Carolina Financial Corporation Reports Results for Fourth Quarter of 2017

NEWS RELEASE – For Release January 24, 2018 4:00PM

 

For More Information, Contact:
William A. Gehman III, EVP and CFO, 843.723.7700

 

Charleston, S.C. January 24, 2018 - Carolina Financial Corporation (the “Company”) (NASDAQ: CARO) today announced financial results for the fourth quarter of 2017.

 

Operational highlights at and for the three months ended December 31, 2017, include:

 

·On November 1, 2017, the Company closed its previously announced acquisition of First South Bancorp, Inc., the holding company for First South Bank, (“First South”) with the operational conversion expected to be completed in the first quarter of 2018. Excluding purchase accounting adjustments, total assets of First South were $1.1 billion, total loans receivable were $774.3 million and total deposits were $952.6 million as of the closing date.

 

Financial highlights at and for the three months ended December 31, 2017, include:

 

·Effective November 1, 2017, the Company completed the previously announced merger of First South Bancorp, Inc. (“First South”).
·Net income for the fourth quarter 2017 increased 22.9% to $6.3 million, or $0.33 per diluted share, from $5.2 million, or $0.41 per diluted share for the fourth quarter of 2016. Included in earnings are pretax merger-related expenses of $4.1 million for the fourth quarter of 2017 compared to $260,000 for the fourth quarter of 2016.
·Operating earnings for the fourth quarter of 2017, which exclude certain non-operating income and expenses, increased 93.0% to $11.1 million, or $0.57 per diluted share, from $5.8 million, or $0.46 per diluted share, from the fourth quarter of 2016.
·

Operating earnings for Q4 2017 have been adjusted to eliminate the following significant items:

o

Pretax merger-related expenses of $4.1 million.

o

The fair value gain on interest rate swaps of $419,000.

o

The loss on sale of securities of $242,000.

oThe effect of an increase in income tax expense of $2.3 million related to application of the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act).
·Performance ratios Q4 2017 compared to Q4 2016:
oReturn on average assets was 0.83% compared to 1.25%.
oOperating return on average assets was 1.46% compared to 1.40%.
oReturn on average tangible equity was 8.78% compared to 13.46%.
oOperating return on average tangible equity was 15.44% compared to 15.06%.

 

 

 

 

·Loans receivable, excluding acquired loans, grew $187.5 million, or at an annualized rate of 15.9%, since December 31, 2016.
·Asset quality continues to improve as nonperforming assets to total assets were 0.20% at December 31, 2017 compared to 0.40% at December 31, 2016.
·Total deposits, excluding acquired deposits, increased $78.3 million since December 31, 2016. Core deposits, excluding core deposits acquired, increased $34.6 million since December 31, 2016.
·The 2017 Tax Act was signed into law by the President on Friday, December 22, 2017. The changes that most affect businesses include the reduction in the corporate tax rate, change in business deductions, and many international provisions. Generally accepted accounting principles require the effect of a change in tax law or rates be recognized as of the date of enactment. The Company’s net income for the quarter and year ended December 31 2017 was reduced by approximately $2.3 million, primarily due to a lower valuation of deferred income taxes.

 

“We continue to see the impact of solid organic growth and acquisitions on earnings. Overall operating results for the fourth quarter of 2017 continued to improve with an increase in operating net income of 93.0% compared to the fourth quarter of 2016. We believe we have partnered with a great franchise with the First South acquisition, and are actively working on integration. We expect the systems conversion to occur late in the first quarter of 2018,” stated Jerry Rexroad, the Company’s Chief Executive Officer.

 

Acquisition of First South Bancorp, Inc.

 

Effective November 1, 2017, the Company completed its previously announced acquisition of First South. At closing, the holding companies were merged with the Company as the surviving corporation, and First South Bank also merged with and into CresCom Bank, with CresCom Bank surviving the merger.

 

Under the terms of the merger, First South shareholders received 0.5064 shares of the Company’s common stock. Fractional shares were paid in cash.

 

The acquisition of First South was accounted for under the acquisition method of accounting. The assets and liabilities of First South have been recorded at their estimated fair values and added to those of the Company as of the merger date. Included in the December 31, 2017 consolidated balance sheet were approximately $728.7 million of acquired loans, net of related purchase accounting adjustments and $939.6 million of deposits. The Company may continue to refine its valuations of acquired assets and liabilities for up to one year following the merger date.

 

Financial Results

 

Carolina Financial Corporation

 

nThe Company reported an increase in net income for the three months ended December 31, 2017 to $6.3 million, or $0.33 per diluted share, as compared to $5.2 million, or $0.41 per diluted share, for the three months ended December 31, 2016. Included in net income for the three months ended December 31, 2017 were pretax merger-related expenses of $4.1 million, compared to $260,000 for the three months ended December 31, 2016.
nThe Company reported an increase in net income for the year ended December 31, 2017 to $28.6 million, or $1.73 per diluted share, as compared to $17.6 million, or $1.42 per diluted share, for the year ended December 31, 2016. Included in net income for the years ended December 31, 2017 and 2016 were pretax merger-related expenses of $6.0 million and $3.2 million, respectively.
nOperating earnings for the fourth quarter of 2017, which excludes certain non-operating income and expenses, increased 93.0% to $11.1 million, or $0.57 per diluted share, from $5.8 million, or $0.46 per diluted share, from the fourth quarter of 2016.

