Carolina Financial Corporation Reports Results for Second Quarter of 2015

Jul 17, 2015, 09:57 ET from Carolina Financial Corporation

CHARLESTON, S.C., July 17, 2015 /PRNewswire/ -- Carolina Financial Corporation (NASDAQ: CARO), today announced net income for the three and six months ended June 30, 2015.  Net income for the three months ended June 30, 2015 increased approximately 74% to $3.9 million, or $0.41 per diluted share, as compared to $2.2 million, or $0.24 per diluted share, for the three months ended June 30, 2014.  Net income for the six months ended June 30, 2015 totaled $6.9 million, or $0.73 per diluted share, compared to net income of $4.2 million, or $0.45 per diluted share, for the six months ended June 30, 2014.  

All share, earnings per share, and per share data have been retroactively adjusted to reflect stock splits for all periods presented in accordance with generally accepted accounting principles.

"We are pleased to report another strong quarter of operating results with an increase in net income of 74% for the second quarter of 2015 compared to the same period of 2014.  CresCom Bank, excluding Crescent Mortgage Company, continues to increase earnings and reported net income of $2.8 million for the second quarter of 2015, an increase of 56% from net income of $1.8 million for the second quarter of 2014. In addition, Crescent Mortgage Company, our wholesale mortgage company, reported improved results during the second quarter of 2015 as compared to the prior period. These results reflect the successful integration efforts from our recent 13 branch acquisition as well as the hard work and dedication of our team members," stated Jerry Rexroad, Chief Executive Officer. 

Financial Highlights

Carolina Financial Corporation

  • The Company reported net income for the three months ended June 30, 2015 of $3.9 million, or $0.41 per diluted share, as compared to $2.2 million, or $0.24 per diluted share, for the three months ended June 30, 2014. Net income for the six months ended June 30, 2015 totaled $6.9 million, or $0.73 per diluted share, compared to net income of $4.2 million, or $0.45 per diluted share, for the six months ended June 30, 2014.
  • 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. In addition, the Bank recovered $460,000 of previously unrecognized interest income from a nonperforming asset that was paid off during June 2015 and recognized a $588,000 gain on interest rate swaps, which were partially offset by a $1.2 million loss on extinguishment of debt arising from the early pay-off of a high rate FHLB advance.
  • The Company reported book value per common share of $10.61 and $10.02 as of June 30, 2015 and December 31, 2014, respectively. Tangible book value per common share was $10.28 and $9.67 as of June 30, 2015 and December 31, 2014, respectively.
  • At June 30, 2015, the Company's regulatory capital ratios exceeded the minimum levels currently required. Stockholders' equity totaled $100.3 million as of June 30, 2015 compared to $93.7 million at December 31, 2014.
  • On June 22, 2015, the Board of Directors of the Company declared a six-for-five stock split representing a 20% stock dividend to stockholders of record as of July 15, 2015, payable on July 31, 2015. All share, earnings per share, and per share data have been retroactively adjusted to reflect this and prior stock splits for all periods presented in accordance with generally accepted accounting principles.

