Exhibit 99.1
|
|
NEWS RELEASE |
| | |
FOR IMMEDIATE RELEASE | Contact: | Bernard H. Clineburg, |
Tysons Corner, Virginia | Chairman, Chief Executive Officer |
July 24, 2013 | or |
| Mark A. Wendel, |
| EVP, Chief Financial Officer |
| 703-584-3400 |
CARDINAL ANNOUNCES SECOND QUARTER EARNINGS,
STRONG LOAN GROWTH, PRISTINE ASSET QUALITY
Cardinal Financial Corporation (NASDAQ: CFNL) (the “Company”) today announced quarterly earnings of $9.8 million, or $0.32 per diluted share, for the period ended June 30, 2013. For the six month year to date period, earnings were $17.0 million, or $0.55 per diluted share. This compares to earnings of $10.2 million, or $0.34 per diluted share, and $17.8 million, or $0.59 per diluted share, for the comparable three and six month periods of 2012. Return on average assets was 1.42% for the current quarter versus 1.59% for the year ago quarter, while return on average equity was 12.13% and 14.68% for the current and year ago quarter, respectively.
Selected Highlights
· Commercial banking segment earnings increased 31% to $8.4 million for the quarter from $6.5 million a year ago, and increased 44% to $17.5 million from $12.2 for the comparable year to date periods ended June 30, 2013 and 2012, respectively.
· During the most recent quarter, loans held for investment grew at an annual rate of 17%, or $75 million, to $1.86 billion.
· Asset quality remains excellent. Nonperforming loans decreased to 0.10% of total assets, and the Company had net loan recoveries of 0.01% of average loans outstanding year to date. The Company continued to have $0 other real estate owned at June 30, 2013, and non-accruing loans decreased to only $2.9 million. The Company had no other past-due loans over 90 days.
· Total deposits grew to $2.10 billion, an increase of 6% compared to June 30, 2012. Noninterest bearing deposit account balances increased over $100 million or 34% year over year.
· At June 30, 2013, total assets of the Company were $2.90 billion, an increase of 7% from total assets of $2.71 billion at June 30, 2012.
· Mortgage loan applications rose to a record $1.7 billion for the current quarter, or 34% over the second quarter of last year, although refinance volume dropped to 34% of total applications from 48% for the previous quarter and from 57% for the year ago quarter. In the second quarter of 2013, purchase money loan closings increased $400 million, or 95%, from the first quarter of 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 10.35% at June 30, 2013.
MANAGEMENT COMMENTS
Bernard H. Clineburg, Chairman and Chief Executive Officer of the Company, said:
“This quarter’s results again include solid earnings in the commercial banking segment, ongoing pristine credit quality metrics and continued growth in purchase money mortgage loan production. While earnings from our mortgage banking unit were lower than a year ago, production volumes have increased as we added capacity. We also acknowledge that mortgage lending is sensitive to changing market conditions that may cause short-term disruption.
We are excited about our strategic growth plans and look forward to our upcoming banking office openings in Georgetown and Rockville, MD. Our Company will continue to concentrate on gaining market share in all of our markets and increasing franchise value for shareholders. We remain committed to building and maintaining a strong financial services company for our employees, clients, shareholders and the communities we serve.”
Commercial Banking Segment Income Review
For the current quarter ended June 30, 2013, net income for the commercial banking segment increased 31% to $8.4 million from $6.5 million for the year ago quarter. Net interest income for the current quarter was $21.9 million compared to $21.1 million for the year ago quarter. The Company’s tax equivalent net interest margin increased to 3.41% from 3.35% for the previous quarter.
For the comparable six month periods ended June 30, 2013 and 2012, net income increased 44% to $17.5 million from $12.2 million. Although the net interest margin has declined from a year ago, net interest income increased to $44.3 million versus $42.4 million a year ago due to growth in average earning assets to $2.68 billion from $2.40 billion.
The allowance for loan losses decreased to 1.45% of loans outstanding at June 30, 2013. The Company’s nonperforming assets decreased to 0.10% of total assets compared to 0.20% at the previous quarter end and 0.43% a year ago. Year to date, net loan recoveries have been 0.01% of average loans outstanding, compared to net charge offs of 0.41% for the same year ago period. The continued improvement in credit metrics resulted in a negative provision for loan losses of $132,000 for the current quarter and $674,000 year to date, versus a provision for loan losses of $2.2 million and $3.9 million for the three and six month periods ended June 30, 2012, respectively.
Non-interest expense was $10.1 million for the current quarter and $20.2 million year to date, compared to $10.2 million and $21.8 million for the year ago comparable periods. The increased expense associated with the addition of seven commercial lenders, a team for the new Georgetown location and other key positions over the past year to support the Company’s growth, was more than offset by a reduction in incentive compensation, lower marketing costs and overall expense controls.
