Cardinal Financial Corporation (NASDAQ: CFNL) (the “Company”)
today reported that earnings for the quarter ended September 30,
2016 were $12.5 million, compared to $11.2 million for the year ago
quarter ended September 30, 2015. Diluted earnings per share were
$0.37 and $0.34 for these same respective periods.
During the current quarter, the Company incurred $1.5 million
after-tax expense, equal to $0.04 per share, related to the August
17th announcement of the merger with United Bankshares. Before
these expenses, the Company had adjusted net income of $14.0
million, or $0.41 per share, for the most recent quarter.
For the year to date period ended September 30, 2016, net income
was $39.7 million, compared to $38.3 million for the nine month
period ended September 30, 2015. Diluted earnings per share were
$1.18 and $1.15 for these same respective periods. Before merger
expenses, the Company had adjusted net income of $41.2 million, or
$1.22 per share, current year to date.
Selected Highlights
- Return on average assets (“ROAA”) and
average equity (“ROAE”) were 1.19% and 11.10% for the third quarter
2016 and 1.29% and 12.11% for the nine months ending September 30,
2016, respectively. Before merger expenses, ROAA was 1.32% and ROAE
was 12.41% for the current quarter.
- Net income before the provision for
loan losses, taxes and merger expenses was $22.4 million for the
quarter ended September 30, 2016, versus $15.9 million for the year
ago same quarter, an increase of 40.9%.
- Total assets of the Company grew above
$4.20 billion, increasing 9% from September 30, 2015.
- Loans held for investment were $3.22
billion, increasing 11% from a year ago.
- Customer deposits, including customer
repurchase agreements, were $2.90 billion, increasing 10% from a
year ago. Non-interest bearing demand deposit accounts increased
22% over the past year and now total $757 million.
- For the third consecutive quarter, the
Company had no nonaccrual loans and no other real estate owned at
quarter end.
- Net interest margin was 3.35% for the
third quarter of 2016, an increase from 3.33% for the prior
quarter.
- Total mortgage loan closings were $1.20
billion for the quarter, an increase of $313 million from $886
million in the third quarter 2015. Closed purchase money mortgages
represented 65% of the quarter’s volume and 68% year to date.
- Mortgage application volume was $1.58
billion, an increase of $426 million from the third quarter of
2015. Purchase money mortgage applications were approximately 63%
of total volume.
Review of Balance Sheet
At September 30, 2016, total assets of the Company were $4.22
billion, an increase of 9% from total assets of $3.88 billion at
September 30, 2015. Average interest earning assets for the third
quarter increased to $4.05 billion from $3.58 billion a year ago,
and average interest bearing liabilities for the third quarter
increased to $2.99 billion from $2.65 billion.
Loans held for investment grew to $3.22 billion at September 30,
2016 versus $2.92 billion a year ago, an 11% increase. Balances
increased $68 million, or 9% annualized, during the third quarter
of the year. Loans held for sale were $432 million at September 30,
2016, compared to $456 million at June 30, 2016, and increased from
the third quarter 2015 balance of $378 million. The Company’s
investment securities portfolio decreased slightly to $398 million
from $413 million at the end of the previous quarter, and from $430
million a year ago.
Over the past year, deposit balances increased $286 million to
$3.22 billion from $2.94 billion, an increase of 10%. Non-interest
bearing demand deposit accounts, which totaled $757 million and
represented 23% of deposits, increased $137 million since September
30, 2015, or 22%. The increase in deposits is due primarily to
continued growth in the number of accounts and balances in consumer
and business non maturing accounts.
Net Interest Income
The Company’s net interest income increased 11%, to $33.0
million from $29.6 million, for the quarters ended September 30,
2016 and 2015, respectively. For the current quarter, the Company’s
tax equivalent net interest margin was 3.35%, an increase from
3.33% for the prior sequential quarter and up from 3.31% for the
first quarter 2016.
The yield on loans held for investment was 4.10% for the third
quarter of 2016 versus 4.09% for the second quarter of 2016, while
the yield on loans held for sale decreased to 3.65% for the third
quarter of 2016 versus 3.71% for the second quarter, reflecting the
lower interest rate environment for mortgage loans. The average
balance of loans held for sale increased to $422 million in the
most recent quarter, versus $366 million in the second quarter of
2016. The yield on total interest earning assets was 3.97% for the
third quarter of 2016, compared to 3.99% for the previous quarter.
For these same respective periods, the Company’s total cost of
interest bearing liabilities decreased to 0.84% from 0.90%.
Including DDAs, the Company’s total cost of funds decreased to
0.68% from 0.73%.
Commercial Banking Review
For the quarter ended September 30, 2016, net income for the
commercial banking segment (the Bank) was $11.5 million, an
increase of 4% from $11.0 million for the third quarter of last
year. During the current quarter, the provision for loan losses was
$990,000 versus a negative provision of $547,000 during the year
ago quarter due to recoveries of charged-off loans. Before taxes
and the provision for loan losses, the Bank’s income for the
current quarter was a record $18.4 million.
For the current year to date period ended September 30, 2016,
the Bank’s net income increased 10% to $32.5 million versus $29.6
million for the year to date period ended September 30, 2015. The
year to date provision expense was $1.7 million versus $939,000 for
the first nine months of 2015.
For the current quarter, there were net charge offs of 0.04%
(annualized) of average loans outstanding. The allowance for loan
losses was 1.04% of loans outstanding at September 30, 2016 versus
1.08% at September 30, 2015. This ratio decrease from a year ago is
primarily the result of continued improvement of credit quality.
The Company had no nonperforming loans at September 30, 2016 versus
nonperforming loans of 0.02% of total assets at September 30,
2015.
Non-interest income was $1.4 million for the current quarter
compared to $954,000 for the year ago quarter. Before gains on
securities sales of $3.7 million, current year to date non-interest
income was $3.6 million versus $3.2 million for the 2015 year to
date period.
For the third quarter of 2016, non-interest expense was $15.9
million, compared to $15.8 million for the prior sequential quarter
and $16.5 million for the first quarter of 2016. The efficiency
ratio for the Bank was 46.4%, 48.7% and 52.2% for these respective
quarters, which reflects the Company’s continued focus on expense
controls. Comparing total non-interest expenses to $15.3 million
for the third quarter of 2015, the increase is primarily the result
of increases in personnel expense to support the Bank’s growth,
including quarterly accruals for performance based compensation. At
the end of September, the Bank closed its office in Tyson’s Corner,
Virginia, and it expects to realize approximately $50,000 of
expense savings per quarter.
Mortgage Banking Review
The Company’s mortgage banking subsidiary, George Mason Mortgage
(GMM), was again extremely active as it accepted approximately
$1.58 billion of loan applications during the quarter and $4.8
billion year to date. For the quarter ended September 30, 2016, GMM
reported a net profit of $2.8 million and operating net income of
$4.3 million. Operating net income (a non-GAAP measure) excludes
the impact of the Staff Accounting Bulletin (“SAB”) 109 accounting
requirement to record unrealized gains associated with the
Company’s locked mortgage loan pipeline. Comparable recent
quarterly results are shown below.
Q3 2016 Q2 2016 Q1 2016
Q4 2015 Q3 2015
Mortgage Banking:
(in 000's)
Reported Net Income
$2,816 $3,994 $3,553
$164 $631 Reverse Impact of SAB 109
1,446 (2,259) (3,794)
765 1,760 Operating Net Income (Loss)
$4,262 $1,735 ($241)
$929 $2,391
The net realized gain on sales and other fees, before the impact
of SAB 109, was $17.9 million for the three months ended September
30, 2016 versus $10.8 million for the same quarter of 2015. The
gain on sale margin was 2.78% for the quarter versus 2.71% last
quarter and 2.61% for the year ago quarter. The increase from
previous periods is primarily due to the success of selling a
majority of its production on a mandatory delivery basis.
