Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE | Contact: | Bernard H. Clineburg, |
Tysons Corner, Virginia |
| Chairman, Chief Executive Officer |
October 23, 2013 |
| or |
|
| Mark A. Wendel, |
|
| EVP, Chief Financial Officer |
|
| 703-584-3400 |
CARDINAL ANNOUNCES THIRD QUARTER EARNINGS
Cardinal Financial Corporation (NASDAQ: CFNL) (the “Company”) today announced quarterly earnings of $3.0 million, or $0.10 per diluted share, for the period ended September 30, 2013. For the nine month year to date period, earnings were $20.0 million, or $0.64 diluted per share. This compares to earnings of $14.5 million, or $0.48 per diluted share, and $32.3 million, or $1.07 per diluted share, for the comparable three and nine month periods of 2012. Quarterly results were heavily influenced by the mortgage banking segment of the Company’s business, which reported a net loss of $4.9 million versus net income of $7.0 million in the year ago quarter. Additionally, the Company incurred approximately $304,000 of merger expenses related to its upcoming acquisition of United Financial Banking Companies, Inc., the holding company of The Business Bank (“TBB”).
Other Selected Highlights
· Commercial banking segment earnings for the quarter increased 4% to $8.6 million from $8.2 million a year ago, and increased 28% to $26.1 million from $20.4 million for the comparable year to date periods ended September 30, 2013 and 2012, respectively.
· During the most recent quarter, loans held for investment grew $105.6 million to $1.94 billion, an increase of 14% year over year.
· Asset quality remains excellent. Nonperforming loans decreased to 0.09% of total assets, and the Company had net loan recoveries of 0.03% of average loans outstanding. The Company continued to have $0 real estate owned and $0 loans 90
days or more past due and still accruing at September 30, 2013. Non-accruing loans decreased to $2.5 million.
· Total deposits were $2.08 billion, a decrease of $96.9 million, or 4%, compared to September 30, 2012. Demand deposit and interest checking account balances increased $163.0 million, or 25%, year over year. Brokered deposits decreased $160.7 million from a year ago, which is correlated to a $478.6 million reduction of mortgage loans held for sale since September 30, 2012.
· Mortgage loan originations decreased 36% to $1.08 billion for the current quarter versus $1.69 billion for last quarter. Refinance volume dropped to 20% of total applications from 34% for the previous quarter and from 64% for the year ago quarter.
· All capital ratios exceed the regulatory requirements to be considered well-capitalized. Tangible common equity capital (TCE) as a percentage of total assets was 10.76% at September 30, 2013.
Commercial Banking Segment Income Review
For the current quarter ended September 30, 2013, net income for the commercial banking segment increased 4% to $8.6 million from $8.2 million for the year ago quarter. Net interest income for the current quarter was $23.1 million compared to $23.2 million for the year ago quarter. The Company’s tax equivalent net interest margin increased 0.24% to 3.65% from 3.41% for the previous quarter as excess cash was used to fund loan growth and additions to the investment portfolio. The yield on interest earning assets increased 0.21% while the cost of interest bearing liabilities decreased 0.03%.
For the comparable nine month periods ended September 30, 2013 and 2012, net income increased 28% to $26.1 million from $20.4 million. Although the net interest margin has declined over the comparable nine month periods, net interest income increased to $67.4 million versus $65.6 million a year ago due to growth in average earning assets to $2.66 billon from $2.48 billion.
The allowance for loan losses decreased to 1.40% of loans outstanding at September 30, 2013. The Company’s nonperforming assets decreased to 0.09% of total assets compared to 0.10% at the previous quarter end and 0.30% a year ago. Year to date, net loan recoveries have been 0.03% of average loans outstanding, compared to net charge offs of 0.43% for the same year ago period. The continued improvement in credit metrics resulted in a provision for loan losses of $157,000 for the current quarter and a negative provision for loan losses of $517,000 year to date, versus a provision for loan losses of $1.5 million and $5.4 million for the three and nine month periods ended September 30, 2012, respectively.
Non-interest expense was $11.1 million for the current quarter and $31.3 million year to date, compared to $10.5 million and $32.3 million for the year ago comparable periods. Over the past year, the Company added commercial lenders and other key positions and prepared to open its two new branches in Georgetown and Rockville, which accounts for the modest increase in
expenses during the third quarter of 2013 as compared to the 2012 third quarter. These increases have been partially offset by a reduction in incentive compensation and lower marketing costs. For the current quarter versus the prior sequential quarter, non-interest expense increased $954,000. Approximately $120,000 of this increase is attributable to costs associated with opening the new branches while approximately $200,000 is attributable to other staff additions. Other items totaling approximately $400,000 are infrequent and non-routine expenses.
Mortgage Banking Segment Income Review
For the current quarter ended September 30, 2013, George Mason Mortgage, the Company’s mortgage banking subsidiary, reported a net loss of $4.9 million versus net income of $7.0 million for the year ago quarter. For the comparable nine month year to date periods, the Company reported a net loss of $3.6 million versus net income of $14.0 million for 2013 and 2012, respectively.
