Cardinal Financial Corporation (NASDAQ: CFNL) (the “Company”)
today reported record earnings of $50.5 million for the year ended
December 31, 2016, which included $3.3 million of after-tax
expenses related to the August 17th announcement of the merger with
United Bankshares. Diluted earnings per share were $1.50, or $1.60,
before the merger expense impact. The adjusted net income of $53.8
million in 2016, which are exclusive of the merger expenses,
represent a 17% increase over 2015 adjusted net income (see Table
7).
Earnings for the quarter ended December 31, 2016 were $10.8
million, compared to $9.0 million for the same year ago quarter.
Diluted earnings per share were $0.32 and $0.27 for these same
respective periods. Before the current quarter merger expenses, the
Company had adjusted net income of $12.4 million, or $0.37 per
share.
Selected Highlights
- Return on average assets (“ROAA”) and
average equity (“ROAE”) were 1.23% and 11.40% for 2016. Before
merger expenses, ROAA was 1.31% and ROAE was 12.14% for the
year.
- Before taxes and the provision for loan
losses, the commercial banking segment’s earnings for the current
year were also a record, improving 19% from a year ago to $71.2
million.
- Total assets of the Company exceeded
$4.21 billion, increasing 4.5% from December 31, 2015.
- Loans held for investment were $3.28
billion, increasing 7.4% from a year ago.
- Non-interest bearing demand deposit
accounts increased 11.6% over the past year, totaling 27% of
customer deposits.
- For the fourth consecutive quarter, the
Company had no nonaccrual loans and no other real estate owned at
quarter end.
- Net interest margin was 3.37% for the
fourth quarter of 2016, an increase from 3.25% for the year ago
fourth quarter.
- Total mortgage loan closings were over
$4.07 billion in 2016, an increase of $466 million from $3.60
billion in 2015. Purchase money mortgages represented 69% of the
year’s closed loan volume.
- During 2016, purchase money mortgage
application volume increased by $400 million compared to 2015 and
nearly $900 million compared to 2014.
Review of Balance Sheet
At December 31, 2016, total assets of the Company were $4.21
billion, an increase of 4.5% from total assets of $4.03 billion at
December 31, 2015. Average interest earning assets for the fourth
quarter increased to $3.99 billion from $3.78 billion a year ago,
and average interest bearing liabilities for the fourth quarter
2016 increased to $2.86 billion from $2.81 billion a year ago.
Loans held for investment grew 7.4% to $3.28 billion at December
31, 2016 versus $3.06 billion a year ago, overcoming $531 million
in loan payoffs during the year. Loans held for sale were $298
million at December 31, 2016, compared to $432 million at September
30, 2016. The Company’s investment securities portfolio increased
slightly to $400 million from $398 million at the end of the
previous quarter.
Over the past year, deposit balances increased $250 million to
$3.28 billion from $3.03 billion, an increase of 8.2%. Non-interest
bearing demand deposit accounts, which totaled $733 million and
represented 27% of customer deposits, increased $76 million since
December 31, 2015, or 11.6%. The increase in customer deposits is
due primarily to steady focus on relationship banking within the
markets the Company serves.
Net Interest Income
Net interest income increased 7.2%, to $32.7 million from $30.5
million, for the quarters ended December 31, 2016 and 2015,
respectively. For the current quarter, the Company’s tax equivalent
net interest margin was 3.37%, an increase from 3.35% for the prior
sequential quarter and up from 3.25% for the year ago linked
quarter in 2015.
The yield on loans held for investment was 4.10% for the fourth
quarter of 2016, the same as the third quarter of 2016, while the
yield on loans held for sale decreased to 3.51% for the fourth
quarter of 2016 versus 3.65% for the previous quarter, reflecting
the lower interest rate environment for mortgage loans that existed
for most of the current period. The average balance of loans held
for sale experienced a normal seasonal decline to $333 million in
the most recent quarter, versus $422 million in the third quarter
of 2016. The yield on total interest earning assets was 3.98% for
the fourth quarter of 2016, compared to 3.97% for the previous
quarter. For these same respective periods, the Company’s total
cost of interest bearing liabilities increased to 0.85% from 0.84%.
