State Bank Financial Corporation today announced that its wholly-owned subsidiary, State Bank and Trust Company, has entered into an agreement with the Federal Deposit Insurance Corporation to terminate all existing loss share agreements with the FDIC.  From July 2009 through October 2011, State Bank acquired substantially all of the assets and assumed substantially all of the liabilities of 12 failed banks in FDIC-assisted acquisitions.  All rights and obligations of State Bank and the FDIC under these FDIC loss share agreements, including the clawback provisions and the settlement of historic loss share and expense reimbursement claims, have been eliminated under the early termination agreement.

In the second quarter of 2015, State Bank expects a one-time after-tax charge of approximately $9.5 million, or $15.1 million pre-tax, resulting primarily from the write-off of the remaining indemnification asset and settlement charges paid to the FDIC.  Approximately $9.7 million of the $17.1 million total indemnification asset as of March 31, 2015, was scheduled to be amortized against future earnings.

Joe Evans, Chairman and CEO of State Bank Financial, commented, “I am very pleased to close the books on our FDIC loss share agreements, which have been an incredible opportunity for us from start to finish.  Going forward, our earnings will be positively impacted by the elimination of future indemnification asset amortization, lower operating expenses and our retention of 100% of future recoveries.  We believe this transaction is an attractive deployment of capital with an expected tangible book value dilution earnback period of less than five quarters.”

As a result of entering into the early termination agreement, covered loans of $88.6 million at March 31, 2015, will no longer be subject to loss share agreements with the FDIC, but will continue to be accounted for as purchased credit impaired loans.  Approximately $4.3 million of covered OREO at March 31, 2015, will also no longer be subject to loss share agreements with the FDIC.  In addition, this agreement will eliminate the FDIC receivable for loss share agreements and the FDIC clawback payable, which totaled $17.1 million and $5.5 million, respectively, at March 31, 2015. 

The termination of the FDIC loss share agreements has no effect on the yields of the loans that were previously covered under these agreements.  State Bank will recognize all future recoveries, losses and expenses related to the previously covered assets because the FDIC will no longer share in those amounts.  While we expect State Bank’s future earnings to be positively impacted by recovering amounts greater than the carrying value of the previously covered assets, they could also be negatively impacted by the recognition of losses and expenses that would have otherwise been covered.