Carolina Financial Corporation Reports Results for Fourth Quarter of 2015 and Announces First Quarter Dividend

Jan 22, 2016, 09:00 ET from Carolina Financial Corporation

CHARLESTON, S.C., Jan. 22, 2016 /PRNewswire/ -- Carolina Financial Corporation (NASDAQ: CARO) today announced net income for the three and twelve months ended December 31, 2015.  Net income for the three months ended December 31, 2015 increased approximately 110% to $3.6 million, or $0.36 per diluted share, compared to $1.7 million, or $0.18 per diluted share, for the three months ended December 31, 2014.  Net income for the twelve months ended December 31, 2015 increased approximately 74% to $14.4 million, or $1.48 per diluted share, compared to net income of $8.3 million, or $0.87 per diluted share, for the twelve months ended December 31, 2014.  

"We are pleased to report an increase in net income of 74% for the year ended 2015 as compared to the prior year. This year was an eventful year for Carolina Financial Corporation. During 2015, we successfully integrated our branch acquisition completed in the 4th quarter of 2014 while remaining focused on our business development efforts resulting in strong loan and deposit growth. In addition, we opened our first branch in the Greenville market and became the second largest bank headquartered in South Carolina, with total assets of $1.4 billion as of December 31, 2015.  In the fourth quarter, we completed a successful capital raise of approximately $32.1 million, net of offering costs, which positions the Company well to support future organic growth and acquisition opportunities as they arise.  These excellent operational and financial results would not have been possible without the efforts of our team members as well as the continued support of our stockholders and customers. On January 6, 2016, we announced the acquisition of Congaree Bancshares, Inc., a $116 million bank holding company headquartered in the Columbia, SC market. We remain are focused on executing our strategic plan to profitably grow stockholder value," stated Jerry Rexroad, Chief Executive Officer. 

Financial Highlights

Carolina Financial Corporation

  • The Company reported net income for the three months ended December 31, 2015 of $3.6 million, or $0.36 per diluted share, as compared to $1.7 million, or $0.18 per diluted share, for the three months ended December 31, 2014. Net income for the twelve months ended December 31, 2015 totaled $14.4 million, or $1.48 per diluted share, compared to net income of $8.3 million, or $0.87 per diluted share, for the twelve months ended December 31, 2014. The 2014 results include pretax acquisition related expenses associated with the completion of branch acquisitions of $1.4 million.
  • The increase in net income from period to period is attributable to the significant growth in loans and securities, increased checking fees, and improved results from the Company's retail mortgage team, as well as significantly improved results from Crescent Mortgage Company.
  • The Company reported book value per common share of $11.92 and $10.02 as of December 31, 2015 and December 31, 2014, respectively. Tangible book value per common share was $11.66 and $9.67 as of December 31, 2015 and December 31, 2014, respectively.
  • At December 31, 2015, the Company's regulatory capital ratios exceeded the minimum levels currently required. Stockholders' equity totaled $139.9 million as of December 31, 2015 compared to $93.7 million at December 31, 2014. On December 14, 2015, the Company closed a public offering of 2,262,296 shares of its common stock with net proceeds of approximately $32.1 million after deducting underwriting discounts, commissions and estimated offering expenses incurred by the Company.

