Cardinal Announces Record Third Quarter Earnings; Assets Exceed $3.0 Billion; Loan Quality Remains S
Cardinal Announces Record Third Quarter Earnings; Assets Exceed $3.0 Billion; Loan Quality Remains Strong
TYSONS CORNER, Va.--(BUSINESS WIRE)-- Cardinal Financial Corporation (NAS: CFNL) (the "Company") today announced quarterly earnings of $14.5 million, or $0.48 per diluted share, for the period ended September 30, 2012. This is a 68% increase over earnings of $8.6 million, or $0.29 per diluted share, from the third quarter of last year. On a year-to-date basis, earnings were $32.3 million, or $1.07 per diluted share through September 30, 2012, versus $19.8 million, or $0.66 per diluted share, in 2011.
Selected Earnings Highlights
- At September 30, 2012, total assets of the Company exceeded $3.0 billion, an increase of 18% from total assets of $2.6 billion at September 30, 2011.
- Asset quality continues to be strong. Nonperforming loans remained low at 0.30% of total assets, and annualized net loan charge offs were 0.43% of average loans outstanding. The Company had no real estate owned at September 30, 2012, and only $306,000 loans receivable past due 90 days or more.
- Loans held for investment grew 14% to $1.72 billion at September 30, 2012, from $1.52 billion at September 30, 2011.
- Total deposits grew to $2.2 billion, an increase of 21% compared to September 30, 2011. Demand deposit account balances increased 26% year over year.
- The results of mortgage banking operations were again exceptional, contributing net income of approximately $7.0 million for the current quarter as the Company was positively impacted by mortgage rates remaining near record lows, leading to a continuation of strong refinance activity and an increase in local home buying.
- The Company's tax equivalent net interest margin increased to 3.62% for the current quarter, an increase from 3.57% for the previous quarter.
- All capital ratios substantially exceed the requirements of banking regulators to be considered well-capitalized. Tangible common equity capital (TCE) as a percentage of total assets was 8.84%.
Income Statement Review
Net Interest Income
Compared to the year ago quarter, net interest income for the third quarter of 2012 increased 18% to $23.7 million from $20.1 million. Tax equivalent net interest margin for the three months ended September 30, 2012 decreased to 3.62% from 3.86% a year ago and increased from 3.57% for the second quarter of 2012. Comparing the current quarter to the second quarter of 2012, average loan balances increased $42 million, the average loan yield decreased 0.03%, and the average yield on all earning assets decreased 0.02%. During this same period, the average costs of interest-bearing liabilities decreased 0.11% primarily due to a mid-second quarter general reduction in deposit pricing.
Provision for Loan Losses
The allowance for loan losses was 1.53% of loans outstanding at September 30, 2012 compared to 1.60% at September 30, 2011. The provision for loan losses was $1.5 million for the current quarter versus $2.9 million for the third quarter of last year. The Company's nonperforming loans stood at 0.30% of total assets at September 30, 2012 compared to 0.43% at June 30, 2012 and 0.43% at September 30, 2011. Year-to-date 2012 net loan charge-offs totaled 0.43% of average loans outstanding compared to 0.44% for the nine months of 2011. There were $306,000 loans receivable past due 90 days or more and early stage loan delinquencies at 30-89 days past due at September 30, 2012 totaled $233,000.
Commercial Banking: Non-interest income was $1.1 million for the current quarter compared to $1.3 million, which included $409,000 of gains on securities, for the year ago quarter ended September 30, 2011. For the nine months ended September 30, 2012 and 2011, non-interest income was $2.5 million and $3.8 million, respectively. The 2011 period included $1.3 million of gains on securities. For the three month comparable periods, deposit fees and loan fees increased $33,000 and $108,000, respectively. For the nine month comparable periods, deposit and loan fees increased $104,000 and $419,000, respectively.
