Carolina Financial Corporation Reports Results for Second Quarter of 2018
Staff Report From Charleston CEO
Tuesday, July 24th, 2018
Carolina Financial Corporation announced financial results for the second quarter of 2018.
Financial highlights at and for the three months ended June 30, 2018, include:
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Net income for the second quarter 2018 increased 60.2% to $15.0 million, or $0.70 per diluted share, from $9.3 million, or $0.58 per diluted share for the second quarter of 2017. Included in net income are pretax merger-related expenses of $0.5 million and $0.3 million for the second quarter of 2018 and 2017, respectively.
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Operating earnings for the second quarter of 2018, which exclude certain non-operating income and expenses, increased 70.9% to $15.6 million, or $0.73 or per diluted share, from $9.1 million, or $0.56 per diluted share, for the second quarter of 2017.
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Operating earnings for Q2 2018 have been adjusted to eliminate the following significant items:
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Pretax merger-related expenses of $506,000
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The fair value gain on interest rate swaps of $451,000.
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The loss on sale of securities of $746,000.
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Performance ratios for Q2 2018 compared to Q2 2017:
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Return on average assets was 1.65% compared to 1.72%.
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Operating return on average assets was 1.72% compared to 1.69%.
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Return on average tangible equity was 17.02% compared to 16.02%.
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Operating return on average tangible equity was 17.74% compared to 15.65%.
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Loans receivable, gross grew $107.7 million, or at an annualized rate of 9.3% since December 31, 2017.
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Nonperforming assets to total assets were 0.28% at June 30, 2018 compared to 0.20% at December 31, 2017.
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Total deposits increased $103.9 million since December 31, 2017. Core deposits increased $76.6 million since December 31, 2017.
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On June 11, Carolina Financial Corporation completed the sale of 1.5 million shares of its common stock. The net proceeds of the offering to the Company, after estimated expenses, were approximately $63.1 million.
"We continue to see the impact of solid organic growth and prior acquisitions on earnings. Overall, results for the second quarter of 2018 continued to improve with an increase in net income to $15.0 million compared to the second quarter of 2017." stated Jerry Rexroad, Chief Executive Officer.
Financial Results
Carolina Financial Corporation
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The Company reported net income for the three months ended June 30, 2018 of $15.0 million, or $0.70 per diluted share, as compared to $9.3 million, or $0.58 per diluted share, for the three months ended June 30, 2017. Included in net income for the three months ended June 30, 2018 and 2017 were pretax merger-related expenses of $0.5 million and $0.3 million, respectively. The Company reported net income for the six months ended June 30, 2018 of $19.0 million or $0.90 per diluted share, as compared to $14.2 million, or $0.94 per diluted share, for the six months ended June 30, 2017. Included in net income for the six months ended June 30, 2018 and 2017 were pretax merger-related expenses of $15.2 million and $1.6 million, respectively.
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Operating earnings for the second quarter of 2018, which excludes certain non-operating income and expenses, increased 70.9% to $15.6 million, or $0.73 per diluted share, from $9.1 million, or $0.56 per diluted share, for the second quarter of 2017. Operating earnings for the six months ended June 30, 2018, which excludes certain non-operating income and expenses, increased 106.4% to $30.8 million, or $1.45 per diluted share, from $14.9 million, or $0.99 per diluted share, for the same period of 2017.
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The Company's net interest margin-tax equivalent increased to 4.11% for the second quarter of 2018 compared to 4.03% for the second quarter of 2017.
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The Company reported common book value per share of $24.60 and $22.76 as of June 30, 2018 and December 31, 2017, respectively. Tangible common book value per share was $18.11 and $15.71 as of June 30, 2018 and December 31, 2017, respectively.
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At June 30, 2018, the Company's regulatory capital ratios exceeded the minimum levels currently required. Stockholders' equity totaled $551.8 million as of June 30, 2018 compared to $475.4 million at December 31, 2017. Tangible equity to tangible assets at June 30, 2018 was 11.5% compared to 9.7% at December 31, 2017.
Community Banking
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Community banking segment net income increased 76.8% to $14.9 million for the three months ended June 30, 2018 compared to $8.4 million for the three months ended June 30, 2017. Included in net income for the three months ended June 30, 2018 and 2017 were pretax merger-related expenses of $0.5 million and $0.3 million, respectively. The community banking segment net income increased 46.0% to $18.9 million for the six months ended June 30, 2018 compared to $13.0 million for the six months ended June 30, 2017. Included in net income for the six months ended June 30, 2018 and 2017 were pretax merger-related expenses of $15.2 million and $1.6 million, respectively.
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Community banking segment operating earnings increased 89.0% to $15.6 million for the three months ended June 30, 2018 compared to $8.2 million for the three months ended June 30, 2017. The community banking segment operating earnings increased 126.4% to $30.8 million for the six months ended June 30, 2018 compared to $13.6 million for the six months ended June 30, 2017.
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Provision for loan loss during the three months ended June 30, 2018 was $534,000. There was no provision for loan loss during the three months ended June 30, 2017. Asset quality and historical loss experience continue to remain favorable. The provision for loan loss was primarily driven by the organic loan growth.
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Non-performing assets were 0.28% and 0.20% of total assets at June 30, 2018 and December 31, 2017, respectively.
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Loans receivable, gross increased to $2.4 billion at June 30, 2018 compared to $2.3 billion at December 31, 2017. Loans increased $107.7 million, or at an annualized rate of 9.3% over December 31, 2017.
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Total deposits increased $103.9 million since December 31, 2017. As of June 30, 2018 and December 31, 2017, core deposits, defined as demand deposits, savings accounts and money market accounts, comprised approximately 67.2% and 66.9% respectively, of total deposits.
Wholesale Mortgage Banking
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Net income for the wholesale mortgage banking segment was $598,000 for the three months ended June 30, 2018 compared to $1.2 million for the three months ended June 30, 2017. Net income was $1.2 million for the six months ended June 30, 2018 compared to $1.9 million for the six months ended June 30, 2017. The decrease in the three months ended June 30, 2018 was primarily due to a loss on sale of other real estate owned of approximately $92,000 and the cost to terminate an equipment lease in the amount of $206,000. Income taxes in 2017 were significantly lower due to tax benefits related to the vesting of employee stock-based compensation.
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Net interest margin was 1.74% for the three months ended June 30, 2018 compared to 1.73% for the three months ended June 30, 2017. Originations for the three months ended June 30, 2018 and 2017 were $205.6 and $213.9 million, respectively. Net margin was 1.74% for the six months ended June 30, 2018 compared to 1.76% for the six months ended June 30, 2017. Originations for the six months ended June 30, 2018 and 2017 were $386.1 million and $394.7 million, respectively.