BNK C1 Financial, Inc.

ST. PETERSBURG, Fla., Oct. 15, 2015 /PRNewswire/ -- C1 Financial, Inc. (NYSE: BNK) today reported net income of $5.0 million, or $0.31 per diluted common share for the third quarter of 2015 ("3Q15"), compared to net income of $4.7 million, or $0.29 per diluted common share for the second quarter of 2015 ("2Q15"), a 5.5% increase in net income, and compared to net income of $2.6 million, or $0.18 per diluted common share for the third quarter of 2014 ("3Q14"), a 90.6% increase in net income.

MESSAGE FROM PRESIDENT & CHIEF EXECUTIVE OFFICER

Trevor Burgess, President & Chief Executive Officer of C1 Financial, Inc. stated, "We are excited by our strong results in the third quarter as we grow our earning assets and leverage our infrastructure. Our deposit growth in the third quarter will provide needed funding for the strong pipeline of new loan relationships as we head into the end of the year. C1 Labs technology has contributed to productivity gains that has allowed us to reduce our retail network headcount by approximately 10%, which should allow us to reach best in class levels of assets and revenue per employee over the long term."

3Q15 showed several positive trends in our results:

1. We originated $93 million in new loans in the quarter, resulting in C1 Bank originated loans outstanding up $49 million (+5%) from the prior quarter and $338 million (+45%) year-over-year. Loan originations year to date were $447 million, up $97 million (+28%) compared to last year. Overall loans outstanding (including acquired loans) were $1.390 billion at the end of 3Q15 (up 2% from the prior quarter and up 23% year-over-year). July and September were strong months for new originations while August was seasonally low, further affected by extensive rain that delayed many construction projects;
2. During the quarter, core deposits grew $44 million (+4.6%) compared to the prior quarter and reached $998 million. Core deposits were 78.9% of total deposits at the end of 3Q15, compared to 78.5% at the end of 2Q15. Noninterest-bearing deposits represented 26.6% of total deposits at the end of 3Q15, slightly higher than at the end of the previous quarter. Our cost of total deposits grew 2 basis points ("bps") to 0.46% when compared to 2Q15, as this mix change took place late in the quarter;
3. Adjusted net interest margin (a non-GAAP measure which excludes the impact of purchase accounting accretion income) improved by 4 bps (from 4.60% for 2Q15 to 4.64% for 3Q15), reflecting another quarter of high loan fees (resulting primarily from management's successful implementation and collection of loan prepayment related fees) and enhanced by the use of excess cash. On a GAAP basis, net interest margin was 4.75% for 3Q15, compared to 4.71% for 2Q15;
4. Net interest income was up $1.2 million when compared to 2Q15, driven mainly by an increase in average loan balances which improved the earning asset mix;
5. In 3Q15, sales of other real estate owned ("OREO") reduced our OREO balance by $1.2 million. Including the decrease in nonperforming loans, total nonperforming assets declined $1.9 million when compared to the previous quarter. Our Texas Ratio (a non-GAAP measure) was 21.0% at the end of 3Q15, improved from 22.4% at the end of 2Q15;
6. C1 Bank originated nonperforming assets accounted for less than 5% of our total nonperforming assets (with C1 Bank originated nonperforming loans below 0.2% of C1 Bank originated loans outstanding). Our allowance for loan losses was 0.57% of total loans at the end of 3Q15 and 0.56% at the end of 2Q15; 
7. Our headcount ended the quarter at 239, down from 247 at the end of 2Q15 as a result of a restructuring of our retail network staffing. Such restructuring was in part made possible because of technology based productivity innovation coming out of our C1 Labs group.

ASSETS

Total assets at the end of 3Q15 were $1.712 billion, $34.7 million higher (+2.1%) than at the end of 2Q15, primarily funded by deposit growth ($48.4 million) net of a decline in Federal Home Loan Bank ("FHLB") advances ($19 million).

