Exhibit 99.1

 

 

National Commerce Corporation Announces

2018 Fourth Quarter and Fiscal Year End Earnings

 

BIRMINGHAM, AL (January 22, 2019) (GLOBE NEWSWIRE) -- National Commerce Corporation (Nasdaq: NCOM) (the “Company” or “NCC”), the parent company of National Bank of Commerce, today reported fourth quarter 2018 net income to common shareholders of $10.7 million, compared to $1.0 million for the fourth quarter of 2017. Diluted net earnings per share were $0.51 in the fourth quarter of 2018, compared to $0.59 in the third quarter of 2018 and $0.07 in the fourth quarter of 2017. The 2017 results include a write-down of the Company’s deferred tax asset (“DTA”) due to the enactment of the Tax Cuts and Jobs Act of 2017, which increased income tax expense for the 2017 fourth quarter and full year by $6.2 million. The DTA write-down reduced fourth quarter 2017 diluted net earnings per share by approximately $0.41.

 

For the year ended December 31, 2018, NCC earned $42.4 million, or $2.21 in diluted net earnings per share, compared to $20.1 million, or $1.41 per diluted share, for the year ended December 31, 2017. The DTA write-down reduced 2017 diluted net earnings per share by approximately $0.44.

 

NCC’s 2018 fourth quarter and full year results include $2.4 million and $5.4 million, respectively, in after-tax merger- and conversion-related expenses, reducing diluted net earnings per share by approximately $0.11 and $0.28 for the 2018 fourth quarter and full year, respectively. Additionally, the Company recorded additional incentive compensation expense in the fourth quarter totaling $3.8 million, or $0.13 per diluted share after tax, which included payments made to certain executive officers in December 2018 in lieu of equity incentive awards that would otherwise be granted in January 2019 in accordance with the Company’s annual equity grant schedule, which awards will not be granted due to the pending merger with CenterState Bank Corporation (“CenterState”).

 

“We are pleased to close out 2018 with a quarter of solid growth and profitability,” said Richard Murray, IV, Chairman and Chief Executive Officer. “We are encouraged by the low double-digit growth rate and the consistency in the net interest margin. We are also pleased to experience another quarter and year of low credit losses. We are excited about our pending merger with CenterState and the ability to serve our customers with a broader product set and a larger balance sheet that will result from the merger. Our team is excited about the opportunity, and we remain focused on doing our part to ensure a successful merger and integration.”

 

Several important measures from the 2018 fourth quarter and full year are as follows:

 

●

Net Interest Margin (taxable equivalent) of 4.74% for the fourth quarter of 2018 and 4.75% for the year ended December 31, 2018. The fourth quarter 2018 margin increased 0.05%, compared to 4.69% reported for the third quarter of 2018, and increased 0.11%, compared to 4.63% reported for the fourth quarter of 2017. For the year ended December 31, 2018, the margin increased by 0.31% compared to the year ended December 31, 2017. Excluding the impact of accretion income, the 2018 fourth quarter margin was flat compared with the 2018 third quarter. Loan yields and interest-earning asset yields during the fourth quarter of 2018 improved by 0.14% and 0.15%, respectively, from the third quarter of 2018. These earning asset yield improvements were offset by an increase in interest-bearing deposit costs of 0.14% during the fourth quarter of 2018 compared to the third quarter of 2018. Total deposit costs during the fourth quarter of 2018 (including noninterest-bearing deposit balances) increased 0.10% compared to the third quarter of 2018. Fourth quarter 2018 total interest-bearing liability costs increased 0.15% compared to the third quarter of 2018.

 

 

●

Return on Average Assets (“ROAA”) of 1.02% for the fourth quarter of 2018, compared to 0.15% for the fourth quarter of 2017. For the year, ROAA was 1.19%, compared to 0.81% in 2017. The 2017 ROAA figures were negatively impacted by the DTA write-down.

 

●

Return on Average Equity (“ROAE”) of 6.14% for the fourth quarter of 2018, compared to 0.99% for the fourth quarter of 2017. For the year, ROAE was 7.23%, compared to 5.65% in 2017. The 2017 ROAE figures were negatively impacted by the DTA write-down.

 

●

Return on Average Tangible Common Equity (“ROATCE”) of 10.06% for the fourth quarter of 2018 and 11.47% for the year ended December 31, 2018, compared to 1.41% for the fourth quarter of 2017 and 8.10% for the year ended December 31, 2017. The 2017 ROATCE figures were negatively impacted by the DTA write-down.

 

●

Fourth quarter and full year 2018 loan growth (excluding mortgage loans held-for-sale) of $87.6 million and $1.18 billion, respectively. The 2018 fourth quarter loan growth represents a 10.8% annualized growth rate. Non-acquired loans grew $178.9 million during the fourth quarter of 2018 and $498.3 million for the year ended December 31, 2018. The full year loan growth figures for 2018 include loans acquired in the Company’s acquisitions of FirstAtlantic Financial Holdings, Inc., Premier Community Bank of Florida and Landmark Bancshares, Inc.

 

●

Increase in deposits of $100.6 million during the 2018 fourth quarter, representing a 12.0% annualized growth rate, and $1.15 billion for the year ended December 31, 2018. The full year deposit growth figures for 2018 include deposits acquired in the Company’s acquisitions of FirstAtlantic Financial Holdings, Inc., Premier Community Bank of Florida and Landmark Bancshares, Inc.

 

●

During the fourth quarter of 2018, mortgage production totaled $109.7 million, compared to $121.0 million during the fourth quarter of 2017. For the year ended December 31, 2018, mortgage production volume totaled $490.8 million, compared to $507.6 million during the year ended December 31, 2017. The 2018 mortgage production was negatively impacted by rising rates. For the 2018 fourth quarter, approximately $70 million of production was sold in the secondary market. The mortgage division reported break-even profitability for the fourth quarter of 2018 and pre-tax profit of $360 thousand for the year ended December 31, 2018.