Mortgage Banking Segment Income Review
For the current quarter ended June 30, 2013, noninterest income for the mortgage banking segment was $12.5 million versus $14.9 million in the same prior year quarter and $7.1 million for the previous quarter ended March 31, 2013. Net gains from mortgage banking activities were $11.2 million for the most recent quarter versus $13.5 million for the year ago quarter and $6.3 million for the previous quarter. For the comparable six month periods ended June 30, 2013 and 2012, noninterest income for the mortgage banking segment was $19.6 million versus $23.5 million. Net gains from mortgage banking activities were $17.5 million for the current period versus $20.4 million for the same period a year ago.
For the current quarter, non-interest expense increased to $9.3 million compared to $8.7 million for the quarter ended June 30, 2012. For the six month periods ended June 30, 2013 and 2012 expenses increased to $18.5 million from $13.6 million, respectively. The increase in non-interest expense is attributable to the strategic expansion of the Company’s mortgage banking operations. Specifically, the mortgage banking segment currently has 182 loan officers, up from 127 officers a year ago and up from 173 at the end of last quarter. Over the past year, the Company added 5 offices and now operates in 19 mortgage banking locations. Included in the recent expansion is the hiring of new lenders in the Richmond and Virginia Beach areas.
As a result of its expansion, the Company’s mortgage subsidiary, George Mason, accepted a record amount of loan applications of approximately $1.7 billion, and closed a record of $1.4 billion mortgage loans, during the second quarter of 2013. As a result of the recent uptick in mortgage rates, the percentage of closings resulting from refinance activity has decreased during the quarter to 34% from 48% last quarter and from 52% for the year ago quarter. However, purchase money loan closings in the second quarter of 2013 increased approximately $400 million, or 95%, from the first quarter of 2013. Production has been maintained as new mortgage loan officers have been hired that have a history of success with purchase money mortgage lending. For the six month period ended June 30, 2013, George Mason closed approximately $1.9 billion purchase money mortgages versus approximately $1.5 billion for the entire 12 months ended December 31, 2012.
Review of Balance Sheet
At June 30, 2013, total assets of the Company grew $186 million to $2.90 billion, an increase of 7% from total assets of $2.71 billion at June 30, 2012. Loans held for investment grew 6% to $1.86 billion at June 30, 2013, from $1.75 billion at June 30, 2012. During this period, the Bank’s investment portfolio decreased to $252 million compared to $313 million a year ago. Loans held for sale increased to $628 million compared to $519 million at June 30, 2012. At March 31, 2013, total assets were $2.82 billion. The current quarter increase in total assets is primarily the result of a 17% annualized increase of $75 million in the loans held for investment portfolio and a $94 million increase in mortgage loans held for sale.
The Bank’s quarterly asset growth was funded primarily from its available cash position. At June 30, 2013, overnight investments decreased $105 million from the quarter ended March 31, 2013. Additionally, noninterest bearing deposits grew $43 million during the quarter. Over the past year, noninterest bearing deposit account balances have increased 34%, or approximately $102 million, reflecting the success of the Bank’s strategic initiatives to generate core deposits.
