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 (NASDAQ: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 (NASDAQ: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.

(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.

(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 $11.4 million for 4Q17, $8.0 million for 3Q17, $9.3 million for 2Q17, $9.9 million for 1Q17, and $8.4 million for 4Q16.
(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 tax-exempt loan interest income to a fully taxable basis. The taxable equivalent adjustments included above amount to $128,000 for 4Q17, $177,000 for 3Q17, $131,000 for 2Q17, $140,000 for 1Q17, and $142,000 for 4Q16.

(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.