 

 

●

The factoring division reported a record quarter and year for revenues and profits. During the fourth quarter of 2018, purchased volume in the factoring division totaled $304.6 million, compared to $267.2 million during the fourth quarter of 2017. For the year ended December 31, 2018, purchase volume totaled $1.21 billion, compared to the $1.03 billion for the year ended December 31, 2017. Factoring net charge-offs were $344 thousand for the year ended December 31, 2018 (less than 0.03% of purchase volume), and the division reported net recoveries of $321 thousand for the fourth quarter of 2018.

 

●

The Company had a record quarter and full year in the merchant sponsorship business, with 2018 fourth quarter revenue of $835 thousand, bringing 2018 full year merchant sponsorship revenue to $3.0 million.

 

●

The Company’s tax rate in the 2018 fourth quarter benefited from the exercise of options by employees, net of some non-deductible compensation, resulting in a net reduction in income tax expense of approximately $700 thousand.

 

●

Increase in non-acquired non-performing assets to $5.7 million, from $1.1 million at September 30, 2018. The increase was almost entirely associated with one commercial borrower that filed Chapter 11 bankruptcy during the fourth quarter of 2018. The loan is secured by real estate with an appraised value in excess of the loan balance. Total nonperforming assets, including acquired nonperforming assets, were 0.37% of loans plus other real estate at December 31, 2018.

 

●

Annualized net charge-offs of 0.02% of average loans outstanding for the fourth quarter of 2018 and 0.05% for the year ended December 31, 2018.

 

●

Provision for loan losses of $1.5 million during the fourth quarter of 2018, the same amount recorded during the fourth quarter of 2017. Provision for loan losses for the year ended December 31, 2018 totaled $4.7 million, compared to $3.9 million for the year ended December 31, 2017.

 

●

At December 31, 2018, the Company’s tier 1 leverage ratio was 10.85%, essentially flat compared to 10.89% at December 31, 2017. At December 31, 2018, the Company’s common equity Tier 1 ratio was 13.10%, an increase of 0.56% from December 31, 2017. At December 31, 2018, total risk-based capital was 14.81%, up 0.44% from December 31, 2017. At December 31, 2018, the Company’s tangible book value per share was $20.63, an increase of $1.58 from $19.05 at December 31, 2017. At December 31, 2018, the Company’s book value per share was $33.57.

 

A copy of this news release may be accessed by visiting www.nationalbankofcommerce.com, and then clicking on the “Investor Relations” link under the “Learn More” tab located on that webpage. The Company will not host a live audio webcast conference this quarter.

 

 

Use of Non-GAAP Financial Measures

 

Some of the financial measures presented in this press release and included in the accompanying unaudited financial statements are not measures prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include adjusted net earnings per diluted share, return on average assets (excluding merger/conversion-related expenses), return on average tangible common equity (excluding merger/conversion-related expenses), tangible common equity, average tangible common equity, return on average tangible common equity, tangible book value per share, efficiency ratio and operating efficiency ratio. The Company’s management uses the non-GAAP financial measures set forth below in its analysis of the Company’s performance.

 

●

“Adjusted net earnings per diluted share” is defined as net income to common shareholders adjusted for the after-tax effect of merger/conversion-related expenses during the period divided by diluted shares outstanding.

 

●

“Return on average assets (excluding merger/conversion-related expenses)” is defined as net income to common shareholders adjusted for the after-tax effect of merger/conversion-related expenses during the period divided by average assets for the period.

 

●

“Return on average tangible common equity (excluding merger/conversion-related expenses)” is defined as net income to common shareholders adjusted for the after-tax effect of merger/conversion-related expenses during the period divided by average tangible common equity for the period.

 

The Company’s management believes that these measures provide useful information to management and investors because they eliminate the impact of merger/conversion-related expenses from each period to provide a meaningful comparison to other periods and other companies that might not have this category of expenses. The Company’s management believes that it is appropriate to exclude merger/conversion-related expenses in its presentation because the costs vary based on factors specific to each acquisition and are not indicative of the costs of operating the Company’s core business.

 

●

“Tangible common equity” is defined as total shareholders’ equity less goodwill, other intangible assets and minority interest not included in intangible assets.

 

●

“Average tangible common equity” is defined as the average of tangible common equity for the applicable period.

 

●

“Return on average tangible common equity,” or ROATCE, is defined as net income available to common shareholders divided by average tangible common equity.

 

●

“Tangible book value per share” is defined as tangible common equity divided by total common shares outstanding. This measure is important to investors interested in changes from period to period in book value per share, exclusive of changes in intangible assets.

 

 

The Company’s management believes that these measures, each of which utilizes the concept of tangible common equity rather than total common equity, provide useful information to management and investors because they eliminate the impact of goodwill and other intangible assets created in an acquisition. These measures are commonly used by investors when assessing financial institutions.

 

●

“Efficiency ratio” is defined as noninterest expense divided by operating revenue (which is equal to net interest income plus noninterest income), excluding one-time gains and losses on sales of securities. This measure is important to investors looking for a measure of efficiency in productivity based on the amount of revenue generated for each dollar spent.

 

●

“Operating efficiency ratio” is defined as noninterest expense divided by operating revenue, excluding one-time gains and losses on sales of securities and one-time gains and expenses related to merger and acquisition activities. This measure is important to investors looking for a measure of efficiency in productivity based on the amount of revenue generated for each dollar spent.

 

The Company’s management believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company’s financial condition, results of operations and cash flows computed in accordance with GAAP; however, the Company acknowledges that these non-GAAP financial measures have a number of limitations. As such, the Company cautions readers that these disclosures should not be viewed as a substitute for results determined in accordance with GAAP, and that these disclosures are not necessarily comparable to non-GAAP financial measures that other companies use. These non-GAAP financial measures exclude various items detailed in the attached “Non-GAAP Reconciliation.”

