Carolina Financial Corporation Reports Results for First Quarter of 2018

CHARLESTON, S.C., April 30, 2018 (GLOBE NEWSWIRE) -- Carolina Financial Corporation (the “Company”) (NASDAQ:CARO) today announced financial results for the first quarter of 2018. 

Financial highlights at and for the three months ended March 31, 2018, include:

• Net income for the first quarter 2018 was $4.1 million, or $0.19 per diluted share, down from $4.9 million, or $0.35 per diluted share for the first quarter of 2017.  Included in net income are pretax merger-related expenses of $14.7 million for the first quarter of 2018 compared to $1.3 million for the first quarter of 2017.
• Operating earnings for the first quarter of 2018, which exclude certain non-operating income and expenses, increased 160.0% to $14.9 million, or $0.71 per diluted share, from $5.8 million, or $0.41 per diluted share, from the first quarter of 2017.
• Operating earnings for Q1 2018 have been adjusted to eliminate the following significant items: 
  -- Pretax merger-related expenses of $14.7 million.
  -- The fair value gain on interest rate swaps of $803,000.
  -- The loss on sale of securities of $697,000.
• Performance ratios Q1 2018 compared to Q1 2017:
  -- Return on average assets was 0.46% compared to 1.11%.
  -- Operating return on average assets was 1.70% compared to 1.30%.
  -- Return on average tangible equity was 4.90% compared to 9.98%.
  -- Operating return on average tangible equity was 18.06% compared to 11.70%.
• Loans receivable, gross grew $60.5 million, or at an annualized rate of 10.4%, since December 31, 2017.
• Nonperforming assets to total assets were 0.30% at March 31, 2018 compared to 0.20% at December 31, 2017.
• Total deposits increased $72.0 million since December 31, 2017. Core deposits increased $39.8 million since December 31, 2017.
• The Company completed the operational integration of the First South acquisition during Q1 2018.
• As a result of the Tax Cuts and Jobs Act of 2017, income taxes reflect the effects of the corporate Federal tax rate reduction to 21% in Q1 2018 compared to 35% in Q1 2017.

“We continue to see the impact of solid organic growth and strategic acquisitions on earnings.  Overall operating results for the first quarter of 2018 continued to improve with an increase in operating earnings of 160.0% compared to the first quarter of 2017. We also completed the integration of the First South acquisition,” stated Jerry Rexroad, the Company’s Chief Executive Officer.

Financial Results

Carolina Financial Corporation

• The Company reported net income for the three months ended March 31, 2018 of $4.1 million, or $0.19 per diluted share, as compared to $4.9 million, or $0.35 per diluted share, for the three months ended March 31, 2017.  Included in net income for the three months ended March 31, 2018 were pretax merger-related expenses of $14.7 million, primarily related to vendor contract termination charges, compared to $1.3 million for the three months ended March 31, 2017. 
• Operating earnings for the first quarter of 2018, which exclude certain non-operating income and expenses, increased 160.0% to $14.9 million, or $0.71 per diluted share, from $5.7 million, or $0.41 per diluted share, from the first quarter of 2017.
• The Company’s net interest margin-tax equivalent increased to 4.20% for the first quarter of 2018 compared to 3.93% for the first quarter of 2017 and 4.19% for the fourth quarter of 2017.
• The Company reported book value per common share of $22.71 and $22.76 as of March 31, 2018 and December 31, 2017, respectively.  Tangible book value per common share was $15.71 as of March 31, 2018 and December 31, 2017.
• At March 31, 2018, the Company’s regulatory capital ratios exceeded the minimum levels currently required.  Stockholders’ equity totaled $475.0 million as of March 31, 2018 compared to $475.4 million at December 31, 2017. Tangible equity to tangible assets at March 31, 2018 and December 31, 2017 was 9.7%.

Community Banking

• Community banking segment net income was $4.0 million for the three months ended March 31, 2018 compared to $4.5 million for the three months ended March 31, 2017. Included in net income for the three months ended March 31, 2018 were pretax merger-related expenses of $14.7 million, compared to $1.3 million for the three months ended March 31, 2017. 
• Community banking segment operating earnings increased 178.8% to $14.9 million for the three months ended March 31, 2018 compared to $5.3 million for the three months ended March 31, 2017.
• There was no provision for loan loss during the three months ended March 31, 2018 and 2017.   Asset quality and historical loss experience continue to remain favorable.  In addition, the Company had net recoveries of loans previously charged off of $1.2 million and $27,000 during the three months ended March 31, 2018 and 2017, respectively.
• Non-performing assets were 0.30% and 0.20% of total assets at March 31, 2018 and December 31, 2017, respectively.
• Loans receivable, gross increased to $2.4 billion at March 31, 2018 compared to $2.3 billion at December 31, 2017.  Loans increased $60.5 million, or 10.4% annualized over December 31, 2017.
• Total deposits increased $72.0 million since December 31, 2017. As of March 31, 2018 and December 31, 2017, core deposits, defined as checking, savings and money market, comprised approximately 66.6% and 66.9%, respectively, of total deposits.

Wholesale Mortgage Banking

• Net income for the wholesale mortgage banking segment was $562,000 for the three months ended March 31, 2018 compared to $645,000 for the three months ended March 31, 2017.
• Net margin was 1.74% for the three months ended March 31, 2018 compared to 1.80% for the three months ended March 31, 2017. Originations for the three months ended March 31, 2018 and 2017 were $180.5 million and $180.8 million, respectively.

Dividend Declared

On April 25, 2018, the Company declared a $0.06 dividend per common share, payable on July 6, 2018, to stockholders of record on June 15, 2018.

Conference Call

A conference call will be held at 10:00 a.m., Eastern Time on May 1, 2018. The conference call can be accessed by dialing (866) 464-9448 or (213) 660-0874 and requesting the Carolina Financial Corporation first quarter earnings call. The conference ID number is 4788606. 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 4788606.

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 March 31, 2018, Carolina Financial Corporation had approximately $3.6 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.

For More Information, Contact: 
William A. Gehman III, EVP and CFO, 843.723.7700