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Carolina Financial Corp (CARO) SEC Filing 10-K Annual report for the fiscal year ending Monday, December 31, 2018

Carolina Financial Corp

CIK: 870385 Ticker: CARO

 

Carolina Financial Corporation Reports Results for Fourth Quarter of 2018

 

NEWS RELEASE – For Release January 24, 2019 4:00PM

 

For More Information, Contact:

William A. Gehman III, EVP and CFO, 843.723.7700

 

Charleston, S.C. January 24, 2019 - Carolina Financial Corporation (the “Company”) (NASDAQ: CARO) today announced financial results for the fourth quarter of 2018.

 

Financial highlights at and for the three months ended December 31, 2018, include:

 

·Net income for Q4 2018 increased 144.0% to $15.4 million, or $0.68 per diluted share, from $6.3 million, or $0.33 per diluted share for Q4 2017.
·Operating earnings for Q4 2018, which exclude certain non-operating income and expenses, increased 52.1% to $16.9 million, or $0.75 per diluted share, from $11.1 million, or $0.57 per diluted share, for Q4 2017.
·Operating earnings for Q4 2018 have been adjusted to eliminate the following significant items:
oThe fair value loss on interest rate swaps of $2.2 million due to the impact of falling long-term interest rates during the quarter on the valuation of longer-duration derivatives that do not meet hedge accounting requirements. The Company uses standalone interest rate swaps to more closely match the interest rate characteristics of assets and liabilities and to mitigate the risks arising from timing mismatches between assets and liabilities including duration mismatches, which includes securities. The balance sheet fair value of securities increased $4.1 million at the end of Q4 2018 compared to Q3 2018.
oThe gain on sale of securities of $346,000.
·Performance ratios Q4 2018 compared to Q4 2017:
oReturn on average assets was 1.67% compared to 0.83%.
oOperating return on average assets was 1.83% compared to 1.46%.
oReturn on average tangible equity was 14.53% compared to 8.78%.
oOperating return on average tangible equity was 15.92% compared to 15.44%.
·Loans receivable, gross grew $66.9 million from September 30, 2018, or at an annualized rate of 10.9% and grew $204.8 million, or at a rate of 8.8%, since December 31, 2017.
·Total deposits decreased $41.4 million from September 30, 2018 and increased $113.3 million since December 31, 2017.
·On December 3, 2018, the Company announced that the Board of Directors had approved a plan to repurchase up to $25,000,000 in shares of the Company’s common stock through open market and privately negotiated transactions over the next three years. The Company began stock repurchases on December 4, 2018. During the fourth quarter, the Company repurchased approximately 176,000 shares at an average price of $30.64. Subsequent to December 31, 2018 through January 22, 2019, the Company repurchased an additional 87,000 shares at an average price of $31.42.

 

“We continue to see the impact of solid organic growth and prior acquisitions on earnings. Overall, results for the fourth quarter of 2018 continued to improve with an increase of 144.0% in net income to $15.4 million compared to the fourth quarter of 2017,” stated Jerry Rexroad, the Company’s Chief Executive Officer.

 

   

 

CresCom Bank Expansion to Charlotte, NC Market

 

On January 21, 2019, the Company announced its planned expansion into the Charlotte, North Carolina market and the hiring of Robin Lyle as Charlotte market leader. The expansion brings the Company’s footprint to the center of the state as a natural expansion to the existing footprint across Eastern North Carolina. CresCom Bank finalized the acquisition of Washington, North Carolina-based First South Bank in November 2017, which added 30 locations to its branch network.

 

Financial Results

 

Carolina Financial Corporation

 

