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State Bank Financial Corporation Reports Fourth Quarter and Full Year 2017 Financial Results

2017 Highlights

  • Record full year pretax income of $87.6 million
  • Non-cash revaluation charge on our net deferred tax assets of $10.7 million, or $.27 per fully diluted share, in the fourth quarter
  • Interest income on loans and invested funds increased $52.3 million year over year
  • Noninterest-bearing deposit growth of $102.7 million, or 10.4% year over year, excluding the AloStar acquisition
  • Announced and completed the AloStar Bank of Commerce merger transaction
  • $.52 of tangible book value growth in 2017

ATLANTA, Jan. 25, 2018 (GLOBE NEWSWIRE) -- State Bank Financial Corporation (STBZ) today announced unaudited financial results for the fourth quarter and full year ended December 31, 2017. Full year net income for 2017 was $46.6 million, or $1.19 per fully diluted share, compared to $47.6 million, or $1.28 per fully diluted share, for full year 2016.  Net income for the fourth quarter of 2017 was $5.4 million, compared to $14.4 million in the third quarter of 2017 and $10.3 million in the fourth quarter of 2016. Fully diluted earnings per share were $.14 in the fourth quarter of 2017, compared to $.37 in the third quarter of 2017 and $.28 in the fourth quarter of 2016.  Net income for the fourth quarter and full year ended December 31, 2017 includes the impact of a $10.7 million non-cash tax expense on tax reform and merger election related revaluation of our net deferred tax assets and $911,000 in after tax securities losses related to an investment portfolio restructure.  Additionally, after tax merger expenses of $1.6 million and $3.3 million were included in our results for the quarter and year ended December 31, 2017, respectively.

Income before income taxes for 2017 was $87.6 million compared to $73.8 million for full year 2016. Income before income taxes for the fourth quarter of 2017 was $24.6 million, compared to $22.0 million  in the third quarter of 2017 and $15.9 million in the fourth quarter of 2016. The annual and linked-quarter increases were primarily attributable to an increase in net interest income, partially offset by an increase in noninterest expenses, both of which related to the AloStar Bank of Commerce acquisition.

Joe Evans, Chairman of State Bank Financial, commented, “2017 was a great year for State Bank by any measure.  With the completion of a significant, immediately accretive acquisition and our continued focus on expense control and margin management, we grew pretax income 18.8% over the prior year.  Further, we believe our strong finish in 2017 has set the stage for another solid year in 2018.”

Operating Highlights

Interest income on loans improved to $46.9 million in the fourth quarter of 2017, an $11.5 million increase from the third quarter of 2017 and a $20.2 million increase from the fourth quarter of 2016.  Net interest income of $58.0 million in the fourth quarter of 2017 increased from $44.3 million in the third quarter of 2017 and $39.1 million in the fourth quarter of 2016.  Accretion income on loans was $10.7 million in the fourth quarter of 2017, up from $6.5 million in the third quarter of 2017 and $10.3 million in the fourth quarter of 2016. The $4.2 million linked-quarter increase  was primarily due to unexpected acceleration of certain purchased credit impaired loan payoffs.  As of December 31, 2017, approximately $58 million of accretable discount remains to be recognized as loan accretion income.

Noninterest income was $10.1 million in the fourth quarter of 2017, compared to $9.7 million in the third quarter of 2017 and $9.9 million in the fourth quarter of 2016.  Revenues in SBA and payroll and insurance increased $402,000 and $211,000, respectively, in the fourth quarter of 2017, compared to the third quarter of 2017, while mortgage banking income decreased $235,000. Loss on sale of securities was $1.5 million in the fourth quarter of 2017, as we opportunistically restructured our portfolio and sold certain lower yielding securities in a loss position and reinvested into higher yielding securities.

Total noninterest expense for the fourth quarter of 2017 was $40.7 million, compared to $31.6 million in the third quarter of 2017 and $32.9 million in the fourth quarter of 2016.  The $9.1 million linked-quarter increase was primarily due to $7.8 million of noninterest expense related to the AloStar Bank of Commerce acquisition.

