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Crescent Financial Bancshares, Inc. Announces Financial
Results for Second Quarter of 2012 and Filing of Application
to Acquire VantageSouth Bank
GlobeNewswire
2012-07-31
RALEIGH, N.C., July 30, 2012 (GLOBE NEWSWIRE) -- Crescent Financial
Bancshares, Inc. (Nasdaq:CRFN) (hereinafter referred to as "Crescent
Financial" or the "Company"), the parent company of Crescent State Bank
and a subsidiary of Piedmont Community Bank Holdings, Inc.
("Piedmont"), today reported financial results for the second quarter
and six months ended June 30, 2012. Crescent Financial also announced
it has filed an application with its regulators to acquire VantageSouth
Bank, which is currently 100% owned by Piedmont.
The second quarter and year-to-date performance summary for Crescent
Financial is as follows:
-- Net income totaled $294 thousand in the six months ended June 30, 2012
compared to a net loss of $10.5 million in the predecessor six months
ended June 30, 2011. The Company incurred a net loss of $414 thousand in
the second quarter of 2012 compared to a net loss of $3.4 million in the
predecessor second quarter of 2011.
-- After the preferred stock dividend, the Company incurred a net loss of
($0.02) per common share in the first six months of 2012 compared to a
net loss of ($1.18) per common share in the first six months of 2011.
The Company incurred a net loss of ($0.03) per common share in the
second quarter of 2012 compared to a net loss of ($0.40) per common
share in the predecessor second quarter of 2011.
-- Asset quality continued to improve as nonperforming assets decreased to
2.38% of total assets at June 30, 2012 from 2.53% of total assets at
March 31, 2012 and 3.87% of total assets at December 31, 2011.
-- The Company originated $48 million of commercial and consumer loans in
the second quarter of 2012 after $15 million of loan originations in the
first quarter of 2012.
-- Net interest margin improved to 4.36% in the first six months of 2012
from 2.88% in the predecessor first six months of 2011. Net interest
margin improved to 4.24% in the second quarter of 2012 from 2.95% in the
predecessor second quarter of 2011.
-- Mortgage banking income improved to $1.3 million in the first six months
of 2012 compared to $425 thousand in the predecessor first six months of
2011. Mortgage banking income improved to $689 thousand in the second
quarter of 2012 from $259 thousand in the predecessor second quarter of
2011.
The Company also announced that it has filed an application with its
regulators to merge VantageSouth Bank ("VantageSouth"), which is
currently 100% owned by Piedmont, into Crescent State Bank.
VantageSouth is headquartered in Burlington, North Carolina, and
operates five branch offices located in Burlington (2), Fayetteville,
and Salisbury (2), North Carolina. At June 30, 2012, VantageSouth had
approximately $248 million in total assets, and its net income totaled
$752 thousand in the second quarter of 2012. Pro forma net income for
the combination of Crescent Financial and VantageSouth totaled $338
thousand in the second quarter of 2012. Crescent Financial's board of
directors has established an independent special committee to evaluate,
negotiate, and make a recommendation to the board regarding the
proposed merger. The completion of the merger is subject to, among
other things, a favorable recommendation by the special committee and
all required regulatory and shareholder approvals.1
"In the second quarter of 2012, Crescent Financial significantly
increased loan origination volume and improved mortgage income by
leveraging its strong team and sound underwriting process," stated
Scott Custer, President and CEO of the Company and Piedmont. Mr. Custer
continued, "Since Piedmont's investment, we have aggressively resolved
legacy problem assets and are in the process of replacing them with
high quality loans that we believe will provide stable revenue growth
over time. We also look forward to Crescent Financial's proposed
acquisition of VantageSouth, which we believe will create operating
efficiencies for the combined institution and will provide Crescent
Financial with new markets, first-class teammates, an established SBA
lending program, and other exciting opportunities."
Net Interest Income
Net interest income in the second quarter of 2012 totaled $7.4 million
compared to net interest income of $6.3 million in the predecessor
second quarter of 2011. Net interest margin increased from 2.95% in the
second quarter of 2011 to 4.24% in the second quarter of 2012. This
significant margin improvement was primarily due to a decline in
funding costs as the average rate on total interest-bearing liabilities
fell from 2.24% in the second quarter of 2011 to 0.97% in the second
quarter of 2012. Yield on earning assets increased from 4.97% in the
second quarter of 2011 to 5.05% in the second quarter of 2012.
Average earning assets totaled $705.9 million in the second quarter of
2012, which was a decline from $897.9 million in the second quarter of
2011. The decline in average earning assets was due to balance sheet
restructuring late in 2011, purchase accounting fair value adjustments,
continued resolution of problem assets, and a change in the Company's
business model which has shifted the loan portfolio mix away from
construction and speculative land loans toward commercial loans for
operating businesses.