 

 

 

 

nOperating earnings for the year ended December 31, 2017, which excludes certain non-operating income and expenses, increased 67.3% to $33.8 million, or $2.04 per diluted share, from $20.2 million, or $1.64 per diluted share, from the same period of 2016.
nThe Company’s net interest margin-tax equivalent increased to 4.19% for the fourth quarter of 2017 compared to 3.87% for the fourth quarter of 2016.
nThe Company reported book value per common share of $22.76 and $13.23 as of December 31, 2017 and December 31, 2016, respectively. Tangible book value per common share was $15.14 and $12.59 as of December 31, 2017 and December 31, 2016, respectively.
nAt December 31, 2017, the Company’s regulatory capital ratios exceeded the minimum levels currently required. Stockholders’ equity totaled $475.4 million as of December 31, 2017 compared to $163.2 million at December 31, 2016. Tangible equity to tangible assets at December 31, 2017 was 9.7% compared to 9.3% at December 31, 2016.
nAs a result of the 2017 Tax Act, the Company’s net income for the quarter and year ended December 31 2017 was reduced by approximately $2.3 million, primarily from a lower valuation of deferred income taxes.

 

Community Banking

 

nCommunity banking segment net income increased 32.6% to $6.1 million for the three months ended December 31, 2017 compared to $4.6 million for the three months ended December 31, 2016. Included in net income for the three months ended December 31, 2017 were pretax merger-related expenses of $4.1 million compared to $254,000 for the three months ended December 31, 2016.
nThe community banking segment net income increased 80.4% to $26.8 million for the year ended December 31, 2017 compared to $14.9 million for the year ended December 31, 2016. Included in net income for the year ended December 31, 2017 and 2016 were pretax merger-related expenses of $6.0 million and $3.1 million, respectively.
nCommunity banking segment operating earnings increased 115.8% to $11.2 million for the three months ended December 31, 2017 compared to $5.2 million for the three months ended December 31, 2016. Included in earnings for the three months ended December 31, 2017 and 2016 were pretax merger-related expenses of $4.1 million and $254,000, respectively. The community banking segment operating earnings increased 86.7% to $32.6 million for the year ended December 31, 2017 compared to $17.5 million for the year ended December 31, 2016. Included in earnings for the year ended December 31, 2017 and 2016 were pretax merger-related expenses of $6.0 million and $3.1 million, respectively.
nProvision for loan loss during the three months ended December 31, 2017 was $779,000. There was no provision for loan loss during the three months ended December 31, 2016. Asset quality and historical loss experience continue to remain favorable. The provision for loan loss was primarily driven by the organic loan growth.
nNon-performing assets were 0.20% and 0.40% of total assets at December 31, 2017 and December 31, 2016, respectively.
nLoans receivable, gross increased to $2.3 billion at December 31, 2017 compared to $1.2 billion at December 31, 2016. Excluding loans acquired, organic loans increased $187.5 million, or 15.9% over December 31, 2016.
nThe number of checking accounts increased at an annualized rate of 8.7%, excluding First South and Greer checking accounts acquired, since December 31, 2016. Total deposits, excluding acquired deposits, increased $78.3 million since December 31, 2016. As of December 31, 2017 and December 31, 2016, core deposits, defined as checking, savings and money market, comprised approximately 66.8% and 60.6%, respectively, of total deposits.
nAs a result of the Tax Act, the community banking segment’s net income for the quarter and year ended December 31 2017 was reduced by approximately $2.5 million, primarily from a lower valuation of deferred income taxes.

 

 

 

Wholesale Mortgage Banking

 

