C1 Financial Reports 2014 Third Quarter Results

ST. PETERSBURG, Fla., Oct. 15, 2014 /PRNewswire/ -- C1 Financial, Inc. (NYSE: BNK) today reported operating net income of $3.1 million, or $0.21 per diluted common share for the third quarter of 2014 ("3Q14"). On a GAAP basis, including one-time expenses incurred in preparation for the IPO and a strategic addition to the allowance for loan and lease losses ("ALLL"), reported net income per diluted common share was $0.18 for 3Q14, compared to $0.2 million, or $0.02 per diluted common share for the second quarter of 2014 ("2Q14").

Per share amounts have been restated to reflect the 7 for 1 reverse stock split that occurred in connection with C1 Financial's initial public offering which became effective on August 13, 2014.

MESSAGE FROM CHIEF EXECUTIVE OFFICER

Trevor Burgess, Chief Executive Officer of C1 Financial, Inc. stated, "We had an exciting first quarter as a public company focusing on building the best bank for Florida's entrepreneurs. Ringing the bell on the NYSE on August 14^th served as a brand accelerator and we see the results of the increased exposure in our strong results and in the strong pipeline of new clients."

WHAT WAS AWESOME IN THE THIRD QUARTER OF 2014:

• Successful initial public offering completed on August 13, 2014. Net proceeds after partial exercise of over-allotment option and offering related expenses totaled $42.3 million, taking Tier 1 Leverage ratio to 12.32% and Total Risk based capital ratio to 15.45% as of the end of 3Q14;
• Origination of $141.4 million in new loan commitments during 3Q14, for a total of $349.7 million during the 9M14, compared to $287.6 million in 9M13, up $62.0 million (+21.6%);
• Unfunded commitments of $181.2 million at end of 3Q14 and up $22.7 million (+14.3%) compared to 2Q14 representing an opportunity for near-term loan funding;
• Strong growth in C1 Bank originated loan balances, up $91.9 million since 2Q14, representing an increase in C1 Bank originated loans outstanding of more than 13.8% in the quarter;
• Great momentum in SBA market with $0.8 million in gain on sales of loans during 3Q14, totaling $2.3 million in 9M14, as we continue to use the SBA program to boost our noninterest income;
• $50.4 million growth in core deposits during 3Q14 and up $132.0 million over the end of 2013, helped by successful Miami operation. Core deposits (transaction, savings and money market accounts) hit 71% of total deposits at the end of 3Q14. Noninterest bearing deposits represented 25.2% of total deposits at the end of 3Q14, up from 22.3% at the end of 2Q14 and 18.7% at the end of 2013. Cost of deposits fell 2 basis points ("bps") since the end of the second quarter;
• Strong net recoveries of $641 thousand for the 3Q14, which allowed for strategic funding of $533 thousand of ALLL, on top of normal loan growth loan loss reserves. ALLL as a percentage of total loans at 3Q14 was 0.48% and up 5 bps compared to 2Q14 (remaining discount on acquired loans accounted for 0.34% of total loans, bringing our non-GAAP total to 0.82%, in line with 0.82% at 2Q14);
• Zero charge-offs in the third quarter for C1 Bank originated loans (for loans originated since January 1, 2010) and zero past due loans (30-89 days) for C1 Bank originated loans; and
• Opportunistic borrowing of $30 million at a 5-year maturity from the Federal Home Loan Bank ("FHLB"), further improving our asset sensitivity profile and pre-funding near-term anticipated loan funding.

ASSETS

Total assets at the end of 3Q14 were $1,548.0 million, up $98.8 million (+ 6.8%) from the end of 2Q14. Balance sheet growth was mainly driven by strong core deposit growth of $50.4 million during the quarter, $42.3 million net proceeds from our initial public offering and borrowing of $30 million of FHLB advances.

LOANS

Total loans at the end of 3Q14 were $1,134.4 million, up $71.6 million (+ 6.7%) from the end of 2Q14. Loan growth was mainly driven by strong loan originations of $141.4 million during the 3Q14 and funding of unfunded commitments (which resulted in net new funding of C1 Bank originated loans of $91.9 million or 13.8% compared to 2Q14), partially offset by selling SBA loans in the secondary market and by loans rolling off in the acquired portfolio, which decreased $20.3 million, or 5.1%, between the end of 2Q14 and 3Q14. At the end of 3Q14, C1 Bank originated loans represented 67% of the loan portfolio up from 63% at the end of 2Q14. 

DEPOSITS

Total deposits at the end of 3Q14 were $1,165.0 million, up $29.5 million (+2.6%) from the end of 2Q14. Deposit growth was mainly driven by strong growth of $41.0 million (+16.2%) in noninterest bearing deposits during the period, fueled by the successful operations of our first branch in Miami.