Non-interest income, which is reported net of commissions and incentives, was $441,000 in the current quarter versus $12.3 million last quarter and $20.4 million for the third quarter of 2012. For the comparable nine month periods ended September 30, 2013 and 2012, noninterest income for the mortgage banking segment was $20.0 million versus $43.9 million, respectively.
For the current quarter, non-interest expense decreased to $8.8 million compared to $10.2 million for the quarter ended September 30, 2012. For the nine month periods ended September 30, 2013 and 2012, expenses increased to $27.2 million from $23.8 million, respectively.
Mortgage banking originations and related revenues were significantly impacted by the rapid increase in interest rates during the third quarter of 2013. The margin on loans sold to investors decreased from 2.07% to 1.77% for the second and third quarters of 2013, respectively, reflecting industry overcapacity and increased competition. As a result of the current operating environment, certain cost control programs and margin enhancement measures have been completed. The impact of these actions will begin to be realized during the fourth quarter of 2013. Other measures are being continually assessed for implementation as production volumes and market conditions are being closely monitored.
Review of Balance Sheet
At September 30, 2013, total assets of the Company decreased $207.3 million to $2.80 billion, a decrease of 7% from total assets of $3.01 billion at September 30, 2012. Loans held for investment grew 14% to $1.94 billion at September 30, 2013, from $1.70 billion at September 30, 2012. During this period, the Bank’s investment portfolio increased to $361.1 million compared to $302.2 million a year ago. Loans held for sale decreased to $323.3 million compared to $802.0 million at September 30, 2012. The decrease in total assets is primarily the result of a decrease of $478.6 million in mortgage loans held for sale partially offset by a $239.2 million increase in loans held for investment and a $58.9 million increase in total investment securities.
Total deposits were $2.08 billion, a decrease of $96.9 million, or 4%, compared to September 30, 2012. The Company recently has used short term brokered CDs as a source of funding for its mortgage loans held for sale portfolio. As these assets have declined, there has been an associated reduction of its brokered CD portfolio from $419.0 million a year ago to $258.3 million at September 30, 2013. Additionally, the Company lowered pricing on balances of a significant customer, which resulted in a decline of $106 million of deposits. However, demand deposits and interest checking deposits grew $163.0 million over the past year, increasing 25% and reflecting the success of the Bank’s strategic initiatives to generate core deposits.
MANAGEMENT COMMENTS
Bernard H. Clineburg, Chairman and Chief Executive Officer of the Company, said:
“At the bank, we delivered record loan growth of $105 million for the quarter, with balances increasing 14% from a year ago. This was supported by strong core deposit growth, especially demand deposits, which increased 30% in the last twelve months. The net interest margin expanded 0.24% from last quarter. In August, we opened our new Georgetown office and before the end of the year we will add our first location in Rockville, MD. Additionally, our acquisition of The Business Bank will solidify Cardinal as the largest community bank headquartered in the northern Virginia market. This acquisition will expand our market share and balance sheet, enhancing the solid earnings performance of our commercial banking business. Our ‘conservative on risk’ philosophy should continue to produce pristine credit quality metrics.
“During the third quarter, mortgage banking revenue was negatively impacted by lower mortgage origination volumes and a decrease in margins. The entire mortgage industry was negatively impacted by higher interest rates, lower refinance activity and lower overall demand with resulting overcapacity. During the quarter, management took measures to reduce expenses and improve margins. We will continue to review our mortgage operations and make additional adjustments as needed. The Company continues to look favorably upon the mortgage industry and is committed to this segment of our business.
“Moving forward, our Company will continue to concentrate on gaining market share, either through de novo expansion or acquisition, and to 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, 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 $2.80 billion at September 30, 2013, serves the Washington Metropolitan region through its wholly-owned subsidiary, Cardinal Bank, with 28 conveniently located banking offices. Cardinal also operates several other subsidiaries: George Mason Mortgage, LLC, a residential mortgage lending company based in Fairfax, with 20 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.
