Cardinal Announces First Quarter Earnings; Increases Quarterly Dividend

Cardinal Announces First Quarter Earnings; Increases Quarterly Dividend

TYSONS CORNER, Va.--(BUSINESS WIRE)-- Cardinal Financial Corporation (NAS: CFNL) (the "Company") today announced quarterly earnings of $7.2 million, or $0.23 per diluted share, for the period ended March 31, 2013. This compares to earnings of $7.7 million, or $0.26 per diluted share, for the first quarter of last year.

Selected Highlights

  • Commercial banking segment pretax earnings before loan loss provision increased 31% to $13.1 million from $10.1 million for the year ago quarter.
  • Asset quality remains excellent. Nonperforming loans decreased to 0.20% of total assets, and the Company had net loan loss recoveries of 0.07% of average loans outstanding. The Company had $0 real estate owned at March 31, 2013, and $5.6 million of non-accruing loans.
  • Mortgage loan applications remained at near record levels of approximately $1.5 billion for the current quarter although refinance volume dropped to an average of 47% of total applications from an average of 67% for the previous quarter.
  • The Company increased its quarterly dividend by $0.01 to $0.06 per share.
  • Loans held for investment grew 7.4% to $1.78 billion at March 31, 2013, from $1.66 billion at March 31, 2012.
  • Total deposits grew to $2.09 billion, an increase of 12% compared to March 31, 2012. Demand deposit account balances increased 19% year over year.
  • At March 31, 2013, total assets of the Company were approximately $2.82 billion, an increase of 8% from total assets of $2.61 billion at March 31, 2012.
  • 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 10.35% at March 31, 2013.

Commercial Banking Segment Income Review

For the current quarter ended March 31, 2013, pre-tax pre-provision income for the commercial banking segment increased 31% to $13.1 million from $10.1 million for the year ago quarter. Net interest income for the current quarter was $22.4 million versus $21.3 million for the year ago quarter and $23.9 million for the previous quarter ended December 31, 2012. Compared to the previous quarter, the Company's tax equivalent net interest margin decreased to 3.35% from 3.57%. This decline resulted from a temporary average balance increase of $96 million in lower yield short term investments. Comparing the current quarter to the fourth quarter of 2012, the average balance of loans held for sale decreased $131 million and loans held for investment balances increased $37 million. The resulting increase in short term investments led to a linked quarter decrease of the average yield on earning assets from 4.42% to 4.18%, while the average costs of interest-bearing liabilities remained at 1.08%. If the temporary average short term investment position was invested in loans held for sale, the margin would have been consistent with the previous quarter at 3.57%.

The allowance for loan losses remained at 1.52% of loans outstanding at March 31, 2013. The Company's nonperforming assets decreased to 0.20% of total assets at March 31, 2013 compared to 0.25% at December 31, 2012 and 0.62% at March 31, 2012. For the current quarter, there was a net recovery of previously charged off loans equal to 0.07% of average loans outstanding, compared to net charge offs of 0.35% for the previous quarter and 0.63% for the year ago quarter. The improving credit metrics resulted in a negative provision for loan losses of $542,000 for the current quarter versus a provision for loan losses of $1.6 million for the first quarter of last year.

Non-interest income was $794,000 for the current quarter compared to $336,000 for the year ago quarter ended March 31, 2012, which included a loss of $473,000 on the sale of real estate owned. Deposit fees increased $57,000 or 13% from the year ago quarter.

Non-interest expense was $10.1 million for the current quarter, compared to $11.6 million for the year ago quarter ended March 31, 2012. Although the Company added 2 new commercial lenders during the most recent quarter and five new commercial lenders over the past year, expenses decreased due to a reduction in incentive compensation, lower marketing costs and overall expense controls.

