3.2 million. There were no additional losses generated during the three months ended March 31, 2017 from these loans.

(5)

Other Borrowings

The Company is a member of the Federal Home Loan Bank of Atlanta (“FHLB”). The FHLB requires members to purchase stock in the FHLB, the required amount changes based upon their level of borrowings. FHLB stock is non-marketable and is carried at cost. At March 31, 2017, the Company held $2.8 million in FHLB stock.

At March 31, 2017, the Company had a maximum borrowing capacity of approximately $232.6 million with the FHLB. Advances are secured by a blanket lien on loans and the Company’s FHLB stock. Pursuant to the collateral agreement, borrowing availability is determined by the amount of qualifying collateral pledged. As of March 31, 2017 the Company had $158.2 million in loans pledged and total credit availability of approximately $113.2 million.

As of March 31, 2017, the Company had the following FHLB advances ($ in thousands).


At March 31, 2017
Maturing in the year ending	Advance type		Interest rate			Amount
2017		Fixed Rate		0.71	%		3,000
2017		Fixed Rate		0.84	%		8,000
2017		Fixed Rate		0.76	%		7,000
2017		Fixed Rate		0.80	%		7,000
2017		Fixed Rate		0.93	%		10,000
2017		Fixed Rate		0.69	%		10,000

						$	45,000

The Company enters into sweep agreements with customers that sweep funds from deposit accounts into investment accounts. These investment accounts are not federally insured and are treated as borrowings. At March 31, 2017 the outstanding balance of such borrowings totaled $9.2 million. The Company pledged securities with a market value of $9.7 million as collateral for these agreements. There were $6.9 million in sweep agreements at December 31, 2016.

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(6)

Subordinated notes

On March 30, 2016, the Company accepted subscriptions for and sold, at 100% of their principal amount, an aggregate of $11.0 million of subordinated notes (the “Notes”), on a private placement basis, to two accredited investors. The investors included a corporation owned and controlled by George Parmer, who is a director of the Company, which purchased $7.0 million in principal amount of the Notes. The Notes bear interest at a fixed interest rate of 5.0% per year. The Notes have a term of five years, and have a maturity date of April 1, 2021. The Notes are redeemable at the option of the Company, in whole or in part, at any time, without penalty or premium, subject to any required regulatory approvals. The Company contributed the proceeds from the Notes to the Bank as equity capital to support the Bank’s continued growth, including ongoing lending activities.

(7)

Fair Value of Financial Instruments

The estimated fair values of the Company’s financial instruments are as follows (in thousands):


	At March 31, 2017				At December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents (Level 1)	$	70,918	$	70,918	$	50,273	$	50,273
Time deposits with banks (Level 1)		2,794		2,794		2,794		2,794
Securities available for sale (Level 2)		109,943		109,943		109,668		109,668
Loans held for sale (Level 3)		865		878		443		450
Loans (Level 3)		689,656		692,120		683,784		718,111
Federal Home Loan Bank stock (Level 3)		2,750		2,750		3,478		3,478
Accrued interest receivable (Level 3)		1,869		1,869		2,077		2,077
Financial liabilities:
Deposits (Level 3)		771,168		770,746		729,949		729,553
FHLB Advances (Level 3)		45,000		44,948		65,000		64,975
Other borrowings (Level 3)		9,179		9,179		6,867		6,867
Subordinated notes (Level 3)		11,000		10,860		11,000		10,860
Off-balance-sheet financial instruments (Level 3)		—		—		—		—

Discussion regarding the assumptions used to compute the estimated fair values of instruments can be found in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 24, 2017 (“2016 Form 10-K”).

(8)

Fair Value Measurements

Securities available for sale measured at fair value on a recurring basis are summarized below (in thousands):


	Fair Value		Level 1		Level 2		Level 3
At March 31, 2017:
Federal Home Loan Bank obligations	$	1,000		—	$	1,000		—
U.S. Government enterprise and agency obligations		20,395		—		20,395		—
Mortgage-backed securities		88,548		—		88,548		—

Total	$	109,943		—	$	109,943		—


	Fair Value		Level 1		Level 2		Level 3
At December 31, 2016:
Federal Home Loan Bank obligations	$	3,002		—	$	3,002		—
U.S. Government enterprise and agency obligations		15,253		—		15,253		—
Mortgage-backed securities		91,413		—		91,413		—

Total	$	109,668		—	$	109,668		—

During the three months ended March 31, 2017 no securities were transferred in or out of Levels 1, 2, or 3.