Cardinal Financial Corporation and Subsidiaries
Summary Statements of Condition
(Dollars in thousands)
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| % Change |
| |||||
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| September 30, 2013 |
| December 31, 2012 |
| September 30, 2012 |
| Current Year |
| Year Over Year |
| |||
|
| (Unaudited) |
|
|
| (Unaudited) |
|
|
|
|
| |||
Cash and due from banks |
| $ | 23,652 |
| $ | 17,552 |
| $ | 14,263 |
| 34.8 | % | 65.8 | % |
Federal funds sold |
| 45,073 |
| 49,588 |
| 59,265 |
| -9.1 | % | -23.9 | % | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Investment securities available-for-sale |
| 347,567 |
| 271,903 |
| 287,651 |
| 27.8 | % | 20.8 | % | |||
Investment securities held-to-maturity |
| 9,811 |
| 11,366 |
| 11,682 |
| -13.7 | % | -16.0 | % | |||
Investment securities – trading |
| 3,716 |
| 3,151 |
| 2,890 |
| 17.9 | % | 28.6 | % | |||
Total investment securities |
| 361,094 |
| 286,420 |
| 302,223 |
| 26.1 | % | 19.5 | % | |||
|
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|
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|
|
|
|
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| |||
Other investments |
| 14,048 |
| 14,302 |
| 14,310 |
| -1.8 | % | -1.8 | % | |||
Loans held for sale |
| 323,341 |
| 785,751 |
| 801,953 |
| -58.8 | % | -59.7 | % | |||
|
|
|
|
|
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|
|
|
|
|
| |||
Loans receivable, net of fees |
| 1,963,519 |
| 1,803,429 |
| 1,723,324 |
| 8.9 | % | 13.9 | % | |||
Allowance for loan losses |
| (27,392 | ) | (27,400 | ) | (26,369 | ) | 0.0 | % | 3.9 | % | |||
Loans receivable, net |
| 1,936,127 |
| 1,776,029 |
| 1,696,955 |
| 9.0 | % | 14.1 | % | |||
|
|
|
|
|
|
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|
|
|
| |||
Premises and equipment, net |
| 19,880 |
| 19,192 |
| 19,136 |
| 3.6 | % | 3.9 | % | |||
Goodwill and intangibles, net |
| 10,144 |
| 10,292 |
| 10,342 |
| -1.4 | % | -1.9 | % | |||
Bank-owned life insurance |
| 31,958 |
| 31,652 |
| 35,661 |
| 1.0 | % | -10.4 | % | |||
Prepaid FDIC insurance premiums |
| — |
| 2,165 |
| 2,481 |
| -100.0 | % | -100.0 | % | |||
Other assets |
| 39,089 |
| 46,244 |
| 55,097 |
| -15.5 | % | -29.1 | % | |||
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TOTAL ASSETS |
| $ | 2,804,406 |
| $ | 3,039,187 |
| $ | 3,011,686 |
| -7.7 | % | -6.9 | % |
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Non-interest bearing deposits |
| $ | 434,228 |
| $ | 351,815 |
| $ | 333,904 |
| 23.4 | % | 30.0 | % |
Interest checking |
| 386,139 |
| 347,697 |
| 323,477 |
| 11.1 | % | 19.4 | % | |||
Money markets |
| 301,179 |
| 214,788 |
| 378,725 |
| 40.2 | % | -20.5 | % | |||
Statement savings |
| 215,334 |
| 215,603 |
| 209,788 |
| -0.1 | % | 2.6 | % | |||
Certificates of deposit |
| 486,919 |
| 497,206 |
| 514,108 |
| -2.1 | % | -5.3 | % | |||
Brokered certificates of deposit |
| 258,277 |
| 616,649 |
| 418,961 |
| -58.1 | % | -38.4 | % | |||
Total deposits |
| 2,082,076 |
| 2,243,758 |
| 2,178,963 |
| -7.2 | % | -4.4 | % | |||
|
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| |||
Other borrowed funds |
| 355,321 |
| 392,275 |
| 395,751 |
| -9.4 | % | -10.2 | % | |||
Mortgage funding checks |
| 10,140 |
| 51,679 |
| 83,847 |
| -80.4 | % | -87.9 | % | |||
Escrow liabilities |
| 2,253 |
| 4,629 |
| 7,295 |
| -51.3 | % | -69.1 | % | |||
Other liabilities |
| 37,748 |
| 38,780 |
| 56,281 |
| -2.7 | % | -32.9 | % | |||
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| |||
Shareholders’ equity |
| 316,868 |
| 308,066 |
| 289,549 |
| 2.9 | % | 9.4 | % | |||
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TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY |
| $ | 2,804,406 |
| $ | 3,039,187 |
| $ | 3,011,686 |
| -7.7 | % | -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 |
|
|
| For the Nine Months Ended |
|
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| ||||||||
|
| September 30 |
|
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| September 30 |
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| 2013 |
| 2012 |
| % Change |
| 2013 |
| 2012 |
