Commerce Union Bancshares, Inc. Reports Record 2016 and Fourth Quarter

Fourth Quarter Net Income Increases 29% to $2.0 Million
Reports Record Loans and Deposits

BRENTWOOD, Tenn.--()--Commerce Union Bancshares, Inc. (Nasdaq: CUBN), parent of Reliant Bank, today reported record net income attributable to common shareholders, loans and deposits for its fourth quarter and year ended December 31, 2016. Fourth quarter net income attributable to common shareholders rose 29.0% to $2.0 million from $1.5 million for the fourth quarter 2015. Fully diluted net income per share attributable to common shareholders rose 19.0% to $0.25 for the fourth quarter of 2016 compared with $0.21 for the fourth quarter 2015. Net income attributable to common shareholders for the full year 2016 rose 60.3% to $8.9 million from $5.6 million for 2015. Fully diluted net income per share attributable to common shareholders rose 34.9% to $1.16 from $0.86 for 2015. Net loans, excluding mortgage loans held for sale, rose 8.0% to a record $657.7 million at December 31, 2016, compared with $608.7 million at December 31, 2015. Deposits were a record $763.8 million at December 31, 2016, up 19.3% compared with $640.0 million at December 31, 2015.

“We are pleased to report record results for our fourth quarter and 2016 that highlight the progress we have made since the merger of Reliant Bank and Commerce Union Bank last year,” stated William R. DeBerry, Chairman and CEO of the Company. “For the fourth quarter and the year, we reported growth in net income, loans and deposits compared with the prior year that benefited from the strong markets in our five county market in middle Tennessee. We plan to expand our presence in Nashville with the planned opening of a new branch in Green Hills, an affluent submarket of Nashville, in the first quarter of 2017. We remain positive about our growth opportunities in 2017 based on the strong economic and demographic trends in middle Tennessee.”

Fourth Quarter Revenue

Total interest income was up 2.8% to $8.9 million in the fourth quarter of 2016 compared with $8.7 million in the fourth quarter of 2015. Total interest income increased 3.4% in the fourth quarter of 2016 compared with $8.7 million in the third quarter of 2016. The increase in interest income from the third quarter of 2016 was primarily due to an increase in average earning assets.

Noninterest income declined to $869,000 in the fourth quarter of 2016 compared with $1.6 million in the third quarter of 2016 and $3.5 million in the fourth quarter of 2015. The decrease in noninterest income from the third quarter of 2016 was due primarily to a $320,000 loss ($197,000 net of the tax benefit) on securities transactions arising from a municipal bond replacement strategy compared with a $296,000 gain in the third quarter of 2016 and a $7,000 loss in the fourth quarter of 2015. The proceeds from the fourth quarter sale of securities were reinvested in higher yielding municipal bonds that are expected to be less price sensitive to rising interest rates and potential declines in corporate tax rates. The decline in noninterest income from the fourth quarter of 2015 was primarily due to the transition of the out-of-market mortgage operations in the second quarter of 2016.

Net Interest Income and Margins

Net interest income rose to $8.0 million in the fourth quarter of 2016, up 1.8% compared with $7.9 million in the fourth quarter of 2015 and an increase of 2.7% from $7.8 million in the third quarter of 2016. The increase in net interest income over the prior year was driven by growth in earning assets, growth in net interest margin, offset partially by lower net discount accretion associated with the merger of Commerce Union Bank and Reliant Bank and lower yields on new loans. The net discount accretion totaled $162,000 for the fourth quarter of 2016 compared with $368,000 for the third quarter of 2016 and $442,000 for the fourth quarter of 2015.

Net discount accretion is expected to total $408,000 in 2017 compared with $1,414,000 in 2016. Net discount accretion by quarter for 2017 is expected to be $99,000, $101,000, $104,000 and $104,000 for the first, second, third and fourth quarters, respectively.

Net interest margin rose 7 basis points to 4.03% in the fourth quarter of 2016 compared with 3.96% in the fourth quarter of 2015 and was up 5 basis points from 3.98% in the third quarter of 2016.

Provision for Loan Losses – Strong Asset Quality

Provision for loan losses was $208,000 for the fourth quarter of 2016 compared with $230,000 for the fourth quarter of 2015. The provision for loan losses in the latest quarter remains low due to the low level of problem credits. Provision for loan losses for the third quarter of 2016 was $145,000. We experienced net recoveries of $74,000 for the fourth quarter of 2016 compared with net charge offs of $33,000 for the third quarter of 2016 and net recoveries of $82,000 for the fourth quarter of 2015.

