Carolina Financial Corporation Reports Results for Fourth Quarter of 2017
NEWS RELEASE – For Release January 24, 2018 4:00PM
For More Information, Contact:
William A. Gehman III, EVP and CFO, 843.723.7700
Charleston, S.C. January 24, 2018 - Carolina Financial Corporation (the “Company”) (NASDAQ: CARO) today announced financial results for the fourth quarter of 2017.
Operational highlights at and for the three months ended December 31, 2017, include:
| · | On November 1, 2017, the Company closed its previously announced acquisition of First South Bancorp, Inc., the holding company for First South Bank, (“First South”) with the operational conversion expected to be completed in the first quarter of 2018. Excluding purchase accounting adjustments, total assets of First South were $1.1 billion, total loans receivable were $774.3 million and total deposits were $952.6 million as of the closing date. |
Financial highlights at and for the three months ended December 31, 2017, include:
| · | Effective November 1, 2017, the Company completed the previously announced merger of First South Bancorp, Inc. (“First South”). |
| · | Net income for the fourth quarter 2017 increased 22.9% to $6.3 million, or $0.33 per diluted share, from $5.2 million, or $0.41 per diluted share for the fourth quarter of 2016. Included in earnings are pretax merger-related expenses of $4.1 million for the fourth quarter of 2017 compared to $260,000 for the fourth quarter of 2016. |
| · | Operating earnings for the fourth quarter of 2017, which exclude certain non-operating income and expenses, increased 93.0% to $11.1 million, or $0.57 per diluted share, from $5.8 million, or $0.46 per diluted share, from the fourth quarter of 2016. |
| · | Operating earnings for Q4 2017 have been adjusted to eliminate the following significant items: |
| o | Pretax merger-related expenses of $4.1 million. |
| o | The fair value gain on interest rate swaps of $419,000. |
| o | The loss on sale of securities of $242,000. |
| o | The effect of an increase in income tax expense of $2.3 million related to application of the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act). |
| · | Performance ratios Q4 2017 compared to Q4 2016: |
| o | Return on average assets was 0.83% compared to 1.25%. |
| o | Operating return on average assets was 1.46% compared to 1.40%. |
| o | Return on average tangible equity was 8.78% compared to 13.46%. |
| o | Operating return on average tangible equity was 15.44% compared to 15.06%. |
| · | Loans receivable, excluding acquired loans, grew $187.5 million, or at an annualized rate of 15.9%, since December 31, 2016. |
| · | Asset quality continues to improve as nonperforming assets to total assets were 0.20% at December 31, 2017 compared to 0.40% at December 31, 2016. |
| · | Total deposits, excluding acquired deposits, increased $78.3 million since December 31, 2016. Core deposits, excluding core deposits acquired, increased $34.6 million since December 31, 2016. |
| · | The 2017 Tax Act was signed into law by the President on Friday, December 22, 2017. The changes that most affect businesses include the reduction in the corporate tax rate, change in business deductions, and many international provisions. Generally accepted accounting principles require the effect of a change in tax law or rates be recognized as of the date of enactment. The Company’s net income for the quarter and year ended December 31 2017 was reduced by approximately $2.3 million, primarily due to a lower valuation of deferred income taxes. |
“We continue to see the impact of solid organic growth and acquisitions on earnings. Overall operating results for the fourth quarter of 2017 continued to improve with an increase in operating net income of 93.0% compared to the fourth quarter of 2016. We believe we have partnered with a great franchise with the First South acquisition, and are actively working on integration. We expect the systems conversion to occur late in the first quarter of 2018,” stated Jerry Rexroad, the Company’s Chief Executive Officer.
Acquisition of First South Bancorp, Inc.
Effective November 1, 2017, the Company completed its previously announced acquisition of First South. At closing, the holding companies were merged with the Company as the surviving corporation, and First South Bank also merged with and into CresCom Bank, with CresCom Bank surviving the merger.
Under the terms of the merger, First South shareholders received 0.5064 shares of the Company’s common stock. Fractional shares were paid in cash.
The acquisition of First South was accounted for under the acquisition method of accounting. The assets and liabilities of First South have been recorded at their estimated fair values and added to those of the Company as of the merger date. Included in the December 31, 2017 consolidated balance sheet were approximately $728.7 million of acquired loans, net of related purchase accounting adjustments and $939.6 million of deposits. The Company may continue to refine its valuations of acquired assets and liabilities for up to one year following the merger date.
Financial Results
Carolina Financial Corporation
| n | The Company reported an increase in net income for the three months ended December 31, 2017 to $6.3 million, or $0.33 per diluted share, as compared to $5.2 million, or $0.41 per diluted share, for the three months ended December 31, 2016. Included in net income for the three months ended December 31, 2017 were pretax merger-related expenses of $4.1 million, compared to $260,000 for the three months ended December 31, 2016. |
| n | The Company reported an increase in net income for the year ended December 31, 2017 to $28.6 million, or $1.73 per diluted share, as compared to $17.6 million, or $1.42 per diluted share, for the year ended December 31, 2016. Included in net income for the years ended December 31, 2017 and 2016 were pretax merger-related expenses of $6.0 million and $3.2 million, respectively. |
| n | Operating earnings for the fourth quarter of 2017, which excludes certain non-operating income and expenses, increased 93.0% to $11.1 million, or $0.57 per diluted share, from $5.8 million, or $0.46 per diluted share, from the fourth quarter of 2016. |
| n | Operating earnings for the year ended December 31, 2017, which excludes certain non-operating income and expenses, increased 67.3% to $33.8 million, or $2.04 per diluted share, from $20.2 million, or $1.64 per diluted share, from the same period of 2016. |
| n | The Company’s net interest margin-tax equivalent increased to 4.19% for the fourth quarter of 2017 compared to 3.87% for the fourth quarter of 2016. |
| n | The Company reported book value per common share of $22.76 and $13.23 as of December 31, 2017 and December 31, 2016, respectively. Tangible book value per common share was $15.14 and $12.59 as of December 31, 2017 and December 31, 2016, respectively. |