CresCom Bank

  • The Bank's net income (excluding Crescent Mortgage Company) was $2.8 million and $5.3 million for the three and six months ended June 30, 2015, respectively, compared to net income of $1.8 million and $3.5 million for the three and six months ended June 30, 2014, respectively.
  • In addition, the following items were included in the Bank's second quarter 2015 results: 
    • The Bank incurred a $1.2 million loss on extinguishment of debt as a result of the prepayment of a Federal Home Loan Bank borrowing.  The Bank expects to realize interest expense savings related to this prepayment going forward.  
    • The Bank collected, and recognized in interest income, previously unrecognized interest totaling $460,000 related to the resolution of a nonperforming asset that paid off during the quarter ended June 30, 2015.
    • The Bank recognized a $588,000 fair value adjustment gain on interest rate swaps as a result of interest rate movements during the second quarter of 2015.  The bank uses interest rate swaps to help offset fair value volatility in the balance sheet related to interest rate changes.
  • No provision for loan loss was recorded during 2015 or 2014. This was primarily due to net recoveries of $637,000 and $261,000 for the three months ended June 30, 2015 and 2014, respectively, and $981,000 and $571,000 for the six months ended June 30, 2015 and 2014, respectively.
  • The Bank's retail mortgage originations increased by 235.6% to $21.3 million compared to $6.4 million for the three months ended June 30, 2015 and 2014, respectively. Originations for the six months ended June 30, 2015 and 2014 were $39.4 million and $12.7 million, respectively. In addition, margins expanded to 1.49% from 1.40% for the quarters ended June 30, 2015 and 2014, respectively, and to 1.46% from 1.34% for the six months ended June 30, 2015 and 2014, respectively.
  • Loans receivable (before allowance for loan losses) grew at an annualized rate of 16.4% to $841.1 million at June 30, 2015 compared to $777.2 million at December 31, 2014. The increase in loans receivable primarily relates to the Bank's focus on increasing residential mortgage lending, commercial lending, and syndicated loans.
  • The Bank continues to experience growth in core deposits (checking, savings and money market) which increased $5.3 million since December 31, 2014. The number of Bank checking accounts increased at an annualized rate of 13.3% since December 31, 2014. As of June 30, 2015 and December 31, 2014, core deposits comprised approximately 61.1% and 63.2%, respectively, of total deposits.
  • The Bank's non-performing assets were 0.55% of total assets at June 30, 2015, compared to 0.47% at December 31, 2014.
  • In July 2015, the Bank received approval from the FDIC, subject to obtaining all necessary and final approvals, to open a branch at 3695 E. North Street, Greenville, South Carolina. The Bank anticipates this branch will open in the fall of 2015.

Crescent Mortgage Company

  • Net income for Crescent Mortgage Company, a wholly-owned subsidiary of the Bank, was $1.3 million and $2.0 million for the three and six months ended June 30, 2015, respectively, as compared to net income of $611,000 and $1.1 million for the three and six months ended June 30, 2014, respectively.
  • The increase in net income of Crescent Mortgage Company is attributable to an increase in originations and margin expansion resulting in increased mortgage banking income. Originations for the three months ended June 30, 2015 and 2014 were $287.5 million and $252.2 million, respectively, an increase of 14.0%. Originations for the six months ended June 30, 2015 and 2014 were $510.9 million and $458.4 million, an increase of 11.4%. Additionally, margin increased to 1.67% for the three months ended June 30, 2015 compared to 1.32% for three months ended June 30, 2014. Margin for the six months ended June 30, 2015 increased to 1.67% compared to 1.25% for the six months ended June 30, 2014.

About Carolina Financial Corporation

Carolina Financial Corporation (NASDAQ: CARO) is the holding company of CresCom Bank, which owns and operates Atlanta-based Crescent Mortgage Company.  As of June 30, 2015, Carolina Financial Corporation had approximately $1.3 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 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, S.C., and Wilmington, N.C. In July 2015, CresCom Bank received approval to open a branch in the Greenville market, which is expected to open in the fall of 2015. To learn more about CresCom Bank, visit www.haveanicebank.com or call 1-855-CRESCOM.  

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; and (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.  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

June 30, 2015

December 31, 2014

(Unaudited)

(Audited)

(Dollars in thousands)

ASSETS

Cash and due from banks

$                 13,672

10,453

Interest-bearing cash

15,726

10,694

Cash and cash equivalents

29,398

21,147

Securities available-for-sale

291,062

251,717

Securities held-to-maturity 

17,169

25,544

Federal Home Loan Bank stock, at cost

9,048

5,405

Other investments

3,121

2,309

Derivative assets

2,326

1,689

Loans held for sale

60,727

40,912

Loans receivable, gross

841,062

777,157

Allowance for loan losses

(10,017)

(9,035)

Loans receivable, net

831,045

768,122

Premises and equipment, net

31,641

31,075

Accrued interest receivable

4,086

3,628

Real estate acquired through foreclosure, net

3,271

3,239

Deferred tax assets, net

4,893

4,715

Mortgage servicing rights

10,642

10,181

Cash value life insurance

21,727

21,532

Core deposit intangible

3,132

3,303

Other assets

2,657

4,499

Total assets

$            1,325,945

1,199,017

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Noninterest-bearing deposits

$               185,179

142,900

Interest-bearing deposits

820,669

821,290

Total deposits

1,005,848

964,190

Short-term borrowed funds

147,500

57,800

Long-term debt

55,465

61,740

Derivative liabilities

380

1,036

Drafts outstanding

2,175

3,320

Advances from borrowers for insurance and taxes

1,357

613

Accrued interest payable

327

312

Reserve for mortgage repurchase losses

4,362

4,999

Dividends payable to stockholders

244

243

Accrued expenses and other liabilities

7,943

11,064

Total liabilities

1,225,601

1,105,317

Commitments and contingencies

Stockholders' equity:

Preferred stock

-

-

Common stock

98

97

Additional paid-in capital

23,848

23,194

Retained earnings

76,028

69,625

Accumulated other comprehensive income, net of tax 

370

784

Total stockholders' equity

100,344

93,700

Total liabilities and stockholders' equity

$            1,325,945

1,199,017

 

 

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months

For the Six Months

Ended June 30,

Ended June 30,

2015

2014

2015

2014

(In thousands, except share data)

Interest income

Loans

$               10,465

7,157

19,928

13,990

Investment securities

2,079

1,526

3,973

3,047

Dividends from FHLB

67

35

145

69

Other interest income

22

25

44

49

Total interest income

12,633

8,743

24,090

17,155

Interest expense

Deposits

1,011

898

1,972

1,713

Short-term borrowed funds

76

11

142

16

Long-term debt

492

512

965

1,023

Total interest expense

1,579

1,421

3,079

2,752

Net interest income

11,054

7,322

21,011

14,403

Provision for loan losses

-

-

-

-

Net interest income after provision for loan losses

11,054

7,322

21,011

14,403

Noninterest income

Mortgage banking income

5,104

3,426

9,121

5,880

Deposit service charges

883

517

1,723

948

Net loss on extinguishment of debt

(1,215)

(31)

(1,215)

(31)

Net gain (loss) on sale of securities

(29)

164

442

480

Fair value adjustments on interest rate swaps

588

(263)

(7)

(518)

Net gain on sale of servicing assets

-

-

-

775

Net increase in cash value life insurance

180

187

358

373

Mortgage loan servicing income

1,318

1,254

2,626

2,531

Other 

435

195

806

380

Total noninterest income

7,264

5,449

13,854

10,818

Noninterest expense

Salaries and employee benefits

7,286

5,515

14,249

10,859

Occupancy and equipment

1,727

1,051

3,511

2,035

Marketing and public relations

367

297

769

571

FDIC insurance

185

136

350

263

Provision for mortgage loan repurchase losses

(250)

(250)

(500)

(250)

Legal expense

73

191

250

361

Other real estate expense, net

43

60

110

307

Mortgage subservicing expense

423

326

818

689

Amortization of mortgage servicing rights

485

441

945

913

Other

2,068

1,724

4,080

3,350

Total noninterest expense

12,407

9,491

24,582

19,098

Income before income taxes

5,911

3,280

10,283

6,123

Income tax expense

1,994

1,031

3,353

1,930

Net income

$                 3,917

2,249

6,930

4,193

Earnings per common share:

Basic

$                   0.41

0.24

0.74

0.45

Diluted

$                   0.41

0.24

0.73

0.45

Weighted average common shares outstanding:

Basic

9,459,073

9,314,676

9,399,348

9,279,247

Diluted

9,620,665

9,483,547

9,558,189

9,431,875

 

 

CAROLINA FINANCIAL CORPORATION

(Unaudited)

(Dollars in thousands, except per share data)

Three Months Ended

Selected Financial Data:

June 30, 2015

March 31, 2015

December 31, 2014

September 30, 2014

June 30, 2014

Selected Average Balances:

Total assets

$     1,297,053

1,230,944

1,108,212

1,011,992

948,167

Investment securities

307,450

286,055

264,157

232,719

223,872

Loans receivable, net

813,293

779,661

684,203

633,617

581,267

Loans held for sale

49,087

30,733

35,530

36,598

28,466

Deposits

999,489

971,181

833,010

799,979

767,358

Stockholders' equity

97,647

95,354

92,794

90,444

87,128

Performance Ratios:

Return on average equity

16.05%

12.83%

7.41%

10.59%

10.33%

Return on average assets

1.21%

0.99%

0.62%

0.95%

0.95%

Average earning assets to average total assets

92.18%

91.26%

91.81%

91.66%

91.04%

Average loans receivable to average deposits

81.37%

80.28%

82.14%

79.20%

75.75%

Average equity to average assets

7.53%

7.75%

8.37%

8.94%

9.19%

Net interest margin-tax equivalent (1)

3.80%

3.68%

3.82%

3.53%

3.45%

Net (recovery) charge-offs to average loans

receivable (annualized)