nNet income for the wholesale mortgage banking segment was $117,000 for the three months ended December 31, 2017 compared to $806,000 for the three months ended December 31, 2016.
nNet income was $2.5 million for the year ended December 31, 2017 compared to $3.5 million for the year ended December 31, 2016.
nOperating earnings for the wholesale mortgage banking segment were $444,000 for the three months ended December 31, 2017 compared to $806,000 for the three months ended December 31, 2016.
nOperating earnings for the wholesale mortgage banking segment were $2.8 million for the year ended December 31, 2017 compared to $3.5 million for the year ended December 31, 2016.
nNet margin was 1.43% for the three months ended December 31, 2017 compared to 1.61% for the three months ended December 31, 2016. Originations for the three months ended December 31, 2017 and 2016 were $239.8 million and $234.9 million, respectively.
nNet margin was 1.59% for the year ended December 31, 2017 compared to 1.73% for the year ended December 31, 2016. Originations for the year ended December 31, 2017 and 2016 were $911.0 million and $875.4 million, respectively.
nNet interest income for the wholesale mortgage banking segment was $388,000 for the three months ended December 31, 2017 compared to $407,000 for the three months ended December 31, 2016. Net interest income for the wholesale mortgage banking segment was $1.6 million for the year ended December 31, 2017 compared to $1.5 million for the year ended December 31, 2016.
nMortgage loan servicing income, net of amortization of mortgage servicing rights and subservicing expense, for the wholesale mortgage banking segment was $400,000 and $400,000 for the three months ended December 31, 2017 and December 31, 2016, respectively. Mortgage loan servicing income, net of amortization of mortgage servicing rights and subservicing expense, for the wholesale mortgage banking segment was $1.6 million and $1.6 million for the year ended December 31, 2017 and December 31, 2016, respectively. At December 31, 2017, loans serviced for third parties totaled $2.6 billion.
nAs a result of the Tax Act, the wholesale mortgage banking segment’s net income for the quarter and year ended December 31, 2017 was reduced by approximately $327,000, primarily from a lower valuation of deferred income taxes.

 

Dividend Declared

 

On January 24, 2018 the Company declared a $0.05 dividend per common share, payable on April 6, 2018, to stockholders of record on March 6, 2018.

Conference Call

 

A conference call will be held at 11:00 a.m., Eastern Time on January 25, 2018. The conference call can be accessed by dialing (866) 464-9448 or (213) 660-0874 and requesting the Carolina Financial Corporation earnings call. The conference ID number is 4095667. Listeners should dial in 10 minutes prior to the start of the call.  The live webcast and presentation slides will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations.”

A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations” approximately three hours after the call and can be accessed by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 4095667.

About Carolina Financial Corporation

Carolina Financial Corporation (NASDAQ: CARO) is the holding company of CresCom Bank, which also owns and operates Atlanta-based Crescent Mortgage Company.  As of December 31, 2017, Carolina Financial Corporation had approximately $3.5 billion in total assets and Crescent Mortgage Company was licensed to originate loans in 47 states, partnering with community banks, credit unions and mortgage brokers.

 

 

Addendum to News Release – Use of Certain Non-GAAP Financial Measures and Forward-Looking Statements

 

This news release contains financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). Such statements should be read along with the accompanying tables, which provide a reconciliation of non-GAAP measures to GAAP measures. This news release and the accompanying tables discuss financial measures, including but not limited to, core deposits, tangible book value, operating earnings and net income related to segments of the Company, which are non-GAAP measures. We believe that such non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare the Company’s operating results from period to period in a meaningful manner. Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP. Investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.

 

Please refer to the Non-GAAP reconciliation tables later in this release for additional information.

 

Forward-Looking Statements

 

Certain statements in this news release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective.  Such forward-looking statements include but are not limited to statements with respect to our plans, objectives, expectations and intentions and other statements that are not historical facts, and other statements identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” and “projects,” as well as similar expressions.  Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate.  Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized.  The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that the future events, plans, or expectations contemplated by the Company will be achieved.

 

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, fourth-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the Company’s loan portfolio and allowance for loan losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (5) changes in the U.S. legal and regulatory framework including, but not limited to, the Dodd-Frank Act, the Tax Cuts and Jobs Act of 2017 and regulations adopted thereunder; (6) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the Company; (7) the business related to acquisitions may not be integrated successfully or such integration may take longer to accomplish than expected; (8) the expected cost savings and any revenue synergies from acquisitions may not be fully realized within expected timeframes; and (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates, or suppliers.  Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).  All subsequent written and oral forward-looking statements concerning the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

###

 

 

 

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   December 31, 2017  December 31, 2016
   (Unaudited)  (Audited)
   (Dollars in thousands)
ASSETS          
Cash and due from banks  $25,254    9,761 
Interest-bearing cash   51,298    14,591 
Cash and cash equivalents   76,552    24,352 
Securities available-for-sale   743,239    335,352 
Federal Home Loan Bank stock, at cost   19,065    11,072 
Other investments   3,446    1,768 
Derivative assets   2,803    2,219 
Loans held for sale   35,292    31,569 
Loans receivable, gross   2,319,529    1,178,266 
Allowance for loan losses   (11,479)   (10,688)
Loans receivable, net   2,308,050    1,167,578 
           