Our cost of deposits was down 2 bps from 0.54% in 2Q14 to 0.52% in 3Q14, continuing to provide stable funding for our loan growth.

ASSET QUALITY

Nonperforming assets totaled $58.6 million at the end of 3Q14, up $0.8 million (+1.5%) compared to the 2Q14, driven by a reduction of $0.8 million in nonperforming loans combined with an increase of $1.7 million in other real estate owned ("OREO"), as we move loans through to foreclosure. As a percentage of total loans and OREO, nonperforming assets decreased to 5.00% in 3Q14 compared to 5.25% in 2Q14, and our Texas ratio improved to 30.92% in 3Q14 from 40.27% in 2Q14. At the end of 3Q14, only $566 thousand, or less than 1.0% of total nonperforming assets, were related to loans originated by C1 Bank.

We had net recoveries of $641 thousand in 3Q14 (0.23% of average total loans on an annualized basis) exceeding our expectations and reflecting our continued effort to collect deficiencies and a lower level of charge-offs on the acquired portfolio. There were no charge offs related to C1 Bank originated loans in the quarter.

During the 3Q14, we booked a provision for loan losses of $207 thousand driven by net loan growth during the quarter and by a strategic addition to the ALLL of $533 thousand funded by our net recoveries.

Our allowance for loan losses at the end of 3Q14 was $5.4 million (representing 0.48% of total loans), compared to $4.6 million (representing 0.43% of total loans) in 2Q14. On a non-GAAP basis (including remaining loan discount from acquired performing loans), the amount totaled $9.3 million (representing 0.82% of total loans) in 3Q14, compared to $8.7 million (representing 0.82% of total loans) in 2Q14.

NET INTEREST INCOME AND MARGIN

Net interest income for 3Q14 totaled $14.0 million, up $0.4 million (+3.1%) from 2Q14, as we continue to grow our average loans balance.

Net interest margin for 3Q14 was 4.18%, down 11 bps from 4.29% in 2Q14, mainly driven by an 8 bps lower yield on loans (due to a mix of loans with longer fee amortization periods), higher average cash balances and 2 bps higher cost of interest bearing liabilities (due to additional FHLB 5-year funding).  Adjusted Net Interest Margin (which excludes the effect of purchase accounting) for 3Q14 was 4.03%, down 9 bps from 4.12% in 2Q14, reflecting a slightly lower impact of purchase accounting than in the previous quarter.

Our average excess cash (defined as our average available cash above our target liquidity level – See explanation of Non-GAAP financial measures), was $115.9 million as of 3Q14 and continues to present a material opportunity for future net interest margin expansion as we deploy these balances into loans. As a sensitivity analysis, deploying this $115.9 million into loans at the beginning of the quarter at an average yield of 5.50% (or a 5.25% pick-up over current 25 bps we are getting at Fed), could potentially add approximately $6.1 million of annualized net interest income, or 46 bps to our reported Net interest margin. At a 5.0% average yield (or a 4.75% pick-up), it could potentially add $5.5 million of annualized net interest income, or 41 bps to our reported Net interest margin, assuming in both scenarios no change in our assets, no change in cost structure to produce those $115.9 million in loans, and no change in the current cost of funds. This net interest margin sensitivity analysis is presented for illustrative purposes only.  A number of factors impact net interest margin and there is no assurance that these pick-ups or increases may be obtained. Our excess cash at the end of 3Q14 was $128.0 million.

NONINTEREST INCOME

Noninterest income for 3Q14 totaled $1.8 million, down $0.6 million (-23.4%) from 2Q14, primarily due to a $306 thousand decrease in gain on sale of other real estate and a $241 thousand decrease in gain on sale of securities (as we sold our last security in 2Q14). Gain on sale of loans continued to be strong at $775 thousand in 3Q14 in line with $804 thousand in 2Q14, driven by a strong demand for SBA loans in the secondary market. Noninterest income for 3Q13 is not comparable as it included a $12.6 million bargain purchase gain on the acquisition of First Community Bank of Southwest Florida.

NONINTEREST EXPENSE & TAXES

Noninterest expense totaled $11.3 million in 3Q14, up $0.3 million (+3.0%) from 2Q14, primarily due to a $495 thousand, or 11.6% increase in salaries and employee benefits expense. This increase was driven by the starting of our 2014 management associate program (with 9 new employees), pre-staffing for Coral Gables and Doral future branch openings and a lower level of vacant positions. Other real estate owned-valuation allowance expense decreased by $140 thousand in the 3Q14 compared to 2Q14 (down 75.7%), driven by lower activity in the revaluation of foreclosed properties held by the Bank. Noninterest expense for 3Q13 is not comparable as it included $994 thousand of merger related expenses for the acquisition of First Community Bank of Southwest Florida.