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, 2012 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 $2.90 billion at June 30, 2013, serves the Washington Metropolitan region through its wholly-owned subsidiary, Cardinal Bank, with 27 conveniently located banking offices. Cardinal also operates 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 full-service brokerage 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.
Cardinal Financial Corporation and Subsidiaries
Summary Statements of Condition
(Dollars in thousands)
| | | | | | | | % Change | |
| | June 30, 2013 | | December 31, 2012 | | June 30, 2012 | | Current Year | | Year Over Year | |
| | (Unaudited) | | | | (Unaudited) | | | | | |
Cash and due from banks | | $ | 19,715 | | $ | 17,552 | | $ | 13,257 | | 12.3 | % | 48.7 | % |
Federal funds sold | | 20,487 | | 49,588 | | 16,164 | | -58.7 | % | 26.7 | % |
| | | | | | | | | | | |
Investment securities available-for-sale | | 238,011 | | 271,903 | | 297,826 | | -12.5 | % | -20.1 | % |
Investment securities held-to-maturity | | 10,506 | | 11,366 | | 12,236 | | -7.6 | % | -14.1 | % |
Investment securities — trading | | 3,518 | | 3,151 | | 2,969 | | 11.6 | % | 18.5 | % |
Total investment securities | | 252,035 | | 286,420 | | 313,031 | | -12.0 | % | -19.5 | % |
| | | | | | | | | | | |
Other investments | | 14,048 | | 14,302 | | 15,534 | | -1.8 | % | -9.6 | % |
Loans held for sale | | 628,481 | | 785,751 | | 519,349 | | -20.0 | % | 21.0 | % |
| | | | | | | | | | | |
Loans receivable, net of fees | | 1,857,454 | | 1,803,429 | | 1,748,715 | | 3.0 | % | 6.2 | % |
Allowance for loan losses | | (26,934 | ) | (27,400 | ) | (26,660 | ) | -1.7 | % | 1.0 | % |
Loans receivable, net | | 1,830,520 | | 1,776,029 | | 1,722,055 | | 3.1 | % | 6.3 | % |
| | | | | | | | | | | |
Premises and equipment, net | | 19,318 | | 19,192 | | 19,123 | | 0.7 | % | 1.0 | % |
Goodwill and intangibles, net | | 10,193 | | 10,292 | | 10,391 | | -1.0 | % | -1.9 | % |
Bank-owned life insurance | | 31,834 | | 31,652 | | 35,497 | | 0.6 | % | -10.3 | % |
Prepaid FDIC insurance premiums | | — | | 2,165 | | 2,771 | | -100.0 | % | -100.0 | % |
Other real estate owned | | — | | — | | 3,126 | | 0.0 | % | -100.0 | % |
Other assets | | 73,471 | | 46,244 | | 43,872 | | 58.9 | % | 67.5 | % |
| | | | | | | | | | | |
TOTAL ASSETS | | $ | 2,900,102 | | $ | 3,039,187 | | $ | 2,714,170 | | -4.6 | % | 6.9 | % |
| | | | | | | | | | | |
Non-interest bearing deposits | | $ | 404,953 | | $ | 351,815 | | $ | 303,138 | | 15.1 | % | 33.6 | % |
Interest bearing deposits | | 1,699,837 | | 1,891,943 | | 1,686,352 | | -10.2 | % | 0.8 | % |
Total deposits | | 2,104,790 | | 2,243,758 | | 1,989,490 | | -6.2 | % | 5.8 | % |
| | | | | | | | | | | |
Other borrowed funds | | 397,181 | | 392,275 | | 352,399 | | 1.3 | % | 12.7 | % |
Mortgage funding checks | | 18,653 | | 51,679 | | 50,088 | | -63.9 | % | -62.8 | % |
Escrow liabilities | | 4,307 | | 4,629 | | 3,409 | | -7.0 | % | 26.3 | % |
Other liabilities | | 59,084 | | 38,780 | | 42,362 | | 52.4 | % | 39.5 | % |
| | | | | | | | | | | |
Shareholders’ equity | | 316,087 | | 308,066 | | 276,422 | | 2.6 | % | 14.3 | % |
| | | | | | | | | | | |
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | | $ | 2,900,102 | | $ | 3,039,187 | | $ | 2,714,170 | | -4.6 | % | 6.9 | % |
Cardinal Financial Corporation and Subsidiaries
Summary Income Statements
(Dollars in thousands, except share and per share data)
(Unaudited)
| | For the Three Months
Ended June 30 | | | | For the Six Months Ended
June 30 | | | |
| | 2013 | | 2012 | | % Change | | 2013 | | 2012 | | % Change | |
| | | | | | | | | | | | | |
Net interest income | | $ | 22,253 | | $ | 21,441 | | 3.8 | % | $ | 44,854 | | $ | 43,179 | | 3.9 | % |
Provision for loan losses | | 132 | | (2,225 | ) | -105.9 | % | 589 | | (4,123 | ) | -114.3 | % |
Net interest income after provision for loan losses | | 22,385 | | 19,216 | | 16.5 | % | 45,443 | | 39,056 | | 16.4 | % |
