Cardinal Financial Corporation (NASDAQ: CFNL) (the “Company”)
today announced quarterly earnings of $4.3 million, or $0.13 per
diluted share, for the period ended March 31, 2014. This compares
to earnings of $7.2 million, or $0.23 per diluted share, for the
first quarter of last year. On January 15th, the Company acquired
United Financial Banking Companies, Inc. (UFBC), and during the
quarter, the Company incurred $3.2 million of expenses related to
this merger and to the conversion of back office systems. The
after-tax impact of these expenses was $0.07 per share. Without
these expenses, the Company had adjusted quarterly earnings of $6.5
million, or $0.20 per share.
Selected Highlights
- During the quarter, loans held for
investment organically grew approximately $67 million, or over 13%
annualized. This is the fourth consecutive quarter of annualized
double digit loan growth.
- Asset quality remains excellent.
Nonperforming loans were 0.16% of total assets, and the Company had
net loan charge offs of 0.12% of average loans outstanding. The
Company had $0 real estate owned at March 31, 2014, and $4.9
million of non-accruing loans.
- The Company integrated UFBC’s systems
in March. Quarterly income and expenses include the operations of
the former UFBC since the January 15, 2014 combination.
- Despite refinance volume slowing to 18%
of originations and difficult winter weather conditions that
impacted home buying, late quarter activity resulted in mortgage
loan applications increasing to $961 million for the current
quarter, up slightly from $886 million for the previous quarter.
Mortgage bank segment net loss decreased to $167,000 compared to
$1.6 million for the previous quarter and $1.1 million for the
first quarter 2013.
- All capital ratios exceed the
requirements of banking regulators to be considered
well-capitalized. Tangible common equity capital (TCE) as a
percentage of total assets was 9.88% at March 31, 2014.
United Financial Banking Companies Acquisition
On January 15, 2014, the Company completed its previously
announced acquisition of UFBC and its primary subsidiary, The
Business Bank. In connection with the transaction, 1,616,882 shares
of the Company’s common stock were issued to UFBC’s shareholders,
along with $26.8 million in cash. The Company added $329 million of
total assets to its balance sheet, including $238 million of loans,
net of negative $3.9 million of fair value adjustments, and $295
million of deposits, including a positive $1.2 million fair value
adjustment to the CD portfolio. Additionally, the Company recorded
$24.7 million of goodwill and $2.7 million of core deposit
intangibles. During the quarter, the Company incurred legal and
accounting costs, contract termination expenses, system conversion
and integration expenses, plus employee retention and severance
payments related to the acquisition. These expenses totaled $3.2
million. Total acquisition costs were initially estimated to be a
range of $6.8 to $7.0 million and are not expected to exceed that
level. We expect remaining expenses to be incurred in the second
quarter of 2014. Our expectation of cost savings associated with
the acquisition has increased to 50%, up from 40% that was
originally reported. Four banking offices will be consolidated in
the second quarter and another two by year end.
Review of Balance Sheet
At March 31, 2014, total assets of the Company were $3.14
billion, an increase of 12% from total assets of $2.82 billion at
March 31, 2013. Loans held for investment grew $563 million, or
32%, to $2.35 billion from $1.78 billion a year ago. Excluding the
acquisition of UFBC, loans grew approximately $325 million, or 18%
annualized. Loans held for sale decreased to $265 million compared
to $535 million at March 31, 2013. Although brokered CD balances
decreased $56 million, overall deposit balances increased $288
million to $2.38 billion at March 31, 2014 versus $2.09 billion at
March 31, 2013. Demand deposits (DDA) increased to $534 million and
now represent 22.5% of total deposits. Organic DDA growth was $82
million, an increase of 23% from a year ago.
For the current quarter, organic loan growth was approximately
$67 million, or over 13% annualized. Organic DDA growth was $10
million, representing a 9.3% annualized increase since year end
2013.
Commercial Banking Segment Income Review
For the current quarter ended March 31, 2014, net income for the
commercial banking segment was $5.5 million. Before the merger and
conversion expenses incurred during the current quarter, net income
was $7.4 million compared to $9.1 million for the quarter ended
March 31, 2013. Included in the current period results is a
provision for loan losses of $1.9 million, versus a negative
provision for loan losses of $542,000 that was recorded during the
same quarter of 2013. The increase to the provision for loan loss
expense for the current quarter resulted from modest charge offs
plus appropriately adding to the allowance for loan growth.