“Our asset quality remained strong at year end 2016,” stated DeVan Ard, CEO of Reliant Bank and President of the Company. “We had a reduction in non-performing loans and lower charge-offs in the fourth quarter of 2016 compared with the prior year’s fourth quarter. We also sold off the remaining other real estate owned during 2016. This reduced non-performing assets both for the fourth quarter of 2016 and for the year. We had no accruing loans past due 90 days or more at year end 2016 and remained in a net recovery position for the year. This is the fourth year that we have ended the year in a net recovery position.”

Noninterest Expenses Decline

Noninterest expenses declined 24.5% to $6.8 million in the fourth quarter of 2016 compared with $9.0 million in the fourth quarter of 2015, and were down slightly when compared with $6.9 million in the third quarter of 2016. The Company reported lower noninterest expenses in every major category compared with the fourth quarter of last year, including lower salaries and employee benefits; occupancy, information technology, advertising and public relations expenses and lower audit; federal deposit insurance, provision for losses on other real estate and other operating expenses compared with the fourth quarter of 2015. The decrease in noninterest expenses benefited from the transition of out-of-market mortgage operations in the second quarter of 2016 and synergies related to the merger of Reliant Bank and Commerce Union Bank.

The Bank’s efficiency ratio, excluding its mortgage subsidiary, improved to 58.0% in the fourth quarter of 2016 compared with 61.4% in the fourth quarter of 2015.

The Company’s effective income tax rate after consideration of the impact of the noncontrolling interest in the (income) loss of the subsidiary for the fourth quarter of 2016 was 19.4% compared with 21.8% for the third quarter of 2016 and 29.1% in the fourth quarter of 2015. The tax rate for the third and fourth quarters of 2016 included credits to income tax expense arising from the recognition of excess tax benefits on the exercise of stock options that totaled $107,000 and $18,000 in the third and fourth quarters of 2016, respectively. The tax rate for the third and fourth quarters of 2016 also benefited from a state tax credit of $217,000 each quarter related to the origination of an interest-free loan to a local housing authority.

Balance Sheet Growth – Loans and Deposits Increase in 2016

Net loans, excluding mortgage loans held for sale, rose to a record $657.7 million at December 31, 2016, up 8.0% compared with $608.7 million at December 31, 2015, and increased 3.2% on an annualized basis from $652.4 million at September 30, 2016.

“We experienced a seasonal slowdown in loan growth in the fourth quarter, due to pay downs in agricultural loans and construction loans. New loan production remained strong, especially for construction loans in our markets. We closed over $67 million in loans in the fourth quarter, including construction loans that will begin funding in the first quarter of 2017. At December 31, 2016 our unfunded loan commitments had grown by $42 million when compared to December 31, 2015, and combined with our robust loan pipeline at year end 2016, we expect our loan growth to be in the low double-digit range in 2017,” stated Ard.

“The market in Nashville has very strong fundamentals that continue to attract new companies, a growing employment base, and increased loan demand. We believe the growth in our loan portfolio will benefit from the projected growth for population and employment in our major growth markets in Williamson, Sumner and Rutherford counties. We remain focused on loan quality and remain cautious about lending to certain market sectors in Nashville due to potential over-building combined with the sharp rise is real estate prices over the past three years. We believe our focus on quality credit metrics is an important part of our long-term growth strategy to build shareholder value,” continued Ard.

The Bank’s average earning assets grew 4.8% to $851.7 million in the fourth quarter of 2016 compared with $813.0 million at December 31, 2015. The growth in earning assets benefited from an 8.9% increase in average loans and a 17.0% increase in average securities available for sale compared with the fourth quarter of last year.

Securities available for sale totaled $146.8 million at December 31, 2016, compared with $154.8 million at September 30, 2016, and $133.8 million at December 31, 2015. The municipal bond replacement strategy that started late in the fourth quarter of 2016 included the sale of approximately $11.7 million of bank-qualified municipal securities and the purchase of a similar amount of general market municipal securities. The proceeds from the sale were reinvested in better yielding securities that are expected to be less sensitive to rising interest rates and potential declines in corporate tax rates. Purchases were completed early in the first quarter of 2017.

Mortgage loans held for sale declined to $11.8 million at December 31, 2016, compared with $14.6 million at September 30, 2016, and $55.1 million at December 31, 2015. The decline in mortgage loans in the latest quarter was due to the seasonal slow-down in mortgage loans and higher interest rate environment in the fourth quarter of 2016, and the transition of the majority of the Bank’s out-of-market mortgage loan production offices to another bank early in the second quarter of 2016.