| | | | | | | | | | | | | |
Service charges on deposit accounts | | 489 | | 473 | | 3.4 | % | 991 | | 918 | | 8.0 | % |
Loan fees | | 274 | | 441 | | -37.9 | % | 493 | | 825 | | -40.2 | % |
Title insurance & other income | | 351 | | 506 | | -30.6 | % | 749 | | 964 | | -22.3 | % |
Investment fee income | | 401 | | 649 | | -38.2 | % | 948 | | 1,262 | | -24.9 | % |
Net gains from mortgage banking activities | | 11,161 | | 13,513 | | -17.4 | % | 17,488 | | 20,395 | | -14.3 | % |
Management fee income | | 811 | | 883 | | -8.2 | % | 1,109 | | 1,892 | | -41.4 | % |
Income from bank owned life insurance | | 91 | | 171 | | -46.8 | % | 183 | | 343 | | -46.6 | % |
Net realized gains on investment securities | | 43 | | (29 | ) | -248.3 | % | 81 | | 158 | | -48.7 | % |
Gain (loss) on sale of real estate | | — | | — | | 0.0 | % | 30 | | (473 | ) | -100.0 | % |
Other non-interest income (loss) | | 6 | | (44 | ) | -113.6 | % | 30 | | (40 | ) | -175.0 | % |
Total non-interest income | | 13,627 | | 16,563 | | -17.7 | % | 22,102 | | 26,244 | | -15.8 | % |
| | | | | | | | | | | | | |
Net interest income and non-interest income | | 36,012 | | 35,779 | | 0.7 | % | 67,545 | | 65,300 | | 3.4 | % |
| | | | | | | | | | | | | |
Salaries and benefits | | 10,389 | | 10,872 | | -4.4 | % | 20,375 | | 20,384 | | 0.0 | % |
Occupancy | | 2,086 | | 1,751 | | 19.1 | % | 4,167 | | 3,460 | | 20.4 | % |
Depreciation | | 777 | | 643 | | 20.8 | % | 1,522 | | 1,244 | | 22.3 | % |
Data processing & communications | | 1,141 | | 1,031 | | 10.7 | % | 2,269 | | 2,197 | | 3.3 | % |
Professional fees | | 1,144 | | 832 | | 37.5 | % | 2,461 | | 1,571 | | 56.7 | % |
FDIC insurance assessment | | 317 | | 326 | | -2.8 | % | 648 | | 653 | | -0.8 | % |
Mortgage loan repurchases and settlements | | (219 | ) | 185 | | -218.4 | % | (157 | ) | 300 | | -152.3 | % |
Other operating expense | | 5,616 | | 4,731 | | 18.7 | % | 10,648 | | 8,642 | | 23.2 | % |
Total non-interest expense | | 21,251 | | 20,371 | | 4.3 | % | 41,933 | | 38,451 | | 9.1 | % |
Income before income taxes | | 14,761 | | 15,408 | | -4.2 | % | 25,612 | | 26,849 | | -4.6 | % |
Provision for income taxes | | 4,958 | | 5,257 | | -5.7 | % | 8,628 | | 9,045 | | -4.6 | % |
NET INCOME | | $ | 9,803 | | $ | 10,151 | | -3.4 | % | $ | 16,984 | | $ | 17,804 | | -4.6 | % |
| | | | | | | | | | | | | |
Earnings per common share - basic | | $ | 0.32 | | $ | 0.34 | | -6.7 | % | $ | 0.55 | | $ | 0.60 | | -7.8 | % |
Earnings per common share - diluted | | $ | 0.32 | | $ | 0.34 | | -6.3 | % | $ | 0.55 | | $ | 0.59 | | -7.6 | % |
Weighted-average common shares outstanding - basic | | 30,668,490 | | 29,639,938 | | 3.5 | % | 30,651,995 | | 29,612,979 | | 3.5 | % |
Weighted-average common shares outstanding - diluted | | 31,026,091 | | 30,103,480 | | 3.1 | % | 31,032,755 | | 30,043,009 | | 3.3 | % |
Cardinal Financial Corporation and Subsidiaries
Selected Financial Information
(Dollars in thousands, except per share data and ratios)
(Unaudited)
| | For the Three Months Ended
June 30 | | For the Six Months Ended June
30 | |
| | 2013 | | 2012 | | 2013 | | 2012 | |
Performance Ratios: | | | | | | | | | |
Return on average assets | | 1.42 | % | 1.59 | % | 1.21 | % | 1.42 | % |
Return on average equity | | 12.13 | % | 14.78 | % | 10.65 | % | 13.18 | % |
Net interest margin (1) | | 3.41 | % | 3.57 | % | 3.38 | % | 3.64 | % |
Efficiency ratio (2) | | 59.23 | % | 53.60 | % | 62.63 | % | 55.39 | % |
Non-interest income to average assets | | 1.97 | % | 2.60 | % | 1.58 | % | 2.09 | % |
Non-interest expense to average assets | | 3.08 | % | 3.20 | % | 2.99 | % | 3.06 | % |
| | | | | | | | | |
Mortgage Banking Select Data: | | | | | | | | | |
$ of loan applications - George Mason Mortgage | | $ | 1,691,000 | | $ | 1,258,000 | | $ | 3,174,000 | | $ | 2,308,000 | |