On a year-to-date basis, net interest income in the first six months of
2012 totaled $15.3 million compared to net interest income of $12.4
million in the predecessor first six months of 2011. Net interest
margin increased from 2.88% in the first six months of 2011 to 4.36% in
the first six months of 2012.
Year-to-date accretion of the discount on purchased non-impaired loans
added $371 thousand to net interest income in the first six months of
2012 and increased earning asset yields by 0.11%. Additionally, the
Company recorded $765 thousand of income in the first six months of
2012 related to recovery payments in excess of carrying value on
certain purchased credit-impaired loans not grouped in pools. These
loan recoveries benefited earning asset yields by 0.22%. Net
amortization of purchase accounting fair value adjustments on
interest-bearing liabilities increased net interest income by $1.7
million in the first six months of 2012 and lowered the cost of
interest-bearing liabilities by 0.56%. The remaining decline in the
cost of interest-bearing liabilities not attributable to amortization
of fair value adjustments was due to the repricing and change in mix of
deposits to favor low-cost, core deposits.
Provision for Loan Losses and Asset Quality
Provision for loan losses in the second quarter of 2012 totaled $2.0
million compared to provision of $3.0 million in the predecessor second
quarter of 2011. The loan loss provision in the first six months of
2012 totaled $2.8 million compared to provision of $10.1 million in the
predecessor first six months of 2011. The allowance for loan losses and
related provision are calculated for loans originated subsequent to
Piedmont's investment in the Company (or "New Loans"), purchased
non-impaired loans, and purchased credit-impaired loans.
The following table summarizes the changes in allowance for loan losses
for each loan category in the three month and six month periods ended
June 30, 2012:
New Purchased Purchased
(Dollars in thousands) Loans Non-Impaired Credit-Impaired Total
----- ------------ --------------- ------
Three Months Ended:
-----------------------------
Balance at March 31, 2012 $366 $371 $-- $737
Net charge-offs -- (592) -- (592)
Provision for loan losses 341 855 772 1,968
----- ------------ --------------- ------
Balance at June 30, 2012 $707 $634 $772 $2,113
===== ============ =============== ======
Six Months Ended:
-----------------------------
Balance at December 31, 2011 $227 $-- $-- $227
Net charge-offs -- (886) -- (886)
Provision for loan losses 480 1,520 772 2,772
----- ------------ --------------- ------
Balance at June 30, 2012 $707 $634 $772 $2,113
===== ============ =============== ======
The allowance for loan losses of $707 thousand on new loans at June 30,
2012 represents 1.00% of related outstanding balances. There were no
impaired or past due new loans at June 30, 2012 or December 31, 2011.
Although purchased non-impaired loans were adjusted to fair value at
acquisition, the Company records charge-offs for losses in excess of
fair value adjustments and provides reserves for deterioration in
credit quality on these loans. All revolving loans were classified as
purchased non-impaired at acquisition and a majority of the charge-offs
and provision relate to acquired revolving home equity lines.
Loans acquired with evidence of credit deterioration since origination
are accounted for as purchased credit-impaired loans. Subsequent to
acquisition of these loans, estimates of cash flows expected to be
collected are updated each reporting period based on assumptions
regarding default rates, loss severities, and other factors that
reflect current market conditions. If the Company has probable
decreases in cash flows expected to be collected (other than due to
decreases in interest rates), the provision for loan losses is charged,
resulting in an increase to the allowance for loan losses. If there are
probable and significant increases in cash flows expected to be
collected, the Company will first reverse any previously established
allowance for loan losses and then increase interest income as a
prospective yield adjustment over the remaining life of the loans.
Results of the Company's second quarter cash flow re-estimation are
summarized as follows:
Cash Flow New Previous
(Dollars in thousands) Impairment Improvement Yield Yield
---------- ----------- ----- --------
Loan pools with cash flow
improvement $-- $1,687 6.67% 5.96%
Loan pools with impairment 772 -- 5.34% 5.34%
---------- ----------- ----- --------
Total $772 $1,687 6.49% 5.88%
========== =========== ===== ========
The second quarter cash flow re-estimation indicated net improved cash
flows on purchased credit-impaired loans of $915 thousand. The $1.7
million of cash flow improvement on related loan pools will be recorded
as additional interest income as a prospective yield adjustment over
the remaining life of the loans. The $772 thousand impairment was
recorded to the provision for loan losses in the second quarter. The
pool-level impairment and cash flow improvement were calculated as the
difference between the pool-level recorded investment and the net
present value of estimated cash flows at the time of the cash flow
re-estimation.
