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8-K - 8-K - STATE BANK FINANCIAL CORPa8kcoverpage123112.htm
EX-99.1 - EX-99.1 - STATE BANK FINANCIAL CORPpressrelease123112.htm
State Bank Financial Corporation 4th Quarter 2012 Earnings Presentation Joe Evans - Chairman and CEO Tom Callicutt - Executive Vice President and CFO Kim Childers - Vice Chairman and Executive Risk Officer January 30, 2013


 
2 Cautionary Note Regarding Forward-Looking Statements Certain statements contained in this earnings deck that are not statements of historical fact may constitute forward-looking statements. These forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words “may,” “would,” “could,” “will,” “expect,” “anticipate,” “believe,” “intend,” “plan” and “estimate,” as well as similar expressions. These forward-looking statements include statements related to our projected growth, anticipated future financial performance, and management’s long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial condition from expected developments or events, or business and growth strategies, including anticipated internal growth and plans to establish or acquire banks or the assets of failed banks. These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ materially from those anticipated in such statements. Potential risks and uncertainties include the following: • general economic conditions (both generally and in our markets) may be less favorable than expected, which could result in, among other things, a continued deterioration in credit quality, a further reduction in demand for credit and a further decline in real estate values; • the general decline in the real estate and lending markets, particularly in our market areas, may continue to negatively affect our financial results; • our ability to raise additional capital may be impaired if current levels of market disruption and volatility continue or worsen; • we may be unable to collect reimbursements on losses that we incur on our assets covered under loss share agreements with the FDIC as we anticipate; • costs or difficulties related to the integration of the banks we acquired or may acquire from the FDIC as receiver may be greater than expected; • restrictions or conditions imposed by our regulators on our operations may make it more difficult for us to achieve our goals; • legislative or regulatory changes, including changes in accounting standards and compliance requirements, may adversely affect us; • competitive pressures among depository and other financial institutions may increase significantly; • changes in the interest rate environment may reduce margins or the volumes or values of the loans we make or have acquired; • other financial institutions have greater financial resources and may be able to develop or acquire products that enable them to compete more successfully than we can; • our ability to attract and retain key personnel can be affected by the increased competition for experienced employees in the banking industry; • adverse changes may occur in the bond and equity markets; • war or terrorist activities may cause further deterioration in the economy or cause instability in credit markets; • economic, governmental or other factors may prevent the projected population, residential and commercial growth in the markets in which we operate; and • we will or may continue to face the risk factors discussed from time to time in the periodic reports we file with the SEC. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. 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 year ended December 31, 2011, as well as Part II, Item 1A, Risk Factors, in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, for a description of some of the important factors that may affect actual outcomes.


 
3 Results Summary  4Q12 net income was  $9.3mm, up from  $3.4mm in 3Q12 due  largely to higher  accretion income on  covered loans and  lower amortization of  the FDIC receivable  Noncovered loans grew  $48.2mm to $985.5mm  and now represent  more than 2/3 of total  gross loans  Noninterest‐bearing  deposits increased to  18% of total deposits,  helping drive cost of  funds down to 39 bps Note: Consolidated financial results for 2012 contained throughout this presentation are unaudited Income Statement Highlights (dol lars  in thousands , except per share  data) 4Q12 3Q12 4Q11 FY 2012 FY 2011 Total  interest income on invested funds $2,611 $2,862 $3,154 $11,505 $11,539 Interest income on noncovered loans, including fees 14,993 14,679 12,486 55,228 38,495 Accretion income on covered loans 26,276 18,893 29,408 100,850 116,967 Total  interest expense 2,096 2,235 3,595 9,749 21,773 Net interest income 41,784 34,199 41,453 157,834 145,228 Provision for loan losses  (noncovered loans) 325 1,050 2,868 5,035 6,482 Provision for loan losses  (covered loans) 3,021 5,441 16,768 10,081 20,034 Net interest income after provision for loan losses 38,438 27,708 21,817 142,718 118,712 Accretion (amortization) of FDIC Receivable (4,199) (6,291) 122 (21,508) 10,257 Other fee income 4,674 3,037 18,661 13,708 31,114 Total  noninterest income 475 (3,254) 18,783 (7,800) 41,371 Total  noninterest expense 24,782 19,835 27,227 90,256 93,549 Income before income taxes 14,131 4,619 13,373 44,662 66,534 Income tax expense 4,790 1,261 4,284 15,794 23,528 Net income $9,341 $3,358 $9,089 $28,868 $43,006 Diluted earnings  per share .28  .10  .28  .88  1.32  Balance Sheet Highlights (period‐end balances) Noncovered loans $985,502 $937,331 $701,029 Total  assets 2,684,803 2,643,744 2,776,334 Noninterest‐bearing deposits 387,450 367,762 297,188 Total  deposits 2,148,436 2,124,298 2,298,465 Shareholders’ equity 436,342 428,198 397,288