Operating expenses were $11.5 million for the most recent
quarter compared to $9.4 million last quarter and $7.9 million for
the year ago quarter. The sequential quarter increase in expenses
reflects $1.3 million and $3.0 million, respectively, of salary
expenses associated with loans held for sale that are deducted from
expense and reported as contra-revenue under GAAP. The expense
increase over the same quarter of 2015 reflects added personnel
costs related to compliance with the new TILA/RESPA Integrated
Disclosure (TRID) regulations. All other fixed expenses are
consistent with the year ago period.
Loan applications totaled $1.58 billion during the third quarter
of 2016, a slight decrease from $1.70 billion last quarter and up
from $1.15 billion for the year ago quarter. Applications to
refinance represented 37% for the current quarter, versus 25% of
total applications last quarter and 26% for the year ago quarter.
Although refi activity has been strong, GMM continues to focus on
the more stable purchase money mortgage business.
Monthly Mortgage Loan Applications (in millions)
JUL AUG SEP
Total Third Quarter 2016 $575.50
$512.50 $487.20 $1,575.20 Purchase
Money % 58% 67% 64%
63% # of Units 1,622
1,500 1,410 4,532
APR MAY JUN Total Second
Quarter 2016 $571.80 $569.30
$562.40 $1,703.50 Purchase Money %
75% 79% 70% 75% #
of Units 1,626 1,585
1,546 4,757 JAN
FEB MAR Total First Quarter 2016
$333.80 $551.70 $617.80
$1,503.30 Purchase Money % 74%
56% 75% 68% # of Units
975 1,590 1,837 4,402
OCT NOV DEC
Total Fourth Quarter 2015 $397.00
$335.40 $331.00 $1,063.40
Purchase Money % 71% 77%
74% 74% # of Units 1,117
935 953 3,005
Parent Company Only Review
For the quarter ended September 30, 2016, Cardinal’s parent
company reported a net loss of $1.8 million versus a net loss of
$702,000 for the previous quarter and a net loss of $413,000 for
the year ago quarter. The current quarter includes approximately
$1.5 million of after-tax merger related expenses.
Capital Ratios
All capital ratios of the Company comfortably exceeded the
requirements of banking regulators to be considered
well-capitalized. Tangible common equity capital (TCE) as a
percentage of total assets was 9.68% at September 30, 2016.
MANAGEMENT COMMENTS
Bernard H. Clineburg, Executive Chairman, said:
“We have always remained committed to maintaining and growing a
strong financial services company for our employees, clients, the
communities we serve, and especially our shareholders.
“In adhering to that mission, we recently announced our
intention to merge with United Bankshares. Richard Adams, United’s
CEO, and I have had a long standing relationship, and we believe
that this merger represents a tremendous opportunity to create a
dominant bank in the Washington DC metropolitan area which will
benefit our customers and shareholders. The process to seek
required approvals from shareholders and regulators has begun, and
we have commenced to collaborate on integration plans.
"Our third quarter results are indicative of our commitment to
continue our positive momentum as we begin to focus on combining
our companies. The quarterly results show improving profitability
metrics while maintaining pristine asset quality levels. Increased
balances in the loan portfolio combined with an increasing net
interest margin resulted in revenue growth over both the previous
quarter and same quarter last year. George Mason continued to have
strong activity as applications for loan originations were almost
$1.6 billion, which is reflective of our ongoing commitment to
building a quality team of mortgage bankers with deep ties to the
realtor and builder communities."
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
This press release contains “forward-looking statements” within
the meaning of the federal securities laws. These forward-looking
statements contain information related to matters such as the
Company’s intent, belief or expectation with regard to such matters
as financial and operational performance, cost savings, credit
quality and branch expansion. Such statements are necessarily based
on management’s assumptions and estimates and are inherently
subject to a variety of risks and uncertainties concerning the
Company’s operations and business environment, which are difficult
to predict and beyond the control of the Company. Such risks and
uncertainties could cause actual results of the Company to differ
materially from those matters expressed or implied in such
forward-looking statements.
Risk and uncertainties related to the pending merger with United
include, among others, that: the businesses of United and Cardinal
may not be combined successfully, or such combination may take
longer, be more difficult, time-consuming or costly to accomplish
than expected; the expected growth opportunities or cost savings
from the merger may not be fully realized or may take longer to
realize than expected; deposit attrition, operating costs, customer
losses and business disruption following the merger, including
adverse effects on relationships with employees, may be greater
than expected; the regulatory approvals required for the merger may
not be obtained on the proposed terms or on the anticipated
schedule; the stockholders of United and Cardinal may fail to
approve the merger.
For an explanation of some of the additional risks and
uncertainties associated with forward-looking statements, please
refer to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2015 and other reports filed with and furnished
to the Securities and Exchange Commission. The Company has no
obligation and does not undertake to update, revise or correct any
of the forward-looking statements after the date of this press
release, or after the respective dates on which such statements
otherwise are made.
About Cardinal Financial Corporation: Cardinal Financial
Corporation, a financial holding company headquartered in Tysons
Corner, Virginia with assets of $4.22 billion at September 30,
2016, serves the Washington Metropolitan region through its
wholly-owned subsidiary, Cardinal Bank. Cardinal also operates
several other subsidiaries: George Mason Mortgage, LLC, a
residential mortgage lending company based in Fairfax, Virginia and
Cardinal Wealth Services, Inc., a wealth management services
company. The Company's stock is traded on NASDAQ (CFNL). For
additional information please visit our Web site at
www.cardinalbank.com or call (703) 584-3400.
Additional Information about the Merger and Where to Find
It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. Shareholders of Cardinal and other investors
are urged to read the proxy statement/prospectus that will be
included in the registration statement on Form S-4 that United will
file with the Securities and Exchange Commission in connection with
the proposed merger because it will contain important information
about United, Cardinal, the merger, the persons soliciting proxies
in the merger and their interests in the merger and related
matters. Investors will be able to obtain all documents filed with
the SEC by United free of charge at the SEC’s Internet site
(http://www.sec.gov). In addition, documents filed with the SEC by
United will be available free of charge from the Corporate
Secretary of United Bankshares, Inc., 514 Market Street,
Parkersburg, West Virginia 26101 telephone (304) 424-8800. The
proxy statement/prospectus (when it is available) and the other
documents may also be obtained for free by accessing United’s
website at www.ubsi-inc.com under the tab “Investor Relations” and
then under the heading “SEC Filings” or by accessing Cardinal’s
website at www.cardinalbank.com under the tab “About Us” and then
under the heading “Investor Relations”, and “SEC Filings”. You are
urged to read the proxy statement/prospectus carefully before
making a decision concerning the merger.
Participants in the Transaction
United, Cardinal and their respective directors, executive
officers and certain other members of management and employees may
be deemed “participants” in the solicitation of proxies from
Cardinal’s shareholders in favor of the merger with United.
Information regarding the persons who may, under the rules of the
SEC, be considered participants in the solicitation of the Cardinal
shareholders in connection with the proposed merger will be set
forth in the proxy statement/prospectus when it is filed with the
SEC.
You can find information about the executive officers and
directors of United in its Annual Report on Form 10-K for the year
ended December 31, 2015 and in its definitive proxy statement filed
with the SEC on April 1, 2016. You can find information about
Cardinal’s executive officers and directors in its Annual Report on
Form 10-K for the year ended December 31, 2015 and in its
definitive proxy statement filed with the SEC on March 24, 2016.
You can obtain free copies of these documents from United or
Cardinal using the contact information above.
Table 1.