Nonperforming loans as a percentage of total loans held for investment
totaled 2.90% at June 30, 2012, which was a decline from 2.99% as of
March 31, 2012 and 4.14% at December 31, 2011. Total nonperforming
assets (which include nonaccrual loans, loans past due 90 days or more
and still accruing, other real estate owned and repossessed loan
collateral) as a percentage of total assets at June 30, 2012 totaled
2.38%, which was a decline from 2.53% at March 31, 2012 and 3.87% at
December 31, 2011.
Non-Interest Income
Non-interest income in the second quarter of 2012 totaled $1.7 million
compared to $1.1 million in the predecessor second quarter of 2011. The
primary reason for this increase is due to growth in the Company's
mortgage lending business. Total mortgage banking income increased from
$259 thousand in the second quarter of 2011 to $689 thousand in the
second quarter of 2012. The Company restructured its mortgage lending
business following Piedmont's investment, hired additional experienced
mortgage lenders and continues to benefit from the improving housing
market in the Raleigh area as well as the currently low interest rate
environment.
Additionally, a $179 thousand impairment of a non-marketable equity
security in the second quarter of 2011 reduced non-interest income in
the prior year period. The Company incurred no securities impairment
charges in the second quarter of 2012. Other non-interest income
increased by $241 thousand primarily due to a benefit of $144 thousand
from fair value adjustments on the Company's interest rate swaps, which
have been marked to fair value through earnings since Piedmont's
investment. The Company realized a gain on sale of securities available
for sale of $189 thousand in the second quarter of 2011 compared to a
loss on sale of securities of $27 thousand in the second quarter of
2012, which served to partially offset the improvement in non-interest
income.
On a year-to-date basis, non-interest income in the first six months of
2012 totaled $3.3 million compared to $2.1 million in the predecessor
first six months of 2011. The primary reason for this increase is the
growth in the Company's mortgage lending business. Total mortgage
banking income increased from $425 thousand in the first six months of
2011 to $1.3 million in the first six months of 2012. Other
non-interest income increased by $276 thousand primarily due to a
benefit of $200 thousand from fair value adjustments on the Company's
interest rate swaps.
Non-Interest Expense
Non-interest expense in the second quarter of 2012 totaled $7.9 million
compared with $7.8 million in the predecessor second quarter of 2011.
Salaries and employee benefits increased by $877 thousand due to
additions of commercial and mortgage bankers following Piedmont's
investment. Other non-interest expense increased by $380 thousand,
which was primarily due to higher consulting and contract employee
expenses. Also contributing to higher non-interest expense was a $141
thousand increase in occupancy and equipment expense.
Partially offsetting the increase in non-interest expense was a
reduction of $203 thousand in federal deposit insurance premium expense
primarily due to a lower assessed premium rate and a de-leveraged
balance sheet that reduced the assessment base. The Company also
reduced foreclosed asset losses by $1.1 million due to a significant
reduction in the level of other real estate and foreclosed assets.
On a year-to-date basis, non-interest expense in the first six months
of 2012 totaled $15.6 million compared with $14.9 million in the
predecessor first six months of 2011. Salaries and employee benefits
increased by $1.4 million partially due to a contract termination
payment to a former executive and due to additions of commercial and
mortgage bankers following Piedmont's investment. Other non-interest
expense increased by $597 thousand, which was primarily due to higher
contract employee expenses. Also contributing to higher non-interest
expense was a $100 thousand increase in occupancy and equipment expense
and a $152 thousand increase in data processing expense.
Partially offsetting the increase in year-to-date non-interest expense
was a reduction of $307 thousand in federal deposit insurance premium
expense primarily due to a lower assessed premium rate and a
de-leveraged balance sheet that reduced the assessment base. The
Company also reduced foreclosed asset losses by $1.3 million due to a
significant reduction in the level of other real estate and foreclosed
assets.
Income Taxes
The Company's income tax benefit in the second quarter of 2012 totaled
$340 thousand, which represented a 45% effective tax rate on pre-tax
losses. This effective tax rate was determined by the Company's
statutory income tax rate adjusted for non-taxable municipal investment
income and earnings on bank owned life insurance. The Company did not
record any tax benefit associated with the pre-tax loss in the
predecessor second quarter of 2011. The valuation allowance on deferred
tax assets was increased in the second quarter of 2011 to reflect a
full reserve on the tax benefit generated by losses in that quarter.
Because of the improvement in the Company's earnings prospects
following Piedmont's investment and based on an analysis of positive
and negative evidence related to its deferred tax assets, the Company
determined that there was sufficient positive evidence to indicate that
it would likely realize the full value of its deferred tax assets over
time and therefore established no valuation allowance on its deferred
tax assets at June 30, 2012.