Total deposits rose 19.3% to a record $763.8 million at December 31, 2016, compared with $640.0 million at December 31, 2015. The increase in deposits was fueled by a 21.1% increase in demand deposits to $134.8 million and a 42.8% increase in time deposits to $359.8 million at December 31, 2016 compared with December 31, 2015. During the fourth quarter of 2016, we paid down approximately $112.4 million of short-term FHLB advances mainly with proceeds received from the placement of State of Tennessee certificates of deposits. This change in our funding mix slightly lowered our funding costs and decreased our dependency on FHLB borrowings. The loan to deposit ratio was 87.3% at December 31, 2016, compared with 100.2% at September 30, 2016, and 96.3% at December 30, 2015.

Stockholders’ equity rose to $106.9 million at the end of the fourth quarter 2016. Tangible book value per share was $12.08 at December 31, 2016. The decline in tangible book value from the third quarter of 2016 was primarily due to a decline in the value of the Bank’s securities portfolio which was recognized through its accumulated other comprehensive loss and the declaration of a $0.22 dividend during the fourth quarter of 2016.

Strong Capital Position

The Company’s and Bank’s capital position remained strong at year-end 2016. The Bank’s Tier 1 leverage ratio was 10.75% and Tier 1 risk-based capital was 12.89% at December 31, 2016. The Bank’s capital ratios are expected to be maintained significantly above the ratios of a “well-capitalized” institution.

Accounting Treatment for Merger and Mortgage Subsidiary

The fourth quarter’s results for 2016 and 2015 are for Commerce Union Bancshares, Inc. (Company) and include the combined results of Reliant Bank and Commerce Union Bank following their merger that was effective April 1, 2015. The results for the year ended December 31, 2015, include the operations of Reliant Bank only for the first quarter 2015 and the combined results of Reliant Bank and Commerce Union Bancshares, Inc. for the second, third and fourth quarters 2015.

The consolidated balance sheets and statements of operations include the operation of the Bank’s majority-controlled subsidiary, Reliant Mortgage Ventures, LLC. For financial accounting purposes the subsidiary is treated as a variable interest entity for which the Bank is deemed to be the primary beneficiary. The venture is operated under a joint venture arrangement. The Bank receives 30% of the net income from the subsidiary once the noncontrolling member has recovered any previous losses incurred by the venture. The Bank does not absorb any losses incurred by the venture. Revenue and expenses related to the subsidiary are included in noninterest income and expenses of the Bank and the noncontrolling portion of the net income or loss of the subsidiary is reflected in the “noncontrolling interest in net (income) loss of the subsidiary” on the Consolidated Statements of Operations. For the fourth quarter of 2016, the mortgage subsidiary generated a net loss of $532,000 compared with a net loss of $605,000 in the third quarter of 2016 and net income of $3,000 for the fourth quarter of 2015. For the year ending December 31, 2016, the subsidiary generated a net loss of $1,039,000 compared with net income of $407,000 for the year ending December 31, 2015.

Non-GAAP Financial Measures

This document contains non-GAAP financial measures. The non-GAAP measures presented below include “adjusted net interest margin” and “efficiency ratio.” We believe these non-GAAP measures provide useful information to investors because these are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe certain purchase accounting adjustments and non-recurring income relating to the payoff of an impaired loan in the second quarter of 2016 do not reflect the operational performance of the business in this period and, accordingly, it is useful to consider these line items with and without such adjustments. We believe this presentation also increases comparability of period-to-period results.

Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by other companies. We caution investors not to place undue reliance on such non-GAAP measures, but instead to consider them with the most directly comparable GAAP measure. Non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as a substitute for our results as reported under GAAP.

About Commerce Union Bancshares, Inc. and Reliant Bank

Commerce Union Bancshares, Inc. (NASDAQ: CUBN) is a Brentwood, Tennessee-based bank holding company which operates banking centers in Davidson, Robertson, Rutherford, Sumner and Williamson Counties, Tennessee through its wholly-owned subsidiary Reliant Bank. Reliant Bank is a full-service commercial bank that offers a variety of deposit, lending and mortgage products and services to business and consumer customers. For additional information, locations and hours of operation, please visit our website found at www.reliantbank.com.