| n | At December 31, 2017, the Company’s regulatory capital ratios exceeded the minimum levels currently required. Stockholders’ equity totaled $475.4 million as of December 31, 2017 compared to $163.2 million at December 31, 2016. Tangible equity to tangible assets at December 31, 2017 was 9.7% compared to 9.3% at December 31, 2016. |
| n | As a result of the 2017 Tax Act, the Company’s net income for the quarter and year ended December 31 2017 was reduced by approximately $2.3 million, primarily from a lower valuation of deferred income taxes. |
Community Banking
| n | Community banking segment net income increased 32.6% to $6.1 million for the three months ended December 31, 2017 compared to $4.6 million for the three months ended December 31, 2016. Included in net income for the three months ended December 31, 2017 were pretax merger-related expenses of $4.1 million compared to $254,000 for the three months ended December 31, 2016. |
| n | The community banking segment net income increased 80.4% to $26.8 million for the year ended December 31, 2017 compared to $14.9 million for the year ended December 31, 2016. Included in net income for the year ended December 31, 2017 and 2016 were pretax merger-related expenses of $6.0 million and $3.1 million, respectively. |
| n | Community banking segment operating earnings increased 115.8% to $11.2 million for the three months ended December 31, 2017 compared to $5.2 million for the three months ended December 31, 2016. Included in earnings for the three months ended December 31, 2017 and 2016 were pretax merger-related expenses of $4.1 million and $254,000, respectively. The community banking segment operating earnings increased 86.7% to $32.6 million for the year ended December 31, 2017 compared to $17.5 million for the year ended December 31, 2016. Included in earnings for the year ended December 31, 2017 and 2016 were pretax merger-related expenses of $6.0 million and $3.1 million, respectively. |
| n | Provision for loan loss during the three months ended December 31, 2017 was $779,000. There was no provision for loan loss during the three months ended December 31, 2016. Asset quality and historical loss experience continue to remain favorable. The provision for loan loss was primarily driven by the organic loan growth. |
| n | Non-performing assets were 0.20% and 0.40% of total assets at December 31, 2017 and December 31, 2016, respectively. |
| n | Loans receivable, gross increased to $2.3 billion at December 31, 2017 compared to $1.2 billion at December 31, 2016. Excluding loans acquired, organic loans increased $187.5 million, or 15.9% over December 31, 2016. |
| n | The number of checking accounts increased at an annualized rate of 8.7%, excluding First South and Greer checking accounts acquired, since December 31, 2016. Total deposits, excluding acquired deposits, increased $78.3 million since December 31, 2016. As of December 31, 2017 and December 31, 2016, core deposits, defined as checking, savings and money market, comprised approximately 66.8% and 60.6%, respectively, of total deposits. |
| n | As a result of the Tax Act, the community banking segment’s net income for the quarter and year ended December 31 2017 was reduced by approximately $2.5 million, primarily from a lower valuation of deferred income taxes. |
Wholesale Mortgage Banking
| n | Net income for the wholesale mortgage banking segment was $117,000 for the three months ended December 31, 2017 compared to $806,000 for the three months ended December 31, 2016. |
| n | Net income was $2.5 million for the year ended December 31, 2017 compared to $3.5 million for the year ended December 31, 2016. |
| n | Operating earnings for the wholesale mortgage banking segment were $444,000 for the three months ended December 31, 2017 compared to $806,000 for the three months ended December 31, 2016. |
| n | Operating earnings for the wholesale mortgage banking segment were $2.8 million for the year ended December 31, 2017 compared to $3.5 million for the year ended December 31, 2016. |
| n | Net margin was 1.43% for the three months ended December 31, 2017 compared to 1.61% for the three months ended December 31, 2016. Originations for the three months ended December 31, 2017 and 2016 were $239.8 million and $234.9 million, respectively. |
| n | Net margin was 1.59% for the year ended December 31, 2017 compared to 1.73% for the year ended December 31, 2016. Originations for the year ended December 31, 2017 and 2016 were $911.0 million and $875.4 million, respectively. |
| n | Net interest income for the wholesale mortgage banking segment was $388,000 for the three months ended December 31, 2017 compared to $407,000 for the three months ended December 31, 2016. Net interest income for the wholesale mortgage banking segment was $1.6 million for the year ended December 31, 2017 compared to $1.5 million for the year ended December 31, 2016. |
| n | Mortgage loan servicing income, net of amortization of mortgage servicing rights and subservicing expense, for the wholesale mortgage banking segment was $400,000 and $400,000 for the three months ended December 31, 2017 and December 31, 2016, respectively. Mortgage loan servicing income, net of amortization of mortgage servicing rights and subservicing expense, for the wholesale mortgage banking segment was $1.6 million and $1.6 million for the year ended December 31, 2017 and December 31, 2016, respectively. At December 31, 2017, loans serviced for third parties totaled $2.6 billion. |
| n | As a result of the Tax Act, the wholesale mortgage banking segment’s net income for the quarter and year ended December 31, 2017 was reduced by approximately $327,000, primarily from a lower valuation of deferred income taxes. |
Dividend Declared
On January 24, 2018 the Company declared a $0.05 dividend per common share, payable on April 6, 2018, to stockholders of record on March 6, 2018.
Conference Call
A conference call will be held at 11:00 a.m., Eastern Time on January 25, 2018. The conference call can be accessed by dialing (866) 464-9448 or (213) 660-0874 and requesting the Carolina Financial Corporation earnings call. The conference ID number is 4095667. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations.”
A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations” approximately three hours after the call and can be accessed by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 4095667.
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 December 31, 2017, Carolina Financial Corporation had approximately $3.5 billion in total assets and Crescent Mortgage Company was licensed to originate loans in 47 states, partnering with community banks, credit unions and mortgage brokers.
