Attached files
| file | filename |
|---|---|
| 8-K - 8-K - VANTAGESOUTH BANCSHARES, INC. | form8-k2013q3.htm |
| EX-99.2 - CONFERENCE CALL PRESENTATION - VANTAGESOUTH BANCSHARES, INC. | a3q2013earningsconferenc.htm |
CONTACT:
Terry Earley, CFO
VantageSouth Bancshares, Inc.
Phone: (919) 659-9015
Email: Terry.Earley@vsb.com
FOR IMMEDIATE RELEASE
VantageSouth Bancshares, Inc. Reports 3rd Quarter Net Income of $1.5 Million and Net Operating Earnings of $3.0 Million
RALEIGH, N.C., October 30, 2013 – VantageSouth Bancshares, Inc. (VSB) (the "Company") today reported third quarter 2013 financial results. Highlights include the following:
• | Net income was $1.5 million in 3Q 2013 compared to $3.3 million in 2Q 2013 and $1.3 million in 3Q 2012. |
• | Earnings in 3Q 2013 were negatively impacted by a $1.2 million income tax charge in connection with recently enacted decreases in North Carolina corporate income tax rates which are effective in future tax years. |
• | In August 2013, the Company placed $38.05 million in 10-year subordinated notes at a fixed rate of 7.625 percent to further strengthen and diversify its regulatory capital position. |
• | Net operating earnings, which exclude securities gains, a one-time acquisition gain, merger and conversion costs, and a non-recurring income tax adjustment, improved to $3.0 million in 3Q 2013 from $2.8 million in 2Q 2013 and $1.4 million in 3Q 2012. |
• | Pre-tax, pre-provision operating earnings totaled $6.2 million in 3Q 2013, an increase from $6.0 million in 2Q 2013 and $2.5 million in 3Q 2012. |
• | Annualized net loan growth was 9 percent in 3Q 2013 while loan originations and commitments totaled $207.4 million in the third quarter. |
• | Net interest margin totaled 4.39 percent in 3Q 2013 compared to 4.67 percent in 2Q 2013 and 4.49 percent in 3Q 2012. |
• | Government-guaranteed, small business lending income improved to $1.5 million in 3Q 2013 from $1.1 million in 2Q 2013 and $776 thousand in 3Q 2012 while loan originations by this group totaled $34.5 million in the third quarter. |
• | Operating non-interest expenses were cut by $1.0 million from 2Q 2013 to 3Q 2013, which was in line with targeted cost savings following the ECB acquisition. |
“We improved operating earnings and achieved annualized net loan growth of 9 percent in the third quarter despite a general environment of economic uncertainty and slowing mortgage activity,” stated Scott Custer, CEO of the Company. Mr. Custer continued, “our SBA lending group notched its second highest quarterly revenue number in the history of our bank and continues to grow its origination of government-guaranteed, small business loans throughout the Southeast. At the same time, we remain on track to realize all of our projected cost savings following the ECB merger which contributed to a 5 percent reduction in operating expenses on a linked-quarter basis. Additionally, we issued $38 million of subordinated notes which bolstered our regulatory capital ratios and will provide room for continued expansion in our core markets. Overall, we are pleased with the progress we made on a number of fronts this quarter and believe that we have properly realigned our mortgage business to operate more profitably in the coming quarters.”
ECB Merger
On April 1, 2013, the Company completed the merger of ECB with and into VSB (the "ECB merger"). The ECB merger was completed pursuant to an Agreement and Plan of Merger dated as of September 25, 2012 (the "Merger Agreement"). Immediately following the ECB merger, The East Carolina Bank, a wholly-owned subsidiary of ECB, was merged with and into VantageSouth Bank. Upon the closing of the ECB merger, each outstanding share of ECB common stock was converted into the right to receive 3.55 shares of VSB common stock. The aggregate merger consideration consisted of 10,312,186 shares of VSB common stock. Based upon the $3.94 per share closing price of VSB common stock on March 28, 2013, the aggregate purchase price totaled $40.6 million.
In connection with the ECB merger, the Company applied the acquisition method of accounting to ECB's balance sheet. Therefore, all acquired assets and liabilities were adjusted to fair value, and the historical allowance for loan losses was eliminated. The Company recorded a one-time acquisition gain of $7.8 million in the second quarter of 2013, which reflects the amount by which the fair value of acquired net assets exceeded the combined purchase price and fair value of non-controlling interests. The Company has a one-year measurement period from the acquisition date to finalize the recorded fair values of net assets acquired. The acquisition gain may change if initial fair value estimates are revised within the measurement period and any changes are reported retrospectively as of the date of acquisition. Measurement period adjustments in the third quarter of 2013, which were retrospectively reflected in the Company's results of operations in the second quarter of 2013, reduced the previously reported gain on acquisition by $433 thousand. This amount included tax-effected adjustments to reduce the estimated fair value of a non-marketable investment, to reduce the fair value of certain distressed loans held for sale, and to increase the fair value of a bank-owned office.
VantageSouth Bank Merger into Crescent
On November 30, 2012, VantageSouth Bank ("Legacy VantageSouth") was merged with and into Crescent State Bank, a wholly-owned banking subsidiary of Crescent Financial Bancshares, Inc. ("Crescent"), and the combined bank was re-branded as VantageSouth Bank. This merger was a combination of commonly controlled companies since both banks were subsidiaries of Piedmont Community Bank Holdings, Inc. ("Piedmont"), and it was accounted for in a manner similar to a pooling of interests transaction. Thus, the Company's financial statements were retrospectively adjusted to combine the financial condition and results of operations of Crescent and Legacy VantageSouth from the date the two companies became commonly controlled.
Further, because of the application of push-down accounting to the books of Legacy VantageSouth on February 1, 2012 when Piedmont purchased the bank's remaining non-controlling equity interests, reporting periods prior to this date are denoted as "2012 Predecessor Period" (January 1 to January 31, 2012) and periods after this date are denoted as "2012 Successor Period" (February 1 to September 30, 2012).
Results of Operations
3Q 2013 compared to 3Q 2012
Net income was $1.5 million in the third quarter of 2013 compared to $1.3 million in the third quarter of 2012. After preferred stock dividends and accretion, net income available to common stockholders was $776 thousand, or $0.02 per common share, in the third quarter of 2013 compared to net income of $918 thousand, or $0.03 per common share, in the third quarter of 2012. Net operating earnings, which exclude securities gains, merger and conversion costs, and a non-recurring income tax charge, improved to $3.0 million in third quarter 2013 from $1.4 million in the third quarter of 2012 as the Company improved its financial performance following the ECB merger by increasing net interest income, lowering provision for loan losses, increasing non-interest income, and by reducing its operating efficiency ratio. Similarly, pre-tax, pre-provision operating earnings increased to $6.2 million in the third quarter of 2013 from $2.5 million in the third quarter of 2012.
Year-to-Date
Net income was $3.9 million in the first nine months of 2013 while net income was $1.7 million in the 2012 Successor Period and $529 thousand in the 2012 Predecessor Period. After dividends and accretion on preferred stock, net income available to common stockholders was $2.2 million, or $0.05 per common share, in the first nine months of 2013, while net income attributable to common stockholders was $703 thousand, or $0.02 per common share, in the 2012 Successor Period, and $407 thousand, or $0.01 per common share, in the 2012 Predecessor Period.
Net Interest Income
3Q 2013 compared to 3Q 2012
Net interest income was $19.9 million in the third quarter of 2013 compared to $10.3 million in the third quarter of 2012. The increase in net interest income was the result of a significant increase in earning assets from organic business activity and the ECB merger. Average earning assets increased from $916.7 million in the 2Qthird quarter of 2012 to $1.80 billion in the third quarter of 2013. Over this period, average loan balances increased by $639.2 million, of which $466.5 million was from acquired ECB loans, and average investment securities balances increased by $218.0 million. In addition, average deposits increased by $796.3 million, of which $736.1 million was from the ECB merger.