Cardinal Financial Corporation and
Subsidiaries Summary Consolidated Statements of
Condition (Dollars in thousands) (Unaudited)
09/30/16 06/30/16
% ChangeCurrentQuarter 03/31/16
12/31/15 09/30/15 %
ChangeFromYear Ago Cash and due from banks
$ 23,928 $ 24,081 -0.6 % $ 19,379 $ 24,760 $ 18,744 27.7 % Federal
funds sold 23,481 11,481 104.5 % 41,489 14,577 13,692 71.5 %
Investment securities available-for-sale 387,150 402,522 -3.8 %
407,980 414,077 421,214 -8.1 % Investment securities
held-to-maturity 3,780 3,796 -0.4 % 3,814 3,836 3,857 -2.0 %
Investment securities – trading 6,958 6,489
7.2 % 6,221 5,881 5,274
31.9 % Total investment securities 397,888 412,807 -3.6 %
418,015 423,794 430,345 -7.5 % Other investments 18,736
18,136 3.3 % 19,411 20,967 16,111 16.3 % Loans held for sale
432,350 456,359 -5.3 % 365,489 383,768 377,878 14.4 % Loans
receivable, net of fees: Commercial and industrial 336,444 350,206
-3.9 % 363,405 379,414 347,914 -3.3 % Real estate - commercial
1,690,305 1,605,868 5.3 % 1,555,985 1,372,627 1,356,821 24.6 % Real
estate - construction 570,776 570,269 0.1 % 560,114 694,408 620,982
-8.1 % Real estate - residential 460,400 463,394 -0.6 % 455,952
448,168 436,832 5.4 % Home equity lines 161,515 161,658 -0.1 %
161,691 156,852 150,769 7.1 % Consumer 5,383
5,476 -1.7 % 4,831 4,841
4,739 13.6 % Total loans, net of fees 3,224,823 3,156,871
2.2 % 3,101,978 3,056,310 2,918,057 10.5 % Allowance for loan
losses (33,641 ) (32,984 ) 2.0 % (32,407 )
(31,723 ) (31,572 ) 6.6 % Loans receivable, net
3,191,182 3,123,887 2.2 % 3,069,571 3,024,587 2,886,485 10.6 %
Premises and equipment, net 24,190 24,273 -0.3 % 24,845
25,163 25,398 -4.8 % Goodwill and intangibles, net 36,115 36,262
-0.4 % 36,415 36,576 36,747 -1.7 % Bank-owned life insurance 33,314
33,213 0.3 % 33,102 32,978 32,876 1.3 % Other real estate owned - -
0.0 % - 253 - 0.0 % Other assets 38,464 56,667 -32.1 % 46,829
42,498 43,460 -11.5 % TOTAL
ASSETS $ 4,219,648 $ 4,197,166 0.5 % $ 4,074,545
$ 4,029,921 $ 3,881,736 8.7 %
Non-interest bearing deposits $ 757,184 $ 710,318 6.6 % $ 687,493 $
657,398 $ 620,630 22.0 % Interest checking 437,358 437,724 -0.1 %
459,377 451,545 433,372 0.9 % Money markets 492,547 445,639 10.5 %
447,565 448,888 447,536 10.1 % Statement savings 333,272 319,116
4.4 % 310,055 291,484 278,871 19.5 % Certificates of deposit
756,991 763,013 -0.8 % 788,756 776,413 738,878 2.5 % Brokered
certificates of deposit 447,148 568,996
-21.4 % 451,781 407,043 419,461
6.6 % Total deposits 3,224,500 3,244,806 -0.6 % 3,145,027
3,032,771 2,938,748 9.7 % Other borrowed funds 464,876
450,696 3.1 % 437,065 537,965 469,019 -0.9 % Mortgage funding
checks 36,740 23,921 53.6 % 28,765 12,554 20,418 79.9 % Escrow
liabilities 3,653 2,491 46.6 % 2,777 2,676 2,861 27.7 % Other
liabilities 38,042 37,320 1.9 % 34,366 30,808 45,467 -16.3 %
Shareholders' equity 451,837 437,932
3.2 % 426,545 413,147 405,223
11.5 % TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $
4,219,648 $ 4,197,166 0.5 % $ 4,074,545 $
4,029,921 $ 3,881,736 8.7 % Table 2.
Cardinal Financial Corporation and Subsidiaries Summary
Consolidated Income Statements (In thousands, except share
data and per share data) (Unaudited)
For the Three Months Ended
09/30/16 06/30/16
%
ChangeCurrentQuarter
03/31/16
12/31/15 09/30/15
% ChangeFromYear Ago
Net interest income $ 32,965 $ 31,523 4.6 % $ 30,706 $
30,471 $ 29,634 11.2 % Provision for loan losses
990 430
130.2 % 250
449 (547
) -281.0 % Net interest
income after provision for loan losses
31,975
31,093 2.8 %
30,456 30,022
30,181 5.9 % Non-interest income:
Service charges on deposit accounts 612 581 5.3 % 551 590 584 4.8 %
Loan fees 596 359 66.0 % 309 307 344 73.3 % Income from bank-owned
life insurance 101 111 -9.0 % 124 102 118 -14.4 % Net realized
gains (losses) on investment securities 331 3,918 -91.6 % (84 )
(127 ) 960 -65.5 % Other non-interest income
134 127
5.5 % 145
22 6
2133.3 % Commercial banking & other
segment non-interest income 1,774 5,096 -65.2 % 1,045 894 2,012
-11.8 % Gains from mortgage banking activities 32,035 34,613
-7.4 % 27,041 19,939 22,915 39.8 % Less: mortgage loan origination
expenses
(16,412 )
(19,304 ) -15.0
% (12,902 )
(11,874 ) (14,802
) 10.9 % Mortgage banking
segment non-interest income 15,623 15,309 2.1 % 14,139 8,065 8,113
92.6 % Wealth management segment non-interest income
94 84
11.9 % 85
133 142
-33.8 % Total non-interest income
17,491 20,489 -14.6
%
15,269 9,092
10,267 70.4 % Net interest
income and non-interest income
49,466
51,582 -4.1 %
45,725
39,114 40,448
22.3 % Salaries and benefits 17,331 16,037 8.1 %
15,497 14,391 13,409 29.2 % Occupancy 2,577 2,448 5.3 % 2,592 2,501
2,492 3.4 % Depreciation 764 833 -8.3 % 844 853 828 -7.7 % Data
processing & communications 1,542 1,517 1.6 % 1,346 1,273 1,373
12.3 % Professional fees 727 549 32.4 % 1,135 1,034 852 -14.7 %
FDIC insurance assessment 516 516 0.0 % 516 516 516 0.0 % Loss on
extinguishment of debt - 3,638 100.0 % - - - 100.0 % Mortgage loan
repurchases and settlements - - 0.0 % 100 350 47 0.0 % Merger and
acquisition expense 2,284 - 0.0 % - - - 0.0 % Other operating
expense
4,594 4,579
0.3 % 4,262
4,364 4,478
2.6 % Total non-interest expense
30,335 30,117
0.7 % 26,292
25,282 23,995
26.4 % Income before income taxes 19,131
21,465 -10.9 % 19,433 13,832 16,453 16.3 % Provision for income
taxes 6,609 7,364
-10.3 % 6,366
4,817 5,244
26.0
% NET INCOME $ 12,522 $ 14,101
-11.2 % $ 13,067 $ 9,015 $ 11,209
11.7 % Earnings per common share - basic $ 0.38
$ 0.43 -11.6 % $ 0.40 $ 0.27
$ 0.34 10.3 % Earnings per common share -
diluted $ 0.37 $ 0.42 -11.7 % $ 0.39
$ 0.27 $ 0.34 10.2 % Weighted-average
common shares outstanding - basic 33,200,426
33,032,595 0.5 % 32,977,970
32,844,212 32,766,772 1.3 %
Weighted-average common shares outstanding - diluted
33,767,143 33,569,058 0.6 %
33,435,858 33,379,656
33,311,261 1.4 % Table 3.