Forward-Looking Statements

Statements in this press release relating to Commerce Union Bancshares Inc.’s plans, objectives, expectations or future performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “possible,” “seek,” “plan,” “strive” or similar words, or negatives of these words, identify forward-looking statements. These forward-looking statements are based on management’s current expectations. The Company’s actual results in future periods may differ materially from those indicated by forward-looking statements due to various risks and uncertainties, including those related to the combination of Commerce Union Bank and Reliant Bank following the merger. These and other risks and uncertainties are described in greater detail under “Risk Factors” in the Company’s 10-K and subsequent periodic reports filed with the Securities and Exchange Commission. The forward-looking statements in this press release are made as of the date of the release and the Company does not assume any responsibility to update these statements.

     

COMMERCE UNION BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2016, SEPTEMBER 30, 2016 AND DECEMBER 31, 2015

(Dollar Amounts In Thousands)

(Unaudited)

 

ASSETS

December 31, September 30,

 

2016 2016

December 31,

(Unaudited) (Unaudited)

2015

 
Cash and due from banks $ 23,413 $ 34,869 $ 20,289
Federal funds sold   830     100     281  
Total cash and cash equivalents 24,243 34,969 20,570
Securities available for sale 146,813 154,816 133,825
Loans, net of unearned income 666,783 661,246 616,570
Allowance for loan losses   (9,082 )   (8,801 )   (7,823 )
Loans, net 657,701 652,445 608,747
Mortgage loans held for sale 11,831 14,649 55,093
Accrued interest receivable 3,786 3,499 3,096
Premises and equipment, net 9,093 8,964 9,196
Restricted equity securities, at cost 7,133 7,081 6,244
Other real estate, net - - 1,149
Cash surrender value of life insurance contracts 24,827 24,633 20,077
Goodwill 11,404 11,404 11,404
Core deposit intangibles 1,582 1,671 1,938
Other assets   13,571     5,889     5,065  
 
TOTAL ASSETS $ 911,984   $ 920,020   $ 876,404  
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 
LIABILITIES
Deposits
Demand $ 134,792 $ 139,720 $ 111,309
Interest-bearing demand 85,478 90,205 95,397
Savings and money market deposit accounts 183,788 183,304 181,316
Time   359,776     246,627     251,986  
Total deposits 763,834 659,856 640,008
Accrued interest payable 107 134 55
Short term borrowings 3,671 - -
Federal Home Loan Bank advances 32,287 144,680 135,759
Dividends payable 1,711 - 1,489
Other liabilities   3,455     6,118     2,342  
 
TOTAL LIABILITIES   805,065     810,788     779,653  
 
STOCKHOLDERS’ EQUITY

Common stock, $1 par value; 10,000,000 shares authorized; 7,778,309, 7,763,351 and 7,279,620 shares issued and outstanding at December 31, 2016, September 30, 2016 and December 31, 2015, respectively

7,778 7,763 7,280
Additional paid-in capital 89,045 88,821 84,520
Retained earnings 12,212 11,952 4,987
Accumulated other comprehensive income (loss)   (2,116 )   696     (36 )
 
TOTAL STOCKHOLDERS’ EQUITY   106,919     109,232     96,751  
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 911,984   $ 920,020   $ 876,404  
 

       

COMMERCE UNION BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE PERIODS INDICATED

(Dollar Amounts In Thousands, Except Per Share Amounts)

(Unaudited)

 
Three Months Ended Years Ended
December 31,   September 30, December 31, December 31,
2016 2016 2015 2016 December 31,
(Unaudited) (Unaudited) (Unaudited) (Unaudited) 2015
INTEREST INCOME
Interest and fees on loans $ 7,894 $ 7,729 $ 7,550 $ 31,905 $ 26,017
Interest and fees on loans held for sale 110 109 448 773 1,523
Interest on investment securities, taxable 135 137 235 724 881
Interest on investment securities, nontaxable 705 578 394 2,211 1,185
Federal funds sold and other   104     103   81     402   282  
 
TOTAL INTEREST INCOME   8,948     8,656   8,708     36,015   29,888  
 
INTEREST EXPENSE
Deposits
Demand 45 46 54 182 190
Savings and money market deposit accounts 152 151 141 632 466
Time 575 430 414 1,835 1,416
Federal Home Loan Bank advances and other   133     194   198     714   646  
 
TOTAL INTEREST EXPENSE   905     821   807     3,363   2,718  
 
NET INTEREST INCOME 8,043 7,835 7,901 32,652 27,170
 
PROVISION FOR LOAN LOSSES   208     145   230     968   (270 )
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   7,835     7,690   7,671     31,684   27,440  
 