The Company's net interest margin declined from 4.49 percent in the third quarter of 2012 to 4.39 percent in the third quarter of 2013. The reduction in net interest margin was due to a reduction in yields on interest-earning assets partially offset by lower costs on interest-bearing liabilities. The yield on earning assets declined from 5.18 percent in the third quarter of 2012 to 4.90 percent in the third quarter of 2013, which reflected lower loan yields and lower yields on investment securities. The decrease in loan yields was a product of lower prevailing market loan rates on new loan originations partially offset by a favorable impact from acquisition accounting fair value adjustments. Securities yields declined as the Company reinvested principal paydowns and proceeds from sales at lower current market rates.
The cost of interest-bearing liabilities declined from 0.83 percent in the third quarter of 2012 to 0.59 percent in the third quarter of 2013, which primarily reflected a lower cost of deposits as the Company adjusted interest rates it pays on certain checking and money market accounts in the second quarter of 2013 and incorporated the ECB deposit base. The Company also increased its level of short-term borrowings in the form of FHLB advances which lowered overall funding costs. These reductions were partially offset by an increase in the cost of long-term debt from the issuance of $38.05 million in 10-year subordinated notes at a fixed rate of 7.625 percent. These subordinated notes were issued to further strengthen and diversify the Company's regulatory capital position.
Income accretion on purchased loans totaled $5.7 million in the third quarter of 2013, which consisted of $3.1 million of accretion on purchased credit-impaired ("PCI") loans and $2.5 million of accretion income on purchased non-impaired loans. PCI loan accretion represents all interest income recorded for those loans in the period while accretion income on purchased non-impaired loans represents accretion of the fair value discount on the effective yield method, which increased interest income above contractual yields. Accretion income on purchased non-impaired loans included $895 thousand of accelerated accretion in the third quarter of 2013 due to principal prepayments. Time deposit fair value amortization totaled $857 thousand, and net amortization of short-term borrowings and long-term debt totaled $18 thousand, which reduced interest expense. Acquisition accounting amortization reduced the Company's cost of interest-bearing liabilities by 0.22 percent in the third quarter of 2013.
Year-to-Date
Net interest income in the first nine months of 2013 totaled $50.3 million while net interest income totaled $27.2 million in the 2012 Successor Period and $3.6 million in the 2012 Predecessor Period. Average earning assets totaled $1.50 billion in the first nine months of 2013, which was a significant increase from $934.4 million in the 2012 Successor Period and $934.3 million in the 2012 Predecessor Period. The increase in average interest-earning assets was primarily the result of assets acquired in the ECB merger as well as organic loan growth.
Net interest margin was 4.47 percent in the first nine months of 2013, which was an increase from 4.41 percent in the 2012 Successor Period but a decline from 4.55 percent in the 2012 Predecessor Period. The increase in net interest margin from the 2012 Successor Period was primarily due to a reduction in the cost of interest-bearing liabilities which fell from 0.88 percent in the 2012 Successor Period to 0.60 percent in the first nine months of 2013. Declining yields on interest-earning assets partially offset the improvement in the cost of interest-bearing liabilities due to the origination of new loans at lower current market rates and the reinvestment of principal paydowns and proceeds from sales of securities at lower current market rates. The average yield on loans decreased from 6.04 percent in the 2012 Successor Period and 6.15 percent in the 2012 Predecessor Period to 5.96 percent in the first nine months of 2013, and the average yield on investment securities declined from 2.69 percent in the 2012 Successor Period and 2.74 percent in the 2012 Predecessor Period to 2.05 percent in the first nine months of 2013.
Income accretion on purchased loans totaled $15.4 million in the first nine months of 2013, which consisted of $10.5 million of accretion on PCI loans and $4.9 million of accretion income on purchased non-impaired loans. Time deposit fair value amortization totaled $2.3 million, which reduced interest expense, while net accretion of short-term borrowings and long-term debt totaled $45 thousand, which increased interest expense. Time deposit amortization, net of accretion on short-term borrowings and long-term debt reduced the Company's cost of interest-bearing liabilities by 0.22 percent in the first nine months of 2013. Income accretion on purchased loans totaled $10.9 million and $1.6 million in the 2012 Successor Period and 2012 Predecessor Period, respectively. Net amortization of fair value premiums on interest-bearing liabilities in the 2012 Successor Period and 2012 Predecessor Period totaled $2.0 million and $298 thousand, respectively, which reduced the Company's cost of interest-bearing liabilities by 0.39 percent and 0.45 percent, respectively.
Provision for Loan Losses and Asset Quality
3Q 2013 compared to 3Q 2012
Provision for loan losses was $1.3 million in the third quarter of 2013 compared to $1.1 million in the third quarter of 2012. Net loan charge-offs were 0.20 percent of average loans in the third quarter of 2013 compared to 0.44 percent in the third quarter of 2012. The allowance for loan and lease losses ("ALLL") and related provision were calculated separately for non-acquired loans, purchased non-impaired loans, and PCI loans. In the third quarter of 2013, the non-acquired loan provision was $253 thousand, purchased non-impaired loan provision was $670 thousand, and PCI loan provision was $357 thousand.
The following table summarizes the changes in the ALLL for each loan category in 3Q 2013 and 3Q 2012.
(Dollars in thousands) | Non-Acquired | Purchased Non-Impaired | Purchased Credit-Impaired | Total | ||||||||||||
3Q 2013: | ||||||||||||||||
Balance at July 1, 2013 | $ | 4,339 | $ | — | $ | 2,086 | $ | 6,425 | ||||||||
Net charge-offs | (1 | ) | (670 | ) | — | (671 | ) | |||||||||
Provision for loan losses | 253 | 670 | 357 | 1,280 | ||||||||||||
Balance at September 30, 2013 | $ | 4,591 | $ | — | $ | 2,443 | $ | 7,034 | ||||||||
3Q 2012: | ||||||||||||||||
Balance at July 1, 2012 | $ | 1,637 | $ | 634 | $ | 772 | $ | 3,043 | ||||||||
Net charge-offs | — | (974 | ) | — | (974 | ) | ||||||||||
Provision for loan losses | 516 | 426 | 135 | 1,077 | ||||||||||||
Balance at September 30, 2012 | $ | 2,153 | $ | 86 | $ | 907 | $ | 3,146 | ||||||||
The increase in provision for loan losses in the third quarter of 2013 compared to the prior year third quarter was primarily due to impairments on certain of the Company's PCI loan pools, which generated provision of $357 thousand in the third quarter of 2013 compared to $135 thousand in the prior year third quarter, and higher provision on purchased non-impaired loans. The higher provision on purchased loans was partially offset by lower provision on the non-acquired loan portfolio.
The ALLL was $7.0 million, or 0.52 percent of total loans as of September 30, 2013, compared to $6.4 million, or 0.49 percent of total loans as of June 30, 2013, and $3.1 million, or 0.43 percent of total loans as of September 30, 2012. Adjusted ALLL, which includes the ALLL and net acquisition accounting fair value adjustments for acquired loans, represented 3.05 percent of total loans as of September 30, 2013 compared to 3.72 percent as of June 30, 2013 and 2.86 percent as of September 30, 2012.
Nonperforming loans as a percentage of total loans was 1.40 percent as of September 30, 2013, which was an increase from 1.14 percent as of June 30, 2013 and a decline from 1.90 percent as of September 30, 2012. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 1.50 percent as of September 30, 2013, which was an increase from 1.33 percent as of June 30, 2013 and a reduction from 1.97 percent as of September 30, 2012. The decline in the nonperforming assets ratio over the past year was due to the ECB merger as well as the Company's continuing efforts to resolve legacy problem assets while maximizing value. These resolution efforts have included a combination of asset sales through various channels and successful loan workout plans.
Year-to-Date
Provision for loan losses was $4.7 million in the first nine months of 2013 while provision for loan losses totaled $4.0 million in the 2012 Successor Period and $195 thousand in the 2012 Predecessor Period. The following table summarizes the changes in ALLL for each loan category in the nine months ended September 30, 2013.