Mortgage Banking: Mortgage banking activities continued to be exceptional. Gains on sales of mortgage loans totaled $18.6 million for the third quarter of 2012, which consisted of realized gains of $9.0 million and unrealized gains of $9.6 million resulting from its locked commitments and closings. This compares to $11.3 million for the year ago quarter of 2011, which included realized gains of $3.0 million and unrealized gains of $8.3 million. For the period ended September 30, 2012, gains on sales of mortgage loans totaled $39.0 million, comprised of $21.0 million in realized gains and $18.0 million in unrealized gains. For year-to-date 2011, gains on sales of mortgage loans totaled $18.7 million which included realized gains of $8.0 million and unrealized gains of $10.7 million. For the current quarter and year to date 2012, the Company closed $1.9 billion and $4.7 billion, respectively, of loans for itself and on behalf of its managed mortgage company affiliates. This compares to $1.2 billion and $2.4 billion during the same time periods last year. Refinance activity represented approximately 64% of the originations during the third quarter of 2012. Title insurance and other income increased $310,000 and $808,000 for the three and nine months ended September 30, 2012 compared to the same periods of 2011. Managed mortgage company affiliate fee income decreased $213,000 and increased $696,000 for the three and nine months ended 2012 over the year ago three and nine month periods. Within the past six months, the Company discontinued two managed company relationships.
Commercial Banking: Non-interest expense was $10.5 million for the current quarter compared to $12.7 million, which includes a loss of $1.8 million from FHLB Advance extinguishment, for the year ago quarter ended September 30, 2011. Certain other expenses in the commercial banking segment have declined as a result of the realignment of direct and indirect corporate overhead expenses toward our mortgage banking segment as this activity has substantially increased. For the nine month periods ended September 30, 2012 and 2011, non-interest expense in the commercial banking segment was $32.3 million and $32.6 million, respectively.
Mortgage Banking: For the three months ended September 30, 2012, non-interest expense increased to $10.2 million compared to $4.8 million for the quarter ended September 30, 2011. For the respective nine month periods ended September 30, 2012 and 2011, non-interest expense was $23.8 million and $11.9 million, representing an increase of $11.9 million. The increase in non-interest expense for the periods presented is attributable to the expansion of the Company's mortgage operations that began during 2011. Specifically, the mortgage banking segment increased to 358 employees at September 30, 2012 up from 219 a year ago. This includes over 50 new loan officers that contributed to the dramatic increase in production. During this period, eight new locations have been opened to house these new mortgage lenders and their staff. The Company now has 16 mortgage banking offices.
Review of Balance Sheet
At September 30, 2012, total assets of the Company were $3.0 billion, an increase of 18% from total assets of $2.6 billion at September 30, 2011.Loans held for investment grew 14% to $1.72 billion at September 30, 2012, from $1.52 billion at September 30, 2011. During this period, the Bank's investment portfolio decreased slightly to $302 million compared to $348 million a year ago. Loans held for sale increased to $802 million compared to $553 million at September 30, 2011.
The Bank's asset growth was primarily funded by a 21% increase in deposits, which grew $383 million and totaled $2.18 billion at September 30, 2012 compared to $1.80 billion a year earlier. Of this growth, over $175 million resulted from the "First Choice" checking campaign. The Company also added over $100 million in traditional, longer term brokered CDs to establish permanent funding for growth in loans held for investment. Demand deposit account balances increased 26% year over year, or approximately $69 million, reflecting the Bank's continued focus on generating core deposit growth.
Bernard H. Clineburg, Chairman and Chief Executive Officer of the Company, said:
"We are pleased to announce another excellent quarter for Cardinal with strong balance sheet growth and earnings. The total assets of our Company now exceed $3.0 billion as our mortgage banking production continued to be exemplary. Loan losses remained minimal as we maintain our 'conservative on risk' philosophy.
We are also excited about the planned opening of a new banking center office in the Georgetown district of Washington DC early next year, and we are pleased to announce that Robert R. Giraldi has joined Cardinal as Senior Vice President and Market Executive, where he will focus on recruiting business development officers and expanding Cardinal's penetration into Montgomery County 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 $3.01 billion at September 30, 2012, serves the Washington Metropolitan region through its wholly-owned subsidiary, Cardinal Bank, with 27 conveniently located banking offices. Cardinal also operates several other subsidiaries: George Mason Mortgage, LLC, and Cardinal First Mortgage, LLC, residential mortgage lending companies based in Fairfax, with 16 offices throughout the Washington Metropolitan region; Cardinal Trust and Investment Services, a trust division; Cardinal Wealth Services, Inc., a full-service brokerage company; and Wilson/Bennett Capital Management, Inc., an asset management company. The Company's stock is traded on NASDAQ (CFNL). For additional information please visit our Web site atwww.cardinalbank.comor call (703) 584-3400.