Cardinal
Financial Corporation and Subsidiaries Summary Consolidated
Income Statements (In thousands, except share data and per
share data) (Unaudited) For the
Nine Months Ended 09/30/16
09/30/15
% ChangeFromYear
Ago
Net interest income $ 95,195 $ 85,923 10.8 % Provision for
loan losses
1,670
939 77.8 % Net
interest income after provision for loan losses
93,525 84,984 10.1 %
Non-interest income: Service charges on deposit accounts
1,744 1,705 2.3 % Loan fees 1,264 1,289 -1.9 % Income from
bank-owned life insurance 336 330 1.8 % Net realized gains on
investment securities 4,164 1,518 174.3 % Litigation recovery -
2,950 -100.0 % Other non-interest income
406
17 2288.2
% Commercial banking & other segment non-interest
income 7,914 7,809 1.3 % Gains from mortgage banking
activities 93,688 75,754 23.7 % Less: mortgage loan origination
expenses
(48,618 )
(40,363 ) 20.5
% Mortgage banking segment non-interest income 45,070
35,391 27.3 % Wealth management segment non-interest income
263 400
-34.3 % Total non-interest income
53,247 43,600 22.1 %
Net interest income and non-interest income
146,772 128,584 14.1
% Salaries and benefits 48,864 37,453 30.5 % Occupancy 7,617
7,323 4.0 % Depreciation 2,441 2,550 -4.3 % Data processing &
communications 4,405 4,336 1.6 % Professional fees 2,411 3,577
-32.6 % FDIC insurance assessment 1,548 1,548 0.0 % Loss on
extinguishment of debt 3,638 - 100.0 % Mortgage loan repurchases
and settlements 100 47 112.8 % Merger and acquisition expense 2,284
472 383.9 % Other operating expense
13,435
13,710 -2.0
% Total non-interest expense
86,743 71,016
22.1 % Income before income taxes 60,029
57,568 4.3 % Provision for income taxes 20,339
19,249
5.7 % NET INCOME $
39,690 $ 38,319 3.6 % Earnings per
common share - basic $ 1.20 $ 1.17 2.4 %
Earnings per common share - diluted $ 1.18 $ 1.15
2.4 % Weighted-average common shares outstanding - basic
33,070,838 32,710,435 1.1 %
Weighted-average common shares outstanding - diluted
33,576,873 33,191,915 1.2 %
Table 4.
Cardinal Financial Corporation and
Subsidiaries Selected Financial Information (In
thousands, except per share data and ratios) (Unaudited)
09/30/16
06/30/16 03/31/16
12/31/15
09/30/15 Capital Ratios:
At Period
End:
Common equity tier 1 capital 10.58 % 10.33 % 9.99 % 9.86 % 9.91 %
Tier 1 risk-based capital 11.23 % 10.99 % 10.64 % 10.52 % 10.59 %
Total risk-based capital 12.11 % 11.86 % 11.50 % 11.37 % 11.47 %
Leverage capital ratio 10.33 % 10.38 % 10.28 % 10.18 % 10.46 % Book
value per common share $ 13.77 $ 13.50 $ 13.16 $ 12.76 $ 12.58
Tangible book value per common share (1) $ 12.67 $ 12.38 $ 12.04 $
11.63 $ 11.44 Common shares outstanding 32,803 32,441 32,415 32,373
32,209
Performance Ratios (annualized):
For the Three
Months Ended:
Return on average assets 1.19 % 1.39 % 1.31 % 0.92 % 1.20 % Return
on average equity 11.10 % 12.92 % 12.34 % 8.72 % 11.02 % Net
interest margin (2) 3.35 % 3.33 % 3.31 % 3.25 % 3.37 % Efficiency
ratio (3) 55.59 % 54.71 % 57.19 % 63.90 % 60.14 %
Asset
Quality Data:
For the Three
Months Ended:
Net charge-offs (recoveries) to average loans receivable, net of
fees (annualized) 0.04 % -0.02 % -0.06 % 0.04 % -0.27 %
At Period
End:
Total nonaccrual loans $ - $ - $ - $ 520 $ 721 Other real estate
owned $ - $ - $ - $ 253 $ - Nonperforming loans to loans
receivable, net of fees 0.00 % 0.00 % 0.00 % 0.02 % 0.02 %
Nonperforming loans to total assets 0.00 % 0.00 % 0.00 % 0.01 %
0.02 % Nonperforming assets to total assets 0.00 % 0.00 % 0.00 %
0.02 % 0.02 % Total loans receivable past due 30 to 89 days $ 394 $
736 $ 163 $ 938 $ 56 Total loans receivable past due 90 days or
more $ - $ 41 $ - $ - $ - Allowance for loan losses to loans
receivable, net of fees 1.04 % 1.04 % 1.04 % 1.04 % 1.08 %
Mortgage Banking Data:
For the Three
Months Ended:
Applications $ 1,575,200 $ 1,703,500 $ 1,503,300 $ 1,063,400 $
1,149,000 Loans closed 1,198,737 1,172,339 769,080 786,363 885,715
Loans sold 1,233,801 1,073,282 791,680 778,854 983,355 Purchase
money % of loans closed - George Mason Mortgage 65 % 76 % 62 % 74 %
74 % Realized gain on sales and fees as a % of loan sold(4) 2.78 %
2.71 % 2.67 % 2.71 % 2.61 %
At Period
End:
Locked Pipeline $ 411,245 $ 458,555 $ 451,905 $ 247,448 $ 316,684
SAB 109 Total Unrealized Gains Recognized 23,713 25,955 22,453
16,571 17,757 Change in Unrealized Gains (2,242 ) 3,502 5,882
(1,186 ) (2,728 )
Change in After-tax Income (1,446
) 2,259 3,794 (765 )
(1,760 )
(1)
Tangible book value is calculated as total
shareholders' equity less goodwill and other intangible assets,
divided by common shares outstanding.
(2)
The average yields for loans receivable
and investment securities available-for-sale are reported on a
fully taxable-equivalent basis at a rate of 36% for 2016 and 35%
for 2015.
(3)
Efficiency ratio is calculated as total
non-interest expense divided by the total of net interest income
and non-interest income. For the three months ended September 30,
2016, non-interest expense excludes $2.3 million of merger and
acquisition expense. For the three months ended June 30, 2016,
non-interest expense excludes a $3.6 million loss on extinguishment
of debt and non-interest income excludes $3.6 million in realized
gains on investment securities.
(4)
Realized gains are those gains recognized
on the date the loan is sold and do not include the unrealized
gains recognized at the loan commitment date.
Table 5.
Cardinal Financial Corporation and
Subsidiaries Selected Financial Information (In
thousands, except ratios) (Unaudited)
09/30/16
09/30/15 Performance Ratios
(annualized):
For the Nine
Months Ended:
Return on average assets 1.29 % 1.43 % Return on average equity
12.11 % 12.81 % Net interest margin (1) 3.32 % 3.40 % Efficiency
ratio (2) 55.80 % 55.71 %
Mortgage Banking Data:
For the Nine
Months Ended:
Applications $ 4,782,000 $ 4,147,000 Loans closed 3,140,156
2,815,713 Loans sold 3,098,763 2,755,321 Realized gain on sales and
fees as a % of loan sold(3) 2.73 % 2.57 %
(1)
The average yields for loans receivable
and investment securities available-for-sale are reported on a
fully taxable-equivalent basis at a rate of 36% for 2016 and 35%
for 2015.
(2)
Efficiency ratio is calculated as total
non-interest expense divided by the total of net interest income
and non-interest income. For the nine months ended September 30,
2016, non-interest expense excludes a $3.6 million loss on
extinguishment of debt and $2.3 million of merger and acquisition
expense. Non-interest income excludes $3.6 million in realized
gains on investment securities. For the nine months ended September
30, 2015, non-interest income excludes a $2.9 million litigation
settlement and non-interest expense excludes the associated legal
expenses of $500,000 related to that same settlement.
(3)
Realized gains are those gains recognized
on the date the loan is sold and do not include the unrealized
gains recognized at the loan commitment date.
Table 6.