 
4 Financial Results: Revenue ( $   i n   t h o u s a n d s )  Interest income volatility driven by  accretion, which was up $7.4mm from  3Q12 due to more early payoffs and a gain  from a loan pool close out in 4Q12  Interest income on noncovered loans was  up 2% from 3Q12 and 20% from 4Q11 ( $   i n   t h o u s a n d s )  Amortization of FDIC receivable negatively  impacted noninterest income in 4Q12 by  $4.2mm  Other fee income of $4.7mm in 4Q12  increased from $3.0mm in 3Q12 due to the  Altera acquisition, higher mortgage banking  income, higher deposit service charges, and  gains on FHLB stock redemptions and sale  of investment securities 0 10,000 20,000 30,000 40,000 50,000 60,000 4Q11 1Q12 2Q12 3Q12 4Q12 Interest Income Interest Income Accretion ‐10,000 ‐5,000 0 5,000 10,000 15,000 20,000 25,000 4Q11 1Q12 2Q12 3Q12 4Q12 Noninterest Income Gain on Acquisitions Other Fee Income Accretion/Ammortization of FDIC Receivable


 
5 Financial Results: Expense ( $   i n   t h o u s a n d s )  Total noninterest expense declined 9% from  4Q11, but increased from last quarter  Drivers of linked‐quarter increase include:  Acquisition of Altera Payroll  The strategic decision to increase staffing  in Risk, Audit, and Compliance  An incentive accrual reversal in 3Q12  Net OREO gains in 3Q12 of $484  thousand compared to losses of $928  thousand in 4Q12 E f f i c i e n c y   R a t i o N IE / A vg. A ssets  Efficiency ratio improvement in 4Q12 was  driven solely by higher revenue  Noninterest expense as a percent of  average assets rose to 3.72%, but is down  from 3.78% at 4Q11 %% ‐5,000 0 5,000 10,000 15,000 20,000 25,000 30,000 4Q11 1Q12 2Q12 3Q12 4Q12 Noninterest Expense Salary & Employee Benefits Other Noninterest Expense OREO Costs 1.5 2.0 2.5 3.0 3.5 4.0 0 10 20 30 40 50 60 70 80 4Q11 1Q12 2Q12 3Q12 4Q12 Expense Metrics Efficiency Ratio NIE / Avg. Assets


 
6 Financial Results: Yields and Cost of Funds  Yield on total earning assets of 8.14% was  up 140 bps from 3Q12, primarily driven by  higher accretion  Yield on noncovered loans of 6.24% was  down 24 bps in the quarter due to  competitive pricing pressure as well as  maturity and repayment of higher‐yielding  noncovered loans %  The transformation of our balance sheet  continues to benefit our cost of funds,  which improved 2 bps from 3Q12  4Q12 marks the 10th consecutive quarterly  decline in cost of funds 1.62% 1.82% 1.71% 1.41% 1.24% 1.12% .79% .60% .52% .47% .41% .39% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Cost of Funds 0 5 10 15 20 25 4Q11 1Q12 2Q12 3Q12 4Q12 Yields Total Earning Assets Covered Loans Noncovered Loans