Including DDAs, the Company’s total cost of funds decreased to
0.67% from 0.68%.
Commercial Banking Review
For the current year ended December 31, 2016, the commercial
banking segment’s (the Bank’s) net income increased 23% to a record
$48.3 million versus $39.2 million for the year ended December 31,
2015. Before taxes and the provision for loan losses, the Bank’s
income for the current year was also a record $71.2 million, a 19%
improvement from the year ago level of $60.0 million.
For the quarter ended December 31, 2016, net income for the Bank
was $15.8 million, an increase of 65% from $9.6 million for the
fourth quarter of last year. During the current quarter, there was
a negative provision for loan losses of $1.9 million versus a
provision of $449,000 during the year ago quarter. Before taxes and
the provision for loan losses, the Bank’s income for the current
quarter was $20.9 million, a 37% improvement from the same quarter
a year ago.
For the current quarter, there were annualized net charge offs
(recoveries) of (0.01%) of average loans outstanding. The allowance
for loan losses was 0.97% of loans outstanding at December 30, 2016
versus 1.04% at December 31, 2015. This ratio decrease from a year
ago is primarily the result of continued improvement of credit
quality. The Company continued to have no nonperforming loans at
December 31, 2016 versus nonperforming loans of 0.01% of total
assets at December 31, 2015.
Non-interest income was $2.9 million for the current quarter
compared to $963,000 for the year ago quarter. Fees primarily
associated with loans that paid off before their maturity increased
$887,000. Before gains on securities sales of $4.6 million, current
year non-interest income was $5.6 million versus $5.3 million for
the 2015 year. Securities gains were offset by $3.6 million of FHLB
Advance prepayment fees, which are recorded in non-interest
expense, and which together were part of a strategy to increase net
interest income.
For the fourth quarter of 2016, non-interest expense was $14.8
million, compared to $15.9 million for the prior sequential quarter
and $15.7 million for the fourth quarter of 2015. For the year
ended December 31, 2016, total non-interest expense was $66.7
million, which included $3.6 million from the prepayment of FHLB
Advances. This compares to $60.0 million of non-interest expense in
2015. The efficiency ratio for the Bank was 47.0% versus 50.0% for
these respective periods, which reflects the Company’s continued
focus on expense controls.
Mortgage Banking Review
The Company’s mortgage banking subsidiary, George Mason Mortgage
(GMM), had an extremely active year as it accepted approximately
$5.8 billion in loan applications versus $5.2 billion in 2015.
Purchase money applications increased to $4.0 billion in 2016 from
$3.6 billion in the previous year. Although refinance activity
contributed to the results, GMM’s primary focus remains on the
relatively more stable purchase money mortgage business.
Q42016
Q32016
Q22016
Q12016
Q42015
YTD2016
YTD2015
Mortgage Loan Applications (000's) $1,043 $1,575
$1,704 $1,503 $1,063 $5,825
$5,211 Purchase Money % 73% 63% 75% 68%
74% 69% 67% # of Units 2,971
4,532 4,757 4,402 3,005 16,662
15,226
During the fourth quarter of 2016, the Company experienced a
typical seasonal slowdown, and for the quarter ended December 31,
2016, GMM reported a net loss of $3.0 million. However, operating
net income was $4.0 million, one of the best quarters on record.
Operating net income (a non-GAAP measure) excludes the impact of
the Staff Accounting Bulletin (“SAB”) 109 accounting requirement to
record unrealized gains associated with the Company’s locked
mortgage loan pipeline.