Net interest income for the current quarter was $25.2 million
versus $22.4 million for the year ago quarter. The Company’s tax
equivalent net interest margin increased to 3.64% from 3.35% for
the same period of last year. The contribution of the assets and
liabilities from UFBC added approximately $2.3 million to net
interest income and 0.01% to the margin for the current
quarter.
Comparing the current quarter to the same quarter of 2013, the
average balance of loans held for sale decreased $278 million and
the average loans held for investment balances increased $468
million. The average balance of investments grew $97 million, and
the yield on total interest earning assets increased to 4.34% from
4.18%. Over this same period, average deposit balances increased
$50 million and the average balance of other borrowed funds
increased $88 million. The average cost of interest bearing
liabilities decreased to 0.96% from 1.08%. The acquisition of UFBC
added approximately $200 million to average loan balances and
approximately $240 million to average deposit balances, and the
yield on loans was enhanced approximately 0.06% while the overall
cost of funds decreased by approximately 0.03%.
The allowance for loan losses decreased to 1.24% of loans
outstanding at March 31, 2014 from 1.37% at December 31, 2013. This
ratio decrease is primarily the result of the addition of $238
million of acquired loans. The allowance for loan losses on the
Company’s legacy portfolio was 1.36% of loans outstanding at
quarter end 2014. The Company’s nonperforming assets were 0.16% of
total assets at March 31, 2014 compared to 0.08% at December 31,
2013 and 0.20% at March 31, 2013. For the current quarter, there
were modest net charge offs equal to 0.12% of average loans
outstanding, compared to net recoveries of 0.03% for the previous
quarter and net recoveries of 0.07% for the year ago quarter.
Non-interest income was $932,000 for the current quarter
compared to $794,000 for the year ago quarter ended March 31, 2013.
Deposit fees increased to $535,000, or 7%, from the year ago
quarter. The UFBC transaction added approximately $134,000 to
non-interest income for the first quarter 2014.
Non-interest expense was $15.8 million for the current quarter
versus $10.1 million for the year ago quarter ended March 31, 2013.
Before the merger and conversion expenses mentioned above,
non-interest expense was $13.0 million, and the bank’s efficiency
ratio was 49.8%. Approximately $1.5 million of the expense increase
from the year ago quarter is attributable to expenses associated
with the former UFBC. The Company also incurred $200,000 of
intangible expense amortization as a result of the transaction.
Another $360,000 of the expense increase resulted from the Company
adding two branches in 2013. The remaining expense increase was
incurred to support the Company’s business initiatives. During the
first quarter of 2014, the Company closed two underperforming
branches which are expected to provide $700,000 in future annual
cost savings.
Mortgage Banking Segment Income Review
For the current quarter ended March 31, 2014, net loss for the
mortgage banking segment was $167,000 versus a net loss of $1.1
million for the quarter ended March 31, 2013, and a net loss of
$1.6 million for the previous quarter ended December 31, 2013.
Non-interest income, which is reported net of commissions,
incentives and certain salary expenses, was $7.4 million versus
$7.1 million in the same prior year quarter and $4.8 million for
the last quarter of 2013. Net gains from mortgage banking
activities were $7.4 million for the most recent quarter versus
$6.3 million for the year ago quarter and $4.2 million for the last
quarter of 2013. The net gains from mortgage banking activities for
the current quarter increased $3.6 million as a result of the Staff
Accounting Bulletin (SAB) 109. For the year ago quarter and the
previous quarter, the SAB 109 adjustments were decreases of $4.7
million, and $2.3 million, respectively, in unrealized gains that
impacted reported income.
Loan applications totaled $961 million during the first quarter
of 2014, up slightly from the previous quarter as origination
trends picked up late in the quarter to offset lower refinance
activity and the impact of several winter weather events. January,
February and March applications totaled $285 million, $299 million
and $376 million, respectively. During the quarter, closed loans
were $551 million and loans sold to investors totaled $562 million,
versus $797 million and $758 million, respectively, for the
previous quarter. The margin on loans sold to investors was 2.17%,
2.24% and 1.91% for the current and previous two quarters.
