State Bank Financial Corporation announced unaudited financial results for the third quarter of 2018.  Net income for the third quarter of 2018 was $18.0 million, compared to $18.8 million in the second quarter of 2018, and $14.4 million in the third quarter of 2017.  Fully diluted earnings per share were $.46 in the third quarter of 2018, compared to  $.48 in the second quarter of 2018 and $.37 in the third quarter of 2017.  The third quarter of 2018 included pre-tax merger-related expenses of $11.0 million.

On September 18, 2018, State Bank's shareholders approved the pending merger with Cadence Bancorporation.  The completion of the merger remains subject to the receipt of certain regulatory approvals and the satisfaction of other customary closing conditions.  Shares of restricted stock that vested upon shareholder approval of the merger resulted in $9.8 million of merger-related expense in the quarter.  The effective tax rate for the third quarter was 9.30% due to the tax benefit resulting from the vesting of the restricted stock.  Merger-related expenses, including the restricted stock vesting and tax adjustments, reduced fully diluted earnings per share by $.14 after-tax.

Joe Evans, Chairman of State Bank Financial, commented, "I am pleased with our strong financial performance in the third quarter and our shareholders' overwhelming approval of our pending merger  with Cadence.  Our two banks are highly complementary and I expect the combined entity to produce exceptional results."

Operating Highlights

Interest income on loans improved to $51.6 million in the third quarter of 2018, a $1.1 million increase from the second quarter of 2018 and a $16.2 million increase from the third quarter of 2017.  Net interest income of $58.6 million in the third quarter of 2018 increased from $56.1 million in the second quarter of 2018 and $44.3 million in the third quarter of 2017.  Accretion income on loans was $8.2 million in the third quarter of 2018, up from $6.6 million in the second quarter of 2018 and $6.5 million in the third quarter of 2017.  Accretion income includes $4.1 million in recovery income during the third quarter of 2018 compared to $2.7 million in the second quarter of 2018 and $2.3 million in the third quarter of 2017.

Noninterest income was $9.7 million in the third quarter of 2018, compared to $10.9 million in the second quarter of 2018 and $9.7 million in the third quarter of 2017.  Mortgage banking revenues declined $1.3 million in the third quarter of 2018 compared to the second quarter of 2018.  In late September 2018, State Bank announced the transition of the majority of its mortgage employees to another financial institution.

Total noninterest expense for the third quarter of 2018 was $46.3 million, compared to $40.0 million in the second quarter of 2018 and $31.6 million in the third quarter of 2017.  The increase was primarily due to $11.0 million in merger-related expenses, of which $9.8 million was related to the vesting of restricted stock in September 2018.  Salaries and employee benefit expenses decreased $1.1 million compared to the second quarter of 2018.  Total noninterest expense excluding merger-related expenses declined $2.0 million from the second quarter of 2018.

Tom Wiley, Vice Chairman and CEO, commented, "I am proud of our positive operating trends.  While the mortgage transition impacted noninterest income during the third quarter, the reduction of associated expenses will measurably improve our efficiency going forward."

Financial Condition

Total assets at September 30, 2018, were $4.9 billion, down from $5.0 billion at June 30, 2018.  Total loans were $3.6 billion at September 30, 2018, up $32.1 million from the second quarter of 2018.  Period-end organic loans increased to $2.8 billion at September 30, 2018, an increase of $123.1 million from the second quarter of 2018.  Purchased non-credit impaired loans decreased to $725.7 million at September 30, 2018, a $67.3 million linked-quarter decline.  Purchased credit impaired loans decreased to $124.8 million at September 30, 2018, a $23.7 million linked-quarter decline.

Past due organic and purchased non-credit impaired loans were .34% and 2.73% of their respective portfolios at September 30, 2018. The increase in past due purchased non-credit impaired loans was due to one relationship that was recorded as nonaccrual in the second quarter of 2018.  The provision for loan losses on organic and purchased non-credit impaired loans was $2.1 million in the third quarter of 2018. The organic allowance as a percent of organic loans was .98% at the end of the third quarter of 2018.

Total deposits at September 30, 2018, were $4.2 billion, down $115.8 million from June 30, 2018, although average deposits increased $54.8 million from the second quarter of 2018. Noninterest-bearing demand deposits represented 27.5% of total deposits as of September 30, 2018. Period-end noninterest-bearing demand deposits were $1.2 billion, a $35.5 million decrease, while average noninterest-bearing demand deposits increased $40.9 million from the second quarter of 2018.

Tangible book value per share was $14.70 at the end of the third quarter of 2018.  State Bank Financial Corporation continues to be well capitalized, ending the quarter with a leverage ratio of 11.85% and a Tier I risk-based capital ratio of 12.89%.