State Bank Financial Corporation Reports Fourth Quarter and Full Year 2015 Financial Results

Fourth Quarter 2015 Highlights

• Operating income of $12.1 million
• Operating return on average assets of 1.39%
• Acquired equipment finance origination platform of Patriot Capital Corp.
• Doubled quarterly dividend to $.14 per common share

Full Year 2015 Highlights

• Operating income of $40.7 million
• Operating return on average assets of 1.21%
• $294 million of loan growth
• Record noninterest income led by mortgage, SBA, and payroll fee income
• Transaction deposit account growth of 18%, excluding acquisitions

ATLANTA, Jan. 27, 2016 (GLOBE NEWSWIRE) -- State Bank Financial Corporation (NASDAQ:STBZ) today announced unaudited financial results for the fourth quarter and full year ended December 31, 2015.  Full year operating income for 2015 was $40.7 million, or $1.10 per fully diluted share, compared to $32.5 million, or $.98 per fully diluted share, for full year 2014.  Operating income for the fourth quarter of 2015 was $12.1 million, or $.33 per fully diluted share, compared to $11.4 million, or $.31 per fully diluted share, for the third quarter of 2015.  Higher accretion income, due in part to gains on loan pools that closed and recovery income, drove the increase in operating income.  Recovery income continues to be positively impacted by the termination of loss share.

Operating income excludes severance, merger-related, and loss share termination expenses that are not considered part of ongoing operations.  Including those items, full year 2015 net income was $28.4 million, compared to $30.9 million for full year 2014.  Fully diluted earnings per share were $.77 for full year 2015 compared to $.93 for full year 2014.  Net income for the fourth quarter of 2015 was $12.1 million, compared to $9.1 million for the third quarter of 2015.  Fully diluted earnings per share were $.33 in the fourth quarter of 2015, compared to $.25 in the third quarter of 2015.

Joe Evans, Chairman and CEO of State Bank Financial, commented, "We capped the year off with a strong fourth quarter that clearly reflects the impact of our 2015 strategic initiatives, which led to a significant year over year increase in noninterest income, measurable improvement in operating efficiency, and better than forecasted benefits from early termination of loss share.  I believe a combination of our strong operating momentum, opportunistic capital deployment, and a significantly increased dividend payout will be very positive for shareholder value in 2016."

Operating Highlights

Net interest income of $40.6 million in the fourth quarter of 2015 increased from $37.4 million in the third quarter of 2015 primarily due to higher accretion income on loans.  Interest income on loans, excluding purchased credit impaired loans, for the fourth quarter of 2015 was $24.3 million, up slightly from $24.2 million in the prior quarter.  Accretion income on loans was $14.2 million in the fourth quarter of 2015, up from $11.2 million in the third quarter of 2015 due primarily to gains from two loan pools closing out in the quarter and recovery income.  There were no loan pool closings during the third quarter of 2015.  As of December 31, 2015, approximately $87 million of accretable discount remains to be recognized as loan accretion income, compared to $97 million of accretable discount remaining at the end of the third quarter of 2015.

Tom Wiley, Vice Chairman and President, commented, "I am pleased to report our highest quarterly profit in over five years.  I am even more pleased with the performance in our organic loan portfolio, which continued to perform very well in the fourth quarter as past due organic loans were only 10 basis points of total organic loans."

The provision for loan losses was $494,000 in the fourth quarter of 2015, consisting of a provision expense on organic and purchased non-credit impaired loans of $951,000 and $52,000, respectively, partially offset by a $509,000 benefit to the provision on purchased credit impaired loans.

Noninterest income was $8.1 million in the fourth quarter of 2015, down from $8.9 million in the third quarter of 2015.  The decline in noninterest income was primarily due to lower mortgage banking and SBA income as a result of lower production volumes.  This decline was partially offset by an increase in payroll fee income, which posted record income in the quarter.

Total noninterest expense for the fourth quarter of 2015 was $29.6 million, a $2.9 million decrease from
the third quarter of 2015.  The decrease was due primarily to lower salary and employee benefit costs, which declined $3.4 million from the previous quarter.  The third quarter of 2015 included $3.0 million in severance expenses related to efficiency actions announced in September 2015.  There were no severance or merger-related expenses in the fourth quarter of 2015.