NONINTEREST INCOME
Service charges on deposit accounts 313 320 276 1,239 958
Gains on mortgage loans sold, net 642 551 3,012 6,317 10,999
Gain (loss) on securities transactions, net (320 ) 296 (7 ) 36 (388 )
Gain on sale of other real estate - 145 5 301 6
Other   234     263   248     907   807  
 
TOTAL NONINTEREST INCOME   869     1,575   3,534     8,800   12,382  
 
NONINTEREST EXPENSE
Salaries and employee benefits 3,962 4,017 5,419 18,256 18,657
Occupancy 768 767 867 3,174 3,387
Information technology 637 586 686 2,486 2,479
Advertising and public relations 160 117 352 702 1,213
Audit, legal and consulting 294 328 583 1,287 1,892
Federal deposit insurance 89 109 107 438 383
Provision for losses on other real estate - 17 - 70 110
Other operating   917     942   1,033     3,961   3,448  
 
TOTAL NONINTEREST EXPENSE   6,827     6,883   9,047     30,374   31,569  
 
INCOME BEFORE PROVISION FOR INCOME TAXES 1,877 2,382 2,158 10,110 8,253
 
INCOME TAX EXPENSE   438     619   627     2,213   2,271  
 
CONSOLIDATED NET INCOME   1,439     1,763   1,531     7,897   5,982  
 

NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY

  532     605   (3 )   1,039   (407 )
 
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 1,971   $ 2,368 $ 1,528   $ 8,936 $ 5,575  
 
Basic net income attributable to common shareholders, per share $ 0.26   $ 0.31 $ 0.21   $ 1.18 $ 0.88  
Diluted net income attributable to common shareholders, per share $ 0.25   $ 0.30 $ 0.21   $ 1.16 $ 0.86  
 

         

COMMERCE UNION BANCSHARES, INC.

SEGMENT FINANCIAL INFORMATION

FOR THE PERIODS INDICATED

(Dollar Amounts In Thousands, Except Per Share Amounts)

(Unaudited)

 

Retail Banking

Three Months Ended Years Ended
December 31, September 30, December 31, December 31, December 31,
2016 2016 2015 2016 2015
Net interest income $ 7,953 $ 7,750 $ 7,539 $ 32,035 $ 25,931
Provision for loan losses 208 145 230 968 (270 )
Noninterest income 228 1,024 522 2,481 1,383
Noninterest expense 5,527 5,600 5,675 22,327 19,590
Income tax expense   475     661     628     2,285     2,419  
Net income $ 1,971   $ 2,368   $ 1,528   $ 8,936   $ 5,575  
 
 

Residential Mortgage Banking

Three Months Ended Years Ended
December 31, September 30, December 31, December 31, December 31,
2016 2016 2015 2016 2015
Net interest income $ 90 $ 85 $ 362 $ 617 $ 1,239
Provision for loan losses - - - - -
Noninterest income 641 551 3,012 6,319 10,999
Noninterest expense 1,300 1,283 3,372 8,047 11,979
Income tax expense   (37 )   (42 )   (1 )   (72 )   (148 )
Net income (loss) (532 ) (605 ) 3 (1,039 ) 407
Noncontrolling interest in net (income) loss of subsidiary   532     605     (3 )   1,039     (407 )
Net income attributable to common shareholders $ -   $ -   $ -   $ -   $ -  
 

         
COMMERCE UNION BANCSHARES, INC.
SELECTED QUARTERLY FINANCIAL DATA
AT OR FOR THE THREE MONTHS ENDED
(Dollar Amounts In Thousands, Except Per Share Amounts)
(Unaudited)
 
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015

Selected Income Statement Data

Total interest income $ 8,948 $ 8,656 $ 9,497 $ 8,914 $ 8,708
Total interest expense 905 821 805 832 807
Net interest income 8,043 7,835 8,692 8,082 7,901
Provision for loan losses 208 145 450 165 230

Net interest income after provision for loan losses

7,835 7,690 8,242 7,917 7,671
Noninterest income 869 1,575 2,510 3,846 3,534
Noninterest expense 6,827 6,883 8,027 8,637 9,047
Income tax expense 438 619 588 568 627
Consolidated net income 1,439 1,763 2,137 2,558 1,531