 

About National Commerce Corporation

 

National Commerce Corporation (Nasdaq: NCOM), a Delaware corporation, is a financial holding company headquartered in Birmingham, Alabama.  Its wholly-owned subsidiary, National Bank of Commerce, provides a broad array of financial services for commercial and consumer customers through seven full-service banking offices in Alabama, twenty-four full-service banking offices in Florida and five full-service banking offices in the Atlanta, Georgia metro area.  National Bank of Commerce conducts business under a number of trade names unique to its local markets, including United Legacy Bank, Reunion Bank of Florida, Private Bank of Buckhead, Private Bank of Decatur, PrivatePlus Mortgage, Patriot Bank, FirstAtlantic Bank, Premier Community Bank of Florida and First Landmark Bank.

 

Additionally, National Bank of Commerce owns a majority stake in Corporate Billing, LLC, a transaction-based finance company headquartered in Decatur, Alabama that provides factoring, invoicing, collection and accounts receivable management services to transportation companies and automotive parts and service providers throughout the United States and parts of Canada.

 

 

National Commerce Corporation files periodic reports with the U.S. Securities and Exchange Commission (the “SEC”). Copies of its filings may be obtained through the SEC’s website at www.sec.gov or at www.nationalbankofcommerce.com. More information about National Commerce Corporation and National Bank of Commerce may be obtained at www.nationalbankofcommerce.com.

 

Forward-Looking Statements

 

Certain statements contained in this press release that are not statements of historical fact constitute forward-looking statements for which NCC claims the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in NCC’s future filings with the SEC, in press releases and in oral and written statements made by NCC or with NCC’s approval that are not statements of historical fact and that constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (a) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (b) statements of NCC’s plans, objectives and expectations or those of its management or Board of Directors, including those relating to the pending merger with CenterState; (c) statements of future economic performance; and (d) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to various risks and uncertainties, including those risks and uncertainties described under the heading “Risk Factors” in NCC’s Annual Report on Form 10-K for the year ended December 31, 2017, and described in any subsequent reports that NCC has filed with the SEC. With respect to the pending merger with CenterState, these risks include, among others: (1) the risk that the cost savings and any revenue synergies from the merger may not be realized or take longer than anticipated to be realized; (2) disruption from the merger with customers, suppliers, employees or other business partners; (3) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (4) the risk of successful integration of NCC’s businesses into CenterState; (5) the failure to obtain required governmental approvals of the merger; (6) the failure to obtain the necessary stockholder approvals in connection with the merger; (7) the amount of the costs, fees, expenses and charges related to the merger; (8) reputational risk and the reaction of each company’s customers, suppliers, employees or other business partners to the merger; (9) the failure of the closing conditions in the merger agreement to be satisfied, or any unexpected delay in closing the merger; (10) the risk that the integration of NCC’s operations into the operations of CenterState will be materially delayed or will be more costly or difficult than expected; (11) the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; and (12) general competitive, economic, political and market conditions. There are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in forward-looking statements, and these forward-looking statements should not be relied upon as predictions of future events. NCC undertakes no obligation to update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. In that respect, NCC cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

 

 

Additional Information About the Merger with CenterState and Where to Find It

 

CenterState has filed a registration statement on Form S-4 with the SEC to register the shares of CenterState’s common stock that will be issued to NCC’s stockholders in connection with the proposed merger. The registration statement includes a joint proxy statement of CenterState and NCC and a prospectus of CenterState. A definitive joint proxy statement-prospectus will be sent to the stockholders of each of CenterState and NCC in connection with the proposed merger.  INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND DEFINITIVE JOINT PROXY STATEMENT-PROSPECTUS WHEN IT BECOMES AVAILABLE (AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT-PROSPECTUS) BECAUSE SUCH DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED MERGER. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC on its website at www.sec.gov. Investors and security holders may also obtain free copies of the documents filed with the SEC by CenterState on its website at www.centerstatebanks.com and by NCC on its website at www.nationalbankofcommerce.com.

 

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Before making any voting or investment decision, investors and security holders of CenterState and NCC are urged to read carefully the entire registration statement and joint proxy statement-prospectus when it becomes available, including any amendments thereto, because such documents will contain important information about the proposed transaction. Free copies of these documents may be obtained as described above.

 

CenterState, NCC and certain of their directors and executive officers may be deemed participants in the solicitation of proxies from the stockholders of each of CenterState and NCC in connection with the proposed merger.  Information regarding the directors and executive officers of CenterState and NCC and other persons who may be deemed participants in the solicitation of the stockholders of CenterState or of NCC in connection with the proposed merger will be included in the joint proxy statement-prospectus for each of CenterState’s and NCC’s special meeting of stockholders, which will be filed by CenterState and NCC with the SEC. Information about the directors and officers of CenterState and their ownership of CenterState common stock can also be found in CenterState’s definitive proxy statement in connection with its 2018 annual meeting of stockholders, as filed with the SEC on March 12, 2018, and other documents subsequently filed by CenterState with the SEC. Information about the directors and officers of NCC and their ownership of NCC common stock can also be found in NCC’s definitive proxy statement in connection with its 2018 annual meeting of stockholders, as filed with the SEC on April 20, 2018, and other documents subsequently filed by NCC with the SEC. Additional information regarding the interests of such participants will be included in the joint proxy statement-prospectus and other relevant documents regarding the merger filed with the SEC when they become available.

