BankFlorida (the Bank) today reported net losses of $67,000 and $82,000 for the three and twelve months ended December 31, 2018, respectively, compared to net loss of $329,000 for the three months ended December 31, 2017 and net income of $205,000 for the twelve months ended December 31, 2017.

Commenting on the Company's results, John K. Stephens, Jr., Chief Executive Officer, said, "The last six months have been impactful in building the Bank's infrastructure as we prepare to implement our strategic growth strategy. As a result, we experienced increased salaries and benefits of approximately $100,000 due to adding various support positions. In addition, professional services and fees increased over $400,000 during the year, primarily due to approximately $40,000 in one-time expenses associated with the re-audits of 2016 and 2017 and $260,000 in one-time expenses associated with Bank Secrecy Act ("BSA") testing and remediation efforts, neither of which will be experienced in 2019 or thereafter. Adjusted net income for the three months ended December 31, 2018, which excludes the one-time costs associated with re-audits and BSA remediation, would have been roughly break even while adjusted net income for the twelve months ended December 31, 2018 would have been approximately $130,000. Having spent the majority of the last six months to build the Bank's infrastructure, we are now well positioned to execute our stated strategic plan. In 2019, we intend to expand into key high growth markets throughout the state and establish BankFlorida as the next premier community bank in Florida."

Tracy L. Keegan, President and Chief Financial Officer, added, "With the re-audits of both 2016 and 2017, updated policies and procedures, and the BSA remediation efforts completed, we believe that we now have a clean platform on which to build upon and execute our strategic growth strategies. In addition, our new name and brand has attracted bankers throughout the state who have expressed a strong desire to join our team."

Highlights of the fourth quarter of 2018 and the full year included:

  • Net interest income was $0.6 million and $2.8 million for the three and twelve months ended December 31, 2018, respectively, compared with $0.8 million and $2.9 million for the three and twelve months ended December 31, 2017, respectively. Net interest margin was 3.07% and 3.27% for the three and twelve months ended December 31, 2018, respectively, compared with 3.67% and 3.40% for the three and twelve months ended December 31, 2017, respectively.
  • Total loans (including portfolio loans, loans held-for-sale, and warehouse loans held-for-investment) increased 1% to $65.9 million at December 31, 2018, from $65.0 million at December 31, 2017.
  • Total deposits decreased 1% to $72.1 million at December 31, 2018, from $72.9 million at December 31, 2017. Excluding time deposits, core deposits increased by $4.4 million, or 10%.
  • Total assets were $87.6 million and $87.9 million at December 31, 2018 and 2017, respectively.
  • Nonperforming assets, as a percentage of total assets, increased to 1.33% at December 31, 2018, from 1.03% at December 31, 2017.
  • The Bank's ratios of total risk-based capital to risk-weighted assets and Tier 1 (core) capital to adjusted total assets were 14.87% and 9.86%, respectively, at December 31, 2018, and each continued to exceed the levels required by regulation, currently 10% and 5%, respectively, for a bank to be considered well-capitalized.
  • Unrealized gains in the investment securities portfolio declined approximately $340,000 during the fourth quarter to $100,000 at December 31, 2018 due to market volatility. This change in unrealized gains caused by market fluctuations contributed to a $0.37 decrease in tangible book value (a non-GAAP measure) per share during the quarter. There were no unrealized gains or losses affecting book value at December 31, 2017.
  • Tangible book value as of December 31, 2018 was $8,912, or $9.54 per share (see non-GAAP table below).
   
Bank Regulatory Capital At

Key Capital Measures

Dec. 31, 2018     Dec. 31, 2017
Total risk-based capital ratio (to risk-weighted assets) 14.87 % 15.32 %
Common equity tier 1 (core) risk-based capital ratio (to risk-weighted assets) 13.64 % 10.93 %
Tier 1 (core) risk-based capital ratio (to risk-weighted assets) 13.64 % 14.26 %
Tier 1 (core) capital ratio (to adjusted total assets) 9.86 % 10.17 %
 

The decrease in risk-weighted capital ratios at December 31, 2018, compared with December 31, 2017, was primarily due to a shift in the balance sheet mix related to loans and investment securities.

   

Credit Quality

At

Dec. 31,

2018

    

Dec. 31,

2017

(Dollars in thousands)
Nonperforming loans $ 1,168 $ 903
Nonperforming loans to total portfolio loans 1.81 % 1.38 %
Nonperforming assets $ 1,168 $ 903
Nonperforming assets to total assets 1.33 % 1.03 %

Troubled debt restructurings performing for more than 12 months under terms of modification

$ 996 $ 903
 

Nonperforming assets increased slightly during the year due to the addition of two new credits that experienced financial difficulties. One of the credits is well secured and the other is in the process of collection.

       

Provision / Allowance for Loan Losses

At and for the

Three Months Ended

At and for the

Year Ended

Dec. 31,

2018

    

Sept. 30,

2018

    

Dec. 31,

2017

Dec. 31,

2018

    

Dec. 31,

2017

(Dollars in thousands)
(Recovery of) Provision for portfolio loan losses $ (229 ) $ -- $ (32 ) $ (211 ) $ 10
Allowance for portfolio loan losses $ 835 $ 797 $ 664 $ 835 $ 664
Allowance for portfolio loan losses to total portfolio loans 1.30 % 1.19 % 1.02 % 1.30 % 1.02 %
Allowance for portfolio loan losses to nonperforming loans 71.49 % 64.20 % 73.53 % 71.49 % 73.53 %
Net charge-offs (recoveries) $ (267 ) $ (57 ) $ -- $ (382 ) $ 11
Net charge-offs (recoveries) to average outstanding portfolio loans (annualized) -0.40 % 0.08 % 0.00 % -0.56 % 0.02 %
 

Net recoveries totaled $267,000 for the three months ended December 31, 2018. There were no charge-offs or recoveries experienced during the three months ended December 31, 2017. This reflects a trend of solid economic conditions across the Company's markets, which has led to continued low levels of net charge-offs during the last twelve months.

No provision expense was recorded for the twelve months ended December 31, 2018. A provision expense of $10,000 was recorded for the twelve months ended December 31, 2017.

       
Net Interest Income Three Months Ended Year Ended

Dec. 31,

2018

    

Sept. 30,

2018

    

Dec. 31,

2017

Dec. 31,

2018

    

Dec. 31,

2017

(Dollars in thousands)
Net interest income $ 639 $ 736 $ 763 $ 2,825 $ 2,865
Net interest margin 3.07 % 3.31 % 3.67 % 3.27 % 3.40 %
Yield on investment securities 4.89 % 4.65 % 4.12 % 4.64 % 3.80 %
Yield on loans 4.56 % 4.75 % 4.94 % 4.62 % 4.76 %
Total cost of funds 1.44 % 1.32 % 1.03 % 1.24 % 0.99 %
Average cost of deposits 1.41 % 1.30 % 0.97 % 1.20 % 0.95 %
Rates paid on borrowed funds 2.07 % 1.87 % 1.67 % 1.85 % 1.58 %
 

The slight decrease in net interest margin during the three months and twelve months ended December 31, 2018, compared with net interest margin for the three and twelve months ended December 31, 2017, reflected an increase in rates paid on deposits and borrowed funds, with little to no change in rates on new loans due to highly competitive lending conditions.

       

Noninterest Income / Noninterest

Expense / Income Tax Expense

Three Months Ended Year Ended

Dec. 31,

2018

    

Sept. 30,

2018

    

Dec. 31,

2017

Dec. 31,

2018

    

Dec. 31,

2017

(Dollars in thousands)
Noninterest income $ 33 $ 78 $ 21 $ 224 $ 245
Noninterest expense $ 1,091 $ 898 $ 1,115 $ 3,472 $ 3,131
Income tax expense (benefit) $ (124 ) $ (19 ) $ 29 $ (132 ) $ (236 )
 

The decrease in noninterest income for the three months ended December 31, 2018, compared with that of the three months ended December 31, 2017, primarily reflected reduced service charges and fees.

The increase in noninterest expense during the three and twelve months ended December 31, 2018, compared with that of the three and twelve months ended December 31, 2017, primarily reflected an increase in salaries and employee benefits, occupancy expense, and professional services and fees, partially offset by reduced data processing expenses.