| % Change |
| ||||
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Net interest income |
| $ | 23,692 |
| $ | 23,658 |
| 0.1 | % | $ | 68,546 |
| $ | 66,837 |
| 2.6 | % |
Provision for loan losses |
| (157 | ) | (1,500 | ) | -89.5 | % | 432 |
| (5,623 | ) | -107.7 | % | ||||
Net interest income after provision for loan losses |
| 23,535 |
| 22,158 |
| 6.2 | % | 68,978 |
| 61,214 |
| 12.7 | % | ||||
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Non-interest income: |
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| ||||
Service charges on deposit accounts |
| 507 |
| 494 |
| 2.6 | % | 1,498 |
| 1,411 |
| 6.2 | % | ||||
Loan fees |
| 364 |
| 417 |
| -12.7 | % | 857 |
| 1,241 |
| -30.9 | % | ||||
Income from bank owned life insurance |
| 124 |
| 164 |
| -24.4 | % | 306 |
| 507 |
| -39.6 | % | ||||
Net realized gains on investment securities |
| 18 |
| — |
| 100.0 | % | 100 |
| 158 |
| -36.7 | % | ||||
Gain (loss) on sale of real estate |
| — |
| 140 |
| -100.0 | % | 30 |
| (333 | ) | -109.0 | % | ||||
Other non-interest income (loss) |
| 9 |
| 4 |
| 125.0 | % | 38 |
| (32 | ) | -218.8 | % | ||||
Commercial banking & other segment non-interest income |
| 1,022 |
| 1,219 |
| -16.2 | % | 2,829 |
| 2,952 |
| -4.2 | % | ||||
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| ||||
Title insurance & other income |
| 169 |
| 750 |
| -77.5 | % | 918 |
| 1,714 |
| -46.4 | % | ||||
Management fee income |
| 374 |
| 943 |
| -60.3 | % | 1,483 |
| 2,834 |
| -47.7 | % | ||||
Gains from mortgage banking activities |
| 15,566 |
| 31,110 |
| -50.0 | % | 64,964 |
| 71,166 |
| -8.7 | % | ||||
Less: mortgage loan origination expenses |
| (15,668 | ) | (12,505 | ) | 25.3 | % | (47,578 | ) | (32,167 | ) | 47.9 | % | ||||
Mortgage banking segment non-interest income |
| 441 |
| 20,298 |
| -97.8 | % | 19,787 |
| 43,547 |
| -54.6 | % | ||||
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Wealth management segment non-interest income |
| 195 |
| 655 |
| -70.2 | % | 1,143 |
| 1,916 |
| -40.3 | % | ||||
Total non-interest income |
| 1,658 |
| 22,172 |
| -92.5 | % | 23,759 |
| 48,415 |
| -50.9 | % | ||||
|
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| ||||
Net interest income and noninterest income |
| 25,193 |
| 44,330 |
| -43.2 | % | 92,737 |
| 109,629 |
| -15.4 | % | ||||
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| ||||
Salaries and benefits |
| 9,992 |
| 12,121 |
| -17.6 | % | 30,367 |
| 32,504 |
| -6.6 | % | ||||
Occupancy |
| 1,981 |
| 1,814 |
| 9.2 | % | 6,148 |
| 5,274 |
| 16.6 | % | ||||
Depreciation |
| 808 |
| 704 |
| 14.8 | % | 2,331 |
| 1,948 |
| 19.7 | % | ||||
Data processing & communications |
| 1,212 |
| 1,140 |
| 6.3 | % | 3,481 |
| 3,337 |
| 4.3 | % | ||||
Professional fees |
| 786 |
| 1,094 |
| -28.2 | % | 3,247 |
| 2,665 |
| 21.8 | % | ||||
FDIC insurance assessment |
| 401 |
| 327 |
| 22.6 | % | 1,049 |
| 980 |
| 7.0 | % | ||||
Mortgage loan repurchases and settlements |
| 111 |
| 172 |
| -35.5 | % | (49 | ) | 472 |
| -110.4 | % | ||||
Merger and acquisition expense |
| 304 |
| — |
| 100.0 | % | 304 |
| — |
| 100.0 | % | ||||
Other operating expense |
| 5,449 |
| 4,915 |
| 10.9 | % | 16,098 |
| 13,557 |
| 18.7 | % | ||||
Total non-interest expense |
| 21,044 |
| 22,287 |
| -5.6 | % | 62,976 |
| 60,737 |
| 3.7 | % | ||||
Income before income taxes |
| 4,149 |
| 22,043 |
| -81.2 | % | 29,761 |
| 48,892 |
| -39.1 | % | ||||
Provision for income taxes |
| 1,168 |
| 7,591 |
| -84.6 | % | 9,796 |
| 16,636 |
| -41.1 | % | ||||
NET INCOME |
| $ | 2,981 |
| $ | 14,452 |
| -79.4 | % | $ | 19,965 |
| $ | 32,256 |
| -38.1 | % |
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Earnings per common share - basic |
| $ | 0.10 |
| $ | 0.49 |
| -80.1 | % | $ | 0.65 |
| $ | 1.09 |
| -40.2 | % |
Earnings per common share - diluted |
| $ | 0.10 |
| $ | 0.48 |
| -79.9 | % | $ | 0.64 |
| $ | 1.07 |
| -40.0 | % |
Weighted-average common shares outstanding - basic |
| 30,692,595 |
| 29,675,788 |
| 3.4 | % | 30,654,343 |
| 29,634,069 |
| 3.4 | % | ||||
Weighted-average common shares outstanding - diluted |
| 31,060,572 |
| 30,237,755 |
| 2.7 | % | 31,053,448 |
| 30,107,895 |
| 3.1 | % | ||||
Cardinal Financial Corporation and Subsidiaries
Selected Financial Information
(Dollars in thousands, except per share data and ratios)
(Unaudited)
|
| For the Three Months Ended |
| For the Nine Months Ended |
| ||||||||
|
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| ||||
Performance Ratios: |
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Return on average assets |
| 0.43 | % | 2.08 | % | 0.95 | % | 1.65 | % | ||||
Return on average equity |
| 3.73 | % | 20.09 | % | 8.34 | % | 15.58 | % | ||||
Net interest margin (1) |
| 3.65 | % | 3.62 | % | 3.47 | % | 3.63 | % | ||||
Efficiency ratio (2) |
| 83.01 | % | 48.63 | % | 68.23 | % | 52.70 | % | ||||
Non-interest income to average assets |
| 0.24 | % | 3.20 | % | 1.13 | % | 2.48 | % | ||||
Non-interest expense to average assets |
| 3.04 | % | 3.21 | % | 3.01 | % | 3.11 | % | ||||
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Mortgage Banking Select Data: |
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$ of loan applications - George Mason Mortgage |
| $ | 1,077,000 |
| $ | 1,569,500 |
| $ | 4,251,000 |
| $ | 3,878,000 |
|
$ of loan applications - Managed Mortgage Company Affiliates |
| 373,000 |
| 742,500 |
| 1,530,000 |
| 2,169,200 |
| ||||
Total |
| 1,450,000 |
| 2,312,000 |
| 5,781,000 |
| 6,047,200 |
| ||||
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Refi % of loan applications - George Mason Mortgage |
| 20 | % | 64 | % | 35 | % | 62 | % | ||||
Refi % of loans applications- Managed Mortgage Company Affiliates |
| 15 | % | 64 | % | 33 | % | 59 | % | ||||
Total |
| 19 | % | 64 | % | 34 | % | 58 | % | ||||
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$ of loans closed - George Mason Mortgage |
| $ | 927,548 |
| $ | 1,196,093 |
| $ | 3,404,016 |
| $ | 2,834,202 |
|
$ of loans closed - Managed Mortgage Company Affiliates |
| 347,957 |
| 664,849 |
| 1,309,776 |
| 1,833,127 |
| ||||
Total |
| 1,275,505 |
| 1,860,942 |
| 4,713,792 |
| 4,667,329 |
| ||||
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# of loans closed - George Mason Mortgage |
| 2,748 |
| 3,531 |
| 9,983 |
| 8,390 |
| ||||
# of loans closed - Managed Mortgage Company Affiliates |
| 899 |
| 1,732 |
| 3,384 |
| 4,834 |
| ||||
Total |
| 3,647 |
| 5,263 |
| 13,367 |
| 13,224 |
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|
| ||||
$ of loans sold - George Mason Mortgage |
| $ | 1,170,953 |
| $ | 1,005,127 |
| $ | 3,741,135 |
| $ | 2,584,735 |
|
$ of loans sold - Managed Mortgage Company Affiliates |
| 435,828 |
| 584,321 |
| 1,449,974 |
| 1,644,011 |
| ||||
Total |
| 1,606,781 |
| 1,589,448 |
| 5,191,109 |
| 4,228,746 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
$ of locked commitments - George Mason Mortgage |
| $ | 789,516 |
| $ | 1,316,773 |
| $ | 3,273,290 |
| $ | 3,217,604 |
|
$ locked commitments at period end - George Mason Mortgage |
|
|
|
|
| $ | 350,976 |
| $ | 593,935 |
| ||
$ of loans held for sale at period end - George Mason Mortgage |
|
|
|
|
| $ | 195,797 |
| $ | 523,000 |
| ||
Realized gain on sales and fees as a % of loan sold (3) |
| 1.91 | % | 2.14 | % | 2.08 | % | 2.06 | % | ||||
Net realized gains as a % of realized gains (Gain on sale margin) (4) |
| 30.03 | % | 41.88 | % | 38.85 | % | 39.50 | % | ||||
|
|
|
|
|
|
|
|
|
| ||||
Asset Quality Data: |
|
|
|
|
|
|
|
|
| ||||
Net charge-offs (recoveries) to average loans receivable, net of fees |
|
|
|
|
| -0.03 | % | 0.43 | % | ||||
Total nonaccrual loans |
|
|
|
|
| $ | 2,510 |
| $ | 8,845 |
| ||
Real estate owned |
|
|
|
|
| $ | — |
| $ | — |
| ||
Nonperforming loans to loans receivable, net of fees |
|
|
|
|
| 0.13 | % | 0.53 | % | ||||
Nonperforming loans to total assets |
|
|
|
|
| 0.09 | % | 0.30 | % | ||||
Nonperforming assets to total assets |
|
|
|
|
| 0.09 | % | 0.30 | % | ||||
Total loans receivable past due 30 to 89 days |
|
|
|
|
| $ | 1,803 |
| $ | 233 |
| ||
Total loans receivable past due 90 days or more |
|
|
|
|
| $ | — |
| $ | 306 |
| ||
Allowance for loan losses to loans receivable, net of fees |
|
|
|
|
| 1.40 | % | 1.53 | % | ||||
Allowance for loan losses to nonperforming loans |
|
|
|
|