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, including but not limited to, core deposits, tangible book value, operating earnings 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 tables 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, fourth-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, the Tax Cuts and Jobs Act of 2017 and regulations adopted thereunder; (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; (7)the business related to acquisitions may not be integrated successfully or such integration may take longer to accomplish than expected; (8) the expected cost savings and any revenue synergies from acquisitions may not be fully realized within expected timeframes; and (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates, or suppliers. 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
| | | December 31, 2017 | | December 31, 2016 |
| | | (Unaudited) | | (Audited) |
| | | (Dollars in thousands) |
| ASSETS | | | | | | | | |
| Cash and due from banks | | $ | 25,254 | | | | 9,761 | |
| Interest-bearing cash | | | 51,298 | | | | 14,591 | |
| Cash and cash equivalents | | | 76,552 | | | | 24,352 | |
| Securities available-for-sale | | | 743,239 | | | | 335,352 | |
| Federal Home Loan Bank stock, at cost | | | 19,065 | | | | 11,072 | |
| Other investments | | | 3,446 | | | | 1,768 | |
| Derivative assets | | | 2,803 | | | | 2,219 | |
| Loans held for sale | | | 35,292 | | | | 31,569 | |
| Loans receivable, gross | | | 2,319,529 | | | | 1,178,266 | |
| Allowance for loan losses | | | (11,479 | ) | | | (10,688 | ) |
| Loans receivable, net | | | 2,308,050 | | | | 1,167,578 | |
| | | | | | | | | |
| Premises and equipment, net | | | 61,406 | | | | 37,054 | |
| Accrued interest receivable | | | 11,992 | | | | 5,373 | |
| Real estate acquired through foreclosure, net | | | 3,106 | | | | 1,179 | |
| Deferred tax assets, net | | | 5,872 | | | | 8,782 | |
| Mortgage servicing rights | | | 21,003 | | | | 15,032 | |
| Cash value life insurance | | | 57,195 | | | | 28,984 | |
| Core deposit intangible | | | 19,601 | | | | 3,658 | |
| Goodwill | | | 139,617 | | | | 4,266 | |
| Other assets | | | 9,221 | | | | 5,939 | |
| Total assets | | $ | 3,517,460 | | | | 1,684,177 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| Liabilities: | | | | | | | | |
| Noninterest-bearing deposits | | $ | 520,914 | | | | 229,905 | |
| Interest-bearing deposits | | | 2,079,315 | | | | 1,028,355 | |
| Total deposits | | | 2,600,229 | | | | 1,258,260 | |
| Short-term borrowed funds | | | 338,000 | | | | 203,000 | |
| Long-term debt | | | 74,759 | | | | 38,465 | |
| Derivative liabilities | | | 156 | | | | 342 | |
| Drafts outstanding | | | 7,324 | | | | 6,223 | |
| Advances from borrowers for insurance and taxes | | | 3,005 | | | | 1,058 | |
| Accrued interest payable | | | 1,126 | | | | 327 | |
| Reserve for mortgage repurchase losses | | | 1,892 | | | | 2,880 | |
| Dividends payable to stockholders | | | 1,051 | | | | 502 | |
| Accrued expenses and other liabilities | | | 14,537 | | | | 9,930 | |
| Total liabilities | | | 3,042,079 | | | | 1,520,987 | |
| Commitments and contingencies | | | | | | | | |
| Stockholders’ equity: | | | | | | | | |
| Preferred stock | | | — | | | | — | |
| Common stock | | | 210 | | | | 125 | |
| Additional paid-in capital | | | 348,037 | | | | 66,156 | |
| Retained earnings | | | 122,705 | | | | 98,451 | |
| Accumulated other comprehensive (loss) income, net of tax | | | 4,429 | | | | (1,542 | ) |
| Total stockholders’ equity | | | 475,381 | | | | 163,190 | |
| Total liabilities and stockholders’ equity | | $ | 3,517,460 | | | | 1,684,177 | |
CAROLINA FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | | For the Three Months | | For the Twelve Months |
| | | Ended December 31, | | Ended December 31, |
| | | 2017 | | 2016 | | 2017 | | 2016* |
| | | (In thousands, except share data) |
| Interest income | | | | | | | | | | | | | | | | |
| Loans | | $ | 27,094 | | | | 14,346 | | | | 79,300 | | | | 51,137 | |
| Investment securities | | | 4,966 | | | | 2,439 | | | | 14,941 | | | | 9,274 | |
| Dividends from Federal Home Loan Bank stock | | | 145 | | | | 86 | | | | 496 | | | | 374 | |
| Federal funds sold | | | — | | | | — | | | | 7 | | | | 5 | |
| Other interest income | | | 164 | | | | 32 | | | | 343 | | | | 124 | |
| Total interest income | | | 32,369 | | | | 16,903 | | | | 95,087 | | | | 60,914 | |
| Interest expense | | | | | | | | | | | | | | | | |
| Deposits | | | 3,175 | | | | 1,523 | | | | 9,386 | | | | 5,972 | |
| Short-term borrowed funds | | | 663 | | | | 189 | | | | 1,888 | | | | 509 | |
| Long-term debt | | | 614 | | | | 529 | | | | 1,978 | | | | 2,272 | |
| Total interest expense | | | 4,452 | | | | 2,241 | | | | 13,252 | | | | 8,753 | |
| Net interest income | | | 27,917 | | | | 14,662 | | | | 81,835 | | | | 52,161 | |
| Provision for loan losses | | | 779 | | | | — | | | | 779 | | | | — | |
| Net interest income after provision for loan losses | | | 27,138 | | | | 14,662 | | | | 81,056 | | | | 52,161 | |
| Noninterest income | | | | | | | | | | | | | | | | |
| Mortgage banking income | | | 3,619 | | | | 4,259 | | | | 15,140 | | | | 17,226 | |
| Deposit service charges | | | 1,715 | | | | 976 | | | | 4,643 | | | | 3,688 | |
| Net loss on extinguishment of debt | | | — | | | | (1,694 | ) | | | — | | | | (1,868 | ) |
| Net gain (loss) on sale of securities | | | (242 | ) | | | 65 | | | | 933 | | | | 706 | |
| Fair value adjustments on interest rate swaps | | | 419 | | | | 998 | | | | 382 | | | | 590 | |
| Net increase in cash value life insurance | | | 357 | | | | 219 | | | | 1,116 | | | | 903 | |
| Mortgage loan servicing income | | | 1,968 | | | | 1,510 | | | | 6,790 | | | | 5,748 | |
| Other | | | 1,743 | | | | 576 | | | | 4,912 | | | | 2,304 | |
| Total noninterest income | | | 9,579 | | | | 6,909 | | | | 33,916 | | | | 29,297 | |
| Noninterest expense | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 11,341 | | | | 8,169 | | | | 37,827 | | | | 31,475 | |
| Occupancy and equipment | | | 3,218 | | | | 2,106 | | | | 10,347 | | | | 7,942 | |
| Marketing and public relations | | | 235 | | | | 284 | | | | 1,417 | | | | 1,428 | |
| FDIC insurance | | | 341 | | | | 175 | | | | 721 | | | | 702 | |
| Recovery of mortgage loan repurchase losses | | | (225 | ) | | | (250 | ) | | | (900 | ) | | | (1,000 | ) |
| Legal expense | | | 134 | | | | 121 | | | | 507 | | | | 306 | |
| Other real estate (income) expense, net | | | 14 | | | | 17 | | | | 54 | | | | (20 | ) |
| Mortgage subservicing expense | | | 501 | | | | 504 | | | | 1,986 | | | | 1,857 | |
| Amortization of mortgage servicing rights | | | 883 | | | | 653 | | | | 2,966 | | | | 2,312 | |
| Merger related expenses | | | 4,091 | | | | 260 | | | | 6,001 | | | | 3,245 | |
| Other | | | 3,254 | | | | 2,034 | | | | 10,220 | | | | 7,793 | |
| Total noninterest expense | | | 23,787 | | | | 14,073 | | | | 71,146 | | | | 56,040 | |
| Income before income taxes | | | 12,930 | | | | 7,498 | | | | 43,826 | | | | 25,418 | |
| Income tax expense | | | 6,602 | | | | 2,348 | | | | 15,261 | | | | 7,848 | |
| Net income | | $ | 6,328 | | | | 5,150 | | | | 28,565 | | | | 17,570 | |
| | | | | | | | | | | | | | | | | |
| Earnings per common share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.33 | | | | 0.42 | | | | 1.75 | | | | 1.45 | |
| Diluted | | $ | 0.33 | | | | 0.41 | | | | 1.73 | | | | 1.42 | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 19,207,307 | | | | 12,336,420 | | | | 16,317,501 | | | | 12,080,128 | |
| Diluted | | | 19,443,353 | | | | 12,585,518 | | | | 16,550,357 | | | | 12,352,246 | |
* Derived from audited financial statements.