Other sources of non-interest income, including managed mortgage
company affiliate fees and title insurance income, have become
insignificant as George Mason has exited these lines of
business.
For the current quarter, reported non-interest expense was $8.3
million. This compares to $9.2 million for the quarter ended March
31, 2013 and to $8.0 million for the quarter ended December 31,
2013. A portion of fixed salary expense associated with loan
closings each quarter are accounted for as an offset to income,
similar to commissions and incentives. As loan closings declined
during the current quarter, the salary expense classified as
contra-revenue declined to $1.8 million, versus $2.4 million for
the previous quarter and $3.4 million for the third quarter of
2013. Without the reclassification of these salary expenses, core
non-interest expense declined to $10.1 million for the current
quarter, versus $10.4 million and $12.2 million for the previous
two quarters, respectively. For these same periods, core salary and
benefit expense was $6.2 million, $6.4 million and $7.6 million.
The decrease is a direct result of a 24% reduction in the non
production workforce since last September. First quarter salary and
benefit expenses included $288,000 of seasonally higher payroll
taxes and retirement benefits, compared to the previous quarter
ended December 31, 2013.
The Company is continuing to take actions to return its mortgage
banking segment to meaningful profitability with each expense
category being monitored, analyzed and measured in relation to
production expectations.
Capital & Dividend Announcement
Subsequent to the acquisition of UFBC, the Company remains in
excess of well capitalized levels. The tier 1 capital ratio 10.72%
and the total risk based capital ratio is 11.71%. Because of its
continued capital strength, the Company today also announced that
its Board of Directors has declared another dividend of $0.08 per
share that will be paid on May 23, 2014 to shareholders of record
as of the close of business on May 8, 2014.
MANAGEMENT COMMENTS
Bernard H. Clineburg, Chairman and Chief Executive Officer of
the Company, said:
“The first quarter was highlighted by the completion of the
acquisition and consolidation of UFBC. Our team worked diligently
to complete the conversion in six months and continues to create
further revenue opportunities and operating efficiencies. Since our
September 9th, 2013 announcement, we saw both the UFBC loan and
deposit balances increase, attesting to our successful integration
process and the acceptance of the Cardinal brand. Not to be
overlooked is our organic commercial loan and deposit growth, which
continued to be strong as we attracted new clients and expanded
existing relationships. We are pleased with the momentum of our
purchase money activity and the progress toward right-sizing our
mortgage banking operations.
As always, we will continue to concentrate on gaining profitable
market share, either through de novo expansion or acquisition,
which will increase our franchise value. We remain committed to
building and maintaining a strong financial services company for
our shareholders, employees, clients and the communities we
serve.”
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, 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.
For an explanation of the 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, 2013 and other
reports filed with and furnished to the Securities and Exchange
Commission.
About Cardinal Financial Corporation: Cardinal Financial
Corporation, a financial holding company headquartered in Tysons
Corner, Virginia with assets of $3.14 billion at March 31, 2014,
serves the Washington Metropolitan region through its wholly-owned
subsidiary, Cardinal Bank, with 35 conveniently located banking
offices. Cardinal also operates several other subsidiaries: George
Mason Mortgage, LLC, a residential mortgage lending company based
in Fairfax, with 17 offices throughout the Washington Metropolitan
region; 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.
Table 1.