On a year to date basis, reported net income was $7.3 million in
2016 versus $9.2 million in 2015, and operating net income was $9.8
million in 2016 versus $6.8 million in 2015. The SAB 109 impact
resulted in a decrease of $2.4 million to reported earnings in 2016
versus an increase of $2.4 million in 2015.
Comparable recent quarterly and year to date results are shown
below.
Q42016
Q32016
Q22016
Q12016
Q42015
YTD2016
YTD2015
Mortgage Banking:
(in 000's)
Reported Net Income (Loss)
$(3,017) $2,816 $3,994 $3,553
$164 $7,346 $9,180 Reverse Impact of SAB 109
7,012 1,446 (2,259) (3,794) 765
2,405 (2,417) Operating Net Income (Loss) 3,995
4,262 1,735 (241) 929 9,715
6,763 Pretax Operating Net Income (Loss) 6,156
6,643 2,743 (329) 1,331 15,212
10,600
The net realized gain on sales and other fees, before the impact
of SAB 109, was $55.0 million for the year ended December 31, 2016
versus $39.7 million for 2015. The gain on sale margin was 2.75%
for the 2016 year versus 2.60% for 2015. The increase from previous
year is primarily due to the success of selling a majority of its
production on a mandatory delivery basis.
Non-interest expenses were $40.9 million for 2016 compared to
$31.8 million last year. In addition to the added personnel costs
related to compliance with the new TILA/RESPA Integrated Disclosure
(TRID) regulations, other expenses increased as a result of the
increased volume of lending activity. All other fixed expenses have
remained consistent.
Bob Brower, President and CEO of George Mason Mortgage said:
“George Mason Mortgage (GMM) had a strong year recording a 44%
increase in pretax operating income to $15.2 million for 2016 and a
near record finish with fourth quarter pretax operating income of
$6.2 million. Our ongoing focus on increasing the firm’s market
share of purchase money mortgages has been beneficial, and our
approach and philosophy to the mortgage business has continued to
attract many of the top professionals in the industry to the GMM
team. We are very excited about our pending merger with United Bank
and the opportunity to join forces with such a strong, well
respected company. The merger should only further benefit our
strong momentum and enhance the products we offer.”
Parent Company Only Review
For the year ended December 31, 2016, Cardinal’s parent company
reported a net loss of $5.2 million versus a net loss of $1.1
million for the previous year. The current year includes
approximately $3.3 million of after-tax merger related
expenses.
Capital Ratios
All capital ratios of the Company comfortably exceeded the
requirements of banking regulators to be considered
well-capitalized. Tangible common equity capital (TCE) as a
percentage of total assets was 9.90% at December 31, 2016.
COMMENTS ON THE YEAR
Bernard H. Clineburg, Executive Chairman, and Christopher W.
Bergstrom, President and CEO, share the following thoughts:
“In August, we announced our intention to merge with United
Bankshares with the belief that the combination of our institutions
represents a tremendous opportunity to create a dominant bank in
the Washington DC metropolitan area which will benefit our
customers and shareholders. The process of seeking required
approvals from shareholders and regulators has proceeded as
expected, and we have been collaborating on integration plans.
"Meanwhile, our 2016 results are indicative of our commitment to
continue our positive momentum as we have begun to focus on
combining our companies. These results show record earnings and
improving profitability metrics while maintaining pristine asset
quality levels. Increased balances in the loan portfolio combined
with an increasing net interest margin resulted in continued
revenue growth. George Mason reported excellent results for the
year with operating earnings at record levels. We have an ongoing
commitment to building a quality team of mortgage bankers with deep
ties to the realtor and builder communities.
“Since Cardinal’s beginning, we have always been committed to
maintaining and growing a strong financial services company for our
employees, clients, the communities we serve, and especially our
shareholders. We are pleased with our 2016 results and especially
proud of our team’s commitment to ongoing excellence. We look
forward to our opportunity for continuing success as we join the
United Bankshares team.”
