Commerce Union Bancshares, Inc. Reports Record Third Quarter

Reports Record Loans and Net Income

BRENTWOOD, Tenn.--()--Commerce Union Bancshares, Inc. (NASDAQ: CUBN) announced today record results for its third quarter and nine months ended September 30, 2015. Net income attributable to common shareholders for the third quarter ended September 30, 2015 rose to a record $1.8 million and net loans, excluding mortgage loans held for sale, increased to $586.3 million. Net income per fully diluted share increased to $0.25 for the third quarter of 2015, a 14% increase compared with the second quarter of 2015.

The third quarter’s results for 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. Prior to the merger date, the consolidated financial statements presented in the accompanying tables are those of Reliant Bank only, and do not include the operations of Commerce Union Bancshares, Inc. since the transaction was treated as a reverse merger for accounting and financial presentation purposes. As a result, the consolidated financial statements for 2014 are those of Reliant Bank (pre-merger), and the results of operations for the first nine months of 2015 include those of Reliant Bank for the first quarter of 2015 added to the combined results of the Commerce Union Bank, Reliant Bank and the Company for the second and third quarters of 2015.

“We are very pleased with our growth in loans, mortgage originations and deposits in the third quarter,” stated William R. DeBerry, Chairman and Chief Executive Officer. “Our loan demand picked up momentum in the third quarter and benefited from the robust economic activity in our middle Tennessee markets and the integration of our teams across our markets. Our improved earnings performance benefited from growth in revenues, good expense control and reduced costs related to improved asset quality.

“Our outlook for the fourth quarter is very positive for continued revenue growth and improved operating leverage. Loan demand remains very good across our markets and this is driving our growth in revenues from interest income and loan fees. Our merger team has made solid progress in combining the products and processes of our legacy banks. We expect to complete the conversion to a single core processor by the close of the fourth quarter, resulting in a material reduction in our data processing costs going forward.

“We expect to increase our visibility across our five county market in middle Tennessee as we consolidate our brands under the Reliant Bank name. We are in the process of rolling out our new branding program and expect this to be completed in early 2016. We believe the adoption of a single brand in our markets will leverage our new business development programs and enhance our ability to grow and compete in the future,” stated DeBerry.

Third Quarter Revenue and Earnings

Total interest income rose to $8.4 million in the third quarter of 2015, up 4.2% compared with $8.0 million in the second quarter of 2015. The increase benefited from growth in earnings assets, including loans and securities available for sale. Net interest margin was 3.98% on a tax equivalent basis in the third quarter of 2015 and was down 3 basis points from the second quarter of 2015. The decrease was due to a slight decline in loan yields and a change in earning asset mix due to the growth in our investment portfolio, offset partially by reduced cost of funds.

Net interest income was a record $7.6 million in the third quarter of 2015, up 4.3% from $7.3 million in the second quarter of 2015. The increase benefited from growth in earning assets and a decline in our cost of funds.

Noninterest income grew to $4.1 million in the third quarter of 2015, a 22.1% increase from $3.4 million in the second quarter of 2015. The growth in noninterest income benefited from record revenue from mortgage loans sold that were generated by the Company’s mortgage subsidiary, growth in service charges on deposit accounts, and growth in other noninterest income, including other loan fees and earnings on bank owned life insurance.

There was no provision for loan losses in third quarter of 2015 compared with a credit of $500,000 to the provision for loan losses in the second quarter of 2015. The lower than normalized provision was due to recoveries exceeding charge-offs for the second and third quarters of 2015.

“We experienced solid growth in third quarter revenues with higher interest income and growth in every major category of noninterest income,” stated DeVan Ard, President of Commerce Union Bancshares and CEO of Reliant Bank. “Our loan portfolio pipeline going into the third quarter was very good and contributed to our loan growth, and our mortgage operations were especially productive with strong originations and loan sales. Our loan portfolio pipeline for the fourth quarter remains very good, especially in our fast-growing markets of Sumner and Williamson counties. We also expect good production from our mortgage loan subsidiary in the fourth quarter, although at a lower rate than the third quarter based on normal seasonality.”

The Company’s mortgage subsidiary is operated under a joint venture arrangement. The Company receives 30% of the income from the subsidiary once the noncontrolling member has recovered any previous losses incurred by the venture. The Company does not absorb any losses incurred by the venture. Expenses related to the mortgage subsidiary are included in noninterest expenses and the noncontrolling portion of the income or loss of the mortgage subsidiary is reflected in the “noncontrolling interest in net (income) loss of the subsidiary” on the Consolidated Statements of Operations. For the third quarter of 2015, this income totaled $507,000 and marked the first quarter of income from the mortgage subsidiary. The Company’s mortgage subsidiary operates mortgage loan offices in Tennessee, Kentucky, Florida, Maryland, Illinois and Ohio.