·The Company reported an increase in net income for Q4 2018 to $15.4 million, or $0.68 per diluted share, as compared to $6.3 million, or $0.33 per diluted share, for Q4 2017. Included in net income for Q4 2018 was a one-time recovery of interest income of approximately $0.9 million related to a payoff of a purchased credit impaired loan, as well as a fair value loss on interest rate swaps of $2.2 million due to the impact of falling long-term interest rates on the valuation of longer-duration derivatives that do not meet hedge accounting requirements. Interest rate swaps that are not designated as hedges are primarily used to more closely match the interest rate characteristics of assets and liabilities and to mitigate the risks arising from timing mismatches between assets and liabilities including duration mismatches, which includes securities. The balance sheet fair value of securities increased $4.1 million at the end of Q4 2018 compared to Q3 2018. Q4 2018 also reflects a $346,000 gain on sale of securities.
·Operating earnings for Q4 2018, which excludes certain non-operating income and expenses, increased 52.1% to $16.9 million, or $0.75 per diluted share, from $11.1 million, or $0.57 per diluted share, from Q4 2017.
·The Company recognized approximately $300,000 less incentive compensation expense in Q4 2018 compared to Q3 2018 as a result of not achieving certain performance metrics.
·The Company reported an increase in net income for the year ended December 31, 2018 to $49.7 million, or $2.26 per diluted share, as compared to $28.6 million, or $1.73 per diluted share, for the year ended December 31, 2017. Included in net income for the year ended December 31, 2018 and 2017 were pretax merger-related expenses of $15.2 million and $8.3 million, respectively. 
·Operating earnings for the year ended December 31, 2018, which excludes certain non-operating income and expenses, increased 85.9% to $62.8 million, or $2.86 per diluted share, from $33.8 million, or $2.04 per diluted share, from the same period of 2017.
·The Company’s net interest margin-tax equivalent (NIM) increased to 4.23% for Q4 2018 (including the one-time recovery of interest income of approximately $0.9 million, or 11 bps to NIM) compared to 4.19% for Q4 2017. In addition, in Q4 2018, included in interest income was purchased loan accretion of $1.9 million (23 bps to NIM) and early payoff fees of $414,000 (5 bps to NIM). In Q4 2017, included in interest income was purchased loan accretion of $2.2 million (32 bps to NIM) and early payoff fees of $47,000 (1 bp to NIM).
·The Company reported book value per common share of $25.83 and $22.76 as of December 31, 2018 and December 31, 2017, respectively. Tangible book value per common share was $19.36 and $15.71 as of December 31, 2018 and December 31, 2017, respectively.
·At December 31, 2018, the Company’s regulatory capital ratios exceeded the minimum levels currently required. Stockholders’ equity totaled $575.3 million as of December 31, 2018 compared to $475.4 million at December 31, 2017. Tangible equity to tangible assets at December 31, 2018 was 11.83% compared to 9.73% at December 31, 2017.
   

 

·On June 11, 2018 Carolina Financial Corporation completed the sale of 1.5 million shares of its common stock. The net proceeds of the offering to the Company, after estimated expenses, were approximately $63.1 million.
·During Q4 2018, the Company repurchased approximately 176,000 shares at an average price of $30.64. Subsequent to December 31, 2018 through January 22, 2019, the Company repurchased an additional 87,000 shares at an average price of $31.42.
·Income tax expense increased $239,000 for Q4 2017 and the year ended December 31, 2017 related to application of Tax Cuts and Jobs Act implementation on deferred tax assets and liabilities.

 

Community Banking

 

·Community banking segment net income increased 155.3% to $15.4 million for Q4 2018 compared to $6.1 million for Q4 2017.
·Community banking segment net income increased 84.9% to $49.6 million for the year ended December 31, 2018 compared to $26.8 million for the year ended December 31, 2017.
·Community banking segment operating earnings increased 55.6% to $16.9 million for Q4 2018 compared to $10.9 million for Q4 2017.
·Community banking segment operating earnings increased 95.1% to $62.8 million for the year ended December 31, 2018 compared to $32.2 million for the year ended December 31, 2017.
·Provision for loan loss during Q4 2018 was $750,000. Provision for loan loss during Q4 2017 was $779,000. Asset quality and historical loss experience continue to remain favorable. The provision for loan loss during both 2018 and 2017 was primarily driven by organic loan growth.
·Non-performing assets (NPA) were 0.35% and 0.20% of total assets at December 31, 2018 and December 31, 2017, respectively. While December 2017 reflected historical NPA ratio lows and ratios continue to remain favorable, we have experienced an increase in NPA frequency. Approximately half of the increase relates to five purchased non-credit impaired loans with balances in excess of $500,000.
·Loans receivable, gross increased at a rate of 8.8% to $2.5 billion at December 31, 2018 compared to $2.3 billion at December 31, 2017.
·Total deposits increased $113.3 million since December 31, 2017.
·As a result of the implementation of the Tax Cuts and Jobs Act and the revaluation of deferred tax assets and liabilities, income tax expense was increased $416,000 for Q4 2017 and the year ended December 31, 2017.

  

Wholesale Mortgage Banking

 

·Net income for the wholesale mortgage banking segment was $599,000 for Q4 2018 compared to $117,000 for Q4 2017. The increase in Q4 2018 was primarily due to higher mortgage loan servicing income and reduced income taxes, both as further described below.
·Net income was $2.3 million for the year ended December 31, 2018 compared to $2.5 million for the year ended December 31, 2017. The net decrease in the year ended December 31, 2018 was primarily due to a decrease in mortgage banking income, early lease termination costs incurred, a loss on sale of other real estate, and the impact of Hurricane Florence, net of higher mortgage loan servicing income and reduced income taxes, as further described below.
·Net margin was 1.84% for Q4 2018 compared to 1.43% for Q4 2017. Originations for Q4 2018 and 2017 were $168.0 million and $212.6 million, respectively.
·Net margin was 1.74% for the year ended December 31, 2018 compared to 1.59% for the year ended December 31, 2017. Originations for the year ended December 31, 2018 and 2017 were $744.2 million and $824.3 million, respectively.
·During fiscal 2018 (primarily in the third quarter), the wholesale mortgage banking segment purchased approximately $880 million of servicing from third parties in addition to increasing its servicing portfolio through organic growth.
·As a result of the implementation of Tax Cuts and Jobs Act and the revaluation of deferred tax assets and liabilities, income tax expense was increased $331,000 for Q4 2017 and the year ended December 31, 2017.