Cardinal Financial Corporation and
Subsidiaries Summary Statements of Condition (Dollars
in thousands) % Change March 31,
2014 December 31, 2013 March 31, 2013 Current
Year Year Over Year (Unaudited)
(Unaudited) Cash and due from banks $ 29,211 $ 18,285 $
13,451 59.8 % 117.2 % Federal funds sold 9,745 10,924 125,612 -10.8
% -92.2 % Investment securities available-for-sale 352,805
349,319 256,900 1.0 % 37.3 % Investment securities held-to-maturity
6,351 6,477 10,790 -1.9 % -41.1 % Investment securities – trading
4,673 3,890 3,299 20.1 %
41.6 % Total investment securities 363,829 359,686 270,989 1.2 %
34.3 % Other investments 15,455 19,068 14,048 -18.9 % 10.0 %
Loans held for sale 265,313 373,993 534,706 -29.1 % -50.4 %
Loans receivable, net of fees 2,345,702 2,040,168 1,782,916 15.0 %
31.6 % Allowance for loan losses (29,093 ) (27,864 )
(27,165 ) 4.4 % 7.1 % Loans receivable, net 2,316,609
2,012,304 1,755,751 15.1 % 31.9 % Premises and equipment,
net 27,000 20,389 19,348 32.4 % 39.5 % Goodwill and intangibles,
net 37,390 10,144 10,243 268.6 % 265.0 % Bank-owned life insurance
32,181 32,063 31,743 0.4 % 1.4 % Prepaid FDIC insurance premiums -
- 1,875 0.0 % -100.0 % Other assets 46,604 37,374 40,466 24.7 %
15.2 % TOTAL ASSETS $ 3,143,337
$ 2,894,230 $ 2,818,232 8.6 % 11.5 %
Non-interest bearing deposits $ 534,064 $ 433,749 $ 361,932 23.1 %
47.6 % Interest checking 448,163 398,136 355,368 12.6 % 26.1 %
Money markets 327,977 266,316 324,278 23.2 % 1.1 % Statement
savings 258,825 209,391 211,596 23.6 % 22.3 % Certificates of
deposit 519,806 469,279 492,165 10.8 % 5.6 % Brokered certificates
of deposit 288,093 281,988
343,679 2.2 % -16.2 % Total deposits 2,376,928 2,058,859
2,089,018 15.4 % 13.8 % Other borrowed funds 382,854 475,232
332,353 -19.4 % 15.2 % Mortgage funding checks 6,474 6,528 45,329
-0.8 % -85.7 % Escrow liabilities 1,670 1,572 6,353 6.2 % -73.7 %
Other liabilities 22,966 31,507 31,559 -27.1 % -27.2 %
Shareholders' equity 352,445 320,532
313,620 10.0 % 12.4 % TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 3,143,337 $ 2,894,230 $
2,818,232 8.6 % 11.5 %
Table 2.
Cardinal Financial Corporation and
Subsidiaries Summary Income Statements (Dollars in
thousands, except share and per share data) (Unaudited)
For the Three Months Ended March 31
2014 2013 %
Change Net interest income $ 25,667 $ 22,601 13.6
% Provision for loan losses
(1,926
) 457 -521.4
% Net interest income after provision for loan losses
23,741 23,058 3.0 % Non-interest income: Service charges on
deposit accounts 535 502 6.6 % Loan fees 212 219 -3.2 % Income from
bank owned life insurance 119 92 29.3 % Net realized gains on
investment securities 152 38 300.0 % Gain on sale of real estate -
30 -100.0 % Other non-interest income
24
22 9.1 %
Commercial banking & other segment non-interest income 1,042
903 15.4 % Title insurance & other income - 399 -100.0 %
Management fee income 21 298 -93.0 % Gains from mortgage banking
activities 15,818 21,686 -27.1 % Less: mortgage loan origination
expenses
(8,435 )
(15,359 ) -45.1
% Mortgage banking segment non-interest income 7,404
7,024 5.4 % Wealth management segment non-interest income
222 547
-59.4 % Total non-interest income 8,668
8,474 2.3 %
Net interest income and non-interest
income
32,409 31,532 2.8 % Salaries and benefits 11,389 9,986 14.0
% Occupancy 2,630 2,081 26.4 % Depreciation 966 745 29.7 % Data
processing & communications 1,615 1,128 43.2 % Professional
fees 818 1,316 -37.8 % FDIC insurance assessment 383 331 15.7 %
Mortgage loan repurchases and settlements - 62 -100.0 % Merger and
acquisition expense 3,212 - 100.0 % Other operating expense
4,777 5,033
-5.1 % Total non-interest expense 25,790
20,682 24.7 % Income before income taxes
6,619
10,850 -39.0
% Provision for income taxes 2,329
3,670 -36.5 % NET INCOME
$ 4,290 $ 7,180 -40.3 %
Earnings per common share - basic $ 0.13
$ 0.23 -43.0 % Earnings per common
share - diluted $ 0.13 $ 0.23
-43.2 % Weighted-average common shares outstanding - basic
32,127,188 30,634,092
4.9 % Weighted-average common shares outstanding -
diluted 32,608,599 31,019,110
5.1 %
Reconciliation of
Non-GAAP measures:
GAAP net income reported above $ 4,290 Add: Merger and
acquisition expense reported above 3,212 Subtract: provision for
income taxes associated with merger and acquisition expense (1,050
) NET INCOME, excluding above merger and acquisition charges
$ 6,452
Earnings per common share - basic
(excluding merger and acquisition charges)
$ 0.20 Earnings per common share - diluted (excluding merger
and acquisition charges) $ 0.20
Table 3.