$ of loan applications - Managed Mortgage Company Affiliates | | 611,000 | | 652,000 | | 1,157,000 | | 1,427,000 | |
Total | | 2,302,000 | | 1,910,000 | | 4,331,000 | | 3,735,000 | |
| | | | | | | | | |
Refi % of loan applications - George Mason Mortgage | | 34 | % | 52 | % | 40 | % | 60 | % |
Refi % of loans applications- Managed Mortgage Company Affiliates | | 32 | % | 46 | % | 39 | % | 56 | % |
Total | | 33 | % | 50 | % | 40 | % | 58 | % |
| | | | | | | | | |
$ of loans closed - George Mason Mortgage | | $ | 1,393,253 | | $ | 890,017 | | $ | 2,476,486 | | $ | 1,638,064 | |
$ of loans closed - Managed Mortgage Company Affiliates | | 536,133 | | 505,219 | | 961,819 | | 1,168,754 | |
Total | | 1,929,386 | | 1,395,236 | | 3,438,305 | | 2,806,818 | |
| | | | | | | | | |
# of loans closed - George Mason Mortgage | | 4,001 | | 2,666 | | 7,235 | | 4,859 | |
# of loans closed - Managed Mortgage Company Affiliates | | 1,364 | | 1,336 | | 2,485 | | 3,103 | |
Total | | 5,365 | | 4,002 | | 9,720 | | 7,962 | |
| | | | | | | | | |
$ of loans sold - George Mason Mortgage | | $ | 1,324,674 | | $ | 832,152 | | $ | 2,570,184 | | $ | 1,579,608 | |
$ of loans sold - Managed Mortgage Company Affiliates | | 504,747 | | 510,248 | | 1,009,146 | | 1,059,690 | |
Total | | 1,829,421 | | 1,342,400 | | 3,579,330 | | 2,639,298 | |
| | | | | | | | | |
$ of locked commitments - George Mason Mortgage | | $ | 1,309,466 | | $ | 1,068,626 | | $ | 2,483,775 | | $ | 1,900,831 | |
$ locked commitments at period end - George Mason Mortgage | | | | | | $ | 489,000 | | $ | 473,000 | |
$ of loans held for sale at period end - George Mason Mortgage | | | | | | $ | 439,000 | | $ | 332,000 | |
Realized gain on sales as a % of loan sold (3) | | 2.19 | % | 2.10 | % | 2.16 | % | 2.00 | % |
Net realized gains as a % of realized gains (Gain on sale margin) (4) | | 42.97 | % | 39.53 | % | 42.41 | % | 37.89 | % |
| | | | | | | | | |
Asset Quality Data: | | | | | | | | | |
Net charge-offs (recoveries) to average loans receivable, net of fees | | | | | | -0.01 | % | 0.41 | % |
Total nonaccrual loans | | | | | | $ | 2,867 | | $ | 11,536 | |
Real estate owned | | | | | | $ | — | | $ | 3,126 | |
Nonperforming loans to loans receivable, net of fees | | | | | | 0.15 | % | 0.66 | % |
Nonperforming loans to total assets | | | | | | 0.10 | % | 0.43 | % |
Nonperforming assets to total assets | | | | | | 0.10 | % | 0.54 | % |
Total loans receivable past due 30 to 89 days | | | | | | $ | 617 | | $ | 340 | |
Total loans receivable past due 90 days or more | | | | | | $ | — | | $ | — | |
Allowance for loan losses to loans receivable, net of fees | | | | | | 1.45 | % | 1.52 | % |
Allowance for loan losses to nonperforming loans | | | | | | 939.45 | % | 231.10 | % |
| | | | | | | | | |
Capital Ratios: | | | | | | | | | |
Tier 1 risk-based capital | | | | | | 12.48 | % | 11.74 | % |
Total risk-based capital | | | | | | 13.56 | % | 12.92 | % |
Leverage capital ratio | | | | | | 11.47 | % | 10.57 | % |
Book value per common share | | | | | | $ | 10.44 | | $ | 9.45 | |
Tangible book value per common share (5) | | | | | | $ | 10.11 | | $ | 9.09 | |
Common shares outstanding | | | | | | 30,265 | | 29,253 | |
(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 34% for 2013 and 35% for 2012.
(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.
Cardinal Financial Corporation and Subsidiaries
Mortgage Revenue Recognition Impact of SAB 109 (Written Loan Commitments Recorded at Fair Value Through Earnings)
For the Three and Six Months Ended June 30, 2013 and 2012
(Dollars in thousands, except share and per share data)
(Unaudited)
| | For the Three Months Ended
June 30 | | | | For the Six Months Ended June
30 | | | |
| | 2013 | | 2012 | | % Change | | 2013 | | 2012 | | % Change | |