The income tax benefit realized for the three and twelve months ended December 31, 2018 was a result of a tax provision adjustment related to previously recorded taxes on non-taxable interest income. The income tax benefit recorded in 2017 was primarily related to the reversal of a previously established valuation allowance against our deferred tax asset, as well as being impacted by the newly enacted tax legislation.

       
Non-GAAP reconciliation

Three Months Ended

Dec. 31,

Year Ended

Dec. 31,

  2018         2017     2018         2017  
 
GAAP income (loss) before income tax expense $ (190 ) $ (300 ) $ (213 ) $ (30 )
Data processing expenses 57 333 45 333
One time professional fees 222 - 388 -
Loan recoveries and adjustments (166 ) - (64 ) -
OTTI   -     43     17     43  
Adjusted income (loss) before income tax expense (77 ) 76 173 346
Income tax expense (benefit)   (20 )   20     45     90  
Adjusted net income (loss) $ (57 ) $ 56   $ 128   $ 256  
 

About BankFLORIDA

BankFlorida is a $88 million asset, state-chartered community bank founded in 2007 that serves the financial needs of small- to medium-sized businesses and individuals.

Forward-looking Statements

Statements included in this press release that are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended. The words "may," "will," "anticipate," "should," "would," "believe," "contemplate," "expect," "estimate," "continue," "may" and "intend," as well as other similar words and expressions of the future, are intended to identify forward-looking statements. 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. The Bank's financial results and the forward-looking statements could be affected by many factors, including but not limited to: general economic trends and changes in interest rates; increased competition; changes in demand for financial services; the state of the banking industry generally; uncertainties associated with newly developed or acquired operations; market disruptions; and cyber-security risks.

     

BANKFLORIDA

Statements of Operations (Unaudited)

(In thousands, except share and per share amounts)

 
Three Months Ended Year Ended

Dec. 31,

2018

  

Sept. 30,

2018

  

Dec. 31,

2017

Dec. 31,

2018

  

Dec. 31,

2017

Interest and dividend income:
Loans, including fees $ 760 $ 829 $ 795 $ 3,133 $ 3,151
Securities and interest-earning deposits in other financial institutions   167     187     170     727     503  
Total interest and dividend income 927 1,016 965 3,860 3,654
 
Interest expense:
Deposits 267 264 177 941 708
Other borrowings   21     16     25     94     80  
Total interest expense 288 280 202 1,035 788
 
Net interest income 639 736 763 2,825 2,865

(Recovery of) Provision for portfolio loan losses

  (229 )   --     (32 )   (211 )   10  

Net interest income after (recovery of) provision for portfolio loan losses

868 736 795 3,035 2,855
 
Noninterest income:
Service charges and fees 17 17 16 71 121
(Loss) gain on sale of loans held-for-sale (1 ) 52 (5 ) 123 127
Loss on sale of investment -- -- -- (17 ) --
Other income   17     9     10     48     (3 )
Total noninterest income   33     78     21     224     245  
 
Noninterest expense:
Salaries and employee benefits 433 427 372 1,640 1,537
Occupancy 88 87 66 356 257
Data processing 137 82 425 368 760
Professional services and fees 296 184 118 637 218
Regulatory assessments 17 23 14 66 68
Other   119     95     121     404     291  
Total noninterest expense   1,091     898     1,115     3,472     3,131  
 
Income (loss) before income tax expense (190 ) (84 ) (300 ) (213 ) (30 )
Income tax expense (benefit)   (124 )   (19 )   29     (132 )   (236 )
Net income (loss) $ (67 ) $ (65 ) $ (329 ) $ (82 ) $ 205  
 
Proforma EPS based on common shares after recap.          
Net income (loss) per basic and diluted share $ (0.07 ) $ (0.07 ) $ (0.35 ) $ (0.09 ) $ 0.22  
 
Basic and diluted weighted average shares outstanding   934,349     934,349     934,349     934,349     934,349  
       

 

BANKFLORIDA

Balance Sheets (Unaudited)

(Dollars in thousands)