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
This press release contains “forward-looking statements” within
the meaning of the federal securities laws. These forward-looking
statements contain information related to matters such as the
Company’s intent, belief or expectation with regard to such matters
as financial and operational performance, cost savings, credit
quality and branch expansion. Such statements are necessarily based
on management’s assumptions and estimates and are inherently
subject to a variety of risks and uncertainties concerning the
Company’s operations and business environment, which are difficult
to predict and beyond the control of the Company. Such risks and
uncertainties could cause actual results of the Company to differ
materially from those matters expressed or implied in such
forward-looking statements.
Risk and uncertainties related to the pending merger with United
include, among others, that: the businesses of United and Cardinal
may not be combined successfully, or such combination may take
longer, be more difficult, time-consuming or costly to accomplish
than expected; the expected growth opportunities or cost savings
from the merger may not be fully realized or may take longer to
realize than expected; deposit attrition, operating costs, customer
losses and business disruption following the merger, including
adverse effects on relationships with employees, may be greater
than expected; the regulatory approvals required for the merger may
not be obtained on the proposed terms or on the anticipated
schedule; the stockholders of United and Cardinal may fail to
approve the merger.
For an explanation of some of the additional risks and
uncertainties associated with forward-looking statements, please
refer to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2015 and other reports filed with and furnished
to the Securities and Exchange Commission. The Company has no
obligation and does not undertake to update, revise or correct any
of the forward-looking statements after the date of this press
release, or after the respective dates on which such statements
otherwise are made.
About Cardinal Financial Corporation: Cardinal Financial
Corporation, a financial holding company headquartered in Tysons
Corner, Virginia with assets of $4.21 billion at December 31, 2016,
serves the Washington Metropolitan region through its wholly-owned
subsidiary, Cardinal Bank. Cardinal also operates several other
subsidiaries: George Mason Mortgage, LLC, a residential mortgage
lending company based in Fairfax, Virginia and Cardinal Wealth
Services, Inc., a wealth management services company. The Company's
stock is traded on NASDAQ (CFNL). For additional information please
visit our Web site at www.cardinalbank.com or call (703)
584-3400.
Additional Information about the Merger and Where to Find
It
This communication 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. Shareholders of Cardinal and other investors
are urged to read the proxy statement/prospectus that will be
included in the registration statement on Form S-4, once it becomes
effective, that United has filed with the Securities and Exchange
Commission in connection with the proposed merger because it will
contain important information about United, Cardinal, the merger,
the persons soliciting proxies in the merger and their interests in
the merger and related matters. Investors will be able to obtain
all documents filed with the SEC by United free of charge at the
SEC’s Internet site (http://www.sec.gov). In addition, documents
filed with the SEC by United will be available free of charge from
the Corporate Secretary of United Bankshares, Inc., 514 Market
Street, Parkersburg, West Virginia 26101 telephone (304) 424-8800.
The proxy statement/prospectus (when it is available) and the other
documents may also be obtained for free by accessing United’s
website at www.ubsi-inc.com under the tab “Investor Relations” and
then under the heading “SEC Filings” or by accessing Cardinal’s
website at www.cardinalbank.com under the tab “About Us” and then
under the heading “Investor Relations”, and “SEC Filings”. You are
urged to read the proxy statement/prospectus carefully before
making a decision concerning the merger.
Participants in the Transaction
United, Cardinal and their respective directors, executive
officers and certain other members of management and employees may
be deemed “participants” in the solicitation of proxies from
Cardinal’s shareholders in favor of the merger with United.
Information regarding the persons who may, under the rules of the
SEC, be considered participants in the solicitation of the Cardinal
shareholders in connection with the proposed merger will be set
forth in the proxy statement/prospectus when it is filed with the
SEC.
You can find information about the executive officers and
directors of United in its Annual Report on Form 10-K for the year
ended December 31, 2015 and in its definitive proxy statement filed
with the SEC on April 1, 2016. You can find information about
Cardinal’s executive officers and directors in its Annual Report on
Form 10-K for the year ended December 31, 2015 and in its
definitive proxy statement filed with the SEC on March 24, 2016.
