Cardinal Announces Strong Fourth Quarter Earnings; Loan Quality Remains Excellent
Cardinal Announces Strong Fourth Quarter Earnings; Loan Quality Remains Excellent
TYSONS CORNER, Va.--(BUSINESS WIRE)-- Cardinal Financial Corporation (NAS: CFNL) (the "Company") today announced quarterly earnings of $13.0 million, or $0.43 per diluted share, for the period ended December 31, 2012. This is a 58% increase over earnings of $8.2 million, or $0.28 per diluted share, from the fourth quarter of last year. For the year ended December 31, 2012, earnings were $45.3 million, or $1.51 per diluted share, versus $28.0 million, or $0.94 per diluted share, in 2011.
Selected Earnings Highlights
- For the year ended December 31, 2012, the Company's performance resulted in a return on average assets of 1.70% and a return on average equity of 16.02%.
- Asset quality remains excellent. Nonperforming loans remained low at 0.25% of total assets, and net loan charge offs were 0.35% of average loans outstanding. The Company had $0 real estate owned at December 31, 2012, and $0 loans receivable past due 30 days or more and still accruing.
- Loans held for investment grew 11% to $1.80 billion at December 31, 2012, from $1.63 billion at December 31, 2011.
- Total deposits grew to $2.24 billion, an increase of 26% compared to December 31, 2011. Demand deposit account balances increased 33% year over year.
- Mortgage banking net income was approximately $3.6 million for the current quarter versus $231,000 for the year ago quarter and versus $7.0 million for the previous quarter ended September 30, 2012.
- At December 31, 2012, total assets of the Company were approximately $3.04 billion, an increase of 17% from total assets of $2.60 billion at December 31, 2011.
- The Company's tax equivalent net interest margin was 3.57% for the current quarter, a decrease from 3.62% for the previous quarter.
- All capital ratios exceed the requirements of banking regulators to be considered well-capitalized. Tangible common equity capital (TCE) as a percentage of total assets was 9.40%.
Income Statement Review
Net Interest Income
Compared to the year ago quarter, net interest income for the fourth quarter of 2012 increased 6% to $24.2 million from $22.7 million. Tax equivalent net interest margin for the three months ended December 31, 2012 decreased to 3.57% from 3.88% a year ago and decreased from 3.62% for the third quarter of 2012. Comparing the current quarter to the third quarter of 2012, average loan balances increased $18 million, the average loan yield decreased 0.08%, and the average yield on all earning assets decreased 0.14%. During this same period, the average costs of interest-bearing liabilities decreased 0.10% primarily due to a 0.80% rate reduction in deposit pricing on the Company's "First Choice" interest checking product that was introduced in early 2012 with a 2.01% rate and raised approximately $180 million of "new money". The Company saw no decline in balances resulting from this rate decrease.
Provision for Loan Losses
The allowance for loan losses was 1.52% of loans outstanding at December 31, 2012 compared to 1.60% at December 31, 2011. The provision for loan losses was $1.5 million for the current quarter versus $2.2 million for the fourth quarter of last year. The Company's nonperforming loans stood at 0.25% of total assets at December 31, 2012 compared to 0.30% at September 30, 2012 and 0.57% at December 31, 2011. For the 2012 year, net loan charge-offs totaled 0.35% of average loans outstanding compared to 0.34% for 2011. At December 31, 2012, there were $0 loans receivable past due 30 days or more and still accruing.
Commercial Banking: Non-interest income was $3.4 million for the current quarter compared to $2.3 million for the year ago quarter ended December 31, 2011. The current quarter included $2.4 million net proceeds from bank owned life insurance (BOLI) that resulted from the death of a former employee, and the year ago quarter included $1.2 million of gains on sales of securities. For the year ended December 31, 2012 and 2011, non-interest income was $5.9 million and $6.1 million, respectively. The 2012 period included the net BOLI proceeds mentioned above, and the 2011 period included a total of $2.5 million of gains on sales of securities. For the twelve month comparable periods, deposit and loan fees increased $147,000 and $273,000, respectively.