Mortgage Banking Segment Income Review

For the current quarter ended March 31, 2013, noninterest income for the mortgage banking segment was $7.1 million versus $8.6 million in the same prior year quarter and $10.9 million for the last quarter of 2012. Net gains from mortgage banking activities were $6.3 million for the most recent quarter versus $6.9 million for the year ago quarter and $8.8 million for the last quarter of 2012. The decrease in net gains from mortgage banking activities is mainly due to changes in unrealized gains associated with the fair market value of locked commitments and closed loans held for sale. For the current quarter, the unrealized gain decreased $4.7 million. For the year ago quarter, there was a $1.8 million increase in unrealized gains. Before the change in fair value, net gains from mortgage banking activities were $11.0 million for the current quarter versus $5.1 million for the year ago quarter, and adjusted mortgage banking net income was $1.9 million and $1.4 million, respectively.

The Company's mortgage subsidiary, George Mason, accepted loan applications totaling $1.48 billion during the first quarter of 2013. Although the average percentage of refinance applications has decreased during the quarter to 47% from 67% last quarter and from 60% for the year ago quarter, the current volume compares favorably to applications of $1.41 billion for the fourth quarter of 2012 and $1.05 billion a year ago. As expected, production has been maintained as new mortgage loan officers have been hired that have a history of success with "purchase money" mortgage lending.

Managed mortgage company affiliate fee income decreased $711,000 when compared to the year ago quarter, a result of the discontinuation of two managed company relationships.

For the current quarter, non-interest expense increased to $9.2 million compared to $4.9 million for the quarter ended March 31, 2012. The increase in non-interest expense is attributable to the continued expansion of the Company's mortgage operations. Specifically, the mortgage banking segment currently has 173 loan officers, up from 116 officers a year ago and up from 160 at the end of last quarter. The Company now has 17 mortgage banking offices. Variable expenses that correlate to production represent approximately 66% of the total expenses.

Review of Balance Sheet

At March 31, 2013, total assets of the Company grew $210 million to $2.82 billion, an increase of 8% from total assets of $2.61 billion at March 31, 2012.Loans held for investment grew 7% to $1.78 billion at March 31, 2013, from $1.66 billion at March 31, 2012. During this period, the Bank's investment portfolio decreased to $271 million compared to $299 million a year ago. Loans held for sale increased to $535 million compared to $501 million at March 31, 2012. At December 31, 2012, total assets were $3.04 billion. The current quarter decrease is the result of a $251 million decline in mortgage loans held for sale compared to year end. The loans held for investment portfolio also declined by $20 million, primarily a result of payoff activity within the residential mortgage portfolio.

The Bank's asset growth was funded by a 12% increase in deposits, which increased $227 million and totaled $2.09 billion at March 31, 2013 compared to $1.86 billion a year earlier. Demand deposit account balances increased 19% year over year, or approximately $58 million, reflecting the Bank's continued focus on generating core deposits. The remaining growth was primarily a result of our high yield checking campaign.

Dividend Announcement

The Company today also announced that its Board of Directors has declared another increase of $0.01 to its quarterly cash dividend. A dividend of $0.06 per share will be paid on May 17, 2013 to shareholders of record as of the close of business on May 2, 2013.


Bernard H. Clineburg, Chairman and Chief Executive Officer of the Company, said:

"Overall our results are as expected; solid earnings growth in the commercial banking segment, ongoing pristine credit quality metrics and continued growth in purchase money mortgage loan production. We also continue our investment in de novo bank expansion into Montgomery County, Maryland with a Rockville banking center expected to open in fourth quarter of this year and the addition of our third commercial banker to serve the Maryland market. Moving forward, our Company will continue to concentrate on gaining market share in all of our markets and increasing franchise value for shareholders.

Although accounting rules can make mortgage banking earnings volatile, we use a broader, longer term approach in evaluating the progress of this business. Regardless of revenue timing, the profitability of each loan originated and sold is unchanged. Therefore, we discount the impact of changes to unrealized gains on quarterly income, and we focus on production trends, sales margins and the variable versus fixed components of the expense structure. By evaluating these metrics, we continue in our belief that we have the premier mortgage banking operation in the metropolitan Washington DC market. We have grown this segment considerably over the past year, and production volumes have been maintained as we continued to add seasoned, proven performers that have survived several business cycles. We firmly believe, even if refinance transactions slow down in 2013 as many expect, George Mason Mortgage will remain a highly profitable component of our business, and it will continue to make a significant contribution to our Company's overall performance.

