Carolina Financial Corporation Reports Results for Third Quarter of 2015

CHARLESTON, S.C., Oct. 21, 2015 /PRNewswire/ -- Carolina Financial Corporation (NASDAQ: CARO), today announced net income for the three and nine months ended September 30, 2015.  Net income for the three months ended September 30, 2015 increased approximately 62% to $3.9 million, or $0.40 per diluted share, compared to $2.4 million, or $0.25 per diluted share, for the three months ended September 30, 2014.  Net income for the nine months ended September 30, 2015 increased approximately 64% to $10.8 million, or $1.13 per diluted share, compared to net income of $6.6 million, or $0.69 per diluted share, for the nine months ended September 30, 2014.  

"We are pleased to report another strong quarter of operating results with an increase in net income of 62% for the third quarter of 2015 compared to the same period of 2014.  Our business development efforts and commitment to our local markets continue to drive new banking relationships. As a result, we continue to experience strong loan and deposit growth while maintaining excellent asset quality.  In addition, our retail mortgage team as well as Crescent Mortgage Company, our wholesale mortgage company, reported improved results positively impacting our bottom line," stated Jerry Rexroad, Chief Executive Officer. 

Financial Highlights

Carolina Financial Corporation

• The Company reported net income for the three months ended September 30, 2015 of $3.9 million, or $0.40 per diluted share, as compared to $2.4 million, or $0.25 per diluted share, for the three months ended September 30, 2014.  Net income for the nine months ended September 30, 2015 totaled $10.8 million, or $1.13 per diluted share, compared to net income of $6.6 million, or $0.69 per diluted share, for the nine months ended September 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. 
• The Company reported book value per common share of $11.01 and $10.02 as of September 30, 2015 and December 31, 2014, respectively.  Tangible book value per common share was $10.69 and $9.67 as of September 30, 2015 and December 31, 2014, respectively.
• At September 30, 2015, the Company's regulatory capital ratios exceeded the minimum levels currently required.  Stockholders' equity totaled $104.2 million as of September 30, 2015 compared to $93.7 million at December 31, 2014.

CresCom Bank

• The Bank's net income (excluding Crescent Mortgage Company) was $2.9 million and $8.1 million for the three and nine months ended September 30, 2015, respectively, compared to net income of $2.0 million and $5.5 million for the three and nine months ended September 30, 2014, respectively.
• In addition, the following items were included in the Bank's third quarter 2015 results:
  • The Bank recorded a $1.2 million fair value adjustment loss on interest rate swaps as a result of interest rate movements during the third quarter of 2015.  Partially offsetting the loss on interest rate swaps was a $1.0 million gain on sale of securities recognized by the Bank.  The Bank uses interest rate swaps to help offset fair value losses on its available for sale investment portfolio due to interest rate changes.
• No provision for loan loss was recorded during the three and nine months ended September 30, 2015 or 2014.   This was primarily due to net recoveries of $854,000 and $814,000 for the nine months ended September 30, 2015 and 2014, respectively.
• The Bank's non-performing assets were 0.57% of total assets at September 30, 2015, compared to 0.47% at December 31, 2014.
• The Bank's retail mortgage originations held for sale increased by 131.7% to $17.6 million compared to $7.6 million for the three months ended September 30, 2015 and 2014, respectively. Originations for the nine months ended September 30, 2015 and 2014 were $50.4 million and $20.6 million, respectively. As a result of the increased originations, retail mortgage banking income within noninterest income increased to $431,000 and $1.2 million for the three and nine months ended September 30, 2015 compared to $204,000 and $483,000 for the three and nine months ended September 30, 2014. Mortgage banking income consists primarily of gain on sale of loans and related fees.
• Loans receivable (before allowance for loan losses) grew at an annualized rate of 13.7% to $856.8 million at September 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 number of checking accounts increased at an annualized rate of 11.3% since December 31, 2014.  As of September 30, 2015 and December 31, 2014, core deposits comprised approximately 59.0% and 63.2%, respectively, of total deposits.
• On August 31, 2015, the Bank opened a new branch operating at 3695 E. North Street, Greenville, South Carolina. 

"The opening of our first branch in Greenville, South Carolina is an exciting achievement for the Company.  We are pleased with the results to date and look forward to servicing the upstate community from our Greenville branch," stated Jerry Rexroad, Chief Executive Officer.

Crescent Mortgage Company

• Net income for Crescent Mortgage Company, a wholly-owned subsidiary of the Bank, was $1.3 million and $3.3 million for the three and nine months ended September 30, 2015, respectively, as compared to net income of $575,000 and $1.6 million for the three and nine months ended September 30, 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 September 30, 2015 and 2014 were $261.9 million and $278.7 million, respectively. However, margin increased to 1.65% for the three months ended September 30, 2015 compared to 1.11% for three months ended September 30, 2014.  Originations for the nine months ended September 30, 2015 and 2014 were $769.7 million and $715.5 million, an increase of 7.6%.  Margin for the nine months ended September 30, 2015 increased to 1.64% compared to 1.21% for the nine months ended September 30, 2014. For the fourth quarter, we expect a decline in mortgage revenues as compared to the third quarter as a result of the seasonally lower volumes.

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 September 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 August 2015, the Company opened a full service branch in Greenville, SC. 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.

SOURCE Carolina Financial Corporation