 
Dec. 31, 2018 Dec. 31, 2017
ASSETS
Cash and due from financial institutions $ 2,356 $ 2,000
Short-term interest-earning deposits   2,507   2,717  
Total cash and cash equivalents 4,863 4,717
Securities available-for-sale 11,085 1,833
Securities held-to-maturity -- 13,839
Portfolio loans, net of allowance of $835 and $664, respectively 63,867 64,701
Other loans:
Loans held-for-sale -- 270
Warehouse loans held-for-investment   1,993   --  
Total other loans 1,993 270
 
Federal Home Loan Bank stock, at cost 346 348
Premises and equipment, net 2,990 143
Bank owned life insurance 1,038 1,008
Accrued interest receivable 241 287
Deferred tax assets 363 273
Other assets   789   426  
Total assets $ 87,575 $ 87,846  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 8,315 $ 10,638
Interest-bearing demand 41,438 34,753
Time   22,304   27,469  
Total deposits 72,057 72,860
Federal Home Loan Bank advances 6,267 6,000
Accrued expenses and other liabilities   338   115  
Total liabilities 78,662 78,975
 
Common stock, additional paid-in capital, retained deficit, and other equity 8,847 8,928
Accumulated other comprehensive (loss) income   66   (58 )
Total stockholders' equity   8,912   8,870  
Total liabilities and stockholders' equity $ 87,575 $ 87,846  
     

BANKFLORIDA

Selected Consolidated Financial Ratios and Other Data (Unaudited)

(Dollars in thousands, except per share data)

 

At and for the

Three Months Ended

Dec. 31,

At and for the

Year Ended

Dec. 31,

  2018       2017     2018       2017  
Interest rate
Net interest spread 3.01 % 3.61 % 3.23 % 3.38 %
Net interest margin 3.07 % 3.67 % 3.27 % 3.40 %
 
Average balances
Portfolio loans receivable, net $ 67,800 $ 63,731 $ 66,558 $ 65,955
Warehouse loans held-for-investment 959 -- 413 --
Total interest-earning assets 83,263 83,268 86,313 84,124
Total assets 89,448 87,968 92,199 88,540
Deposits – includes non-interest deposits 75,825 72,633 78,099 74,869
Total interest-bearing liabilities 71,291 69,072 73,083 69,755
Total liabilities 80,173 78,827 83,407 80,057
Stockholders' equity 9,274 9,140 8,792 8,483
 
Performance ratios (annualized)
Return on average total assets -0.30 % -1.49 % -0.01 % 0.80 %
Return on average stockholders' equity -2.90 % -14.38 % -0.15 % 8.39 %
Ratio of operating expenses to average total assets 1.22 % 1.32 % 2.58 % 2.26 %
 
Credit and liquidity ratios
Nonperforming loans $ 1,168 $ 903 $ 1,168 $ 903
Impaired loans 1,168 903 1,168 903
Nonperforming assets to total assets 1.33 % 1.03 % 1.33 % 1.03 %
Nonperforming loans to total portfolio loans 1.82 % 1.38 % 1.82 % 1.38 %
Allowance for loan losses to nonperforming loans 71.49 % 73.53 % 71.49 % 73.53 %
Allowance for loan losses to total portfolio loans 1.30 % 1.02 % 1.30 % 1.02 %
Net charge-offs (recoveries) to average outstanding portfolio loans (annualized) -0.40 % 0.00 % -0.56 % 0.02 %
Ratio of gross portfolio loans to total deposits 89.79 % 89.71 % 89.79 % 89.71 %
 
Capital ratios
Tangible stockholders' equity to tangible assets (1) 10.18 % 10.10 % 10.18 % 10.10 %
Average stockholders' equity to average total assets 10.37 % 10.39 % 10.37 % 10.39 %
 
Other Data
Tangible book value per share (1) $ 9.54 $ 9.49 $ 9.54 $ 9.49
 

________________________

(1)  Non-GAAP financial measure. Because the Company does not currently have any intangible assets, tangible stockholders' equity is equal to stockholders' equity, tangible assets is equal to assets, and tangible book value is equal to book value. Accordingly, no reconciliations are required for these measures.