 

   

 

Dividend Declared

 

On January 23, 2019 the Company declared a $0.08 dividend per common share, payable on April 5, 2019, to stockholders of record on March 15, 2019. This represents a 14.3% increase in the quarterly dividend. Over the last 4 quarters, the Company has increased its quarterly dividend from $0.04 per share to $0.08 per share, or by 100%, as a result of increased earnings.

 

Conference Call

 

A conference call will be held at 10:00 a.m., Eastern Time on January 25, 2019. 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 7660616. 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.

 

A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, “News and Market Information” and “Presentations” approximately three hours after the call and can be accessed by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 7660616.

 

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, 2018, Carolina Financial Corporation had approximately $3.8 billion in total assets and Crescent Mortgage Company was approved to originate loans in 48 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, third-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 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; (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates, or suppliers; and (10) the impact of recent and future hurricanes and other natural disasters on our loan portfolio and the economic prospects of our coastal markets.  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, 2018  December 31, 2017
   (Unaudited)  (Audited)
   (Dollars in thousands)
ASSETS      
Cash and due from banks  $28,857    25,254 
Interest-bearing cash   33,276    55,998 
Cash and cash equivalents   62,133    81,252 
Securities available-for-sale   842,801    743,239 
Federal Home Loan Bank stock, at cost   21,696    19,065 
Other investments   3,450    3,446 
Derivative assets   4,032    2,803 
Loans held for sale   16,972    35,292 
Loans receivable, gross   2,524,336    2,319,528 
Allowance for loan losses   (14,463)   (11,478)
Loans receivable, net   2,509,873    2,308,050 
           
Premises and equipment, net   60,866    61,407 
Accrued interest receivable   13,494    11,992 
Real estate acquired through foreclosure, net   1,534    3,106 
Deferred tax assets, net   5,786    2,436 
Mortgage servicing rights   32,933    21,003 
Cash value life insurance   58,728    57,195 
Core deposit intangible   16,462    19,601 
Goodwill   127,592    127,592 
Other assets   12,396    21,538 
Total assets  $3,790,748    3,519,017 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Liabilities:          
Noninterest-bearing deposits  $547,022    525,615 
Interest-bearing deposits   2,171,171    2,079,314 
Total deposits   2,718,193    2,604,929 
Short-term borrowed funds   405,500    340,500 
Long-term debt   59,436    72,259 
Derivative liabilities   1,232    156 
Drafts outstanding   8,129    7,324 
Advances from borrowers for insurance and taxes   4,100    3,005 
Accrued interest payable   1,591    1,126 
Reserve for mortgage repurchase losses   1,292    1,892 
Dividends payable to stockholders   1,576    1,051 
Accrued expenses and other liabilities   14,414    11,394 
Total liabilities   3,215,463    3,043,636 
Stockholders' equity:          
Preferred stock   —      —   
Common stock   224    210 
Additional paid-in capital   408,224    348,037 
Retained earnings   167,173    123,537 
Accumulated other comprehensive (loss) income, net of tax   (336)   3,597 
Total stockholders' equity   575,285    475,381 
Total liabilities and stockholders' equity  $3,790,748    3,519,017 

 

   

 

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

  

   For the Three Months  For the Twelve Months
   Ended December 31,  Ended December 31,
   2018  2017  2018  2017*
   (In thousands, except share data)
Interest income                    
Loans  $35,214    27,094    133,252    79,300 
Investment securities   7,243    4,966    26,222    14,941 
Dividends from Federal Home Loan Bank stock   253    145    1,004    496 
Other interest income   209    164    580    350 
Total interest income   42,919    32,369    161,058    95,087 
Interest expense                    
Deposits   5,808    3,175    18,727    9,387 
Short-term borrowed funds   1,576    663    6,064    1,888 
Long-term debt   643    614    2,457    1,978 
Total interest expense   8,027    4,452    27,248    13,253 
Net interest income   34,892    27,917    133,810    81,834 
Provision for loan losses   750    779    2,059    779 
Net interest income after provision for loan losses   34,142    27,138    131,751    81,055 
Noninterest income                    
Mortgage banking income   3,593    3,619    15,295    15,140 
Deposit service charges   1,775    1,715    7,755    4,643 
Net gain (loss) on sale of securities   346    (242)   (1,946)   933 
Fair value adjustments on interest rate swaps   (2,222)   419    (340)   382 
Net increase in cash value life insurance   377    357    1,530    1,116 
Mortgage loan servicing income   2,624    1,968    9,052    6,790 
Debit card income, net   1,246    961    4,809    2,308 
Other   781    1,208    3,741    2,604 
Total noninterest income   8,520    10,005    39,896    33,916 
Noninterest expense                    
Salaries and employee benefits   12,857    11,341    53,517    37,827 
Occupancy and equipment   4,101    3,218    15,961    10,347 
Marketing and public relations   320    235    1,330    1,417 
FDIC insurance   285    341    1,090    721 
Recovery of mortgage loan repurchase losses   (150)   (225)   (600)   (900)
Legal expense   95    134    422    507 
Other real estate (income) expense, net   (10)   14    (13)   54 
Mortgage subservicing expense   696    501    2,468    1,986 
Amortization of mortgage servicing rights   1,239    883    4,206    2,966 
Amortization of core deposit intangible   763    565    3,139    1,037 
Merger-related expenses   —      6,391    15,216    8,301 
Other   3,041    3,115    12,472    9,182 
Total noninterest expense   23,237    26,513    109,208    73,445 
Income before income taxes   19,425    10,630    62,439    41,526 
Income tax expense   3,981    4,302    12,769    12,961 
Net income  $15,444    6,328    49,670    28,565 
                     