Mr. Wiley added, "Going forward, we expect continued loan and core deposit growth, meaningful contributions from noninterest income lines of business and to maintain our intense focus on efficiency."

Financial Condition

Total assets at December 31, 2015 were $3.5 billion, up from $3.4 billion at September 30, 2015.  Period-end organic and purchased non-credit impaired loans increased to $2.0 billion at December 31, 2015, a net increase of $34.3 million from the third quarter of 2015.  Purchased credit impaired loans decreased to $145.6 million at the end of the fourth quarter of 2015, a $13.7 million linked-quarter decline.  Total net loans, excluding loans held for sale, were $2.1 billion at December 31, 2015, up $20.4 million from the third quarter of 2015.

Total deposits at December 31, 2015 were $2.9 billion, up from $2.8 billion at the end of the third quarter of 2015.  Period-end transaction accounts, comprised of noninterest-bearing demand deposits and interest-bearing transaction accounts, increased $92.0 million from the third quarter of 2015.  Noninterest-bearing demand deposits represented 28.9% of total deposits as of December 31, 2015.  Average noninterest-bearing demand deposits increased $12.5 million from the third quarter of 2015, the 15th consecutive quarterly increase.  Average transaction accounts increased $85.1 million from the third quarter of 2015.

Tangible book value per share was $13.22 at the end of the fourth quarter of 2015.  State Bank Financial Corporation continues to be well capitalized, ending the quarter with a leverage ratio of 14.48% and a Tier I risk-based capital ratio of 18.05%.

Comparison to the Fourth Quarter of 2014

Comparisons to the fourth quarter of 2014 are materially affected by State Bank's acquisitions of Atlanta Bancorporation, Inc. on October 1, 2014 and Georgia-Carolina Bancshares, Inc. on January 1, 2015.

Net operating income for the quarter ended December 31, 2015 increased $3.4 million compared to the fourth quarter of 2014 primarily due to an $8.2 million increase in interest income and a $2.8 million increase in noninterest income, partially offset by higher operating expenses.  Net income increased $4.5 million from the fourth quarter of 2014.  Cost of funds for the fourth quarter of 2015 of 28 basis points was down five basis points from the fourth quarter of 2014.

Noninterest income, excluding amortization of the FDIC receivable, increased $2.8 million in the fourth  quarter of 2015 compared to the fourth quarter of 2014, primarily as a result of the mortgage banking and SBA lending units acquired in our two acquisitions.  Operating expenses were also impacted by the acquisitions and increased $5.6 million during the fourth quarter of 2015 compared to the fourth quarter of 2014. 

Total loans increased $525.7 million during the year-over-year period as growth in organic loans of $454.0 million and purchased non-credit impaired loans of $132.5 million was partially offset by a $60.8 million decline in purchased credit impaired loans.  Excluding the effect of $292.4 million of acquired loans, loan growth was $294.0 million year-over-year.

Total deposits increased $470.3 million for the quarter ended December 31, 2015, compared to the fourth quarter of 2014, including growth in noninterest-bearing deposits of $248.9 million and interest-bearing transaction accounts of $92.4 million.

Detailed Results

Supplemental tables displaying financial results for the fourth quarter of 2015, the previous four quarters and full year 2015 are included with this press release.

Non-GAAP Financial Measures

This press release contains certain performance 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 4Q15 Financial Supplement: Tables 8 and 9, Condensed Operating Results to GAAP Earnings Reconciliation.

Conference Call

Chief Executive Officer Joe Evans, President Tom Wiley, Chief Financial Officer Sheila Ray, and Chief Credit Officer David Black will discuss financial and business results for the quarter and the year on a conference call today at 11:00 a.m. ET.

Dial in number:  1.877.256.3282

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's completion 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 (NASDAQ:STBZ), with approximately $3.5 billion in assets as of December 31, 2015, is an Atlanta-based bank holding company for State Bank and Trust Company.  State Bank operates 26 banking offices in Metro Atlanta, Middle Georgia and Augusta, Georgia, and seven mortgage origination offices.

