C1 Financial Reports 2014 Fourth Quarter Results

ST. PETERSBURG, Fla., Jan. 28, 2015 /PRNewswire/ -- C1 Financial, Inc. (NYSE: BNK) today reported net income of $1.3 million, or $0.08 per diluted common share for the fourth quarter of 2014 ("4Q14"), compared to $2.6 million, or $0.18 per diluted common share for the third quarter of 2014 ("3Q14"). On a non-GAAP basis, operating net income, which excludes real estate-related valuation allowances incurred in relation to the FDIC-assisted acquisition of First Community Bank of Southwest Florida in 2013, was $2.8 million, or $0.17 per diluted common share for 4Q14. Please refer to the last table in this release for the explanation of non-GAAP financial measures.

MESSAGE FROM PRESIDENT & CHIEF EXECUTIVE OFFICER

Trevor Burgess, President & Chief Executive Officer of C1 Financial, Inc. stated, "We originated $489 million in new loans in 2014, which allowed for C1 Bank's originated loans outstanding to grow by nearly 37% in 2014. As a percentage of overall loans, C1 Bank's originated loans grew to 71%, up from 58%, at the end of 2013. We are excited by the robust pipeline of new clients as we enter 2015."

4Q14 showed seven positive trends in our operating figures:

1. We originated $139 million in new loan relationships in the quarter resulting in 37% year-to-date growth in C1 Bank originated loans outstanding. C1 Bank originated loans outstanding grew by $83 million in the quarter and $226 million in the year.  Overall loans outstanding ended the year at $1.189 billion (up 4.8% from the prior quarter and up 12.9% from the end of 2013 as our acquired bank loans rolled off);
2. Unfunded commitments ended the year at $189 million, up $8 million (+4.3%) during the quarter and present a clear opportunity for near-term loan funding;
3. The quarter saw $26 million growth in core deposits bringing 2014 core deposit growth to $159 million. Core deposits reached 73.2% of total deposits at the end of 2014 compared to 66.8% at the end of 2013. Noninterest-bearing deposits represented 23.9% of total deposits at the end of 2014, up from 18.7% at the end of 2013. Cost of deposits fell 2 basis points ("bps") to 50 bps compared to 3Q14 and fell 4 bps compared to 4Q13;
4. Adjusted net interest margin (a non-GAAP measure which excludes the impact of purchase accounting) improved by 2 bps (from 4.03% to 4.05%). Strong loan funding took place late in the quarter, resulting in the modest improvement to adjusted net interest margin. We ended the year with excess cash of $51 million and had an average excess cash balance of $127 million during 4Q14;
5. Net interest income was up $0.9 million compared to 3Q14, driven mainly by an increase in loan interest income, and helped by improvement in the deposit mix;
6. In December 2014, we purchased $35 million in bank-owned life insurance ("BOLI"), which allowed for deployment of excess cash and which will enhance noninterest income once fully invested;
7. C1 Bank originated nonperforming assets accounted for less than 1% of our total nonperforming assets (with C1 Bank originated nonperforming loans below 0.1% of C1 Bank loans outstanding). Our Texas Ratio ended at 29.3%, down from 52.5% at the end of 2013.

ASSETS

Total assets at the end of 2014 were $1.537 billion, slightly lower (-0.7%) than at the end of 3Q14, impacted by the repayment of $10.5 million in Federal Home Loan Bank ("FHLB") advances and $3.0 million in subordinated debt. Total assets were $1.323 billion at the end of 2013.

LOANS

Total loans at the end of 2014 were $1.189 billion, up $54.2 million (+4.8%) from the end of 3Q14 and up $135.5 million (+12.9%) from the end of 2013. Loan growth in 4Q14 was mainly driven by strong loan originations of $139.0 million and funding of unfunded commitments, partially offset by selling small business administration ("SBA") loans in the secondary market and by loans rolling off in the acquired portfolio, which decreased $28.6 million from $376.8 million to $348.2 million, or 7.6%, during 4Q14. The outstanding balance of C1 Bank originated loans grew $82.7 million, up 10.9% when compared to 3Q14. At the end of 2014, C1 Bank originated loans represented 71% of the loan portfolio, up from 67% at the end of 3Q14 and 58% at the end of 2013. 

DEPOSITS

Total deposits at the end of 2014 were $1.168 billion, slightly higher (+0.2%) than at the end of 3Q14. Total deposits were $1.041 billion at the end of 2013. We continued our focus on improving deposit mix while we hold excess cash. The shift in the deposit mix provided for a 2 bps decline in the cost of deposits to 0.50% in 4Q14 from 0.52% in 3Q14, continuing to trend down from 0.54% in 4Q13.