We remain committed to building and maintaining a strong financial services company for our employees, clients, shareholders and the communities we serve. The announcement of an increase to our dividend is a testament to the board of director's and management's belief in the fundamentals of our earnings and growth prospects for the Company. We are also proud to announce our inclusion in the Keefe, Bruyette & Woods "Bank Honor Roll", a distinction for banks achieving positive earnings per share growth trends over the last decade, with no annual losses, regardless of the economic environment."


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, 2012 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 $2.82 billion at March 31, 2013, 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 17 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
(Dollars in thousands)
% Change
March 31, 2013December 31, 2012March 31, 2012Current YearYear Over Year
Cash and due from banks$13,451$17,552$17,055-23.4%-21.1%
Federal funds sold125,61249,58832,964153.3%281.1%
Investment securities available-for-sale256,900271,903284,198-5.5%-9.6%
Investment securities held-to-maturity10,79011,36612,561-5.1%-14.1%
Investment securities - trading 3,299  3,151  2,725 4.7%21.1%
Total investment securities270,989286,420299,484-5.4%-9.5%
Other investments14,04814,30217,910-1.8%-21.6%
Loans held for sale534,706785,751501,215-31.9%6.7%
Loans receivable, net of fees1,782,9161,803,4291,660,271-1.1%7.4%
Allowance for loan losses (27,165) (27,400) (25,223)-0.9%7.7%
Loans receivable, net1,755,7511,776,0291,635,048-1.1%7.4%
Premises and equipment, net19,34819,19218,1900.8%6.4%
Goodwill and intangibles, net10,24310,29210,441-0.5%-1.9%
Bank-owned life insurance31,74331,65235,3260.3%-10.1%
Prepaid FDIC insurance premiums1,8752,1653,061-13.4%-38.7%
Other real estate owned--2,5000.0%-100.0%
Other assets40,46646,24435,472-12.5%14.1%
TOTAL ASSETS$2,818,232 $3,039,187 $2,608,666 -7.3%8.0%
Non-interest bearing deposits$361,932$351,815$303,6852.9%19.2%
Interest bearing deposits 1,727,086  1,891,943  1,557,862 -8.7%10.9%
Total deposits2,089,0182,243,7581,861,547-6.9%12.2%
Other borrowed funds332,353392,275408,439-15.3%-18.6%
Mortgage funding checks45,32951,67937,425-12.3%21.1%
Escrow liabilities6,3534,6296,29837.2%0.9%
Other liabilities31,55938,78029,299-18.6%7.7%
Shareholders' equity 313,620  308,066  265,658 1.8%18.1%
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY$2,818,232 $3,039,187 $2,608,666 -7.3%8.0%
Cardinal Financial Corporation and Subsidiaries
Summary Income Statements
(Dollars in thousands, except share and per share data)
For the Three Months Ended
March 31
20132012% Change
Net interest income$22,601$21,7383.97%
Provision for loan losses 457 (1,898)-124.08%
Net interest income after provision for loan losses23,05819,84016.22%
Service charges on deposit accounts50244512.81%
Loan fees219376-41.76%
Title insurance & other income399466-14.38%
Investment fee income547613-10.77%
Net gains from mortgage banking activities6,3276,881-8.05%
Management fee income2981,009-70.47%
Income from bank owned life insurance92172-46.51%
Net realized gains on investment securities38187-79.68%
Gain (loss) on sale of real estate30(473)-106.34%
Other non-interest income (loss) 22 6 266.67%
Total non-interest income8,4749,682-12.48%
Net interest income and non-interest income31,53229,5226.81%
Salaries and benefits9,9869,5124.98%
Data processing & communications1,1281,167-3.34%
Professional fees1,31673978.08%
FDIC insurance assessment3313271.22%
Mortgage loan repurchases and settlements62115-46.09%
Other operating expense 5,033 3,910 28.72%
Total non-interest expense20,68218,08114.39 Read Full Story
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