Cardinal Financial Corporation and
Subsidiaries Mortgage Revenue Recognition Impact of SAB 109
(Written Loan Commitments Recorded at Fair Value Through
Earnings) (Dollars in thousands, except per share data and
ratios) (Unaudited) For the
Three Months Ended 09/30/16
06/30/16 %
ChangeCurrentQuarter
03/31/16 12/31/15
09/30/15 %
ChangeFromYear Ago
Net Gains from
Mortgage Banking Activities **(see note below):
As
Reported
Fair Value of LCs / Unrealized Gains Recognized @ LC date $ 32,035
$ 34,613 -7.4 % $ 27,041 $ 19,939 $ 22,915 39.8 % Loan origination
expenses recognized @ Loan Sale Date 16,412
19,304 -15.0 % 12,902 11,874
14,802 10.9 %
Reported Net Gains
from Mortgage Banking Activities 15,623
15,309 2.1 % 14,139 8,065
8,113 92.6 %
As
Adjusted
Realized Gains Recognized @ Loan Sale Date 34,277 31,111 10.2 %
21,159 21,125 25,643 33.7 % Loan origination expenses recognized @
Loan Sale Date 16,412 19,304
-15.0 % 12,902 11,874 14,802
10.9 %
Adjusted Net Gains from Mortgage Banking
Activities 17,865 11,807
51.3 % 8,257 9,251 10,841
64.8 %
Impact of SAB 109
on Net Gains from Mortgage Banking Activities:
Increase/(Decrease) in Unrealized Gains on Mortgage Banking
Activities Related to SAB 109 $ (2,242 ) $ 3,502
-164.0 % $ 5,882 $ (1,186 ) $ (2,728 ) -17.8 %
Net Income
Reconciliation:
Reported Net Income $ 12,522 $ 14,101 -11.2 % $ 13,067 $ 9,015 $
11,209 11.7 % After-tax Merger and Acquisition Expense 1,473
- 0.0 % - -
- 0.0 % Adjusted Net Income $ 13,995 $ 14,101
-0.8 % $ 13,067 $ 9,015 $ 11,209 24.9 % After-tax Net Increase /
(Decrease) in Unrealized Gains on Mortgage Banking Activities
Related to SAB 109 (1,446 ) 2,259
-164.0 % 3,794 (765 ) (1,760 )
-17.8 %
Operating Net Income $ 15,441 $ 11,842
30.4 % $ 9,273 $ 9,780 $ 12,969
19.1 %
Diluted Earnings
per Share (EPS) Reconciliation:
Reported Net Income $ 0.37 $ 0.42 -11.7 % $ 0.39 $ 0.27 $ 0.34 9.1
% After-tax Merger and Acquisition Expense 0.04
- 0.0 % - -
- 0.0 % Adjusted Net Income 0.41
0.42 -1.3 % 0.39 0.27
0.34 21.9 % After-tax Net Increase /
(Decrease) in Unrealized Gains on Mortgage Banking Activities
Related to SAB 109 (0.04 ) 0.07 -163.6
% 0.11 (0.02 ) (0.05 ) -14.3 %
Operating Net Income $ 0.45 $ 0.35 26.8 % $
0.28 $ 0.29 $ 0.39 14.7 %
Performance
Ratios (adjusted for change in unrealized mortgage banking
gains):
Return on average assets 1.46 % 1.17 % 0.93 % 1.00 % 1.39 % Return
on average equity 13.69 % 10.85 % 8.76 % 9.46 % 12.75 % Efficiency
ratio 57.56 % 62.08 % 65.58 % 62.04 % 56.29 % Non-interest income
to average assets 1.87 % 1.67 % 0.94 % 1.05 % 1.39 % ** Per
the accounting guidance set forth by SEC Staff Accounting Bulletin
(SAB) 109 regarding mortgage lending activities, the fair value of
a "locked" commitment, or an unrealized gain, is recognized in
income on the day of the locked commitment (LC). As a result of
this revenue recognition, the unrealized gains then become part of
the basis of the ensuing loan held for sale (LHFS) when the loan is
closed. When the loan is sold to investors, the “price" received is
equal to the basis of the loan held for sale, and there is no gain
or loss recognized. At any point in time (e.g. quarter end) the
fair value of the LCs and the premium to the par value of LHFS
represent unrealized gains that have been recognized in income,
either in the current period or prior periods. This accounting
creates a mismatch between the income recognition on loan
production and expense recognition for those same loans, which is
discussed below. In accordance with accounting rules (ASC
310-20, formerly FAS 91), direct (e.g. commissions) and indirect
loan expenses associated with originating, underwriting and closing
loans are deferred and amortized over the life of the loan. In
mortgage banking, this results in the mentioned expenses being
recognized at the time of investor purchase of the loan (i.e. loan
sale date) which often occurs in the quarter subsequent to the
original LC and creates a mismatch in the timing of the revenue and
expense. These expenses are “netted” from the gain on sale from
mortgage banking activities, which is included in non-interest
income. Table 7.
Cardinal Financial Corporation
and Subsidiaries Mortgage Revenue Recognition Impact of SAB
109 (Written Loan Commitments Recorded at Fair Value Through
Earnings) (Dollars in thousands, except per share data and
ratios) (Unaudited) For the Nine
Months Ended 09/30/16
09/30/15 %
ChangeFromYear Ago
Net Gains from
Mortgage Banking Activities **(see note below):
As
Reported
Fair Value of LCs / Unrealized Gains Recognized @ LC date $ 93,688
$ 75,754 23.7 % Loan origination expenses recognized @ Loan Sale
Date 48,618 40,363 20.5 %
Reported Net Gains from Mortgage Banking Activities
45,070 35,391 27.3 %
As
Adjusted
Realized Gains Recognized @ Loan Sale Date 86,546 70,820 22.2 %
Loan origination expenses recognized @ Loan Sale Date 48,618
40,363 20.5 %
Adjusted Net Gains
from Mortgage Banking Activities 37,928
30,457 24.5 %
Impact of SAB 109
on Net Gains from Mortgage Banking Activities:
Increase/(Decrease) in Unrealized Gains on Mortgage Banking
Activities Related to SAB 109 $ 7,142 $ 4,934
44.8 %
Net Income
Reconciliation:
Reported Net Income $ 39,690 $ 38,319 3.6 % After-tax litigation
settlement (less associated legal expenses) - (1,592 ) -100.0 %
After-tax Merger and Acquisition Expense 1,473
313 370.7 % Adjusted Net Income $ 41,163 $ 37,040
11.1 % After-tax Net Increase / (Decrease) in Unrealized Gains on
Mortgage Banking Activities Related to SAB 109 4,607
3,182 44.8 %
Operating Net Income $
36,556 $ 33,858 8.0 %
Diluted Earnings
per Share (EPS) Reconciliation:
Reported Net Income $ 1.18 $ 1.15 2.4 % After-tax litigation
settlement (less associated legal expenses) - (0.04 ) -100.0 %
After-tax Merger and Acquisition Expense 0.04
0.01 365.3 % Adjusted Net Income 1.22
1.13 8.0 % After-tax Net Increase / (Decrease)
in Unrealized Gains on Mortgage Banking Activities Related to SAB
109 0.14 0.10 43.1 %
Operating Net Income $ 1.08 $ 1.03 4.7 %
Performance
Ratios (adjusted for change in unrealized mortgage banking
gains):
Return on average assets 1.19 % 1.26 % Return on average equity
11.15 % 11.32 % Efficiency ratio 61.39 % 57.00 % Non-interest
income to average assets 1.50 % 1.44 % ** Per the accounting
guidance set forth by SEC Staff Accounting Bulletin (SAB) 109
regarding mortgage lending activities, the fair value of a "locked"
commitment, or an unrealized gain, is recognized in income on the
day of the locked commitment (LC). As a result of this revenue
recognition, the unrealized gains then become part of the basis of
the ensuing loan held for sale (LHFS) when the loan is closed. When
the loan is sold to investors, the “price" received is equal to the
basis of the loan held for sale, and there is no gain or loss
recognized. At any point in time (e.g. quarter end) the fair value
of the LCs and the premium to the par value of LHFS represent
unrealized gains that have been recognized in income, either in the
current period or prior periods. This accounting creates a mismatch
between the income recognition on loan production and expense
recognition for those same loans, which is discussed below.