Financial Condition

Total assets at December 31, 2017, were $5.0 billion, down from $5.1 billion at September 30, 2017.  Total loans were $3.5 billion at December 31, 2017, down $40.6 million from the third quarter of 2017.  Period-end organic loans increased to $2.4 billion at December 31, 2017, an increase of $61.2 million from the third quarter of 2017.  Purchased non-credit impaired loans decreased to $990.7 million at December 31, 2017, a $73.7 million linked-quarter decline.  Purchased credit impaired loans decreased to $175.6 million at December 31, 2017, a $28.0 million linked-quarter decline.

Past due organic and purchased non-credit impaired loans were .20% and .40% of their respective portfolios at December 31, 2017. The provision for loan losses on organic and purchased non-credit impaired loans was $2.1 million in the fourth quarter of 2017 and was primarily attributable to net charge-offs, organic loan growth, and continued seasoning of the purchased non-credit impaired portfolio.  The organic allowance as a percent of organic loans was 1.02% at the end of the fourth quarter of 2017.

Total deposits at December 31, 2017, were $4.2 billion, up $2.1 million from September 30, 2017. Period-end transaction accounts, comprised of noninterest-bearing demand deposits and interest-bearing transaction accounts, increased $80.4 million from the third quarter of 2017.  Noninterest-bearing demand deposits represented 28.1% of total deposits as of December 31, 2017. Average noninterest-bearing demand deposits were $1.1 billion, a $143.8 million increase from the third quarter of 2017 and a $274.9 million increase from the fourth quarter of 2016.

Tom Wiley, Vice Chairman and CEO, commented “After a record setting year in 2017, I’m even more optimistic about our prospects for 2018.  Benefits from the full integration of the AloStar acquisition, tax reform and economic trends in our core markets should all be positive catalysts for State Bank.  Our strategic priorities remain intently focused on taking extraordinary care of our clients, continuing to build our core deposit base, being disciplined risk managers and growing earnings per share.”

Tangible book value per share was $14.00 at the end of the fourth quarter of 2017.  State Bank Financial Corporation continues to be well capitalized, ending the quarter with a leverage ratio of 11.24% and a Tier I risk-based capital ratio of 12.61%.

Detailed Results

Supplemental tables displaying financial results for the fourth quarter of 2017, the previous four quarters, and full year 2017 are included with this press release.

Non-GAAP Financial Measures

This press release contains financial measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  For more information on these non-GAAP financial measures, please refer to 4Q17 Financial Supplement: Table 8, Reconciliation of Non-GAAP Measures.

Conference Call

Chairman Joe Evans, Chief Executive Officer Tom Wiley, Chief Financial Officer and Chief Operating Officer Sheila Ray, and Chief Credit Officer David Black will discuss financial and business results for the quarter on a conference call today at 10:00 a.m. ET.

Dial in number:  1.800.699.3428

Please allow time to register your name and affiliation/company prior to the start of the call.  A replay of the conference call will be available shortly after the call is completed in the Investors section on the company’s website at www.statebt.com.  A slide presentation for today’s call is also available in the Investors section on the company’s website.

About State Bank Financial Corporation

State Bank Financial Corporation (STBZ), with approximately $5.0 billion in assets as of December 31, 2017, is an Atlanta-based bank holding company for State Bank and Trust Company.  State Bank operates a full service banking business and offers a broad range of commercial and retail banking products to our customers throughout seven of Georgia’s eight largest MSAs.

To learn more about State Bank, visit www.statebt.com

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release and other information that we make publicly available from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “intend,” “anticipate,” “plan,” “seek,” “believe,” “expect,” “strategy,” “future,” “likely,” “project,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements regarding the amount of accretable discount that remains, our prospects for 2018, including the benefits of the full integration of the AloStar Bank of Commerce acquisition, tax reform and economic trends in our core markets, our ability to continue to build our core deposit base, manage risk and grow earnings per share. Such forward-looking statements are subject to risks, uncertainties, and other factors, including a downturn in the economy, particularly in our markets, volatile credit and financial markets both domestic and foreign, potential deterioration in real estate values, regulatory changes and excessive loan losses, the conversion of AloStar's operating systems and procedures may take longer than anticipated or may be more costly than anticipated or have unanticipated adverse results relating to the Company's or AloStar's existing businesses, the anticipated benefits of the AloStar transaction, including anticipated cost savings and strategic gains, may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events, as well as additional risks and uncertainties contained in the “Risk Factors” and forward-looking statements disclosure contained in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, any or all of 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 our company or any person that future events, plans, or expectations contemplated by our company will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.