 

 

Contact:

 

National Commerce Corporation

 

William E. Matthews, V	Lowell Womack, Jr.
President and Chief Financial Officer	Director of Financial Reporting
(205) 313-8100	(205) 313-8100

                                           

 

NATIONAL COMMERCE CORPORATION

Unaudited Financial Highlights

(In thousands, except share and per share amounts and percentages or as otherwise noted)

 

		For the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2018				2018				2018				2018				2017
Earnings Summary
Interest income		$	51,430			$	46,195			$	37,713			$	36,320			$	30,224
Interest expense			7,533				6,174				4,310				3,420				2,824
Net interest income			43,897				40,021				33,403				32,900				27,400
Provision for loan losses			1,548				1,001				856				1,318				1,478
Gain (loss) on sale of securities			-				-				2				191				(119	)
Other noninterest income (1)			5,130				4,768				4,673				4,517				4,744
Merger/conversion-related expenses (2)			2,810				897				542				2,396				1,172
Additional incentive compensation expenses (3)			3,776				-				-				-				-
Other noninterest expense (4)			26,799				26,199				22,077				21,579				17,838
Income before income taxes			14,094				16,692				14,603				12,315				11,537
Income tax expense			2,672				4,040				3,303				2,776				3,890
Deferred tax asset write-down			-				-				-				-				6,231
Total income tax expense			2,672				4,040				3,303				2,776				10,121
Net income before minority interest			11,422				12,652				11,300				9,539				1,416
Net income attributable to minority interest			721				676				616				456				413
Net income to common shareholders		$	10,701			$	11,976			$	10,684			$	9,083			$	1,003
Weighted average common and diluted shares outstanding
Basic			20,676,626				19,838,772				17,236,525				17,209,551				14,783,597
Diluted			21,169,085				20,360,770				17,642,926				17,612,298				15,173,984
Net earnings per common share
Basic		$	0.52			$	0.60			$	0.62			$	0.53			$	0.07
Diluted		$	0.51			$	0.59			$	0.61			$	0.52			$	0.07
Adjusted net earnings per diluted share (excluding merger/conversion-related expenses)		$	0.62			$	0.63			$	0.63			$	0.62			$	0.12

 

		December 31,				September 30,				June 30,				March 31,				December 31,
Selected Performance Ratios		2018				2018				2018				2018				2017
Return on average assets (ROAA) (5)			1.02	%			1.23	%			1.36	%			1.18	%			0.15	%
ROAA (excluding merger/conversion-related expenses)			1.24				1.31				1.42				1.42				0.28
Return on average equity (ROAE)			6.14				7.40				8.39				7.35				0.99
Return on average tangible common equity (ROATCE)			10.06				12.09				12.73				11.27				1.41
ROATCE (excluding merger/conversion-related expenses)			12.28				12.85				13.26				13.54				2.55
Net interest margin - taxable equivalent			4.74				4.69				4.77				4.80				4.63
Efficiency ratio			68.10				60.50				59.40				64.08				59.14
Operating efficiency ratio (4)			62.36				58.49				57.98				57.67				55.49
Noninterest income / average assets (annualized)			0.49				0.49				0.60				0.59				0.72
Noninterest expense / average assets (annualized)			2.82				2.78				2.88				3.12				2.88
Yield on loans			5.88				5.74				5.74				5.66				5.45
Cost of total deposits			0.80	%			0.70	%			0.60	%			0.47	%			0.43	%

 

		December 31,				September 30,				June 30,				March 31,				December 31,
Factoring Metrics		2018				2018				2018				2018				2017
Recourse purchased volume		$	129,388			$	132,531			$	127,680			$	115,970			$	108,628
Non-recourse purchased volume			175,220				182,742				181,835				167,015				158,565
Total purchased volume		$	304,608			$	315,273			$	309,515			$	282,985			$	267,193
Average turn (days)			44.79				44.56				42.85				42.25				43.59
Net (recoveries) charge-offs / total purchased volume			(0.11	)%			0.03	%			0.06	%			0.14	%			0.18	%
Average discount rate			1.53	%			1.64	%			1.63	%			1.64	%			1.59	%

 

		December 31,				September 30,				June 30,				March 31,				December 31,
Mortgage Metrics		2018				2018				2018				2018				2017
Total production ($)		$	109,740			$	116,540			$	149,640			$	114,850			$	120,969
Refinance (%)			31.4	%			23.4	%			17.0	%			27.8	%			22.1	%
Purchases (%)			68.6	%			76.6	%			83.0	%			72.2	%			77.9	%

 

 

NATIONAL COMMERCE CORPORATION

Unaudited Financial Highlights

(In thousands, except share and per share amounts and percentages or as otherwise noted)

 

		As of
		December 31,				September 30,				June 30,				March 31,				December 31,
Balance Sheet Highlights		2018				2018				2018				2018				2017
Cash and cash equivalents		$	217,130			$	200,291			$	217,773			$	132,825			$	235,288
Total investment securities			212,561				211,182				161,542				169,868				111,396
Mortgage loans held-for-sale			15,031				15,533				24,455				21,077				29,191
Acquired purchased credit-impaired loans			39,536				40,922				26,942				29,359				25,696
Acquired non-purchased credit-impaired loans			1,198,058				1,262,636				714,359				783,556				538,276
Nonacquired loans held for investment (6)			1,953,685				1,774,835				1,614,376				1,531,475				1,455,376
CBI loans (factoring receivables)			126,686				151,985				141,455				136,194				118,710
Total gross loans held for investment			3,317,965				3,230,378				2,497,132				2,480,584				2,138,058
Allowance for loan losses			18,176				16,759				15,997				15,839				14,985
Total intangibles			267,984				269,297				173,590				174,225				117,849
Total assets			4,210,541				4,103,345				3,214,367				3,113,766				2,737,676
Total deposits			3,432,289				3,331,682				2,643,713				2,551,517				2,285,831
FHLB advances			2,000				2,000				7,000				7,000				7,000
Securities sold under agreements to repurchase			18,851				18,340				-				-				-
Subordinated debt			37,235				37,211				24,580				24,567				24,553
Total liabilities			3,513,483				3,418,534				2,697,563				2,608,040				2,337,718
Minority interest			7,655				7,611				7,551				7,391				7,348
Common stock			208				206				172				172				148
Total shareholders' equity			697,058				684,811				516,804				505,726				399,958
Tangible common equity		$	428,353			$	414,837			$	342,597			$	331,044			$	281,695
End of period common shares outstanding			20,762,084				20,649,948				17,246,659				17,229,043				14,788,436