Noninterest expenses rose to $8.8 million in the third quarter of 2015. The increase in noninterest expenses from prior quarters included higher commissions on mortgage lending which coincide with the increase in mortgage lending revenue, consulting costs associated with our bank name selection, data processing costs that include the operation of two core systems, costs related to SEC reporting and other public company expenses, and some remaining merger related expenses. The Company expects to incur dual data processing costs until the core processing is consolidated with a single vendor in the fourth quarter of 2015. Noninterest expenses also reflected the combined operations of Commerce Union and Reliant Banks compared with only Reliant Bank in prior periods.

“We expect to reduce our core operating costs as we enter 2016,” continued Ard. “Our merger team has worked very hard this year to improve our operating efficiencies and we expect this will result in improved leverage of our costs as we continue to grow our asset base and footprint in middle Tennessee.”

Net income attributable to common shareholders rose to $1.8 million and benefited from growth in revenues and lower costs associated with problem assets, offset partially by higher noninterest expenses. Net income per fully diluted share rose to $0.25 for the third quarter of 2015. Earnings per share are not comparable to prior periods in 2014 since they include only the earnings and shares outstanding associated with Reliant Bank prior to the merger.

Third Quarter Balance Sheet Growth

Net loans rose to $586.3 million at September 30, 2015, a 3.4% increase from the second quarter of 2015.

Mortgage loans held for sale rose to $44.7 million at September 30, 2015, a 7.3% increase from the second quarter of 2015. The growth in mortgage loans held for sale reflects the strong demand for residential real estate in the Company’s markets and the contribution from new mortgage loan officers.

Investment securities grew by $18.0 million to $130.0 million at September 30, 2015 compared with $112.0 million at June 30, 3015.

Cash surrender value of life insurance contracts grew to $19.9 million and included the purchase of additional bank owned life insurance and earnings on the contracts.

Deposits rose to $609 million and represented 104% of net loans at September 30, 2015. Non-interest bearing deposits grew to 15.7% of total deposits reflecting the continued effort in acquiring low-cost core deposits.

Stockholders’ equity rose to $94.4 million. Tangible book value per share grew to $11.42 at September 30, 2015.

Improved Asset Quality

“Our asset quality continued to improve in the third quarter and was excellent as evidenced by our low ratio of nonperforming assets to total loans which was 0.75% as of September 30, 2015,” continued Ard. “Since the merger was completed, we have made steady progress in reducing nonperforming assets and other real estate owned compared with prior periods.”

The allowance for loan losses was 1.26% of gross loans at September 30, 2015, 176% of nonaccrual loans plus loans 90 days past due and still accruing and 157% of nonperforming assets. Nonaccrual loans declined to 0.67% of gross loans plus other real estate owned (OREO). Loans 90 days past due and accruing declined to 0.0% of gross loans and OREO, and OREO declined to only 0.06% of total assets. The Company had no net charge-offs in the third quarter. Loans classified as Trouble Debt Restructuring (TDRs) declined to 0.25% of total loans, for the third quarter of 2015. TDRs for the third quarter of 2015 included $923,586 of TDRs on a nonaccrual basis and $699,140 of TDRs that were accruing interest, both declines from the previous quarter.

Strong Capital Position

“Commerce Union Bancshares, Inc. maintained its strong capital position with solid growth in net income during the third quarter. Our Tier 1 leverage ratio rose to 10.26% and our Tier 1 capital ratio increased to 12.23% at September 30, 2015, and were significantly above the ratios of a 'well-capitalized institution,' the highest regulatory rating,” stated Ard.

“We believe that Commerce Union’s strong capital base will be important in supporting loan growth and as we seek bank acquisitions in the Nashville MSA. We remain focused on building shareholder value and look forward to these future growth opportunities,” concluded DeBerry.

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 websites found at www.commerceunionbank.com and 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 joint Form S-4 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
SEPTEMBER 30, 2015 (UNAUDITED) AND DECEMBER 31, 2014
(Dollar amounts in thousands except per share amounts)
 

September 30,

2015

December 31,

2014

ASSETS

 
Cash and due from banks $ 33,409 $ 10,747
Federal funds sold   -   400
Total cash and cash equivalents 33,409 11,147
Securities held to maturity (fair value of $22,655 at December 31, 2014) - 22,959
Securities available for sale 130,019 54,286
Loans, net 586,306 309,497
Mortgage loans held for sale 44,745 26,640
Accrued interest receivable 2,745 1,386
Leasehold improvements and equipment, net 9,341 3,353
Restricted equity securities, at cost 5,851 3,263
Other real estate, net 528 1,204
Cash surrender value of life insurance contracts 19,914 11,355
Deferred tax assets, net 1,779 1,763
Goodwill 11,404 773
Core deposit intangibles 2,028 337
Other assets   4,620   1,768
 
TOTAL ASSETS $ 852,689 $ 449,731
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 
LIABILITIES
Deposits
Demand $ 95,883 $ 45,800
Interest-bearing demand 106,495 51,414
Savings and money market deposit accounts 177,010 106,874
Time   229,602   130,277
Total deposits 608,990 334,365
 
Accrued interest payable 85 79
Federal Home Loan Bank advances 145,646 63,500
Federal funds purchased - 6,651
Other liabilities   3,565   1,620
 