ASSET QUALITY

Nonperforming assets totaled $55.8 million at the end of 2014, declining $2.8 million (-4.7%) compared to 3Q14 and down $9.0 million (-13.9%) from the end of 2013. The decline in 4Q14 was driven by a reduction of $3.0 million in other real estate owned ("OREO") balances primarily from non-cash valuation allowance expense. This expense totaled $2.7 million, of which $2.1 million related to OREO acquired in the First Community Bank of Southwest Florida transaction, which took place in August 2013. The remaining reduction in OREO was due to OREO valuation allowance expense on previously acquired banks' OREO ($0.6 million) and to the continued sale of properties. In 2014, we sold 60 properties and had approximately 90 remaining to sell at year end, with close to 30 loans remaining under foreclosure. As a percentage of total assets, nonperforming assets decreased to 3.63% at the end of 2014 compared to 3.78% at the end of 3Q14 and 4.90% at the end of 2013, and our Texas Ratio improved to 29.3% at the end of 2014 from 30.9% at the end of 3Q14 and 52.5% at the end of 2013. At the end of 2014, only $487 thousand, or less than 1.0% of total nonperforming assets, were related to loans originated by C1 Bank.

We had net charge-offs of $116 thousand in 4Q14 (0.04% of total average loans on an annualized basis), primarily related to charge-offs of classified acquired loans, which had been reserved for in previous periods. Total charge-offs of $552 thousand for 4Q14 included a $117 thousand charge-off related to a collateral-dependent purchased credit impaired loan from First Community Bank of Southwest Florida (based on a new appraisal). Strong recoveries of $436 thousand in 4Q14 allowed funding of the allowance for loan losses on net loan growth, resulting in a nominal reversal of provision for loan losses for 4Q14.

Our allowance for loan losses at the end of 2014 was $5.3 million (representing 0.45% of total loans), compared to $5.4 million (representing 0.48% of total loans) at the end of 3Q14 and $3.4 million (representing 0.32% of total loans) at the end of 2013. The reduction in 4Q14 compared to the previous quarter was mainly driven by the charge-offs of classified acquired loans which were previously reserved for. During 2014, our general reserves (per Accounting Standards Codification Topic 450) grew by $2.1 million, or 83%, from $2.6 million at the end of 2013 to $4.7 million at the end of 2014, and represented 89% of our total allowance for loan losses. This 83% growth compares to loan growth of 14% for loans covered by this reserve. On a non-GAAP basis (including remaining loan discount from acquired performing loans), the allowance plus discount amount totaled $8.9 million (representing 0.75% of total loans) at the end of 2014, compared to $8.2 million (representing 0.78% of total loans) at the end of 2013.

NET INTEREST INCOME AND MARGIN

Net interest income for 4Q14 totaled $14.9 million, up $0.9 million (+6.4%) from 3Q14, as we continue to grow our average loans balance.

Net interest margin for 4Q14 increased 6 bps to 4.24% from 4.18% in 3Q14, mainly driven by a 5 bps higher yield on loans (primarily due to higher accretion on acquired loans as a result of prepayments and despite the fact that loan funding took place late in the quarter) and an improvement in deposit mix. Adjusted net interest margin (which excludes the effect of purchase accounting) for 4Q14 was 4.05%, or 2 bps higher from 4.03% in 3Q14.

Our excess cash at the end of 2014 was $51.0 million, substantially lower than the $128.0 million at the end of 3Q14. However, our average excess cash (defined as our average available cash above our target liquidity level – See explanation of non-GAAP financial measures), was $127.1 million for 4Q14 as we increased loan balances and funded the $35 million in BOLI late in 4Q14. Our excess cash continues to present an opportunity for future net interest margin expansion as we deploy these balances into loans.

NONINTEREST INCOME

Noninterest income for 4Q14 totaled $1.6 million, down $0.2 million (-13.5%) from 3Q14, primarily due to a $566 thousand decrease in gain on sale of SBA loans (due to a longer funding period of originated SBA loans as well as the overall volatility of SBA sales) partially offset by a $261 thousand increase in gains on sales of OREO ($329 thousand in 4Q14 compared to $68 thousand in 3Q14) and a $56 thousand increase in service charges and fees ($582 thousand in 4Q14 compared to $526 thousand in 3Q14).