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(8)

Fair Value Measurements, continued

Impaired collateral-dependent loans are carried at fair value when the current collateral value is lower than the carrying value of the loan. Those impaired collateral-dependent loans which are measured at fair value on a nonrecurring basis, excluding purchased credit impaired loans are as follows (in thousands):


	At Period End										Losses Recorded
	Fair Value		Level 1		Level 2		Level 3		Total Losses		During the Period
*At March 31, 2017:*
One-to-four-family residential	$	313		—		—	$	313		16		—
Commercial and Multifamily		239		—		—		239		408		—
Commercial		421		—		—		421		31		—

Total	$	973		—		—	$	973		455		—

*At December 31, 2016:*
Commercial and Multifamily	$	587		—		—		587		718		73
Commercial		427		—		—		427		72		—

Total	$	1,014		—		—	$	1,014		790		73

Other real estate owned which is measured at fair value on a nonrecurring basis is summarized below (in thousands):


	At Period End										Losses Recorded
	Fair Value		Level 1		Level 2		Level 3		Total Losses		During the Period
*At March 31, 2017*
Other real estate owned	$	32		—		—		32		—		—

*At December 31, 2016*
Other real estate owned	$	32		—		—		32		—		—

(9)

Employee Stock Ownership Plan (“ESOP”)

The Holding Company has established an ESOP which acquired 338,560 shares in exchange for a $3,385,600 indirect note payable from the Employee Stock Ownership Plan Trust to the Holding Company. The note bears interest at a variable rate based on Prime and is payable in thirty annual installments. As of March 31, 2017 33,855 shares held by the Employee Stock Ownership Plan Trust have been released and allocated to employees.

ESOP shares were as follows ($ in thousands, except per share amounts):


	At March 31, 2017		At December 31, 2016
Allocated shares		33,855		33,855
Unallocated shares		304,705		304,705

Total ESOP shares		338,560		338,560

Fair value of unallocated shares	$	6,381	$	5,223

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

(10)

Stock-Based Compensation

The Company’s 2015 Equity Incentive Plan (the “Plan”), provides for the grant of stock-based awards to officers, employees and directors of the Company. Generally the grants vest over a five year period. On September 28, 2016, stockholders approved an amendment to the Plan, increasing the total number of shares available for issuance from 592,480 shares to 742,480 shares and the corresponding increase in the maximum number of shares issuable pursuant to the exercise of stock options. Awards of the Company granted as replacements for awards granted by an acquired company do not reduce the total available for issuance. Stock-based compensation is accounted for in accordance with FASB ASC Topic 718 for Compensation — Stock Compensation. The Company establishes fair value for its stock awards measured by the Company’s stock price on the grant date. The fair value of options is measured on the grant date using the Black-Scholes option-pricing model. The Company’s assumptions included the one year Treasury-bill rate to establish a risk free interest rate of 0.32%, expected volatility of 16.7%, and an expected life of seven years. The Company recognizes the related expense for employees ratably over the vesting period. The following table summarizes the outstanding stock options and restricted stock:


	Stock Options			Weighted Average Exercise Price
Outstanding at January 1, 2017		800,190		$	13.04
Granted		—			—
Forfeited		(1,200	)	$	13.96
Exercised or Expired		(69,378	)	$	13.96

Outstanding at March 31, 2017		729,612		$	13.04

Exercisable at March 31, 2017		322,216		$	11.78
Unvested awards at March 31, 2017		407,396		$	14.20

	Restricted Stock Awards			Weighted Average Grant Date Fair Value
Non-vested at January 1, 2017		82,874		$	13.97
Granted		—			—
Forfeited		(1,200	)	$	13.96

Unvested awards at March 31, 2017		81,674		$	13.97

The weighted average remaining contractual term was approximately 8.5 years and the aggregate intrinsic value was $5.7 million for options outstanding as of March 31, 2017. As of March 31, 2017, exercisable options had a weighted average remaining contractual term of approximately 7.6 years, and an aggregate intrinsic value of $2.9 million. As of March 31, 2017, there was $ 1.1 million of total unrecognized compensation cost related to options and $1.1 million in unrecognized compensation cost related to non-vested stock awards granted. For the three months ended March 31, 2017, the Company recognized $79,000 in compensation cost related to options and $97,000 in compensation cost related to stock awards, with an implied tax benefit of $45,000. The current quarter tax provision includes no excess tax benefit from stock based compensation.