Linked Quarter Comparison
Net interest income in the second quarter of 2012 totaled $7.4 million
compared to net interest income of $7.9 million in the predecessor
first quarter of 2012. Net interest margin decreased from 4.46% in the
first quarter to 4.24% in the second quarter. The linked quarter
decrease in margin and net interest income was due to a decline in
average loan balances, a decline in accretion income on purchased
non-impaired loans, and a decline in recovery payments on certain
purchased credit-impaired loans. These decreases in income were
partially offset by improved yields on certain purchased-credit
impaired loan pools following the second quarter re-estimation.
Average loan balances declined from $541.4 million in the first quarter
of 2012 to $510.7 million in the second quarter of 2012. This decline
was a result of the Company's continued efforts to resolve problem
assets and to change the portfolio mix. Accretion of the discount on
purchased non-impaired loans and the related benefit to net interest
income decreased by $389 thousand from the first quarter to the second
quarter. Additionally, income related to recovery payments in excess of
carrying value on certain purchased credit-impaired loans not grouped
in pools decreased from $563 thousand in the first quarter to $202
thousand in the second quarter.
Provision for loan losses in the second quarter of 2012 totaled $2.0
million compared to provision of $804 thousand in the first quarter of
2012. The increase in provision was related to a $202 thousand increase
in provision for new loans, a $190 thousand increase in provision for
purchased non-impaired loans, and a $772 thousand increase in provision
for purchased credit-impaired loans. The provision (or impairment) on
purchased credit-impaired loans in the second quarter was based on the
quarterly cash flow re-estimation while the Company's evaluation of
estimated cash flows in the first quarter indicated that no impairment
was necessary.
Non-interest income in the second quarter of 2012 totaled $1.7 million
compared to $1.6 million in the first quarter of 2012. This increase
was primarily due to other non-interest income, which increased by $225
thousand on a linked quarter basis, and was partially offset by a
decrease in income from sales of available for sale securities, which
declined from a $192 thousand gain in the first quarter to a $27
thousand loss in the second quarter. The increase in other non-interest
income was primarily due to higher favorable fair value adjustments on
the Company's interest rate swaps, which have been marked to fair value
through earnings since Piedmont's investment.
Non-interest expense in the second quarter of 2012 totaled $7.9 million
compared to $7.7 million in the first quarter of 2012. This increase
was primarily due to a $192 thousand increase in salaries and employee
benefits and a $150 thousand increase in occupancy and equipment
partially offset by a linked quarter decline of $171 thousand in FDIC
insurance premiums.
The income tax benefit of $340 thousand in the second quarter of 2012
and income tax expense of $354 thousand in the first quarter of 2012
were based on pre-tax loss and income in the respective quarters
adjusted for non-taxable income such as municipal investment income and
earnings on bank owned life insurance.
Piedmont Investment
On November 18, 2011, the Company completed the issuance and sale of
18,750,000 shares of its common stock to Piedmont for $75.0 million in
cash. As part of its investment, Piedmont also made a tender offer to
the Company's stockholders commencing on November 8, 2011 to purchase
up to 67% of the Company's outstanding common stock at a price of $4.75
per share ("Tender Offer"). Pursuant to the Tender Offer, Piedmont
purchased 6,128,423 shares of the Company's common stock for $29.1
million. As a result of Piedmont's initial investment and the Tender
Offer, Piedmont owns approximately 88% of the Company's outstanding
common stock.
Because of the level of Piedmont's ownership and control, the Company
has applied push-down accounting. Accordingly, the Company's assets and
liabilities were adjusted to estimated fair value at the acquisition
date, and the allowance for loan losses was eliminated. The Company is
currently within the one-year measurement period with respect to the
acquisition date, and thus, future material adjustments to these
purchase accounting fair value adjustments are possible.
In the first six months of 2012, the Company increased goodwill by $2.1
million as a result of adjustments to refine the Company's acquisition
date estimate of market rent on two branch leases, adjustments to
refine the valuation of certain other real estate owned, and
adjustments to refine acquisition date cash flow estimates and the
related valuation of certain loans. Balances and activity in the
Company's consolidated financial statements prior to Piedmont's
investment have been labeled with "Predecessor Company" while balances
and activity subsequent to Piedmont's investment have been labeled with
"Successor Company."
1 VantageSouth's common stock is not registered under the Exchange Act
and, as a result, VantageSouth does not file securities reports with
the SEC. However, additional financial and regulatory information is
available in Reports of Condition and Income ("Call Reports") filed by
VantageSouth with the FDIC, which are publicly accessible at
http://www.fdic.gov. Such reports are not incorporated by reference in
this release or in the accompanying Form 8-K.