CresCom Bank

  • The Bank's net income (excluding Crescent Mortgage Company) was $3.3 million and $11.4 million for the three and twelve months ended December 31, 2015, respectively, compared to net income of $1.8 million and $7.3 million for the three and twelve months ended December 31, 2014, respectively.
  • No provision for loan loss was recorded during the three and twelve months ended December 31, 2015 or 2014. This was primarily due to net recoveries of $1.1 million and $944,000 for the twelve months ended December 31, 2015 and 2014, respectively.
  • The Bank's non-performing assets were 0.47% of total assets at December 31, 2015 and 2014.
  • Loans receivable (before allowance for loan losses) grew to $922.7 million at December 31, 2015 compared to $777.2 million at December 31, 2014. The increase in loans receivable primarily relates to the Bank's focus on increasing commercial lending, residential mortgage lending, and syndicated loans. In addition, the Company purchased a pool of residential mortgages during the fourth quarter totaling $37.3 million at December 31, 2015.
  • The number of checking accounts increased at an annualized rate of 11.1% since December 31, 2014. As of December 31, 2015 and December 31, 2014, core deposits, defined as checking, savings and money market, comprised approximately 56.7% and 63.2%, respectively, of total deposits.
  • The Bank's retail mortgage originations held for sale increased to $23.2 million compared to $13.1 million for the three months ended December 31, 2015 and 2014, respectively. Originations for the twelve months ended December 31, 2015 and 2014 were $73.6 million and $33.7 million, respectively. As a result of the increased originations, retail mortgage banking income within noninterest income increased to $424,000 and $1.7 million for the three and twelve months ended December 31, 2015 compared to $278,000 and $761,000 for the three and twelve months ended December 31, 2014. Mortgage banking income consists primarily of gain on sale of loans and related fees.

Crescent Mortgage Company

  • Net income for Crescent Mortgage Company, a wholly-owned subsidiary of the Bank, was $525,000 and $3.8 million for the three and twelve months ended December 31, 2015, respectively, as compared to net income of $225,000 and $1.9 million for the three and twelve months ended December 31, 2014, respectively.
  • The increase in net income of Crescent Mortgage Company is attributable to margin expansion resulting in increased mortgage banking income. Originations for the three months ended December 31, 2015 and 2014 were $217.0 million and $233.0 million, respectively. However, margin increased to 1.44% for the three months ended December 31, 2015 compared to 1.05% for three months ended December 31, 2014. Originations for the twelve months ended December 31, 2015 and 2014 were $986.7 million and $948.6 million, an increase of 4.0%. Margin for the twelve months ended December 31, 2015 increased to 1.60% compared to 1.18% for the twelve months ended December 31, 2014. As expected, originations for the fourth quarter of 2015 were down from originations from the third quarter of 2015. Seasonal influences significantly impact our wholesale mortgage business in the fourth and first quarters.

Quarterly Cash Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.03 per share payable on its common stock. The cash dividend will be payable on April 8, 2016 to stockholders of record as of March 18, 2016.

Conference Call

A conference call will be held at 2:00 p.m.., Eastern Time on January 26, 2016. The conference call can be accessed by dialing (855) 218-6998 or (615) 247-5963 and requesting the Carolina Financial Corporation earnings call. 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" shortly following the call. A replay of the conference call can be accessed approximately three hours after the call by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 35480877.

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, 2015, Carolina Financial Corporation had approximately $1.4 billion in total assets and Crescent Mortgage Company originated loans in 45 states and partnered with approximately 2,000 community banks, credit unions and mortgage brokers.  In 2014, Carolina Financial Corporation was added to the Nasdaq Community Bank Index (ABAQ) by the American Bankers Association.  It also ranked #1 on American Banker's 2015 list of "Top 200 Community Banks and Thrifts as Ranked by Three-Year Average ROE."  During 2014, CresCom Bank completed two branch acquisitions and grew from 11 to 26 branch locations. In addition, in 2014 the Company added loan production offices in Greenville, SC, and Wilmington, NC. In August 2015, the Company opened its first full-service branch in Greenville, SC.  On December 14, 2015, the Company closed a public offering of 2,262,296 shares of its common stock with net proceeds of approximately $32.1 million after deducting underwriting discounts, commissions and estimated offering expenses incurred by the Company. In January 2016, the Company announced the acquisition of Congaree Bancshares, Inc., a $116 million bank holding company headquartered in the Columbia, SC market.

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, such as core deposits, tangible book value, 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 table 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 businesses of the Company and Congaree Bancshares, Inc. ("Congaree") 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 the acquisition may not be fully realized within the expected timeframes; (9) disruption from the acquisition may make it more difficult to maintain relationships with clients, associates, or suppliers; (10) the required governmental approvals of the acquisition may not be obtained on the proposed terms and schedule; and (ii) the shareholders of Congaree may not approve the acquisition.  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.

ADDITIONAL INFORMATION ABOUT THE CONGAREE ACQUISITION AND WHERE TO FIND IT

The Company intends to file relevant documents concerning the Congaree acquisition with the SEC, including a registration statement on Form S-4 which will include a proxy statement/prospectus.  Shareholders of Congaree will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings by the Company, at the SEC's internet site (http://www.sec.gov). Copies of the proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the proxy statement/ prospectus can also be obtained, without charge, by directing a request to Carolina Financial Corporation, 288 Meeting Street, Charleston, SC 29401, Attention: William A. Gehman, III, Executive Vice President and Chief Financial Officer.

SHAREHOLDERS OF CONGAREE ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS WHEN THEY ARE FILED WITH THE SEC REGARDING THE PROPOSED TRANSACTION WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

The directors and executive officers of Congaree and other persons may be deemed to be participants in the solicitation of proxies from Congaree's shareholders in connection with the proposed acquisition. Information regarding Congaree's directors and executive officers is available in its definitive proxy statement (DEF 14A) and additional definitive proxy soliciting materials filed with the SEC for Congaree's 2015 annual shareholder meeting. Other information regarding the participants in the Congaree proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.

 

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2015

December 31, 2014

(Unaudited)

(Audited)

(Dollars in thousands)

ASSETS

Cash and due from banks

$                    10,206

10,453

Interest-bearing cash

16,421

10,694

Cash and cash equivalents

26,627

21,147

Securities available-for-sale

306,474

251,717

Securities held-to-maturity 

17,053

25,544

Federal Home Loan Bank stock, at cost

9,919

5,405

Other investments

3,273

2,309

Derivative assets

1,945

1,689

Loans held for sale

41,774

40,912

Loans receivable, gross

922,723

777,157

Allowance for loan losses

(10,141)

(9,035)

Loans receivable, net

912,582

768,122

Premises and equipment, net

32,562

31,075

Accrued interest receivable

4,333

3,628

Real estate acquired through foreclosure, net

2,374

3,239

Deferred tax assets, net

4,924

4,715

Mortgage servicing rights

11,433

10,181

Cash value life insurance

28,082

21,532

Core deposit intangible

2,961

3,303

Other assets

3,004

4,499

Total assets

$               1,409,320

1,199,017

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Noninterest-bearing deposits

$                  163,054

142,900

Interest-bearing deposits

868,474

821,290

Total deposits

1,031,528

964,190

Short-term borrowed funds

120,000

57,800

Long-term debt

103,465

61,740

Derivative liabilities

306

1,036

Drafts outstanding

2,154

3,320

Advances from borrowers for insurance and taxes

641

613

Accrued interest payable

333

312

Reserve for mortgage repurchase losses

3,876

4,999

Dividends payable to stockholders

361

243

Accrued expenses and other liabilities

6,797

11,064

Total liabilities

1,269,461

1,105,317

Commitments and contingencies

Stockholders' equity:

Preferred stock

-

-

Common stock

120

97

Additional paid-in capital

56,418

23,194

Retained earnings

82,859

69,625

Accumulated other comprehensive income, net of tax 

462

784

Total stockholders' equity

139,859

93,700

Total liabilities and stockholders' equity

$               1,409,320

1,199,017

 

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months

For the Twelve Months

Ended December 31,

Ended December 31,

2015

2014

2015

2014*

(In thousands, except share data)

Interest income

Loans

$               10,747

9,352

41,020

31,317

Investment securities

2,145

1,571

8,176

6,083

Dividends from FHLB

90

55

328

158

Other interest income

20

27

80

98

Total interest income

13,002

11,005

49,604

37,656

Interest expense

Deposits

1,273

876

4,367

3,483

Short-term borrowed funds

114

60

331

106

Long-term debt

515

475

1,906

2,013

Total interest expense

1,902

1,411

6,604

5,602

Net interest income

11,100

9,594

43,000

32,054

Provision for loan losses

-

-

-

-

Net interest income after provision for loan losses

11,100

9,594

43,000

32,054

Noninterest income

Mortgage banking income

3,543

2,734

17,417

11,908

Deposit service charges

858

597

3,496

2,065

Net (loss) gain on extinguishment of debt

(36)

11

(1,251)

(58)

Net gain on sale of securities

34

391

1,493

1,084

Fair value adjustments on interest rate swaps

142

(596)

(1,111)

(1,170)

Net gain on sale of servicing assets

-

-

-

775

Net increase in cash value life insurance

196

180

726

731

Mortgage loan servicing income

1,357

1,284

5,313

5,077

Other 

409

222

1,596

736

Total noninterest income

6,503

4,823

27,679

21,148

Noninterest expense

Salaries and employee benefits

7,176

6,584

28,629

23,308

Occupancy and equipment

1,896

1,584

7,228

4,858

Marketing and public relations

287

390

1,434

1,251

FDIC insurance

158

156

698

581

Provision for mortgage loan repurchase losses

(250)

(250)

(1,000)

(750)

Legal expense

60

(171)

407

438

Other real estate expense, net

24

256

138

638

Mortgage subservicing expense

398

343

1,634

1,392

Amortization of mortgage servicing rights

526

451

1,986

1,795

Other

1,961

2,769

8,045

7,932

Total noninterest expense

12,236

12,112

49,199

41,443

Income before income taxes

5,367

2,305

21,480

11,759

Income tax expense

1,758

587

7,060

3,448

Net income

$                 3,609

1,718

14,420

8,311

Earnings per common share:

Basic

$                   0.37

0.18

1.51

0.89

Diluted

$                   0.36

0.18

1.48

0.87

Weighted average common shares outstanding:

Basic

9,888,030

9,351,883

9,537,358

9,314,048

Diluted

10,103,966

9,572,323

9,718,356

9,507,425

* Derived from audited financial statements.

 

 

CAROLINA FINANCIAL CORPORATION

(Unaudited)

(Dollars in thousands)

Three Months Ended

Selected Financial Data:

December 31,  2015

September 30,  2015

June 30,  2015

March 31, 2015

December 31, 2014

Selected Average Balances:

Total assets

$     1,364,772

1,320,219

1,297,053

1,230,944

1,108,212

Investment securities

330,364

312,707

307,450

286,055

264,157

Loans receivable, net

876,445

840,414

813,293

779,661

684,203

Loans held for sale

31,212

43,193

49,087

30,733

35,530

Deposits

882,729

1,027,771

999,489

971,181

833,010

Stockholders' equity

111,189

102,327

97,647

95,354

92,794

Performance Ratios:

Return on average equity (1)

12.98%

15.17%

16.05%

12.83%

7.41%

Return on average assets (1)

1.06%

1.18%

1.21%

0.99%

0.62%

Average earning assets to average total assets

92.23%

91.82%

92.18%

91.26%

91.81%

Average loans receivable to average deposits

99.29%

81.77%

81.37%

80.28%

82.14%

Average equity to average assets

8.15%

7.75%

7.53%

7.75%

8.37%

Net interest margin-tax equivalent (2)

3.59%

3.66%

3.80%

3.68%

3.82%

Net charge-offs  (recovery) to average loans

receivable (annualized)

(0.11)%

0.06%

(0.31)%

(0.18)%

(0.02)%

Nonperforming assets to period end loans

receivable

0.72%

0.89%

0.86%

0.74%

0.73%

Nonperforming assets to total assets

0.47%

0.57%

0.55%

0.46%

0.47%

Nonperforming loans to total loans

0.47%

0.57%

0.47%

0.34%

0.31%

Allowance for loan losses as a percentage of

gross loans receivable (end of period) (3)

1.10%

1.15%

1.19%

1.17%

1.16%

Allowance for loan losses as a percentage

of nonperforming loans

235.67%

201.98%

252.13%

341.68%

371.20%

Nonperforming Assets:

Loans 90 days or more past due and still

accruing

$                    -

-

-

-

-

Nonaccrual loans

4,303

4,896

3,973

2,745

2,434

Total nonperforming loans

4,303

4,896

3,973

2,745

2,434

Real estate acquired through foreclosure, net

2,374

2,744

3,271

3,166

3,239

Total nonperforming assets

$            6,677

$            7,640

$            7,244

$            5,911

$            5,673

(1)  Included in the net income of December 31, 2014 were pretax acquisition related expenses of approximately $1.4 million.