In accordance with accounting rules (ASC 310-20, formerly FAS 91),
direct (e.g. commissions) and indirect loan expenses associated
with originating, underwriting and closing loans are deferred and
amortized over the life of the loan. In mortgage banking, this
results in the mentioned expenses being recognized at the time of
investor purchase of the loan (i.e. loan sale date) which often
occurs in the quarter subsequent to the original LC and creates a
mismatch in the timing of the revenue and expense. These expenses
are “netted” from the gain on sale from mortgage banking
activities, which is included in non-interest income.
Table 8.
Cardinal Financial Corporation and Subsidiaries
Average Statements of Condition and Yields on Earning Assets and
Interest-Bearing Liabilities (Dollars in thousands)
(Unaudited) For the Three Months
Ended 9/30/2016 6/30/2016
3/31/2016 12/31/2015 9/30/2015
AverageBalance
AverageYield
AverageBalance
AverageYield
AverageBalance
AverageYield
AverageBalance
AverageYield
AverageBalance
AverageYield
Interest-earning assets:
Loans receivable, net of fees (1) Commercial and industrial $
243,678 3.75 % $ 258,678 3.74 % $ 266,353 3.74 % $ 255,255 3.66 % $
255,011 3.68 % Commercial and industrial - tax exempt(1) 101,749
2.90 % 103,221 2.82 % 105,386 2.80 % 103,456 2.50 % 82,656 2.64 %
Real estate - commercial(1) 1,659,767 4.27 % 1,563,089 4.37 %
1,532,293 4.28 % 1,361,134 4.27 % 1,311,664 4.38 % Real estate -
construction 572,704 4.60 % 556,939 4.37 % 549,907 4.62 % 661,665
4.59 % 592,669 4.69 % Real estate - residential 445,848 3.53 %
448,453 3.57 % 441,134 3.67 % 423,533 3.65 % 410,605 3.69 % Home
equity lines 160,877 3.28 % 160,303 3.23 % 160,240 3.16 % 153,366
3.10 % 145,625 3.12 % Consumer 5,246 5.01 %
5,239 4.91 % 5,284 4.72 %
4,739 5.44 % 4,602 5.52 %
Total loans 3,189,869 4.10 % 3,095,922 4.09 % 3,060,597 4.10 %
2,963,148 4.08 % 2,802,832 4.17 % Loans held for sale
421,843 3.65 % 365,520 3.71 % 304,653 3.88 % 339,793 3.87 % 364,513
3.97 % Investment securities (1) 400,936 3.67 % 400,085 3.82 %
419,678 3.76 % 426,776 3.52 % 372,188 3.78 % Federal funds sold
41,050
0.50
% 33,435 0.45 % 55,018
0.47 % 45,307 0.25 % 41,108
0.22 % Total interest-earning assets 4,053,698 3.97 %
3,894,962 3.99 % 3,839,946 3.99 % 3,775,024 3.95 % 3,580,641 4.06 %
Non-interest earning assets: Cash and due from banks
21,764 21,899 21,169 22,226 19,964 Premises and equipment, net
24,399 24,642 25,185 25,498 25,043 Goodwill and intangibles, net
36,189 36,333 36,498 36,662 36,842 Accrued interest and other
assets 124,196 119,723 105,663 102,977 110,463 Allowance for loan
losses (33,461 ) (32,702 ) (32,113 ) (31,515 ) (31,564 )
TOTAL ASSETS $ 4,226,785
$ 4,064,857 $ 3,996,348 $ 3,930,872 $
3,741,389
Interest-bearing liabilities:
Interest checking $ 432,246 0.36 % $ 445,991 0.36 % $ 457,528 0.40
% $ 438,527 0.48 % $ 429,211 0.48 % Money markets 479,455 0.39 %
438,863 0.36 % 451,303 0.37 % 466,452 0.36 % 431,958 0.36 %
Statement savings 327,653 0.43 % 315,804 0.42 % 301,734 0.42 %
285,257 0.40 % 280,467 0.37 % Certificates of deposit 773,912 1.23
% 773,053 1.23 % 784,306 1.23 % 752,104 1.23 % 724,527 1.26 %
Brokered certificates of deposit 538,130 0.89
% 454,152 0.93 % 398,455
0.91 % 400,793 0.88 % 417,095
0.83 % Total interest-bearing deposits 2,551,396 0.75 %
2,427,863 0.75 % 2,393,326 0.75 % 2,343,133 0.76 % 2,283,258 0.75 %
Other borrowed funds 441,576 1.39 %
456,044 1.69 % 487,087
1.87 % 470,416 1.82 % 369,481
2.02 % Total interest-bearing liabilities 2,992,972 0.84 %
2,883,907 0.90 % 2,880,413 0.94 % 2,813,549 0.93 % 2,652,739 0.93 %
Noninterest-bearing liabilities: Noninterest-bearing
deposits 732,506 698,123 653,432 660,236 638,658 Other liabilities
50,098 46,193 38,986 43,357 43,058 Shareholders' equity
451,209 436,634 423,517 413,730 406,934
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $
4,226,785 $ 4,064,857 $ 3,996,348 $ 3,930,872
$ 3,741,389 NET INTEREST MARGIN (1) 3.35 %
3.33 % 3.31 % 3.25 % 3.37 %
(1)
The average yields for loans receivable
and investment securities available-for-sale are reported on a
fully taxable-equivalent basis at a rate of 36% for 2016 and 35%
for 2015.
Table 9.
Cardinal Financial
Corporation and Subsidiaries Average Statements of Condition
and Yields on Earning Assets and Interest-Bearing Liabilities
(Dollars in thousands) (Unaudited) For the
Nine Months Ended 9/30/2016 9/30/2015
Average Average Average Average
Balance Yield Balance
Yield Interest-earning assets: Loans receivable, net
of fees (1) Commercial and industrial $ 256,190 3.75 % $ 277,679
3.68 % Commercial and industrial - tax exempt(1) 103,446 2.84 %
63,351 3.63 % Real estate - commercial(1) 1,536,605 4.31 %
1,286,353 4.42 % Real estate - construction 608,614 4.51 % 518,423
4.71 % Real estate - residential 445,148 3.59 % 399,446 3.75 % Home
equity lines 160,475 3.22 % 139,747 3.19 % Consumer 5,256
4.90 % 4,845 5.71 % Total loans
3,115,734 4.09 % 2,689,844 4.21 % Loans held for sale
364,217 3.73 % 346,088 3.78 % Investment securities (1) 406,867
3.75 % 346,335 3.78 % Federal funds sold 43,160
0.48 % 39,772 0.21 % Total
interest-earning assets 3,929,978 3.99 % 3,422,039 4.08 %
Non-interest earning assets: Cash and due from banks 21,611
20,679 Premises and equipment, net 24,741 25,087 Goodwill and
intangibles, net 36,339 37,037 Accrued interest and other assets
116,566 105,670 Allowance for loan losses (32,761 ) (29,951 )
TOTAL ASSETS $ 4,096,474 $ 3,580,561
Interest-bearing liabilities: Interest checking $
445,208 0.37 % $ 427,496 0.49 % Money markets 456,624 0.37 %
392,806 0.34 % Statement savings 315,109 0.42 % 272,302 0.34 %
Certificates of deposit 777,079 1.23 % 670,442 1.22 % Brokered
certificates of deposit 463,851 0.91 %
405,473 0.78 % Total interest-bearing deposits
2,457,871 0.75 % 2,168,519 0.72 % Other borrowed funds
461,496 1.66 % 368,965
2.07 % Total interest-bearing liabilities 2,919,367 0.89 %
2,537,484 0.92 %
Noninterest-bearing liabilities:
Noninterest-bearing deposits 694,825 605,088 Other liabilities
45,111 39,222 Shareholders' equity 437,171 398,767
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 4,096,474
$ 3,580,561 NET INTEREST MARGIN (1) 3.32 %
3.40 %
(1)
The average yields for loans receivable
and investment securities available-for-sale are reported on a
fully taxable-equivalent basis at a rate of 36% for 2016 and 35%
for 2015.
Table 10.