Earnings per common share:                    
Basic  $0.69    0.33    2.28    1.75 
Diluted  $0.68    0.33    2.26    1.73 
Dividends Per Common Share  $0.07    0.04    0.25    0.16 
Weighted average common shares outstanding:                    
Basic   22,416,190    19,207,307    21,756,595    16,317,501 
Diluted   22,587,466    19,443,353    21,972,857    16,550,357 

 

* Derived from audited financial statements.

 

   

 

CAROLINA FINANCIAL CORPORATION

(Unaudited)

(Dollars in thousands)

 

   At or for the Three Months Ended
Selected Financial Data:  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
                
Selected Average Balances:               
Total assets  $3,700,795    3,663,915    3,627,402    3,522,407    3,048,214 
Investment securities and FHLB stock   838,834    831,793    809,625    770,161    647,276 
Loans receivable, net   2,428,603    2,402,075    2,401,075    2,322,203    2,003,429 
Loans held for sale   20,120    23,692    23,137    21,645    25,001 
Deposits   2,760,156    2,735,346    2,677,401    2,616,640    2,352,303 
Stockholders' equity   569,528    559,401    497,694    477,830    380,529 
                          
Performance Ratios (annualized):                         
Return on average stockholders' equity   10.85%   10.87%   12.03%   3.40%   6.65%
Return on average tangible equity (Non-GAAP)   14.53%   14.68%   17.02%   4.90%   8.78%
Return on average assets   1.67%   1.66%   1.65%   0.46%   0.83%
Operating return on average stockholders' equity (Non-GAAP)   11.88%   10.99%   12.54%   12.51%   11.69%
Operating return on average tangible equity (Non-GAAP)   15.92%   14.85%   17.74%   18.06%   15.44%
Operating return on average assets (Non-GAAP)   1.83%   1.68%   1.72%   1.70%   1.46%
Average earning assets to average total assets   89.64%   89.59%   89.82%   89.28%   89.25%
Average loans receivable to average deposits   87.99%   87.82%   89.68%   88.75%   85.17%
Average stockholders' equity to average assets   15.39%   15.27%   13.72%   13.57%   12.48%
Net interest margin-tax equivalent (1)   4.23%   4.15%   4.11%   4.20%   4.19%
                         
Net (recoveries) charge-offs to average loans receivable   (0.02)%   0.02%   0.04%   (0.21)%   0.02%
Nonperforming assets to period end loans receivable   0.53%   0.49%   0.42%   0.45%   0.30%
Nonperforming assets to total assets   0.35%   0.32%   0.28%   0.30%   0.20%
Nonperforming loans to total loans   0.47%   0.43%   0.35%   0.36%   0.17%
Allowance for loan losses as a percentage of gross loans receivable (end of period) (2)   0.57%   0.55%   0.54%   0.53%   0.49%
Allowance for loan losses as a percentage of gross non-acquired loans receivable (Non-GAAP)   0.79%   0.80%   0.80%   0.85%   0.84%
Allowance for loan losses as a percentage of nonperforming loans (2)   123.13%   129.26%   153.84%   146.93%   291.81%
                          
Nonperforming Assets:                         
Non-acquired loans 90 days or more past due and still accruing  $20    32    19    —      —   
Non-acquired nonaccrual loans   11,726    10,501    8,423    8,649    3,934 
Total nonperforming loans   11,746    10,533    8,442    8,649    3,934 
Real estate acquired through foreclosure, net   1,534    1,601    1,726    1,963    3,106 
Total nonperforming assets  $13,280    12,134    10,168    10,612    7,040 

 

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

(2) Acquired loans represent 27.2%, 30.5%, 33.5%, 36.8%, and 41.1%, of gross loans receivable at December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017, respectively.

 

   

 

Carolina Financial Corporation

Segment Information

(Unaudited)

(Dollars in thousands)

 

   For the Three Months  For the Twelve Months  Increase (Decrease)
   December 31,  Ended December 31,  Three  Twelve
   2018  2017  2018  2017  Months  Months
Segment net income:                              
Community banking  $15,449    6,052    49,624    26,839    9,397    22,785 
Wholesale mortgage banking   599    117    2,315    2,450    482    (135)
Other   (594)   124    (2,266)   (786)   (718)   (1,480)
Eliminations   (10)   35    (3)   62    (45)   (65)
Total net income  $15,444    6,328    49,670    28,565    9,116    21,105 

 

   For the Three Months Ended
   December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
Segment net income:                         
Community banking  $15,449    15,263    14,928    3,984    6,050 
Wholesale mortgage banking   599    555    598    562    118 
Other   (594)   (606)   (568)   (497)   124 
Eliminations   (10)   (8)   8    7    36 
Total net income  $15,444    15,204    14,966    4,056    6,328 

 

   For the Three Months Ended December 31, 2018
   Community  Mortgage         
   Banking  Banking  Other  Eliminations  Total
Interest income  $42,577    480    15    (153)   42,919 
Interest expense   7,494    170    537    (174)   8,027 
Net interest income (expense)   35,083    310    (522)   21    34,892 
Provision for loan losses   750    —      —      —      750 
Noninterest income from external customers   2,990    5,507    23    —      8,520 
Intersegment noninterest income   242    36    —      (278)   —   
Noninterest expense   18,141    4,818    277    1    23,237 
Intersegment noninterest expense   —      240    2    (242)   —   
Income (loss) before income taxes   19,424    795    (778)   (16)   19,425 
Income tax expense (benefit)   3,975    196    (184)   (6)   3,981 
Net income (loss)  $15,449    599    (594)   (10)   15,444 

 

   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 loan losses   779    —      —      —      779 
Noninterest income from external customers   5,247    4,758    —      —      10,005 
Intersegment noninterest income   244    —      —      (244)   —   
Noninterest expense   22,125    4,171    217    —      26,513 
Intersegment noninterest expense   —      241    —      (241)   —   
Income (loss) before income taxes   10,448    734    (609)   57    10,630 
Income tax expense (benefit)   4,396    617    (733)   22    4,302 
Net income (loss)  $6,052    117    124    35    6,328 

 

   

 

Carolina Financial Corporation

Segment Information, Continued

(Unaudited)

(Dollars in thousands)

 

   For the Twelve Months Ended December 31, 2018
   Community  Mortgage         
   Banking  Banking  Other  Eliminations  Total
Interest income  $159,483    1,841    56    (322)   161,058 
Interest expense   25,227    414    2,025    (418)   27,248 
Net interest income (expense)   134,256    1,427    (1,969)   96    133,810 
Provision for loan losses   2,034    25    —      —      2,059 
Noninterest income from external customers   18,680    21,106    110    —      39,896 
Intersegment noninterest income   966    99    —      (1,065)   —   
Noninterest expense   89,459    18,631    1,117    1    109,208 
Intersegment noninterest expense   —      960    6    (966)   —   
Income (loss) before income taxes   62,409    3,016    (2,982)   (4)   62,439 
Income tax expense (benefit)   12,785    701    (716)   (1)   12,769 
Net income (loss)  $49,624    2,315    (2,266)   (3)   49,670 

 

   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    (171)   13,253 
Net interest income (expense)   81,219    1,571    (1,121)   165    81,834 
Provision for loan losses   779    —      —      —      779 
Noninterest income from external customers   14,262    19,654    —      —      33,916 
Intersegment noninterest income   966    67    —      (1,033)   —   
Noninterest expense   55,900    16,614    931    —      73,445 
Intersegment noninterest expense   —      966    1    (967)   —   
Income (loss) before income taxes   39,768    3,712    (2,053)   99    41,526 
Income tax expense (benefit)   12,929    1,262    (1,267)   37    12,961 
Net income (loss)  $26,839    2,450    (786)   62    28,565 

 

   For the Three Months Ended December 31,
   Loan Originations  Mortgage Banking Income  Margin
   2018  2017  2018  2017  2018  2017
Additional segment information:                              
Community banking  $16,935    27,221    509    569    3.01%   2.09%
Wholesale mortgage banking   168,002    212,585    3,084    3,050    1.84%   1.43%
Total  $184,937    239,806    3,593    3,619    1.94%   1.51%

 

   For the Twelve Months Ended December 31,
   Loan Originations  Mortgage Banking Income  Margin
   2018  2017  2018  2017  2018  2017
Additional segment information:                              
Community banking  $108,721    86,732    2,352    2,009    2.16%   2.32%
Wholesale mortgage banking   744,208    824,282    12,943    13,131    1.74%   1.59%
Total  $852,929    911,014    15,295    15,140    1.79%   1.66%

 

   

 

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,
   2018  2018  2018  2018  2017
                
Core deposits:                         
Noninterest-bearing demand accounts  $547,022    567,394    577,568    547,744    525,615 
Interest-bearing demand accounts   566,527    579,522    584,719    558,942    551,308 
Savings accounts   192,322    190,946    198,571    212,249    213,142 
Money market accounts   431,246    453,957    458,558    463,676    452,734 
Total core deposits (Non-GAAP)   1,737,117    1,791,819    1,819,416    1,782,611    1,742,799 
                          
Certificates of deposit:                         
Less than $250,000   875,749    863,290    788,693    791,789    755,887 
$250,000 or more   105,327    104,514    100,689    102,569    106,243 
Total certificates of deposit   981,076    967,804    889,382    894,358    862,130 
Total deposits  $2,718,193    2,759,623    2,708,798    2,676,969    2,604,929 