You can obtain free copies of these documents from United or
Cardinal using the contact information above.
Table 1.
Cardinal Financial Corporation and Subsidiaries Summary
Consolidated Statements of Condition (Dollars in
thousands) (Unaudited) % Change %
Change Current From 12/31/16
09/30/16 Quarter 06/30/16
03/31/16 12/31/15
Year Ago Cash and due from banks $ 21,104 $ 23,928
-11.8 % $ 24,081 $ 19,379 $ 24,760 -14.8 % Federal funds sold
76,728 23,481 226.8 % 11,481 41,489 14,577 426.4 %
Investment securities available-for-sale 388,191 387,150 0.3 %
402,522 407,980 414,077 -6.3 % Investment securities
held-to-maturity 3,543 3,780 -6.3 % 3,796 3,814 3,836 -7.6 %
Investment securities – trading 8,383 6,958
20.5 % 6,489 6,221 5,881
42.5 % Total investment securities 400,117 397,888 0.6 %
412,807 418,015 423,794 -5.6 % Other investments 16,420
18,736 -12.4 % 18,136 19,411 20,967 -21.7 % Loans held for sale
297,766 432,350 -31.1 % 456,359 365,489 383,768 -22.4 %
Loans receivable, net of fees: Commercial and industrial 373,637
336,444 11.1 % 350,206 363,405 379,414 -1.5 % Real estate -
commercial 1,685,001 1,690,305 -0.3 % 1,605,868 1,555,985 1,372,627
22.8 % Real estate - construction 587,089 570,776 2.9 % 570,269
560,114 694,408 -15.5 % Real estate - residential 468,463 460,400
1.8 % 463,394 455,952 448,168 4.5 % Home equity lines 161,135
161,515 -0.2 % 161,658 161,691 156,852 2.7 % Consumer 5,834
5,383 8.4 % 5,476 4,831
4,841 20.5 % Total loans, net of fees
3,281,159 3,224,823 1.7 % 3,156,871 3,101,978 3,056,310 7.4 %
Allowance for loan losses (31,767 ) (33,641 ) -5.6 %
(32,984 ) (32,407 ) (31,723 ) 0.1 % Loans
receivable, net 3,249,392 3,191,182 1.8 % 3,123,887 3,069,571
3,024,587 7.4 % Premises and equipment, net 22,736 24,190
-6.0 % 24,273 24,845 25,163 -9.6 % Goodwill and intangibles, net
35,982 36,115 -0.4 % 36,262 36,415 36,576 -1.6 % Bank-owned life
insurance 33,388 33,314 0.2 % 33,213 33,102 32,978 1.2 % Other real
estate owned - - 0.0 % - - 253 -100.0 % Other assets 56,881 38,464
47.9 % 56,667 46,829 42,498 33.8 %
TOTAL ASSETS $ 4,210,514 $ 4,219,648 -0.2 % $
4,197,166 $ 4,074,545 $ 4,029,921 4.5 %
Non-interest bearing deposits $ 733,475 $ 757,184 -3.1 % $ 710,318
$ 687,493 $ 657,398 11.6 % Interest checking 453,863 437,358 3.8 %
437,724 459,377 451,545 0.5 % Money markets 466,290 492,547 -5.3 %
445,639 447,565 448,888 3.9 % Statement savings 346,463 333,272 4.0
% 319,116 310,055 291,484 18.9 % Certificates of deposit 738,658
756,991 -2.4 % 763,013 788,756 776,413 -4.9 % Brokered certificates
of deposit 543,951 447,148 21.6 %
568,996 451,781 407,043
33.6 % Total deposits 3,282,700 3,224,500 1.8 % 3,244,806 3,145,027
3,032,771 8.2 % Other borrowed funds 426,671 464,876 -8.2 %
450,696 437,065 537,965 -20.7 % Mortgage funding checks 13,762
36,740 -62.5 % 23,921 28,765 12,554 9.6 % Escrow liabilities 1,506
3,653 -58.8 % 2,491 2,777 2,676 -43.7 % Other liabilities 33,698
38,042 -11.4 % 37,320 34,366 30,808 9.4 % Shareholders'
equity 452,177 451,837 0.1 %
437,932 426,545 413,147 9.4 %
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 4,210,514
$ 4,219,648 -0.2 % $ 4,197,166 $ 4,074,545
$ 4,029,921 4.5 %
Table 2.