Premises and equipment, net   61,406    37,054 
Accrued interest receivable   11,992    5,373 
Real estate acquired through foreclosure, net   3,106    1,179 
Deferred tax assets, net   5,872    8,782 
Mortgage servicing rights   21,003    15,032 
Cash value life insurance   57,195    28,984 
Core deposit intangible   19,601    3,658 
Goodwill   139,617    4,266 
Other assets   9,221    5,939 
Total assets  $3,517,460    1,684,177 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Liabilities:          
Noninterest-bearing deposits  $520,914    229,905 
Interest-bearing deposits   2,079,315    1,028,355 
Total deposits   2,600,229    1,258,260 
Short-term borrowed funds   338,000    203,000 
Long-term debt   74,759    38,465 
Derivative liabilities   156    342 
Drafts outstanding   7,324    6,223 
Advances from borrowers for insurance and taxes   3,005    1,058 
Accrued interest payable   1,126    327 
Reserve for mortgage repurchase losses   1,892    2,880 
Dividends payable to stockholders   1,051    502 
Accrued expenses and other liabilities   14,537    9,930 
Total liabilities   3,042,079    1,520,987 
Commitments and contingencies          
Stockholders’ equity:          
Preferred stock   —      —   
Common stock   210    125 
Additional paid-in capital   348,037    66,156 
Retained earnings   122,705    98,451 
Accumulated other comprehensive (loss) income, net of tax   4,429    (1,542)
Total stockholders’ equity   475,381    163,190 
Total liabilities and stockholders’ equity  $3,517,460    1,684,177 

 

 

 

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   For the Three Months  For the Twelve Months
   Ended December 31,  Ended December 31,
   2017  2016  2017  2016*
   (In thousands, except share data)
Interest income                    
Loans  $27,094    14,346    79,300    51,137 
Investment securities   4,966    2,439    14,941    9,274 
Dividends from Federal Home Loan Bank stock   145    86    496    374 
Federal funds sold   —      —      7    5 
Other interest income   164    32    343    124 
Total interest income   32,369    16,903    95,087    60,914 
Interest expense                    
Deposits   3,175    1,523    9,386    5,972 
Short-term borrowed funds   663    189    1,888    509 
Long-term debt   614    529    1,978    2,272 
Total interest expense   4,452    2,241    13,252    8,753 
Net interest income   27,917    14,662    81,835    52,161 
Provision for loan losses   779    —      779    —   
Net interest income after provision for loan losses   27,138    14,662    81,056    52,161 
Noninterest income                    
Mortgage banking income   3,619    4,259    15,140    17,226 
Deposit service charges   1,715    976    4,643    3,688 
Net loss on extinguishment of debt   —      (1,694)   —      (1,868)
Net gain (loss) on sale of securities   (242)   65    933    706 
Fair value adjustments on interest rate swaps   419    998    382    590 
Net increase in cash value life insurance   357    219    1,116    903 
Mortgage loan servicing income   1,968    1,510    6,790    5,748 
Other   1,743    576    4,912    2,304 
Total noninterest income   9,579    6,909    33,916    29,297 
Noninterest expense                    
Salaries and employee benefits   11,341    8,169    37,827    31,475 
Occupancy and equipment   3,218    2,106    10,347    7,942 
Marketing and public relations   235    284    1,417    1,428 
FDIC insurance   341    175    721    702 
Recovery of mortgage loan repurchase losses   (225)   (250)   (900)   (1,000)
Legal expense   134    121    507    306 
Other real estate (income) expense, net   14    17    54    (20)
Mortgage subservicing expense   501    504    1,986    1,857 
Amortization of mortgage servicing rights   883    653    2,966    2,312 
Merger related expenses   4,091    260    6,001    3,245 
Other   3,254    2,034    10,220    7,793 
Total noninterest expense   23,787    14,073    71,146    56,040 
Income before income taxes   12,930    7,498    43,826    25,418 
Income tax expense   6,602    2,348    15,261    7,848 
Net income  $6,328    5,150    28,565    17,570 
                     
Earnings per common share:                    
Basic  $0.33    0.42    1.75    1.45 
Diluted  $0.33    0.41    1.73    1.42 
Weighted average common shares outstanding:                    
Basic   19,207,307    12,336,420    16,317,501    12,080,128 
Diluted   19,443,353    12,585,518    16,550,357    12,352,246 

 

* Derived from audited financial statements.

 

 

 

CAROLINA FINANCIAL CORPORATION

(Unaudited)

(Dollars in thousands)

 

   At or for the Three Months Ended
Selected Financial Data:  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
                
Selected Average Balances:                         
Total assets  $3,048,214    2,230,586    2,166,803    1,768,323    1,651,653 
Investment securities and FHLB stock   647,276    521,569    510,706    373,551    326,485 
Loans receivable, net   2,003,429    1,463,771    1,412,940    1,214,777    1,138,120 
Loans held for sale   25,001    27,282    22,412    17,827    32,951 
Deposits   2,352,303    1,710,263    1,633,285    1,330,805    1,288,665 
Stockholders’ equity   380,529    286,524    277,708    210,071    160,991 
                          