TOTAL LIABILITIES   758,286   406,215
 
STOCKHOLDERS’ EQUITY

Common stock, $1 par value; 10,000,000 shares authorized; 7,092,294 and 3,910,191 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively

7,092 3,910
Additional paid-in capital 83,198 38,955
Retained earnings 4,948 901
Accumulated other comprehensive loss   (835)   (250)
 
TOTAL STOCKHOLDERS’ EQUITY   94,403   43,516
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 852,689 $ 449,731

 

 

 

         
COMMERCE UNION BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
(Dollar amounts in thousands except per share amounts)
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
 
INTEREST INCOME
Interest and fees on loans $ 7,758 $ 4,160 $ 19,248 $ 11,340
Interest on investment securities 535 422 1,437 1,258
Federal funds sold and other   82   40   201   124
 
TOTAL INTEREST INCOME   8,375   4,622   20,886   12,722
 
INTEREST EXPENSE
Deposits
Demand 57 33 136 121
Savings and money market deposit accounts 136 85 325 255
Time 385 208 1,002 578
Federal Home Loan Bank advances and other   186   93   448   266
 
TOTAL INTEREST EXPENSE   764   419   1,911   1,220
 
NET INTEREST INCOME 7,611 4,203 18,975 11,502
 
PROVISION FOR LOAN LOSSES   -   (500)   (500)   (1,250)
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   7,611   4,703   19,475   12,752
 
NONINTEREST INCOME
Service charges on deposit accounts 270 167 682 446
Gains on mortgage loans sold, net 3,454 664 7,987 1,274
Gain (loss) on securities transactions, net 15 10 (381) 116
Gain (loss) on sales of other real estate 1 - 1 (8)
Other   387   108   853   302
 
TOTAL NONINTEREST INCOME   4,127   949   9,142   2,130
 
NONINTEREST EXPENSES
Salaries and employee benefits 5,324 3,024 13,238 7,102
Occupancy 914 669 2,520 1,938
Data processing 562 359 1,516 1,005
Advertising and public relations 363 164 861 334
Audit, legal and consulting 565 354 1,309 532
Federal deposit insurance 93 72 276 193
Provision for losses on other real estate - 20 110 52
Other operating   1,019   300   2,692   708
 
TOTAL NONINTEREST EXPENSES   8,840   4,962   22,522   11,864
 
INCOME BEFORE PROVISION FOR INCOME TAXES 2,898 690 6,095 3,018
 
INCOME TAX EXPENSE   558   368   1,644   1,432
 
CONSOLIDATED NET INCOME   2,340   322   4,451   1,586
 
NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY   (507)   527   (404)   1,327
 
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 1,833 $ 849 $ 4,047 $ 2,913
 
Basic net income attributable to common shareholders, per share $ 0.26 $ 0.21 $ 0.67 $ 0.73
Diluted net income attributable to common shareholders, per share $ 0.25 $ 0.21 $ 0.65 $ 0.72
 

     
COMMERCE UNION BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND JUNE 30, 2015
(Dollar amounts in thousands except per share amounts)
(Unaudited)
 
Three Months Ended

September 30,

2015

June 30,

2015

INTEREST INCOME
Interest and fees on loans $ 7,758 $ 7,454
Interest on investment securities 535 517
Federal funds sold and other   82   67
 
TOTAL INTEREST INCOME   8,375   8,038
 
INTEREST EXPENSE
Deposits
Demand 57 57
Savings and money market deposit accounts 136 124
Time 385 393
Federal Home Loan Bank advances and other   186   169
 
TOTAL INTEREST EXPENSE   764   743
 
NET INTEREST INCOME 7,611 7,295
 
PROVISION FOR LOAN LOSSES   -   (500)
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   7,611   7,795
 
NONINTEREST INCOME
Service charges on deposit accounts 270 265
Gains on mortgage loans sold, net 3,454 2,756
Gain (loss) on securities transactions, net 15 -
Gain (loss) on sales of other real estate 1 -
Other   387   360
 
TOTAL NONINTEREST INCOME   4,127   3,381
 
NONINTEREST EXPENSES
Salaries and employee benefits 5,324 5,075
Occupancy 914 906
Data processing 562 546
Advertising and public relations 363 289
Audit, legal and consulting 565 520
Federal deposit insurance 93 113
Provision for losses on other real estate - 90
Other operating   1,019   1,165
 
TOTAL NONINTEREST EXPENSES   8,840   8,704
 
INCOME BEFORE PROVISION FOR INCOME TAXES 2,898 2,472
 
INCOME TAX EXPENSE   558   902
 
CONSOLIDATED NET INCOME   2,340   1,570
 
NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY   (507)   32
 
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 1,833 $ 1,602
 
Basic net income attributable to common shareholders, per share $ 0.26 $ 0.23
Diluted net income attributable to common shareholders, per share $ 0.25 $ 0.22

Contacts

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

$Cashtags

Contacts

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