State Bank Financial Corporation
4Q17 Financial Supplement: Table 1
Condensed Consolidated Financial Summary Results
Quarterly (Unaudited)
                        4Q17 change vs
(Dollars in thousands, except per share  amounts)   4Q17   3Q17   2Q17   1Q17   4Q16   3Q17   4Q16
                             
Income Statement Highlights                            
Interest income on loans   $ 46,926     $ 35,400     $ 34,872     $ 34,060     $ 26,696     $ 11,526     $ 20,230  
Accretion income on loans   10,671     6,520     9,228     7,677     10,271     4,151     400  
Interest income on invested funds   6,034     5,782     5,747     5,460     4,810     252     1,224  
Total interest income   63,631     47,702     49,847     47,197     41,777     15,929     21,854  
Interest expense   5,614     3,370     3,369     3,239     2,631     2,244     2,983  
Net interest income   58,017     44,332     46,478     43,958     39,146     13,685     18,871  
Provision for loan and lease losses (organic & PNCI loans)   2,050     1,300     1,470     1,361     300     750     1,750  
Provision for loan and lease losses (purchased credit impaired loans)   798     (885 )   375     (359 )   (23 )   1,683     821  
Provision for loan and lease losses   2,848     415     1,845     1,002     277     2,433     2,571  
Total noninterest income   10,140     9,682     10,476     9,459     9,911     458     229  
Total noninterest expense   40,684     31,571     31,997     34,565     32,875     9,113     7,809  
Income before income taxes   24,625     22,028     23,112     17,850     15,905     2,597     8,720  
Income tax expense   19,248     7,592     7,909     6,292     5,578     11,656     13,670  
Net income   $ 5,377     $ 14,436     $ 15,203     $ 11,558     $ 10,327     $ (9,059 )   $ (4,950 )
                             
Common Share Data                            
Basic earnings per share   $ .14     $ .37     $ .39     $ .30     $ .28     $ (.23 )   $ (.14 )
Diluted earnings per share   .14     .37     .39     .30     .28     (.23 )   (.14 )
Cash dividends declared per share   .14     .14     .14     .14     .14          
Book value per share   16.45     16.48     16.23     15.96     15.80     (.03 )   .65  
Tangible book value per share (1)   14.00     14.01     13.94     13.66     13.48     (.01 )   .52  
Market price per share (quarter end)   29.84     28.65     27.12     26.12     26.86     1.19     2.98  
                             
Common Shares Outstanding                            
Common stock   38,992,163     38,991,022     38,967,972     38,870,424     38,845,573     1,141     146,590  
Weighted average shares outstanding:                            
Basic   38,009,181     37,918,753     37,896,125     37,867,718     35,904,009     90,428     2,105,172  
Diluted   38,068,619     37,963,141     37,942,483     37,954,585     36,009,098     105,478     2,059,521  
                             
Average Balance Sheet Highlights                            
Loans   $ 3,603,482     $ 2,893,187     $ 2,905,415     $ 2,846,571     $ 2,431,512     $ 710,295     $ 1,171,970  
Assets   4,982,451     4,178,731     4,200,843     4,181,961     3,636,544     803,720     1,345,907  
Deposits   4,248,553     3,437,329     3,413,831     3,423,506     2,975,510     811,224     1,273,043  
Equity   645,409     638,620     627,294     617,009     559,561     6,789     85,848  
Tangible equity (1)   549,564     550,002     538,153     527,603     514,982     (438 )   34,582  
                             