Cardinal Financial Corporation and Subsidiaries Segment
Reporting - as Reported and Non-GAAP Reconciliation (Dollars
in thousands) (Unaudited) For the Three Months
Ended % Change % Change Current
From 9/30/2016
6/30/2016 Quarter
3/31/2016 12/31/2015
9/30/2015 Year Ago
Commercial
Banking:
Net interest income $ 32,980 $ 31,442 4.9 % $ 30,545 $ 30,042 $
29,137 13.2 % Non-interest income 1,391 1,056 31.7 % 1,104 963 954
45.8 % Net realized gain on available-for-sale securities - 3,614
100.0 % 112 - 769 -100.0 % Loss on extinguishment of debt - 3,638
100.0 % - - - 100.0 % Non-interest expense 15,940
15,823 0.7 % 16,514
15,734 15,339 3.9 % Net income before
provision for loan losses and taxes 18,431 16,651 10.7 % 15,247
15,271 15,521 18.7 % Provision for loan losses 990 430 130.2 % 250
449 (547 ) -281.0 % Provision for income taxes 5,978
5,464 9.4 % 4,757 5,238
5,089 17.5 % Net income $ 11,463
$ 10,757 6.6 % $ 10,240 $ 9,584 $ 10,979
4.4 % Average Assets $ 4,140,341 $ 3,998,824 $ 3,937,805 $
3,866,407 $ 3,674,500 Commercial Banking Segment Contribution to
earnings 92 % 76 % 78 % 106 % 98 %
Mortgage
Banking:
Net interest income $ 196 $ 283 -30.7 % $ 358 $ 619 $ 682 -71.3 %
Non-interest income 15,669 15,344 2.1 % 14,158 8,115 8,217 90.7 %
Non-interest expense 11,464 9,382
22.2 % 8,963 8,589 7,905
45.0 % Net income before provision for taxes 4,401
6,245 -29.5 % 5,553 145 994 342.8 % Provision for income taxes
1,585 2,251 -29.6 % 2,000
(19 ) 363 336.6 % Net income $
2,816 $ 3,994 -29.5 % $ 3,553 $ 164 $
631 346.3 % Add:decrease in unrealized gains (or
(Less):increase in unrealized gains) on mortgage banking activities
(SAB 109) 2,242 (3,502 ) -164.0 % (5,882 ) 1,186 2,728 -17.8 % Add
/ (Less): provision for income taxes associated with SAB 109
(796 ) 1,243 -164.0 % 2,088
(421 ) (968 ) -17.8 % Operating net income
(loss) $ 4,262 $ 1,735 145.6 % $ (241 ) $ 929
$ 2,391 78.3 % Average Assets $ 455,608 $ 382,899 19.0 % $
317,034 $ 351,129 $ 380,504 19.7 % Mortgage Banking Segment
Contribution to earnings 22 % 28 % 27 % 2 % 6 %
Wealth
Management/Other:
Net interest income $ (211 ) $ (201 ) 5.0 % $ (197 ) $ (190 ) $
(185 ) 14.1 % Non-interest income 431 473 -8.9 % (105 ) 14 327 31.8
% Non-interest expense 2,931 1,273
130.2 % 815 959 751
290.3 % Net income (loss) before provision for taxes
(2,711 ) (1,001 ) 170.8 % (1,117 ) (1,135 ) (609 ) 345.2 %
Provision for income taxes (954 ) (351 ) 171.8
% (391 ) (402 ) (208 ) 358.7 % Net
income (loss) $ (1,757 ) $ (650 ) 170.3 % $ (726 ) $ (733 ) $ (401
) 338.2 % Add: merger & acquisition (M&A) expense 2,284 -
0.0 % - - - 0.0 % Subtract: provision for income taxes associated
with M&A expense (811 ) -100.0 %
0.0 % Operating net income (loss) $ (284 ) $
(650 ) -56.3 % $ (726 ) $ (733 ) $ (401 ) -29.2 % Average Assets /
Intersegment Eliminations $ (369,164 ) $ (316,866 ) 16.5 % $
(258,491 ) $ (286,664 ) $ (313,615 ) 17.7 % Wealth Management/Other
Segments Contribution to earnings -14 % -5 % 206.7 % -5 % -8 % -4 %
286.6 %
Consolidated:
Net interest income $ 32,965 $ 31,524 4.6 % $ 30,706 $ 30,471 $
29,634 11.2 % Non-interest income 17,491 16,873 3.7 % 15,157 9,092
9,498 84.2 % Net realized gain on available-for-sale securities -
3,614 100.0 % 112 - 769 -100.0 % Loss on extinguishment of debt -
3,638 100.0 % - - - 100.0 % Non-interest expense 30,335
26,478 14.6 % 26,292
25,282 23,995 26.4 % Net income
before provision for loan losses and taxes 20,121 21,895 -8.1 %
19,683 14,281 15,906 26.5 % Provision for loan losses 990 430 130.2
% 250 449 (547 ) -281.0 % Provision for income taxes 6,609
7,364 -10.3 % 6,366
4,817 5,244 26.0 % Net income $
12,522 $ 14,101 -11.2 % $ 13,067 $ 9,015
$ 11,209 11.7 % Add: merger & acquisition
(M&A) expense 2,284 - 0.0 % - - - 100.0 % Add:decrease in
unrealized gains (or (Less): increase in unrealized gains) on
mortgage banking activities (SAB 109) 2,242 (3,502 ) -164.0 %
(5,882 ) 1,186 2,728 -17.8 % Add/(Less): provision for income taxes
associated with M&A expenses & SAB 109 (1,607 )
1,243 -229.2 % 2,088 (421
) (969 ) 65.8 % Operating net income $ 15,441
$ 11,842 30.4 % $ 9,273 $ 9,780 $ 12,968
19.1 % Average Assets $ 4,226,785 $ 4,064,857 4.0 % $
3,996,348 $ 3,930,872 $ 3,741,389 13.0 %
Table 11.
Cardinal Financial Corporation and
Subsidiaries Segment Reporting - as Reported and Non-GAAP
Reconciliation (Dollars in thousands) (Unaudited)
For the Nine Months Ended % Change From
9/30/2016 9/30/2015
Year Ago
Commercial
Banking:
Net interest income $ 94,968 $ 84,632 12.2 % Non-interest income
3,552 3,178 11.8 % Net realized gain on available-for-sale
securities 3,726 1,151 223.7 % Loss on extinguishment of debt 3,638
- 100.0 % Non-interest expense 48,276 44,223
9.2 % Net income before provision for loan losses and
taxes 50,332 44,738 12.5 % Provision for loan losses 1,670 939 77.8
% Provision for income taxes 16,200 14,209
14.0 % Net income $ 32,462 $ 29,590 9.7
% Add: merger & acquisition (M&A) expense - 471 -100.0 %
Less: provision for income taxes associated with M&A expense
- (158 ) -100.0 % Operating net income $
32,462 $ 29,903 Average Assets $ 4,015,870 $
3,516,829 Commercial Banking Segment Contribution to earnings 82 %
77 %
Mortgage
Banking:
Net interest income $ 836 $ 1,834 -54.4 % Non-interest income
45,170 35,583 26.9 % Non-interest expense 29,809
23,213 28.4 % Net income before provision for
taxes 16,197 14,204 14.0 % Provision for income taxes 5,835
5,187 12.5 % Net income $ 10,362
$ 9,017 14.9 % Add:decrease in unrealized gains (or
(Less):increase in unrealized gains) on mortgage banking activities
(SAB 109) (7,142 ) (4,934 ) 44.8 % Add / (Less): provision for
income taxes associated with SAB 109 2,535
1,752 44.8 % Operating net income $ 5,755 $
5,835 -1.4 % Average Assets $ 395,642 $ 359,173 10.2 %
Mortgage Banking Segment Contribution to earnings 26 % 24 %
Wealth
Management/Other:
Net interest income $ (609 ) $ (543 ) 12.2 % Non-interest income
799 3,688 -78.3 % Non-interest expense 5,020
3,580 40.2 % Net income (loss) before provision for
taxes (4,830 ) (435 ) 1010.3 % Provision for income taxes
(1,696 ) (147 ) 1053.7 % Net income (loss) $ (3,134 )
$ (288 ) 988.2 % Add: merger & acquisition (M&A) expense
2,284 - 100.0 % Add: legal expense associated with litigation
settlement - 500 -100.0 % Less: litigation settlement - (2,950 )
-100.0 % Less: provision for income taxes associated with
litigation settlement and M&A expense (811 ) 858
-194.5 % Operating net income (loss) $ (1,661 ) $
(1,880 ) -11.7 % Average Assets / Intersegment Eliminations $
(315,038 ) $ (295,441 ) 6.6 % Wealth Management/Other Segments
Contribution to earnings -8 % -1 % 950.6 %
Consolidated:
Net interest income $ 95,195 $ 85,923 10.8 % Non-interest income
49,521 42,449 16.7 % Net realized gain on available-for-sale
securities 3,726 1,151 223.7 % Loss on extinguishment of debt 3,638
- 100.0 % Non-interest expense 83,105 71,016
17.0 % Net income before provision for loan losses
and taxes 61,699 58,507 5.5 % Provision for loan losses 1,670 939
77.8 % Provision for income taxes 20,339
19,249 5.7 % Net income $ 39,690 $ 38,319
3.6 % Add: merger & acquisition (M&A) expense 2,284
471 384.9 % Add: legal expense associated with litigation
settlement - 500 -100.0 % Less: litigation settlement - (2,950 )
-100.0 % Add:decrease in unrealized gains (or Less: increase in
unrealized gains) on mortgage banking activities (SAB 109) (7,142 )
(4,934 ) 44.8 % Less: provision for income taxes associated with
M&A expense, litigation settlement & SAB 109 1,725
2,452 -29.7 % Operating net income $
36,557 $ 33,858 8.0 % Average Assets $ 4,096,474 $
3,580,561 14.4 % Table 12.