 

		As of and For the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
Asset Quality Analysis		2018				2018				2018				2018				2017
Nonacquired
Nonaccrual loans		$	4,807			$	231			$	294			$	367			$	82
Other real estate and repossessed assets			75				340				340				-				-
Loans past due 90 days or more and still accruing			818				484				408				723				677
Total nonacquired nonperforming assets		$	5,700			$	1,055			$	1,042			$	1,090			$	759
Acquired
Nonaccrual loans		$	5,612			$	4,050			$	2,461			$	2,412			$	2,640
Other real estate and repossessed assets			899				999				999				999				1,094
Loans past due 90 days or more and still accruing			-				-				-				-				-
Total acquired nonperforming assets		$	6,511			$	5,049			$	3,460			$	3,411			$	3,734
Selected asset quality ratios
Nonperforming assets / Assets			0.29	%			0.15	%			0.14	%			0.14	%			0.16	%
Nonperforming assets / (Loans + OREO + repossessed assets)			0.37				0.19				0.18				0.18				0.21
Net charge-offs (recoveries) to average loans (annualized)			0.02				0.03				0.11				0.08				0.14
Allowance for loan losses to total loans			0.55				0.52				0.64				0.64				0.70
Nonacquired nonperforming assets / (Nonacquired loans + nonacquired OREO + nonacquired repossessed assets) (6)			0.29				0.06				0.06				0.07				0.05
Allowance for loan losses / (Nonacquired nonaccrual loans + nonacquired loans past due 90 days or more and still accruing)			323.13				2,343.92				2,278.77				1,453.12				1,974.31

 

		As of
		December 31,				September 30,				June 30,				March 31,				December 31,
Additional Information - Allowance for Loan Losses		2018				2018				2018				2018				2017
Allowance for loan losses excluding CBI loans (factoring receivables)			17,576				16,159				15,397				15,239				14,385
Nonacquired loans held for investment (6)			1,953,685				1,774,835				1,614,376				1,531,475				1,455,376
Allowance for loan losses allocated to CBI loans (factoring receivables)			600				600				600				600				600
CBI loans (factoring receivables)			126,686				151,985				141,455				136,194				118,710

 

 

NATIONAL COMMERCE CORPORATION

Unaudited Financial Highlights

(In thousands, except share and per share amounts and percentages or as otherwise noted)

 

		For the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
Taxable Equivalent Yields/Rates		2018				2018				2018				2018				2017
Interest income:
Loans			5.88	%			5.74	%			5.74	%			5.66	%			5.45	%
Mortgage loans held-for-sale			4.68				4.92				3.71				4.85				2.96
Interest on securities:
Taxable			3.45				3.10				3.14				3.11				3.09
Non-taxable			4.07				4.01				4.23				4.06				4.81
Cash balances in other banks			2.27				2.13				1.80				1.55				1.37
Funds sold			-				-				-				1.38				-
Total interest-earning assets			5.56				5.41				5.38				5.29				5.10
Interest expense:
Interest on deposits			1.11				0.97				0.84				0.67				0.62
Interest on FHLB advances			4.17				2.98				4.13				4.11				4.02
Interest on securities sold under agreements to repurchase			1.48				1.07				-				-				-
Interest on subordinated debt			6.50				6.47				6.30				6.41				6.27
Total interest-bearing liabilities			1.20				1.05				0.93				0.76				0.73
Net interest spread			4.36				4.36				4.45				4.53				4.37
Net interest margin			4.74	%			4.69	%			4.77	%			4.80	%			4.63	%

 

		As of
		December 31,				September 30,				June 30,				March 31,				December 31,
		2018				2018				2018				2018				2017
Shareholders' Equity and Capital Ratios
Tier 1 leverage ratio			10.85	%			11.40	%			11.24	%			10.98	%			10.89	%
Common equity tier 1 capital ratio			13.10				13.03				13.43				13.03				12.54
Tier 1 risk-based capital ratio			13.10				13.03				13.43				13.03				12.54
Total risk-based capital ratio			14.81				14.74				15.06				14.66				14.37
Equity / Assets			16.56				16.69				16.08				16.24				14.61
Tangible common equity to tangible assets			10.86	%			10.82	%			11.27	%			11.26	%			10.75	%
Book value per share		$	33.57			$	33.16			$	29.97			$	29.35			$	27.05
Tangible book value per share		$	20.63			$	20.09			$	19.86			$	19.21			$	19.05

 

		For the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2018				2018				2018				2018				2017
Detail of Noninterest Income
Service charges and fees on deposit accounts		$	1,165			$	1,166			$	1,029			$	1,012			$	733
Mortgage origination and fee income			1,882				1,825				2,262				1,895				2,450
Merchant sponsorship revenue			835				749				675				720				592
Income from bank-owned life insurance			340				323				276				286				210
Wealth management fees			27				16				15				15				11
(Loss) gain on sale of other real estate			(83	)			-				(32	)			171				(66	)
Gain (loss) on sale of investments			-				-				2				191				(119	)
Other noninterest income			964				689				448				418				814
Total noninterest income		$	5,130			$	4,768			$	4,675			$	4,708			$	4,625

 

		For the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2018				2018				2018				2018				2017
Detail of Noninterest Expense
Salaries and employee benefits		$	18,872			$	14,336			$	12,498			$	12,460			$	10,016
Commission-based compensation			1,753				1,876				1,825				1,501				1,700
Occupancy and equipment, net			2,536				2,439				2,025				1,994				1,649
Data processing expenses			2,520				1,820				1,369				3,356				1,437
Advertising and marketing expenses			340				296				361				268				349
Legal fees			1,001				384				496				160				219
FDIC insurance assessments			265				267				226				281				145
Property and casualty insurance premiums			217				232				251				224				253
Accounting and audit expenses			328				388				332				335				209
Consulting and other professional expenses			1,450				1,347				568				538				888
Telecommunications expenses			350				295				227				229				217
ORE, Repo asset and other collection expenses			80				61				71				69				75
Core deposit intangible amortization			1,466				1,306				738				739				393
Other noninterest expense			2,207				2,049				1,632				1,821				1,460
Total noninterest expense		$	33,385			$	27,096			$	22,619			$	23,975			$	19,010

 

 

NATIONAL COMMERCE CORPORATION

Unaudited Financial Highlights

(In thousands, except share and per share amounts and percentages or as otherwise noted)

 

		As of
		December 31,				September 30,				June 30,				March 31,				December 31,
Non-GAAP Reconciliation		2018				2018				2018				2018				2017
Total shareholders' equity		$	697,058			$	684,811			$	516,804			$	505,726			$	399,958
Less: intangible assets			267,984				269,297				173,590				174,225				117,849
Less: minority interest not included in intangible assets			721				677				617				457				414
Tangible common equity		$	428,353			$	414,837			$	342,597			$	331,044			$	281,695
Common shares outstanding at year or period end			20,762,084				20,649,948				17,246,659				17,229,043				14,788,436
Tangible book value per share		$	20.63			$	20.09			$	19.86			$	19.21			$	19.05
Total assets at end of period		$	4,210,541			$	4,103,345			$	3,214,367			$	3,113,766			$	2,737,676
Less: intangible assets			267,984				269,297				173,590				174,225				117,849
Adjusted total assets at end of period		$	3,942,557			$	3,834,048			$	3,040,777			$	2,939,541			$	2,619,827
Tangible common equity to tangible assets			10.86	%			10.82	%			11.27	%			11.26	%			10.75	%

 

		For the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2018				2018				2018				2018				2017
Non-GAAP Reconciliation
Net income to common shareholders		$	10,701			$	11,976			$	10,684			$	9,083			$	1,003
Plus: merger/conversion-related expenses (net of tax)			2,353				752				445				1,826				815
Adjusted net income to common shareholders		$	13,054			$	12,728			$	11,129			$	10,909			$	1,818
Net earnings per common share		$	0.51			$	0.59			$	0.61			$	0.52			$	0.07
Effect to adjust for merger/conversion-related expenses (net of tax)			0.11				0.04				0.02				0.10				0.05
Adjusted net earnings per diluted share		$	0.62			$	0.63			$	0.63			$	0.62			$	0.12
Total average shareholders' equity		$	690,986			$	642,367			$	510,958			$	500,901			$	402,317
Less: average intangible assets			268,619				248,900				173,953				173,766				119,415
Less: average minority interest not included in intangible assets			465				435				366				326				357
Average tangible common equity		$	421,902			$	393,032			$	336,639			$	326,809			$	282,545
Net income to common shareholders			10,701				11,976				10,684				9,083				1,003
Return on average tangible common equity (ROATCE)			10.06	%			12.09	%			12.73	%			11.27	%			1.41	%
Return on average tangible common equity			10.06	%			12.09	%			12.73	%			11.27	%			1.41	%
Effect of merger/conversion-related expenses (net of tax)			2.22				0.76				0.53				2.27				1.14
ROATCE (excluding merger/conversion-related expenses)			12.28	%			12.85	%			13.26	%			13.54	%			2.55	%
Return on average assets			1.02	%			1.23	%			1.36	%			1.18	%			0.15	%
Effect of merger/conversion-related expenses (net of tax)			0.22				0.08				0.06				0.24				0.12
ROAA (excluding merger/conversion related-expenses)			1.24	%			1.31	%			1.42	%			1.42	%			0.28	%
Efficiency ratio:
Net interest income		$	43,897			$	40,021			$	33,403			$	32,900			$	27,400
Total noninterest income			5,130				4,768				4,675				4,708				4,625
Less: Gain (loss) on sale of securities			-				-				2				191				(119	)
Operating revenue		$	49,027			$	44,789			$	38,076			$	37,417			$	32,144
Expenses:
Total noninterest expenses		$	33,385			$	27,096			$	22,619			$	23,975			$	19,010
Efficiency ratio			68.10	%			60.50	%			59.40	%			64.08	%			59.14	%
Operating efficiency ratio:
Net interest income		$	43,897			$	40,021			$	33,403			$	32,900			$	27,400
Total noninterest income			5,130				4,768				4,675				4,708				4,625
Less: Gain (loss) on sale of securities			-				-				2				191				(119	)
Operating revenue		$	49,027			$	44,789			$	38,076			$	37,417			$	32,144
Expenses:
Total noninterest expenses		$	33,385			$	27,096			$	22,619			$	23,975			$	19,010
Less: merger/conversion-related expenses			2,810				897				542				2,396				1,172
Adjusted noninterest expenses		$	30,575			$	26,199			$	22,077			$	21,579			$	17,838
Operating efficiency ratio			62.36	%			58.49	%			57.98	%			57.67	%			55.49	%

 

(1) Excludes securities gains

(2) After-tax impact of merger/conversion-related expenses of $2,353, $752, $445, $1,826 and $815, respectively, for the periods presented

(3) After-tax impact of additional compensation expenses of $2,823 shown in three months ended December 2018

(4) Excludes merger/conversion-related expenses

(5) Net income to common shareholders / average assets

(6) Excludes CBI loans (factoring receivables)

 

 

NATIONAL COMMERCE CORPORATION

Unaudited Consolidated Balance Sheets

(In thousands, except share and per share data)

 

		December 31, 2018				December 31, 2017
Assets
Cash and due from banks		$	50,628			$	36,246
Interest-bearing deposits with banks			166,502				199,042
Cash and cash equivalents			217,130				235,288
Investment securities held-to-maturity (fair value of $24,821 and $25,932 at December 31, 2018 and December 31, 2017, respectively)			25,045				25,562
Investment securities available-for-sale			187,516				85,834
Other investments			16,946				11,350
Mortgage loans held-for-sale			15,031				29,191
Loans, net of unearned income			3,317,965				2,138,058
Less: allowance for loan losses			18,176				14,985
Loans, net			3,299,789				2,123,073
Premises and equipment, net			86,658				52,455
Accrued interest receivable			10,348				6,157
Bank-owned life insurance			55,114				31,584
Other real estate			974				1,094
Deferred tax assets, net			17,405				12,041
Goodwill			249,612				113,394
Core deposit intangible, net			18,372				4,455
Other assets			10,601				6,198
Total assets		$	4,210,541			$	2,737,676
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand		$	929,820			$	697,144
Interest-bearing demand			692,725				362,266
Savings and money market			1,315,337				951,846
Time			494,407				274,575
Total deposits			3,432,289				2,285,831
Federal Home Loan Bank advances			2,000				7,000
Securities sold under agreements to repurchase			18,851				-
Subordinated debt			37,235				24,553
Accrued interest payable			1,437				900
Other liabilities			21,671				19,434
Total liabilities			3,513,483				2,337,718
Shareholders’ equity:
Preferred stock, 250,000 shares authorized, no shares issued or outstanding			-				-
Common stock, $0.01 par value, 30,000,000 shares authorized, 20,762,084 and 14,788,436 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively			208				148
Additional paid-in capital			604,965				347,999
Retained earnings			86,433				43,989
Accumulated other comprehensive (loss) income			(2,203	)			474
Total shareholders' equity attributable to National Commerce Corporation			689,403				392,610
Noncontrolling interest			7,655				7,348
Total shareholders' equity			697,058				399,958
Total liabilities and shareholders' equity		$	4,210,541			$	2,737,676

 

 

NATIONAL COMMERCE CORPORATION

Unaudited Consolidated Statements of Earnings

(In thousands, except share and per share data)

 

		For the Three Months Ended								For the Twelve Months Ended
		December 31,								December 31,
		2018				2017				2018				2017
Interest and dividend income:
Interest and fees on loans		$	48,505			$	28,834			$	162,332			$	104,194
Interest and dividends on taxable investment securities			1,776				756				5,654				2,627
Interest on non-taxable investment securities			181				191				751				783
Interest on interest-bearing deposits and federal funds sold			968				443				2,921				2,187
Total interest income			51,430				30,224				171,658				109,791
Interest expense:
Interest on deposits			6,831				2,365				19,205				8,530
Interest on FHLB advances			21				71				190				283
Interest on securities sold under agreements to repurchase			71				-				121				1
Interest on subordinated debt			610				388				1,921				1,553
Total interest expense			7,533				2,824				21,437				10,367
Net interest income			43,897				27,400				150,221				99,424
Provision for loan losses			1,548				1,478				4,723				3,894
Net interest income after provision for loan losses			42,349				25,922				145,498				95,530
Other income:
Service charges and fees on deposit accounts			1,165				733				4,372				2,711
Mortgage origination and fee income			1,882				2,450				7,864				11,529
Merchant sponsorship revenue			835				592				2,979				2,560
Income from bank-owned life insurance			340				210				1,225				855
Wealth management fees			27				11				73				47
Gain (loss) on other real estate			(83	)			(66	)			56				44
Gain on sale of investment securities available-for-sale			-				(119	)			193				(91	)
Other			964				814				2,519				2,056
Total other income			5,130				4,625				19,281				19,711
Other expense:
Salaries and employee benefits			18,872				10,016				58,166				39,556
Commission-based compensation			1,753				1,700				6,955				6,855
Occupancy and equipment, net			2,536				1,649				8,994				6,209
Core deposit intangible amortization			1,466				393				4,249				1,455
Other operating expense			8,758				5,252				28,711				19,120
Total other expense			33,385				19,010				107,075				73,195
Earnings before income taxes			14,094				11,537				57,704				42,046
Income tax expense			2,672				10,121				12,791				20,071
Net earnings			11,422				1,416				44,913				21,975
Less: Net earnings attributable to noncontrolling interest			721				413				2,469				1,907
Net earnings attributable to National Commerce Corporation		$	10,701			$	1,003			$	42,444			$	20,068
Weighted average common and diluted shares outstanding
Basic			20,676,626				14,783,597				18,753,066				13,800,595
Diluted			21,169,085				15,173,984				19,230,190				14,193,433
Basic earnings per common share		$	0.52			$	0.07			$	2.26			$	1.45
Diluted earnings per common share		$	0.51			$	0.07			$	2.21			$	1.41

 

 

NATIONAL COMMERCE CORPORATION

Average Balance Sheets and Net Interest Analysis

 