CAROLINA FINANCIAL CORPORATION
(Unaudited)
(Dollars in thousands)
| | | At or for the Three Months Ended |
| Selected Financial Data: | | December 31,
2017 | | September 30,
2017 | | June 30,
2017 | | March 31,
2017 | | December 31,
2016 |
| | | | | | | | | | | |
| Selected Average Balances: | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 3,048,214 | | | | 2,230,586 | | | | 2,166,803 | | | | 1,768,323 | | | | 1,651,653 | |
| Investment securities and FHLB stock | | | 647,276 | | | | 521,569 | | | | 510,706 | | | | 373,551 | | | | 326,485 | |
| Loans receivable, net | | | 2,003,429 | | | | 1,463,771 | | | | 1,412,940 | | | | 1,214,777 | | | | 1,138,120 | |
| Loans held for sale | | | 25,001 | | | | 27,282 | | | | 22,412 | | | | 17,827 | | | | 32,951 | |
| Deposits | | | 2,352,303 | | | | 1,710,263 | | | | 1,633,285 | | | | 1,330,805 | | | | 1,288,665 | |
| Stockholders’ equity | | | 380,529 | | | | 286,524 | | | | 277,708 | | | | 210,071 | | | | 160,991 | |
| | | | | | | | | | | | | | | | | | | | | |
| Performance Ratios (annualized): | | | | | | | | | | | | | | | | | | | | |
| Return on average stockholders’ equity | | | 6.65 | % | | | 11.16 | % | | | 13.45 | % | | | 9.34 | % | | | 12.80 | % |
| Retun on average tangible equity (Non-GAAP) | | | 8.78 | % | | | 13.24 | % | | | 16.02 | % | | | 9.98 | % | | | 13.46 | % |
| Return on average assets | | | 0.83 | % | | | 1.43 | % | | | 1.72 | % | | | 1.11 | % | | | 1.25 | % |
| Operating return on average equity (Non-GAAP) | | | 11.69 | % | | | 11.02 | % | | | 13.15 | % | | | 10.95 | % | | | 14.32 | % |
| Operating return on average tangible equity (Non-GAAP) | | | 15.44 | % | | | 13.08 | % | | | 15.65 | % | | | 11.70 | % | | | 15.06 | % |
| Operating return on average assets (Non-GAAP) | | | 1.46 | % | | | 1.42 | % | | | 1.69 | % | | | 1.30 | % | | | 1.40 | % |
| Average earning assets to average total assets | | | 89.25 | % | | | 91.09 | % | | | 90.68 | % | | | 91.99 | % | | | 93.21 | % |
| Average loans receivable to average deposits | | | 85.17 | % | | | 85.59 | % | | | 86.51 | % | | | 91.28 | % | | | 88.32 | % |
| Average stockholders’ equity to average assets | | | 12.48 | % | | | 12.85 | % | | | 12.82 | % | | | 11.88 | % | | | 9.75 | % |
| Net interest margin-tax equivalent (1) | | | 4.19 | % | | | 3.94 | % | | | 4.03 | % | | | 3.93 | % | | | 3.87 | % |
| Net charge-offs (recovery) to average loans receivable | | | 0.02 | % | | | 0.02 | % | | | (0.01 | )% | | | (0.01 | )% | | | (0.12 | )% |
| Nonperforming assets to period end loans receivable | | | 0.30 | % | | | 0.44 | % | | | 0.48 | % | | | 0.52 | % | | | 0.58 | % |
| Nonperforming assets to total assets | | | 0.20 | % | | | 0.29 | % | | | 0.31 | % | | | 0.34 | % | | | 0.40 | % |
| Nonperforming loans to total loans | | | 0.17 | % | | | 0.33 | % | | | 0.38 | % | | | 0.42 | % | | | 0.48 | % |
| Allowance for loan losses as a percentage of gross loans receivable (end of period) (2) | | | 0.49 | % | | | 0.72 | % | | | 0.75 | % | | | 0.76 | % | | | 0.91 | % |
| Allowance for loan losses as a percentage of non-acquired loans receivable (Non-GAAP) | | | 0.80 | % | | | 0.87 | % | | | 0.93 | % | | | 0.96 | % | | | 1.01 | % |
| Allowance for loan losses as a percentage of nonperforming loans (2) | | | 291.79 | % | | | 216.53 | % | | | 196.85 | % | | | 180.66 | % | | | 190.01 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Nonperforming Assets: | | | | | | | | | | | | | | | | | | | | |
| Loans 90 days or more past due and still accruing | | $ | — | | | | — | | | | — | | | | — | | | | — | |
| Nonaccrual loans | | | 3,934 | | | | 4,924 | | | | 5,461 | | | | 5,931 | | | | 5,625 | |
| Total nonperforming loans | | | 3,934 | | | | 4,924 | | | | 5,461 | | | | 5,931 | | | | 5,625 | |
| Real estate acquired through foreclosure, net | | | 3,106 | | | | 1,640 | | | | 1,417 | | | | 1,479 | | | | 1,179 | |
| Total nonperforming assets | | $ | 7,040 | | | $ | 6,564 | | | $ | 6,878 | | | $ | 7,410 | | | $ | 6,804 | |
(1) Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.
(2) Acquired loans represent 37.8%, 17.3%, 19.4%, 21.4%, and 10.1% of gross loans receivable at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016, respectively.