Cardinal Financial Corporation and
Subsidiaries Selected Financial Information (Dollars
in thousands, except per share data and ratios)
(Unaudited) For the Three Months Ended
March 31 2014 2013
Performance Ratios: Return on average assets 0.57 % 1.01 %
Return on average equity 4.79 % 9.12 % Net interest margin (1) 3.64
% 3.35 % Efficiency ratio (2) 75.11 % 66.56 % Non-interest income
to average assets 1.15 % 1.19 % Non-interest expense to average
assets 3.41 % 2.91 %
Mortgage Banking Select Data: $
of loan applications - George Mason Mortgage $ 960,600 $ 1,483,300
$ of loan applications - Managed Mortgage Company Affiliates
1,400 546,600 Total 962,000 2,029,900
Refi % of loan applications - George Mason Mortgage 18 % 48 % Refi
% of loans applications- Managed Mortgage Company Affiliates
0 % 46 % Total 18 % 47 % $ of loans closed - George
Mason Mortgage $ 551,443 $ 1,083,217 $ of loans closed - Managed
Mortgage Company Affiliates 13,034 425,687
Total 564,477 1,508,904 # of loans closed - George
Mason Mortgage 1,689 3,234 # of loans closed - Managed Mortgage
Company Affiliates 30 1,121 Total 1,719
4,355 $ of loans sold - George Mason Mortgage $ 561,956 $
1,245,510 $ of loans sold - Managed Mortgage Company Affiliates
71,504 504,600 Total 633,460 1,750,110
$ of locked commitments - George Mason Mortgage $ 667,778 $
1,174,308 $ locked commitments at period end - George Mason
Mortgage $ 327,243 $ 572,794 $ of loans held for sale at period end
- George Mason Mortgage $ 224,248 $ 370,623 Realized gain on sales
and fees as a % of loan sold (3) 2.17 % 2.12 % Net realized gains
as a % of realized gains (Gain on sale margin) (4) 30.69 % 41.81 %
Asset Quality Data: Net charge-offs (recoveries) to
average loans receivable, net of fees 0.12 % -0.07 % Total
nonaccrual loans $ 4,947 $ 5,606 Real estate owned $ - $ -
Nonperforming loans to loans receivable, net of fees 0.21 % 0.31 %
Nonperforming loans to total assets 0.16 % 0.20 % Nonperforming
assets to total assets 0.16 % 0.20 % Total loans receivable past
due 30 to 89 days $ 2,954 $ 2,943 Total loans receivable past due
90 days or more $ - $ - Allowance for loan losses to loans
receivable, net of fees 1.24 % 1.52 % Allowance for loan losses to
nonperforming loans 588.09 % 484.57 %
Capital Ratios:
Tier 1 risk-based capital 10.72 % 12.70 % Total risk-based capital
11.71 % 13.83 % Leverage capital ratio 10.82 % 10.83 % Book value
per common share $ 11.03 $ 10.36 Tangible book value per common
share (5) $ 9.86 $ 10.03 Common shares outstanding 31,962 30,262
(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 33% for 2014 and
2013.
(2)
Efficiency ratio is calculated as total
non-interest expense divided by the total of net interest income
and non-interest income.
(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.
(4)
Net realized gains are gains net of loan
origination expense recognized on the date the loan is sold and do
not include the unrealized gains recognized at the loan commitment
date.
(5)
Tangible book value is calculated as total
shareholders' equity less goodwill and other intangible assets,
divided by common shares outstanding.
Table 4.
Cardinal Financial Corporation and Subsidiaries (Dollars
in thousands, except share and per share data)
(Unaudited) Mortgage Revenue Recognition
Impact of SAB 109 (Written Loan Commitments Recorded at Fair Value
Through Earnings) For the Three Months Ended
March 31 2014 2013
% Change
Net Gains from
Mortgage Banking Activities:
As
Reported
Fair Value of LCs / Unrealized Gains Recognized @ LC date **(see
note below) $ 15,818 $ 21,686 -27.06 % Loan origination expenses
recognized @ Loan Sale Date 8,435 15,359
-45.08 %
Reported Net Gains from Mortgage Banking
Activities 7,383 6,327 16.69 %
As
Adjusted
Realized Gains Recognized @ Loan Sale Date 12,170 26,393 -53.89 %
Loan origination expenses recognized @ Loan Sale Date 8,435
15,359 -45.08 %
Adjusted Net Gains from
Mortgage Banking Activities 3,735 11,033
-66.15 %
Impact of SAB 109
on Net Gains from Mortgage Banking Activities:
Increase/(Decrease) in Unrealized Gains on Mortgage Banking
Activities Related to SAB 109 $ 3,648 $ (4,707 ) -177.51 %
Net Income
Reconciliation for the Impact of Merger and Acquisition Expenses
and SAB 109
For the Three Months Ended March 31
2014 2013
% Change Reported Net
Income $ 4,290 $ 7,180 -40.25 %
Aftertax Merger and Acquisition
Expense
2,162 Adjusted Net Income 6,452 7,180
-10.14 % Aftertax Net Increase / (Decrease) in Unrealized Gains on
Mortgage Banking Activities Related to SAB109 2,353 (3,036 )
-177.51 %
Adjusted Net Income Before Increase / (Decrease) in
Unrealized Gain on Mortgage Banking Activities and Merger &
Acquisition Expenses $ 4,099 $ 10,216 -59.88 %
Earnings per
Share (EPS) Reconciliation:
Reported Net Income $ 0.13 $ 0.23 -43.16 %
Aftertax Merger and Acquisition
Expense
0.07 - Adjusted Net Income 0.20
0.23 Aftertax Net Increase / (Decrease) in Unrealized Gains on
Mortgage Banking Activities Related to SAB109 0.07
(0.10 ) -173.73 %
Adjusted Net Income Before Increase /
(Decrease) in Unrealized Gain on Mortgage Banking Activities and
Merger & Acquisition Expenses $ 0.13 $ 0.33
-61.83 %
Performance
Ratios (adjusted for M&A expense and change in unrealized
mortgage banking gains):
Return on average assets 0.54 % 1.44 % Return on average equity
4.58 % 12.97 % Efficiency ratio 73.58 % 57.80 % Non-interest income
to average assets 0.66 % 1.85 % ** Per the accounting guidance set
forth by SEC Staff Accounting Bulleting (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 (formally 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 5.
Cardinal Financial Corporation and
Subsidiaries Average Statements of Condition and Yields on
Earning Assets and Interest-Bearing Liabilities Three Months
Ended March 31, 2014, December 31, 2013, and March 31, 2013
(Dollars in thousands) (Unaudited) For the
Three Months Ended March 31, 2014 December 31,
2013 March 31, 2013 Average Average
Average Average Average Average
Balance Yield Balance
Yield Balance Yield
Interest-earning assets: Loans receivable, net of fees (1)
Commercial and industrial $ 259,650 4.96 % $ 218,324 4.24 % $
218,584 4.00 % Real estate - commercial 1,159,091 4.36 % 1,000,286
4.52 % 825,509 4.91 % Real estate - construction 397,199 4.86 %
343,793 5.17 % 374,301 5.12 % Real estate - residential 304,546
4.08 % 286,403 4.22 % 234,630 4.60 % Home equity lines 114,720 3.70
% 110,333 3.65 % 116,539 3.72 % Consumer 6,465
5.21 % 3,853 5.56 % 3,725
5.14 % Total loans 2,241,671 4.45 % 1,962,992
4.57 % 1,773,288 4.74 % Loans held for sale 218,094 4.54 %