Crescent State Bank is a state chartered bank operating fifteen banking
offices in Cary (2), Apex, Clayton, Holly Springs, Southern Pines,
Pinehurst, Sanford, Garner, Raleigh (3), Wilmington (2) and Knightdale,
North Carolina. Crescent Financial Bancshares, Inc. stock can be found
on the NASDAQ Global Market trading under the symbol CRFN. Investors
can access additional corporate information, product descriptions and
online services through the Bank's website at
http://www.crescentstatebank.com.
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 interests of Piedmont differing from
other stockholders or any change in management, strategic direction,
business plan, or operations, the Company's new management's ability to
successfully integrate into the Company's business and execute its
business plan, 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 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.
Disclaimer
This press release is not a solicitation of a proxy, an offer to
purchase nor a solicitation of an offer to sell shares of the Company,
and it is not a substitute for any proxy statement or other filings
that may be made with the Securities and Exchange Commission (the
"SEC"). If such documents are filed with the SEC, investors will be
urged to thoroughly review and consider them because they will contain
important information, including risk factors. Any such documents, once
filed, would be available free of charge at the SEC's website
(www.sec.gov) and from the Company.
INCOME STATEMENTS (unaudited)
(Dollars in thousands except per share data; prior quarters' information may have been reclassified)
Successor Company Predecessor Company
-------------------------------------------------------------------------
For the For the
Period Period
For the Three Month For the Three Month
Period Ended Period Ended
------------------------ November 19 October 1 ------------------------
through through
September
June 30, March 31, December 31, November 18, 30, June 30,
2012 2012 2011 2011 2011 2011
-------------------------------------------------------------------------
INTEREST INCOME
Loans $ 7,849 $ 8,335 $ 4,252 $ 4,439 $ 9,030 $ 9,022
Investment securities available for sale 931 963 313 874 1,836 1,825
Fed funds sold and other interest-earning deposits 26 12 45 7 18 28
-------------------------------------------------------------------------
Total interest income 8,806 9,310 4,610 5,320 10,884 10,875
-------------------------------------------------------------------------
INTEREST EXPENSE
Deposits 1,125 1,124 617 1,315 2,719 3,131
Short-term borrowings 1 2 18 21 21 21
Long-term debt 287 276 624 718 1,387 1,377
-------------------------------------------------------------------------
Total interest expense 1,413 1,402 1,259 2,054 4,127 4,529
-------------------------------------------------------------------------
Net interest income 7,393 7,908 3,351 3,266 6,757 6,346
Provision for loan losses 1,968 804 227 2,207 4,452 3,035
-------------------------------------------------------------------------
Net interest income after provision for loan losses 5,425 7,104 3,124 1,059 2,305 3,311
-------------------------------------------------------------------------
Non-interest income
Mortgage banking income 689 656 169 341 475 259
Service charges and fees on deposit accounts 443 447 217 242 470 457
Earnings on bank owned life insurance 203 204 103 112 215 216
Gain (loss) on sale of available for sale
securities (27) 192 (55) 3,642 57 189
Impairment of marketable equity securities -- -- -- -- (48) --
Impairment of nonmarketable equity securities -- -- -- -- 179 (179)
Other 375 150 50 174 96 134
-------------------------------------------------------------------------
Total non-interest income 1,683 1,649 484 4,511 1,444 1,076
Non-interest expense
Salaries and employee benefits 4,014 3,822 2,399 3,163 3,140 3,137
Occupancy and equipment 1,121 971 436 529 968 980
Data processing 503 519 241 241 447 449
FDIC insurance premiums 174 345 141 191 292 377
Net loss (gain) on foreclosed assets 63 (58) (9) (74) 291 1,187
Other loan related expense 365 496 231 373 378 460
Other 1,622 1,596 837 1,175 1,237 1,242
-------------------------------------------------------------------------
Total non-interest expense 7,862 7,691 4,276 5,597 6,753 7,832