State Bank Financial Corporation
4Q17 Financial Supplement: Table 1 (continued)
Condensed Consolidated Financial Summary Results
Quarterly (Unaudited)
                        4Q17 change vs
(Dollars in thousands, except per share  amounts)   4Q17   3Q17   2Q17   1Q17   4Q16   3Q17   4Q16
                             
Key Metrics (2)                            
Return on average assets   .43 %   1.37 %   1.45 %   1.12 %   1.13 %   (.94 )%   (.70 )%
Return on average equity   3.31     8.97     9.72     7.60     7.34     (5.66 )   (4.03 )
Yield on earning assets   5.39     4.85     5.11     4.93     4.87     .54     .52  
Cost of funds   .52     .38     .38     .37     .35     .14     .17  
Rate on interest-bearing liabilities   .71     .54     .53     .52     .49     .17     .22  
Net interest margin   4.91     4.51     4.76     4.59     4.56     .40     .35  
Leverage ratio (3)   11.24     13.37     13.23     13.04     14.90     (2.13 )   (3.66 )
Tier I risk-based capital ratio (3)   12.61     12.30     15.01     14.74     14.78     .31     (2.17 )
Total risk-based capital ratio (3)   13.27     12.91     15.79     15.49     15.52     .36     (2.25 )
Efficiency ratio (4)   59.69     58.45     56.18     64.71     67.01     1.24     (7.32 )
Average loans to average deposits   84.82     84.17     85.11     83.15     81.72     .65     3.10  
Noninterest-bearing deposits to total deposits   28.07     27.82     29.24     27.71     28.69     .25     (.62 )

                                                      

(1)  Denotes a non-GAAP financial measure. See Reconciliation of Non-GAAP Measures (Table 8) for further information.
(2)  Income statement ratios and yield/rate information are annualized for the applicable period.
(3)  Current period capital ratios are estimated as of the date of this earnings release.
(4)  Noninterest expense divided by net interest income plus noninterest income.


State Bank Financial Corporation
4Q17 Financial Supplement: Table 2
Condensed Consolidated Balance Sheets
Quarterly (Unaudited)
                        4Q17 change vs
(Dollars in thousands)   4Q17   3Q17   2Q17   1Q17   4Q16   3Q17   4Q16
                             
Assets                            
Cash and amounts due from depository institutions   $ 17,438     $ 14,235     $ 11,284     $ 12,101     $ 13,219     $ 3,203     $ 4,219  
Interest-bearing deposits in other financial institutions   211,142     251,115     126,390     62,222     132,851     (39,973 )   78,291  
Federal funds sold   2,297     16,889             3,523     (14,592 )   (1,226 )
Cash and cash equivalents   230,877     282,239     137,674     74,323     149,593     (51,362 )   81,284  
Investment securities available-for-sale   873,970     920,763     847,795     896,297     847,178     (46,793 )   26,792  
Investment securities held-to-maturity   32,852     57,867     63,104     67,053     67,063     (25,015 )   (34,211 )
Loans   3,532,193     3,572,790     2,881,000     2,854,780     2,814,572     (40,597 )   717,621  
Allowance for loan and lease losses   (28,750 )   (26,842 )   (27,988 )   (26,976 )   (26,598 )   (1,908 )   (2,152 )
Loans, net   3,503,443     3,545,948     2,853,012     2,827,804     2,787,974     (42,505 )   715,469  
Loans held-for-sale   36,211     47,743     48,895     51,380     52,169     (11,532 )   (15,958 )
Other real estate owned   895     1,271     2,407     3,759     10,897     (376 )   (10,002 )
Premises and equipment, net   51,794     52,120     51,170     51,535     52,056     (326 )   (262 )
Goodwill   84,564     84,564     77,476     77,084     77,084         7,480  
Other intangibles, net   11,034     11,755     11,599     12,054     12,749     (721 )   (1,715 )
SBA servicing rights   4,069     3,950     3,828     3,547     3,477     119     592  
Bank-owned life insurance   67,313     66,846     66,320     65,855     65,371     467     1,942  
Other assets   61,560     73,417     70,697     71,990     99,654     (11,857 )   (38,094 )
Total assets   $ 4,958,582     $ 5,148,483     $ 4,233,977     $ 4,202,681     $ 4,225,265     $ (189,901 )   $ 733,317  
Liabilities and Shareholders’ Equity                            
Noninterest-bearing deposits   $ 1,191,106     $ 1,179,698     $ 1,009,509     $ 944,838     $ 984,419     $ 11,408     $ 206,687  
Interest-bearing deposits   3,052,029     3,061,387     2,443,183     2,464,937     2,446,746     (9,358 )   605,283  
Total deposits   4,243,135     4,241,085     3,452,692     3,409,775     3,431,165     2,050     811,970  
Federal funds purchased and securities sold under agreements to repurchase   25,209     25,499     25,256     25,056     27,673     (290 )   (2,464 )
FHLB borrowings           80,000     100,000     47,014         (47,014 )
Notes payable   398     398     398     398     398          
Other liabilities   48,289     238,911     43,294     47,169     105,382     (190,622 )   (57,093 )
Total liabilities   4,317,031     4,505,893     3,601,640     3,582,398     3,611,632     (188,862 )   705,399  
Total shareholders’ equity   641,551     642,590     632,337     620,283     613,633     (1,039 )   27,918  
Total liabilities and shareholders’ equity   $ 4,958,582     $ 5,148,483     $ 4,233,977     $ 4,202,681     $ 4,225,265     $ (189,901 )   $ 733,317  
                             