Net Gains from Mortgage Banking Activities: | | | | | | | | | | | | | |
As Reported | | | | | | | | | | | | | |
Fair Value of LCs / Unrealized Gains Recognized @ LC date **(see note below) | | $ | 27,713 | | $ | 24,067 | | 15.15 | % | $ | 49,399 | | $ | 40,057 | | 23.32 | % |
Loan origination expenses recognized @ Loan Sale Date | | 16,552 | | 10,554 | | 56.83 | % | 31,911 | | 19,662 | | 62.30 | % |
Reported Net Gains from Mortgage Banking Activities | | 11,161 | | 13,513 | | -17.41 | % | 17,488 | | 20,395 | | -14.25 | % |
| | | | | | | | | | | | | |
As Adjusted | | | | | | | | | | | | | |
Realized Gains Recognized @ Loan Sale Date | | 29,022 | | 17,453 | | 66.29 | % | 55,414 | | 31,657 | | 75.05 | % |
Loan origination expenses recognized @ Loan Sale Date | | 16,552 | | 10,554 | | 56.83 | % | 31,911 | | 19,662 | | 62.30 | % |
Adjusted Net Gains from Mortgage Banking Activities | | 12,470 | | 6,899 | | 80.75 | % | 23,503 | | 11,995 | | 95.94 | % |
| | | | | | | | | | | | | |
Impact of SAB 109 on Net Gains from Mortgage Banking Activities: | | | | | | | | | | | | | |
Increase/(Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB 109 | | $ | (1,309 | ) | $ | 6,614 | | -119.79 | % | $ | (6,015 | ) | $ | 8,400 | | -171.61 | % |
| | | | | | | | | | | | | |
Net Income Reconciliation: | | | | | | | | | | | | | |
Reported Net Income | | $ | 9,803 | | $ | 10,151 | | -3.43 | % | $ | 16,984 | | $ | 17,804 | | -4.61 | % |
Aftertax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB109 | | (844 | ) | 4,266 | | -119.79 | % | (3,880 | ) | 5,418 | | -171.61 | % |
Adjusted Net Income Before Increase / (Decrease) in Unrealized Gain on Mortgage Banking Activities | | $ | 10,647 | | $ | 5,885 | | 80.92 | % | $ | 20,864 | | $ | 12,386 | | 68.45 | % |
| | | | | | | | | | | | | |
Earnings per Share (EPS) Reconciliation: | | | | | | | | | | | | | |
Reported Net Income | | $ | 0.32 | | $ | 0.34 | | -6.30 | % | $ | 0.55 | | $ | 0.59 | | -7.65 | % |
Aftertax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB109 | | (0.03 | ) | 0.14 | | -119.20 | % | (0.13 | ) | 0.18 | | -169.32 | % |
Adjusted Net Income Before Increase / (Decrease) in Unrealized Gain on Mortgage Banking Activities | | $ | 0.34 | | $ | 0.20 | | 75.54 | % | $ | 0.67 | | $ | 0.41 | | 63.07 | % |
| | | | | | | | | | | | | |
Performance Ratios (adjusted for change in unrealized mortgage banking gains): | | | | | | | | | | | | | |
Return on average assets | | 1.54 | % | 0.92 | % | | | 1.49 | % | 0.98 | % | | |
Return on average equity | | 13.18 | % | 8.57 | % | | | 13.08 | % | 9.17 | % | | |
Efficiency ratio | | 57.14 | % | 64.90 | % | | | 57.47 | % | 63.01 | % | | |
Non-interest income to average assets | | 2.16 | % | 1.56 | % | | | 2.01 | % | 1.42 | % | | |
**
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.
Cardinal Financial Corporation and Subsidiaries
Average Statements of Condition and Yields on Earning Assets and Interest-Bearing Liabilities
Three and Six Months Ended June 30, 2013 and 2012
(Dollars in thousands)
(Unaudited)
| | For the Three Months Ended | | For the Six Months Ended | |
| | June 30, 2013 | | June 30, 2012 | | June 30, 2013 | | June 30, 2012 | |
| | Average
Balance | | Average
Yield | | Average
Balance | | Average
Yield | | Average
Balance | | Average
Yield | | Average
Balance | | Average
Yield | |
Interest-earning assets: | | | | | | | | | | | | | | | | | |
Loans receivable, net of fees (1) | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 209,858 | | 4.07 | % | $ | 227,242 | | 4.02 | % | $ | 214,197 | | 4.04 | % | $ | 238,039 | | 4.12 | % |
Real estate - commercial | | 856,942 | | 4.85 | % | 745,343 | | 5.42 | % | 841,312 | | 4.88 | % | 741,280 | | 5.47 | % |
