State Bank Financial (STBZ) in Atlanta reported strong loan growth and lower expenses in the first quarter, but its overall profit fell 38% from the same period last year due what it describes as the "inherent volatility" related to the accounting of failed-bank acquisitions.
The $2.7 billion-asset company on Monday reported earnings of $5.1 million in the quarter, down from $8.2 million a year earlier and $9.1 million in the fourth quarter. Its earnings per share also fell 38%, to 16 cents, or 18 cents less than the estimates of analysts polled by Thomson Reuters.
State Bank said the decline was actually a result of improved asset quality in its portfolio of loans covered by loss-sharing agreements with the Federal Deposit Insurance Corp.
The company was formed in 2009 to acquire a cluster of six failed banks and has taken over six other failed institutions since. It said Monday that its net interest income was negatively affected by a $7 million charge to its FDIC indemnification asset as a result of what it expects to be fewer losses on loans covered by the FDIC.
"While detrimental to near-term earnings, this change reflects a more positive view of covered loan asset quality, and therefore fewer claims planned to be made to the FDIC," State Bank said in a news release.
State Bank reported solid results from its core banking activities. Its portfolio of loans (excluding those covered by the FDIC) swelled 78% year over year, to $723 million, which led to a 76% jump in net interest income, to $35 million. Compared to the prior quarter, however, net interest income was down 14%, due to declining loan yields.
Interest income has been buoyed by a continued decline in deposit costs. State Bank's interest expense in the quarter was $2.9 million, down 60% from a year earlier and 26% from the fourth quarter.
State Bank's shares were trading at $17.24 midday Monday, down 4.4% from Friday's closing price.