-------------------------------------------------------------------------
Income (loss) before income taxes (754) 1,062 (668) (27) (3,004) (3,445)
Income taxes (340) 354 (520) -- -- --
-------------------------------------------------------------------------
Net income (loss) (414) 708 (148) (27) (3,004) (3,445)
-------------------------------------------------------------------------
Effective dividend on preferred stock 373 384 182 233 442 437
-------------------------------------------------------------------------
Net income (loss) attributable common stockholders $ (787) $ 324 $ (330) $ (260) $ (3,446) $ (3,882)
=========================================================================
NET INCOME (LOSS) PER COMMON SHARE
Basic $ (0.03) $ 0.01 $ (0.01) $ (0.03) $ (0.36) $ (0.40)
=========================================================================
Diluted $ (0.03) $ 0.01 $ (0.01) $ (0.03) $ (0.36) $ (0.40)
=========================================================================
COMMON SHARE DATA
Book value per common share $ 4.16 $ 4.24 $ 4.17 $ 4.16 $ 4.48 $ 4.74
Tangible book value per common share $ 3.30 $ 3.39 $ 3.39 $ 4.10 $ 4.41 $ 4.67
Ending shares outstanding 28,385,308 28,360,196 28,412,059 9,662,059 9,662,059 9,664,059
Weighted average common shares outstanding - basic 28,361,060 28,360,196 28,353,053 9,587,324 9,587,324 9,586,390
=========================================================================
Weighted average common shares outstanding -
diluted 28,361,060 28,385,439 28,353,053 9,587,324 9,587,324 9,586,390
=========================================================================
PERFORMANCE RATIOS (annualized)
Return on average assets -0.20% 0.35% -0.13% -0.02% -1.32% -1.47%
Return on average equity -1.15% 1.99% -0.85% -0.31% -17.59% -19.21%
Tax equivalent yield on earning assets 5.05% 5.25% 4.45% 4.95% 5.05% 4.97%
Cost of interest-bearing liabilities 0.97% 0.95% 1.41% 2.04% 2.10% 2.24%
Tax equivalent net interest margin 4.24% 4.46% 3.24% 3.09% 3.17% 2.95%
Efficiency ratio 86.62% 80.48% 111.50% 71.97% 82.34% 105.52%
Net loan charge-offs 0.47% 0.22% 0.00% 2.74% 2.64% 2.62%
INCOME STATEMENTS (unaudited)
(Dollars in thousands except per share data; prior years' information
may have been reclassified)
Successor Predecessor
Company Company
---------- -----------
For the
Six For the Six
Month Month
Period Period
Ended Ended
June 30, June 30,
2012 2011
---------- -----------
INTEREST INCOME
Loans $ 16,184 $ 18,100
Investment securities available for sale 1,894 3,488
Fed funds sold and other interest-earning
deposits 38 57
---------- -----------
Total interest income 18,116 21,645
---------- -----------
INTEREST EXPENSE
Deposits 2,249 6,480
Short-term borrowings 3 36
Long-term debt 563 2,747
---------- -----------
Total interest expense 2,815 9,263
---------- -----------
Net interest income 15,301 12,382
Provision for loan losses 2,772 10,059
---------- -----------
Net interest income after provision for
loan losses 12,529 2,323
---------- -----------
Non-interest income
Mortgage banking income 1,345 425
Service charges and fees on deposit
accounts 890 904
Earnings on bank owned life insurance 407 429
Gain on sale of available for sale
securities 165 290
Impairment of nonmarketable equity
securities -- (179)
Other 525 249
---------- -----------
Total non-interest income 3,332 2,118
Non-interest expense
Salaries and employee benefits 7,836 6,484
Occupancy and equipment 2,092 1,992
Data processing 1,022 870
FDIC deposit insurance premium 519 826
Net loss on foreclosed assets 5 1,345
Other loan related expense 861 794
Other 3,218 2,621
---------- -----------
Total non-interest expense 15,553 14,932
---------- -----------
Income (loss) before income taxes 308 (10,491)
Income taxes 14 --
---------- -----------
Net income (loss) 294 (10,491)
---------- -----------
Effective dividend on preferred stock 757 865
---------- -----------
Net loss attributable to common stockholders $ (463) $ (11,356)
========== ===========
NET INCOME (LOSS) PER COMMON SHARE
Basic $ (0.02) $ (1.18)
========== ===========
Diluted $ (0.02) $ (1.18)
========== ===========
Weighted average common shares outstanding
- basic 28,360,628 9,583,904
========== ===========
Weighted average common shares outstanding
- diluted 28,360,628 9,583,904
========== ===========
PERFORMANCE RATIOS (annualized)