(Dollars in thousands) | Non-Acquired | Purchased Non-Impaired | Purchased Credit-Impaired | Total | ||||||||||||
Balance at January 1, 2013 | $ | 2,665 | $ | 55 | $ | 1,278 | $ | 3,998 | ||||||||
Net charge-offs | (119 | ) | (1,557 | ) | — | (1,676 | ) | |||||||||
Provision for loan losses | 2,045 | 1,502 | 1,165 | 4,712 | ||||||||||||
Balance at September 30, 2013 | $ | 4,591 | $ | — | $ | 2,443 | $ | 7,034 | ||||||||
Non-Interest Income
3Q 2013 compared to 3Q 2012
Non-interest income totaled $4.5 million in the third quarter of 2013, which was an increase from $3.3 million in the third quarter of 2012. The increase was primarily the result of higher income from the Company's government-guaranteed, small business lending program, higher income from service charges and fees on deposit accounts and higher income on bank-owned life insurance. These increases were partially offset by a reduction in mortgage banking income.
Government-guaranteed, small business lending income, which includes gains on sales of the guaranteed portion of certain SBA loans originated by the Company as well as servicing fees on previously sold SBA loans, increased by $749 thousand. The Company sells the guaranteed portion of certain SBA loans in the secondary market without recourse and recognizes gains as those loans are sold at a premium. Service charges and fees on deposit accounts increased by $989 thousand primarily due to the addition of deposit accounts acquired in the ECB merger. Mortgage banking income decreased by $817 thousand due to several factors, including an increase in long-term interest rates which significantly reduced refinancing activities as well as declining profit margins on loans sold to investors. The Company has taken certain steps to improve its mortgage banking performance in the future which included hiring a veteran mortgage production manager in the third quarter, hiring FHA and VA mortgage underwriters, which generally produce higher margin loans, and reducing headcount and cutting costs in the mortgage business.
Year-to-Date
Non-interest income totaled $20.7 million in the first nine months of 2013 while non-interest income totaled $7.2 million in the 2012 Successor Period and $657 thousand in the 2012 Predecessor Period. Non-interest income in the current year-to-date period included a one-time acquisition gain of $7.8 million related to the ECB merger. Securities gains totaled $1.2 million in the first nine months of 2013 as the Company recognized gains upon selling the majority of its municipal bonds for balance sheet management and tax purposes. Additionally, service charges and fees on deposits, mortgage banking income, government-guaranteed, small business lending income, and bank-owned life insurance income totaled $3.6 million, $1.8 million, $3.7 million, and $829 thousand, respectively, in the first nine months of 2013.
Non-Interest Expense
3Q 2013 compared to 3Q 2012
Non-interest expense totaled $18.7 million in the third quarter of 2013 which was a significant increase from $11.1 million in the third quarter of 2012. The increase in expenses was primarily due to increases in salaries and employee benefits, occupancy and equipment, data processing, and other non-interest expense categories due to the ECB merger which added employees, branch and other facilities, and equipment to the Company's expense base. The Company's operating efficiency ratio, which excludes non-recurring merger and conversion costs, improved from 77.9 percent in the third quarter of 2012 to 74.5 percent in the third quarter of 2013. Much of the improvement in the operating efficiency ratio was due to increased scale and operating leverage provided by the ECB merger combined with cost cutting measures implemented during the second and third quarters of 2013 which will continue to benefit the Company going forward. For example, full time equivalent employees for the combined Company decreased from 520 at the ECB merger date to 474 as of September 30, 2013.
Year-to-Date
Non-interest expense totaled $62.5 million in the first nine months of 2013 while non-interest expense totaled $28.9 million in the 2012 Successor Period and $3.2 million in the 2012 Predecessor Period. Expenses in the first nine months of 2013 were significantly impacted by ECB merger and system conversion costs, which totaled $14.0 million, as well as a higher general expense run rate following the ECB merger. The Company's operating efficiency ratio was 76.7 percent in the first nine months of 2013 compared to 80.9 percent in the 2012 Successor Period and 74.7 percent in the 2012 Predecessor Period.
Income Taxes
The Company’s income tax expense was $3.0 million in the third quarter of 2013 compared to $95 thousand in the third quarter of 2012. Income tax expense in the third quarter of 2013 includes a $1.2 million charge as a result of recently enacted decreases in North Carolina corporate income tax rates which are effective in future tax years. Taxable income is calculated using pre-tax net income adjusted for non-taxable municipal investment income, bank-owned life insurance income, and non-deductible merger costs. The Company’s income tax benefit was $206 thousand in the first nine months of 2013. The income tax benefit was $160 thousand in the 2012 Successor Period, and income tax expense was $270 thousand in the 2012 Predecessor Period.
Linked Quarter Comparison
Net income was $1.5 million in the third quarter of 2013 compared to $3.3 million in the second quarter of 2013. After preferred stock dividends and accretion, net income available to common stockholders was $776 thousand, or $0.02 per common share, in the third quarter of 2013 compared to $2.6 million, or $0.06 per common share, in the second quarter of 2013. Net operating earnings, which exclude securities gains, the ECB acquisition gain, merger and conversion costs, and a non-recurring income tax charge, improved to $3.0 million in the third quarter of 2013 from $2.8 million in the second quarter of 2013 as the Company cut costs and continued to improve its operating efficiency ratio. Similarly, pre-tax, pre-provision earnings increased to $6.2 million in the third quarter of 2013 from $6.0 million in the second quarter of 2013.
Net interest income was $19.9 million in the third quarter of 2013 compared to $20.4 million in the second quarter of 2013. The decrease in net interest income was the result of lower yields on loans and investments as well as higher costs on long-term debt due to the subordinated notes issued in the current quarter. Partially offsetting the reduction in yields was an increase in earning assets from organic business activity. Average earning assets increased from $1.75 billion in the second quarter of 2013 to $1.80 billion in the third quarter of 2013. Over this period, average loan balances increased by $45.1 million, while average investment securities balances declined by $12.7 million.
The Company's net interest margin declined from 4.67 percent in the second quarter of 2013 to 4.39 percent in the third quarter of 2013. The lower net interest margin was due to higher costs on long-term debt and lower yields on earning assets. Loan yields declined as a result of lower prevailing market loan rates on new loan originations, and yields on investments also declined as the Company reinvested principal paydowns and proceeds from sales at lower current market rates. The cost of interest-bearing liabilities increased from 0.51 percent in the second quarter of 2013 to 0.59 percent in the third quarter of 2013, which primarily reflected a higher cost of long-term debt from the issuance of $38.05 million in 10-year subordinated notes at a fixed rate of 7.625 percent. Core net interest margin, which excludes the impact of acquisition accounting, was 3.46 percent in the third quarter of 2013 compared to 3.64 percent in the second quarter of 2013.
Provision for loan losses was $1.3 million in the third quarter of 2013 compared to $1.5 million in the second quarter of 2013. The reduction in provision for loan losses in the third quarter of 2013 was primarily due to a $1.3 million reduction in provision for non-acquired loans, which was partially offset by a $1.1 million increase in provision on purchased loans. Net loan charge-offs were 0.20 percent of average loans in the third quarter of 2013 compared to 0.18 percent in the second quarter of 2013.
Non-interest income totaled $4.5 million in the third quarter of 2013, which was a significant decline from $12.7 million in the second quarter of 2013. Non-interest income in the second quarter of 2013 included a one-time acquisition gain of $7.8 million related to the ECB merger, which reflected the amount by which the fair value of acquired net assets exceeded the combined purchase price and fair value of non-controlling interests. Core non-interest income, which excludes the acquisition gain, declined by $318 thousand during this period. Government-guaranteed, small business lending income increased by $467 thousand due to increased production and loan sales while mortgage banking income declined by $786 thousand due to several factors, including an increase in long-term interest rates which significantly reduced refinancing activities as well as declining profit margins on loans sold to investors.