Carolina Financial Corporation
Segment Information
(Unaudited)
(Dollars in thousands)
| | | For the Three Months | | For the Twelve Months | | Increase (Decrease) |
| | | Ended December 31, | | Ended December 31, | | Three | | Twelve |
| | | 2017 | | 2016 | | 2017 | | 2016 | | Months | | Months |
| Segment net income: | | | | | | | | | | | | | | | | | | | | | | | | |
| Community banking | | $ | 6,052 | | | | 4,565 | | | | 26,840 | | | | 14,874 | | | | 1,487 | | | | 11,966 | |
| Wholesale mortgage banking | | | 117 | | | | 806 | | | | 2,450 | | | | 3,528 | | | | (689 | ) | | | (1,078 | ) |
| Other | | | 124 | | | | (232 | ) | | | (786 | ) | | | (901 | ) | | | 356 | | | | 115 | |
| Eliminations | | | 35 | | | | 11 | | | | 61 | | | | 69 | | | | 24 | | | | (8 | ) |
| Total net income | | $ | 6,328 | | | | 5,150 | | | | 28,565 | | | | 17,570 | | | | 1,178 | | | | 10,995 | |
| | | For the Three Months Ended |
| | | December 31,
2017 | | September 30,
2017 | | June 30,
2017 | | March 31,
2017 | | December 31,
2016 |
| Segment net income: | | | | | | | | | | | | | | | | | | | | |
| Community banking | | $ | 6,052 | | | | 7,837 | | | | 8,443 | | | | 4,509 | | | | 4,565 | |
| Wholesale mortgage banking | | | 117 | | | | 449 | | | | 1,238 | | | | 645 | | | | 806 | |
| Other | | | 124 | | | | (320 | ) | | | (346 | ) | | | (244 | ) | | | (232 | ) |
| Eliminations | | | 35 | | | | 27 | | | | 5 | | | | (6 | ) | | | 11 | |
| Total net income | | $ | 6,328 | | | | 7,993 | | | | 9,340 | | | | 4,904 | | | | 5,150 | |
| | | For the Three Months Ended December 31, 2017 |
| | | Community | | Mortgage | | | | | | |
| | | Banking | | Banking | | Other | | Eliminations | | Total |
| Interest income | | $ | 31,911 | | | | 441 | | | | 10 | | | | 7 | | | | 32,369 | |
| Interest expense | | | 4,050 | | | | 53 | | | | 402 | | | | (53 | ) | | | 4,452 | |
| Net interest income (expense) | | | 27,861 | | | | 388 | | | | (392 | ) | | | 60 | | | | 27,917 | |
| Provision for (recovery of) loan losses | | | 779 | | | | — | | | | — | | | | — | | | | 779 | |
| Noninterest income from external customers | | | 4,821 | | | | 4,758 | | | | — | | | | | | | | 9,579 | |
| Intersegment noninterest income | | | 244 | | | | — | | | | — | | | | (244 | ) | | | | |
| Noninterest expense | | | 19,399 | | | | 4,171 | | | | 217 | | | | | | | | 23,787 | |
| Intersegment noninterest expense | | | — | | | | 241 | | | | | | | | (241 | ) | | | — | |
| Income (loss) before income taxes | | | 12,748 | | | | 734 | | | | (609 | ) | | | 57 | | | | 12,930 | |
| Income tax expense (benefit) | | | 6,696 | | | | 617 | | | | (733 | ) | | | 22 | | | | 6,602 | |
| Net income (loss) | | $ | 6,052 | | | | 117 | | | | 124 | | | | 35 | | | | 6,328 | |
| | | For the Three Months Ended December 31, 2016 |
| | | Community | | Mortgage | | | | | | |
| | | Banking | | Banking | | Other | | Eliminations | | Total |
| Interest income | | $ | 16,453 | | | | 458 | | | | 4 | | | | (12 | ) | | | 16,903 | |
| Interest expense | | | 2,084 | | | | 51 | | | | 155 | | | | (49 | ) | | | 2,241 | |
| Net interest income (expense) | | | 14,369 | | | | 407 | | | | (151 | ) | | | 37 | | | | 14,662 | |
| Provision for (recovery of) loan losses | | | (24 | ) | | | 24 | | | | — | | | | — | | | | — | |
| Noninterest income from external customers | | | 1,597 | | | | 5,312 | | | | — | | | | — | | | | 6,909 | |
| Intersegment noninterest income | | | 261 | | | | — | | | | — | | | | (261 | ) | | | — | |
| Noninterest expense | | | 9,706 | | | | 4,151 | | | | 216 | | | | — | | | | 14,073 | |
| Intersegment noninterest expense | | | — | | | | 242 | | | | — | | | | (242 | ) | | | — | |
| Income (loss) before income taxes | | | 6,545 | | | | 1,302 | | | | (367 | ) | | | 18 | | | | 7,498 | |
| Income tax expense (benefit) | | | 1,980 | | | | 496 | | | | (135 | ) | | | 7 | | | | 2,348 | |
| Net income (loss) | | $ | 4,565 | | | | 806 | | | | (232 | ) | | | 11 | | | | 5,150 | |
Carolina Financial Corporation
Segment Information, Continued
(Unaudited)
(Dollars in thousands)
| | | For the Twelve Months Ended December 31, 2017 |
| | | Community | | Mortgage | | | | | | |
| | | Banking | | Banking | | Other | | Eliminations | | Total |
| Interest income | | $ | 93,319 | | | | 1,743 | | | | 31 | | | | (6 | ) | | | 95,087 | |
| Interest expense | | | 12,100 | | | | 172 | | | | 1,152 | | | | (172 | ) | | | 13,252 | |
| Net interest income (expense) | | | 81,219 | | | | 1,571 | | | | (1,121 | ) | | | 166 | | | | 81,835 | |
| Provision for (recovery of) loan losses | | | 779 | | | | — | | | | — | | | | — | | | | 779 | |
| Noninterest income from external customers | | | 14,195 | | | | 19,721 | | | | — | | | | — | | | | 33,916 | |
| Intersegment noninterest income | | | 1,034 | | | | | | | | — | | | | (1,034 | ) | | | — | |
| Noninterest expense | | | 53,600 | | | | 16,620 | | | | 926 | | | | | | | | 71,146 | |
| Intersegment noninterest expense | | | — | | | | 960 | | | | 6 | | | | (966 | ) | | | — | |
| Income (loss) before income taxes | | | 42,069 | | | | 3,712 | | | | (2,053 | ) | | | 98 | | | | 43,826 | |
| Income tax expense (benefit) | | | 15,229 | | | | 1,262 | | | | (1,267 | ) | | | 37 | | | | 15,261 | |
| Net income (loss) | | $ | 26,840 | | | | 2,450 | | | | (786 | ) | | | 61 | | | | 28,565 | |
| | | For the Twelve Months Ended December 31, 2016 |
| | | Community | | Mortgage | | | | | | |
| | | Banking | | Banking | | Other | | Eliminations | | Total |
| Interest income | | $ | 59,241 | | | | 1,591 | | | | 18 | | | | 64 | | | | 60,914 | |
| Interest expense | | | 8,148 | | | | 93 | | | | 603 | | | | (91 | ) | | | 8,753 | |
| Net interest income (expense) | | | 51,093 | | | | 1,498 | | | | (585 | ) | | | 155 | | | | 52,161 | |
| Provision for (recovery of) loan losses | | | (36 | ) | | | 36 | | | | — | | | | — | | | | — | |
| Noninterest income from external customers | | | 8,389 | | | | 20,953 | | | | — | | | | (45 | ) | | | 29,297 | |
| Intersegment noninterest income | | | 966 | | | | — | | | | — | | | | (966 | ) | | | — | |
| Noninterest expense | | | 39,226 | | | | 15,972 | | | | 842 | | | | — | | | | 56,040 | |
| Intersegment noninterest expense | | | — | | | | 967 | | | | — | | | | (967 | ) | | | — | |
| Income (loss) before income taxes | | | 21,258 | | | | 5,476 | | | | (1,427 | ) | | | 111 | | | | 25,418 | |
| Income tax expense (benefit) | | | 6,384 | | | | 1,948 | | | | (526 | ) | | | 42 | | | | 7,848 | |
| Net income (loss) | | $ | 14,874 | | | | 3,528 | | | | (901 | ) | | | 69 | | | | 17,570 | |
Impact of the Tax Cuts and Jobs Act on Income Tax Expense for the Three and Twelve Months Ended December 31, 2017:
| | | Community | | Mortgage | | | | | | |
| | | Banking | | Banking | | Other | | Eliminations | | Total |
| Increase (decrease) to tax expense | | $ | 2,504 | | | | 327 | | | | (511 | ) | | | — | | | | 2,320 | |
| | | For the Three Months Ended December 31, |
| | | Loan Originations | | Mortgage Banking Income | | Margin |
| | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Additional segment information: | | | | | | | | | | | | | | | | | | | | | | | | |
| Community banking | | $ | 27,221 | | | $ | 29,121 | | | | 569 | | | | 476 | | | | 2.09 | % | | | 1.63 | % |
| Wholesale mortgage banking | | | 212,585 | | | | 234,915 | | | | 3,050 | | | | 3,783 | | | | 1.43 | % | | | 1.61 | % |
| Total | | $ | 239,806 | | | | 264,036 | | | | 3,619 | | | | 4,259 | | | | 1.51 | % | | | 1.61 | % |
| | | For the Twelve Months Ended December 31, |
| | | Loan Originations | | Mortgage Banking Income | | Margin |
| | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Additional segment information: | | | | | | | | | | | | | | | | | | | | | | | | |
| Community banking | | $ | 86,732 | | | $ | 97,062 | | | | 2,010 | | | | 2,063 | | | | 2.32 | % | | | 2.13 | % |
| Wholesale mortgage banking | | | 824,282 | | | | 875,360 | | | | 13,130 | | | | 15,163 | | | | 1.59 | % | | | 1.73 | % |
| Total | | $ | 911,014 | | | | 972,422 | | | | 15,140 | | | | 17,226 | | | | 1.66 | % | | | 1.77 | % |
Carolina Financial Corporation
Reconciliation of Non-GAAP Financial Measures - Consolidated
(Unaudited)
(In thousands, except share data)
| | | At the Month Ended |
| | | December 31, | | September 30, | | June 30, | | March 31, | | December 31, |
| | | 2017 | | 2017 | | 2017 | | 2017 | | 2016 |
| | | | | | | | | | | |
| Core deposits: | | | | | | | | | | | | | | | | | | | | |
| Noninterest-bearing demand accounts | | $ | 520,914 | | | | 333,267 | | | | 330,641 | | | | 298,365 | | | | 229,905 | |
| Interest-bearing demand accounts | | | 551,308 | | | | 309,241 | | | | 298,123 | | | | 309,961 | | | | 191,851 | |
| Savings accounts | | | 213,141 | | | | 69,552 | | | | 70,336 | | | | 66,506 | | | | 48,648 | |
| Money market accounts | | | 452,734 | | | | 377,754 | | | | 380,108 | | | | 363,600 | | | | 292,639 | |
| Total core deposits (Non-GAAP) | �� | | 1,738,097 | | | | 1,089,814 | | | | 1,079,208 | | | | 1,038,432 | | | | 763,043 | |
| | | | | | | | | | | | | | | | | | | | | |
| Certificates of deposit: | | | | | | | | | | | | | | | | | | | | |
| Less than $250,000 | | | 754,137 | | | | 567,483 | | | | 539,177 | | | | 524,836 | | | | 467,937 | |
| $250,000 or more | | | 107,995 | | | | 50,357 | | | | 45,344 | | | | 44,452 | | | | 27,280 | |
| Total certificates of deposit | | | 862,132 | | | | 617,840 | | | | 584,521 | | | | 569,288 | | | | 495,217 | |
| Total deposits | | $ | 2,600,229 | | | | 1,707,654 | | | | 1,663,729 | | | | 1,607,720 | | | | 1,258,260 | |
| | | At the Month Ended |
| | | December 31, | | September 30, | | June 30, | | March 31, | | December 31, |
| | | 2017 | | 2017 | | 2017 | | 2017 | | 2016 |
| | | | | | | | | | | |
| Tangible book value per share: | | | | | | | | | | | | | | | | | | | | |
| Total stockholders’ equity | | $ | 475,381 | | | | 290,224 | | | | 281,818 | | | | 271,454 | | | | 163,190 | |
| Less intangible assets | | | (159,218 | ) | | | (44,953 | ) | | | (45,123 | ) | | | (45,292 | ) | | | (7,924 | ) |
| Tangible common equity (Non-GAAP) | | $ | 316,163 | | | | 245,271 | | | | 236,695 | | | | 226,162 | | | | 155,266 | |
| | | | | | | | | | | | | | | | | | | | | |
| Issued and outstanding shares | | | 21,022,202 | | | | 16,159,309 | | | | 16,156,943 | | | | 16,185,408 | | | | 12,548,328 | |
| Less nonvested restricted stock awards | | | (134,302 | ) | | | (99,639 | ) | | | (101,489 | ) | | | (227,439 | ) | | | (211,908 | ) |
| Period end dilutive shares | | | 20,887,900 | | | | 16,059,670 | | | | 16,055,454 | | | | 15,957,969 | | | | 12,336,420 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total stockholders equity | | $ | 475,381 | | | | 290,224 | | | | 281,818 | | | | 271,454 | | | | 163,190 | |
| Divided by period end dilutive shares | | | 20,887,900 | | | | 16,059,670 | | | | 16,055,454 | | | | 15,957,969 | | | | 12,336,420 | |
| Common book value per share | | $ | 22.76 | | | | 18 | | | | 17.55 | | | | 17.01 | | | | 13.23 | |
| | | | | | | | | | | | | | | | | | | | | |
| Tangible common equity (Non-GAAP) | | $ | 316,163 | | | | 245,271 | | | | 236,695 | | | | 226,162 | | | | 155,266 | |
| Divided by period end dilutive shares | | | 20,887,900 | | | | 16,059,670 | | | | 16,055,454 | | | | 15,957,969 | | | | 12,336,420 | |
| Tangible common book value per share (Non-GAAP) | | $ | 15.14 | | | | 15.27 | | | | 14.74 | | | | 14.17 | | | | 12.59 | |
| | | At the Month Ended |
| | | December 31, | | September 30, | | June 30, | | March 31, | | December 31, |
| | | 2017 | | 2017 | | 2017 | | 2017 | | 2016 |
| Acquired and non-acquired loans: | | | | | | | | | | | | | | | | | | | | |
| Acquired loans receivable | | $ | 872,020 | | | | 257,461 | | | | 278,275 | | | | 303,244 | | | | 119,422 | |
| Non-acquired loans receivable | | | 1,436,030 | | | | 1,227,000 | | | | 1,157,145 | | | | 1,113,766 | | | | 1,058,844 | |
| Total loans receivable | | $ | 2,308,050 | | | | 1,484,461 | | | | 1,435,420 | | | | 1,417,010 | | | | 1,178,266 | |
| % Acquired | | | 37.78 | % | | | 17.34 | % | | | 19.39 | % | | | 21.40 | % | | | 10.14 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Non-acquired loans | | $ | 1,436,030 | | | | 1,227,000 | | | | 1,157,145 | | | | 1,113,766 | | | | 1,058,844 | |
| Allowance for loan losses | | | 11,479 | | | | 10,662 | | | | 10,750 | | | | 10,715 | | | | 10,688 | |
| Allowance for loan losses to non-acquired loans (Non-GAAP) | | | 0.80 | % | | | 0.87 | % | | | 0.93 | % | | | 0.96 | % | | | 1.01 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Total loans receivable | | $ | 2,308,050 | | | | 1,484,461 | | | | 1,435,420 | | | | 1,417,010 | | | | 1,178,266 | |