Performance Ratios (annualized):                         
Return on average stockholders’ equity   6.65%   11.16%   13.45%   9.34%   12.80%
Retun on average tangible equity (Non-GAAP)   8.78%   13.24%   16.02%   9.98%   13.46%
Return on average assets   0.83%   1.43%   1.72%   1.11%   1.25%
Operating return on average equity (Non-GAAP)   11.69%   11.02%   13.15%   10.95%   14.32%
Operating return on average tangible equity (Non-GAAP)   15.44%   13.08%   15.65%   11.70%   15.06%
Operating return on average assets (Non-GAAP)   1.46%   1.42%   1.69%   1.30%   1.40%
Average earning assets to average total assets   89.25%   91.09%   90.68%   91.99%   93.21%
Average loans receivable to average deposits   85.17%   85.59%   86.51%   91.28%   88.32%
Average stockholders’ equity to average assets   12.48%   12.85%   12.82%   11.88%   9.75%
Net interest margin-tax equivalent (1)   4.19%   3.94%   4.03%   3.93%   3.87%
Net charge-offs  (recovery) to average loans receivable   0.02%   0.02%   (0.01)%   (0.01)%   (0.12)%
Nonperforming assets to period end loans receivable   0.30%   0.44%   0.48%   0.52%   0.58%
Nonperforming assets to total assets   0.20%   0.29%   0.31%   0.34%   0.40%
Nonperforming loans to total loans   0.17%   0.33%   0.38%   0.42%   0.48%
Allowance for loan losses as a percentage of gross loans receivable (end of period) (2)   0.49%   0.72%   0.75%   0.76%   0.91%
Allowance for loan losses as a percentage of non-acquired loans receivable (Non-GAAP)   0.80%   0.87%   0.93%   0.96%   1.01%
Allowance for loan losses as a percentage of nonperforming loans (2)   291.79%   216.53%   196.85%   180.66%   190.01%
                          
Nonperforming Assets:                         
Loans 90 days or more past due and still accruing  $—      —      —      —      —   
Nonaccrual loans   3,934    4,924    5,461    5,931    5,625 
Total nonperforming loans   3,934    4,924    5,461    5,931    5,625 
Real estate acquired through foreclosure, net   3,106    1,640    1,417    1,479    1,179 
Total nonperforming assets  $7,040   $6,564   $6,878   $7,410   $6,804 

 

(1) Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.

(2) Acquired loans represent 37.8%, 17.3%, 19.4%, 21.4%, and 10.1% of gross loans receivable at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016, respectively.

 

 

 

Carolina Financial Corporation

Segment Information

(Unaudited)

(Dollars in thousands)

 

   For the Three Months  For the Twelve Months  Increase (Decrease)
   Ended December 31,  Ended December 31,  Three  Twelve
   2017  2016  2017  2016  Months  Months
Segment net income:                              
Community banking  $6,052    4,565    26,840    14,874    1,487    11,966 
Wholesale mortgage banking   117    806    2,450    3,528    (689)   (1,078)
Other   124    (232)   (786)   (901)   356    115 
Eliminations   35    11    61    69    24    (8)
Total net income  $6,328    5,150    28,565    17,570    1,178    10,995 

 

   For the Three Months Ended
   December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
Segment net income:                         
Community banking  $6,052    7,837    8,443    4,509    4,565 
Wholesale mortgage banking   117    449    1,238    645    806 
Other   124    (320)   (346)   (244)   (232)
Eliminations   35    27    5    (6)   11 
Total net income  $6,328    7,993    9,340    4,904    5,150 

 

 

 

 

   For the Three Months Ended December 31, 2017
   Community  Mortgage         
   Banking  Banking  Other  Eliminations  Total
Interest income  $31,911    441    10    7    32,369 
Interest expense   4,050    53    402    (53)   4,452 
Net interest income (expense)   27,861    388    (392)   60    27,917 
Provision for (recovery of) loan losses   779    —      —      —      779 
Noninterest income from external customers   4,821    4,758    —            9,579 
Intersegment noninterest income   244    —      —      (244)      
Noninterest expense   19,399    4,171    217          23,787 
Intersegment noninterest expense   —      241         (241)   —   
Income (loss) before income taxes   12,748    734    (609)   57    12,930 
Income tax expense (benefit)   6,696    617    (733)   22    6,602 
Net income (loss)  $6,052    117    124    35    6,328 

 

   For the Three Months Ended December 31, 2016
   Community  Mortgage         
   Banking  Banking  Other  Eliminations  Total
Interest income  $16,453    458    4    (12)   16,903 
Interest expense   2,084    51    155    (49)   2,241 
Net interest income (expense)   14,369    407    (151)   37    14,662 
Provision for (recovery of) loan losses   (24)   24    —      —      —   
Noninterest income from external customers   1,597    5,312    —      —      6,909 
Intersegment noninterest income   261    —      —      (261)   —   
Noninterest expense   9,706    4,151    216    —      14,073 
Intersegment noninterest expense   —      242    —      (242)   —   
Income (loss) before income taxes   6,545    1,302    (367)   18    7,498 
Income tax expense (benefit)   1,980    496    (135)   7    2,348 
Net income (loss)  $4,565    806    (232)   11    5,150 