|Cardinal Financial Corporation and Subsidiaries|
|Summary Statements of Condition|
|September 30, 2012, December 31, 2011 and September 30, 2011|
|(Dollars in thousands)|
|September 30, 2012||December 31, 2011||September 30, 2011||Current Year||Year Over Year|
|Cash and due from banks||$||14,263||$||16,745||$||17,049||-14.8||%||-16.3||%|
|Federal funds sold||59,265||20,394||18,841||190.6||%||214.6||%|
|Investment securities available-for-sale||287,651||295,560||332,325||-2.7||%||-13.4||%|
|Investment securities held-to-maturity||11,682||12,918||13,518||-9.6||%||-13.6||%|
|Investment securities - trading||2,890||2,065||2,145||40.0||%||34.7||%|
|Total investment securities||302,223||310,543||347,988||-2.7||%||-13.2||%|
|Loans held for sale||801,953||529,500||552,838||51.5||%||45.1||%|
|Loans receivable, net of fees||1,723,324||1,631,882||1,515,286||5.6||%||13.7||%|
|Allowance for loan losses||(26,369||)||(26,159||)||(24,212||)||0.8||%||8.9||%|
|Loans receivable, net||1,696,955||1,605,723||1,491,074||5.7||%||13.8||%|
|Premises and equipment, net||19,136||19,302||18,905||-0.9||%||1.2||%|
|Goodwill and intangibles, net||10,342||10,490||10,540||-1.4||%||-1.9||%|
|Bank-owned life insurance||35,661||35,154||34,961||1.4||%||2.0||%|
|Prepaid FDIC insurance premiums||2,481||3,350||3,627||-25.9||%||-31.6||%|
|Other real estate owned||-||3,046||3,957||-100.0||%||-100.0||%|
|Non-interest bearing deposits||$||333,904||$||263,752||$||264,857||26.6||%||26.1||%|
|Interest bearing deposits||1,845,059||1,511,508||1,531,522||22.1||%||20.5||%|
|Other borrowed funds||395,751||510,385||419,546||-22.5||%||-5.7||%|
|Mortgage funding checks||83,847||25,989||43,357||222.6||%||93.4||%|
|TOTAL LIABILITIES & SHAREHOLDERS' EQUITY||$||3,011,686||$||2,602,716||$||2,554,482||15.7||%||17.9||%|
|Cardinal Financial Corporation and Subsidiaries|
|Summary Income Statements|
|Three and Nine Months Ended September 30, 2012 and 2011|
|(Dollars in thousands, except share and per share data)|
|For the Three Months Ended||For the Nine Months Ended|
|September 30,||September 30,|
|2012||2011||% Change||2012||2011||% Change|
|Net interest income||$||23,658||$||20,099||17.7||%||$||66,837||$||56,423||18.5||%|
|Provision for loan losses||(1,500||)||(2,885||)||-48.0||%||(5,623||)||(4,745||)||18.5||%|
|Net interest income after provision for loan losses||22,158||17,214||28.7||%||61,214||51,678||18.5||%|
|Service charges on deposit accounts||494||461||7.2||%||1,411||1,307||8.0||%|
|Title insurance & other income||750||440||70.5||%||1,714||906||89.2||%|
|Investment fee income||655||643||1.9||%||1,916||1,902||0.7||%|
|Realized and unrealized gains on mortgage banking activities||18,605||11,343||64.0||%||38,999||18,735||108.2||%|
|Management fee income||943||1,156||-18.4||%||2,834||2,138||32.6||%|
|Income from bank owned life insurance||164||216||-24.1||%||507||603||-15.9||%|
|Net realized gains on investment securities||-||409||-100.0||%||158||1,286||-87.7||%|
|Gain (loss) on sale of real estate||140||-||100.0||%||(333||)||-||-100.0||%|
|Other non-interest income (loss)||4||6||-33.3||%||(32||)||4||-900.0||
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