 

   At the Month Ended
   December 31,  September 30,  June 30,  March 31,  December 31,
   2018  2018  2018  2018  2017
                
Tangible book value per share:                         
Total stockholders' equity  $575,285    564,027    551,784    475,046    475,381 
Less intangible assets   (144,054)   (144,817)   (145,595)   (146,387)   (147,193)
Tangible common equity (Non-GAAP)  $431,231    419,210    406,189    328,659    328,188 
                          
Issued and outstanding shares   22,387,009    22,570,445    22,570,182    21,057,539    21,022,202 
Less nonvested restricted stock awards   (117,966)   (135,045)   (137,345)   (136,395)   (134,302)
Period end dilutive shares   22,269,043    22,435,400    22,432,837    20,921,144    20,887,900 
                          
Total stockholders' equity  $575,285    564,027    551,784    475,046    475,381 
Divided by period end dilutive shares   22,269,043    22,435,400    22,432,837    20,921,144    20,887,900 
Common book value per share  $25.83    25.14    24.60    22.71    22.76 
                          
Tangible common equity (Non-GAAP)  $431,231    419,210    406,189    328,659    328,188 
Divided by period end dilutive shares   22,269,043    22,435,400    22,432,837    20,921,144    20,887,900 
Tangible common book value per share (Non-GAAP)  $19.36    18.69    18.11    15.71    15.71 

 

   At the Month Ended
   December 31,  September 30,  June 30,  March 31,  December 31,
   2018  2018  2018  2018  2017
Acquired and non-acquired loans:                         
Acquired loans receivable  $686,401    749,442    813,688    877,012    952,220 
Non-acquired gross loans receivable   1,837,935    1,708,022    1,613,533    1,503,006    1,367,308 
Total gross loans receivable  $2,524,336    2,457,464    2,427,221    2,380,018    2,319,528 
% Acquired   27.19%   30.50%   33.52%   36.85%   41.05%
                          
Non-acquired loans  $1,837,935    1,708,022    1,613,533    1,503,006    1,367,308 
Allowance for loan losses   14,463    13,615    12,987    12,708    11,478 
Allowance for loan losses to non-acquired loans (Non-GAAP)   0.79%   0.80%   0.80%   0.85%   0.84%
                          
Total gross loans receivable  $2,524,336    2,457,464    2,427,221    2,380,018    2,319,528 
Allowance for loan losses   14,463    13,615    12,987    12,708    11,478 
Allowance for loan losses to total gross loans receivable   0.57%   0.55%   0.54%   0.53%   0.49%

 

   

 

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
   December 31,
2018
  September 30, 
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  December 31,
2018
  December 31,
2017
As Reported:                     
Income before income taxes  $19,425    19,431    19,002    4,581    10,630    62,439    41,526 
Tax expense   3,981    4,227    4,036    525    4,302    12,769    12,961 
Net Income  $15,444    15,204    14,966    4,056    6,328    49,670    28,565 
                                    
Average equity  $569,528    559,401    497,694    477,830    380,529    526,701    280,877 
Average tangible equity (Non-GAAP)  $425,105    414,205    351,703    331,047    288,156    381,110    231,781 
Average assets  $3,700,795    3,663,915    3,627,401    3,522,407    3,048,214    3,629,490    2,306,667 
                                    
Return on average assets   1.67%   1.66%   1.65%   0.46%   0.83%   1.37%   1.24%
Return on average equity   10.85%   10.87%   12.03%   3.40%   6.65%   9.43%   10.17%
Return on average tangible equity (Non-GAAP)   14.53%   14.68%   17.02%   4.90%   8.78%   13.03%   12.32%
Tangible equity to tangible assets   11.83%   11.72%   11.45%   9.65%   9.73%   11.83%   9.73%
                                    
Weighted average common shares outstanding:                                   
Basic   22,416,190    22,678,681    21,243,094    20,908,225    19,207,307    21,756,595    16,317,501 
Diluted   22,587,466    22,898,983    21,454,039    21,119,316    19,443,353    21,972,857    16,550,357 
Earnings per common share:                                   
Basic  $0.69    0.67    0.70    0.19    0.33    2.28    1.75 
Diluted  $0.68    0.66    0.70    0.19    0.33    2.26    1.73 
                                    
                                    
Operating Earnings and Performance Ratios:                                   
Income before income taxes  $19,425    19,431    19,002    4,581    10,630    62,439    41,526 
(Gain)/loss on sale of securities   (346)   849    746    697    242    1,946    (933)
Fair value adjustments on interest rate swaps   2,222    (628)   (451)   (803)   (419)   340    (382)
Merger related expenses   —      —      506    14,710    6,391    15,216    8,301 
Operating earnings before income taxes   21,301    19,652    19,803    19,185    16,844    79,941    48,512 
Tax expense (1)   4,379    4,279    4,205    4,242    5,721    17,105    14,706 
Operating earnings (Non-GAAP)  $16,922    15,373    15,598    14,943    11,123    62,836    33,806 
                                    