Noncontrolling interest in net (income) loss of subsidiary

532 605 223 (321 ) (3 )
Net income attributable to common shareholders 1,971 2,368 2,360 2,237 1,528
 
Per Common Share Data

Net income attributable to common shareholders, per share

Basic $ 0.26 $ 0.31 $ 0.31 $ 0.30 $ 0.21
Diluted $ 0.25 $ 0.30 $ 0.31 $ 0.30 $ 0.21
Book value per common share $ 13.75 $ 14.07 $ 13.90 $ 13.49 $ 13.29
Tangible book value per common share $ 12.08 $ 12.39 $ 12.17 $ 11.74 $ 11.46
Basic weighted average common shares 7,719,126 7,673,347 7,560,503 7,450,400 7,130,665
Diluted weighted average common shares 7,853,581 7,768,792 7,678,508 7,563,666 7,291,960
Common shares outstanding at period end 7,778,309 7,763,351 7,627,777 7,560,594 7,279,620
 
Selected Balance Sheet Data
Total assets $ 911,984 $ 920,020 $ 883,204 $ 868,545 $ 876,404
Securities available for sale 146,813 154,816 147,675 139,899 133,825
Loans, net of unearned income 666,783 661,246 649,277 622,733 616,570
Allowance for loan losses 9,082 8,801 8,688 8,090 7,823
Mortgage loans held for sale 11,831 14,649 14,961 24,682 55,093
Other real estate - - 475 1,139 1,149
Goodwill 11,404 11,404 11,404 11,404 11,404
Core deposit intangibles 1,582 1,671 1,760 1,849 1,938
Non-interest bearing deposits 134,792 139,720 134,515 116,362 111,309
Total deposits 763,834 659,856 647,851 657,777 640,008
Federal Home Loan Bank advances 32,287 144,680 124,871 104,798 135,759
Total stockholders' equity 106,919 109,232 106,024 102,022 96,751
Average loans 657,203 649,778 637,787 617,600 603,329
Average earnings assets (1) 851,652 836,487 830,501 821,181 813,009
Average total assets 902,547 885,127 880,657 871,961 864,752
Average stockholders' equity 107,529 106,778 103,297 99,237 92,582
 
(1)   Average earning assets is the daily average of earning assets. Earning assets consists of loans, mortgage loans held for sale, federal funds sold, deposits with banks, investment securities and restricted equity securities
 

         
COMMERCE UNION BANCSHARES, INC.
SELECTED QUARTERLY FINANCIAL DATA
AT OR FOR THE THREE MONTHS ENDED
(Dollar Amounts In Thousands, Except Per Share Amounts)
(Unaudited)
 
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015

Selected Asset Quality Measures

Nonaccrual loans $ 5,634 $ 6,122 $ 4,126 $ 4,342 $ 5,004

Total nonperforming assets (1)

5,634 6,122 4,601 5,481 6,153
Net charge offs (recoveries) (74 ) 33 (149 ) (102 ) (82 )
Nonaccrual loans to total loans 0.84 % 0.93 % 0.64 % 0.70 % 0.81 %
Nonperforming assets to total assets 0.62 % 0.67 % 0.52 % 0.63 % 0.70 %
Nonperforming assets to total loans and other real estate 0.84 % 0.93 % 0.71 % 0.88 % 1.00 %
Allowance for loan losses to total loans 1.36 % 1.33 % 1.34 % 1.30 % 1.27 %
Allowance for loan losses to nonaccrual loans 161.20 % 143.76 % 210.57 % 186.32 % 156.33 %

Net charge offs (recoveries) to average loans (2)

(0.05 %) 0.02 % (0.09 %) (0.07 %) (0.05 %)
 
Capital Ratios (Bank Subsidiary Only)
Tier 1 leverage 10.75 % 10.94 % 10.59 % 10.34 % 9.88 %
Common equity tier 1 12.89 % 12.96 % 12.49 % 12.75 % 11.97 %
Tier 1 risk-based capital 12.89 % 12.96 % 12.49 % 12.75 % 11.97 %
Total risk-based capital 14.11 % 14.16 % 13.67 % 13.91 % 13.08 %
 

Selected Performance Ratios (2) (3)

Return on average assets 0.87 % 1.07 % 1.07 % 1.03 % 0.71 %
Return on average stockholders' equity 7.33 % 8.87 % 9.14 % 9.02 % 6.60 %
Net interest margin 4.03 % 3.98 % 4.42 % 4.08 % 3.96 %
 
NON-GAAP FINANCIAL MEASURES

Adjusted net interest margin (4)