(11)

Regulatory Matters

Effective January 1, 2015, the Bank became subject to new capital requirements set forth by federal banking regulations. These changes were designed to ensure capital positions remain strong during the events of economic downturns or unforeseen losses. The Company is exempt from consolidated capital requirements as the Federal Reserve Board amended its “small bank holding company” policy statement to generally exempt savings and loan holding companies with less than $1.0 billion in assets from capital requirements.

These new requirements create a new capital ratio for common equity Tier 1 capital and increase the Tier 1 capital ratio requirements. Under the new capital regulation for the Bank, the minimum capital ratios consist of a common equity tier 1 ratio of 4.5% of risk-weighted assets, a tier 1 capital ratio of 6.0% of risk-weighted assets, a total capital ratio of 8.0% of risk weighted assets, and a leverage ratio of 4.0%. Common equity tier 1 generally comprises of common stock, additional paid in capital, and retained income.

There were changes in the risk weighting of certain assets to better reflect the risk associated with those assets, such as the risk weighting for nonperforming loans and certain high volatility commercial real estate acquisitions, development and construction loans. The changes also include additional limitations on the inclusion of deferred tax asset in capital. The Bank made a one-time election to exclude accumulated other comprehensive income from regulatory capital in order to reduce the impact of market volatility on regulatory capital. In order to avoid limitations on distributions, including

SUNSHINE BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

dividend payments, and certain discretionary bonus payments to executive officers, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. As of March 31, 2017 the Bank’s capital conservation buffer was 5.21% exceeding the minimum of 1.25% for 2017.

The following table shows the Bank’s capital amounts and ratios and regulatory thresholds at March 31, 2017 and December 31, 2016. As of March 31, 2017 the Bank was “Well Capitalized” under all capital ratios. ($ in thousands)


	Actual					Minimum for Capital Adequacy Purposes					Minimum to be Well Capitalized
	Amount		%			Amount		%			Amount		%
March 31, 2017
Common Equity Tier 1 to Risk-Weighted Assets	$	94,420		12.72	%	$	33,400		4.50	%	$	48,244		6.50	%
Tier I Capital to Risk-Weighted Assets		94,420		12.72	%		44,533		6.00	%		59,377		8.00	%
Total Capital to Risk-Weighted Assets		98,063		13.21	%		59,377		8.00	%		74,222		10.00	%
Tier I Capital to Total Assets		94,420		10.30	%		36,685		4.00	%		45,856		5.00	%

December 31, 2016
Common Equity Tier 1 to Risk-Weighted Assets	$	93,083		12.93	%	$	32,387		4.50	%	$	46,781		6.50	%
Tier I Capital to Risk-Weighted Assets		93,083		12.93	%		43,183		6.00	%		57,577		8.00	%
Total Capital to Risk-Weighted Assets		96,357		13.39	%		57,577		8.00	%		71,971		10.00	%
Tier I Capital to Total Assets		93,083		12.10	%		30,771		4.00	%		38,464		5.00	%

(12)

Earnings per Share

Basic earnings per share has been computed on the basis of the weighted-average number of shares of common stock outstanding. For the three months ended March 31, 2017 outstanding stock options are considered dilutive securities for the purposes of calculating diluted earnings per share which was computed using the treasury method. The shares purchased by the Employee Stock Ownership Plan are included in the weighted-average shares when they are committed to be released. ($ in thousands, except per share amounts):


	Three months Ended March 31, 2017		Three months Ended March 31, 2016
Net Income Available to Common Stockholders	$	1,630	$	154
Weighted Average Shares		7,707,791		4,949,835
Basic income per share:	$	0.21	$	0.03
Weighted Average Diluted Shares		7,878,356		4,966,070
Diluted income per share	$	0.21	$	0.03

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto presented elsewhere in this report. For additional information, refer to the audited consolidated financial statements and footnotes for the year ended December 31, 2016 in the Annual Report on Form 10-K.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “target” and words of similar meaning. Certain factors that could cause actual results to differ materially from expected results include, general economic conditions, including our local, state and national real estate markets and employment trends; changes in legislation or regulation; competition from other financial institutions; the accuracy of our estimates of future loan losses; inflation, interest rate, market and monetary fluctuations; acquisitions and integration of acquired businesses; the possible impairment of goodwill associated with our acquisitions; expansion of our operations, including branch openings and branch acquisitions, new product offerings and expansion into new markets; the impact of new capital requirements; restrictions or conditions imposed by our regulators on our operations; cybersecurity breaches, including potential business disruptions or financial losses. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to revise or update any forward-looking statements contained in this Form 10-Q to reflect future events or developments.