Included in noninterest expense for 3Q14 is $182 thousand of pre-tax non-recurring audit expenses incurred in preparation for becoming a public company. Excluding these expenses, noninterest expense is $11.1 million and up 1.4% compared to 2Q14.

Our income tax expense for the 3Q14 was $1.7 million compared to $0.2 million in 2Q14. Effective tax rate in the first nine months of 2014 was 39.6%, mainly due to some non-deductible expenses incurred during the period.

EFFICIENCY

Our efficiency ratio was 71.31% in 3Q14 (70.16% excluding $182 thousand of pre-tax non-recurring audit expenses previously mentioned), compared with 69.73% in 2Q14, mainly driven by higher noninterest expense. We also track closely average assets per employee and annualized revenue per employee, as measures of efficiency. In 3Q14, average assets per employee were $6.4 million and annualized revenue per employee was $305 thousand as compared to $6.8 million and $343 thousand in 2Q14, respectively, primarily due to the increase in our average number of employees, from 211 in 2Q14 to 235 in 3Q14, as explained in the noninterest expense section above.

NET INCOME AND OPERATING INCOME

Net income was $2.6 million for 3Q14 compared to $0.2 million for 2Q14. This corresponded to a return on average assets of 0.70% and 0.06% for 3Q14 and 2Q14, respectively, and a return on average equity of 6.47% and 0.66% for 3Q14 and 2Q14, respectively.  Operating income was $3.1 million for 3Q14, corresponding to an operating return on average assets of 0.81% and an operating return on average equity of 7.56%.

CAPITAL

During the 3Q14, we successfully completed our initial public offering. Net proceeds after partial exercise of the over-allotment option and offering related expenses totaled $42.3 million.

As a result of the initial public offering and our earnings during the 3Q14, our consolidated Tier 1 Leverage ratio was 12.32% and Total Risk based capital ratio was 15.45% as of the end of 3Q14, compared to 9.73% and 12.42%, respectively, at the end of 2Q14. Additional capital ratios are presented on the financial tables.

PERSONNEL

Effective October 16, 2014, Alan G. Randolph will become C1 Bank's sole Senior Lender, adding the West Florida Market to his current responsibilities.  William H. Sedgeman, Jr. will continue in his role as Director, Chairman of the Board and will serve as a Senior Advisor to the Bank.

Jerry J. Allen joined C1 Bank in April 2014 as Deputy Chief Credit Officer and will be promoted to Chief Credit Officer effective October 16, 2014.   Previously Mr. Allen was Senior Vice President, Deputy Chief Credit Officer of Lake Forest Bank & Trust Co., a subsidiary bank of Wintrust Financial Corporation.  Mr. Allen began his banking career in 1992 and has an MBA from the Kellogg School of Management at Northwestern University and a BS from Roosevelt University.  Kathryn B. Pemble will continue in her role as Director, Vice Chairman of the Board and President.  Ms. Pemble will focus on originating new client relationships as one of C1 Bank's most senior and experienced bankers.

OTHER EXCITING EVENTS

C1 Bank was recently recognized by both local and national organizations as a fast growing company.  C1 Bank was listed for the 2nd consecutive year as one of both the "Tampa Bay Fast 50" as well as the "Florida Fast 100."  C1 Bank was also listed in the 2014 Inc. 5000 National Ranking of fastest growing companies at #1075 as the highest ranked bank on the list. 

On October 7th, C1 Bank opened in Coral Gables, its 29th banking center and second in Miami-Dade County.

WEBCAST AND CONFERENCE CALL INFORMATION

C1 Financial, Inc. will host a webcast and conference call at 8:30 a.m. (ET) on October 16, 2014 to discuss third quarter 2014 results and other matters.  To access the call for audio only, please call 1-877-870-4263.  For the streaming audio, please access the webcast on the investor relations page of C1 Financial's website at www.c1bank.com/ir.  For those unable to participate in the webcast, it will be archived on C1 Financial's website for 90 days following the presentation.  

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 29 banking centers and one loan production office on the West Coast of Florida and in Miami-Dade and Orange Counties. Now the 20^th largest bank in the state of Florida by assets and the 19^th largest by equity, having grown both organically and through acquisitions, we are near the top 1% of the fastest growing banks in the country as measured by asset growth, increasing assets from $260 million at December 31, 2009 to $1.4 billion at June 30, 2014 ($1.5 billion at September 30, 2014). 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.