 

 

 

Carolina Financial Corporation

Segment Information, Continued

(Unaudited)

(Dollars in thousands)

 

   For the Twelve Months Ended December 31, 2017
   Community  Mortgage         
   Banking  Banking  Other  Eliminations  Total
Interest income  $93,319    1,743    31    (6)   95,087 
Interest expense   12,100    172    1,152    (172)   13,252 
Net interest income (expense)   81,219    1,571    (1,121)   166    81,835 
Provision for (recovery of) loan losses   779    —      —      —      779 
Noninterest income from external customers   14,195    19,721    —      —      33,916 
Intersegment noninterest income   1,034         —      (1,034)   —   
Noninterest expense   53,600    16,620    926          71,146 
Intersegment noninterest expense   —      960    6    (966)   —   
Income (loss) before income taxes   42,069    3,712    (2,053)   98    43,826 
Income tax expense (benefit)   15,229    1,262    (1,267)   37    15,261 
Net income (loss)  $26,840    2,450    (786)   61    28,565 

 

   For the Twelve Months Ended December 31, 2016
   Community  Mortgage         
   Banking  Banking  Other  Eliminations  Total
Interest income  $59,241    1,591    18    64    60,914 
Interest expense   8,148    93    603    (91)   8,753 
Net interest income (expense)   51,093    1,498    (585)   155    52,161 
Provision for (recovery of) loan losses   (36)   36    —      —      —   
Noninterest income from external customers   8,389    20,953    —      (45)   29,297 
Intersegment noninterest income   966    —      —      (966)   —   
Noninterest expense   39,226    15,972    842    —      56,040 
Intersegment noninterest expense   —      967    —      (967)   —   
Income (loss) before income taxes   21,258    5,476    (1,427)   111    25,418 
Income tax expense (benefit)   6,384    1,948    (526)   42    7,848 
Net income (loss)  $14,874    3,528    (901)   69    17,570 

 

 

 

Impact of the Tax Cuts and Jobs Act on Income Tax Expense for the Three and Twelve Months Ended December 31, 2017:

 

   Community  Mortgage         
   Banking  Banking  Other  Eliminations  Total
Increase (decrease) to tax expense  $2,504    327    (511)   —      2,320 

 

   For the Three Months Ended December 31,
   Loan Originations  Mortgage Banking Income  Margin
   2017  2016  2017  2016  2017  2016
Additional segment information:                              
Community banking  $27,221   $29,121    569    476    2.09%   1.63%
Wholesale mortgage banking   212,585    234,915    3,050    3,783    1.43%   1.61%
Total  $239,806    264,036    3,619    4,259    1.51%   1.61%

 

   For the Twelve Months Ended December 31,
   Loan Originations  Mortgage Banking Income  Margin
   2017  2016  2017  2016  2017  2016
Additional segment information:                              
Community banking  $86,732   $97,062    2,010    2,063    2.32%   2.13%
Wholesale mortgage banking   824,282    875,360    13,130    15,163    1.59%   1.73%
Total  $911,014    972,422    15,140    17,226    1.66%   1.77%

 

 

 

Carolina Financial Corporation

Reconciliation of Non-GAAP Financial Measures - Consolidated

(Unaudited)

(In thousands, except share data)

 

   At the Month Ended
   December 31,  September 30,  June 30,  March 31,  December 31,
   2017  2017  2017  2017  2016
                
Core deposits:                         
Noninterest-bearing demand accounts  $520,914    333,267    330,641    298,365    229,905 
Interest-bearing demand accounts   551,308    309,241    298,123    309,961    191,851 
Savings accounts   213,141    69,552    70,336    66,506    48,648 
Money market accounts   452,734    377,754    380,108    363,600    292,639 
Total core deposits (Non-GAAP)   1,738,097    1,089,814    1,079,208    1,038,432    763,043 
                          
Certificates of deposit:                         
Less than $250,000   754,137    567,483    539,177    524,836    467,937 
$250,000 or more   107,995    50,357    45,344    44,452    27,280 
Total certificates of deposit   862,132    617,840    584,521    569,288    495,217 
Total deposits  $2,600,229    1,707,654    1,663,729    1,607,720    1,258,260 

 

   At the Month Ended
   December 31,  September 30,  June 30,  March 31,  December 31,
   2017  2017  2017  2017  2016
                
Tangible book value per share:                         
Total stockholders’ equity  $475,381    290,224    281,818    271,454    163,190 
Less intangible assets   (159,218)   (44,953)   (45,123)   (45,292)   (7,924)
Tangible common equity (Non-GAAP)  $316,163    245,271    236,695    226,162    155,266 
                          
Issued and outstanding shares   21,022,202    16,159,309    16,156,943    16,185,408    12,548,328 
Less nonvested restricted stock awards   (134,302)   (99,639)   (101,489)   (227,439)   (211,908)
Period end dilutive shares   20,887,900    16,059,670    16,055,454    15,957,969    12,336,420 
                          
