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