Non-interest expense totaled $18.7 million in the third quarter of 2013, which was a significant decline from $31.1 million in the second quarter of 2013. Lower expenses on a linked quarter basis were partially due to an $11.5 million decrease in merger and conversion-related costs. Core non-interest expense, which excludes merger and conversion-related costs, declined $974 thousand during this period as the Company cut costs, primarily personnel related, after the ECB merger and continued to improve its operating efficiency. The Company's operating efficiency ratio, which excludes merger and conversion costs, improved from 75.9 percent in the second quarter of 2013 to 74.5 percent in the third quarter of 2013.
****
VantageSouth Bank is a state-chartered bank operating forty-six banking offices in central and eastern North Carolina. The common stock of VantageSouth Bancshares, Inc. is listed on the NYSE MKT, LLC under the symbol VSB. Investors can access additional corporate information, product descriptions and online services through VantageSouth Bank’s website at www.VantageSouth.com.
Conference Call
VSB will conduct a conference call at 10:00 a.m. Eastern Time today to discuss this press release. The conference call will be broadcast live over the Internet and can be accessed by any interested party at http://www.VantageSouth.com (under the Investor Relations section). A telephone playback of the conference call will be available approximately one hour after the completion of the call by dialing (800) 633-8284 and entering passcode 21682075.
Non-GAAP Financial Measures
Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company's management uses these non-GAAP financial measures, including: (i) net operating earnings (loss); (ii) pre-tax, pre-provision operating earnings; (iii) operating non-interest income, (iv) operating non-interest expense, (v) operating efficiency ratio, (vi) adjusted allowance for loan losses to loans; and (vii) tangible common equity, in their analysis of the Company's performance. Net operating earnings (loss) excludes the following from net income (loss): securities gains, a one-time acquisition gain, merger and conversion costs, income tax expense from the change in future state tax rates, and the income tax effect of adjustments. Pre-tax, pre-provision operating earnings excludes the following from net income (loss): provision for loan losses, income tax expense (benefit), securities gains, a one-time acquisition gain, and merger and conversion costs. Operating non-interest income excludes a one-time acquisition gain from non-interest income. Operating non-interest expense excludes merger and conversion costs from non-interest expense. The operating efficiency ratio excludes a one-time acquisition gain and merger and conversion costs from the efficiency ratio. Adjusted allowance for loan losses adds net acquisition accounting fair value discounts to the allowance for loan losses. Tangible common equity excludes preferred stock as well as goodwill and other intangible assets, net, from total stockholders' equity.
Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance
or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.
Forward-Looking Statements
Information in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, risks associated with the ownership by Piedmont of a majority of the Company’s voting power, including the possibility of the interests of Piedmont differing from other Company stockholders or any change in management, strategic direction, business plan, or operations, the ability of our management to successfully integrate the Company’s business and execute its business plan across several geographic areas, local economic conditions affecting retail and commercial real estate, disruptions in the credit markets, changes in interest rates, adverse developments in the real estate market affecting the value and marketability of collateral securing loans made by the Bank, the failure of assumptions underlying loan loss and other reserves, competition, our ability to successfully integrate any businesses that we acquire, and the risk of new and changing regulation. Additional factors that could cause actual results to differ materially are discussed in the Company’s filings with the Securities and Exchange Commission, including without limitation its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K. The forward-looking statements in this press release speak only as of the date of the press release, and the Company does not assume any obligation to update such forward-looking statements.
QUARTERLY RESULTS OF OPERATIONS
Three Months Ended | |||||||||||||||||||
(Dollars in thousands, except per share data) | September 30, 2013 | June 30, 2013 | March 31, 2013 | December 31, 2012 | September 30, 2012 | ||||||||||||||
Interest income | |||||||||||||||||||
Loans | $ | 20,348 | $ | 20,376 | $ | 10,697 | $ | 10,898 | $ | 10,810 | |||||||||
Investment securities | 1,846 | 2,005 | 815 | 855 | 1,036 | ||||||||||||||
Federal funds sold and interest-earning deposits | 33 | 21 | 16 | 20 | 16 | ||||||||||||||
Total interest income | 22,227 | 22,402 | 11,528 | 11,773 | 11,862 | ||||||||||||||
Interest expense | |||||||||||||||||||
Deposits | 1,621 | 1,619 | 1,302 | 1,309 | 1,320 | ||||||||||||||
Short-term borrowings | 46 | 42 | 12 | 10 | 3 | ||||||||||||||
Long-term debt | 654 | 313 | 270 | 279 | 274 | ||||||||||||||
Total interest expense | 2,321 | 1,974 | 1,584 | 1,598 | 1,597 | ||||||||||||||
Net interest income | 19,906 | 20,428 | 9,944 | 10,175 | 10,265 | ||||||||||||||
Provision for loan losses | 1,280 | 1,492 | 1,940 | 1,167 | 1,077 | ||||||||||||||
Net interest income after provision for loan losses | 18,626 | 18,936 | 8,004 | 9,008 | 9,188 | ||||||||||||||
Non-interest income | |||||||||||||||||||
Service charges and fees on deposit accounts | 1,512 | 1,525 | 515 | 508 | 523 | ||||||||||||||
Mortgage banking | 310 | 1,096 | 391 | 771 | 1,127 | ||||||||||||||
Government-guaranteed lending | 1,525 | 1,058 | 1,119 | 1,718 | 776 | ||||||||||||||
Bank-owned life insurance | 324 | 310 | 195 | 208 | 215 | ||||||||||||||
Gain on sales of available for sale securities | — | 123 | 1,092 | 603 | 483 | ||||||||||||||
Gain on acquisition | — | 7,809 | — | — | — | ||||||||||||||
Other | 866 | 743 | 150 | 325 | 208 | ||||||||||||||