Net interest income $ 8,043 $ 7,835 $ 8,692 $ 8,082 $ 7,901
Purchase accounting adjustments (162 ) (368 ) (442 ) (442 ) (442 )

Interest income recognized on payoff of purchased credit impaired loan

  -     -     (619 )   -     -  
Adjusted net interest income $ 7,881 $ 7,467 $ 7,631 $ 7,640 $ 7,459
Adjusted net interest margin 3.95 % 3.80 % 3.91 % 3.86 % 3.76 %
 
Efficiency ratio (subsidiary bank only excluding the Holding

Company and the mortgage segment) (4)

Non-interest expense $ 5,169   $ 5,294   $ 5,499   $ 5,039   $ 5,077  
 
Net interest income 7,953 7,750 8,545 7,788 7,540
Tax equivalent adjustment for tax exempt
interest income (5) 414 354 308 286 203
Non-interest income 228 1,024 728 502 522
Less gain on sale of other real estate and other assets - (145 ) (130 ) (20 ) (5 )
Less (gain) loss on sale of securities   320     (296 )   (60 )   -     7  
Adjusted operating income $ 8,915 $ 8,687 $ 9,391 $ 8,556 $ 8,267
 
Efficiency Ratio 57.98 % 60.94 % 58.56 % 58.89 % 61.41 %
 
(1)   Nonperforming assets consist of nonaccrual loans and other real estate
(2) Data has been annualized
(3) Return on average assets is defined as net income attributable to common shareholders divided by average total assets; return on average stockholders’ equity is defined as net income attributable to common shareholders divided by average stockholders’ equity; net interest margin is defined as net interest income divided by average earning assets
(4) Not a recognized measure under generally accepted accounting principles (GAAP)
(5) Utilizes a federal tax rate of 34%
 

COMMERCE UNION BANCSHARES, INC.
YIELD TABLES
FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 AND 2015
(Dollar Amounts In Thousands)
(Unaudited)

The following table sets forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for interest-earning assets and interest-bearing liabilities, net interest spread and net interest margin for the three months ended December 31, 2016 and 2015:

                 
Three Months Ended December Three Months Ended December Change
31, 2016 31, 2015  
Rates / Interest Rates / Interest
Average Yields Income / Average Yields Income / Due to Due to
Balances   (%)   Expense Balances   (%)   Expense Volume   Rate   Total

Interest Earning Assets

Loans $ 657,203 4.55 $ 7,348 $ 603,329 4.66 $ 7,080 $ 1,262 $ (994 ) $ 268
Loan fees   -   0.33       546   -   0.31       470     76       -       76  
Loans with fees 657,203 4.88 7,894 603,329 4.97 7,550 1,338 (994 ) 344
Mortgage loans held for sale 11,205 3.91 110 46,475 3.82 448 (409 ) 71 (338 )
Federal funds sold 319 - - 442 1.80 2 - (2 ) (2 )
Deposits with banks 19,021 0.33 16 22,880 0.21 12 (11 ) 15 4
Investment securities - taxable 30,332 1.77 135 49,667 1.88 235 (87 ) (13 ) (100 )
Investment securities - tax-exempt 126,465 3.52 705 84,323 2.81 394 207 104 311
Other   7,107   4.93       88   5,893   4.51       67   14       7       21  
Total earning assets   851,652   4.45       8,948   813,009   4.35       8,708   1,052       (812 )     240  
Nonearning assets   50,895   51,743
$ 902,547 $ 864,752
Interest bearing liabilities
Interest bearing demand 86,288 0.21 45 98,769 0.22 54 (7 ) (2 ) (9 )
Savings and money market 180,731 0.33 152 176,389 0.32 141 5 6 11
Time deposits - retail 209,600 0.70 369 142,378 0.72 258 158 (47 ) 111
Time deposits - wholesale   94,939   0.86       206   99,095   0.62       156   (42 )     92       50  
Total interest bearing deposits 571,558 0.54 772 516,631 0.47 609 114 49 163
Federal Home Loan Bank advances and other   79,165   0.67       133   142,129   0.55       198   (272 )     207       (65 )
Total interest-bearing liabilities   650,723   0.55       905   658,760   0.49       807   (158 )     256       98  

Net interest rate spread (%) / Net Interest Income ($)