Cardinal Financial Corporation and Subsidiaries
Historical Segment Performance (Dollars in thousands,
except per share data) (Unaudited) Wealth
Commercial Mortgage Management/ Banking
Banking Other Consolidated For the Three
Months Ended September 30, 2016: Net income (loss) $ 11,463 $
2,816 $ (1,757 ) $ 12,522 Earnings per common share - diluted $
0.34 $ 0.08 $ (0.05 ) $ 0.37 Segment Contribution to Earnings 91.9
% 21.6 % -13.5 % 100 %
For the Three Months Ended
September 30, 2015: Net income $ 10,979 $ 631 $ (401 ) $ 11,209
Earnings per common share - diluted $ 0.33 $ 0.02 $ (0.01 ) $ 0.34
Segment Contribution to Earnings 97.9 %
5.6 % -3.6 % 100 %
For the Nine Months
Ended September 30, 2016: Net income (loss) $ 32,462 $ 10,362 $
(3,134 ) $ 39,690 Earnings per common share - diluted $ 0.97 $ 0.31
$ (0.10 ) $ 1.18 Segment Contribution to Earnings 82.2 % 25.4 %
-7.6 % 100 %
For the Nine Months Ended September 30,
2015: Net income (loss) $ 29,590 $ 9,017 $ (288 ) $ 38,319
Earnings per common share - diluted $ 0.89 $ 0.27 $ (0.01 ) $ 1.15
Segment Contribution to Earnings 77.3 %
23.4 % -0.7 % 100 %
For the Year
Ended December 31, 2015: Net income (loss) $ 39,175 $ 9,180 $
(1,021 ) $ 47,334 Earnings per common share - diluted $ 1.18 $ 0.28
$ (0.03 ) $ 1.43 Segment Contribution to Earnings 82.8 % 19.4 %
-2.2 % 100.0 %
For the Year Ended December 31, 2014:
Net income (loss) $ 34,351 $ 2,658 $ (4,326 ) $ 32,683 Earnings per
common share - diluted $ 1.05 $ 0.08 $ (0.13 ) $ 1.00 Segment
Contribution to Earnings 105.1 % 8.1 % -13.2 % 100 %
For
the Year Ended December 31, 2013: Net income (loss) $ 33,881 $
(5,215 ) $ (3,156 ) $ 25,510 Earnings per common share - diluted $
1.09 $ (0.17 ) $ (0.10 ) $ 0.82 Segment Contribution to Earnings
132.8 % -20.4 % -12.4 % 100.0 %
For the Year Ended
December 31, 2012: Net income (loss) $ 30,544 $ 17,608 $ (2,855
) $ 45,297 Earnings per common share - diluted $ 1.02 $ 0.59 $
(0.10 ) $ 1.51 Segment Contribution to Earnings 67.4 % 38.9 % -6.3
% 100.0 %
For the Year Ended December 31, 2011: Net
income (loss) $ 23,063 $ 7,791 $ (2,856 ) $ 27,998 Earnings per
common share - diluted $ 0.77 $ 0.26 $ (0.09 ) $ 0.94 Segment
Contribution to Earnings 82.4 % 27.8 % -10.2 % 100.0 %
Table 13.
Cardinal Financial
Corporation and Subsidiaries Loan Fundings and Payoffs
(Dollars in thousands) (Unaudited) Net
Draws/Pay Downs
Ending Balance Ending Balance 12/31/2015
New Loans Loan Payoffs and Transfers
9/30/2016 Commercial and industrial $ 379,414
$ 44,105 $ (24,255 ) $ (62,820 )
$ 336,444 Real
estate - commercial 1,372,627 415,924 (79,911 ) (18,335 )
$
1,690,305 Real estate - construction 694,408 46,462 (233,307
) 63,213
$ 570,776 Real estate - residential 448,168
69,369 (47,242 ) (9,895 )
$ 460,400 Home equity lines
156,852 24,136 (22,392 ) 2,919
$ 161,515 Consumer
4,841 6,779 (2,163 )
(4,074 )
$ 5,383 Total loans, net of
fees $ 3,056,310 $ 606,775 $
(409,270 ) $ (28,992 ) $
3,224,823 Table
14.
Cardinal Financial Corporation and Subsidiaries
Commercial Real Estate ("CRE") Concentrations (Dollars in
thousands) (Unaudited)
09/30/16 06/30/16
03/31/16 12/31/15
09/30/15 Construction, land development, and
other land loans $ 470,914 $ 443,879 $ 497,691 $ 459,261 $ 453,263
Owner-occupied construction, land development loans (105,709
) (89,225 ) (76,351 ) (83,237 ) (68,592
) Construction loans concentration less owner-occupied $ 365,205
$ 354,654 $ 421,340 $ 376,024 $ 384,671
As a percentage
of risk-based capital (consolidated):
Construction loans concentration 100.8 % 98.3 % 113.2 % 107.2 %
108.0 % Construction loans concentration less owner-occupied 78.2 %
78.6 % 95.8 % 87.7 % 91.7 % Loans secured by
commercial real estate properties $ 2,228,820 $ 2,146,775 $
2,105,479 $ 2,079,265 $ 1,996,623 Owner-occupied commercial real
estate properties (426,048 ) (409,772 ) (392,514 ) (421,278 )
(365,010 ) Owner-occupied construction, land development loans
(105,709 ) (89,225 ) (76,351 ) (83,237
) (68,592 ) Commercial real estate concentration less
owner-occupied construction $ 1,697,063 $ 1,647,778 $
1,636,614 $ 1,574,750 $ 1,563,021
As a percentage
of risk-based capital (consolidated):
Commercial real estate concentration 386.0 % 384.7 % 389.5 % 386.9
% 388.9 % Commercial real estate concentration less owner-occupied
construction 363.4 % 365.0 % 372.1 % 367.5 % 372.6 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161019006126/en/
Cardinal Financial CorporationBernard H.
ClineburgExecutive
Chairman703-584-3400orChristopher
BergstromChief Executive
Officer703-584-3400orMark A. WendelEVP,
Chief Financial Officer703-584-3400
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