LOANS

Total loans at the end of 3Q15 were $1.390 billion, up $28.8 million (+2.1%) from the end of 2Q15. Loan growth in 3Q15 was mainly driven by loan originations of $93.5 million and funding of unfunded commitments, partially offset by higher loan prepayments in the C1 Bank originated loan portfolio, and loans paying off in both the C1 Bank originated loan portfolio and in the acquired portfolio. The outstanding balance of C1 Bank originated loans grew $49.0 million (+4.7%) during 3Q15, while the outstanding balance of acquired loans decreased $20.2 million (-6.4%) to $295 million at the end of 3Q15. At the end of 3Q15, C1 Bank originated loans represented 79% of the loan portfolio, up from 77% at the end of 2Q15.

DEPOSITS

Total deposits at the end of 3Q15 were $1.264 billion, an increase of $48.4 million (+4.0%) from the end of 2Q15. Core deposits were $997.8 million, or 78.9% of total deposits at the end of 3Q15, compared to $954.1 million, or 78.5% of total deposits at the end of 2Q15. This positive shift in the average deposit mix took place later in the quarter and didn't reflect in our cost of total deposits, which was up to 0.46% in 3Q15 from 0.44% in 2Q15. We are scheduled to open our new Ft. Lauderdale banking center location in November 2015.

ASSET QUALITY

Nonperforming assets totaled $43.3 million at the end of 3Q15, declining $1.9 million (-4.2%) when compared to the end of 2Q15. The decline in 3Q15 was driven primarily by a reduction of $1.2 million in OREO balances as we continued to sell properties. As a percentage of total assets, nonperforming assets decreased to 2.53% at the end of 3Q15 when compared to 2.69% at the end of 2Q15. Our Texas Ratio improved to 21.0% at the end of 3Q15 from 22.4% at the end of 2Q15. At the end of 3Q15, $2.0 million (less than 5.0%) of total nonperforming assets were related to loans originated by C1 Bank, compared to $340 thousand (less than 1%) at the end of 2Q15, the increase being primarily due to one loan relationship downgraded to nonperforming during the quarter.

Total recoveries of $418 thousand, net of charge-offs of $94 thousand, resulted in net recoveries of $324 thousand in 3Q15 (0.09% of total average loans on an annualized basis). Net recoveries reflected our continued effort to collect deficiencies and a lower level of charge-offs, and provided a $67 thousand reversal of provision for loan losses after covering the allowance for loan losses required for net loan growth.

Our allowance for loan losses at the end of 3Q15 was $7.9 million (representing 0.57% of total loans), compared to $7.7 million (representing 0.56% of total loans) at the end of 2Q15. On a non-GAAP basis (including remaining loan discount from acquired performing loans), the allowance plus discount amount totaled $10.8 million (representing 0.77% of total loans) at the end of 3Q15, compared to $10.7 million (representing 0.79% of total loans) at the end of 2Q15.

NET INTEREST INCOME AND MARGIN

Net interest income for 3Q15 totaled $18.0 million, up $1.2 million (+7.3%) from 2Q15, mainly driven by growth of our average loans balance which allowed for an improvement in our earning assets mix. 

Net interest margin for 3Q15 increased 4 bps to 4.75% from 4.71% in 2Q15, mainly driven by a 5 bps higher yield on average earning assets as we redeployed lower-yielding cash investments into higher-yielding loans, partially offset by a shift in the average deposit mix (which resulted in a 2 bps increase in the cost of total deposits when compared to the previous quarter). Strong loan fees (driven primarily by prepayments) continued to enhance our yield on loans in the quarter. Adjusted net interest margin (which excludes the effect of purchase accounting) was 4.64% for 3Q15 and 4.60% in 2Q15.

Our excess cash (defined as our available cash above our target liquidity level – See explanation of non-GAAP financial measures) was $30.7 million at the end of 3Q15, while our average excess cash was $10.6 million for 3Q15 (down from $27.6 million in 2Q15), as we successfully deployed it into loans during the quarter.

NONINTEREST INCOME

Noninterest income for 3Q15 totaled $2.1 million, $2.2 million less when compared to 2Q15. The decrease was primarily due to a $2.6 million gain on the sale of land (included in gains on disposals of premises and equipment) in 2Q15 and a $505 thousand decline in gains on sales of loans (due to a lower volume of Small Business Administration ("SBA") loans sold). Partially offsetting the reduction in noninterest income was a $670 thousand gain on the early redemption of long-term FHLB advances (included in other noninterest income) completed for asset-liability and liquidity management purposes, and a $129 thousand increase in gains on sales of OREO.

