State Bank Financial Corporation Reports First Quarter 2018 Financial Results

• Record net income of $17.4 million, or $.44 per diluted share, in the first quarter of 2018
• Return on assets of 1.45% and return on equity of 10.96%
• Loan growth of $104.4 million, or 12.6% annualized, excluding purchased credit impaired loans
• Successful conversion of AloStar Bank of Commerce's core system
• Dividend increased 43% to $.20 per common share, a $.06 per share increase

ATLANTA, April 26, 2018 (GLOBE NEWSWIRE) -- State Bank Financial Corporation (NASDAQ:STBZ) today announced unaudited financial results for the first quarter of 2018.  Net income for the first quarter of 2018 was $17.4 million, compared to $5.4 million in the fourth quarter of 2017, which included the impact of a $10.7 million non-cash tax expense related to the revaluation of our net deferred tax assets, and $11.6 million in the first quarter of 2017.  Fully diluted earnings per share were $.44 in the first quarter of 2018, compared to $.14 in the fourth quarter of 2017 and $.30 in the first quarter of 2017.

Tom Wiley, Vice Chairman and CEO, commented, “Strong loan growth, disciplined expense management and completion of the AloStar systems conversion led to a fast start to 2018.  I am proud of our team as we successfully completed the conversion without losing focus on production. We expect the benefits of our merger with AloStar to grow during the year.  Quarterly net income of $17.4 million reflects the benefit of the newly acquired lines of business and the reduction in income taxes.”

Operating Highlights

Interest income on loans improved to $48.4 million in the first quarter of 2018, a $1.5 million increase from the fourth quarter of 2017 and a $14.4 million increase from the first quarter of 2017.  Net interest income of $54.9 million in the first quarter of 2018 decreased from $58.0 million in the fourth quarter of 2017 and increased from $44.0 million in the first quarter of 2017.  Accretion income on loans was $5.9 million in the first quarter of 2018, down from $10.7 million in the fourth quarter of 2017 and $7.7 million in the first quarter of 2017. The $4.7 million linked-quarter decrease was primarily due to unexpected acceleration of certain purchased credit impaired loan payoffs in the fourth quarter of 2017.  As of March 31, 2018, approximately $58 million of accretable discount remains to be recognized as loan accretion income.

Noninterest income was $10.5 million in the first quarter of 2018, compared to $10.1 million in the fourth quarter of 2017 and $9.5 million in the first quarter of 2017.  Revenues from mortgage banking and payroll and insurance increased $367,000 and $62,000, respectively, in the first quarter of 2018, compared to the fourth quarter of 2017, while SBA income decreased $674,000.

Total noninterest expense for the first quarter of 2018 was $39.3 million, compared to $40.7 million in the fourth quarter of 2017 and $34.6 million in the first quarter of 2017.  The $1.4 million linked-quarter decrease was primarily due to a $1.3 million decrease in merger-related expenses related to the AloStar Bank of Commerce acquisition.  Merger-related expenses were $1.3 million for the first quarter of 2018.

Financial Condition

Total assets at March 31, 2018, were $4.9 billion, down from $5.0 billion at December 31, 2017.  Total loans were $3.6 billion at March 31, 2018, up $86.3 million from the fourth quarter of 2017.  Period-end organic loans increased to $2.5 billion at March 31, 2018, an increase of $149.5 million from the fourth quarter of 2017.  Purchased non-credit impaired loans decreased to $945.7 million at March 31, 2018, a $45.1 million linked-quarter decline.  Purchased credit impaired loans decreased to $157.5 million at March 31, 2018, an $18.1 million linked-quarter decline.

Past due organic and purchased non-credit impaired loans were .22% and .45% of their respective portfolios at March 31, 2018.  The provision for loan losses on organic and purchased non-credit impaired loans was $2.7 million in the first quarter of 2018 and was primarily attributable to organic loan growth, net charge-offs and continued seasoning of the purchased non-credit impaired portfolio.  The organic allowance as a percent of organic loans was .99% at the end of the first quarter of 2018.

Total deposits at March 31, 2018, were $4.2 billion, down $58.7 million from December 31, 2017, as the seasonal cash operating cycle of certain State Bank clients led to a decline of $156.1 million in period-end transaction accounts.  Noninterest-bearing demand deposits represented 26.0% of total deposits as of March 31, 2018.  Average noninterest-bearing demand deposits were $1.1 billion, a $65.3 million decrease from the fourth quarter of 2017 and a $127.0 million increase from the first quarter of 2017.

Joe Evans, Chairman of State Bank Financial, commented, “We began 2018 with a 43% increase in our quarterly dividend and are pleased with the first quarter’s solid growth in earnings and loans.  Our focus remains on long term growth, a best in class client experience, operational efficiency and shareholder return.  The economic backdrop in our markets remains favorable and creates great opportunity for continued strong performance in 2018.”

Tangible book value per share was $14.15 at the end of the first quarter of 2018.  State Bank Financial Corporation continues to be well capitalized, ending the quarter with a leverage ratio of 11.69% and a Tier I risk-based capital ratio of 12.44%.

Detailed Results

Supplemental tables displaying financial results for the first quarter of 2018 and the previous four quarters 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 1Q18 Financial Supplement: Table 7, 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 11:00 a.m. ET.

Dial in number:  1.800.772.4206

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 of our website at www.statebt.com.  A slide presentation for today’s call is also available in the Investors section of our website.

About State Bank Financial Corporation

State Bank Financial Corporation (NASDAQ:STBZ), with approximately $4.9 billion in assets as of March 31, 2018, 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,” “focus,” “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 to be recognized as loan accretion income, expected benefits of our merger with AloStar Bank of Commerce, our focus on long term growth, best in class client experience, operational efficiency and shareholder return, our belief that our markets remain favorable and our prospects for continued strong performance. 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 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.

(1)   Denotes a non-GAAP financial measure. See Reconciliation of Non-GAAP Measures (Table 7) 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.

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

(1) Loans originated by State Bank and Trust Company.
(2) Consists of loans purchased in our acquisitions of Bank of Atlanta, First Bank of Georgia, The National Bank of Georgia, S Bank, and AloStar Bank of Commerce.
(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) For each period presented, a portion of our purchased credit impaired loans were contractually past due; however, such delinquencies
were included in our 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, we do not consider purchased credit impaired loans to be nonperforming assets.

(1) Includes average nonaccrual loans of $12.9 million for 1Q18, $11.4 million for 4Q17, $8.0 million for 3Q17, $9.3 million for 2Q17, and $9.9 million for 1Q17.
(2) Interest income or expense annualized for the applicable period.
(3) Reflects taxable equivalent adjustments using the federal statutory tax rate of 21% for all periods beginning on or after January 1, 2018 and 35% for all periods prior to January 1, 2018 in adjusting tax-exempt loan interest income to a fully taxable basis. The taxable equivalent adjustments included above amount to $57,000 for 1Q18, $128,000 for 4Q17, $177,000 for 3Q17, $131,000 for 2Q17, and $140,000 for 1Q17.

(1) Certain financial measures included in this press release, tangible book value per common share and average tangible equity, are financial measures that are not recognized by generally accepted accounting principles in the United States, or GAAP. These non-GAAP financial measures exclude the effect of the period end or average balance of intangible assets. Management believes that these non-GAAP financial measures provides additional useful information to investors, particularly since these measure are widely used by industry analysts for companies with prior merger and acquisition activities, such as us.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure is presented in the table above. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. These non-GAAP financial measures should not be considered as a substitute for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this press release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this press release with other companies’ non-GAAP financial measures having the same or similar names.