| Allowance for loan losses | | | 11,479 | | | | 10,662 | | | | 10,750 | | | | 10,715 | | | | 10,688 | |
| Allowance for loan losses to total loans receivable | | | 0.50 | % | | | 0.72 | % | | | 0.75 | % | | | 0.76 | % | | | 0.91 | % |
Carolina Financial Corporation
Reconciliation of Non-GAAP Financial Measures - Consolidated
(Unaudited)
(In thousands, except share data)
| | | For the Three Months Ended | | For the Twelve Months Ended |
| Operating Earnings and Performance Ratios: | | December 31,
2017 | | September 30,
2017 | | June 30,
2017 | | March 31,
2017 | | December 31,
2016 | | December 31,
2017 | | December 31,
2016 |
| Income before income taxes | | $ | 12,930 | | | | 11,968 | | | | 12,013 | | | | 6,915 | | | | 7,498 | | | | 43,826 | | | | 25,418 | |
| Gain/Loss on sale of securities | | | 242 | | | | (368 | ) | | | (621 | ) | | | (185 | ) | | | (65 | ) | | | (933 | ) | | | (706 | ) |
| Net loss on extinguishment of debt | | | — | | | | — | | | | — | | | | — | | | | 1,694 | | | | — | | | | 1,868 | |
| Fair value adjustments on interest rate swaps | | | (419 | ) | | | (90 | ) | | | 69 | | | | 58 | | | | (998 | ) | | | (382 | ) | | | (590 | ) |
| Merger related expenses | | | 4,091 | | | | 311 | | | | 279 | | | | 1,319 | | | | 260 | | | | 6,001 | | | | 3,245 | |
| Operating earnings before income taxes | | | 16,844 | | | | 11,821 | | | | 11,740 | | | | 8,107 | | | | 8,389 | | | | 48,512 | | | | 29,235 | |
| Tax expense (1) | | | 5,721 | | | | 3,926 | | | | 2,612 | | | | 2,358 | | | | 2,627 | | | | 14,706 | | | | 9,027 | |
| Operating earnings (Non-GAAP) | | $ | 11,123 | | | | 7,895 | | | | 9,128 | | | | 5,749 | | | | 5,762 | | | | 33,806 | | | | 20,208 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average equity | | $ | 380,529 | | | | 286,524 | | | | 277,708 | | | | 210,071 | | | | 160,991 | | | | 280,877 | | | | 151,346 | |
| Less average intangible assets | | | (92,373 | ) | | | (45,035 | ) | | | (44,452 | ) | | | (13,510 | ) | | | (7,979 | ) | | | (49,096 | ) | | | (5,516 | ) |
| Average tangible common equity (Non-GAAP) | | $ | 288,156 | | | | 241,489 | | | | 233,256 | | | | 196,561 | | | | 153,012 | | | | 231,781 | | | | 145,830 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average assets | | $ | 3,048,214 | | | | 2,230,586 | | | | 2,166,803 | | | | 1,768,323 | | | | 1,651,653 | | | | 2,306,667 | | | | 1,537,654 | |
| Less average intangible assets | | | (92,373 | ) | | | (45,035 | ) | | | (44,452 | ) | | | (13,510 | ) | | | (7,979 | ) | | | (49,096 | ) | | | (5,516 | ) |
| Average tangible assets (Non-GAAP) | | $ | 2,955,841 | | | | 2,185,551 | | | | 2,122,351 | | | | 1,754,813 | | | | 1,643,674 | | | | 2,257,571 | | | | 1,532,138 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating return on average assets (Non-GAAP) | | | 1.46 | % | | | 1.42 | % | | | 1.69 | % | | | 1.30 | % | | | 1.40 | % | | | 1.47 | % | | | 1.31 | % |
| Operating return on average equity (Non-GAAP) | | | 11.69 | % | | | 11.02 | % | | | 13.15 | % | | | 10.95 | % | | | 14.32 | % | | | 12.04 | % | | | 13.35 | % |
| Operating return on average tangible assets (Non-GAAP) | | | 1.51 | % | | | 1.44 | % | | | 1.72 | % | | | 1.31 | % | | | 1.40 | % | | | 1.50 | % | | | 1.32 | % |
| Operating return on average tangible equity (Non-GAAP) | | | 15.44 | % | | | 13.08 | % | | | 15.65 | % | | | 11.70 | % | | | 15.06 | % | | | 14.59 | % | | | 13.86 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 19,207,307 | | | | 16,029,332 | | | | 16,029,332 | | | | 13,919,711 | | | | 12,336,420 | | | | 16,317,501 | | | | 12,080,128 | |
| Diluted | | | 19,443,353 | | | | 16,187,869 | | | | 16,180,171 | | | | 14,139,241 | | | | 12,585,518 | | | | 16,550,357 | | | | 12,352,246 | |
| Operating earnings per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic (Non-GAAP) | | $ | 0.58 | | | | 0.49 | | | | 0.57 | | | | 0.41 | | | | 0.47 | | | | 2.07 | | | | 1.67 | |
| Diluted (Non-GAAP) | | $ | 0.57 | | | | 0.49 | | | | 0.56 | | | | 0.41 | | | | 0.46 | | | | 2.04 | | | | 1.64 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As Reported: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | $ | 12,930 | | | | 11,968 | | | | 12,013 | | | | 6,915 | | | | 7,498 | | | | 43,826 | | | | 25,418 | |
| Tax expense (2) | | | 6,602 | | | | 3,975 | | | | 2,673 | | | | 2,011 | | | | 2,348 | | | | 15,261 | | | | 7,848 | |
| Net Income | | $ | 6,328 | | | | 7,993 | | | | 9,340 | | | | 4,904 | | | | 5,150 | | | | 28,565 | | | | 17,570 | |
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| Average equity | | $ | 380,529 | | | | 286,524 | | | | 277,708 | | | | 210,071 | | | | 160,991 | | | | 280,877 | | | | 151,346 | |
| Average tangible equity (Non-GAAP) | | $ | 288,156 | | | | 241,489 | | | | 233,256 | | | | 196,561 | | | | 153,012 | | | | 231,780 | | | | 145,831 | |
| Average assets | | $ | 3,048,214 | | | | 2,230,586 | | | | 2,166,803 | | | | 1,768,323 | | | | 1,651,653 | | | | 2,306,667 | | | | 1,537,654 | |
| Return on average assets | | | 0.83 | % | | | 1.43 | % | | | 1.72 | % | | | 1.11 | % | | | 1.25 | % | | | 1.24 | % | | | 1.14 | % |
| Return on average equity | | | 6.65 | % | | | 11.16 | % | | | 13.45 | % | | | 9.34 | % | | | 12.80 | % | | | 10.17 | % | | | 11.61 | % |
| Return on average tangible equity (Non-GAAP) | | | 8.78 | % | | | 13.24 | % | | | 16.02 | % | | | 9.98 | % | | | 13.46 | % | | | 12.32 | % | | | 12.05 | % |
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| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 19,207,307 | | | | 16,029,332 | | | | 16,029,332 | | | | 13,919,711 | | | | 12,336,420 | | | | 16,317,501 | | | | 12,080,128 | |
| Diluted | | | 19,443,353 | | | | 16,187,869 | | | | 16,180,171 | | | | 14,139,241 | | | | 12,585,518 | | | | 16,550,357 | | | | 12,352,246 | |
| Earnings per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.33 | | | | 0.50 | | | | 0.58 | | | | 0.35 | | | | 0.42 | | | | 1.75 | | | | 1.45 | |
| Diluted | | $ | 0.33 | | | | 0.49 | | | | 0.58 | | | | 0.35 | | | | 0.41 | | | | 1.73 | | | | 1.42 | |
(1) Tax expense is determined using the effective tax rate reflected in the accompanying income statement for the applicable reporting period, adjusted to eliminate the impact of the application of the Tax Cuts and Jobs Act on deferred income tax assets and liabilities.
