News

Carolina Financial Corporation Reports Results for Second Quarter of 2018

Carolina Financial Corporation (the ”Company”) (NASDAQ:CARO) today announced financial results for the second quarter of 2018. 

Financial highlights at and for the three months ended June 30, 2018, include:

  • 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.
  • 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.
  • Operating earnings for Q2 2018 have been adjusted to eliminate the following significant items:
    • Pretax merger-related expenses of $506,000
    • The fair value gain on interest rate swaps of $451,000.
    • The loss on sale of securities of $746,000.
  • Performance ratios for Q2 2018 compared to Q2 2017:
    • Return on average assets was 1.65% compared to 1.72%.
    • Operating return on average assets was 1.72% compared to 1.69%.
    • Return on average tangible equity was 17.02% compared to 16.02%.
    • Operating return on average tangible equity was 17.74% compared to 15.65%.
  • Loans receivable, gross grew $107.7 million, or at an annualized rate of 9.3% since December 31, 2017.
  • Nonperforming assets to total assets were 0.28% at June 30, 2018 compared to 0.20% at December 31, 2017.
  • Total deposits increased $103.9 million since December 31, 2017. Core deposits increased $76.6 million since December 31, 2017.
  • 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

  • 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. 
  • 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.
  • 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.
  • 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.
  • 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

  • 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. 
  • 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.
  • 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.
  • Non-performing assets were 0.28% and 0.20% of total assets at June 30, 2018 and December 31, 2017, respectively.
  • 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.
  • 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

  • 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.
  • 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.

Conference Call

A conference call will be held at 10:00 a.m., Eastern Time on July 24, 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 1880558. 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 1880558.

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 June 30, 2018, Carolina Financial Corporation had approximately $3.7 billion in total assets and Crescent Mortgage Company was approved to originate loans in 48 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, 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; (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.

#FDIC

CresCom Bank

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