Return on average assets 0.07% -2.21%
Return on average equity 0.41% -28.02%
Tax equivalent yield on earning assets 5.15% 4.95%
Cost of interest-bearing liabilities 0.96% 2.29%
Tax equivalent net interest margin 4.36% 2.88%
Efficiency ratio 83.47% 102.98%
Net loan charge-offs 0.34% 2.60%
CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars in thousands)
Successor Company Predecessor Company
---------------------------------- -----------------------
December September
June 30, March 31, 31, 30, June 30,
2012 2012 2011 (a) 2011 2011
---------- ---------- ---------- ----------- ----------
ASSETS
Cash and due from banks $ 13,695 $ 12,027 $ 8,844 $ 9,551 $ 8,594
Interest-earning deposits with banks 1,144 2,120 1,773 1,187 1,143
Federal funds sold 40,775 42,925 14,745 20,780 41,415
Investment securities available for sale 151,430 144,944 143,504 216,932 200,922
Mortgage loans held for sale 3,226 3,317 3,841 2,821 1,949
Loans held for investment 508,284 515,761 552,877 615,980 636,408
Allowance for loan losses (2,113) (737) (227) (22,601) (22,319)
---------- ---------- ---------- ----------- ----------
Net Loans 506,171 515,024 552,650 593,379 614,089
Federal Home Loan Bank stock 2,931 8,669 8,669 9,156 9,606
Premises and equipment, net 10,623 10,619 10,286 10,988 11,208
Bank owned life insurance 19,620 19,441 19,261 19,068 18,873
Foreclosed assets 4,743 5,497 9,422 13,643 13,491
Deferred tax asset, net 30,673 29,691 30,191 11,564 11,684
Goodwill 22,131 21,816 20,015 -- --
Other intangibles, net 2,100 2,165 2,230 593 626
Other assets 10,243 7,373 9,072 6,299 13,316
---------- ---------- ---------- ----------- ----------
Total Assets $ 819,505 $ 825,628 $ 834,503 $ 915,961 $ 946,916
========== ========== ========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand $ 77,650 $ 75,320 $ 91,215 $ 70,739 $ 67,616
Savings 41,008 42,613 46,840 50,130 55,038
Money market and NOW 262,532 251,433 226,584 226,868 228,102
Time 278,318 289,463 309,780 338,437 363,818
---------- ---------- ---------- ----------- ----------
Total Deposits 659,508 658,829 674,419 686,174 714,574
Short-term borrowings -- 5,000 -- 5,000 5,000
Long-term debt 12,288 12,251 12,216 152,748 152,748
Accrued expenses and other liabilities 5,145 4,931 4,809 5,057 5,175
---------- ---------- ---------- ----------- ----------
Total Liabilities 676,941 681,011 691,444 848,979 877,497
STOCKHOLDERS' EQUITY
Preferred stock 24,544 24,489 24,442 23,741 23,614
Common stock 28 28 28 9,662 9,664
Common stock warrant 1,325 1,325 1,325 2,367 2,367
Additional paid-in capital 117,453 117,445 117,434 74,736 74,700
Retained earnings (accumulated deficit) (1,968) 480 (181) (46,776) (43,643)
Accumulated other comprehensive income 1,182 850 11 3,252 2,717
---------- ---------- ---------- ----------- ----------
Total Stockholders' Equity 142,564 144,617 143,059 66,982 69,419
Total Liabilities and Stockholders' Equity $ 819,505 $ 825,628 $ 834,503 $ 915,961 $ 946,916
========== ========== ========== =========== ==========
(a) Derived from audited consolidated financial statements.
CAPITAL RATIOS
Tangible equity to tangible assets 14.88% 15.05% 14.87% 7.25% 7.27%
Tangible common equity to tangible assets 11.79% 11.99% 11.86% 4.66% 4.77%
Tier 1 leverage ratio 12.36% 12.72% 10.68% 7.25% 7.52%
Tier 1 risk-based capital ratio 14.59% 15.66% 14.26% 9.39% 9.64%
Total risk-based capital ratio 15.98% 16.87% 15.27% 11.71% 11.92%
ASSET QUALITY DATA
Nonperforming loans $ 14,762 $ 15,423 $ 22,888 $ 43,115 $ 39,105
Foreclosed assets 4,743 5,497 9,422 13,643 13,491
---------- ---------- ---------- ----------- ----------
Total nonperforming assets $ 19,505 $ 20,920 $ 32,310 $ 56,758 $ 52,596
========== ========== ========== =========== ==========
Allowance for loan losses to loans 0.42% 0.14% 0.04% 3.67% 3.51%
Nonperforming loans to total loans 2.90% 2.99% 4.14% 7.00% 6.14%
Nonperforming assets to total assets 2.38% 2.53% 3.87% 6.20% 5.55%
Restructured not included in categories
above $ -- $ -- $ -- $ 10,602 $ 7,221
AVERAGE BALANCES, INTEREST AND YIELDS/COSTS (in thousands)
Successor Company Predecessor Company
--------------------------------------------------------------------- ---------------------------------
For the Three Months Ended For the Three Months Ended For the Three Months Ended
June 30, 2012 March 31, 2012 June 30, 2011