(2) Income tax expense increased approximately $2.3 million for the quarter and year ended December 31, 2017 due to application of the Tax Cuts and Jobs Act on deferred income tax assetsand liabilities.
Carolina Financial Corporation
Reconciliation of Non-GAAP Financial Measures - Community Banking Segment
(Unaudited)
(In thousands, except share data)
| | | For the Three Months Ended | | For the Year Ended |
| | | December 31,
2017 | | September 30,
2017 | | June 30,
2017 | | March 31,
2017 | | December 31,
2016 | | December 31,
2017 | | December 31,
2016 |
| Segment net income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Community banking | | $ | 6,052 | | | | 7,837 | | | | 8,443 | | | | 4,509 | | | | 4,565 | | | $ | 26,840 | | | | 14,874 | |
| Wholesale mortgage banking | | | 117 | | | | 449 | | | | 1,238 | | | | 645 | | | | 806 | | | | 2,450 | | | | 3,528 | |
| Other | | | 124 | | | | (320 | ) | | | (346 | ) | | | (244 | ) | | | (232 | ) | | | (786 | ) | | | (901 | ) |
| Eliminations | | | 35 | | | | 27 | | | | 5 | | | | (6 | ) | | | 11 | | | | 61 | | | | 69 | |
| Total net income | | $ | 6,328 | | | | 7,993 | | | | 9,340 | | | | 4,904 | | | | 5,150 | | | $ | 28,565 | | | | 17,570 | |
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| Community banking segment operating earnings: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | $ | 12,748 | | | | 11,714 | | | | 11,232 | | | | 6,375 | | | | 6,545 | | | $ | 42,069 | | | | 21,258 | |
| Tax expense (1) (3) | | | 6,696 | | | | 3,877 | | | | 2,789 | | | | 1,866 | | | | 1,980 | | | | 15,228 | | | | 6,384 | |
| Bank segment net income | | $ | 6,052 | | | | 7,837 | | | | 8,443 | | | | 4,509 | | | | 4,565 | | | $ | 26,840 | | | | 14,874 | |
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| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 19,207,307 | | | | 16,029,332 | | | | 16,029,332 | | | | 13,919,711 | | | | 12,336,420 | | | | 16,317,501 | | | | 12,080,128 | |
| Diluted | | | 19,443,353 | | | | 16,187,869 | | | | 16,180,171 | | | | 14,139,241 | | | | 12,585,518 | | | | 16,550,357 | | | | 12,352,246 | |
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| Earnings per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.33 | | | | 0.50 | | | | 0.53 | | | | 0.32 | | | | 0.37 | | | $ | 1.64 | | | $ | 1.23 | |
| Diluted | | $ | 0.33 | | | | 0.49 | | | | 0.52 | | | | 0.32 | | | | 0.36 | | | $ | 1.62 | | | $ | 1.20 | |
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| Bank segment income before taxes | | $ | 12,748 | | | | 11,714 | | | | 11,232 | | | | 6,375 | | | | 6,545 | | | $ | 42,069 | | | $ | 21,258 | |
| Gain on sale of securities | | | 242 | | | | (368 | ) | | | (621 | ) | | | (185 | ) | | | (65 | ) | | | (932 | ) | | | (706 | ) |
| Net loss on extinguishment of debt | | | — | | | | — | | | | — | | | | — | | | | 1,693 | | | | — | | | | 1,868 | |
| Fair value adjustments on interest rate swaps | | | (419 | ) | | | (90 | ) | | | 69 | | | | 58 | | | | (998 | ) | | | (382 | ) | | | (590 | ) |
| Merger related expenses (2) | | | 4,091 | | | | 311 | | | | 279 | | | | 1,311 | | | | 254 | | | | 5,992 | | | | 3,137 | |
| Operating earnings before income taxes | | | 16,662 | | | | 11,567 | | | | 10,959 | | | | 7,559 | | | | 7,429 | | | | 46,747 | | | | 24,967 | |
| Tax expense (1) | | | 5,480 | | | | 3,828 | | | | 2,721 | | | | 2,213 | | | | 2,247 | | | | 14,140 | | | | 7,498 | |
| Operating bank segment earnings (Non-GAAP) | | $ | 11,182 | | | | 7,739 | | | | 8,238 | | | | 5,346 | | | | 5,182 | | | $ | 32,607 | | | $ | 17,469 | |
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| Operating bank segment earnings per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic (Non-GAAP) | | $ | 0.58 | | | | 0.48 | | | | 0.51 | | | | 0.38 | | | | 0.42 | | | $ | 2.00 | | | $ | 1.45 | |
| Diluted (Non-GAAP) | | $ | 0.58 | | | | 0.48 | | | | 0.51 | | | | 0.38 | | | | 0.41 | | | $ | 1.97 | | | $ | 1.41 | |
(1) Tax expense is determined using the effective tax rate for the applicable reporting segment for the applicable reporting period which includes the impact of the application of the Tax Cuts and Jobs Act on deferred income tax assets and liabilities.
(2) Remaining merger related costs were incurred within the category “Other” segment earnings.
(3) Income tax expense increased approximately $2.5 million in the Banking Segment for the quarter and year ended December 31, 2017 due to application of the Tax Cuts and Jobs Act on deferred tax assets and liabilities.