Total stockholders equity  $475,381    290,224    281,818    271,454    163,190 
Divided by period end dilutive shares   20,887,900    16,059,670    16,055,454    15,957,969    12,336,420 
Common book value per share  $22.76    18    17.55    17.01    13.23 
                          
Tangible common equity (Non-GAAP)  $316,163    245,271    236,695    226,162    155,266 
Divided by period end dilutive shares   20,887,900    16,059,670    16,055,454    15,957,969    12,336,420 
Tangible common book value per share (Non-GAAP)  $15.14    15.27    14.74    14.17    12.59 

 

   At the Month Ended
   December 31,  September 30,  June 30,  March 31,  December 31,
   2017  2017  2017  2017  2016
Acquired and non-acquired loans:                         
Acquired loans receivable  $872,020    257,461    278,275    303,244    119,422 
Non-acquired loans receivable   1,436,030    1,227,000    1,157,145    1,113,766    1,058,844 
Total loans receivable  $2,308,050    1,484,461    1,435,420    1,417,010    1,178,266 
% Acquired   37.78%   17.34%   19.39%   21.40%   10.14%
                          
Non-acquired loans  $1,436,030    1,227,000    1,157,145    1,113,766    1,058,844 
Allowance for loan losses   11,479    10,662    10,750    10,715    10,688 
Allowance for loan losses to non-acquired loans (Non-GAAP)   0.80%   0.87%   0.93%   0.96%   1.01%
                          
Total loans receivable  $2,308,050    1,484,461    1,435,420    1,417,010    1,178,266 
Allowance for loan losses   11,479    10,662    10,750    10,715    10,688 
Allowance for loan losses to total loans receivable   0.50%   0.72%   0.75%   0.76%   0.91%

 

 

 

Carolina Financial Corporation

Reconciliation of Non-GAAP Financial Measures - Consolidated

(Unaudited)

(In thousands, except share data)

 

   For the Three Months Ended  For the Twelve Months Ended
Operating Earnings and Performance Ratios:  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  December 31,
2017
  December 31,
2016
Income before income taxes  $12,930    11,968    12,013    6,915    7,498    43,826    25,418 
Gain/Loss on sale of securities   242    (368)   (621)   (185)   (65)   (933)   (706)
Net loss on extinguishment of debt   —      —      —      —      1,694    —      1,868 
Fair value adjustments on interest rate swaps   (419)   (90)   69    58    (998)   (382)   (590)
Merger related expenses   4,091    311    279    1,319    260    6,001    3,245 
Operating earnings before income taxes   16,844    11,821    11,740    8,107    8,389    48,512    29,235 
Tax expense (1)   5,721    3,926    2,612    2,358    2,627    14,706    9,027 
Operating earnings (Non-GAAP)  $11,123    7,895    9,128    5,749    5,762    33,806    20,208 
                                    
Average equity  $380,529    286,524    277,708    210,071    160,991    280,877    151,346 
Less average intangible assets   (92,373)   (45,035)   (44,452)   (13,510)   (7,979)   (49,096)   (5,516)
Average tangible common equity (Non-GAAP)  $288,156    241,489    233,256    196,561    153,012    231,781    145,830 
                                    
Average assets  $3,048,214    2,230,586    2,166,803    1,768,323    1,651,653    2,306,667    1,537,654 
Less average intangible assets   (92,373)   (45,035)   (44,452)   (13,510)   (7,979)   (49,096)   (5,516)
Average tangible assets (Non-GAAP)  $2,955,841    2,185,551    2,122,351    1,754,813    1,643,674    2,257,571    1,532,138 
                                    
Operating return on average assets (Non-GAAP)   1.46%   1.42%   1.69%   1.30%   1.40%   1.47%   1.31%
Operating return on average equity (Non-GAAP)   11.69%   11.02%   13.15%   10.95%   14.32%   12.04%   13.35%
Operating return on average tangible assets (Non-GAAP)   1.51%   1.44%   1.72%   1.31%   1.40%   1.50%   1.32%
Operating return on average tangible equity (Non-GAAP)   15.44%   13.08%   15.65%   11.70%   15.06%   14.59%   13.86%
                                    
Weighted average common shares outstanding:                                   
Basic   19,207,307    16,029,332    16,029,332    13,919,711    12,336,420    16,317,501    12,080,128 
Diluted   19,443,353    16,187,869    16,180,171    14,139,241    12,585,518    16,550,357    12,352,246 
Operating earnings per common share:                                   
Basic (Non-GAAP)  $0.58    0.49    0.57    0.41    0.47    2.07    1.67 
Diluted (Non-GAAP)  $0.57    0.49    0.56    0.41    0.46    2.04    1.64 
                                    
As Reported:                                   
Income before income taxes  $12,930    11,968    12,013    6,915    7,498    43,826    25,418 
Tax expense (2)   6,602    3,975    2,673    2,011    2,348    15,261    7,848 
Net Income  $6,328    7,993    9,340    4,904    5,150    28,565    17,570 
                                    