Total non-interest income | 4,537 | 12,664 | 3,462 | 4,133 | 3,332 | ||||||||||||||
Non-interest expense | |||||||||||||||||||
Salaries and employee benefits | 10,034 | 11,009 | 5,991 | 6,588 | 5,648 | ||||||||||||||
Occupancy and equipment | 2,497 | 2,408 | 1,547 | 1,321 | 1,385 | ||||||||||||||
Data processing | 1,105 | 1,075 | 644 | 698 | 644 | ||||||||||||||
FDIC insurance premiums | 423 | 400 | 227 | 216 | 205 | ||||||||||||||
Professional services | 598 | 914 | 497 | 684 | 800 | ||||||||||||||
Foreclosed asset expenses | 201 | 79 | 183 | 662 | 251 | ||||||||||||||
Other loan-related expense | 909 | 792 | 461 | 352 | 419 | ||||||||||||||
Merger and conversion costs | 477 | 11,961 | 1,601 | 2,114 | 547 | ||||||||||||||
Other | 2,438 | 2,502 | 1,516 | 1,719 | 1,241 | ||||||||||||||
Total non-interest expense | 18,682 | 31,140 | 12,667 | 14,354 | 11,140 | ||||||||||||||
Income (loss) before income taxes | 4,481 | 460 | (1,201 | ) | (1,213 | ) | 1,380 | ||||||||||||
Income tax expense (benefit) | 2,997 | (2,808 | ) | (395 | ) | (3,326 | ) | 95 | |||||||||||
Net income (loss) | 1,484 | 3,268 | (806 | ) | 2,113 | 1,285 | |||||||||||||
Dividends and accretion on preferred stock | 708 | 705 | 369 | 368 | 367 | ||||||||||||||
Net income available (loss attributable) to common stockholders | $ | 776 | $ | 2,563 | $ | (1,175 | ) | $ | 1,745 | $ | 918 | ||||||||
NET INCOME (LOSS) PER COMMON SHARE | |||||||||||||||||||
Basic | $ | 0.02 | $ | 0.06 | $ | (0.03 | ) | $ | 0.05 | $ | 0.03 | ||||||||
Diluted | $ | 0.02 | $ | 0.06 | $ | (0.03 | ) | $ | 0.05 | $ | 0.03 | ||||||||
WEIGHTED AVERAGE COMMON SHARES | |||||||||||||||||||
Weighted average common shares outstanding - basic | 46,021,308 | 45,916,707 | 35,758,033 | 35,728,359 | 35,725,915 | ||||||||||||||
Weighted average common shares outstanding - diluted | 46,213,216 | 45,935,330 | 35,758,033 | 35,806,191 | 35,924,425 | ||||||||||||||
Three Months Ended | |||||||||||||||||||
(Dollars in thousands, except per share data) | September 30, 2013 | June 30, 2013 | March 31, 2013 | December 31, 2012 | September 30, 2012 | ||||||||||||||
PERFORMANCE RATIOS | |||||||||||||||||||
Return on average assets | 0.29 | % | 0.75 | % | (0.30 | )% | 0.79 | % | 0.49 | % | |||||||||
Return on average equity | 2.55 | % | 6.27 | % | (1.88 | )% | 4.84 | % | 2.98 | % | |||||||||
Yield on earning assets, tax equivalent | 4.90 | % | 5.12 | % | 4.91 | % | 5.05 | % | 5.18 | % | |||||||||
Cost of interest-bearing liabilities | 0.59 | % | 0.51 | % | 0.76 | % | 0.80 | % | 0.83 | % | |||||||||
Net interest margin, tax equivalent | 4.39 | % | 4.67 | % | 4.24 | % | 4.37 | % | 4.49 | % | |||||||||
Efficiency ratio | 76.43 | % | 94.10 | % | 94.49 | % | 100.32 | % | 81.93 | % | |||||||||
Net loan charge-offs | 0.20 | % | 0.18 | % | 0.21 | % | 0.17 | % | 0.44 | % | |||||||||
Reconciliation of GAAP to Non-GAAP | |||||||||||||||||||
OPERATING EARNINGS | |||||||||||||||||||
Net income (loss) (GAAP) | $ | 1,484 | $ | 3,268 | $ | (806 | ) | $ | 2,113 | $ | 1,285 | ||||||||
Securities gains | — | (123 | ) | (1,092 | ) | (603 | ) | (483 | ) | ||||||||||
Gain on acquisition | — | (7,809 | ) | — | — | — | |||||||||||||
Merger and conversion costs | 477 | 11,961 | 1,601 | 2,114 | 547 | ||||||||||||||
Income tax effect of adjustments | (172 | ) | (4,484 | ) | (125 | ) | (89 | ) | 33 | ||||||||||
Deferred tax asset revaluation from reduction in state income tax rates | 1,218 | — | — | — | — | ||||||||||||||
Deferred tax asset valuation allowance reversal | — | — | — | (3,300 | ) | — | |||||||||||||
Net operating earnings (loss) (Non-GAAP) | 3,007 | 2,813 | (422 | ) | 235 | 1,382 | |||||||||||||
Dividends and accretion on preferred stock | 708 | 705 | 369 | 368 | 367 | ||||||||||||||
Net operating earnings available (loss attributable) to common stockholders (Non-GAAP) | $ | 2,299 | $ | 2,108 | $ | (791 | ) | $ | (133 | ) | $ | 1,015 | |||||||
OPERATING EARNINGS (LOSS) PER COMMON SHARE | |||||||||||||||||||
Basic (Non-GAAP) | $ | 0.05 | $ | 0.05 | $ | (0.02 | ) | $ | — | $ | 0.03 | ||||||||
Diluted (Non-GAAP) | $ | 0.05 | $ | 0.05 | $ | (0.02 | ) | $ | — | $ | 0.03 | ||||||||
PRE-TAX, PRE-PROVISION OPERATING EARNINGS | |||||||||||||||||||
Net income (loss) (GAAP) | $ | 1,484 | $ | 3,268 | $ | (806 | ) | $ | 2,113 | $ | 1,285 | ||||||||
Provision for loan losses | 1,280 | 1,492 | 1,940 | 1,167 | 1,077 | ||||||||||||||
Income tax expense (benefit) | 2,997 | (2,808 | ) | (395 | ) | (3,326 | ) | 95 | |||||||||||
Pre-tax, pre-provision income (loss) | 5,761 | 1,952 | 739 | (46 | ) | 2,457 | |||||||||||||
Securities gains | — | (123 | ) | (1,092 | ) | (603 | ) | (483 | ) | ||||||||||
Gain on acquisition | — | (7,809 | ) | — | — | — | |||||||||||||
Merger and conversion costs | 477 | 11,961 | 1,601 | 2,114 | 547 | ||||||||||||||
Pre-tax, pre-provision operating earnings (Non-GAAP) | $ | 6,238 | $ | 5,981 | $ | 1,248 | $ | 1,465 | $ | 2,521 | |||||||||
OPERATING NON-INTEREST INCOME | |||||||||||||||||||
Non-interest income (GAAP) | $ | 4,537 | $ | 12,664 | $ | 3,462 | $ | 4,133 | $ | 3,332 | |||||||||
Gain on acquisition | — | (7,809 | ) | — | — | — | |||||||||||||
Operating non-interest income (Non-GAAP) | $ | 4,537 | $ | 4,855 | $ | 3,462 | $ | 4,133 | $ | 3,332 | |||||||||
OPERATING NON-INTEREST EXPENSE | |||||||||||||||||||
Non-interest expense (GAAP) | $ | 18,682 | $ | 31,140 | $ | 12,667 | $ | 14,354 | $ | 11,140 | |||||||||
Merger and conversion costs | (477 | ) | (11,961 | ) | (1,601 | ) | (2,114 | ) | (547 | ) | |||||||||
Operating non-interest expense (Non-GAAP) | $ | 18,205 | $ | 19,179 | $ | 11,066 | $ | 12,240 | $ | 10,593 | |||||||||
OPERATING EFFICIENCY RATIO | |||||||||||||||||||
Efficiency ratio (GAAP) | 76.43 | % | 94.10 | % | 94.49 | % | 100.32 | % | 81.93 | % | |||||||||
Effect to adjust for gain on acquisition | — | % | 17.90 | % | — | % | — | % | — | % | |||||||||
Effect to adjust for merger and conversion costs | (1.95 | )% | (36.14 | )% | (11.94 | )% | (14.77 | )% | (4.02 | )% | |||||||||
Operating efficiency ratio (Non-GAAP) | 74.48 | % | 75.86 | % | 82.55 | % | 85.55 | % | 77.91 | % | |||||||||
YEAR-TO-DATE RESULTS OF OPERATIONS
Successor Company | Predecessor Company | |||||||||||
(Dollars in thousands, except per share data) | Nine Months Ended September 30, 2013 | Period from February 1 to September 30, 2012 | Period from January 1 to January 31, 2012 | |||||||||
