State Bank Financial Corporation announced unaudited financial results for the quarter ended June 30, 2016.  Net income for the second quarter of 2016 was $13.8 million, compared to $10.8 million in the first quarter of 2016 and a net loss of $2.0 million in the second quarter of 2015 related to one-time expenses associated with the early termination of loss share agreements in May 2015.  Fully diluted earnings per share were $.37 in the second quarter of 2016 compared to $.29 in the first quarter of 2016 and a fully diluted loss per share of $.06 in the second quarter of 2015. 

Driven by solid loan growth during the quarter, interest income on loans improved to $25.4 million in the second quarter of 2016, a $1.1 million increase from the first quarter of 2016 and a $2.3 million increase from the second quarter of 2015.  Higher accretion income on loans due to a gain from a loan pool closing and an increase in noninterest income also contributed to strong financial results in the second quarter.

Joe Evans, Chairman and CEO of State Bank Financial, commented, "We had a great second quarter with $13.8 million of net income as we continue to generate capital and increase tangible book value for shareholders.  Further, we announced two bank acquisitions in the quarter that will accelerate the growth of our core earnings and add three attractive MSAs to our footprint.  I am very pleased with our performance thus far in 2016 and with the positive momentum we are carrying into the second half of the year."

Operating Highlights

Net interest income of $41.7 million in the second quarter of 2016 increased from $36.6 million in the first quarter of 2016 and $33.5 million in the second quarter of 2015 primarily due to higher interest and accretion income on loans.  Accretion income on loans was $14.0 million in the second quarter of 2016, up from $9.7 million in the first quarter of 2016 and $8.4 million in the second quarter of 2015.  Accretion income in the second quarter of 2016 was positively impacted by a $4.1 million gain from one loan pool closing.  Comparatively, there were no loan pool closings during the first quarter of 2016.  As of June 30, 2016, approximately $75 million of accretable discount remains to be recognized as loan accretion income.

Tom Wiley, Vice Chairman and President, commented, "Second quarter results demonstrated continued progress executing on our strategic priorities.  Strong loan growth in the second quarter was complimented by our second highest noninterest income quarter ever, driven by outstanding results from mortgage, SBA, and Altera Payroll.  The team is intensely focused on serving our clients’ needs and growing these fee income lines of business, which should benefit from adding scale to our existing platform."

Noninterest income was $10.2 million in the second quarter of 2016, up from $9.4 million in the first quarter of 2016 and $9.3 million in the second quarter of 2015, excluding amortization of the FDIC receivable.  Growth in our key noninterest income initiatives continued in the second quarter of 2016, with income from mortgage banking increasing $510 thousand from the previous quarter to $3.6 million and SBA lending increasing $183 thousand from the previous quarter to $1.7 million.  Payroll fee income of $1.1 million increased versus the prior year period, but decreased from the previous quarter due to what is typically a seasonally strong first quarter.  Gain on sale of securities totaled $396 thousand in the second quarter of 2016.

Total noninterest expense for the second quarter of 2016 was $30.7 million, a $1.8 million increase from the first quarter of 2016, and a $683 thousand decrease from the second quarter of 2015.  Salary and employee benefit costs increased $1.9 million from the previous quarter due to the addition of an SBA lending team in April, new hires in mortgage banking and Patriot Capital, higher commissions on production, and other seasonal factors.  Merger-related expenses totaled $319 thousand in the second quarter of 2016.

Financial Condition

Total assets at June 30, 2016 were $3.59 billion, up from $3.53 billion at March 31, 2016.  Total loans were $2.3 billion at June 30, 2016, up $86.6 million from the first quarter of 2016.  Period-end organic and purchased non-credit impaired loans increased to $2.2 billion at June 30, 2016, a net increase of $91.8 million from the first quarter of 2016.  Purchased credit impaired loans decreased to $134.5 million at the end of the second quarter of 2016, a $5.3 million linked-quarter decline.

Total deposits at June 30, 2016 were $2.89 billion, down from $2.91 billion at the end of the first quarter of 2016.  Period-end transaction accounts, comprised of noninterest-bearing demand deposits and interest-bearing transaction accounts, decreased $69.5 million from the first quarter of 2016 as a few large depositors reduced balances related to normal operating cycles of their business.  Noninterest-bearing demand deposits represented 28.8% of total deposits as of June 30, 2016.  Average noninterest-bearing demand deposits decreased $14.0 million from the first quarter of 2016.

The organic loan portfolio continued to perform well in the second quarter of 2016 as past due organic loans represented .18% of total organic loans.  Net charge-offs were $2.3 million during the quarter, almost entirely related to one loan that was classified and assigned a specific reserve of $2.2 million in the first quarter of 2016.  The allowance as a percent of loans declined nine basis points to 1.10% at the end of the second quarter of 2016 and covers organic nonperforming assets by over three times.

Tangible book value per share was $13.77 at the end of the second quarter of 2016.  State Bank Financial Corporation continues to be well capitalized, ending the quarter with a leverage ratio of 14.56% and a Tier I risk-based capital ratio of 16.68%.

Recent Transactions

On April 5, 2016, State Bank Financial announced the signing of a definitive agreement to acquire NBG Bancorp, Inc. and its wholly-owned subsidiary, The National Bank of Georgia, in a cash and stock transaction with a purchase price of approximately $68 million.  At June 30, 2016, The National Bank of Georgia had assets of approximately $417 million, loans of approximately $342 million, deposits of approximately $322 million, a branch and mortgage office in Athens, and a branch office in Gainesville, Georgia.  At a special meeting held on July 25, 2016, NBG Bancorp, Inc. received shareholder approval for the transaction.  The completion of the transaction is subject to receipt of regulatory approvals and satisfaction of other customary closing conditions.

On May 19, 2016, State Bank Financial announced the signing of a definitive agreement to acquire S Bankshares, Inc. and its wholly-owned subsidiary, S Bank, in a cash and stock transaction with a purchase price of approximately $11 million.  At June 30, 2016, S Bank had assets of approximately $109 million, loans of approximately $82 million, and deposits of approximately $91 million.  S Bank has banking operations in Savannah, Glennville, Reidsville, and Hinesville, Georgia.  The completion of the transaction is subject to receipt of regulatory approvals and satisfaction of other customary closing conditions, including approval of S Bankshares shareholders.