Average equity  $569,528    559,401    497,694    477,830    380,529    526,701    280,877 
Less average intangible assets   (144,423)   (145,196)   (145,991)   (146,783)   (92,373)   (145,591)   (49,096)
Average tangible common equity (Non-GAAP)  $425,105    414,205    351,703    331,047    288,156    381,110    231,781 
                                    
Average assets  $3,700,795    3,663,915    3,627,401    3,522,407    3,048,214    3,629,490    2,306,667 
Less average intangible assets   (144,423)   (145,196)   (145,991)   (146,783)   (92,373)   (145,591)   (49,096)
Average tangible assets (Non-GAAP)  $3,556,372    3,518,719    3,481,410    3,375,624    2,955,841    3,483,899    2,257,571 
                                    
Operating return on average assets (Non-GAAP)   1.83%   1.68%   1.72%   1.70%   1.46%   1.73%   1.47%
Operating return on average equity (Non-GAAP)   11.88%   10.99%   12.54%   12.51%   11.69%   11.93%   12.04%
Operating return on average tangible assets (Non-GAAP)   1.90%   1.75%   1.79%   1.77%   1.51%   1.80%   1.50%
Operating return on average tangible equity (Non-GAAP)   15.92%   14.85%   17.74%   18.06%   15.44%   16.49%   14.59%
                                    
Weighted average common shares outstanding:                                   
Basic   22,416,190    22,678,681    21,243,094    20,908,225    19,207,307    21,756,595    16,317,501 
Diluted   22,587,466    22,898,983    21,454,039    21,119,316    19,443,353    21,972,857    16,550,357 
Operating earnings per common share:                                   
Basic (Non-GAAP)  $0.75    0.68    0.73    0.71    0.58    2.89    2.07 
Diluted (Non-GAAP)  $0.75    0.67    0.73    0.71    0.57    2.86    2.04 

 

(1) Tax expense is determined using the effective tax rate adjusted to eliminate the impact of the non-operating items.

 

   

 

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 Twelve Months Ended
   December 31,
2018
  September 30, 
2018
  June 30, 
2018
  March 31, 
2018
  December 31, 
2017
  December 31, 
2018
  December 31, 
2017
Segment net income:                                   
Community banking  $15,449    15,263    14,928    3,984    6,052    49,624    26,839 
Wholesale mortgage banking   599    555    598    562    117    2,315    2,450 
Other   (594)   (606)   (568)   (497)   124    (2,266)   (786)
Eliminations   (10)   (8)   8    7    35    (3)   62 
Total net income  $15,444    15,204    14,966    4,056    6,328    49,670    28,565 
                                    
Community banking segment operating earnings:                                   
Income before income taxes  $19,424    19,517    18,924    4,545    10,448    62,409    39,768 
Tax expense (1)   3,975    4,254    3,996    561    4,396    12,785    12,929 
Bank segment net income  $15,449    15,263    14,928    3,984    6,052    49,624    26,839 
                                    
Weighted average common shares outstanding:                                   
Basic   22,416,190    22,678,681    21,243,094    20,908,225    19,207,307    21,756,595    16,317,501 
Diluted   22,587,466    22,898,983    21,454,039    21,119,316    19,443,353    21,972,857    16,550,357 
                                    
Bank segment earnings per common share:                                   
Basic  $0.69    0.67    0.70    0.19    0.31    2.28    1.64 
Diluted  $0.68    0.67    0.70    0.19    0.31    2.26    1.62 
                                    
Bank segment income before taxes  $19,424    19,517    18,924    4,545    10,448    62,409    39,768 
(Gain) loss on sale of securities   (346)   849    746    692    242    1,941    (932)
Fair value adjustments on interest rate swaps   2,222    (628)   (451)   (755)   (419)   388    (382)
Merger related expenses   —      —      506    14,710    6,391    15,216    8,292 
Operating earnings before income taxes   21,300    19,738    19,725    19,192    16,662    79,954    46,746 
Tax expense (1)   4,371    4,306    4,152    4,288    5,778    17,117    14,540 
Operating bank segment earnings (Non-GAAP)  $16,929    15,432    15,573    14,904    10,884    62,837    32,206 
                                    
                                    
Operating bank segment earnings per common share:                                   
Basic (Non-GAAP)  $0.76    0.68    0.73    0.71    0.57    2.89    1.97 
Diluted (Non-GAAP)  $0.75    0.67    0.73    0.71    0.56    2.86    1.95 

  

(1) Tax expense is determined using the effective tax rate adjusted to eliminate the impact of the non-operating items.