| 1091.31 | % | 288.15 | % | ||||
|
|
|
|
|
|
|
|
|
| ||||
Capital Ratios: |
|
|
|
|
|
|
|
|
| ||||
Tier 1 risk-based capital |
|
|
|
|
| 12.21 | % | 11.71 | % | ||||
Total risk-based capital |
|
|
|
|
| 13.28 | % | 12.82 | % | ||||
Leverage capital ratio |
|
|
|
|
| 11.50 | % | 10.20 | % | ||||
Book value per common share |
|
|
|
|
| $ | 10.46 |
| $ | 9.89 |
| ||
Tangible book value per common share (5) |
|
|
|
|
| $ | 10.13 |
| $ | 9.54 |
| ||
Common shares outstanding |
|
|
|
|
| 30,281 |
| 29,272 |
| ||||
(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 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 Nine Months Ended September 30, 2013 and 2012
(Dollars in thousands, except share and per share data)
(Unaudited)
|
| For the Three Months Ended |
|
|
| For the Nine Months Ended |
|
|
| ||||||||
|
| 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) |
| $ | 15,566 |
| $ | 31,110 |
| -49.96 | % | $ | 64,964 |
| $ | 71,166 |
| -8.71 | % |
Loan origination expenses recognized @ Loan Sale Date |
| 15,668 |
| 12,505 |
| 25.29 | % | 47,578 |
| 32,167 |
| 47.91 | % | ||||
Reported Net Gains from Mortgage Banking Activities |
| (102 | ) | 18,605 |
| -100.55 | % | 17,386 |
| 38,999 |
| -55.42 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
As Adjusted |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Realized Gains Recognized @ Loan Sale Date |
| 22,394 |
| 21,515 |
| 4.09 | % | 77,808 |
| 53,171 |
| 46.34 | % | ||||
Loan origination expenses recognized @ Loan Sale Date |
| 15,668 |
| 12,505 |
| 25.29 | % | 47,578 |
| 32,167 |
| 47.91 | % | ||||
Adjusted Net Gains from Mortgage Banking Activities |
| 6,726 |
| 9,010 |
| -25.35 | % | 30,230 |
| 21,004 |
| 43.92 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Impact of SAB 109 on Net Gains from Mortgage Banking Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Increase/(Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB 109 |
| $ | (6,828 | ) | $ | 9,595 |
| -171.16 | % | $ | (12,844 | ) | $ | 17,995 |
| -171.38 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Income Reconciliation: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Reported Net Income |
| $ | 2,981 |
| $ | 14,452 |
| -79.37 | % | $ | 19,965 |
| $ | 32,256 |
| -38.10 | % |
Aftertax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB109 |
| (4,404 | ) | 6,189 |
| -171.16 | % | (8,284 | ) | 11,607 |
| -171.38 | % | ||||
Adjusted Net Income Before Increase / (Decrease) in Unrealized Gain on Mortgage Banking Activities |
| $ | 7,385 |
| $ | 8,263 |
| -10.63 | % | $ | 28,249 |
| $ | 20,649 |
| 36.81 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings per Share (EPS) Reconciliation: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Reported Net Income |
| $ | 0.10 |
| $ | 0.48 |
| -79.92 | % | $ | 0.64 |
| $ | 1.07 |
| -39.99 | % |
Aftertax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB109 |
| (0.14 | ) | 0.20 |
| -169.28 | % | (0.27 | ) | 0.39 |
| -169.20 | % | ||||
Adjusted Net Income Before Increase / (Decrease) in Unrealized Gain on Mortgage Banking Activities |
| $ | 0.24 |
| $ | 0.27 |
| -12.99 | % | $ | 0.91 |
| $ | 0.69 |
| 32.64 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Performance Ratios (adjusted for change in unrealized mortgage banking gains): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Return on average assets |
| 1.07 | % | 1.19 | % |
|
| 1.35 | % | 1.06 | % |
|
| ||||
Return on average equity |
| 9.25 | % | 11.48 | % |
|
| 11.80 | % | 9.97 | % |
|
| ||||
Efficiency ratio |
| 65.40 | % | 61.51 | % |
|
| 59.89 | % | 62.45 | % |
|
| ||||
Non-interest income to average assets |
| 1.23 | % | 1.81 | % |
|
| 1.75 | % | 1.56 | % |
|
| ||||
**
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 Nine Months Ended September 30, 2013 and 2012
(Dollars in thousands)
(Unaudited)
|
| For the Three Months Ended |
| For the Nine Months Ended |
| ||||||||||||||||
|
| September 30, 2013 |
| September 30, 2012 |
| September 30, 2013 |
| September 30, 2012 |
| ||||||||||||
|
| Average |
| Average |
| Average |
| Average |
| Average |
| Average |
| Average |
| Average |