Real estate - construction | | 336,877 | | 5.41 | % | 322,140 | | 5.45 | % | 355,486 | | 5.26 | % | 313,254 | | 5.35 | % |
Real estate - residential | | 226,737 | | 4.42 | % | 259,044 | | 4.85 | % | 230,715 | | 4.51 | % | 238,050 | | 4.94 | % |
Home equity lines | | 113,951 | | 3.68 | % | 120,038 | | 3.74 | % | 115,238 | | 3.70 | % | 120,653 | | 3.72 | % |
Consumer | | 3,154 | | 5.69 | % | 2,935 | | 5.48 | % | 3,438 | | 5.39 | % | 2,994 | | 5.24 | % |
Total loans | | 1,747,519 | | 4.75 | % | 1,676,742 | | 5.03 | % | 1,760,386 | | 4.75 | % | 1,654,270 | | 5.05 | % |
| | | | | | | | | | | | | | | | | |
Loans held for sale | | 474,549 | | 3.85 | % | 345,951 | | 4.16 | % | 485,234 | | 3.76 | % | 371,759 | | 4.11 | % |
Investment securities - available-for-sale (1) | | 228,883 | | 4.28 | % | 266,377 | | 4.39 | % | 236,548 | | 4.29 | % | 268,323 | | 4.41 | % |
Investment securities - held-to-maturity | | 10,685 | | 1.82 | % | 12,387 | | 2.56 | % | 10,902 | | 1.92 | % | 12,576 | | 2.60 | % |
Other investments | | 13,312 | | 2.30 | % | 16,332 | | 1.51 | % | 13,425 | | 2.34 | % | 16,394 | | 1.35 | % |
Federal funds sold (1) | | 161,232 | | 0.26 | % | 109,077 | | 0.24 | % | 173,137 | | 0.25 | % | 73,756 | | 0.24 | % |
Total interest-earning assets | | 2,636,180 | | 4.25 | % | 2,426,866 | | 4.58 | % | 2,679,632 | | 4.21 | % | 2,397,078 | | 4.65 | % |
| | | | | | | | | | | | | | | | | |
Non-interest earning assets: | | | | | | | | | | | | | | | | | |
Cash and due from banks | | 19,246 | | | | 15,422 | | | | 16,720 | | | | 16,087 | | | |
Premises and equipment, net | | 19,530 | | | | 18,673 | | | | 19,478 | | | | 18,466 | | | |
Goodwill and intangibles, net | | 10,217 | | | | 10,419 | | | | 10,242 | | | | 10,445 | | | |
Accrued interest and other assets | | 103,104 | | | | 103,100 | | | | 104,907 | | | | 100,949 | | | |
Allowance for loan losses | | (27,428 | ) | | | (26,894 | ) | | | (27,406 | ) | | | (26,978 | ) | | |
| | | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 2,760,849 | | | | $ | 2,547,586 | | | | $ | 2,803,573 | | | | $ | 2,516,047 | | | |
| | | | | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | | | | |
Interest checking | | $ | 380,378 | | 0.63 | % | $ | 292,467 | | 1.04 | % | $ | 362,830 | | 0.63 | % | $ | 237,823 | | 0.88 | % |
Money markets | | 297,597 | | 0.31 | % | 278,168 | | 0.36 | % | 287,816 | | 0.31 | % | 230,755 | | 0.38 | % |
Statement savings | | 211,553 | | 0.27 | % | 216,689 | | 0.31 | % | 210,691 | | 0.27 | % | 217,194 | | 0.34 | % |
Certificates of deposit | | 807,912 | | 1.17 | % | 812,593 | | 1.30 | % | 899,899 | | 1.10 | % | 890,161 | | 1.24 | % |
Total interest-bearing deposits | | 1,697,440 | | 0.79 | % | 1,599,917 | | 0.96 | % | 1,761,236 | | 0.78 | % | 1,575,933 | | 0.94 | % |
| | | | | | | | | | | | | | | | | |
Other borrowed funds | | 292,051 | | 2.99 | % | 316,301 | | 2.96 | % | 289,860 | | 3.03 | % | 329,388 | | 2.87 | % |
Total interest-bearing liabilities | | 1,989,491 | | 1.11 | % | 1,916,218 | | 1.29 | % | 2,051,096 | | 1.09 | % | 1,905,321 | | 1.27 | % |
| | | | | | | | | | | | | | | | | |
Noninterest-bearing liabilities: | | | | | | | | | | | | | | | | | |
Noninterest-bearing deposits | | 407,323 | | | | 321,424 | | | | 392,503 | | | | 306,542 | | | |
Other liabilities | | 40,851 | | | | 35,133 | | | | 40,888 | | | | 34,095 | | | |
| | | | | | | | | | | | | | | | | |
Shareholders’ equity | | 323,184 | | | | 274,811 | | | | 319,086 | | | | 270,089 | | | |
| | | | | | | | | | | | | | | | | |
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | | $ | 2,760,849 | | | | $ | 2,547,586 | | | | $ | 2,803,573 | | | | $ | 2,516,047 | | | |
| | | | | | | | | | | | | | | | | |
NET INTEREST MARGIN (1) | | | | 3.41 | % | | | 3.57 | % | | | 3.38 | % | | | 3.64 | % |
(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 34% for 2013 and 35% for 2012.