NONINTEREST EXPENSE & TAXES

Noninterest expense totaled $14.0 million in 4Q14, up $2.7 million (+24.2%) from 3Q14, primarily due to a $2.7 million increase in OREO valuation allowance expense. As the FDIC-assisted acquisition of First Community Bank of Southwest Florida took place just over one year ago, management elected to re-appraise many properties despite improving market conditions, to ensure that they continued to be held at fair value at year-end 2014.

Our income tax expense for 4Q14 was $1.1 million compared to $1.7 million in 3Q14. Included in income tax expense for 4Q14 was a $77 thousand prior period adjustment relating to 2012. The effective tax rate for the year 2014 was unusually high at 40.9%, mainly due to our nondeductible expenses representing a larger share of pre-tax income (as a result of the one-time charge-off of our only Shared National Credit in 2Q14 and OREO valuation allowances in 4Q14, which lowered our pre-tax income), combined with the prior period adjustment mentioned above.

EFFICIENCY

Our efficiency ratio was 85.0% in 4Q14, compared with 71.3% in 3Q14, mainly as a result of $2.7 million valuation allowances on previously acquired banks' OREO. Our operating efficiency ratio, which excludes $2.1 million of OREO valuation allowance expense related to the acquisition of First Community Bank of Southwest Florida in 2013, was 72.1% for 4Q14. We also track closely average assets per employee and annualized revenue per employee, as measures of efficiency. Average assets per employee were $6.4 million in 4Q14 compared to $5.8 million in 4Q13, which reflected our continued growth in the balance sheet, while annualized revenue per employee was $307 thousand in 4Q14 compared to $328 thousand in 4Q13, as growth in revenue was offset by a higher number of average employees as we expanded our branch network.

NET INCOME AND OPERATING INCOME

Net income was $1.3 million for 4Q14 compared to $2.6 million for 3Q14. This corresponded to a return on average assets of 0.34% and 0.70% for 4Q14 and 3Q14, respectively, and a return on average equity of 2.84% and 6.47% for 4Q14 and 3Q14, respectively. Operating net income was $2.8 million for 4Q14, corresponding to an operating return on average assets of 0.72% and an operating return on average equity of 5.96%.

CAPITAL

Our consolidated Tier 1 leverage ratio was 11.95% and total risk-based capital ratio was 14.74% as of the end of 2014, compared to 12.32% and 15.45%, respectively, at the end of 3Q14. Additional capital ratios are presented in the financial tables.

PERSONNEL & OTHER MATTERS

In 1Q15, we plan to close the Franklin Street branch in Tampa, which will be consolidated with the Hyde Park branch (located approximately 1 mile away). We expect to continue to serve our Tampa clients while lowering noninterest expense.

OTHER EXCITING EVENTS DURING 4Q14

C1 Bank was listed as the sixth fastest-growing bank in the U.S. in a report issued by SNL Financial. As of June 30, 2014, C1 Bank posted a 472.3% asset growth over the prior 5 years.

In December 2014, the American Banker magazine named our President & CEO, Trevor Burgess, the Community Banker of the year.

On November 17th, C1 Bank opened a temporary branch in Miami Beach (the permanent branch is scheduled to open in late 2015), its 30th banking center and third in Miami-Dade County.

WEBCAST AND CONFERENCE CALL INFORMATION

C1 Financial, Inc. will host a webcast and conference call at 8:00 a.m. (ET) on January 29, 2015 to discuss fourth quarter 2014 results and other matters.  To access the conference call, please dial 1-855-209-8212. The live webcast audio can be heard at http://www.videonewswire.com/event.asp?id=101453. For those unable to participate in the webcast, it will be archived on C1 Financial's website at www.c1bank.com/ir.

C1 Financial, Inc. Information

Our name expresses our ideals to put our Clients 1^st and our Community 1^st. We are focused on serving the needs of entrepreneurs, tailoring a wide range of relationship banking services to entrepreneurs and their families, including commercial loans and a full line of depository products. We are based in St. Petersburg, Florida and operate from 30 banking centers and one loan production office on the West Coast of Florida and in Miami-Dade and Orange Counties. Now the 18^th largest bank headquartered in the state of Florida by assets and the 16^th largest by equity, having grown both organically and through acquisitions, we are the sixth fastest-growing bank in the country as measured by asset growth. Additional information is available at www.c1bank.com.

Forward-Looking Statements

In addition to historical information, this earnings release contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or "may," the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. There are a number of potential factors, risks and uncertainties that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. These potential factors, risks and uncertainties are discussed in our Prospectus filed with the Securities and Exchange Commission on August 15, 2014.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, we do not assume responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this earnings release to conform our prior statements to actual results or revised expectations.