Capital Ratios (1)                            
Average equity to average assets   12.95 %   15.28 %   14.93 %   14.75 %   15.39 %   (2.33 )%   (2.44 )%
Leverage ratio   11.24     13.37     13.23     13.04     14.90     (2.13 )   (3.66 )
CET1 risk-based capital ratio   12.61     12.30     15.01     14.74     14.78     .31     (2.17 )
Tier I risk-based capital ratio   12.61     12.30     15.01     14.74     14.78     .31     (2.17 )
Total risk-based capital ratio   13.27     12.91     15.79     15.49     15.52     .36     (2.25 )

                                     

(1)  Current period capital ratios are estimated as of the date of this earning release.


State Bank Financial Corporation
4Q17 Financial Supplement: Table 3
Condensed Consolidated Income Statements
Quarterly (Unaudited)
                        4Q17 change vs
(Dollars in thousands, except per share  amounts)   4Q17   3Q17   2Q17   1Q17   4Q16   3Q17   4Q16
                             
Net Interest Income:                            
Interest income on loans   $ 46,926     $ 35,400     $ 34,872     $ 34,060     $ 26,696     $ 11,526     $ 20,230  
Accretion income on loans   10,671     6,520     9,228     7,677     10,271     4,151     400  
Interest income on invested funds   6,034     5,782     5,747     5,460     4,810     252     1,224  
Interest expense   5,614     3,370     3,369     3,239     2,631     2,244     2,983  
Net interest income   58,017     44,332     46,478     43,958     39,146     13,685     18,871  
Provision for loan and lease losses (organic & PNCI loans)   2,050     1,300     1,470     1,361     300     750     1,750  
Provision for loan and lease losses (purchased credit impaired loans)   798     (885 )   375     (359 )   (23 )   1,683     821  
Provision for loan and lease losses   2,848     415     1,845     1,002     277     2,433     2,571  
Net interest income after provision for loan and lease losses   55,169     43,917     44,633     42,956     38,869     11,252     16,300  
Noninterest Income:                            
Service charges on deposits   1,678     1,575     1,471     1,467     1,319     103     359  
Mortgage banking income   2,558     2,793     3,096     2,894     2,511     (235 )   47  
Payroll and insurance income   1,698     1,487     1,418     1,495     1,528     211     170  
SBA income   1,866     1,464     1,983     1,178     1,718     402     148  
ATM income   860     826     864     832     735     34     125  
Bank-owned life insurance income   467     526     465     484     467     (59 )    
(Loss) gain on sale of investment securities   (1,481 )   3     13     12     42     (1,484 )   (1,523 )
Other   2,494     1,008     1,166     1,097     1,591     1,486     903  
Total noninterest income   10,140     9,682     10,476     9,459     9,911     458     229  
Noninterest Expense:                            
Salaries and employee benefits   26,418     21,457     21,912     22,057     19,554     4,961     6,864  
Occupancy and equipment   3,576     3,187     3,329     3,280     3,069     389     507  
Data processing   2,596     2,587     2,382     2,639     2,131     9     465  
Legal and professional fees   973     700     898     1,805     1,702     273     (729 )
Merger-related expenses   2,588     135     372     2,235     3,507     2,453     (919 )
Marketing   693     342     403     664     430     351     263  
Federal deposit insurance premiums and other regulatory fees   498     407     398     397     188     91     310  
Loan collection costs and OREO activity   358     181     (213 )   (1,042 )   (127 )   177     485  
Amortization of intangibles   721     701     697     696     516     20     205  
Other   2,263     1,874     1,819     1,834     1,905     389     358  
Total noninterest expense   40,684     31,571     31,997     34,565     32,875     9,113     7,809  
Income Before Income Taxes   24,625     22,028     23,112     17,850     15,905     2,597     8,720  
Income tax expense   19,248     7,592     7,909     6,292     5,578     11,656     13,670  
Net Income   $ 5,377     $ 14,436     $ 15,203     $ 11,558     $ 10,327     $ (9,059 )   $ (4,950 )
                             