(0.31)%

(0.18)%

(0.02)%

(0.15)%

(0.16)%

Nonperforming assets to period end loans

receivable

0.86%

0.74%

0.73%

1.74%

2.45%

Nonperforming assets to total assets

0.55%

0.46%

0.47%

1.10%

1.52%

Nonperforming loans to total loans

0.47%

0.34%

0.31%

1.10%

1.53%

Allowance for loan losses as a percentage of

gross loans receivable (end of period) (2)

1.19%

1.17%

1.16%

1.35%

1.41%

Allowance for loan losses as a percentage

of nonperforming loans

252.13%

341.68%

371.20%

123.10%

92.22%

Nonperforming Assets:

Loans 90 days or more past due and still

accruing

$                  -

-

-

-

-

Nonaccrual loans

3,973

2,745

2,434

7,234

9,393

Total nonperforming loans

3,973

2,745

2,434

7,234

9,393

Real estate acquired through foreclosure, net

3,271

3,166

3,239

4,236

5,655

Total nonperforming assets

$            7,244

$            5,911

$            5,673

$          11,470

$          15,048

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

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

 

 

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

At June 30,

At December 31,

2015

2014

Core deposits:

Noninterest-bearing demand accounts

$        185,179

142,900

Interest-bearing demand accounts

158,286

183,550

Savings accounts

38,357

36,630

Money market accounts

232,703

246,116

Total core deposits

614,525

609,196

Certificates of deposit:

Less than $250,000

374,484

335,740

$250,000 or more

16,839

19,254

Total certificates of deposit

391,323

354,994

Total deposits

$     1,005,848

964,190

At June 30,

At December 31,

2015

2014

Tangible book value per share: 

Total common equity

$        100,344

93,700

Less intangible assets

(3,132)

(3,303)

Tangible common equity

$          97,212

90,397

Issued and outstanding shares

9,758,879

9,717,043

Less nonvested restricted stock awards

(299,806)

(365,160)

Period end dilutive shares

9,459,073

9,351,883

Total common equity

$        100,344

93,700

Divided by period end dilutive shares

9,459,073

9,351,883

Common book value per share

$            10.61

10.02

Tangible common equity

97,212

90,397

Divided by period end dilutive shares

9,459,073

9,351,883

Tangible common book value per share

$            10.28

9.67

For the Three Months

For the Six Months

Increase (Decrease)

Ended June 30,

Ended June 30,

Three

Six

2015

2014

2015

2014

Months

Months

Segment net income:

Community banking

$            2,817

1,808

5,290

3,499

1,009

1,791

Wholesale mortgage banking

1,323

611

2,034

1,052

712

982

Other

(224)

(178)

(404)

(341)

(46)

(63)

Eliminations

1

8

10

(17)

(7)

27

Total net income

$            3,917

2,249

6,930

4,193

1,668

2,737

For the Three Months Ended

June 30,  2015

March 31, 2015

December 31, 2014 (Note 1)

September 30, 2014

June 30, 2014

Segment net income:

Community banking

$            2,817

2,473

1,779

1,990

1,808

Wholesale mortgage banking

1,323

711

225

575

611

Other

(224)

(180)

(303)

(166)

(178)

Eliminations

1

9

17

2

8

Total net income

$            3,917

3,013

1,718

2,401

2,249

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

Reconciliation of Non-GAAP Financial Measures, Continued

(Unaudited)

(In thousands, except share data)

For the Three Months Ended June 30,

Loan Originations

Mortgage Banking Income

Margin

2015

2014

2015

2014

2015

2014

Additional segment information:

Community banking

$          21,321

6,353

317

89

1.49%

1.40%

Wholesale mortgage banking

287,465

252,202

4,787

3,337

1.67%

1.32%

Total mortgage banking income

$        308,786

258,555

5,104

3,426

1.65%

1.33%

For the Six Months Ended June 30,

Loan Originations

Mortgage Banking Income

Margin

2015

2014

2015

2014

2015

2014

Additional segment information:

Community banking

$          39,358

12,690

574

170

1.46%

1.34%

Wholesale mortgage banking

510,886

458,411

8,547

5,710

1.67%

1.25%

Total mortgage banking income

$        550,244

471,101

9,121

5,880

1.66%

1.25%

 

SOURCE Carolina Financial Corporation



RELATED LINKS

http://www.haveanicebank.com