Interest income | ||||||||||||
Loans | $ | 51,421 | $ | 28,819 | $ | 3,807 | ||||||
Investment securities | 4,666 | 2,862 | 395 | |||||||||
Federal funds sold and interest-earning deposits | 70 | 65 | 4 | |||||||||
Total interest income | 56,157 | 31,746 | 4,206 | |||||||||
Interest expense | ||||||||||||
Deposits | 4,542 | 3,777 | 530 | |||||||||
Short-term borrowings | 100 | 9 | — | |||||||||
Long-term debt | 1,237 | 786 | 103 | |||||||||
Total interest expense | 5,879 | 4,572 | 633 | |||||||||
Net interest income | 50,278 | 27,174 | 3,573 | |||||||||
Provision for loan losses | 4,712 | 3,991 | 195 | |||||||||
Net interest income after provision for loan losses | 45,566 | 23,183 | 3,378 | |||||||||
Non-interest income | ||||||||||||
Service charges and fees on deposit accounts | 3,552 | 1,429 | 194 | |||||||||
Mortgage banking | 1,797 | 2,393 | 225 | |||||||||
Government-guaranteed lending | 3,702 | 1,342 | 98 | |||||||||
Bank-owned life insurance | 829 | 552 | 70 | |||||||||
Gain on sales of available for sale securities | 1,215 | 648 | — | |||||||||
Gain on acquisition | 7,809 | — | — | |||||||||
Other | 1,759 | 830 | 70 | |||||||||
Total non-interest income | 20,663 | 7,194 | 657 | |||||||||
Non-interest expense | ||||||||||||
Salaries and employee benefits | 27,034 | 14,661 | 1,737 | |||||||||
Occupancy and equipment | 6,452 | 3,547 | 396 | |||||||||
Data processing | 2,824 | 1,683 | 212 | |||||||||
FDIC insurance premiums | 1,050 | 711 | 141 | |||||||||
Professional services | 2,009 | 1,925 | 144 | |||||||||
Foreclosed asset expenses | 463 | 641 | 11 | |||||||||
Other loan-related expense | 2,162 | 1,171 | 162 | |||||||||
Merger and conversion costs | 14,039 | 1,050 | 78 | |||||||||
Other | 6,456 | 3,467 | 355 | |||||||||
Total non-interest expense | 62,489 | 28,856 | 3,236 | |||||||||
Income before income taxes | 3,740 | 1,521 | 799 | |||||||||
Income tax expense (benefit) | (206 | ) | (160 | ) | 270 | |||||||
Net income | 3,946 | 1,681 | 529 | |||||||||
Dividends and accretion on preferred stock | 1,782 | 978 | 122 | |||||||||
Net income available to common stockholders | $ | 2,164 | $ | 703 | $ | 407 | ||||||
NET INCOME PER COMMON SHARE | ||||||||||||
Basic | $ | 0.05 | $ | 0.02 | $ | 0.01 | ||||||
Diluted | $ | 0.05 | $ | 0.02 | $ | 0.01 | ||||||
WEIGHTED AVERAGE COMMON SHARES | ||||||||||||
Weighted average common shares outstanding - basic | 42,602,944 | 35,723,057 | 35,511,770 | |||||||||
Weighted average common shares outstanding - diluted | 42,755,223 | 35,878,990 | 35,534,050 | |||||||||
Successor Company | Predecessor Company | |||||||||||
(Dollars in thousands, except per share data) | Nine Months Ended September 30, 2013 | Period from February 1 to September 30, 2012 | Period from January 1 to January 31, 2012 | |||||||||
PERFORMANCE RATIOS | ||||||||||||
Return on average assets | 0.31% | 0.24% | 0.58% | |||||||||
Return on average equity | 2.47% | 1.48% | 3.67% | |||||||||
Yield on earning assets, tax equivalent | 5.00% | 5.15% | 5.35% | |||||||||
Cost of interest-bearing liabilities | 0.60% | 0.88% | 0.95% | |||||||||
Net interest margin, tax equivalent | 4.47% | 4.41% | 4.55% | |||||||||
Efficiency ratio | 88.09% | 83.96% | 76.50% | |||||||||
Net loan charge-offs | 0.19% | 0.24% | —% | |||||||||
Reconciliation of GAAP to Non-GAAP | ||||||||||||
OPERATING EARNINGS | ||||||||||||
Net income (GAAP) | $ | 3,946 | $ | 1,681 | $ | 529 | ||||||
Securities gains | (1,215 | ) | (648 | ) | — | |||||||
Gain on acquisition | (7,809 | ) | — | — | ||||||||
Merger and conversion costs | 14,039 | 1,050 | 78 | |||||||||
Income tax effect of adjustments | (4,793 | ) | (153 | ) | (30 | ) | ||||||
Deferred tax asset revaluation from reduction in state income tax rates | 1,218 | — | — | |||||||||
Net operating earnings (Non-GAAP) | 5,386 | 1,930 | 577 | |||||||||
Dividends and accretion on preferred stock | 1,782 | 978 | 122 | |||||||||
Net operating earnings available to common stockholders (Non-GAAP) | $ | 3,604 | $ | 952 | $ | 455 | ||||||
OPERATING EARNINGS PER COMMON SHARE | ||||||||||||
Basic (Non-GAAP) | $ | 0.08 | $ | 0.03 | $ | 0.01 | ||||||
Diluted (Non-GAAP) | $ | 0.08 | $ | 0.03 | $ | 0.01 | ||||||
PRE-TAX, PRE-PROVISION OPERATING EARNINGS | ||||||||||||
Net income (GAAP) | $ | 3,946 | $ | 1,681 | $ | 529 | ||||||
Provision for loan losses | 4,712 | 3,991 | 195 | |||||||||
Income tax expense (benefit) | (206 | ) | (160 | ) | 270 | |||||||
Pre-tax, pre-provision income | 8,452 | 5,512 | 994 | |||||||||
Securities gains | (1,215 | ) | (648 | ) | — | |||||||
Gain on acquisition | (7,809 | ) | — | — | ||||||||
Merger and conversion costs | 14,039 | 1,050 | 78 | |||||||||
Pre-tax, pre-provision operating earnings (Non-GAAP) | $ | 13,467 | $ | 5,914 | $ | 1,072 | ||||||
OPERATING NON-INTEREST INCOME | ||||||||||||
Non-interest income (GAAP) | $ | 20,663 | $ | 7,194 | $ | 657 | ||||||
Gain on acquisition | (7,809 | ) | — | — | ||||||||
Operating non-interest income (Non-GAAP) | $ | 12,854 | $ | 7,194 | $ | 657 | ||||||
OPERATING NON-INTEREST EXPENSE | ||||||||||||
Non-interest expense (GAAP) | $ | 62,489 | $ | 28,856 | $ | 3,236 | ||||||
Merger and conversion costs | (14,039 | ) | (1,050 | ) | (78 | ) | ||||||
Operating non-interest expense (Non-GAAP) | $ | 48,450 | $ | 27,806 | $ | 3,158 | ||||||
OPERATING EFFICIENCY RATIO | ||||||||||||
Efficiency ratio (GAAP) | 88.09 | % | 83.96 | % | 76.50 | % | ||||||
Effect to adjust for gain on acquisition | 10.90 | % | — | — | ||||||||
Effect to adjust for merger and conversion costs | (22.24 | )% | (3.06 | )% | (1.84 | )% | ||||||
Operating efficiency ratio (Non-GAAP) | 76.75 | % | 80.90 | % | 74.66 | % | ||||||
QUARTERLY BALANCE SHEETS
Ending Balances | |||||||||||||||||||
(Dollars in thousands, except per share data) | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||
2013 | 2013 | 2013 | 2012 | 2012 | |||||||||||||||
Assets | |||||||||||||||||||
Cash and due from banks | $ | 37,681 | $ | 29,264 | $ | 11,020 | $ | 15,735 | $ | 13,187 | |||||||||
Interest-earning deposits with banks | 47,954 | 57,689 | 4,092 | 7,978 | 3,821 | ||||||||||||||
Federal funds sold | — | 855 | 29,125 | 26,750 | 20,550 | ||||||||||||||
Investment securities available for sale | 403,900 | 376,536 | 154,634 | 136,311 | 153,742 | ||||||||||||||