NONINTEREST EXPENSE & TAXES

Noninterest expense totaled $12.0 million in 3Q15, only $127 thousand more when compared to 2Q15. The increase was primarily due to higher professional fees of $164 thousand and loan collection expenses of $83 thousand (primarily due to activity relating to nonperforming assets), and OREO valuation allowance expense of $67 thousand. These higher expenses were mainly offset by lower advertising expenses of $180 thousand (primarily due to fewer promotional and seasonal activities).

Our income tax expense was $3.2 million for 3Q15 and $3.3 million for 2Q15. The effective tax rate for 3Q15 was 39.3%, which reflected the projected tax rate for 2015 that was updated in 3Q15. The effective tax rate for 2Q15 was 40.9%, which included a $163 thousand audit related tax adjustment.

EFFICIENCY

Our efficiency ratio was 59.4% in 3Q15, higher than the 56.0% in 2Q15 and substantially lower than the 71.3% in 3Q14. The unfavorable change in the efficiency ratio versus the prior quarter was impacted by the gain on sale of land during 2Q15. The improvement compared to same quarter last year was driven by strong revenue growth combined with controlled non-interest expense, as we leverage our existing infrastructure. We also closely track annualized revenue per employee and average assets per employee, as measures of efficiency. Annualized revenue per employee was $367 thousand in 3Q15, compared to $384 thousand in 2Q15 and $305 thousand in 3Q14, which reflected the impact of the gain on sale of land during 2Q15 and a substantial improvement year over year, while average assets per employee were $6.9 million in 3Q15, compared to $6.6 million in 2Q15 and $6.4 million in 3Q14, which reflected our efforts to grow our balance sheet and our headcount efficiency initiatives.

NET INCOME

Net income was $5.0 million for 3Q15, compared to $4.7 million for 2Q15. This corresponded to a return on average assets of 1.18% for both 3Q15 and 2Q15 and a return on average equity of 10.02% and 9.88% for 3Q15 and 2Q15, respectively.

CAPITAL

Our consolidated Tier 1 leverage ratio was 11.79% and total risk-based capital ratio was 14.04% as of the end of 3Q15, reflecting that we remained well capitalized under Interim Final Basel III rules. Additional capital ratios are presented in the financial tables.

OTHER EVENTS DURING 3Q15

On July 1, C1 Bank announced that Diane Morton joined its executive management team as EVP, Chief Human Capital Officer & General Counsel and Dustin Symes joined as EVP, Retail Lending Executive.

WEBCAST AND CONFERENCE CALL INFORMATION

C1 Financial, Inc. will host a webcast and conference call at 8:30 a.m. (ET) on October 16, 2015 to discuss third quarter 2015 results and other matters. To access the conference call, please dial 1-855-209-8212. The live webcast audio can be heard at http://services.choruscall.com/links/bnk151016. For those unable to participate in the webcast, it will be archived on C1 Financial's website at investors.c1bank.com.

C1 Financial, Inc. Information
Our name expresses our ideals to put our Clients 1^st and our Community 1^st. We are focused on serving the needs of entrepreneurs, tailoring a wide range of relationship banking services to entrepreneurs and their families, including commercial loans and a full line of depository products. We are based in St. Petersburg, Florida and operate from 31 banking centers and one loan production office on the West Coast of Florida and in Miami-Dade and Orange Counties. As of December 31, 2014, we were the 18^th largest bank headquartered in the state of Florida by assets and the 16^th largest by equity, having grown both organically and through acquisitions, and we were the sixth fastest-growing bank in the country as measured by asset growth for the five-year period ending June 30, 2014. Additional information is available at www.c1bank.com.

Forward-Looking Statements
In addition to historical information, this earnings release contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or "may," the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. There are a number of potential factors, risks and uncertainties that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. These potential factors, risks and uncertainties are discussed in our Prospectus filed with the Securities and Exchange Commission on August 13, 2015.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, we do not assume responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this earnings release to conform our prior statements to actual results or revised expectations.