		For the Three Months Ended
(Dollars in thousands)		December 31, 2018												September 30, 2018												June 30, 2018												March 31, 2018												December 31, 2017
Interest-earning assets		Average Balance				Interest Income/ Expense				Average Yield/ Rate				Average Balance				Interest Income/ Expense				Average Yield/ Rate				Average Balance				Interest Income/ Expense				Average Yield/ Rate				Average Balance				Interest Income/ Expense				Average Yield/ Rate				Average Balance				Interest Income/ Expense				Average Yield/ Rate
Loans		$	3,263,797			$	48,332				5.88	%		$	3,002,640			$	43,459				5.74	%		$	2,480,578			$	35,501				5.74	%		$	2,451,352			$	34,220				5.66	%		$	2,091,443			$	28,704				5.45	%
Mortgage loans held-for-sale			14,909				176				4.68				18,935				235				4.92				23,247				215				3.71				17,402				208				4.85				18,237				136				2.96
Securities:
Taxable securities			204,498				1,776				3.45				191,157				1,496				3.10				155,062				1,212				3.14				152,748				1,170				3.11				97,175				756				3.09
Tax-exempt securities			23,595				242				4.07				25,102				254				4.01				24,393				257				4.23				25,169				252				4.06				25,005				303				4.81
Cash balances in other banks			169,235				968				2.27				152,715				818				2.13				132,868				596				1.80				138,358				529				1.55				128,606				443				1.37
Funds sold			-				-				0.00				-				-				0.00				-				-				0.00				2,946				10				1.38				-				-				0.00
Total interest-earning assets			3,676,034			$	51,494				5.56				3,390,549			$	46,262				5.41				2,816,148			$	37,781				5.38				2,787,975			$	36,389				5.29				2,360,466			$	30,342				5.10
Noninterest-earning assets			485,083												475,094												333,297												328,605												255,239
Total assets		$	4,161,117											$	3,865,643											$	3,149,445											$	3,116,580											$	2,615,705
Interest-bearing liabilities
Interest-bearing transaction accounts		$	605,295			$	984				0.64	%		$	644,863			$	877				0.54	%		$	517,769			$	632				0.49	%		$	423,537			$	322				0.31	%		$	331,876			$	277				0.33	%
Savings and money market deposits			1,311,434				3,893				1.18				1,162,707				3,114				1.06				975,986				2,182				0.90				1,038,751				1,816				0.71				884,660				1,381				0.62
Time deposits			520,994				1,954				1.49				470,211				1,570				1.32				342,890				1,038				1.21				327,011				823				1.02				285,669				707				0.98
Federal Home Loan Bank			2,000				21				4.17				3,467				26				2.98				7,000				72				4.13				7,000				71				4.11				7,000				71				4.02
Securities sold under agreements to repurchase			19,041				71				1.48				18,457				50				1.07				-				-				0.00				-				-				0.00				381				-				0.00
Subordinated debt			37,235				610				6.50				32,950				537				6.47				24,574				386				6.30				24,560				388				6.41				24,547				388				6.27
Total interest-bearing liabilities			2,495,999			$	7,533				1.20				2,332,655			$	6,174				1.05				1,868,219			$	4,310				0.93				1,820,859			$	3,420				0.76				1,534,133			$	2,824				0.73
Noninterest-bearing deposits			946,572												866,974												746,940												772,358												657,786
Total funding sources			3,442,571												3,199,629												2,615,159												2,593,217												2,191,919
Noninterest-bearing liabilities			27,560												23,647												23,328												22,462												21,469
Shareholders' equity			690,986												642,367												510,958												500,901												402,317
		$	4,161,117											$	3,865,643											$	3,149,445											$	3,116,580											$	2,615,705
Net interest rate spread											4.36	%											4.36	%											4.45	%											4.53	%											4.37	%
Net interest income/margin (taxable equivalent)							43,961				4.74	%							40,088				4.69	%							33,471				4.77	%							32,969				4.80	%							27,518				4.63	%
Tax equivalent adjustment							64												67												68												69												118
Net interest income/margin						$	43,897				4.74	%						$	40,021				4.68	%						$	33,403				4.76	%						$	32,900				4.79	%						$	27,400				4.61	%

 

 

NATIONAL COMMERCE CORPORATION

Average Balance Sheets and Net Interest Analysis

 

		For the Twelve Months Ended
(Dollars in thousands)		December 31, 2018												December 31, 2017
Interest-earning assets		Average Balance				Interest Income/ Expense				Average Yield/ Rate				Average Balance				Interest Income/ Expense				Average Yield/ Rate
Loans		$	2,802,374			$	161,512				5.76	%		$	1,918,634			$	103,539				5.40	%
Mortgage loans held for sale			18,617				834				4.48				18,779				679				3.62
Securities:
Taxable securities			176,050				5,654				3.21				89,492				2,627				2.94
Tax-exempt securities			24,562				1,005				4.09				25,420				1,243				4.89
Cash balances in other banks			148,391				2,911				1.96				198,689				2,187				1.10
Funds sold			726				10				1.38				-				-				0.00
Total interest-earning assets			3,170,720			$	171,926				5.42				2,251,014			$	110,275				4.90
Non-interest earning assets			406,140												230,482
Total assets		$	3,576,860											$	2,481,496
Interest-bearing liabilities
Interest-bearing transactions accounts		$	548,630			$	2,815				0.51	%		$	330,057			$	944				0.29	%
Savings and money market deposits			1,123,078				11,005				0.98				834,664				4,848				0.58
Time deposits			415,958				5,385				1.29				288,851				2,738				0.95
Federal Home Loan Bank advances			4,849				190				3.92				7,000				283				4.04
Securities sold under agreements to repurchase			9,452				121				1.28				651				1				0.15
Subordinated debt			29,873				1,921				6.43				24,527				1,553				6.33
Total interest-bearing liabilities			2,131,840			$	21,437				1.01				1,485,750			$	10,367				0.70
Non-interest bearing deposits			833,781												621,819
Total funding sources			2,965,621												2,107,569
Non-interest bearing liabilities			24,262												18,549
Shareholders' equity			586,977												355,378
		$	3,576,860											$	2,481,496
Net interest rate spread											4.41	%											4.20	%
Net interest income/margin (taxable equivalent)							150,489				4.75	%							99,908				4.44	%
Tax equivalent adjustment							268												484
Net interest income/margin						$	150,221				4.74	%						$	99,424				4.42	%