 
7  DDAs have increased over 95% since 1Q10,  reflecting our focus on relationship banking  and payments expertise  Higher cost deposits have been intentionally  managed down, as CDs have declined from  over 36% to now less than 22% of total  deposits Total Deposits: $2.2B Financial Results: Balance Sheet Evolution  Noncovered  or “organic” loan growth of  5.1% in 4Q12 and 40.6% during 2012,  equating to $284.5mm in loan growth for  full‐year 2012  Noncovered loans total nearly $1B and  comprise 68% of total gross loans, up from  46% at the end of 2011 Deposit Mix Total Deposits: $2.1B 1Q10 4Q12 8.5% 11.3% 43.9% 36.3% DDA NOW Savings & MM CDs 18.0% 16.6% 44.2% 21.2% ( $   i n   m i l l i o n s ) 78 154 221 343 413 546 650 701 803 881 937 986 1,036 979 957 935 891 814 770 812 744 687 553 475 0 200 400 600 800 1,000 1,200 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Loan Portfolio Noncovered Covered


 
8 Credit: Charge-offs and Provision ( $   i n   t h o u s a n d s )  $325 thousand loan loss provision for  noncovered loans in 4Q12, in line with  historically low noncovered charge‐offs ( $   i n   t h o u s a n d s )  4Q12 had net recoveries on noncovered  assets  Annualized YTD net charge‐offs to average  noncovered loans remain low at just 6 bps 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4Q11 1Q12 2Q12 3Q12 4Q12 Noncovered Loan Loss Provision (200) 0 200 400 600 800 1,000 4Q11 1Q12 2Q12 3Q12 4Q12 Noncovered Charge‐offs


 
9 Credit: Allowance and Credit Ratios  NPLs to total noncovered loans at 49 bps        in 4Q12  Noncovered allowance to noncovered loans  is 1.49%, which is 3.1x noncovered NPLs % ( $   i n   t h o u s a n d s )  Allowance for noncovered loans increased  slightly to $14.7mm 0 4,000 8,000 12,000 16,000 20,000 4Q11 1Q12 2Q12 3Q12 4Q12 Noncovered Allowance 0.0 0.5 1.0 1.5 2.0 4Q11 1Q12 2Q12 3Q12 4Q12 Noncovered Credit Ratios Noncovered NPLs to Total Noncovered Loans Noncovered ALL to Noncovered Loans


 
10 Credit: Covered Loans and Provision  Carrying value on covered loans represents  a 58% discount to the contractual balance  The indemnification asset of $269mm is  specifically related to covered loans and  excludes the indemnification asset related  to covered OREO and receivables from the  FDIC ( $   i n   t h o u s a n d s )  $3.0mm loan loss provision for covered  loans in 4Q12 as a result of impairments  centered in residential loan pools and  re‐estimation of cash flows of certain  specific reviewed loans (5,000) 0 5,000 10,000 15,000 20,000 4Q11 1Q12 2Q12 3Q12 4Q12 Net Covered Loan Loss Provision ( $   i n   m i l l i o n s ) 1,124  923  507  293  994  800  419  269  0 200 400 600 800 1,000 1,200 Contractual Balance FDIC Certificate Balance Carrying Value Indemnification Asset Covered Loan Portfolio 3Q12 4Q12


 
11 Credit: OREO ( $   i n   t h o u s a n d s )  OREO balances decreased 21% in the quarter  and 46% year‐over‐year to $46.2mm  97.6% of OREO balances are covered  OREO sales have averaged over $22mm per  quarter over the past year  OREO sales outpaced new inflows by nearly  $20mm in 2012 ( $   i n   t h o u s a n d s ) 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 4Q11 1Q12 2Q12 3Q12 4Q12 OREO Balances 0 5,000 10,000 15,000 20,000 25,000 30,000 4Q11 1Q12 2Q12 3Q12 4Q12 OREO Sales Activity


 
12 Well Positioned Franchise Efficient Network in  Attractive Markets Special Asset Expertise Mitigated Credit Risk Balance Sheet Strength Management Depth  Scalable core banking operations in attractive markets  A highly effective problem asset resolution business   Capital levels to support organic and opportunistic growth  Team with a track record of successful integrations and building long‐term  shareholder value  Credit risk mitigated by covered assets and timing of when noncovered assets were  generated (commencing July 2009) Payments Expertise  Treasury services / cash management capabilities to drive core deposit growth