285,466 4.82 % 496,038 3.67 % Investment securities -
available-for-sale (1) 342,127 3.98 % 337,097 4.03 % 244,297 4.30 %
Investment securities - held-to-maturity 8,306 1.87 % 9,694 1.70 %
11,121 2.01 % Other investments 15,521 3.40 % 13,728 2.68 % 13,539
6.88 % Federal funds sold 31,790 0.40 %
35,880 0.25 % 185,174
0.25 % Total interest-earning assets 2,857,509 4.34 %
2,644,857 4.45 % 2,723,457 4.18 %
Non-interest earning
assets: Cash and due from banks 35,831 18,159 14,166 Premises
and equipment, net 24,849 19,995 19,425 Goodwill and intangibles,
net 32,849 10,144 10,267 Accrued interest and other assets 100,878
92,763 106,841 Allowance for loan losses (30,043 ) (27,565 )
(27,384 ) TOTAL ASSETS $ 3,021,873 $
2,758,353 $ 2,846,772
Interest-bearing
liabilities: Interest checking $ 420,285 0.52 % $ 387,340 0.53
% $ 345,087 0.63 % Money markets 312,656 0.30 % 301,097 0.25 %
277,927 0.30 % Statement savings 247,568 0.27 % 214,209 0.27 %
209,820 0.27 % Certificates of deposit 754,081
1.01 % 741,677 1.18 %
992,907 1.03 % Total interest-bearing deposits
1,734,590 0.66 % 1,644,323 0.74 % 1,825,741 0.76 % Other
borrowed funds 375,775 2.34 %
304,069 2.87 % 287,645
3.08 % Total interest-bearing liabilities 2,110,365 0.96 %
1,948,392 1.07 % 2,113,386 1.08 %
Non-interest bearing
liabilities: Non-interest bearing deposits 519,016 444,791
377,518 Other liabilities 34,529 40,583 40,925 Shareholders'
equity 357,963 324,587 314,943 TOTAL
LIABILITIES & SHAREHOLDERS' EQUITY $ 3,021,873 $
2,758,353 $ 2,846,772 NET INTEREST MARGIN (1)
3.64 % 3.65 % 3.35 %
(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 33% for 2014 and
2013.
Table 6.
Cardinal Financial
Corporation and Subsidiaries Segment Reporting
(Dollars in thousands) (Unaudited)
Commercial Mortgage Wealth Intersegment
Banking Banking Management Other
Elimination Consolidated At and for the Three
Months Ended March 31, 2014: Net interest income
$
25,193
$ 638 $ - $ (164 ) $ - $ 25,667 Non-interest income 932 7,391 167
178 - 8,668 Non-interest expense 15,792 8,293
112 1,593 -
25,790 Net income (loss) before provision and taxes 10,333
(264 )
55
(1,579 )
-
8,545 Provision for loan losses 1,926 - - - - 1,926 Provision for
income taxes 2,895 (97 ) 19
(488 ) - 2,329 Net income (loss)
$ 5,512 $ (167 ) $ 36 $ (1,091 ) $ - $ 4,290
Add: merger & acquisition expense reported above 2,772 -
- 440 - 3,212 Subtract: provision for income taxes associated with
merger & acquisition expense (908 ) -
- (142 ) - (1,050 ) Net
income, excluding above merger and acquisition charges $ 7,376
$ (167 ) $ 36 $ (793 ) $ - $ 6,452
Average Assets $ 2,943,545 $ 230,424 $ 2,300 $ 379,810 $
(534,206 ) $ 3,021,873
At and for the Three Months Ended
March 31, 2013: Net interest income $ 22,397 $ 398 $ - $ (194 )
$ - $ 22,601 Non-interest income 794 7,101 547 42 (10 ) 8,474
Non-interest expense 10,052 9,201
677 762 (10 ) 20,682
Net income (loss) before provision and taxes 13,139 (1,702 )
(130 )
(914 )
-
10,393 Provision for loan losses (542 ) 85 - - - (457 ) Provision
for income taxes 4,599 (641 ) (43 )
(245 ) - 3,670 Net income (loss)
$ 9,082 $ (1,146 ) $ (87 ) $ (669 ) $ - $ 7,180
Average Assets $ 2,840,355 $ 498,024 $ 2,528 $
331,480 $ (825,615 ) $ 2,846,772
Cardinal Financial CorporationBernard H.
ClineburgChairman, Chief Executive OfficerorMark A. WendelEVP,
Chief Financial Officer703-584-3400
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