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

Cautionary Note Regarding Forward-Looking Statements

Certain statements on our conference call may be "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,” “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 our belief that we can maintain strong operating momentum, opportunistic capital deployment and increased dividend payouts which will be positive for shareholder value in 2016, our expectation that we will have continued loan and core deposit growth and meaningful contributions from noninterest income lines of business, and our expectation that we will continue to maintain our intense focus on efficiency. Such forward-looking statements are subject to risks, uncertainties, and other factors, such as a downturn in the economy, unanticipated losses related to the integration of, and accounting for, acquired assets and assumed liabilities in our acquisitions, access to funding sources, greater than expected noninterest expenses, volatile credit and financial markets both domestic and foreign, potential deterioration in real estate values, regulatory changes and excessive loan losses, 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. See Item 1A, Risk Factors, in our Annual Report on Form 10-K for the most recently ended fiscal year, for a description of some of the important factors that may affect actual outcomes.

(1)   Non-GAAP financial measure. See Condensed Operating Results to GAAP Earnings Reconciliation (Table 8) for further information.
(2)   Income statement ratios and yield/rate information are annualized for the applicable period.
(3)   Excludes the one-time loss share expense termination charge of $14.5 million in the second quarter of 2015.
(4)   Includes all line items of noninterest income other than (amortization) accretion of FDIC receivable for loss share agreements.
(5)   Excludes severance costs and merger-related expenses.
(6)   Excludes the taxable equivalent adjustments on interest income and the income tax benefit relating to the one-time loss share expense termination charge, severance costs and merger-related expenses.
(7)   Excludes the one-time loss share expense termination charge, severance costs and merger-related expenses, net of the income tax benefit.
(8)   Since the Company had a net loss for the three month period ended June 30, 2015, all potential common shares were excluded from the calculation of diluted earnings per share as they would have had an anti-dilutive effect for the period.
(9)   Excludes accretion income on loans and average purchased credit impaired loans.
(10) Current period capital ratios are estimated as of the date of this earnings release.

(1)  Current period capital ratios are estimated as of the date of this earning release. Beginning January 1, 2015, the Company's ratios are calculated using the Basel III framework. Capital ratios for prior periods were calculated using the Basel I framework. The Common Equity Tier 1 (CET1) capital ratio is a new ratio introduced under the Basel III framework.

(1) Loans originated by State Bank and Trust Company.
(2) Consists of loans purchased through the Bank of Atlanta and First Bank of Georgia acquisitions.
(3) Acquired loans, which at acquisition, management determined it was probable that we would be unable to collect all contractual principal and interest payments due, including all loans acquired from the FDIC.

(1) Provision for loan and lease losses amount attributable to FDIC loss share agreements for purchased credit impaired loans was $0 for
4Q15, $0 for 3Q15, $(549,000) for 2Q15, $(496,000) for 1Q15, and $83,000 for 4Q14.
(2) For each period presented, a portion of the Company's purchased credit impaired loans were contractually past due; however, such delinquencies
were included in the Company's performance expectations in determining the fair values of purchased credit impaired loans at each acquisition and at subsequent valuation dates. All purchased credit impaired loan cash flows and the timing of such cash flows continue to be estimable and probable of collection and thus accretion income continues to be recognized on these assets. As such, purchased credit impaired loans are not considered to be nonperforming assets.

(1) Includes average nonaccrual loans of $6.5 million for 4Q15, $5.9 million for 3Q15, $4.9 million for 2Q15, $5.1 million for 1Q15, and $5.6 million for 4Q14.
(2) Interest income or expense annualized for the applicable period.
(3) Reflects taxable equivalent adjustments using the federal statutory tax rate of 35% in adjusting interest on tax-exempt securities to a fully taxable basis. The taxable equivalent adjustments included above amount to $3,000 for 4Q15, $4,000 for 3Q15, $5,000 for 2Q15, $27,000 for 1Q15, and $4,000 for 4Q14.
(4) Reflects taxable equivalent adjustments using the federal statutory tax rate of 35% in adjusting tax-exempt loan interest income to a fully taxable basis. The taxable equivalent adjustments included above amount to $134,000 for 4Q15, $179,000 for 3Q15, $104,000 for 2Q15, $98,000 for 1Q15, and $80,000 for 4Q14.