Overview

The Bank is a financial services institution focused on positively impacting the consumers, businesses, and non-profits throughout central Florida by creating financial success for our customers. Our competitive advantage is our ability to attract and retain employees, who are passionate about providing uncompromising service with a sense of warmth, integrity, friendliness, and company spirit. Operations are conducted from the main banking office in Plant City, Florida and seventeen additional full service Florida banking offices located in Bartow, Brandon, Bradenton, Kissimmee, Lakeland, Lake Mary, Melbourne, Merritt Island, Orlando, Plant City, Riverview, Sarasota, Tampa, Winter Haven, Winter Park, and Zephyrhills. Our common stock is traded on the NASDAQ Capital Market under the symbol “SBCP.”

Our principal business has consisted of attracting retail and commercial deposits from the general public in our primary market area of Brevard, Hillsborough, Manatee, Orange, Osceola, Pasco, Polk, and Seminole counties, Florida, and investing those deposits, together with funds generated from operations, in commercial real estate loans, commercial business loans and, to a lesser extent, multi-family real estate, land and construction, one-to- four-family and consumer loans. We also invest in securities, which consist primarily of U.S. Treasury securities, U.S government sponsored enterprise (“GSE”) mortgage-backed securities, GSE securities and obligations, U.S. government agency securities, and securities issued by the Federal Home Loan Bank. We offer a variety of deposit accounts to consumers and small businesses, including savings accounts, NOW accounts, money market accounts, certificate of deposit accounts, other borrowings, and cash management programs.

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provision for loan losses, non-interest income and non-interest expense. Non-interest income currently consists of fees and service charges on deposit accounts, mortgage broker fees, gain on sales of securities, income from bank-owned life insurance, and other income such as wealth management services and sales of SBA guaranteed loans. Non-interest expense currently consists of expenses related to salaries and employee benefits, occupancy and equipment, data and item processing, professional fees, advertising and promotion, stationery and supplies, FDIC insurance, merger related expenses, and other expenses.

Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

Critical Accounting Policies

There have been no material changes in our critical accounting policies since the Company filed its Annual Report on Form 10-K for 2016.

Comparison of Financial Condition at March 31, 2017 and December 31, 2016

Total Assets. Total assets increased $24.9 million, or 2.7%, to $956.4 million at March 31, 2017 from $931.4 million at December 31, 2016. The increase was primarily the result of an increase of $5.9 million in net loans and an increase of $20.6 million in cash and cash equivalents.

Cash and Cash Equivalents. Total cash and cash equivalents increased by $20.6 million, or 41.1%, to $70.9 million at March 31, 2017 from $50.3 million at December 31, 2016. Cash provided by financing activities totaled $23.5 million, primarily from increases in deposits. Cash provided by operations totaled $2.4 million. These were offset by cash used in investing of $5.3 million primarily from increases in loans.

Investment Securities. Investment securities increased $275,000, or 0.3%, to $109.9 million at March 31, 2017 from $109.7 million at December 31, 2016. New purchases were nearly offset by, repayments and maturities as the portfolio was managed to remain consistent with the prior period end balances. All of our investment securities were classified as available for sale at both March 31, 2017 and December 31, 2016.

Net Loans. Our primary interest-earning asset and source of income is our loan portfolio. Net loans increased $5.9 million, or 0.9%, to $689.7 million at March 31, 2017 from $683.8 million at December 31, 2016. The growth consisted of increases of $10.6 million in commercial real estate loans, $4.9 million in commercial loans, $7.0 million in construction and land loans, partially offset by a decrease of $15.5 million in one-to-four family residential loans. During the first quarter of 2017, the Bank continued its strategic emphasis on relationship banking and targeted asset class diversification within the loan portfolio.

Deposits. Deposits increased $41.2 million, or 5.6%, to $771.2 million at March 31, 2017 from $729.9 million at December 31, 2016. The increase was primarily due to a $25.9 million increase in noninterest-bearing deposits and a $22.7 million increase in non-maturity deposits, partially offset by a decrease of $7.4 million in time deposits. The increase in core deposits reflects growth from the increased footprint and deposit base associated with the integration of the FBC merger and the seasonal variations in the agricultural deposit base. The decrease in time deposits was mainly from less utilization of brokered deposits because of the increased core deposits gathered in market. Non-reciprocal brokered deposits decreased $14.7 million during the quarter. The Bank continued its efforts to attract new customers and offer more banking options to existing relationships during the first quarter of 2017.