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The following information was filed by Carolina Financial Corp (CARO) on Thursday, January 24, 2019 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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Definitive Proxy Statement (Form DEF 14A)
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Carolina Financial Corp's Definitive Proxy Statement (Form DEF 14A) filed after their 2019 10-K Annual Report includes:

  • Voting Procedures
  • Board Members
  • Executive Team
  • Salaries, Bonuses, Perks
  • Peers / Competitors

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Inside Carolina Financial Corp's 10-K Annual Report:

Financial Statements, Disclosures and Schedules

Inside this 10-K Annual Report

Document And Entity Information
Consolidated Balance Sheets
Consolidated Balance Sheets (Parenthetical)
Consolidated Statements Of Cash Flows
Consolidated Statements Of Changes In Stockholders' Equity
Consolidated Statements Of Comprehensive Income
Consolidated Statements Of Operations
Business Combination
Business Combination (Tables)
Business Combinations (Details 2)
Business Combinations (Details 3)
Business Combinations (Details)
Capital Requirements And Other Restrictions
Capital Requirements And Other Restrictions (Details)
Capital Requirements And Other Restrictions (Tables)
Commitments And Contingencies
Commitments And Contingencies (Details Narrative)
Commitments And Contingencies (Details)
Commitments And Contingencies (Tables)
Core Deposit Intangibles
Core Deposit Intangibles (Details)
Core Deposit Intangibles (Tables)
Deposits
Deposits (Details 2)
Deposits (Details)
Deposits (Tables)
Derivatives
Derivatives (Details)
Derivatives (Tables)
Earnings Per Share
Earnings Per Share (Details 2)
Earnings Per Share (Details)
Earnings Per Share (Tables)
Employee Benefit Plans
Employee Benefit Plans (Details Narrative)
Estimated Fair Value Of Financial Instruments
Estimated Fair Value Of Financial Instruments (Details 2)
Estimated Fair Value Of Financial Instruments (Details 3)
Estimated Fair Value Of Financial Instruments (Details 4)
Estimated Fair Value Of Financial Instruments (Details 5)
Estimated Fair Value Of Financial Instruments (Details)
Estimated Fair Value Of Financial Instruments (Tables)
Income Taxes
Income Taxes (Details 2)
Income Taxes (Details 3)
Income Taxes (Details)
Income Taxes (Tables)
Loans Receivable, Net
Loans Receivable, Net (Details 2)
Loans Receivable, Net (Details 3)
Loans Receivable, Net (Details 4)
Loans Receivable, Net (Details 5)
Loans Receivable, Net (Details 6)
Loans Receivable, Net (Details 7)
Loans Receivable, Net (Details 8)
Loans Receivable, Net (Details 9)
Loans Receivable, Net (Details Narrative)
Loans Receivable, Net (Details)
Loans Receivable, Net (Tables)
Long-Term Debt
Long-Term Debt (Details 2)
Long-Term Debt (Details Narrative)
Long-Term Debt (Details)
Long-Term Debt (Tables)
Mortgage Servicing Rights
Mortgage Servicing Rights (Details 2)
Mortgage Servicing Rights (Details Narrative)
Mortgage Servicing Rights (Details)
Mortgage Servicing Rights (Tables)
Off-Balance Sheet Financial Instruments And Concentrations Of Credit Risk
Off-Balance Sheet Financial Instruments And Concentrations Of Credit Risk (Details Narrative)
Parent Company Financial Information
Parent Company Financial Information (Tables)
Parent Company Financial Information - Condensed Statements Of Cash Flows (Details 3)
Parent Company Financial Information - Condensed Statements Of Financial Condition (Details 2)
Parent Company Financial Information - Condensed Statements Of Operations (Details)
Premises And Equipment, Net
Premises And Equipment, Net (Details)
Premises And Equipment, Net (Tables)
Real Estate Acquired Through Foreclosure
Real Estate Acquired Through Foreclosure (Details 2)
Real Estate Acquired Through Foreclosure (Details)
Real Estate Acquired Through Foreclosure (Tables)
Securities
Securities (Details 2)
Securities (Details 3)
Securities (Details 4)
Securities (Details 5)
Securities (Details Narrative)
Securities (Details)
Securities (Tables)
Short-Term Borrowed Funds
Short-Term Borrowed Funds (Details)
Short-Term Borrowed Funds (Tables)
Stock-Based Compensation
Stock-Based Compensation (Details 2)
Stock-Based Compensation (Details 3)
Stock-Based Compensation (Details 4)
Stock-Based Compensation (Details Narrative)
Stock-Based Compensation (Details)
Stock-Based Compensation (Tables)
Summarized Quarterly Information (Tables)
Summarized Quarterly Information (Unaudited)
Summarized Quarterly Information (Unaudited) (Details)
Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies (Details Narrative)
Summary Of Significant Accounting Policies (Details)
Summary Of Significant Accounting Policies (Policies)
Summary Of Significant Accounting Policies (Tables)
Supplemental Segment Information
Supplemental Segment Information (Details 2)
Supplemental Segment Information (Details)
Supplemental Segment Information (Tables)
Ticker: CARO
CIK: 870385
Form Type: 10-K Annual Report
Accession Number: 0001552781-19-000072
Submitted to the SEC: Fri Mar 01 2019 6:02:55 AM EST
Accepted by the SEC: Fri Mar 01 2019
Period: Monday, December 31, 2018
Industry: State Commercial Banks

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