| ||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans receivable, net of fees (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial and industrial |
| $ | 214,301 |
| 4.04 | % | $ | 218,233 |
| 4.27 | % | $ | 214,232 |
| 4.04 | % | $ | 231,389 |
| 4.17 | % |
Real estate - commercial |
| 960,770 |
| 4.65 | % | 752,653 |
| 5.39 | % | 881,570 |
| 4.79 | % | 745,099 |
| 5.45 | % | ||||
Real estate - construction |
| 345,072 |
| 5.28 | % | 364,238 |
| 5.30 | % | 351,975 |
| 5.27 | % | 330,372 |
| 5.32 | % | ||||
Real estate - residential |
| 259,395 |
| 4.31 | % | 259,782 |
| 4.62 | % | 240,380 |
| 4.44 | % | 245,051 |
| 4.83 | % | ||||
Home equity lines |
| 110,297 |
| 3.67 | % | 119,554 |
| 3.67 | % | 113,573 |
| 3.69 | % | 120,284 |
| 3.71 | % | ||||
Consumer |
| 2,601 |
| 5.18 | % | 4,089 |
| 4.86 | % | 3,156 |
| 5.33 | % | 3,361 |
| 5.16 | % | ||||
Total loans |
| 1,892,436 |
| 4.65 | % | 1,718,549 |
| 5.00 | % | 1,804,886 |
| 4.71 | % | 1,675,556 |
| 5.03 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans held for sale |
| 373,318 |
| 4.44 | % | 571,715 |
| 3.88 | % | 447,519 |
| 3.95 | % | 438,898 |
| 4.01 | % | ||||
Investment securities - available-for-sale (1) |
| 294,445 |
| 4.11 | % | 270,450 |
| 4.27 | % | 256,059 |
| 4.21 | % | 269,037 |
| 4.37 | % | ||||
Investment securities - held-to-maturity |
| 10,146 |
| 1.72 | % | 11,972 |
| 2.43 | % | 10,647 |
| 1.85 | % | 12,373 |
| 2.55 | % | ||||
Other investments |
| 13,312 |
| 2.50 | % | 14,166 |
| 1.68 | % | 13,387 |
| 2.39 | % | 15,646 |
| 1.45 | % | ||||
Federal funds sold (1) |
| 44,788 |
| 0.25 | % | 52,519 |
| 0.23 | % | 129,884 |
| 0.25 | % | 66,626 |
| 0.24 | % | ||||
Total interest-earning assets |
| 2,628,445 |
| 4.46 | % | 2,639,371 |
| 4.56 | % | 2,662,382 |
| 4.71 | % | 2,478,136 |
| 4.61 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and due from banks |
| 16,876 |
|
|
| 14,172 |
|
|
| 16,773 |
|
|
| 15,444 |
|
|
| ||||
Premises and equipment, net |
| 19,846 |
|
|
| 19,275 |
|
|
| 19,602 |
|
|
| 18,738 |
|
|
| ||||
Goodwill and intangibles, net |
| 10,168 |
|
|
| 10,368 |
|
|
| 10,217 |
|
|
| 10,420 |
|
|
| ||||
Accrued interest and other assets |
| 120,034 |
|
|
| 117,522 |
|
|
| 110,004 |
|
|
| 106,809 |
|
|
| ||||
Allowance for loan losses |
| (27,211 | ) |
|
| (27,300 | ) |
|
| (27,340 | ) |
|
| (27,085 | ) |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
TOTAL ASSETS |
| $ | 2,768,158 |
|
|
| $ | 2,773,408 |
|
|
| $ | 2,791,638 |
|
|
| $ | 2,602,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest checking |
| $ | 387,367 |
| 0.53 | % | $ | 319,617 |
| 1.07 | % | $ | 371,099 |
| 0.59 | % | $ | 265,287 |
| 0.96 | % |
Money markets |
| 300,920 |
| 0.23 | % | 380,531 |
| 0.31 | % | 292,232 |
| 0.28 | % | 281,045 |
| 0.35 | % | ||||
Statement savings |
| 219,021 |
| 0.26 | % | 221,549 |
| 0.26 | % | 213,498 |
| 0.27 | % | 218,657 |
| 0.31 | % | ||||
Certificates of deposit |
| 761,246 |
| 1.21 | % | 870,470 |
| 1.20 | % | 853,174 |
| 1.13 | % | 883,548 |
| 1.23 | % | ||||
Total interest-bearing deposits |
| 1,668,554 |
| 0.75 | % | 1,792,167 |
| 0.87 | % | 1,730,003 |
| 0.77 | % | 1,648,537 |
| 0.92 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other borrowed funds |
| 291,787 |
| 2.98 | % | 296,515 |
| 3.01 | % | 290,509 |
| 3.02 | % | 318,350 |
| 2.91 | % | ||||
Total interest-bearing liabilities |
| 1,960,341 |
| 1.08 | % | 2,088,682 |
| 1.18 | % | 2,020,512 |
| 1.09 | % | 1,966,887 |
| 1.24 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Noninterest-bearing deposits |
| 426,265 |
|
|
| 347,346 |
|
|
| 403,881 |
|
|
| 320,242 |
|
|
| ||||
Other liabilities |
| 62,150 |
|
|
| 49,567 |
|
|
| 48,052 |
|
|
| 39,293 |
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Shareholders’ equity |
| 319,402 |
|
|
| 287,813 |
|
|
| 319,193 |
|
|
| 276,040 |
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY |
| $ | 2,768,158 |
|
|
| $ | 2,773,408 |
|
|
| $ | 2,791,638 |
|
|
| $ | 2,602,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
NET INTEREST MARGIN (1) |
|
|
| 3.65 | % |
|
| 3.62 | % |
|
| 3.47 | % |
|
| 3.63 | % | ||||
(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 2013 and 35% for 2012.
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 September 30, 2013: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net interest income |
| $ | 23,110 |
| $ | 750 |
| $ | — |
| $ | (168 | ) | $ | — |
| $ | 23,692 |
|
Non-interest income |
| 1,010 |
| 441 |
| 195 |
| 22 |
| (10 | ) | 1,658 |
| ||||||
Non-interest expense |
| 11,100 |
| 8,764 |
| 101 |
| 1,089 |
| (10 | ) | 21,044 |
| ||||||
Net income (loss) before provision and taxes |
| 13,020 |
| (7,573 | ) | 94 |
| (1,235 | ) | — |
| 4,306 |
| ||||||
Provision for loan losses |
| 157 |
| — |
| — |
| — |
| — |
| 157 |
| ||||||
Provision for income taxes |
| 4,291 |
| (2,722 | ) | 33 |
| (434 | ) | — |
| 1,168 |
| ||||||
Net income (loss) |
| $ | 8,572 |
| $ | (4,851 | ) | $ | 61 |
| $ | (801 | ) | $ | — |
| $ | 2,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Average Assets |
| $ | 2,745,832 |
| $ | 409,394 |
| $ | 2,172 |
| $ | 321,867 |
| $ | (711,107 | ) | $ | 2,768,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
At and for the Three Months Ended September 30, 2012: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net interest income |
| $ | 23,196 |
| $ | 672 |
| $ | — |
| $ | (210 | ) | $ | — |
| $ | 23,658 |
|
Non-interest income |
| 1,129 |
| 20,406 |
| 655 |
| 5 |
| (23 | ) | 22,172 |
| ||||||
Non-interest expense |
| 10,511 |
| 10,231 |
| 727 |
| 841 |
| (23 | ) | 22,287 |
| ||||||
Net income (loss) before provision and taxes |
| 13,814 |
| 10,847 |
| (72 | ) | (1,046 | ) | — |
| 23,543 |
| ||||||
Provision for loan losses |
| 1,500 |
| — |
| — |
| — |
| — |
| 1,500 |
| ||||||
Provision for income taxes |
| 4,103 |
| 3,879 |
| (24 | ) | (367 | ) | — |
| 7,591 |
| ||||||
Net income (loss) |
| $ | 8,211 |
| $ | 6,968 |
| $ | (48 | ) | $ | (679 | ) | $ | — |
| $ | 14,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Average Assets |
| $ | 2,765,709 |
| $ | 582,677 |
| $ | 542 |
| $ | 285,308 |
| $ | (860,828 | ) | $ | 2,773,408 |
|
|
| Commercial |
| Mortgage |
| Wealth |
|
|
| Intersegment |
|
|
| ||||||
|
| Banking |
| Banking |
| Management |
| Other |
| Elimination |
| Consolidated |
| ||||||
At and for the Nine Months Ended September 30, 2013: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net interest income |
| $ | 67,410 |
| $ | 1,665 |
| $ | — |
| $ | (529 | ) | $ | — |
| $ | 68,546 |
|
Non-interest income |
| 2,530 |
| 20,000 |
| 1,143 |
| 112 |
| (26 | ) | 23,759 |
| ||||||
Non-interest expense |
| 31,296 |
| 27,222 |
| 1,472 |
| 3,012 |
| (26 | ) | 62,976 |
| ||||||
Net income (loss) before provision and taxes |
| 38,644 |
| (5,557 | ) | (329 | ) | (3,429 | ) | — |
| 29,329 |
| ||||||
Provision for loan losses |
| (517 | ) | 85 |
| — |
| — |
| — |
| (432 | ) | ||||||
Provision for income taxes |
| 13,062 |
| (2,028 | ) | (111 | ) | (1,127 | ) | — |
| 9,796 |
| ||||||
Net income (loss) |
| $ | 26,099 |
| $ | (3,614 | ) | $ | (218 | ) | $ | (2,302 | ) | $ | — |
| $ | 19,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Average Assets |
| $ | 2,780,602 |
| $ | 461,212 |
| $ | 2,342 |
| $ | 328,183 |
| $ | (780,701 | ) | $ | 2,791,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
At and for the Nine Months Ended September 30, 2012: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net interest income |
| $ | 65,552 |
| $ | 1,912 |
| $ | — |
| $ | (627 | ) | $ | — |
| $ | 66,837 |
|
Non-interest income |
| 2,472 |
| 43,893 |
| 1,917 |
| 172 |
| (39 | ) | 48,415 |
| ||||||
Non-interest expense |
| 32,271 |
| 23,824 |
| 1,980 |
| 2,701 |
| (39 | ) | 60,737 |
| ||||||
Net income (loss) before provision and taxes |
| 35,753 |
| 21,981 |
| (63 | ) | (3,156 | ) | — |
| 54,515 |
| ||||||
Provision for loan losses |
| 5,365 |
| 258 |
| — |
| — |
| — |
| 5,623 |
| ||||||
Provision for income taxes |
| 9,996 |
| 7,768 |
| (23 | ) | (1,105 | ) | — |
| 16,636 |
| ||||||
Net income (loss) |
| $ | 20,392 |
| $ | 13,955 |
| $ | (40 | ) | $ | (2,051 | ) | $ | — |
| $ | 32,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Average Assets |
| $ | 2,605,355 |
| $ | 442,198 |
| $ | 557 |
| $ | 284,067 |
| $ | (729,715 | ) | $ | 2,602,462 |
|