Mortgage Banking: Mortgage banking activity continued to be strong. Realized and unrealized gains on mortgage banking activities totaled $8.8 million for the fourth quarter of 2012, which consisted of realized gains of $11.1 million and a $2.3 million decrease in the fair market value of locked commitments and loans held for sale at December 31, 2012 compared to the prior quarter end. The fair value decrease primarily resulted from seasonal production declines. The current quarter's results compare to a $1.8 million gain on sale for the year ago quarter of 2011, which included realized gains of $6.4 million and a fair value decrease of $4.6 million. For the year ended December 31, 2012, gains on sales of mortgage loans totaled $47.8 million, comprised of $32.1 million in realized gains and a $15.7 million fair value increase. For the year ended December 31, 2011, gains on sales of mortgage loans totaled $20.5 million, which included realized gains of $14.4 million and a $6.1 million fair value increase. For the current quarter and year ended 2012, the Company closed $1.9 billion and $6.6 billion, respectively, of loans for itself and on behalf of its managed mortgage company affiliates. This compares to $1.5 billion and $3.9 billion during the same time periods of 2011. Refinance activity represented approximately 67% of the originations during the fourth quarter of 2012. Title insurance and other income increased $274,000 and $1.1 million for the three and twelve months ended December 31, 2012 compared to the same periods of 2011. During the current quarter, managed mortgage company affiliate fee income decreased $20,000 when compared to the year ago quarter, a result of the recent discontinuation of two managed company relationships.
Commercial Banking: Non-interest expense was $11.2 million for the current quarter, compared to $9.7 million, for the year ago quarter ended December 31, 2011. The most recent quarter includes approximately $2.3 million of accelerated benefit expense accruals primarily related to the death of the former employee mentioned above. The year ago quarter included $911,000 of expenses related to the disposition of real estate owned (REO). Excluding these items, non-interest expense for the current quarter was $8.9 million versus $8.7 million for the year ago quarter, an increase of 2.0%. For the years ended December 31, 2012 and 2011, non-interest expense in the commercial banking segment was $43.5 million and $42.2 million, respectively. The 2011 annual period also included a $2.3 million debt extinguishment expense related to the prepayment of FHLB Advances. Excluding this and the previously mentioned items, non-interest expense for 2012 was $41.2 million versus $39.0 million for 2011, an increase of 5.8%. During the year, the Company added 4 commercial bankers to it staff.
Mortgage Banking: For the three months ended December 31, 2012, non-interest expense increased to $5.7 million compared to $4.1 million for the quarter ended December 31, 2011. For the respective 2012 and 2011 annual periods, non-interest expense was $29.5 million and $16.0 million, representing an increase of $13.5 million. The increase in non-interest expense for the periods presented is attributable to the continued expansion of the Company's mortgage operations. Specifically, the mortgage banking segment increased to 425 employees at December 31, 2012, up from 246 a year ago, and eight new locations have been opened to house these new mortgage lenders and staff. The Company now has 16 mortgage banking offices.
Review of Balance Sheet
At December 31, 2012, total assets of the Company were $3.04 billion, an increase of 17% from total assets of $2.60 billion at December 31, 2011.Loans held for investment grew 11% to $1.80 billion at December 31, 2012, from $1.63 billion at December 31, 2011. During this period, the Bank's investment portfolio decreased to $286 million compared to $311 million a year ago. Loans held for sale increased to $786 million compared to $530 million at December 31, 2011.
The Bank's asset growth was primarily funded by a 26% increase in deposits, which increased $468 million and totaled $2.24 billion at December 31, 2012 compared to $1.78 billion a year earlier. As mentioned, over $180 million of the growth resulted from the Company's "First Choice" checking campaign. Demand deposit account balances increased 33% year over year, or approximately $88 million, reflecting the Bank's continued focus on generating core deposit growth. The remaining growth was primarily from short-term brokered CD's obtained to fund the increase in mortgage loans held for sale.
Bernard H. Clineburg, Chairman and Chief Executive Officer of the Company, said:
"We are pleased to announce solid performance for Cardinal with strong earnings and loan growth. For the most recent quarter, we achieved a return on average assets of 1.81%, and a return on average equity of 17.23%, while growing our loans held for investment portfolio by $80 million, or over 18% annualized. This portfolio now exceeds $1.80 billion, and our nonperforming assets and loan losses remain minimal as we've maintained our 'conservative on risk' philosophy. Currently, we have $0 loans past due 30 days or more.
We also remain excited about the planned opening of a new banking center office in the Georgetown area of Washington DC this year and expanding Cardinal's penetration into Montgomery County, Maryland and the District of Columbia. Moving forward, our Company will continue to concentrate on gaining market share in all of our markets and increasing franchise value for shareholders. We remain committed to building a great financial services company for our employees, clients, shareholders and the communities we serve."
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements contain information related to matters such as the Company's intent, belief or expectation with regard to such matters as financial and operational performance, credit quality and branch expansion. Such statements are necessarily based on management's assumptions and estimates and are inherently subject to a variety of risks and uncertainties concerning the Company's operations and business environment, which are difficult to predict and beyond the control of the Company. Such risks and uncertainties could cause actual results of the Company to differ materially from those matters expressed or implied in such forward-looking statements. For an explanation of the risks and uncertainties associated with forward-looking statements, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2011 and other reports filed with and furnished to the Securities and Exchange Commission.