Cardinal Financial Corporation and Subsidiaries
Segment Reporting
(Dollars in thousands)
(Unaudited)
| | | | | | Wealth | | | | | | | |
| | Commercial | | Mortgage | | Management & | | | | Intersegment | | | |
| | Banking | | Banking | | Trust Services | | Other | | Elimination | | Consolidated | |
At and for the Three Months Ended June 30, 2013: | | | | | | | | | | | | | |
Net interest income | | $ | 21,903 | | $ | 517 | | $ | — | | $ | (167 | ) | $ | — | | $ | 22,253 | |
Non-interest income | | 728 | | 12,458 | | 401 | | 48 | | (8 | ) | 13,627 | |
Non-interest expense | | 10,146 | | 9,257 | | 695 | | 1,161 | | (8 | ) | 21,251 | |
Net income (loss) before provision and taxes | | 12,485 | | 3,718 | | (294 | ) | (1,280 | ) | — | | 14,629 | |
Provision for loan losses | | (132 | ) | — | | — | | — | | — | | (132 | ) |
Provision for income taxes | | 4,172 | | 1,335 | | (101 | ) | (448 | ) | — | | 4,958 | |
Net income (loss) | | $ | 8,445 | | $ | 2,383 | | $ | (193 | ) | $ | (832 | ) | $ | — | | $ | 9,803 | |
| | | | | | | | | | | | | |
Average Assets | | $ | 2,756,671 | | $ | 477,192 | | $ | 2,315 | | $ | 331,307 | | $ | (806,636 | ) | $ | 2,760,849 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
At and for the Three Months Ended June 30, 2012: | | | | | | | | | | | | | |
Net interest income | | $ | 21,056 | | $ | 593 | | $ | — | | $ | (208 | ) | $ | — | | $ | 21,441 | |
Non-interest income | | 1,009 | | 14,936 | | 649 | | (24 | ) | (7 | ) | 16,563 | |
Non-interest expense | | 10,186 | | 8,684 | | 596 | | 912 | | (7 | ) | 20,371 | |
Net income (loss) before provision and taxes | | 11,879 | | 6,845 | | 53 | | (1,144 | ) | — | | 17,633 | |
Provision for loan losses | | 2,225 | | — | | — | | — | | — | | 2,225 | |
Provision for income taxes | | 3,193 | | 2,448 | | 16 | | (400 | ) | — | | 5,257 | |
Net income (loss) | | $ | 6,461 | | $ | 4,397 | | $ | 37 | | $ | (744 | ) | $ | — | | $ | 10,151 | |
| | | | | | | | | | | | | |
Average Assets | | $ | 2,553,766 | | $ | 347,048 | | $ | 556 | | $ | 283,807 | | $ | (637,591 | ) | $ | 2,547,586 | |
| | | | | | Wealth | | | | | | | |
| | Commercial | | Mortgage | | Management & | | | | Intersegment | | | |
| | Banking | | Banking | | Trust Services | | Other | | Elimination | | Consolidated | |
At and for the Six Months Ended June 30, 2013: | | | | | | | | | | | | | |
Net interest income | | $ | 44,300 | | $ | 915 | | $ | — | | $ | (361 | ) | $ | — | | $ | 44,854 | |
Non-interest income | | 1,521 | | 19,559 | | 947 | | 90 | | (15 | ) | 22,102 | |
Non-interest expense | | 20,197 | | 18,457 | | 1,371 | | 1,923 | | (15 | ) | 41,933 | |
Net income (loss) before provision and taxes | | 25,624 | | 2,017 | | (424 | ) | (2,194 | ) | — | | 25,023 | |
Provision for loan losses | | (674 | ) | 85 | | — | | — | | — | | (589 | ) |
Provision for income taxes | | 8,771 | | 694 | | (144 | ) | (693 | ) | — | | 8,628 | |
Net income (loss) | | $ | 17,527 | | $ | 1,238 | | $ | (280 | ) | $ | (1,501 | ) | $ | — | | $ | 16,984 | |
| | | | | | | | | | | | | |
Average Assets | | $ | 2,798,281 | | $ | 487,550 | | $ | 2,421 | | $ | 331,393 | | $ | (816,072 | ) | $ | 2,803,573 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
At and for the Six Months Ended June 30, 2012: | | | | | | | | | | | | | |
Net interest income | | $ | 42,357 | | $ | 1,239 | | $ | — | | $ | (417 | ) | $ | — | | $ | 43,179 | |
Non-interest income | | 1,343 | | 23,487 | | 1,263 | | 167 | | (16 | ) | 26,244 | |
Non-interest expense | | 21,760 | | 13,593 | | 1,253 | | 1,861 | | (16 | ) | 38,451 | |
Net income (loss) before provision and taxes | | 21,940 | | 11,133 | | 10 | | (2,111 | ) | — | | 30,972 | |
Provision for loan losses | | 3,865 | | 258 | | — | | — | | — | | 4,123 | |
Provision for income taxes | | 5,894 | | 3,888 | | 2 | | (739 | ) | — | | 9,045 | |
Net income (loss) | | $ | 12,181 | | $ | 6,987 | | $ | 8 | | $ | (1,372 | ) | $ | — | | $ | 17,804 | |
| | | | | | | | | | | | | |
Average Assets | | $ | 2,524,295 | | $ | 371,186 | | $ | 566 | | $ | 283,440 | | $ | (663,440 | ) | $ | 2,516,047 | |