Borrowings. Other borrowings, consisting of Federal Home Loan Bank (“FHLB”) advances and customer repurchase sweep agreements, decreased $17.7 million to $54.2 million at March 31, 2017 compared to $71.9 million at December 31, 2016. The deposit growth in the first quarter of 2017 allowed for decreased utilization of FHLB advances resulting in $20.0 million in repayments at maturity. The $45.0 million in FHLB advances are secured by a blanket asset lien on loans with maximum borrowing capacity of approximately $232.6 million at March 31, 2017 collateralized by residential and commercial real estate loans. The customer repurchase sweep agreements are secured by securities with a market value of $9.7 million at March 31, 2017.

Subordinated notes (the “Notes”) were $11.0 million at March 31, 2017, which was unchanged from December 31, 2016. The Notes were issued on March 30, 2016, to two accredited investors. The investors included a corporation owned and controlled by George Parmer, who is a director of the Company, which purchased $7.0 million in principal amount of the Notes. The Notes bear interest at a fixed interest rate of 5.0% per year. The Notes have a maturity date of April 1, 2021. The Notes are redeemable at the option of the Company, in whole or in part, at any time, without penalty or premium, subject to any required regulatory approvals.

Stockholders’ Equity. Stockholders’ equity increased $1.9 million, or 1.7%, to $114.1 million at March 31, 2017 as a result of net income of $1.6 million for the three months ended March 31, 2017, $176,000 in additional paid in capital from stock-based compensation and $147,000 in other comprehensive income mainly from increases in unrealized gains on securities.

Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the three ended March 31, 2017 and 2016. No tax-equivalent yield adjustments have been made, as we had no tax-free interest-earning assets during the periods. All average balances are daily average balances based upon amortized costs. Nonaccrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.


	For the Three Months Ended March 31,
	2017								2016
	Average Outstanding Balance			Interest		Average Yield/Rate(1)			Average Outstanding Balance			Interest		Average Yield/Rate(1)
Interest-earning assets:
Loans	$	679,931		$	7,930		4.67	%	$	331,144		$	4,055		4.90	%
Securities		108,932			427		1.57			65,312			221		1.35
Other(2)		49,177			131		1.07			44,602			78		0.70

Total interest-earning assets		838,040			8,488		4.05			441,058			4,354		3.95

Non-interest-earning assets		104,588								62,094

Total assets	$	942,628							$	503,152

Interest-bearing liabilities:
Interest-bearing demand and savings accounts	$	359,803		$	358		0.40	%	$	205,339		$	159		0.31	%
Time deposits		152,604			230		0.60			106,321			156		0.59

Total interest-bearing deposits		512,407			588		0.46			311,660			315		0.40
FHLB Advances and other borrowings		64,952			121		0.75			23,050			22		0.38
Subordinated Notes		11,000			142		5.00			241			3		5.00

Total interest-bearing liabilities		588,359			851		0.58			334,951			340		0.41

Non-interest-bearing liabilities		240,383								96,490

Total liabilities		828,742								431,441
Stockholders’ equity		113,886								71,711

Total liabilities and stockholders’ equity	$	942,628							$	503,152

Net interest income				$	7,637							$	4,014

Net interest rate spread (3)							3.47	%							3.54	%
Net interest-earning assets (4)	$	249,681							$	106,107

Net interest margin (5)							3.65	%							3.64	%
Average interest-earning assets to average interest-bearing liabilities		142.4	%							131.7	%

(1)

Annualized.

(2)

Includes interest-earning deposits, federal funds, FHLB stock and time deposits with other banks.

(3)

Net interest rate spread represents the difference between the weighted-average yield on interest earning assets and the weighted-average cost of interest-bearing liabilities.

(4)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(5)

Net interest margin represents net interest income divided by average total interest-earning assets.