--------------------------------- ---------------------------------- ---------------------------------
Average Average Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost
---------- --------- ---------- ----------- --------- ---------- ----------- -------- ----------
Interest-ear
nings assets
Loans $ 510,749 $ 7,849 6.18% $ 541,361 $ 8,335 6.19% $ 643,774 $ 9,022 5.62%
Investment
securities 148,280 931 2.70% * 152,811 963 2.71% * 204,459 1,825 4.07% *
Fed funds
and other
interest-ea
rning 46,896 26 0.22% 24,457 12 0.20% 49,642 28 0.23%
---------- --------- ---------- ----------- --------- ---------- ----------- -------- ----------
Total
interest-ea
rning assets 705,925 8,806 5.05% * 718,629 9,310 5.25% * 897,875 10,875 4.97% *
Noninterest-
earning
assets 114,153 101,449 53,582
---------- ----------- -----------
Total assets $ 812,771 $ 820,078 $ 951,457
========== =========== ===========
Interest-bea
ring
liabilities
Interest-bea
ring NOW $ 119,234 144 0.49% $ 142,452 237 0.67% $ 151,948 686 1.81%
Money market
and savings 169,392 306 0.73% 132,648 206 0.62% 132,430 268 0.81%
Time
deposits 285,436 675 0.95% 299,895 681 0.91% 368,987 2,177 2.37%
Short-term
borrowings 1,389 1 0.17% 3,648 2 0.17% 5,000 21 1.66%
Long-term
debt 12,269 287 9.41% 12,238 276 9.07% 152,748 1,377 3.57%
---------- --------- ---------- ----------- --------- ---------- ----------- -------- ----------
Total
interest-be
aring
liabilities 587,720 1,413 0.97% 590,881 1,402 0.95% 811,113 4,529 2.24%
Non-interest
bearing
deposits 75,363 79,933 63,025
Other
liabilities 4,729 4,663 4,551
---------- ----------- -----------
Total
liabilities 667,812 675,477 878,689
Stockholders
' equity 144,959 144,601 72,768
---------- ----------- -----------
Total
liabilities
and
stockholder
s' equity $ 812,771 $ 820,078 $ 951,457
========== =========== ===========
--------- --------- --------
Net interest
income $ 7,393 $ 7,908 $ 6,346
========= ========= ========
Interest
rate spread 4.08% 4.30% 2.73%
========== ========== ==========
Tax
equivalent
net
interest-ma
rgin 4.24% 4.46% 2.95%
========== ========== ==========
Percentage
of average
interest-ea
rning assets
to average
interest-be
aring
liabilities 120.11% 121.62% 110.70%
========== ========== ==========
* Shown as a tax equivalent yield
Successor Company Predecessor Company
--------------------------------- ----------------------------------
For the Six Months Ended For the Six Months Ended
June 30, 2012 June 30, 2011
--------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
---------- --------- ---------- ----------- --------- ----------
Interest-ear
nings assets
Loans $ 527,383 $ 16,184 6.17% $ 655,896 $ 18,100 5.56%
Investment
securities 150,531 1,894 2.71% * 197,362 3,488 4.07% *
Fed funds
and other
interest-ea
rning 34,328 38 0.22% 49,549 57 0.23%
---------- --------- ---------- ----------- --------- ----------
Total
interest-ea
rning assets 712,242 18,116 5.15% * 902,807 21,645 4.95% *
Noninterest-
earning
assets 104,182 54,939
---------- -----------
Total assets $ 816,424 $ 957,746
========== ===========
Interest-bea
ring
liabilities
Interest-bea
ring NOW $ 130,835 381 0.59% $ 151,193 1,445 1.93%
Money market
and savings 151,012 512 0.68% 132,963 584 0.89%
Time
deposits 292,667 1,356 0.93% 374,402 4,451 2.40%
Short-term
borrowings 2,511 2 0.17% 4,320 36 1.70%
Long-term
debt 12,263 564 9.25% 153,853 2,747 3.55%
---------- --------- ---------- ----------- --------- ----------
Total
interest-be
aring
liabilities 589,288 2,815 0.96% 816,731 9,263 2.29%
Non-interest
bearing
deposits 77,643 61,066
Other
liabilities 4,713 4,449
---------- -----------
Total
liabilities 671,644 882,246
Stockholders
' equity 144,780 75,500
---------- -----------
Total
liabilities
and
stockholder
s' equity $ 816,424 $ 957,746
========== ===========
--------- ---------
Net interest
income $ 15,301 $ 12,382
========= =========
Interest
rate spread 4.19% 2.66%
========== ==========
Tax
equivalent
net
interest-ma
rgin 4.36% 2.88%
========== ==========
Percentage
of average
interest-ea
rning assets
to average
interest-be
aring
liabilities 120.86% 110.54%
========== ==========
* Shown as a tax equivalent yield
CONTACT: Terry Earley, CFO
Crescent Financial Bancshares, Inc.
Phone: (919) 659-9015
Email: tearley@CrescentStateBank.com
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