About Cardinal Financial Corporation: Cardinal Financial Corporation, a financial holding company headquartered in Tysons Corner, Virginia with assets of $3.04 billion at December 31, 2012, serves the Washington Metropolitan region through its wholly-owned subsidiary, Cardinal Bank, with 27 conveniently located banking offices. Cardinal also operates several other subsidiaries: George Mason Mortgage, LLC, and Cardinal First Mortgage, LLC, residential mortgage lending companies based in Fairfax, with 16 offices throughout the Washington Metropolitan region; Cardinal Trust and Investment Services, a trust division; Cardinal Wealth Services, Inc., a full-service brokerage company; and Wilson/Bennett Capital Management, Inc., an asset management company. The Company's stock is traded on NASDAQ (CFNL). For additional information please visit our Web site atwww.cardinalbank.comor call (703) 584-3400.
|Cardinal Financial Corporation and Subsidiaries|
|Summary Statements of Condition|
|December 31, 2012 and December 31, 2011|
|(Dollars in thousands)|
|December 31, 2012||December 31, 2011||Current Year|
|Cash and due from banks||$||17,552||$||16,745||4.8||%|
|Federal funds sold||49,588||20,394||143.1||%|
|Investment securities available-for-sale||271,903||295,560||-8.0||%|
|Investment securities held-to-maturity||11,366||12,918||-12.0||%|
|Investment securities - trading||3,151||2,065||52.6||%|
|Total investment securities||286,420||310,543||-7.8||%|
|Loans held for sale|
|Loans receivable, net of fees||1,803,429||1,631,882||10.5||%|
|Allowance for loan losses||(27,400||)||(26,159||)||4.7||%|
|Loans receivable, net||1,776,029||1,605,723||10.6||%|
|Premises and equipment, net||19,192||19,302||-0.6||%|
|Goodwill and intangibles, net||10,292||10,490||-1.9||%|
|Bank-owned life insurance||31,652||35,154||-10.0||%|
|Prepaid FDIC insurance premiums||2,165||3,350||-35.4||%|
|Other real estate owned||-||3,046||-100.0||%|
|Non-interest bearing deposits||$||351,815||$||263,752||33.4||%|
|Interest bearing deposits||1,891,943||1,511,508||25.2||%|
|Other borrowed funds||392,275||510,385||-23.1||%|
|Mortgage funding checks||51,679||25,989||98.8||%|
|TOTAL LIABILITIES & SHAREHOLDERS' EQUITY||$|
|Cardinal Financial Corporation and Subsidiaries|
|Summary Income Statements|
|For the Three Months and Years Ended December 31, 2012 and 2011|
|(Dollars in thousands, except share and per share data)|
|For the Three Months Ended||For the Years Ended|
|December 31,||December 31,|
|2012||2011||% Change||2012||2011||% Change|
|Net interest income||$||24,166||$||22,738||6.3||%||$||91,003||$||79,162||15.0||%|
|Provision for loan losses||(1,500||)||(2,165||)||-30.7||%||(7,123||)||(6,910||)||3.1||%|
|Net interest income after provision for loan losses||22,666||20,573||10.2||%||83,880||72,252||16.1||%|
|Service charges on deposit accounts||503||460||9.3||%||1,914||1,767||8.3||%|
|Title insurance & other income||775||501||54.7||%||2,489||1,408||76.8||%|
|Investment fee income||706||644||9.6||%||2,623||2,546||3.0||%|
|Realized and unrealized gains on mortgage banking activities||8,795||1,794||390.2||%||47,794||20,529||132.8||%|
|Management fee income||1,248||1,268||-1.6||%||4,082||3,406||19.8||%|
|Income from bank owned life insurance||2,565||193||1229.0||%||3,072||796||285.9||%|
|Net realized gains on investment securities||-||1,256||-100.0||%||158||2,541||-93.8||%|
|Gain (loss) on sale of real estate||-||-||0.0||%||(333||)||-||-100.0||%|
|Other non-interest income (loss)||28||11||154.5||%||(6||)||14||-142.9||%|
|Total non-interest income||14,977||6,632||125.8||%||63,392||34,333||84.6||%|
|Net interest income and non-interest income||37,643||27,205||38.4||%||147,272||106,585||38.2||%|
|Salaries and benefits||6,865||5,736||19.7||%||39,370||28,707||37.1||%|
|Data processing & communications||1,089||1,235||-11.8||%||4,427||4,117||7.5||%|
|FDIC insurance assessment||356||309||15.2||%||1,336||1,387||-3.7||%|
|Impairment of other real estate owned||
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