Comparison of Operating Results for the Three Months Ended March 31, 2017 and March 31, 2016

General. Net income for the three months ended March 31, 2017 was $1.6 million compared to net income of $154,000 for the three months ended March 31, 2016. The increase in net income was primarily due to increases in net interest income of $3.6 million or 90.3% due to the growth in the Company’s interest earning assets and an increase in noninterest income of $408,000 or 61.2%. This increase in revenue was offset by an increase in noninterest expense of $1.6 million. The increase in noninterest expense was mostly comprised of increases in compensation, occupancy, and data processing expenses due to the expanded size and footprint of the Company as a result of the Company’s growth strategy and integration of the FBC merger.

Interest Income. Interest income increased $4.1 million, or 95.0%, to $8.5 million for the three months ended March 31, 2017 primarily as a result of a $3.9 million increase in interest income on loans. The increase in interest income resulted primarily from a $397.0 million increase in the average balance of our interest-earning assets to $838.0 million and a 10 basis points increase in the average yield on our interest-earning assets to 4.05% for the three months ended March 31, 2017 compared to the prior year period.

Interest income on loans increased $3.9 million, or 95.6%, to $7.9 million for the three months ended March 31, 2017 as compared to the same period in 2016. The average balance of loans increased to $679.9 million for the three months ended March 31, 2017 from $331.1 million for the three months ended March 31, 2016, mainly as a result of the Company’s FBC acquisition in October 2016. The generally low rate yield environment resulted in the Company experiencing a decrease in its average yield on loans decreasing 23 basis points to 4.67% in the three months ended March 31, 2017 as compared to the same period in 2016.

Interest income on investment securities increased $206,000, or 93.2%, to $427,000 for the three months ended March 31, 2017 as compared to the same period in 2016, mostly as a result of the average balance on investments increasing. The average balance of investment securities increased $43.6 million to $108.9 million for the three months ended March 31, 2017 from $65.3 million for the three months ended March 31, 2016. The increase in the average balance of investment securities was the result of purchases. The Company purchased various agency mortgage back securities with specific characteristics designed to achieve improved diversification of the total portfolio’s risk profile and expected cash flow behavior under various rate scenarios. The Company also experienced a 22 basis points increase in the average yield on investment securities to 1.57% as a result of the higher yielding securities in the portfolio compared to the same period in 2016.

Interest Expense. Interest expense increased $511,000, or 150.3%, to $851,000 for the three months ended March 31, 2017 from $340,000 for the three months ended March 31, 2016 primarily as the result of the $200.7 million increase in the average balance of interest-bearing deposits and the $139,000 increase in borrowing costs from the subordinated debt.

The average balance of interest-bearing deposits increased by $200.7 million during the three months ended March 31, 2017 to $512.4 million compared to the prior year period due mostly to the FBC merger. Interest expense on deposits increased $273,000, or 86.7%, to $588,000 for the three months ended March 31, 2017 from $315,000 for the three months ended March 31, 2016 primarily as the result of the increase in the average balance of interest-bearing deposits from the FBC merger. The average cost of interest-bearing deposits increased by six basis points to 0.46% for the three months ended March 31, 2017 from 0.40% for the three months ended March 31, 2016 reflecting the higher deposit rates on new money market deposits and slightly higher deposit costs assumed in the FBC merger. Competitive market pricing and the expectation of a future fed funds increase have pressured increased rates on new time and money market deposits.

Interest expense on borrowed funds increased $238,000, to $263,000 for the three months ended March 31, 2017 from $25,000 for the three months ended March 31, 2016 primarily as the result of the $52.7 million increase in the average balance of borrowed funds due to increased use of short-term FHLB advances and the 37 basis point increase in the average cost of short-term FHLB advances due to recent rate increases in short-term borrowings and the overnight Fed Funds rate.

Net Interest Income. Net interest income increased $3.6 million or 90.1%, to $7.6 million for the three months ended March 31, 2017 compared to the prior year period as average net interest-earning assets increased to $249.7 million for the three months ended March 31, 2017 as compared to $106.1 million for the prior year period. The effect of the FBC merger compared to the prior year period has increased the Company’s net interest-earning assets and income for the three months ended March 31, 2017. The net interest rate spread decreased to 3.47% for the three months ended March 31, 2017 from 3.54% for the three months ended March 31, 2016. Our net interest margin increased to 3.65% for the three months ended March 31, 2017 from 3.64% for the three months ended March 31, 2016.

Provision for Loan Losses. We recorded no provision for loan losses for the three months ended March 31, 2017 or for the three months ended March 31, 2016. The Company has continued to experience strong credit quality, requiring no additional provision during the quarter. Net recoveries for the three months ended March 31, 2017 were $369,000 compared to net recoveries of $21,000 for the three months ended March 31, 2016.

Management considers the allowance for loan losses at March 31, 2017 to be adequate to cover losses inherent in the loan portfolio based on an assessment of the qualitative and quantitative factors affecting the loan portfolio. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future losses will not exceed the amount of the established allowance for loan losses or that any increased allowance for loan losses that may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of our allowance for loan losses is subject to review by bank regulators, as part of the routine examination process, which may result in additions to our provision for loan losses based upon their judgment of information available to them at the time of their examination.

Noninterest Income. Noninterest income increased $408,000, or 61.2%, to $1.1 million for the three months ended March 31, 2017 from $667,000 for the three months ended March 31, 2016. The Bank experienced a $139,000 increase in fees and service charges on deposit accounts as a result of its expanded deposit base after the FBC merger. The Bank experienced a $12,000 increase in Mortgage broker fees as the Bank began to originate loans for sale on a correspondent basis after the FBC merger. Income from Bank-owned life insurance (“BOLI”) increased $87,000, or 91.6% compared to the same period in 2016. The increase in BOLI income was attributable to the additional $10.0 million of BOLI purchased in December 2016. Other income increased $196,000, or 113.3% to $369,000 compared to the same period in 2016, due to increases in wealth management fee income and from sales of SBA loans originated by the Bank. SBA loan originations began in November 2016 as a result of the FBC merger.

Noninterest Expenses. Non-interest expenses increased $1.6 million to $6.1 million for the three months ended March 31, 2017 compared to the same period in 2016. The increase reflected an increase of $1.1 million in salaries and employee benefits expense, as a result of the increased FTEs from the FBC merger. Occupancy increased $148,000, data processing increased $199,000, and other expenses increased $215,000, all consistently with the increased size of the Company following completion of the FBC merger.

Income Tax Expense. Income taxes were $969,000 for the three months ended March 31, 2017 due to pretax income of $2.6 million at a 37.3% effective tax rate compared to an income tax expense of $49,000 for the three months ended March 31, 2016 due to the pretax income of $203,000 at a 24.1% effective tax rate. The primary reason for the decrease in the effective tax rates is due to a larger percentage of tax exempt income, such as BOLI income, relative to total income reduced the effective tax rate in 2016.

Asset Quality

Non-Performing Assets. We define non-performing loans as loans that are either non-accruing or accruing whose payments are 90 days or more past due. Non-performing assets, including non-performing loans and other real estate owned, totaled $619,000, or 0.06% of total assets, at March 31, 2017 and $323,000, or 0.03% of total assets, at December 31, 2016. The following table sets forth the amounts and categories of our non-performing assets at the dates indicated. We had no accruing loans past due 90 days or more at March 31, 2017 or December 31, 2016.


	At March 31,			At December 31,
	2017			2016
	*(dollars in thousands)*
Non-accrual loans:
Real estate mortgage loans:
One- to four-family residential	$	346		$	—
Commercial real estate and multi-family		55			117
Construction and land		—			—
Home Equity		30			—
Non-Real estate loans:					—
Commercial business loans		—			—
Consumer loans		39			36

Total non-accrual loans		470			153

Non-accruing troubled debt restructured loans:
Commercial real estate and multi-family		117			138

Total non-performing loans		587			291

Other real estate owned
Land and construction		32			32

Total non-performing assets	$	619		$	323

Total accruing troubled debt restructured loans	$	436		$	1,278

Total non-performing loans to total loans		0.08	%		0.04	%

Total non-performing assets to total assets		0.06	%		0.03	%

The following table sets forth activity in our allowance for loan losses for the periods indicated.


	For the three months ended March 31,
	2017			2016
	*(dollars in thousands)*
Allowance at beginning of period	$	3,274		$	2,511
Provision for loan losses		—			—
Charge offs:
Real estate mortgage loans:
One- to four-family residential		—			—
Commercial real estate and multi-family		—			—
Construction and land		—			—
Commercial business loans		—			(11	)
Consumer loans		—			(2	)

Total charge-offs		—			(13	)

Recoveries:
Real estate mortgage loans:
One- to four-family residential		—			—
Commercial real estate and multi-family		338			2
Construction and land		—			—
Home Equity		12			12
Commercial business loans		19			19
Consumer loans		—			1