Average equity  $380,529    286,524    277,708    210,071    160,991    280,877    151,346 
Average tangible equity (Non-GAAP)  $288,156    241,489    233,256    196,561    153,012    231,780    145,831 
Average assets  $3,048,214    2,230,586    2,166,803    1,768,323    1,651,653    2,306,667    1,537,654 
Return on average assets   0.83%   1.43%   1.72%   1.11%   1.25%   1.24%   1.14%
Return on average equity   6.65%   11.16%   13.45%   9.34%   12.80%   10.17%   11.61%
Return on average tangible equity (Non-GAAP)   8.78%   13.24%   16.02%   9.98%   13.46%   12.32%   12.05%
                                    
Weighted average common shares outstanding:                                   
Basic   19,207,307    16,029,332    16,029,332    13,919,711    12,336,420    16,317,501    12,080,128 
Diluted   19,443,353    16,187,869    16,180,171    14,139,241    12,585,518    16,550,357    12,352,246 
Earnings per common share:                                   
Basic  $0.33    0.50    0.58    0.35    0.42    1.75    1.45 
Diluted  $0.33    0.49    0.58    0.35    0.41    1.73    1.42 

 

(1) Tax expense is determined using the effective tax rate reflected in the accompanying income statement for the applicable reporting period, adjusted to eliminate the impact of the application of the Tax Cuts and Jobs Act on deferred income tax assets and liabilities.

(2) Income tax expense increased approximately $2.3 million for the quarter and year ended December 31, 2017 due to application of the Tax Cuts and Jobs Act on deferred income tax assets and liabilities.

 

 

 

Carolina Financial Corporation

Reconciliation of Non-GAAP Financial Measures - Community Banking Segment

(Unaudited)

(In thousands, except share data)

 

   For the Three Months Ended  For the Year Ended
   December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  December 31,
2017
  December 31,
2016
Segment net income:                                   
Community banking  $6,052    7,837    8,443    4,509    4,565   $26,840    14,874 
Wholesale mortgage banking   117    449    1,238    645    806    2,450    3,528 
Other   124    (320)   (346)   (244)   (232)   (786)   (901)
Eliminations   35    27    5    (6)   11    61    69 
Total net income  $6,328    7,993    9,340    4,904    5,150   $28,565    17,570 
                                    
Community banking segment operating earnings:                                   
Income before income taxes  $12,748    11,714    11,232    6,375    6,545   $42,069    21,258 
Tax expense (1) (3)   6,696    3,877    2,789    1,866    1,980    15,228    6,384 
Bank segment net income  $6,052    7,837    8,443    4,509    4,565   $26,840    14,874 
                                    
Weighted average common shares outstanding:                                   
Basic   19,207,307    16,029,332    16,029,332    13,919,711    12,336,420    16,317,501    12,080,128 
Diluted   19,443,353    16,187,869    16,180,171    14,139,241    12,585,518    16,550,357    12,352,246 
                                    
Earnings per common share:                                   
Basic  $0.33    0.50    0.53    0.32    0.37   $1.64   $1.23 
Diluted  $0.33    0.49    0.52    0.32    0.36   $1.62   $1.20 
                                    
Bank segment income before taxes  $12,748    11,714    11,232    6,375    6,545   $42,069   $21,258 
Gain on sale of securities   242    (368)   (621)   (185)   (65)   (932)   (706)
Net loss on extinguishment of debt   —      —      —      —      1,693    —      1,868 
Fair value adjustments on interest rate swaps   (419)   (90)   69    58    (998)   (382)   (590)
Merger related expenses (2)   4,091    311    279    1,311    254    5,992    3,137 
Operating earnings before income taxes   16,662    11,567    10,959    7,559    7,429    46,747    24,967 
Tax expense (1)   5,480    3,828    2,721    2,213    2,247    14,140    7,498 
Operating bank segment earnings (Non-GAAP)  $11,182    7,739    8,238    5,346    5,182   $32,607   $17,469 
                                    
                                    
Operating bank segment earnings per common share:                                   
Basic (Non-GAAP)  $0.58    0.48    0.51    0.38    0.42   $2.00   $1.45 
Diluted (Non-GAAP)  $0.58    0.48    0.51    0.38    0.41   $1.97   $1.41 

 

(1) Tax expense is determined using the effective tax rate for the applicable reporting segment for the applicable reporting period which includes the impact of the application of the Tax Cuts and Jobs Act on deferred income tax assets and liabilities.

(2) Remaining merger related costs were incurred within the category “Other” segment earnings.

(3) Income tax expense increased approximately $2.5 million in the Banking Segment for the quarter and year ended December 31, 2017 due to application of the Tax Cuts and Jobs Act on deferred tax assets and liabilities.

 

 


The following information was filed by Carolina Financial Corp (CARO) on Wednesday, January 24, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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