(2) The tax equivalent net interest margin reflects tax-exempt income on a tax-equivalent basis.

(3) Acquired loans represent 7.0%, 8.0%, 8.8%, 9.9%, and 10.3%, of gross loans receivable at December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.  

 

 

Segment Information

(Unaudited)

(Dollars in thousands)

For the Three Months

For the Twelve Months

Increase (Decrease)

Ended December 31,

Ended December 31,

Three

Twelve

2015

2014

2015

2014*

Months

Months

Segment net income:

Community banking

$                  3,258

1,779

11,402

7,268

1,479

4,134

Wholesale mortgage banking

525

225

3,832

1,851

300

1,981

Other

(207)

(302)

(867)

(809)

95

(58)

Eliminations

33

16

53

1

17

52

Total net income

$                  3,609

1,718

14,420

8,311

1,891

6,109

For the Three Months Ended

December 31,    2015

September 30,    2015

June 30,    2015

March 31,  2015

December 31, 2014 (Note 1)

Segment net income:

Community banking

$                  3,258

2,854

2,817

2,473

1,779

Wholesale mortgage banking

525

1,273

1,323

711

225

Other

(207)

(256)

(224)

(180)

(302)

Eliminations

33

10

1

9

16

Total net income

$                  3,609

3,881

3,917

3,013

1,718

* Derived from audited financial statements.

Note 1 - Included in Community banking were pretax acquisition related expenses of approximately $1.4 million.

For the Three Months Ended December 31,

Loan Originations

Mortgage Banking Income

Margin

2015

2014

2015

2014

2015

2014

Additional segment information:

Community banking

$                23,161

13,097

424

278

1.83%

2.12%

Wholesale mortgage banking

216,971

233,042

3,119

2,456

1.44%

1.05%

Total mortgage banking income

$              240,132

246,139

3,543

2,734

1.48%

1.11%

For the Twelve Months Ended December 31,

Loan Originations

Mortgage Banking Income

Margin

2015

2014

2015

2014

2015

2014

Additional segment information:

Community banking

$                73,591

33,654

1,656

$               761

2.25%

2.26%

Wholesale mortgage banking

986,650

948,550

15,761

11,147

1.60%

1.18%

Total mortgage banking income

$           1,060,241

982,204

17,417

$          11,908

1.64%

1.21%

 

 

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

At December 31,

2015

2014

Core deposits:

Noninterest-bearing demand accounts

$              163,054

142,900

Interest-bearing demand accounts

158,581

183,550

Savings accounts

39,147

36,630

Money market accounts

223,906

246,116

Total core deposits

584,688

609,196

Certificates of deposit:

Less than $250,000

428,067

335,740

$250,000 or more

18,773

19,254

Total certificates of deposit

446,840

354,994

Total deposits

$           1,031,528

964,190

At December 31,

2015

2014

Tangible book value per share: 

Total common equity

$              139,859

93,700

Less intangible assets

(2,961)

(3,303)

Tangible common equity

$              136,898

90,397

Issued and outstanding shares

12,023,557

9,717,043

Less nonvested restricted stock awards

(285,805)

(365,160)

Period end dilutive shares

11,737,752

9,351,883

Total common equity

$              139,859

93,700

Divided by period end dilutive shares

11,737,752

9,351,883

Common book value per share

$                  11.92

10.02

Tangible common equity

136,898

90,397

Divided by period end dilutive shares

11,737,752

9,351,883

Tangible common book value per share

$                  11.66

9.67

 

SOURCE Carolina Financial Corporation



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