Net income allocated to participating securities   $ 136     $ 389     $ 413     $ 295     $ 282     $ (253 )   $ (146 )
Net income allocated to common shareholders   5,241     14,047     14,790     11,263     10,045     (8,806 )   (4,804 )
Earnings Per Share                            
Basic   $ .14     $ .37     $ .39     $ .30     $ .28     $ (.23 )   $ (.14 )
Diluted   .14     .37     .39     .30     .28     (.23 )   (.14 )
Weighted Average Shares Outstanding                            
Basic   38,009,181     37,918,753     37,896,125     37,867,718     35,904,009     90,428     2,105,172  
Diluted   38,068,619     37,963,141     37,942,483     37,954,585     36,009,098     105,478     2,059,521  



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State Bank Financial Corporation
4Q17 Financial Supplement: Table 4
Condensed Consolidated Income Statements
Year to Date (Unaudited)
    Years Ended December 31   Change
(Dollars in thousands, except per share amounts)   2017   2016  
             
Net Interest Income:            
Interest income on loans   $ 151,258     $ 103,024     $ 48,234  
Accretion income on loans   34,096     43,310     (9,214 )
Interest income on invested funds   23,023     18,923     4,100  
Interest expense   15,592     9,619     5,973  
Net interest income   192,785     155,638     37,147  
Provision for loan and lease losses (organic & PNCI loans)   6,181     3,596     2,585  
Provision for loan and lease losses (purchased credit impaired loans)   (71 )   (3,359 )   3,288  
Provision for loan and lease losses   6,110     237     5,873  
Net interest income after provision for loan and lease losses   186,675     155,401     31,274  
Noninterest Income:            
Service charges on deposits   6,191     5,440     751  
Mortgage banking income   11,341     12,319     (978 )
Payroll and insurance income   6,098     5,625     473  
SBA income   6,491     6,458     33  
ATM income   3,382     3,008     374  
Bank-owned life insurance income   1,942     1,930     12  
(Loss) gain on sale of investment securities   (1,453 )   489     (1,942 )
Other   5,765     4,032     1,733  
Total noninterest income   39,757     39,301     456  
Noninterest Expense:            
Salaries and employee benefits   91,844     78,775     13,069  
Occupancy and equipment   13,372     12,169     1,203  
Data processing   10,204     8,514     1,690  
Legal and professional fees   4,376     4,695     (319 )
Merger-related expenses   5,330     3,961     1,369  
Marketing   2,102     2,216     (114 )
Federal deposit insurance premiums and other regulatory fees   1,700     1,744     (44 )
Loan collection costs and OREO activity   (716 )   (579 )   (137 )
Amortization of intangibles   2,815     2,102     713  
Other   7,790     7,330     460  
Total noninterest expense   138,817     120,927     17,890  
Income Before Income Taxes