Total recoveries		369			34

Net (charge-offs)recoveries		369			21

Allowance at end of period	$	3,643		$	2,532

Allowance to nonperforming loans		620.6	%		265.69	%
Allowance to total loans outstanding at the end of the period		0.53	%		0.74	%
Net (charge-offs)recoveries to average loans outstanding during the period (annualized)		0.22	%		0.03	%

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities and calls of securities. We also have the ability to borrow from the Federal Home Loan Bank of Atlanta. At March 31, 2017 we had the capacity to borrow approximately $158.2 million from the Federal Home Loan Bank of Atlanta. At March 31, 2017, we had outstanding advances of approximately $45.0 million and at December 31, 2016 we had $65.0 million in outstanding advances from the Federal Home Loan Bank of Atlanta. We also have lines of credit at three financial institutions that would allow us to borrow up to $31.0 million at March 31, 2017. No credit lines were drawn upon at March 31, 2017.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-earning demand deposits. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period.

The principal sources of the Holding Company’s liquidity are its existing cash resources. The Holding Company serves as a source of capital strength for the Bank. The Holding company has contributed $19 million in additional capital to the Bank year to date. The Holding Company has undertaken recent actions that demonstrate its ability to access capital and provide for the funding needs of the Bank. Cash on hand at the Holding Company represent mainly the proceeds of our December 2015 private placement of common stock, which raised net proceeds of approximately $11.4 million. On March 30, 2016, the Holding Company also issued $11.0 million in subordinated notes, the proceeds of which were contributed to the Bank to support the growing loan demand.

The Company has established an Asset/Liability Management (ALCO) policy and committee in order to maximize earnings performance while maintaining acceptable levels of risks, adequate liquidity, and a “well capitalized” balance sheet. ALCO reviews and approves products, pricing, and strategies that affect balance sheet, cash flows, and liquidity positions. ALCO has also established a contingency funding plan to address risks associated with periods of liquidity stress. The Company is committed to maintaining a strong liquidity position. The Company monitors its liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments.

At March 31, 2017, Sunshine Bank exceeded all of our regulatory capital requirements with a Tier 1 leverage capital level of 10.3% of adjusted total assets, which is above the required level of 5.00% to be considered “well capitalized”, common equity tier 1 capital to risk-weighted assets of 12.7%, which is above the required level of 6.50% to be considered “well capitalized”, tier 1 capital to risk-weighted assets of 12.7%, which is above the required level of 8.00% to be considered “well capitalized”, and total risk-based capital of 13.2% of risk-weighted assets, which is above the required level of 10.00% to be considered “well capitalized”. The capital conservation buffer was 5.21% exceeding the minimum of 1.25% for 2017. Management is not aware of any conditions or events since the most recent notification that would change our category.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At March 31, 2017, we had unfunded loan commitments of $99.9 million. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in less than one year from March 31, 2017 totaled $98.9 million. Management expects that a substantial portion of the maturing time deposits will be renewed. However, if a substantial portion of these deposits are not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for equipment, agreements with respect to borrowed funds and deposit liabilities.

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

Not required for smaller reporting companies

Item 4.

Controls and Procedures

An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Act”)) as of March 31, 2017, was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and several other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures in effect as of March 31, 2017, were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

In addition, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended March 31, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

In the normal course of business, the Company occasionally becomes involved in various legal proceedings. In the opinion of management, any liability from such proceedings would not have a material adverse effect on the business or financial condition of the Company as of March 31, 2017.

Item 1A.

Risk Factors

Not required for smaller reporting company.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Nothing to report.

Item 3.

Defaults Upon Senior Securities

Nothing to report.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

Nothing to report.

Item 6.

Exhibits


Exhibits:

31.1		Rule 13a-14(a) Certification of the Chief Executive Officer

31.2		Rule 13a-14(a) Certification of the Chief Financial Officer

32.0		Section 1350 Certification

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Calculation Linkbase Document

101 DEF		XBRL Taxonomy Extension Definition Linkbase Document

101 LAB		XBRL Taxonomy Label Linkbase Document

101.PRE		XBRL Taxonomy Presentation Linkbase Document

SUNSHINE BANCORP, INC. AND SUBSIDIARY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SUNSHINE BANCORP, INC.

Date: May 12, 2017	By:	/s/ Andrew S. Samuel
		Andrew S. Samuel
		President and Chief Executive Officer
		(Duly Authorized Officer)

Date: May 12, 2017	By:	/s/ John Finley
		John Finley
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐ (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

Sunshine Bancorp, Inc. 10-Q