3.90     $ 8,043 3.86     $ 7,901 $ 1,210     $ (1,068 )   $ 142  
Non-interest bearing deposits 139,896 (0.09 ) 102,150 (0.07 )
Other non-interest bearing liabilities 4,399 11,260
Stockholder's equity   107,529   92,582
$ 902,547   $ 864,752  
0.46   0.42  

Net interest margin

4.03 3.96
 

COMMERCE UNION BANCSHARES, INC.
YIELD TABLES
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
(Dollar Amounts In Thousands)
(Unaudited)

The following table sets forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for interest-earning assets and interest-bearing liabilities, net interest spread and net interest margin for the years ended December 31, 2016 and 2015:

     
Year Ended December 31, 2016 Year Ended December 31, 2015 Change
  Rates /   Interest   Rates /   Interest    
Average Yields Income / Average Yields Income / Due to Due to
Balances   (%)   Expense Balances   (%)   Expense Volume   Rate   Total
Interest Earning Assets
Loans $ 640,592 4.78 $ 29,950 $ 517,148 4.78 $ 24,719 $ 5,231 $ - $ 5,231
Loan fees   -   0.31       1,955   -   0.25       1,298   657       -       657  
Loans with fees 640,592 5.09 31,905 517,148 5.03 26,017 5,888 - 5,888
Mortgage loans held for sale 21,064 3.67 773 38,284 3.98 1,523 (639 ) (111 ) (750 )
Federal funds sold 605 0.50 3 441 2.72 12 3 (12 ) (9 )
Deposits with banks 20,240 0.35 70 21,715 0.18 39 (3 ) 34 31
Investment securities - taxable 40,463 1.79 724 46,393 1.90 881 (108 ) (49 ) (157 )
Investment securities - tax-exempt 105,536 3.39 2,211 65,165 2.76 1,185 749 277 1,026
Other   6,837   4.81       329   4,989   4.63       231   89       9       98  
Total earning assets   835,337   4.56       36,015   694,135   4.39       29,888   5,979       148       6,127  
Nonearning assets   49,737   39,516
$ 885,074 $ 733,651
Interest bearing liabilities
Interest bearing demand 88,775 0.21 182 88,857 0.21 190 (8 ) - (8 )
Savings and money market 186,473 0.34 632 158,670 0.29 466 84 82 166
Time deposits - retail 159,351 0.70 1,116 116,364 0.76 883 307 (74 ) 233
Time deposits - wholesale   102,626   0.70       719   95,719   0.56       533   42       144       186  
Total interest bearing deposits 537,225 0.49 2,649 459,610 0.45 2,072 425 152 577
Federal Home Loan Bank advances and other   111,290   0.64       714   105,624   0.61       646   36       32       68  
Total interest-bearing liabilities   648,515   0.52       3,363   565,234   0.48       2,718   461       184       645  
Net interest rate spread (%) / Net Interest Income ($) 4.04     $ 32,652 3.91     $ 27,170 $ 5,518     $ (36 )   $ 5,482  
Non-interest bearing deposits 127,619 (0.09 ) 83,731 (0.07 )
Other non-interest bearing liabilities 4,724 4,564
Stockholder's equity   104,216   80,122
$ 885,074   $ 733,651  
Cost of funds 0.43   0.41  

Net interest margin

4.15 4.00
 

Yield Table Assumptions - Average loan balances are inclusive of nonperforming loans. Yields computed on tax-exempt instruments are on a tax equivalent basis. Net interest spread is calculated as the yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities. Net interest margin is the result of net interest income calculated on a tax-equivalent basis divided by average interest earning assets for the period. Changes in net interest income are attributed to either changes in average balances (volume change) or changes in average rates (rate change) for earning assets and sources of funds on which interest is received or paid. Volume change is calculated as change in volume times the previous rate while rate change is change in rate times the previous volume. Changes not due solely to volume or rate changes have been allocated to volume change and rate change in proportion to the relationship of the absolute dollar amounts of the change in each category.

Contacts

Commerce Union Bancshares, Inc.
DeVan Ard, 615-221-2020
President, Commerce Union Bancshares, Inc.
President and Chief Executive Officer, Reliant Bank
or
Ron DeBerry, 615-433-7200
Chairman and Chief Executive Officer, Commerce Union Bancshares, Inc.

$Cashtags

Contacts

Commerce Union Bancshares, Inc.
DeVan Ard, 615-221-2020
President, Commerce Union Bancshares, Inc.
President and Chief Executive Officer, Reliant Bank
or
Ron DeBerry, 615-433-7200
Chairman and Chief Executive Officer, Commerce Union Bancshares, Inc.