Investment securities held to maturity | 208 | 200 | 194 | 180 | 166 | ||||||||||||||
Loans held for sale | 7,349 | 21,142 | 8,671 | 16,439 | 8,239 | ||||||||||||||
Loans | 1,353,360 | 1,323,981 | 794,623 | 763,416 | 739,028 | ||||||||||||||
Allowance for loan losses | (7,034 | ) | (6,425 | ) | (5,527 | ) | (3,998 | ) | (3,146 | ) | |||||||||
Net loans | 1,346,326 | 1,317,556 | 789,096 | 759,418 | 735,882 | ||||||||||||||
Federal Home Loan Bank stock | 8,029 | 6,904 | 2,382 | 2,307 | 2,172 | ||||||||||||||
Premises and equipment, net | 42,306 | 43,052 | 17,885 | 17,351 | 17,068 | ||||||||||||||
Bank-owned life insurance | 32,896 | 32,642 | 20,138 | 19,976 | 19,800 | ||||||||||||||
Foreclosed assets | 11,806 | 11,632 | 4,752 | 5,837 | 6,697 | ||||||||||||||
Deferred tax asset, net | 55,692 | 58,831 | 37,525 | 36,659 | 33,162 | ||||||||||||||
Goodwill | 26,254 | 26,254 | 26,254 | 26,254 | 26,254 | ||||||||||||||
Other intangible assets, net | 6,113 | 6,343 | 2,266 | 2,376 | 2,487 | ||||||||||||||
Accrued interest receivable and other assets | 19,557 | 20,088 | 8,008 | 11,654 | 10,842 | ||||||||||||||
Total assets | $ | 2,046,071 | $ | 2,008,988 | $ | 1,116,042 | $ | 1,085,225 | $ | 1,054,069 | |||||||||
Liabilities | |||||||||||||||||||
Deposits: | |||||||||||||||||||
Non-interest demand | $ | 208,736 | $ | 197,229 | $ | 73,756 | $ | 71,613 | $ | 111,725 | |||||||||
Interest-bearing demand | 339,973 | 344,515 | 188,463 | 188,843 | 139,768 | ||||||||||||||
Money market and savings | 458,214 | 482,672 | 270,994 | 260,966 | 241,324 | ||||||||||||||
Time | 615,616 | 630,283 | 370,710 | 351,800 | 360,172 | ||||||||||||||
Total deposits | 1,622,539 | 1,654,699 | 903,923 | 873,222 | 852,989 | ||||||||||||||
Short-term borrowings | 100,500 | 68,002 | 6,000 | 7,500 | — | ||||||||||||||
Long-term debt | 75,880 | 45,341 | 28,902 | 19,864 | 24,326 | ||||||||||||||
Accrued interest payable and other liabilities | 16,143 | 11,505 | 4,818 | 10,698 | 5,243 | ||||||||||||||
Total liabilities | 1,815,062 | 1,779,547 | 943,643 | 911,284 | 882,558 | ||||||||||||||
Stockholders' equity | |||||||||||||||||||
Preferred stock, series A, no par value | 24,833 | 24,774 | 24,715 | 24,657 | 24,601 | ||||||||||||||
Preferred stock, series B, no par value | 17,776 | 17,663 | — | — | — | ||||||||||||||
Common stock, $0.001 par value | 46 | 46 | 36 | 36 | 36 | ||||||||||||||
Common stock warrant | 1,457 | 1,457 | 1,325 | 1,325 | 1,325 | ||||||||||||||
Additional paid-in capital | 188,658 | 188,408 | 147,738 | 147,510 | 146,655 | ||||||||||||||
Retained earnings (accumulated deficit) | 760 | (16 | ) | (2,578 | ) | (1,405 | ) | (3,200 | ) | ||||||||||
Accumulated other comprehensive income (loss) | (2,521 | ) | (2,891 | ) | 1,163 | 1,818 | 2,094 | ||||||||||||
Total stockholders' equity | 231,009 | 229,441 | 172,399 | 173,941 | 171,511 | ||||||||||||||
Total liabilities and stockholders' equity | $ | 2,046,071 | $ | 2,008,988 | $ | 1,116,042 | $ | 1,085,225 | $ | 1,054,069 | |||||||||
Supplemental information on components of accumulated other comprehensive income (loss): | |||||||||||||||||||
Investment securities available for sale, net of tax | $ | (4,430 | ) | $ | (5,115 | ) | $ | 1,374 | $ | 2,085 | $ | 2,367 | |||||||
Cash flow hedges, net of tax | 1,909 | 2,224 | (211 | ) | (267 | ) | (273 | ) | |||||||||||
Total accumulated other comprehensive income (loss) | $ | (2,521 | ) | $ | (2,891 | ) | $ | 1,163 | $ | 1,818 | $ | 2,094 | |||||||
Ending Balances | |||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
(Dollars in thousands, except per share data) | 2013 | 2013 | 2013 | 2012 | 2012 | ||||||||||||||
COMMON SHARE DATA | |||||||||||||||||||
Book value per common share | $ | 4.09 | $ | 4.06 | $ | 4.13 | $ | 4.18 | $ | 4.11 | |||||||||
Tangible book value per common share | $ | 3.39 | $ | 3.35 | $ | 3.33 | $ | 3.37 | $ | 3.31 | |||||||||
Ending shares outstanding | 46,037,808 | 46,038,808 | 35,779,127 | 35,754,247 | 35,747,576 | ||||||||||||||
CAPITAL RATIOS | |||||||||||||||||||
Tangible equity to tangible assets | 9.86 | % | 9.96 | % | 13.23 | % | 13.75 | % | 13.92 | % | |||||||||
Tangible common equity to tangible assets | 7.75 | % | 7.81 | % | 10.96 | % | 11.42 | % | 11.52 | % | |||||||||
VantageSouth Bank: | |||||||||||||||||||
Tier 1 leverage ratio | 9.95 | % | 8.26 | % | 11.08 | % | 11.45 | % | 9.89 | % | |||||||||
Tier 1 risk-based capital ratio | 11.78 | % | 10.22 | % | 13.13 | % | 13.66 | % | 12.82 | % | |||||||||
Total risk-based capital ratio | 12.66 | % | 11.11 | % | 14.58 | % | 14.96 | % | 13.28 | % | |||||||||
Crescent State Bank: | |||||||||||||||||||
Tier 1 leverage ratio | N/A | N/A | N/A | N/A | 12.21 | % | |||||||||||||
Tier 1 risk-based capital ratio | N/A | N/A | N/A | N/A | 13.81 | % | |||||||||||||
Total risk-based capital ratio | N/A | N/A | N/A | N/A | 15.20 | % | |||||||||||||
ASSET QUALITY DATA | |||||||||||||||||||
Nonperforming loans | $ | 18,911 | $ | 15,116 | $ | 11,792 | $ | 12,770 | $ | 14,023 | |||||||||
Foreclosed assets | 11,806 | 11,632 | 4,752 | 5,837 | 6,697 | ||||||||||||||
Total nonperforming assets | $ | 30,717 | $ | 26,748 | $ | 16,544 | $ | 18,607 | $ | 20,720 | |||||||||
Allowance for loan losses to loans | 0.52 | % | 0.49 | % | 0.70 | % | 0.52 | % | 0.43 | % | |||||||||
Nonperforming loans to total loans | 1.40 | % | 1.14 | % | 1.48 | % | 1.67 | % | 1.90 | % | |||||||||
Nonperforming assets to total assets | 1.50 | % | 1.33 | % | 1.48 | % | 1.71 | % | 1.97 | % | |||||||||
Restructured loans not included in categories above | $ | 542 | $ | 550 | $ | 558 | $ | 104 | $ | — | |||||||||
Reconciliation of GAAP to Non-GAAP | |||||||||||||||||||
ADJUSTED ALLOWANCE FOR LOAN LOSSES | |||||||||||||||||||
Allowance for loan losses (GAAP) | $ | 7,034 | $ | 6,425 | $ | 5,527 | $ | 3,998 | $ | 3,146 | |||||||||
Net acquisition accounting fair value discounts to loans | 34,264 | 42,783 | 14,688 | 16,633 | 17,962 | ||||||||||||||
Adjusted allowance for loan losses | 41,298 | 49,208 | 20,215 | 20,631 | 21,108 | ||||||||||||||
Loans | $ | 1,353,360 | $ | 1,323,981 | $ | 794,623 | $ | 763,416 | $ | 739,028 | |||||||||
Adjusted allowance for loan losses to loans (Non-GAAP) | 3.05 | % | 3.72 | % | 2.54 | % | 2.70 | % | 2.86 | % | |||||||||
TANGIBLE COMMON EQUITY | |||||||||||||||||||
Total stockholders' equity (GAAP) | $ | 231,009 | $ | 229,441 | $ | 172,399 | $ | 173,941 | $ | 171,511 | |||||||||
Less: Preferred stock | 42,609 | 42,437 | 24,715 | 24,657 | 24,601 | ||||||||||||||
Less: Goodwill and other intangible assets, net | 32,367 | 32,597 | 28,520 | 28,630 | 28,741 | ||||||||||||||
Tangible common equity (Non-GAAP) | $ | 156,033 | $ | 154,407 | $ | 119,164 | $ | 120,654 | $ | 118,169 | |||||||||
QUARTERLY NET INTEREST MARGIN ANALYSIS
Three months ended September 30, 2013 | Three months ended June 30, 2013 | Three months ended September 30, 2012 | ||||||||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest* | Yield/Cost* | Average Balance | Interest* | Yield/Cost* | Average Balance | Interest* | Yield/Cost* | |||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Loans | $ | 1,361,340 | $ | 20,348 | 5.93 | % | $ | 1,316,237 | $ | 20,376 | 6.21 | % | $ | 722,177 | $ | 10,810 | 5.95 | % | ||||||||||||||
Investment securities | 381,684 | 1,849 | 1.92 | 394,398 | 2,008 | 2.04 | 163,655 | 1,115 | 2.71 | |||||||||||||||||||||||
Federal funds and other | 55,984 | 33 | 0.23 | 43,719 | 21 | 0.19 | 30,844 | 16 | 0.21 | |||||||||||||||||||||||
Total interest-earning assets | 1,799,008 | 22,230 | 4.90 | % | 1,754,354 | 22,405 | 5.12 | % | 916,676 | 11,941 | 5.18 | % | ||||||||||||||||||||
Non-interest-earning assets | 220,220 | 225,912 | 132,347 | |||||||||||||||||||||||||||||
Total assets | $ | 2,019,228 | $ | 1,980,266 | $ | 1,049,023 | ||||||||||||||||||||||||||
Liabilities and Equity | ||||||||||||||||||||||||||||||||
Interest-bearing demand | $ | 335,653 | 156 | 0.18 | % | $ | 333,215 | 183 | 0.22 | % | $ | 135,786 | $ | 102 | 0.30 | % | ||||||||||||||||
Money market and savings | 475,985 | 332 | 0.28 | 484,685 | 346 | 0.29 | 244,619 | 357 | 0.58 | |||||||||||||||||||||||
Time | 627,874 | 1,133 | 0.72 | 620,441 | 1,090 | 0.70 | 362,733 | 862 | 0.95 | |||||||||||||||||||||||
Total interest-bearing deposits | 1,439,512 | 1,621 | 0.45 | 1,438,341 | 1,619 | 0.45 | 743,138 | 1,321 | 0.71 | |||||||||||||||||||||||
Short-term borrowings | 72,068 | 46 | 0.25 | 58,292 | 42 | 0.29 | 1,500 | 3 | 0.80 | |||||||||||||||||||||||
Long-term debt | 62,347 | 654 | 4.16 | 45,465 | 313 | 2.76 | 22,802 | 274 | 4.78 | |||||||||||||||||||||||
Total interest-bearing liabilities | 1,573,927 | 2,321 | 0.59 | % | 1,542,098 | 1,974 | 0.51 | % | 767,440 | 1,598 | 0.83 | % | ||||||||||||||||||||
Noninterest-bearing deposits | 203,427 | 192,459 | 103,535 | |||||||||||||||||||||||||||||
Other liabilities | 10,714 | 8,846 | 6,457 | |||||||||||||||||||||||||||||
Total liabilities | 1,788,068 | 1,743,403 | 877,432 | |||||||||||||||||||||||||||||
Stockholders’ equity | 231,160 | 236,863 | 171,591 | |||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,019,228 | $ | 1,980,266 | $ | 1,049,023 | ||||||||||||||||||||||||||
Net interest income, taxable equivalent | $ | 19,909 | $ | 20,431 | $ | 10,343 | ||||||||||||||||||||||||||
Interest rate spread | 4.31 | % | 4.61 | % | 4.35 | % | ||||||||||||||||||||||||||
Tax equivalent net interest margin | 4.39 | % | 4.67 | % | 4.49 | % | ||||||||||||||||||||||||||
Percentage of average interest-earning assets to average interest-bearing liabilities | 114.30 | % | 113.76 | % | 119.45 | % | ||||||||||||||||||||||||||
* Taxable equivalent basis | ||||||||||||||||||||||||||||||||
YEAR-TO-DATE NET INTEREST MARGIN ANALYSIS
Successor Company | Predecessor Company | ||||||||||||||||||||||||||||||||
Nine months ended September 30, 2013 | Period from February 1 to September 30, 2012 | Period from January 1 to January 31, 2012 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest* | Yield/Cost* | Average Balance | Interest* | Yield/Cost* | Average Balance | Interest* | Yield/Cost* | ||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||
Loans | $ | 1,153,455 | $ | 51,421 | 5.96 | % | $ | 719,196 | $ | 28,819 | 6.04 | % | $ | 730,387 | $ | 3,807 | 6.15 | % | |||||||||||||||
Investment securities | 307,458 | 4,715 | 2.05 | 170,856 | 3,056 | 2.69 | 180,220 | 419 | 2.74 | ||||||||||||||||||||||||
Federal funds and other | 43,109 | 70 | 0.22 | 44,388 | 65 | 0.22 | 23,719 | 4 | 0.20 | ||||||||||||||||||||||||
Total interest-earning assets | 1,504,022 | 56,206 | 5.00 | % | 934,440 | 31,940 | 5.15 | % | 934,326 | 4,230 | 5.35 | % | |||||||||||||||||||||
Non-interest-earning assets | 192,570 | 125,252 | 134,240 | ||||||||||||||||||||||||||||||
Total assets | $ | 1,696,592 | $ | 1,059,692 | $ | 1,068,566 | |||||||||||||||||||||||||||
Liabilities and Equity | |||||||||||||||||||||||||||||||||
Interest-bearing demand | $ | 284,178 | 478 | 0.22 | % | $ | 145,764 | $ | 420 | 0.43 | % | $ | 172,363 | $ | 108 | 0.74 | % | ||||||||||||||||
Money market and savings | 408,529 | 1,021 | 0.33 | 231,133 | 991 | 0.65 | 184,716 | 96 | 0.61 | ||||||||||||||||||||||||
Time | 537,188 | 3,043 | 0.76 | 377,754 | 2,367 | 0.94 | 404,999 | 326 | 0.95 | ||||||||||||||||||||||||
Total interest-bearing deposits | 1,229,895 | 4,542 | 0.49 | 754,651 | 3,778 | 0.75 | 762,078 | 530 | 0.82 | ||||||||||||||||||||||||
Short-term borrowings | 45,857 | 100 | 0.29 | 2,917 | 9 | 0.46 | 968 | — | — | ||||||||||||||||||||||||
Long-term debt | 43,670 | 1,237 | 3.79 | 23,134 | 786 | 5.12 | 24,217 | 103 | 5.02 | ||||||||||||||||||||||||
Total interest-bearing liabilities | 1,319,422 | 5,879 | 0.60 | % | 780,702 | 4,573 | 0.88 | % | 787,263 | 633 | 0.95 | % | |||||||||||||||||||||
Noninterest-bearing deposits | 154,619 | 101,370 | 107,156 | ||||||||||||||||||||||||||||||
Other liabilities | 8,661 | 6,637 | 4,184 | ||||||||||||||||||||||||||||||
Total liabilities | 1,482,702 | 888,709 | 898,603 | ||||||||||||||||||||||||||||||
Stockholders’ equity | 213,890 | 170,983 | 169,963 | ||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,696,592 | $ | 1,059,692 | $ | 1,068,566 | |||||||||||||||||||||||||||
Net interest income, taxable equivalent | $ | 50,327 | $ | 27,367 | $ | 3,597 | |||||||||||||||||||||||||||
Interest rate spread | 4.40 | % | 4.27 | % | 4.40 | % | |||||||||||||||||||||||||||
Tax equivalent net interest margin | 4.47 | % | 4.41 | % | 4.55 | % | |||||||||||||||||||||||||||
Percentage of average interest-earning assets to average interest-bearing liabilities | 113.99 | % | 119.69 | % | 118.68 | % | |||||||||||||||||||||||||||
* Taxable equivalent basis | |||||||||||||||||||||||||||||||||