Cardinal Financial Corporation and
Subsidiaries Summary Consolidated Income Statements
(In thousands, except share data and per share data)
(Unaudited) For the Three Months Ended
% Change % Change Current From
12/31/16
09/30/16 Quarter
06/30/16
03/31/16
12/31/15 Year Ago
Net interest income $ 32,663 $ 32,965 -0.9 % $ 31,523 $
30,706 $ 30,471 7.2 % Provision for loan losses
(1,934 ) 990
-295.4 % 430
250 449
-530.7 % Net interest income after
provision for loan losses
34,597
31,975 8.2 %
31,093
30,456 30,022
15.2 % Non-interest income: Service charges on deposit
accounts 572 612 -6.5 % 581 551 590 -3.1 % Loan fees 1,194 596
100.3 % 359 309 307 288.9 % Income from bank-owned life insurance
74 101 -26.7 % 111 124 102 -27.5 % Net realized gains (losses) on
investment securities 758 331 129.0 % 3,918 (84 ) (127 ) -696.9 %
Other non-interest income
215
134 60.4 %
127 145
22 877.3 % Commercial
banking & other segment non-interest income 2,813 1,774 58.6 %
5,096 1,045 894 214.7 % Gains from mortgage banking
activities 18,742 32,035 -41.5 % 34,613 27,041 19,939 -6.0 % Less:
mortgage loan origination expenses
(12,543
) (16,412 )
-23.6 % (19,304
) (12,902 )
(11,874 ) 5.6 %
Mortgage banking segment non-interest income 6,199 15,623 -60.3 %
15,309 14,139 8,065 -23.1 % Wealth management segment
non-interest income
94
94 0.0 %
84 85
133 -29.3 % Total
non-interest income
9,106
17,491 -47.9 %
20,489
15,269 9,092
0.2 % Net interest income and non-interest income
43,703 49,466
-11.7 %
51,582
45,725 39,114 11.7 %
Salaries and benefits 16,582 17,331 -4.3 % 16,037 15,497
14,391 15.2 % Occupancy 2,590 2,577 0.5 % 2,448 2,592 2,501 3.6 %
Depreciation 708 764 -7.3 % 833 844 853 -17.0 % Data processing
& communications 1,494 1,542 -3.1 % 1,517 1,346 1,273 17.4 %
Professional fees 393 727 -45.9 % 549 1,135 1,034 -62.0 % FDIC
insurance assessment 516 516 0.0 % 516 516 516 0.0 % Loss on
extinguishment of debt - - 0.0 % 3,638 - - 0.0 % Mortgage loan
repurchases and settlements - - 0.0 % - 100 350 -100.0 % Merger and
acquisition expense 1,809 2,284 0.0 % - - - 100.0 % Other operating
expense
4,335 4,594
-5.6 % 4,579
4,262 4,364
-0.7 % Total non-interest expense
28,427 30,335
-6.3 % 30,117
26,292 25,282
12.4 % Income before income taxes 15,276
19,131 -20.2 % 21,465 19,433 13,832 10.4 % Provision for income
taxes 4,475 6,609
-32.3 % 7,364
6,366 4,817
-7.1
% NET INCOME $ 10,801 $ 12,522
-13.7 % $ 14,101 $ 13,067 $
9,015 19.8 % Earnings per common share - basic $ 0.32
$ 0.38 -14.5 % $ 0.43 $
0.40 $ 0.27 17.5 % Earnings per common share -
diluted $ 0.32 $ 0.37 -14.6 % $ 0.42
$ 0.39 $ 0.27 17.3 %
Weighted-average common shares outstanding - basic
33,477,798 33,200,426 0.8 %
33,032,595 32,977,970
32,844,212 1.9 % Weighted-average common shares
outstanding - diluted 34,095,904
33,767,143 1.0 % 33,569,058
33,435,858 33,379,656 2.1 %
Table 3.
Cardinal Financial Corporation and
Subsidiaries Summary Consolidated Income Statements
(In thousands, except share data and per share data)
(Unaudited) For the Years Ended %
Change From 12/31/16
12/31/15 Year
Ago Net interest income $ 127,857 $ 116,394 9.8 %
Provision for loan losses
(264 )
1,388 -119.0 %
Net interest income after provision for loan losses
128,121 115,006 11.4
% Non-interest income: Service charges on deposit accounts
2,315 2,294 0.9 % Loan fees 2,458 1,596 54.0 % Income from
bank-owned life insurance 410 433 -5.3 % Net realized gains on
investment securities 4,923 1,391 253.9 % Litigation recovery -
2,950 -100.0 % Other non-interest income
622
83 649.4
% Commercial banking & other segment non-interest
income 10,728 8,747 22.6 % Gains from mortgage banking
activities 112,430 95,693 17.5 % Less: mortgage loan origination
expenses
(61,161 )
(52,237 ) 17.1
% Mortgage banking segment non-interest income 51,269
43,456 18.0 % Wealth management segment non-interest income
357 489
-27.0 % Total non-interest income
62,354 52,692 18.3 %
Net interest income and non-interest income
190,475 167,698 13.6
% Salaries and benefits 65,446 51,844 26.2 % Occupancy
10,206 9,823 3.9 % Depreciation 3,150 3,403 -7.4 % Data processing
& communications 5,899 5,609 5.2 % Professional fees 2,804
4,611 -39.2 % FDIC insurance assessment 2,064 2,064 0.0 % Loss on
extinguishment of debt 3,638 - 100.0 % Mortgage loan repurchases
and settlements 100 397 -74.8 % Merger and acquisition expense
4,093 472 767.2 % Other operating expense
17,770 18,075
-1.7 % Total non-interest expense
115,170 96,298
19.6 % Income before income taxes 75,305
71,400 5.5 % Provision for income taxes 24,814
24,066
3.1 % NET INCOME $
50,491 $ 47,334 6.7 % Earnings per
common share - basic $ 1.52 $ 1.45 5.3 %
Earnings per common share - diluted $ 1.50 $ 1.43
5.1 % Weighted-average common shares outstanding - basic
33,173,095 32,744,154 1.3 %
Weighted-average common shares outstanding - diluted
33,689,854 33,208,266 1.5 %
Table 4.
Cardinal Financial
Corporation and Subsidiaries Selected Financial
Information (In thousands, except per share data and
ratios) (Unaudited)
12/31/16
09/30/16
06/30/16
03/31/16
12/31/15 Capital Ratios:
At Period
End:
Common equity tier 1 capital 10.83 % 10.58 % 10.33 % 9.99 % 9.86 %
Tier 1 risk-based capital 11.48 % 11.23 % 10.99 % 10.64 % 10.52 %
Total risk-based capital 12.32 % 12.11 % 11.86 % 11.50 % 11.37 %
Leverage capital ratio 10.77 % 10.33 % 10.38 % 10.28 % 10.18 % Book
value per common share $ 13.74 $ 13.77 $ 13.50 $ 13.16 $ 12.76
Tangible book value per common share (1) $ 12.65 $ 12.67 $ 12.38 $
12.04 $ 11.63 Common shares outstanding 32,910 32,803 32,441 32,415
32,373
Performance Ratios (annualized):
For the Three
Months Ended:
Return on average assets 1.04 % 1.19 % 1.39 % 1.31 % 0.92 % Return
on average equity 9.39 % 11.10 % 12.92 % 12.34 % 8.72 % Net
interest margin (2) 3.37 % 3.35 % 3.33 % 3.31 % 3.25 % Efficiency
ratio (3) 63.73 % 55.59 % 54.71 % 57.19 % 63.90 %
Asset
Quality Data:
For the Three
Months Ended:
Net charge-offs (recoveries) to average loans receivable, net of
fees (annualized) -0.01 % 0.04 % -0.02 % -0.06 % 0.04 %
At Period
End:
Total nonaccrual loans $ - $ - $ - $ - $ 520 Other real estate
owned $ - $ - $ - $ - $ 253 Nonperforming loans to loans
receivable, net of fees 0.00 % 0.00 % 0.00 % 0.00 % 0.02 %
Nonperforming loans to total assets 0.00 % 0.00 % 0.00 % 0.00 %
0.01 % Nonperforming assets to total assets 0.00 % 0.00 % 0.00 %
0.00 % 0.02 % Total loans receivable past due 30 to 89 days $ 225 $
394 $ 736 $ 163 $ 938 Total loans receivable past due 90 days or
more $ - $ - $ 41 $ - $ - Allowance for loan losses to loans
receivable, net of fees 0.97 % 1.04 % 1.04 % 1.04 % 1.04 %
Mortgage Banking Data:
For the Three
Months Ended:
Applications $ 1,043,000 $ 1,575,200 $ 1,703,500 $ 1,503,300 $
1,063,400 Loans closed 927,828 1,198,737 1,172,339 769,080 786,363
Loans sold 1,046,704 1,233,801 1,073,282 791,680 778,854 Purchase
money % of loans closed - George Mason Mortgage 68 % 65 % 76 % 62 %
74 % Realized gain on sales and fees as a % of loan sold(4) 2.83 %
2.78 % 2.71 % 2.67 % 2.71 %
At Period
End:
Locked Pipeline $ 217,815 $ 411,245 $ 458,555 $ 451,905 $ 247,448
SAB 109 Total Unrealized Gains Recognized 12,841 23,713 25,955
22,453 16,571 Change in Unrealized Gains (10,872 ) (2,242 ) 3,502
5,882 (1,186 )
Change in After-tax Income (7,012
) (1,446 ) 2,259 3,794
(765 )
(1)
Tangible book value is calculated as total
shareholders' equity less goodwill and other intangible assets,
divided by common shares outstanding.
(2)
The average yields for loans receivable
and investment securities available-for-sale are reported on a
fully taxable-equivalent basis at a rate of 36% for 2016 and 35%
for 2015.
(3)
Efficiency ratio is calculated as total
non-interest expense divided by the total of net interest income
and non-interest income. For the three months ended December 31,
2016, non-interest expense excludes $1.8 million of merger and
acquisition expense. For the three months ended September 30, 2016,
non-interest expense excludes $2.3 million of merger and
acquisition expense. For the three months ended June 30, 2016,
non-interest expense excludes a $3.6 million loss on extinguishment
of debt and non-interest income excludes $3.6 million in realized
gains on investment securities.
(4)
Realized gains are those gains recognized
on the date the loan is sold and do not include the unrealized
gains recognized at the loan commitment date.
Table 5.
Cardinal Financial Corporation and
Subsidiaries Selected Financial Information (In
thousands, except ratios) (Unaudited)
12/31/16
12/31/15 Performance Ratios:
For the Year
Ended:
Return on average assets 1.23 % 1.29 % Return on average equity
11.40 % 11.76 % Net interest margin (1) 3.33 % 3.37 % