Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
Tysons Corner, Virginia
January 25, 2017
CARDINAL’S 2016 RECORD EARNINGS SURPASS $50 MILLION
Cardinal Financial Corporation (NASDAQ: CFNL) (the “Company”) today reported record earnings of $50.5 million for the year ended December 31, 2016, which included $3.3 million of after-tax expenses related to the August 17th announcement of the merger with United Bankshares. Diluted earnings per share were $1.50, or $1.60, before the merger expense impact. The adjusted net income of $53.8 million in 2016, which are exclusive of the merger expenses, represent a 17% increase over 2015 adjusted net income (see Table 7).
Earnings for the quarter ended December 31, 2016 were $10.8 million, compared to $9.0 million for the same year ago quarter. Diluted earnings per share were $0.32 and $0.27 for these same respective periods. Before the current quarter merger expenses, the Company had adjusted net income of $12.4 million, or $0.37 per share.
Selected Highlights
· Return on average assets (“ROAA”) and average equity (“ROAE”) were 1.23% and 11.40% for 2016. Before merger expenses, ROAA was 1.31% and ROAE was 12.14% for the year.
· Before taxes and the provision for loan losses, the commercial banking segment’s earnings for the current year were also a record, improving 19% from a year ago to $71.2 million.
· Total assets of the Company exceeded $4.21 billion, increasing 4.5% from December 31, 2015.
· Loans held for investment were $3.28 billion, increasing 7.4% from a year ago.
· Non-interest bearing demand deposit accounts increased 11.6% over the past year, totaling 27% of customer deposits.
· For the fourth consecutive quarter, the Company had no nonaccrual loans and no other real estate owned at quarter end.
· Net interest margin was 3.37% for the fourth quarter of 2016, an increase from 3.25% for the year ago fourth quarter.
· Total mortgage loan closings were over $4.07 billion in 2016, an increase of $466 million from $3.60 billion in 2015. Purchase money mortgages represented 69% of the year’s closed loan volume.
· During 2016, purchase money mortgage application volume increased by $400 million compared to 2015 and nearly $900 million compared to 2014.
Review of Balance Sheet
At December 31, 2016, total assets of the Company were $4.21 billion, an increase of 4.5% from total assets of $4.03 billion at December 31, 2015. Average interest earning assets for the fourth quarter increased to $3.99 billion from $3.78 billion a year ago, and average interest bearing liabilities for the fourth quarter 2016 increased to $2.86 billion from $2.81 billion a year ago.
Loans held for investment grew 7.4% to $3.28 billion at December 31, 2016 versus $3.06 billion a year ago, overcoming $531 million in loan payoffs during the year. Loans held for sale were $298 million at December 31, 2016, compared to $432 million at September 30, 2016. The Company’s investment securities portfolio increased slightly to $400 million from $398 million at the end of the previous quarter.
Over the past year, deposit balances increased $250 million to $3.28 billion from $3.03 billion, an increase of 8.2%. Non-interest bearing demand deposit accounts, which totaled $733 million and represented 27% of customer deposits, increased $76 million since December 31, 2015, or 11.6%. The increase in customer deposits is due primarily to steady focus on relationship banking within the markets the Company serves.
Net Interest Income
Net interest income increased 7.2%, to $32.7 million from $30.5 million, for the quarters ended December 31, 2016 and 2015, respectively. For the current quarter, the Company’s tax equivalent net interest margin was 3.37%, an increase from 3.35% for the prior sequential quarter and up from 3.25% for the year ago linked quarter in 2015.
The yield on loans held for investment was 4.10% for the fourth quarter of 2016, the same as the third quarter of 2016, while the yield on loans held for sale decreased to 3.51% for the fourth quarter of 2016 versus 3.65% for the previous quarter, reflecting the lower interest rate environment for mortgage loans that existed for most of the current period. The average balance
of loans held for sale experienced a normal seasonal decline to $333 million in the most recent quarter, versus $422 million in the third quarter of 2016. The yield on total interest earning assets was 3.98% for the fourth quarter of 2016, compared to 3.97% for the previous quarter. For these same respective periods, the Company’s total cost of interest bearing liabilities increased to 0.85% from 0.84%. Including DDAs, the Company’s total cost of funds decreased to 0.67% from 0.68%.
Commercial Banking Review
For the current year ended December 31, 2016, the commercial banking segment’s (the Bank’s) net income increased 23% to a record $48.3 million versus $39.2 million for the year ended December 31, 2015. Before taxes and the provision for loan losses, the Bank’s income for the current year was also a record $71.2 million, a 19% improvement from the year ago level of $60.0 million.
For the quarter ended December 31, 2016, net income for the Bank was $15.8 million, an increase of 65% from $9.6 million for the fourth quarter of last year. During the current quarter, there was a negative provision for loan losses of $1.9 million versus a provision of $449,000 during the year ago quarter. Before taxes and the provision for loan losses, the Bank’s income for the current quarter was $20.9 million, a 37% improvement from the same quarter a year ago.
For the current quarter, there were annualized net charge offs (recoveries) of (0.01%) of average loans outstanding. The allowance for loan losses was 0.97% of loans outstanding at December 30, 2016 versus 1.04% at December 31, 2015. This ratio decrease from a year ago is primarily the result of continued improvement of credit quality. The Company continued to have no nonperforming loans at December 31, 2016 versus nonperforming loans of 0.01% of total assets at December 31, 2015.
Non-interest income was $2.9 million for the current quarter compared to $963,000 for the year ago quarter. Fees primarily associated with loans that paid off before their maturity increased $887,000. Before gains on securities sales of $4.6 million, current year non-interest income was $5.6 million versus $5.3 million for the 2015 year. Securities gains were offset by $3.6 million of FHLB Advance prepayment fees, which are recorded in non-interest expense, and which together were part of a strategy to increase net interest income.
For the fourth quarter of 2016, non-interest expense was $14.8 million, compared to $15.9 million for the prior sequential quarter and $15.7 million for the fourth quarter of 2015. For the year ended December 31, 2016, total non-interest expense was $66.7 million, which included $3.6 million from the prepayment of FHLB Advances. This compares to $60.0 million of non-interest expense in 2015. The efficiency ratio for the Bank was 47.0% versus 50.0% for these respective periods, which reflects the Company’s continued focus on expense controls.
Mortgage Banking Review
The Company’s mortgage banking subsidiary, George Mason Mortgage (GMM), had an extremely active year as it accepted approximately $5.8 billion in loan applications versus $5.2 billion in 2015. Purchase money applications increased to $4.0 billion in 2016 from $3.6 billion in the previous year. Although refinance activity contributed to the results, GMM’s primary focus remains on the relatively more stable purchase money mortgage business.
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| Q4 |
| Q3 |
| Q2 |
| Q1 |
| Q4 |
| YTD |
| YTD |
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Mortgage Loan Applications (000’s) |
| $ | 1,043 |
| $ | 1,575 |
| $ | 1,704 |
| $ | 1,503 |
| $ | 1,063 |
| $ | 5,825 |
| $ | 5,211 |
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Purchase Money % |
| 73 | % | 63 | % | 75 | % | 68 | % | 74 | % | 69 | % | 67 | % | |||||||
# of Units |
| 2,971 |
| 4,532 |
| 4,757 |
| 4,402 |
| 3,005 |
| 16,662 |
| 15,226 |
| |||||||
During the fourth quarter of 2016, the Company experienced a typical seasonal slowdown, and for the quarter ended December 31, 2016, GMM reported a net loss of $3.0 million. However, operating net income was $4.0 million, one of the best quarters on record. Operating net income (a non-GAAP measure) excludes the impact of the Staff Accounting Bulletin (“SAB”) 109 accounting requirement to record unrealized gains associated with the Company’s locked mortgage loan pipeline.
On a year to date basis, reported net income was $7.3 million in 2016 versus $9.2 million in 2015, and operating net income was $9.8 million in 2016 versus $6.8 million in 2015. The SAB 109 impact resulted in a decrease of $2.4 million to reported earnings in 2016 versus an increase of $2.4 million in 2015.
Comparable recent quarterly and year to date results are shown below.
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| Q4 |
| Q3 |
| Q2 |
| Q1 |
| Q4 |
| YTD |
| YTD |
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Mortgage Banking: (in 000’s) |
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Reported Net Income (Loss) |
| $ | (3,017 | ) | $ | 2,816 |
| $ | 3,994 |
| $ | 3,553 |
| $ | 164 |
| $ | 7,346 |
| $ | 9,180 |
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Reverse Impact of SAB 109 |
| 7,012 |
| 1,446 |
| (2,259 | ) | (3,794 | ) | 765 |
| 2,405 |
| (2,417 | ) | |||||||
Operating Net Income (Loss) |
| 3,995 |
| 4,262 |
| 1,735 |
| (241 | ) | 929 |
| 9,715 |
| 6,763 |
| |||||||
Pretax Operating Net Income (Loss) |
| 6,156 |
| 6,643 |
| 2,743 |
| (329 | ) | 1,331 |
| 15,212 |
| 10,600 |
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The net realized gain on sales and other fees, before the impact of SAB 109, was $55.0 million for the year ended December 31, 2016 versus $39.7 million for 2015. The gain on sale margin was
2.75% for the 2016 year versus 2.60% for 2015. The increase from previous year is primarily due to the success of selling a majority of its production on a mandatory delivery basis.
Non-interest expenses were $40.9 million for 2016 compared to $31.8 million last year. In addition to the added personnel costs related to compliance with the new TILA/RESPA Integrated Disclosure (TRID) regulations, other expenses increased as a result of the increased volume of lending activity. All other fixed expenses have remained consistent.
Bob Brower, President and CEO of George Mason Mortgage said:
“George Mason Mortgage (GMM) had a strong year recording a 44% increase in pretax operating income to $15.2 million for 2016 and a near record finish with fourth quarter pretax operating income of $6.2 million. Our ongoing focus on increasing the firm’s market share of purchase money mortgages has been beneficial, and our approach and philosophy to the mortgage business has continued to attract many of the top professionals in the industry to the GMM team. We are very excited about our pending merger with United Bank and the opportunity to join forces with such a strong, well respected company. The merger should only further benefit our strong momentum and enhance the products we offer.”
Parent Company Only Review
For the year ended December 31, 2016, Cardinal’s parent company reported a net loss of $5.2 million versus a net loss of $1.1 million for the previous year. The current year includes approximately $3.3 million of after-tax merger related expenses.
Capital Ratios
All capital ratios of the Company comfortably exceeded the requirements of banking regulators to be considered well-capitalized. Tangible common equity capital (TCE) as a percentage of total assets was 9.90% at December 31, 2016.
COMMENTS ON THE YEAR
Bernard H. Clineburg, Executive Chairman, and Christopher W. Bergstrom, President and CEO, share the following thoughts:
“In August, we announced our intention to merge with United Bankshares with the belief that the combination of our institutions represents a tremendous opportunity to create a dominant bank in the Washington DC metropolitan area which will benefit our customers and shareholders. The process of seeking required approvals from shareholders and regulators has proceeded as expected, and we have been collaborating on integration plans.
“Meanwhile, our 2016 results are indicative of our commitment to continue our positive momentum as we have begun to focus on combining our companies. These results show record
earnings and improving profitability metrics while maintaining pristine asset quality levels. Increased balances in the loan portfolio combined with an increasing net interest margin resulted in continued revenue growth. George Mason reported excellent results for the year with operating earnings at record levels. We have an ongoing commitment to building a quality team of mortgage bankers with deep ties to the realtor and builder communities.
“Since Cardinal’s beginning, we have always been committed to maintaining and growing a strong financial services company for our employees, clients, the communities we serve, and especially our shareholders. We are pleased with our 2016 results and especially proud of our team’s commitment to ongoing excellence. We look forward to our opportunity for continuing success as we join the United Bankshares team.”
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
This press release contains “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements contain information related to matters such as the Company’s intent, belief or expectation with regard to such matters as financial and operational performance, cost savings, credit quality and branch expansion. Such statements are necessarily based on management’s assumptions and estimates and are inherently subject to a variety of risks and uncertainties concerning the Company’s operations and business environment, which are difficult to predict and beyond the control of the Company. Such risks and uncertainties could cause actual results of the Company to differ materially from those matters expressed or implied in such forward-looking statements.
Risk and uncertainties related to the pending merger with United include, among others, that: the businesses of United and Cardinal may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; the expected growth opportunities or cost savings from the merger may not be fully realized or may take longer to realize than expected; deposit attrition, operating costs, customer losses and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected; the regulatory approvals required for the merger may not be obtained on the proposed terms or on the anticipated schedule; the stockholders of United and Cardinal may fail to approve the merger.
For an explanation of some of the additional risks and uncertainties associated with forward-looking statements, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and other reports filed with and furnished to the Securities and Exchange Commission. The Company has no obligation and does not undertake to update, revise or correct any of the forward-looking statements after the date of this press release, or after the respective dates on which such statements otherwise are made.
About Cardinal Financial Corporation: Cardinal Financial Corporation, a financial holding company headquartered in Tysons Corner, Virginia with assets of $4.21 billion at December 31, 2016, serves the Washington Metropolitan region through its wholly-owned subsidiary, Cardinal Bank. Cardinal also operates several other subsidiaries: George Mason Mortgage, LLC, a
residential mortgage lending company based in Fairfax, Virginia and Cardinal Wealth Services, Inc., a wealth management services company. The Company’s stock is traded on NASDAQ (CFNL). For additional information please visit our Web site at www.cardinalbank.com or call (703) 584-3400.
Additional Information about the Merger and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Shareholders of Cardinal and other investors are urged to read the proxy statement/prospectus that will be included in the registration statement on Form S-4, once it becomes effective, that United has filed with the Securities and Exchange Commission in connection with the proposed merger because it will contain important information about United, Cardinal, the merger, the persons soliciting proxies in the merger and their interests in the merger and related matters. Investors will be able to obtain all documents filed with the SEC by United free of charge at the SEC’s Internet site (http://www.sec.gov). In addition, documents filed with the SEC by United will be available free of charge from the Corporate Secretary of United Bankshares, Inc., 514 Market Street, Parkersburg, West Virginia 26101 telephone (304) 424-8800. The proxy statement/prospectus (when it is available) and the other documents may also be obtained for free by accessing United’s website at www.ubsi-inc.com under the tab “Investor Relations” and then under the heading “SEC Filings” or by accessing Cardinal’s website at www.cardinalbank.com under the tab “About Us” and then under the heading “Investor Relations”, and “SEC Filings”. You are urged to read the proxy statement/prospectus carefully before making a decision concerning the merger.
Participants in the Transaction
United, Cardinal and their respective directors, executive officers and certain other members of management and employees may be deemed “participants” in the solicitation of proxies from Cardinal’s shareholders in favor of the merger with United. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the Cardinal shareholders in connection with the proposed merger will be set forth in the proxy statement/prospectus when it is filed with the SEC.
You can find information about the executive officers and directors of United in its Annual Report on Form 10-K for the year ended December 31, 2015 and in its definitive proxy statement filed with the SEC on April 1, 2016. You can find information about Cardinal’s executive officers and directors in its Annual Report on Form 10-K for the year ended December 31, 2015 and in its definitive proxy statement filed with the SEC on March 24, 2016. You can obtain free copies of these documents from United or Cardinal using the contact information above.
Contact: |
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Bernard H. Clineburg |
Executive Chairman |
or |
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Christopher Bergstrom |
Cardinal Financial Corporation and Subsidiaries
Summary Consolidated Statements of Condition
(Dollars in thousands)
(Unaudited)
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| % Change |
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| % Change |
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| Current |
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| From |
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| 12/31/16 |
| 09/30/16 |
| Quarter |
| 06/30/16 |
| 03/31/16 |
| 12/31/15 |
| Year Ago |
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Cash and due from banks |
| $ | 21,104 |
| $ | 23,928 |
| -11.8 | % | $ | 24,081 |
| $ | 19,379 |
| $ | 24,760 |
| -14.8 | % |
Federal funds sold |
| 76,728 |
| 23,481 |
| 226.8 | % | 11,481 |
| 41,489 |
| 14,577 |
| 426.4 | % | |||||
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Investment securities available-for-sale |
| 388,191 |
| 387,150 |
| 0.3 | % | 402,522 |
| 407,980 |
| 414,077 |
| -6.3 | % | |||||
Investment securities held-to-maturity |
| 3,543 |
| 3,780 |
| -6.3 | % | 3,796 |
| 3,814 |
| 3,836 |
| -7.6 | % | |||||
Investment securities — trading |
| 8,383 |
| 6,958 |
| 20.5 | % | 6,489 |
| 6,221 |
| 5,881 |
| 42.5 | % | |||||
Total investment securities |
| 400,117 |
| 397,888 |
| 0.6 | % | 412,807 |
| 418,015 |
| 423,794 |
| -5.6 | % | |||||
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Other investments |
| 16,420 |
| 18,736 |
| -12.4 | % | 18,136 |
| 19,411 |
| 20,967 |
| -21.7 | % | |||||
Loans held for sale |
| 297,766 |
| 432,350 |
| -31.1 | % | 456,359 |
| 365,489 |
| 383,768 |
| -22.4 | % | |||||
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Loans receivable, net of fees: |
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Commercial and industrial |
| 373,637 |
| 336,444 |
| 11.1 | % | 350,206 |
| 363,405 |
| 379,414 |
| -1.5 | % | |||||
Real estate - commercial |
| 1,685,001 |
| 1,690,305 |
| -0.3 | % | 1,605,868 |
| 1,555,985 |
| 1,372,627 |
| 22.8 | % | |||||
Real estate - construction |
| 587,089 |
| 570,776 |
| 2.9 | % | 570,269 |
| 560,114 |
| 694,408 |
| -15.5 | % | |||||
Real estate - residential |
| 468,463 |
| 460,400 |
| 1.8 | % | 463,394 |
| 455,952 |
| 448,168 |
| 4.5 | % | |||||
Home equity lines |
| 161,135 |
| 161,515 |
| -0.2 | % | 161,658 |
| 161,691 |
| 156,852 |
| 2.7 | % | |||||
Consumer |
| 5,834 |
| 5,383 |
| 8.4 | % | 5,476 |
| 4,831 |
| 4,841 |
| 20.5 | % | |||||
Total loans, net of fees |
| 3,281,159 |
| 3,224,823 |
| 1.7 | % | 3,156,871 |
| 3,101,978 |
| 3,056,310 |
| 7.4 | % | |||||
Allowance for loan losses |
| (31,767 | ) | (33,641 | ) | -5.6 | % | (32,984 | ) | (32,407 | ) | (31,723 | ) | 0.1 | % | |||||
Loans receivable, net |
| 3,249,392 |
| 3,191,182 |
| 1.8 | % | 3,123,887 |
| 3,069,571 |
| 3,024,587 |
| 7.4 | % | |||||
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Premises and equipment, net |
| 22,736 |
| 24,190 |
| -6.0 | % | 24,273 |
| 24,845 |
| 25,163 |
| -9.6 | % | |||||
Goodwill and intangibles, net |
| 35,982 |
| 36,115 |
| -0.4 | % | 36,262 |
| 36,415 |
| 36,576 |
| -1.6 | % | |||||
Bank-owned life insurance |
| 33,388 |
| 33,314 |
| 0.2 | % | 33,213 |
| 33,102 |
| 32,978 |
| 1.2 | % | |||||
Other real estate owned |
| — |
| — |
| 0.0 | % | — |
| — |
| 253 |
| -100.0 | % | |||||
Other assets |
| 56,881 |
| 38,464 |
| 47.9 | % | 56,667 |
| 46,829 |
| 42,498 |
| 33.8 | % | |||||
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TOTAL ASSETS |
| $ | 4,210,514 |
| $ | 4,219,648 |
| -0.2 | % | $ | 4,197,166 |
| $ | 4,074,545 |
| $ | 4,029,921 |
| 4.5 | % |
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Non-interest bearing deposits |
| $ | 733,475 |
| $ | 757,184 |
| -3.1 | % | $ | 710,318 |
| $ | 687,493 |
| $ | 657,398 |
| 11.6 | % |
Interest checking |
| 453,863 |
| 437,358 |
| 3.8 | % | 437,724 |
| 459,377 |
| 451,545 |
| 0.5 | % | |||||
Money markets |
| 466,290 |
| 492,547 |
| -5.3 | % | 445,639 |
| 447,565 |
| 448,888 |
| 3.9 | % | |||||
Statement savings |
| 346,463 |
| 333,272 |
| 4.0 | % | 319,116 |
| 310,055 |
| 291,484 |
| 18.9 | % | |||||
Certificates of deposit |
| 738,658 |
| 756,991 |
| -2.4 | % | 763,013 |
| 788,756 |
| 776,413 |
| -4.9 | % | |||||
Brokered certificates of deposit |
| 543,951 |
| 447,148 |
| 21.6 | % | 568,996 |
| 451,781 |
| 407,043 |
| 33.6 | % | |||||
Total deposits |
| 3,282,700 |
| 3,224,500 |
| 1.8 | % | 3,244,806 |
| 3,145,027 |
| 3,032,771 |
| 8.2 | % | |||||
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Other borrowed funds |
| 426,671 |
| 464,876 |
| -8.2 | % | 450,696 |
| 437,065 |
| 537,965 |
| -20.7 | % | |||||
Mortgage funding checks |
| 13,762 |
| 36,740 |
| -62.5 | % | 23,921 |
| 28,765 |
| 12,554 |
| 9.6 | % | |||||
Escrow liabilities |
| 1,506 |
| 3,653 |
| -58.8 | % | 2,491 |
| 2,777 |
| 2,676 |
| -43.7 | % | |||||
Other liabilities |
| 33,698 |
| 38,042 |
| -11.4 | % | 37,320 |
| 34,366 |
| 30,808 |
| 9.4 | % | |||||
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Shareholders’ equity |
| 452,177 |
| 451,837 |
| 0.1 | % | 437,932 |
| 426,545 |
| 413,147 |
| 9.4 | % | |||||
| �� |
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TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY |
| $ | 4,210,514 |
| $ | 4,219,648 |
| -0.2 | % | $ | 4,197,166 |
| $ | 4,074,545 |
| $ | 4,029,921 |
| 4.5 | % |
Cardinal Financial Corporation and Subsidiaries
Summary Consolidated Income Statements
(In thousands, except share data and per share data)
(Unaudited)
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| For the Three Months Ended |
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| Current |
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| From |
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| 12/31/16 |
| 09/30/16 |
| Quarter |
| 06/30/16 |
| 03/31/16 |
| 12/31/15 |
| Year Ago |
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Net interest income |
| $ | 32,663 |
| $ | 32,965 |
| -0.9 | % | $ | 31,523 |
| $ | 30,706 |
| $ | 30,471 |
| 7.2 | % |
Provision for loan losses |
| (1,934 | ) | 990 |
| -295.4 | % | 430 |
| 250 |
| 449 |
| -530.7 | % | |||||
Net interest income after provision for loan losses |
| 34,597 |
| 31,975 |
| 8.2 | % | 31,093 |
| 30,456 |
| 30,022 |
| 15.2 | % | |||||
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Non-interest income: |
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| |||||
Service charges on deposit accounts |
| 572 |
| 612 |
| -6.5 | % | 581 |
| 551 |
| 590 |
| -3.1 | % | |||||
Loan fees |
| 1,194 |
| 596 |
| 100.3 | % | 359 |
| 309 |
| 307 |
| 288.9 | % | |||||
Income from bank-owned life insurance |
| 74 |
| 101 |
| -26.7 | % | 111 |
| 124 |
| 102 |
| -27.5 | % | |||||
Net realized gains (losses) on investment securities |
| 758 |
| 331 |
| 129.0 | % | 3,918 |
| (84 | ) | (127 | ) | -696.9 | % | |||||
Other non-interest income |
| 215 |
| 134 |
| 60.4 | % | 127 |
| 145 |
| 22 |
| 877.3 | % | |||||
Commercial banking & other segment non-interest income |
| 2,813 |
| 1,774 |
| 58.6 | % | 5,096 |
| 1,045 |
| 894 |
| 214.7 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gains from mortgage banking activities |
| 18,742 |
| 32,035 |
| -41.5 | % | 34,613 |
| 27,041 |
| 19,939 |
| -6.0 | % | |||||
Less: mortgage loan origination expenses |
| (12,543 | ) | (16,412 | ) | -23.6 | % | (19,304 | ) | (12,902 | ) | (11,874 | ) | 5.6 | % | |||||
Mortgage banking segment non-interest income |
| 6,199 |
| 15,623 |
| -60.3 | % | 15,309 |
| 14,139 |
| 8,065 |
| -23.1 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Wealth management segment non-interest income |
| 94 |
| 94 |
| 0.0 | % | 84 |
| 85 |
| 133 |
| -29.3 | % | |||||
Total non-interest income |
| 9,106 |
| 17,491 |
| -47.9 | % | 20,489 |
| 15,269 |
| 9,092 |
| 0.2 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income and non-interest income |
| 43,703 |
| 49,466 |
| -11.7 | % | 51,582 |
| 45,725 |
| 39,114 |
| 11.7 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Salaries and benefits |
| 16,582 |
| 17,331 |
| -4.3 | % | 16,037 |
| 15,497 |
| 14,391 |
| 15.2 | % | |||||
Occupancy |
| 2,590 |
| 2,577 |
| 0.5 | % | 2,448 |
| 2,592 |
| 2,501 |
| 3.6 | % | |||||
Depreciation |
| 708 |
| 764 |
| -7.3 | % | 833 |
| 844 |
| 853 |
| -17.0 | % | |||||
Data processing & communications |
| 1,494 |
| 1,542 |
| -3.1 | % | 1,517 |
| 1,346 |
| 1,273 |
| 17.4 | % | |||||
Professional fees |
| 393 |
| 727 |
| -45.9 | % | 549 |
| 1,135 |
| 1,034 |
| -62.0 | % | |||||
FDIC insurance assessment |
| 516 |
| 516 |
| 0.0 | % | 516 |
| 516 |
| 516 |
| 0.0 | % | |||||
Loss on extinguishment of debt |
| — |
| — |
| 0.0 | % | 3,638 |
| — |
| — |
| 0.0 | % | |||||
Mortgage loan repurchases and settlements |
| — |
| — |
| 0.0 | % | — |
| 100 |
| 350 |
| -100.0 | % | |||||
Merger and acquisition expense |
| 1,809 |
| 2,284 |
| 0.0 | % | — |
| — |
| — |
| 100.0 | % | |||||
Other operating expense |
| 4,335 |
| 4,594 |
| -5.6 | % | 4,579 |
| 4,262 |
| 4,364 |
| -0.7 | % | |||||
Total non-interest expense |
| 28,427 |
| 30,335 |
| -6.3 | % | 30,117 |
| 26,292 |
| 25,282 |
| 12.4 | % | |||||
Income before income taxes |
| 15,276 |
| 19,131 |
| -20.2 | % | 21,465 |
| 19,433 |
| 13,832 |
| 10.4 | % | |||||
Provision for income taxes |
| 4,475 |
| 6,609 |
| -32.3 | % | 7,364 |
| 6,366 |
| 4,817 |
| -7.1 | % | |||||
NET INCOME |
| $ | 10,801 |
| $ | 12,522 |
| -13.7 | % | $ | 14,101 |
| $ | 13,067 |
| $ | 9,015 |
| 19.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings per common share - basic |
| $ | 0.32 |
| $ | 0.38 |
| -14.5 | % | $ | 0.43 |
| $ | 0.40 |
| $ | 0.27 |
| 17.5 | % |
Earnings per common share - diluted |
| $ | 0.32 |
| $ | 0.37 |
| -14.6 | % | $ | 0.42 |
| $ | 0.39 |
| $ | 0.27 |
| 17.3 | % |
Weighted-average common shares outstanding - basic |
| 33,477,798 |
| 33,200,426 |
| 0.8 | % | 33,032,595 |
| 32,977,970 |
| 32,844,212 |
| 1.9 | % | |||||
Weighted-average common shares outstanding - diluted |
| 34,095,904 |
| 33,767,143 |
| 1.0 | % | 33,569,058 |
| 33,435,858 |
| 33,379,656 |
| 2.1 | % | |||||
Cardinal Financial Corporation and Subsidiaries
Summary Consolidated Income Statements
(In thousands, except share data and per share data)
(Unaudited)
|
| For the Years Ended |
| ||||||
|
|
|
|
|
| % Change |
| ||
|
|
|
|
|
| From |
| ||
|
| 12/31/16 |
| 12/31/15 |
| Year Ago |
| ||
|
|
|
|
|
|
|
| ||
Net interest income |
| $ | 127,857 |
| $ | 116,394 |
| 9.8 | % |
Provision for loan losses |
| (264 | ) | 1,388 |
| -119.0 | % | ||
Net interest income after provision for loan losses |
| 128,121 |
| 115,006 |
| 11.4 | % | ||
|
|
|
|
|
|
|
| ||
Non-interest income: |
|
|
|
|
|
|
| ||
Service charges on deposit accounts |
| 2,315 |
| 2,294 |
| 0.9 | % | ||
Loan fees |
| 2,458 |
| 1,596 |
| 54.0 | % | ||
Income from bank-owned life insurance |
| 410 |
| 433 |
| -5.3 | % | ||
Net realized gains on investment securities |
| 4,923 |
| 1,391 |
| 253.9 | % | ||
Litigation recovery |
| — |
| 2,950 |
| -100.0 | % | ||
Other non-interest income |
| 622 |
| 83 |
| 649.4 | % | ||
Commercial banking & other segment non-interest income |
| 10,728 |
| 8,747 |
| 22.6 | % | ||
|
|
|
|
|
|
|
| ||
Gains from mortgage banking activities |
| 112,430 |
| 95,693 |
| 17.5 | % | ||
Less: mortgage loan origination expenses |
| (61,161 | ) | (52,237 | ) | 17.1 | % | ||
Mortgage banking segment non-interest income |
| 51,269 |
| 43,456 |
| 18.0 | % | ||
|
|
|
|
|
|
|
| ||
Wealth management segment non-interest income |
| 357 |
| 489 |
| -27.0 | % | ||
Total non-interest income |
| 62,354 |
| 52,692 |
| 18.3 | % | ||
|
|
|
|
|
|
|
| ||
Net interest income and non-interest income |
| 190,475 |
| 167,698 |
| 13.6 | % | ||
|
|
|
|
|
|
|
| ||
Salaries and benefits |
| 65,446 |
| 51,844 |
| 26.2 | % | ||
Occupancy |
| 10,206 |
| 9,823 |
| 3.9 | % | ||
Depreciation |
| 3,150 |
| 3,403 |
| -7.4 | % | ||
Data processing & communications |
| 5,899 |
| 5,609 |
| 5.2 | % | ||
Professional fees |
| 2,804 |
| 4,611 |
| -39.2 | % | ||
FDIC insurance assessment |
| 2,064 |
| 2,064 |
| 0.0 | % | ||
Loss on extinguishment of debt |
| 3,638 |
| — |
| 100.0 | % | ||
Mortgage loan repurchases and settlements |
| 100 |
| 397 |
| -74.8 | % | ||
Merger and acquisition expense |
| 4,093 |
| 472 |
| 767.2 | % | ||
Other operating expense |
| 17,770 |
| 18,075 |
| -1.7 | % | ||
Total non-interest expense |
| 115,170 |
| 96,298 |
| 19.6 | % | ||
Income before income taxes |
| 75,305 |
| 71,400 |
| 5.5 | % | ||
Provision for income taxes |
| 24,814 |
| 24,066 |
| 3.1 | % | ||
NET INCOME |
| $ | 50,491 |
| $ | 47,334 |
| 6.7 | % |
|
|
|
|
|
|
|
| ||
Earnings per common share - basic |
| $ | 1.52 |
| $ | 1.45 |
| 5.3 | % |
Earnings per common share - diluted |
| $ | 1.50 |
| $ | 1.43 |
| 5.1 | % |
Weighted-average common shares outstanding - basic |
| 33,173,095 |
| 32,744,154 |
| 1.3 | % | ||
Weighted-average common shares outstanding - diluted |
| 33,689,854 |
| 33,208,266 |
| 1.5 | % | ||
Cardinal Financial Corporation and Subsidiaries
Selected Financial Information
(In thousands, except per share data and ratios)
(Unaudited)
|
| 12/31/16 |
| 09/30/16 |
| 06/30/16 |
| 03/31/16 |
| 12/31/15 |
| |||||
Capital Ratios: |
|
|
|
|
|
|
|
|
|
|
| |||||
At Period End: |
|
|
|
|
|
|
|
|
|
|
| |||||
Common equity tier 1 capital |
| 10.83 | % | 10.58 | % | 10.33 | % | 9.99 | % | 9.86 | % | |||||
Tier 1 risk-based capital |
| 11.48 | % | 11.23 | % | 10.99 | % | 10.64 | % | 10.52 | % | |||||
Total risk-based capital |
| 12.32 | % | 12.11 | % | 11.86 | % | 11.50 | % | 11.37 | % | |||||
Leverage capital ratio |
| 10.77 | % | 10.33 | % | 10.38 | % | 10.28 | % | 10.18 | % | |||||
Book value per common share |
| $ | 13.74 |
| $ | 13.77 |
| $ | 13.50 |
| $ | 13.16 |
| $ | 12.76 |
|
Tangible book value per common share (1) |
| $ | 12.65 |
| $ | 12.67 |
| $ | 12.38 |
| $ | 12.04 |
| $ | 11.63 |
|
Common shares outstanding |
| 32,910 |
| 32,803 |
| 32,441 |
| 32,415 |
| 32,373 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Performance Ratios (annualized): |
|
|
|
|
|
|
|
|
|
|
| |||||
For the Three Months Ended: |
|
|
|
|
|
|
|
|
|
|
| |||||
Return on average assets |
| 1.04 | % | 1.19 | % | 1.39 | % | 1.31 | % | 0.92 | % | |||||
Return on average equity |
| 9.39 | % | 11.10 | % | 12.92 | % | 12.34 | % | 8.72 | % | |||||
Net interest margin (2) |
| 3.37 | % | 3.35 | % | 3.33 | % | 3.31 | % | 3.25 | % | |||||
Efficiency ratio (3) |
| 63.73 | % | 55.59 | % | 54.71 | % | 57.19 | % | 63.90 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Asset Quality Data: |
|
|
|
|
|
|
|
|
|
|
| |||||
For the Three Months Ended: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net charge-offs (recoveries) to average loans receivable, net of fees (annualized) |
| -0.01 | % | 0.04 | % | -0.02 | % | -0.06 | % | 0.04 | % | |||||
At Period End: |
|
|
|
|
|
|
|
|
|
|
| |||||
Total nonaccrual loans |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 520 |
|
Other real estate owned |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 253 |
|
Nonperforming loans to loans receivable, net of fees |
| 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.02 | % | |||||
Nonperforming loans to total assets |
| 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.01 | % | |||||
Nonperforming assets to total assets |
| 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.02 | % | |||||
Total loans receivable past due 30 to 89 days |
| $ | 225 |
| $ | 394 |
| $ | 736 |
| $ | 163 |
| $ | 938 |
|
Total loans receivable past due 90 days or more |
| $ | — |
| $ | — |
| $ | 41 |
| $ | — |
| $ | — |
|
Allowance for loan losses to loans receivable, net of fees |
| 0.97 | % | 1.04 | % | 1.04 | % | 1.04 | % | 1.04 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mortgage Banking Data: |
|
|
|
|
|
|
|
|
|
|
| |||||
For the Three Months Ended: |
|
|
|
|
|
|
|
|
|
|
| |||||
Applications |
| $ | 1,043,000 |
| $ | 1,575,200 |
| $ | 1,703,500 |
| $ | 1,503,300 |
| $ | 1,063,400 |
|
Loans closed |
| 927,828 |
| 1,198,737 |
| 1,172,339 |
| 769,080 |
| 786,363 |
| |||||
Loans sold |
| 1,046,704 |
| 1,233,801 |
| 1,073,282 |
| 791,680 |
| 778,854 |
| |||||
Purchase money % of loans closed - George Mason Mortgage |
| 68 | % | 65 | % | 76 | % | 62 | % | 74 | % | |||||
Realized gain on sales and fees as a % of loan sold(4) |
| 2.83 | % | 2.78 | % | 2.71 | % | 2.67 | % | 2.71 | % | |||||
At Period End: |
|
|
|
|
|
|
|
|
|
|
| |||||
Locked Pipeline |
| $ | 217,815 |
| $ | 411,245 |
| $ | 458,555 |
| $ | 451,905 |
| $ | 247,448 |
|
SAB 109 Total Unrealized Gains Recognized |
| 12,841 |
| 23,713 |
| 25,955 |
| 22,453 |
| 16,571 |
| |||||
Change in Unrealized Gains |
| (10,872 | ) | (2,242 | ) | 3,502 |
| 5,882 |
| (1,186 | ) | |||||
Change in After-tax Income |
| (7,012 | ) | (1,446 | ) | 2,259 |
| 3,794 |
| (765 | ) | |||||
(1) Tangible book value is calculated as total shareholders’ equity less goodwill and other intangible assets, divided by common shares outstanding.
(2) The average yields for loans receivable and investment securities available-for-sale are reported on a fully taxable-equivalent basis at a rate of 36% for 2016 and 35% for 2015.
(3) Efficiency ratio is calculated as total non-interest expense divided by the total of net interest income and non-interest income. For the three months ended December 31, 2016, non-interest expense excludes $1.8 million of merger and acquisition expense. For the three months ended September 30, 2016, non-interest expense excludes $2.3 million of merger and acquisition expense. For the three months ended June 30, 2016, non-interest expense excludes a $3.6 million loss on extinguishment of debt and non-interest income excludes $3.6 million in realized gains on investment securities.
(4) Realized gains are those gains recognized on the date the loan is sold and do not include the unrealized gains recognized at the loan commitment date.
Cardinal Financial Corporation and Subsidiaries
Selected Financial Information
(In thousands, except ratios)
(Unaudited)
|
| 12/31/16 |
| 12/31/15 |
| ||
Performance Ratios: |
|
|
|
|
| ||
For the Year Ended: |
|
|
|
|
| ||
Return on average assets |
| 1.23 | % | 1.29 | % | ||
Return on average equity |
| 11.40 | % | 11.76 | % | ||
Net interest margin (1) |
| 3.33 | % | 3.37 | % | ||
Efficiency ratio (2) |
| 57.58 | % | 57.66 | % | ||
|
|
|
|
|
| ||
Mortgage Banking Data: |
|
|
|
|
| ||
For the Year Ended: |
|
|
|
|
| ||
Applications |
| $ | 5,825,000 |
| $ | 5,211,000 |
|
Loans closed |
| $ | 4,067,984 |
| 3,602,075 |
| |
Loans sold |
| $ | 4,145,467 |
| 3,534,175 |
| |
Realized gain on sales and fees as a% of loan sold(3) |
| 2.75 | % | 2.60 | % | ||
(1) The average yields for loans receivable and investment securities available-for-sale are reported on a fully taxable-equivalent basis at a rate of 36% for 2016 and 35% for 2015.
(2) Efficiency ratio is calculated as total non-interest expense divided by the total of net interest income and non-interest income. For the year ended December 31, 2016, non-interest expense excludes a $3.6 million loss on extinguishment of debt and $4.1 million of merger and acquisition expense. Non-interest income excludes $3.6 million in realized gains on investment securities. For the year ended December 31, 2015, non-interest income excludes a $2.9 million litigation settlement and non-interest expense excludes the associated legal expenses of $500,000 related to that same settlement.
(3) Realized gains are those gains recognized on the date the loan is sold and do not include the unrealized gains recognized at the loan commitment date.
Cardinal Financial Corporation and Subsidiaries
Mortgage Revenue Recognition Impact of SAB 109 (Written Loan Commitments Recorded at Fair Value Through Earnings)
(Dollars in thousands, except per share data and ratios)
(Unaudited)
|
| For the Three Months Ended |
| |||||||||||||||||
|
|
|
|
|
| % Change |
|
|
|
|
|
|
| % Change |
| |||||
|
|
|
|
|
| Current |
|
|
|
|
|
|
| From |
| |||||
|
| 12/31/16 |
| 09/30/16 |
| Quarter |
| 06/30/16 |
| 03/31/16 |
| 12/31/15 |
| Year Ago |
| |||||
Net Gains from Mortgage Banking Activities **(see note below): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
As Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Fair Value of LCs / Unrealized Gains Recognized @ LC date |
| $ | 18,742 |
| $ | 32,035 |
| -41.5 | % | $ | 34,613 |
| $ | 27,041 |
| $ | 19,939 |
| -6.0 | % |
Loan origination expenses recognized @ Loan Sale Date |
| 12,543 |
| 16,412 |
| -23.6 | % | 19,304 |
| 12,902 |
| 11,874 |
| 5.6 | % | |||||
Reported Net Gains from Mortgage Banking Activities |
| 6,199 |
| 15,623 |
| -60.3 | % | 15,309 |
| 14,139 |
| 8,065 |
| -23.1 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
As Adjusted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Realized Gains Recognized @ Loan Sale Date |
| 29,614 |
| 34,277 |
| -13.6 | % | 31,111 |
| 21,159 |
| 21,125 |
| 40.2 | % | |||||
Loan origination expenses recognized @ Loan Sale Date |
| 12,543 |
| 16,412 |
| -23.6 | % | 19,304 |
| 12,902 |
| 11,874 |
| 5.6 | % | |||||
Adjusted Net Gains from Mortgage Banking Activities |
| 17,071 |
| 17,865 |
| -4.4 | % | 11,807 |
| 8,257 |
| 9,251 |
| 84.5 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Impact of SAB 109 on Net Gains from Mortgage Banking Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Increase/(Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB 109 |
| $ | (10,872 | ) | $ | (2,242 | ) | 384.9 | % | $ | 3,502 |
| $ | 5,882 |
| $ | (1,186 | ) | 816.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Income Reconciliation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Reported Net Income |
| $ | 10,801 |
| $ | 12,522 |
| -13.7 | % | $ | 14,101 |
| $ | 13,067 |
| $ | 9,015 |
| 19.8 | % |
After-tax Merger and Acquisition Expense |
| 1,646 |
| 1,644 |
| 0.0 | % | — |
| — |
| — |
| 0.0 | % | |||||
Adjusted Net Income |
| $ | 12,447 |
| $ | 14,166 |
| -12.1 | % | $ | 14,101 |
| $ | 13,067 |
| $ | 9,015 |
| 38.1 | % |
After-tax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB 109 |
| (7,012 | ) | (1,446 | ) | 384.9 | % | 2,259 |
| 3,794 |
| (765 | ) | 816.7 | % | |||||
Operating Net Income |
| $ | 19,459 |
| $ | 15,612 |
| 24.6 | % | $ | 11,842 |
| $ | 9,273 |
| $ | 9,780 |
| 99.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted Earnings per Share (EPS) Reconciliation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Reported Net Income |
| $ | 0.32 |
| $ | 0.37 |
| -14.6 | % | $ | 0.42 |
| $ | 0.39 |
| $ | 0.27 |
| 17.3 | % |
After-tax Merger and Acquisition Expense |
| $ | 0.05 |
| 0.05 |
| 0.0 | % | — |
| — |
| — |
| 0.0 | % | ||||
Adjusted Net Income |
| $ | 0.37 |
| 0.42 |
| -13.0 | % | 0.42 |
| 0.39 |
| 0.27 |
| 35.2 | % | ||||
After-tax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB 109 |
| (0.21 | ) | (0.04 | ) | 380.2 | % | 0.07 |
| 0.11 |
| (0.02 | ) | 838.4 | % | |||||
Operating Net Income |
| $ | 0.58 |
| $ | 0.46 |
| 25.6 | % | $ | 0.35 |
| $ | 0.28 |
| $ | 0.29 |
| 98.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Performance Ratios (adjusted for change in unrealized mortgage banking gains): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Return on average assets |
| 1.88 | % | 1.48 | % |
|
| 1.17 | % | 0.93 | % | 1.00 | % |
|
| |||||
Return on average equity |
| 16.91 | % | 13.84 | % |
|
| 10.85 | % | 8.76 | % | 9.46 | % |
|
| |||||
Efficiency ratio |
| 54.00 | % | 57.56 | % |
|
| 62.08 | % | 65.58 | % | 62.04 | % |
|
| |||||
Non-interest income to average assets |
| 1.93 | % | 1.87 | % |
|
| 1.67 | % | 0.94 | % | 1.05 | % |
|
| |||||
**
Per the accounting guidance set forth by SEC Staff Accounting Bulletin (SAB) 109 regarding mortgage lending activities, the fair value of a “locked” commitment, or an unrealized gain, is recognized in income on the day of the locked commitment (LC). As a result of this revenue recognition, the unrealized gains then become part of the basis of the ensuing loan held for sale (LHFS) when the loan is closed. When the loan is sold to investors, the “price” received is equal to the basis of the loan held for sale, and there is no gain or loss recognized. At any point in time (e.g. quarter end) the fair value of the LCs and the premium to the par value of LHFS represent unrealized gains that have been recognized in income, either in the current period or prior periods. This accounting creates a mismatch between the income recognition on loan production and expense recognition for those same loans, which is discussed below.
In accordance with accounting rules (ASC 310-20, formerly FAS 91), direct (e.g. commissions) and indirect loan expenses associated with originating, underwriting and closing loans are deferred and amortized over the life of the loan. In mortgage banking, this results in the mentioned expenses being recognized at the time of investor purchase of the loan (i.e. loan sale date) which often occurs in the quarter subsequent to the original LC and creates a mismatch in the timing of the revenue and expense. These expenses are “netted” from the gain on sale from mortgage banking activities, which is included in non-interest income.
Cardinal Financial Corporation and Subsidiaries
Mortgage Revenue Recognition Impact of SAB 109 (Written Loan Commitments Recorded at Fair Value Through Earnings)
(Dollars in thousands, except per share data and ratios)
(Unaudited)
|
| For the Years Ended |
| ||||||
|
|
|
|
|
| % Change |
| ||
|
|
|
|
|
| From |
| ||
|
| 12/31/16 |
| 12/31/15 |
| Year Ago |
| ||
Net Gains from Mortgage Banking Activities **(see note below): |
|
|
|
|
|
|
| ||
As Reported |
|
|
|
|
|
|
|
|
|
Fair Value of LCs / Unrealized Gains Recognized @ LC date |
| $ | 112,430 |
| $ | 95,693 |
| 17.5 | % |
Loan origination expenses recognized @ Loan Sale Date |
| 61,161 |
| 52,237 |
| 17.1 | % | ||
Reported Net Gains from Mortgage Banking Activities |
| 51,269 |
| 43,456 |
| 18.0 | % | ||
|
|
|
|
|
|
|
| ||
As Adjusted |
|
|
|
|
|
|
| ||
Realized Gains Recognized @ Loan Sale Date |
| 116,159 |
| 91,945 |
| 26.3 | % | ||
Loan origination expenses recognized @ Loan Sale Date |
| 61,161 |
| 52,237 |
| 17.1 | % | ||
Adjusted Net Gains from Mortgage Banking Activities |
| 54,998 |
| 39,708 |
| 38.5 | % | ||
|
|
|
|
|
|
|
| ||
Impact of SAB 109 on Net Gains from Mortgage Banking Activities: |
|
|
|
|
|
|
| ||
Increase/(Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB 109 |
| $ | (3,729 | ) | $ | 3,748 |
| -199.5 | % |
|
|
|
|
|
|
|
| ||
Net Income Reconciliation: |
|
|
|
|
|
|
| ||
Reported Net Income |
| $ | 50,491 |
| $ | 47,334 |
| 6.7 | % |
After-tax litigation settlement (less associated legal expenses) |
| — |
| (1,592 | ) | -100.0 | % | ||
After-tax Merger and Acquisition Expense |
| 3,290 |
| 314 |
| 947.8 | % | ||
Adjusted Net Income |
| $ | 53,781 |
| $ | 46,056 |
| 16.8 | % |
After-tax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB 109 |
| (2,405 | ) | 2,417 |
| -199.5 | % | ||
Operating Net Income |
| $ | 56,186 |
| $ | 43,639 |
| 28.8 | % |
|
|
|
|
|
|
|
| ||
Diluted Earnings per Share (EPS) Reconciliation: |
|
|
|
|
|
|
| ||
Reported Net Income |
| $ | 1.50 |
| $ | 1.43 |
| 5.1 | % |
After-tax litigation settlement (less associated legal expenses) |
| — |
| (0.05 | ) | -100.0 | % | ||
After-tax Merger and Acquisition Expense |
| 0.10 |
| 0.01 |
| 932.8 | % | ||
Adjusted Net Income |
| 1.60 |
| 1.39 |
| 15.1 | % | ||
After-tax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB 109 |
| (0.07 | ) | 0.07 |
| -198.1 | % | ||
Operating Net Income |
| $ | 1.67 |
| $ | 1.32 |
| 26.8 | % |
|
|
|
|
|
|
|
| ||
Performance Ratios (adjusted for change in unrealized mortgage banking gains): |
|
|
|
|
|
|
| ||
Return on average assets |
| 1.37 | % | 1.19 | % |
|
| ||
Return on average equity |
| 12.68 | % | 10.84 | % |
|
| ||
Efficiency ratio |
| 59.38 | % | 58.24 | % |
|
| ||
Non-interest income to average assets |
| 1.61 | % | 1.33 | % |
|
| ||
**
Per the accounting guidance set forth by SEC Staff Accounting Bulletin (SAB) 109 regarding mortgage lending activities, the fair value of a “locked” commitment, or an unrealized gain, is recognized in income on the day of the locked commitment (LC). As a result of this revenue recognition, the unrealized gains then become part of the basis of the ensuing loan held for sale (LHFS) when the loan is closed. When the loan is sold to investors, the “price” received is equal to the basis of the loan held for sale, and there is no gain or loss recognized. At any point in time (e.g. quarter end) the fair value of the LCs and the premium to the par value of LHFS represent unrealized gains that have been recognized in income, either in the current period or prior periods. This accounting creates a mismatch between the income recognition on loan production and expense recognition for those same loans, which is discussed below.
In accordance with accounting rules (ASC 310-20, formerly FAS 91), direct (e.g. commissions) and indirect loan expenses associated with originating, underwriting and closing loans are deferred and amortized over the life of the loan. In mortgage banking, this results in the mentioned expenses being recognized at the time of investor purchase of the loan (i.e. loan sale date) which often occurs in the quarter subsequent to the original LC and creates a mismatch in the timing of the revenue and expense. These expenses are “netted” from the gain on sale from mortgage banking activities, which is included in non-interest income.
Cardinal Financial Corporation and Subsidiaries
Average Statements of Condition and Yields on Earning Assets and Interest-Bearing Liabilities
(Dollars in thousands)
(Unaudited)
|
| For the Three Months Ended |
| |||||||||||||||||||||||
|
| 12/31/2016 |
| 9/30/2016 |
| 6/30/2016 |
| 3/31/2016 |
| 12/31/2015 |
| |||||||||||||||
|
| Average |
| Average |
| Average |
| Average |
| Average |
| Average |
| Average Balance |
| Average Yield |
| Average |
| Average Yield |
| |||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans receivable, net of fees (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial and industrial |
| $ | 250,362 |
| 3.82 | % | $ | 243,678 |
| 3.75 | % | $ | 258,678 |
| 3.74 | % | $ | 266,353 |
| 3.74 | % | $ | 255,255 |
| 3.66 | % |
Commercial and industrial - tax exempt(1) |
| 96,842 |
| 2.95 | % | 101,749 |
| 2.90 | % | 103,221 |
| 2.82 | % | 105,386 |
| 2.80 | % | 103,456 |
| 2.50 | % | |||||
Real estate - commercial(1) |
| 1,699,067 |
| 4.23 | % | 1,659,767 |
| 4.27 | % | 1,563,089 |
| 4.37 | % | 1,532,293 |
| 4.28 | % | 1,361,134 |
| 4.27 | % | |||||
Real estate - construction |
| 578,744 |
| 4.63 | % | 572,704 |
| 4.60 | % | 556,939 |
| 4.37 | % | 549,907 |
| 4.62 | % | 661,665 |
| 4.59 | % | |||||
Real estate - residential |
| 442,922 |
| 3.58 | % | 445,848 |
| 3.53 | % | 448,453 |
| 3.57 | % | 441,134 |
| 3.67 | % | 423,533 |
| 3.65 | % | |||||
Home equity lines |
| 159,837 |
| 3.35 | % | 160,877 |
| 3.28 | % | 160,303 |
| 3.23 | % | 160,240 |
| 3.16 | % | 153,366 |
| 3.10 | % | |||||
Consumer |
| 5,214 |
| 5.11 | % | 5,246 |
| 5.01 | % | 5,239 |
| 4.91 | % | 5,284 |
| 4.72 | % | 4,739 |
| 5.44 | % | |||||
Total loans |
| 3,232,988 |
| 4.10 | % | 3,189,869 |
| 4.10 | % | 3,095,922 |
| 4.09 | % | 3,060,597 |
| 4.10 | % | 2,963,148 |
| 4.08 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans held for sale |
| 332,728 |
| 3.51 | % | 421,843 |
| 3.65 | % | 365,520 |
| 3.71 | % | 304,653 |
| 3.88 | % | 339,793 |
| 3.87 | % | |||||
Investment securities (1) |
| 390,538 |
| 3.67 | % | 400,936 |
| 3.67 | % | 400,085 |
| 3.82 | % | 419,678 |
| 3.76 | % | 426,776 |
| 3.52 | % | |||||
Federal funds sold |
| 38,445 |
| 0.48 | % | 41,050 |
| 0.50 | % | 33,435 |
| 0.45 | % | 55,018 |
| 0.47 | % | 45,307 |
| 0.25 | % | |||||
Total interest-earning assets |
| 3,994,699 |
| 3.98 | % | 4,053,698 |
| 3.97 | % | 3,894,962 |
| 3.99 | % | 3,839,946 |
| 3.99 | % | 3,775,024 |
| 3.95 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Non-interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and due from banks |
| 20,982 |
|
|
| 21,764 |
|
|
| 21,899 |
|
|
| 21,169 |
|
|
| 22,226 |
|
|
| |||||
Premises and equipment, net |
| 23,774 |
|
|
| 24,399 |
|
|
| 24,642 |
|
|
| 25,185 |
|
|
| 25,498 |
|
|
| |||||
Goodwill and intangibles, net |
| 36,050 |
|
|
| 36,189 |
|
|
| 36,333 |
|
|
| 36,498 |
|
|
| 36,662 |
|
|
| |||||
Accrued interest and other assets |
| 98,318 |
|
|
| 124,196 |
|
|
| 119,723 |
|
|
| 105,663 |
|
|
| 102,977 |
|
|
| |||||
Allowance for loan losses |
| (33,265 | ) |
|
| (33,461 | ) |
|
| (32,702 | ) |
|
| (32,113 | ) |
|
| (31,515 | ) |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
TOTAL ASSETS |
| $ | 4,140,558 |
|
|
| $ | 4,226,785 |
|
|
| $ | 4,064,857 |
|
|
| $ | 3,996,348 |
|
|
| $ | 3,930,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest checking |
| $ | 441,472 |
| 0.35 | % | $ | 432,246 |
| 0.36 | % | $ | 445,991 |
| 0.36 | % | $ | 457,528 |
| 0.40 | % | $ | 438,527 |
| 0.48 | % |
Money markets |
| 490,461 |
| 0.41 | % | 479,455 |
| 0.39 | % | 438,863 |
| 0.36 | % | 451,303 |
| 0.37 | % | 466,452 |
| 0.36 | % | |||||
Statement savings |
| 342,699 |
| 0.44 | % | 327,653 |
| 0.43 | % | 315,804 |
| 0.42 | % | 301,734 |
| 0.42 | % | 285,257 |
| 0.40 | % | |||||
Certificates of deposit |
| 751,633 |
| 1.22 | % | 773,912 |
| 1.23 | % | 773,053 |
| 1.23 | % | 784,306 |
| 1.23 | % | 752,104 |
| 1.23 | % | |||||
Brokered certificates of deposit |
| 439,499 |
| 0.95 | % | 538,130 |
| 0.89 | % | 454,152 |
| 0.93 | % | 398,455 |
| 0.91 | % | 400,793 |
| 0.88 | % | |||||
Total interest-bearing deposits |
| 2,465,764 |
| 0.75 | % | 2,551,396 |
| 0.75 | % | 2,427,863 |
| 0.75 | % | 2,393,326 |
| 0.75 | % | 2,343,133 |
| 0.76 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other borrowed funds |
| 394,356 |
| 1.49 | % | 441,576 |
| 1.39 | % | 456,044 |
| 1.69 | % | 487,087 |
| 1.87 | % | 470,416 |
| 1.82 | % | |||||
Total interest-bearing liabilities |
| 2,860,120 |
| 0.85 | % | 2,992,972 |
| 0.84 | % | 2,883,907 |
| 0.90 | % | 2,880,413 |
| 0.94 | % | 2,813,549 |
| 0.93 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Noninterest-bearing deposits |
| 776,242 |
|
|
| 732,506 |
|
|
| 698,123 |
|
|
| 653,432 |
|
|
| 660,236 |
|
|
| |||||
Other liabilities |
| 43,990 |
|
|
| 50,098 |
|
|
| 46,193 |
|
|
| 38,986 |
|
|
| 43,357 |
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Shareholders’ equity |
| 460,206 |
|
|
| 451,209 |
|
|
| 436,634 |
|
|
| 423,517 |
|
|
| 413,730 |
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY |
| $ | 4,140,558 |
|
|
| $ | 4,226,785 |
|
|
| $ | 4,064,857 |
|
|
| $ | 3,996,348 |
|
|
| $ | 3,930,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
NET INTEREST MARGIN (1) |
|
|
| 3.37 | % |
|
| 3.35 | % |
|
| 3.33 | % |
|
| 3.31 | % |
|
| 3.25 | % | |||||
(1) The average yields for loans receivable and investment securities available-for-sale are reported on a fully taxable-equivalent basis at a rate of 36% for 2016 and 35% for 2015.
Cardinal Financial Corporation and Subsidiaries
Average Statements of Condition and Yields on Earning Assets and Interest-Bearing Liabilities
(Dollars in thousands)
(Unaudited)
|
| For the Years Ended |
| ||||||||
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||
|
| Average |
| Average |
| Average |
| Average |
| ||
Interest-earning assets: |
|
|
|
|
|
|
|
|
| ||
Loans receivable, net of fees (1) |
|
|
|
|
|
|
|
|
| ||
Commercial and industrial |
| $ | 254,725 |
| 3.76 | % | $ | 272,026 |
| 3.87 | % |
Commercial and industrial - tax exempt(1) |
| 101,786 |
| 2.87 | % | 73,460 |
| 2.88 | % | ||
Real estate - commercial(1) |
| 1,577,443 |
| 4.29 | % | 1,305,202 |
| 4.37 | % | ||
Real estate - construction |
| 601,106 |
| 4.54 | % | 554,527 |
| 4.67 | % | ||
Real estate - residential |
| 444,588 |
| 3.59 | % | 405,517 |
| 3.73 | % | ||
Home equity lines |
| 160,315 |
| 3.25 | % | 143,180 |
| 3.17 | % | ||
Consumer |
| 5,245 |
| 4.96 | % | 4,819 |
| 5.64 | % | ||
Total loans |
| 3,145,208 |
| 4.10 | % | 2,758,731 |
| 4.18 | % | ||
|
|
|
|
|
|
|
|
|
| ||
Loans held for sale |
| 360,147 |
| 3.64 | % | 344,501 |
| 3.85 | % | ||
Investment securities (1) |
| 402,763 |
| 3.73 | % | 366,611 |
| 3.18 | % | ||
Federal funds sold |
| 41,973 |
| 0.48 | % | 41,167 |
| 0.22 | % | ||
Total interest-earning assets |
| 3,950,091 |
| 3.98 | % | 3,511,010 |
| 4.06 | % | ||
|
|
|
|
|
|
|
|
|
| ||
Non-interest earning assets: |
|
|
|
|
|
|
|
|
| ||
Cash and due from banks |
| 21,453 |
|
|
| 21,069 |
|
|
| ||
Premises and equipment, net |
| 24,498 |
|
|
| 25,191 |
|
|
| ||
Goodwill and intangibles, net |
| 36,267 |
|
|
| 36,943 |
|
|
| ||
Accrued interest and other assets |
| 108,134 |
|
|
| 104,991 |
|
|
| ||
Allowance for loan losses |
| (32,888 | ) |
|
| (30,346 | ) |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
TOTAL ASSETS |
| $ | 4,107,555 |
|
|
| $ | 3,668,858 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
| ||
Interest checking |
| $ | 444,269 |
| 0.37 | % | $ | 430,276 |
| 0.49 | % |
Money markets |
| 465,129 |
| 0.38 | % | 411,369 |
| 0.34 | % | ||
Statement savings |
| 322,044 |
| 0.43 | % | 275,567 |
| 0.36 | % | ||
Certificates of deposit |
| 770,683 |
| 1.22 | % | 691,026 |
| 1.22 | % | ||
Brokered certificates of deposit |
| 457,730 |
| 0.92 | % | 404,293 |
| 0.80 | % | ||
Total interest-bearing deposits |
| 2,459,855 |
| 0.75 | % | 2,212,531 |
| 0.73 | % | ||
|
|
|
|
|
|
|
|
|
| ||
Other borrowed funds |
| 444,619 |
| 1.62 | % | 394,536 |
| 2.00 | % | ||
Total interest-bearing liabilities |
| 2,904,474 |
| 0.88 | % | 2,607,067 |
| 0.92 | % | ||
|
|
|
|
|
|
|
|
|
| ||
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
| ||
Noninterest-bearing deposits |
| 715,291 |
|
|
| 618,988 |
|
|
| ||
Other liabilities |
| 44,829 |
|
|
| 40,264 |
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Shareholders’ equity |
| 442,961 |
|
|
| 402,539 |
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY |
| $ | 4,107,555 |
|
|
| $ | 3,668,858 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
NET INTEREST MARGIN (1) |
|
|
| 3.33 | % |
|
| 3.37 | % | ||
(1) The average yields for loans receivable and investment securities available-for-sale are reported on a fully taxable-equivalent basis at a rate of 36% for 2016 and 35% for 2015.
Cardinal Financial Corporation and Subsidiaries
Segment Reporting - as Reported and Non-GAAP Reconciliation
(Dollars in thousands)
(Unaudited)
|
| For the Three Months Ended |
| |||||||||||||||||
|
|
|
|
|
| % Change |
|
|
|
|
|
|
| % Change |
| |||||
|
|
|
|
|
| Current |
|
|
|
|
|
|
| From |
| |||||
|
| 12/31/2016 |
| 9/30/2016 |
| Quarter |
| 6/30/2016 |
| 3/31/2016 |
| 12/31/2015 |
| Year Ago |
| |||||
Commercial Banking: |
| |||||||||||||||||||
Net interest income |
| $ | 32,758 |
| $ | 32,980 |
| -0.7 | % | $ | 31,442 |
| $ | 30,545 |
| $ | 30,042 |
| 9.0 | % |
Non-interest income |
| 2,050 |
| 1,391 |
| 47.4 | % | 1,056 |
| 1,104 |
| 963 |
| 112.9 | % | |||||
Net realized gain on available-for-sale securities |
| 868 |
| — |
| 100.0 | % | 3,614 |
| 112 |
| — |
| 100.0 | % | |||||
Loss on extinguishment of debt |
| — |
| — |
| 0.0 | % | 3,638 |
| — |
| — |
| 0.0 | % | |||||
Non-interest expense |
| 14,794 |
| 15,940 |
| -7.2 | % | 15,823 |
| 16,514 |
| 15,734 |
| -6.0 | % | |||||
Net income before provision for loan losses and taxes |
| 20,882 |
| 18,431 |
| 13.3 | % | 16,651 |
| 15,247 |
| 15,271 |
| 36.7 | % | |||||
Provision for loan losses |
| (1,934 | ) | 990 |
| -295.4 | % | 430 |
| 250 |
| 449 |
| -530.7 | % | |||||
Provision for income taxes |
| 6,993 |
| 5,978 |
| 17.0 | % | 5,464 |
| 4,757 |
| 5,238 |
| 33.5 | % | |||||
Net income |
| $ | 15,823 |
| $ | 11,463 |
| 38.0 | % | $ | 10,757 |
| $ | 10,240 |
| $ | 9,584 |
| 65.1 | % |
Average Assets |
| $ | 4,059,989 |
| $ | 4,140,341 |
|
|
| $ | 3,998,824 |
| $ | 3,937,805 |
| $ | 3,866,407 |
|
|
|
Commercial Banking Segment Contribution to earnings |
| 146 | % | 92 | % |
|
| 76 | % | 78 | % | 106 | % |
|
| |||||
Mortgage Banking: |
| |||||||||||||||||||
Net interest income |
| $ | 128 |
| $ | 196 |
| -34.7 | % | $ | 283 |
| $ | 358 |
| $ | 619 |
| -79.3 | % |
Non-interest income |
| 6,198 |
| 15,669 |
| -60.4 | % | 15,344 |
| 14,158 |
| 8,115 |
| -23.6 | % | |||||
Non-interest expense |
| 11,042 |
| 11,464 |
| -3.7 | % | 9,382 |
| 8,963 |
| 8,589 |
| 28.6 | % | |||||
Net income before provision for taxes |
| (4,716 | ) | 4,401 |
| -207.2 | % | 6,245 |
| 5,553 |
| 145 |
| -3352.4 | % | |||||
Provision for income taxes |
| (1,699 | ) | 1,585 |
| -207.2 | % | 2,251 |
| 2,000 |
| (19 | ) | 8842.1 | % | |||||
Net income (loss) |
| $ | (3,017 | ) | $ | 2,816 |
| -207.1 | % | $ | 3,994 |
| $ | 3,553 |
| $ | 164 |
| -1939.6 | % |
Add:decrease in unrealized gains (or (Less):increase in unrealized gains) on mortgage banking activities (SAB 109) |
| 10,872 |
| 2,242 |
| 384.9 | % | (3,502 | ) | (5,882 | ) | 1,186 |
| 816.7 | % | |||||
Add / (Less): provision for income taxes associated with SAB 109 |
| (3,860 | ) | (796 | ) | 384.9 | % | 1,243 |
| 2,088 |
| (421 | ) | 816.7 | % | |||||
Operating net income (loss) |
| $ | 3,995 |
| $ | 4,262 |
| -6.3 | % | $ | 1,735 |
| $ | (241 | ) | $ | 929 |
| 330.1 | % |
Average Assets |
| $ | 347,419 |
| $ | 455,608 |
| -23.7 | % | $ | 382,899 |
| $ | 317,034 |
| $ | 351,129 |
| -1.1 | % |
Mortgage Banking Segment Contribution to earnings |
| -28 | % | 22 | % |
|
| 28 | % | 27 | % | 2 | % |
|
| |||||
Wealth Management/Other: |
| |||||||||||||||||||
Net interest income |
| $ | (223 | ) | $ | (211 | ) | 5.7 | % | $ | (201 | ) | $ | (197 | ) | $ | (190 | ) | 17.4 | % |
Non-interest income |
| (10 | ) | 431 |
| -102.3 | % | 473 |
| (105 | ) | 14 |
| -171.4 | % | |||||
Non-interest expense |
| 2,591 |
| 2,931 |
| -11.6 | % | 1,273 |
| 815 |
| 959 |
| 170.2 | % | |||||
Net income (loss) before provision for taxes |
| (2,824 | ) | (2,711 | ) | 4.2 | % | (1,001 | ) | (1,117 | ) | (1,135 | ) | 148.8 | % | |||||
Provision for income taxes |
| (819 | ) | (954 | ) | -14.2 | % | (351 | ) | (391 | ) | (402 | ) | 103.7 | % | |||||
Net income (loss) |
| $ | (2,005 | ) | $ | (1,757 | ) | 14.1 | % | $ | (650 | ) | $ | (726 | ) | $ | (733 | ) | 173.5 | % |
Add: merger & acquisition (M&A) expense |
| 1,809 |
| 2,284 |
| -20.8 | % | — |
| — |
| — |
| 100.0 | % | |||||
Subtract: provision for income taxes associated with M&A expense |
| (163 | ) | (640 | ) | -74.5 | % |
|
|
|
|
|
| -100.0 | % | |||||
Operating net income (loss) |
| $ | (359 | ) | $ | (113 | ) | 217.7 | % | $ | (650 | ) | $ | (726 | ) | $ | (733 | ) | -51.0 | % |
Average Assets / Intersegment Eliminations |
| $ | (266,850 | ) | $ | (369,164 | ) | -27.7 | % | $ | (316,866 | ) | $ | (258,491 | ) | $ | (286,664 | ) | -6.9 | % |
Wealth Management/Other Segments Contribution to earnings |
| -18 | % | -14 | % | 27.0 | % | -5 | % | -5 | % | -8 | % | 116.0 | % | |||||
Consolidated: |
| |||||||||||||||||||
Net interest income |
| $ | 32,663 |
| $ | 32,965 |
| -0.9 | % | $ | 31,524 |
| $ | 30,706 |
| $ | 30,471 |
| 7.2 | % |
Non-interest income |
| 8,238 |
| 17,491 |
| -52.9 | % | 16,873 |
| 15,157 |
| 9,092 |
| -9.4 | % | |||||
Net realized gain on available-for-sale securities |
| 868 |
| — |
| 100.0 | % | 3,614 |
| 112 |
| — |
| 100.0 | % | |||||
Loss on extinguishment of debt |
| — |
| — |
| 0.0 | % | 3,638 |
| — |
| — |
| 0.0 | % | |||||
Non-interest expense |
| 28,427 |
| 30,335 |
| -6.3 | % | 26,478 |
| 26,292 |
| 25,282 |
| 12.4 | % | |||||
Net income before provision for loan losses and taxes |
| 13,342 |
| 20,121 |
| -33.7 | % | 21,895 |
| 19,683 |
| 14,281 |
| -6.6 | % | |||||
Provision for loan losses |
| (1,934 | ) | 990 |
| -295.4 | % | 430 |
| 250 |
| 449 |
| -530.7 | % | |||||
Provision for income taxes |
| 4,475 |
| 6,609 |
| -32.3 | % | 7,364 |
| 6,366 |
| 4,817 |
| -7.1 | % | |||||
Net income |
| $ | 10,801 |
| $ | 12,522 |
| -13.7 | % | $ | 14,101 |
| $ | 13,067 |
| $ | 9,015 |
| 19.8 | % |
Add: merger & acquisition (M&A) expense |
| 1,809 |
| 2,284 |
| -20.8 | % | — |
| — |
| — |
| 100.0 | % | |||||
Add:decrease in unrealized gains (or (Less): increase in unrealized gains) on mortgage banking activities (SAB 109) |
| 10,872 |
| 2,242 |
| 384.9 | % | (3,502 | ) | (5,882 | ) | 1,186 |
| 816.7 | % | |||||
Add/(Less): provision for income taxes associated with M&A expenses & SAB 109 |
| (4,023 | ) | (1,436 | ) | 180.1 | % | 1,243 |
| 2,088 |
| (421 | ) | 855.4 | % | |||||
Operating net income |
| $ | 19,459 |
| $ | 15,612 |
| 24.6 | % | $ | 11,842 |
| $ | 9,273 |
| $ | 9,780 |
| 99.0 | % |
Average Assets |
| $ | 4,140,558 |
| $ | 4,226,785 |
| -2.0 | % | $ | 4,064,857 |
| $ | 3,996,348 |
| $ | 3,930,872 |
| 5.3 | % |
Cardinal Financial Corporation and Subsidiaries
Segment Reporting — as Reported and Non-GAAP Reconciliation
(Dollars in thousands)
(Unaudited)
|
| For the Years Ended |
| ||||||
|
|
|
|
|
| % Change |
| ||
|
|
|
|
|
| From |
| ||
|
| 12/31/2016 |
| 12/31/2015 |
| Year Ago |
| ||
Commercial Banking: |
| ||||||||
Net interest income |
| $ | 127,726 |
| $ | 114,674 |
| 11.4 | % |
Non-interest income |
| 5,602 |
| 5,293 |
| 5.8 | % | ||
Net realized gain on available-for-sale securities |
| 4,594 |
| — |
| 100.0 | % | ||
Loss on extinguishment of debt |
| 3,638 |
| — |
| 100.0 | % | ||
Non-interest expense |
| 63,072 |
| 59,956 |
| 5.2 | % | ||
Net income before provision for loan losses and taxes |
| 71,212 |
| 60,011 |
| 18.7 | % | ||
Provision for loan losses |
| (264 | ) | 1,388 |
| -119.0 | % | ||
Provision for income taxes |
| 23,192 |
| 19,448 |
| 19.3 | % | ||
Net income |
| $ | 48,284 |
| $ | 39,175 |
| 23.3 | % |
Add: merger & acquisition (M&A) expense |
| — |
| 472 |
| -100.0 | % | ||
Less: provision for income taxes associated with M&A expense |
| — |
| (158 | ) | -100.0 | % | ||
Operating net income |
| $ | 48,284 |
| $ | 39,489 |
|
|
|
Average Assets |
| $ | 4,026,960 |
| $ | 3,604,942 |
|
|
|
Commercial Banking Segment Contribution to earnings |
| 96 | % | 83 | % |
|
| ||
Mortgage Banking: |
| ||||||||
Net interest income |
| $ | 964 |
| $ | 2,454 |
| -60.7 | % |
Non-interest income |
| 51,369 |
| 43,700 |
| 17.5 | % | ||
Non-interest expense |
| 40,850 |
| 31,806 |
| 28.4 | % | ||
Net income before provision for taxes |
| 11,483 |
| 14,348 |
| -20.0 | % | ||
Provision for income taxes |
| 4,137 |
| 5,168 |
| -19.9 | % | ||
Net income |
| $ | 7,346 |
| $ | 9,180 |
| -20.0 | % |
Add:decrease in unrealized gains (or (Less):increase in unrealized gains) on mortgage banking activities (SAB 109) |
| 3,729 |
| (3,748 | ) | -199.5 | % | ||
Add / (Less): provision for income taxes associated with SAB 109 |
| (1,324 | ) | 1,331 |
| -199.5 | % | ||
Operating net income |
| $ | 9,751 |
| $ | 6,763 |
| 44.2 | % |
Average Assets |
| $ | 383,520 |
| $ | 357,145 |
| 7.4 | % |
Mortgage Banking Segment Contribution to earnings |
| 14 | % | 19 | % |
|
| ||
Wealth Management/Other: |
| ||||||||
Net interest income |
| $ | (833 | ) | $ | (734 | ) | 13.5 | % |
Non-interest income |
| 789 |
| 3,699 |
| -78.7 | % | ||
Non-interest expense |
| 7,610 |
| 4,536 |
| 67.8 | % | ||
Net income (loss) before provision for taxes |
| (7,654 | ) | (1,571 | ) | 387.2 | % | ||
Provision for income taxes |
| (2,515 | ) | (550 | ) | 357.3 | % | ||
Net income (loss) |
| $ | (5,139 | ) | $ | (1,021 | ) | 403.3 | % |
Add: merger & acquisition (M&A) expense |
| 4,093 |
| — |
| 100.0 | % | ||
Add: legal expense associated with litigation settlement |
| — |
| 500 |
| -100.0 | % | ||
Less: litigation settlement |
| — |
| (2,950 | ) | -100.0 | % | ||
Less: provision for income taxes associated with litigation settlement and M&A expense |
| (803 | ) | 858 |
| -193.6 | % | ||
Operating net income (loss) |
| $ | (1,849 | ) | $ | (2,613 | ) | -29.2 | % |
Average Assets / Intersegment Eliminations |
| $ | (302,925 | ) | $ | (293,229 | ) | 3.3 | % |
Wealth Management/Other Segments Contribution to earnings |
| -10 | % | -2 | % | 371.9 | % | ||
Consolidated: |
| ||||||||
Net interest income |
| $ | 127,857 |
| $ | 116,394 |
| 9.8 | % |
Non-interest income |
| 57,760 |
| 52,692 |
| 9.6 | % | ||
Net realized gain on available-for-sale securities |
| 4,594 |
| — |
| 100.0 | % | ||
Loss on extinguishment of debt |
| 3,638 |
| — |
| 100.0 | % | ||
Non-interest expense |
| 111,532 |
| 96,298 |
| 15.8 | % | ||
Net income before provision for loan losses and taxes |
| 75,041 |
| 72,788 |
| 3.1 | % | ||
Provision for loan losses |
| (264 | ) | 1,388 |
| -119.0 | % | ||
Provision for income taxes |
| 24,814 |
| 24,066 |
| 3.1 | % | ||
Net income |
| $ | 50,491 |
| $ | 47,334 |
| 6.7 | % |
Add: merger & acquisition (M&A) expense |
| 4,093 |
| 472 |
| 767.2 | % | ||
Add: legal expense associated with litigation settlement |
| — |
| 500 |
| -100.0 | % | ||
Less: litigation settlement |
| — |
| (2,950 | ) | -100.0 | % | ||
Add:decrease in unrealized gains (or Less: increase in unrealized gains) on mortgage banking activities (SAB 109) |
| 3,729 |
| (3,748 | ) | -199.5 | % | ||
Less: provision for income taxes associated with M&A expense, litigation settlement & SAB 109 |
| (2,127 | ) | 2,031 |
| -204.7 | % | ||
Operating net income |
| $ | 56,186 |
| $ | 43,639 |
| 28.8 | % |
Average Assets |
| $ | 4,107,555 |
| $ | 3,668,858 |
| 12.0 | % |
Cardinal Financial Corporation and Subsidiaries
Historical Segment Performance
(Dollars in thousands, except per share data)
(Unaudited)
|
| Commercial |
| Mortgage |
| Wealth |
| Consolidated |
| ||||
For the Three Months Ended December 31, 2016: |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 15,823 |
| $ | (3,017 | ) | $ | (2,005 | ) | $ | 10,801 |
|
Earnings per common share - diluted |
| $ | 0.46 |
| $ | (0.09 | ) | $ | (0.05 | ) | $ | 0.32 |
|
Segment Contribution to Earnings |
| 146.0 | % | -28.4 | % | -17.6 | % | 100 | % | ||||
|
|
|
|
|
|
|
|
|
| ||||
For the Three Months Ended December 31, 2015: |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 9,584 |
| $ | 164 |
| $ | (733 | ) | $ | 9,015 |
|
Earnings per common share - diluted |
| $ | 0.29 |
| $ | 0.00 |
| $ | (0.02 | ) | $ | 0.27 |
|
Segment Contribution to Earnings |
| 106.3 | % | 1.8 | % | -8.1 | % | 100 | % | ||||
|
|
|
|
|
|
|
|
|
| ||||
For the Year Ended December 31, 2016: |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 48,284 |
| $ | 7,346 |
| $ | (5,139 | ) | $ | 50,491 |
|
Earnings per common share - diluted |
| $ | 1.43 |
| $ | 0.22 |
| $ | (0.15 | ) | $ | 1.50 |
|
Segment Contribution to Earnings |
| 95.7 | % | 14.5 | % | -10.2 | % | 100 | % | ||||
|
|
|
|
|
|
|
|
|
| ||||
For the Year Ended December 31, 2015: |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 39,175 |
| $ | 9,180 |
| $ | (1,021 | ) | $ | 47,334 |
|
Earnings per common share - diluted |
| $ | 1.18 |
| $ | 0.28 |
| $ | (0.03 | ) | $ | 1.43 |
|
Segment Contribution to Earnings |
| 82.8 | % | 19.4 | % | -2.2 | % | 100.0 | % | ||||
|
|
|
|
|
|
|
|
|
| ||||
For the Year Ended December 31, 2014: |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 34,351 |
| $ | 2,658 |
| $ | (4,326 | ) | $ | 32,683 |
|
Earnings per common share - diluted |
| $ | 1.05 |
| $ | 0.08 |
| $ | (0.13 | ) | $ | 1.00 |
|
Segment Contribution to Earnings |
| 105.1 | % | 8.1 | % | -13.2 | % | 100 | % | ||||
|
|
|
|
|
|
|
|
|
| ||||
For the Year Ended December 31, 2013: |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 33,881 |
| $ | (5,215 | ) | $ | (3,156 | ) | $ | 25,510 |
|
Earnings per common share - diluted |
| $ | 1.09 |
| $ | (0.17 | ) | $ | (0.10 | ) | $ | 0.82 |
|
Segment Contribution to Earnings |
| 132.8 | % | -20.4 | % | -12.4 | % | 100.0 | % | ||||
|
|
|
|
|
|
|
|
|
| ||||
For the Year Ended December 31, 2012: |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 30,544 |
| $ | 17,608 |
| $ | (2,855 | ) | $ | 45,297 |
|
Earnings per common share - diluted |
| $ | 1.02 |
| $ | 0.59 |
| $ | (0.10 | ) | $ | 1.51 |
|
Segment Contribution to Earnings |
| 67.4 | % | 38.9 | % | -6.3 | % | 100.0 | % | ||||
|
|
|
|
|
|
|
|
|
| ||||
For the Year Ended December 31, 2011: |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 23,063 |
| $ | 7,791 |
| $ | (2,856 | ) | $ | 27,998 |
|
Earnings per common share - diluted |
| $ | 0.77 |
| $ | 0.26 |
| $ | (0.09 | ) | $ | 0.94 |
|
Segment Contribution to Earnings |
| 82.4 | % | 27.8 | % | -10.2 | % | 100.0 | % | ||||
Cardinal Financial Corporation and Subsidiaries
Loan Fundings and Payoffs
(Dollars in thousands)
(Unaudited)
|
| Ending Balance 12/31/2015 |
| New Loans |
| Loan Payoffs |
| Net Draws/Pay Downs |
| Ending Balance |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial and industrial |
| $ | 379,414 |
| $ | 59,523 |
| $ | (30,287 | ) | $ | (35,013 | ) | $ | 373,637 |
|
Real estate - commercial |
| 1,372,627 |
| 477,445 |
| (140,785 | ) | (24,286 | ) | $ | 1,685,001 |
| ||||
Real estate - construction |
| 694,408 |
| 69,017 |
| (262,695 | ) | 86,359 |
| $ | 587,089 |
| ||||
Real estate - residential |
| 448,168 |
| 96,299 |
| (64,559 | ) | (11,445 | ) | $ | 468,463 |
| ||||
Home equity lines |
| 156,852 |
| 29,014 |
| (29,242 | ) | 4,511 |
| $ | 161,135 |
| ||||
Consumer |
| 4,841 |
| 8,582 |
| (3,039 | ) | (4,550 | ) | $ | 5,834 |
| ||||
Total loans, net of fees |
| $ | 3,056,310 |
| $ | 739,880 |
| $ | (530,607 | ) | $ | 15,576 |
| $ | 3,281,159 |
|
Cardinal Financial Corporation and Subsidiaries
Commercial Real Estate (“CRE”) Concentrations
(Dollars in thousands)
(Unaudited)
|
| 12/31/16 |
| 09/30/16 |
| 06/30/16 |
| 03/31/16 |
| 12/31/15 |
| |||||
Construction, land development, and other land loans |
| $ | 461,898 |
| $ | 470,914 |
| $ | 443,879 |
| $ | 497,691 |
| $ | 459,261 |
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Owner-occupied construction, land development loans |
| (85,529 | ) | (105,709 | ) | (89,225 | ) | (76,351 | ) | (83,237 | ) | |||||
Construction loans concentration less owner-occupied |
| $ | 376,369 |
| $ | 365,205 |
| $ | 354,654 |
| $ | 421,340 |
| $ | 376,024 |
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As a percentage of risk-based capital (consolidated): |
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Construction loans concentration |
| 97.4 | % | 100.8 | % | 98.3 | % | 113.2 | % | 107.2 | % | |||||
Construction loans concentration less owner-occupied |
| 79.4 | % | 78.2 | % | 78.6 | % | 95.8 | % | 87.7 | % | |||||
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Loans secured by commercial real estate properties |
| $ | 2,231,663 |
| $ | 2,228,820 |
| $ | 2,146,775 |
| $ | 2,105,479 |
| $ | 2,079,265 |
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Owner-occupied commercial real estate properties |
| (436,697 | ) | (426,048 | ) | (409,772 | ) | (392,514 | ) | (421,278 | ) | |||||
Owner-occupied construction, land development loans |
| (85,529 | ) | (105,709 | ) | (89,225 | ) | (76,351 | ) | (83,237 | ) | |||||
Commercial real estate concentration less owner-occupied construction |
| $ | 1,709,437 |
| $ | 1,697,063 |
| $ | 1,647,778 |
| $ | 1,636,614 |
| $ | 1,574,750 |
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As a percentage of risk-based capital (consolidated): |
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Commercial real estate concentration |
| 378.7 | % | 386.0 | % | 384.7 | % | 389.5 | % | 386.9 | % | |||||
Commercial real estate concentration less owner-occupied construction |
| 360.6 | % | 363.4 | % | 365.0 | % | 372.1 | % | 367.5 | % | |||||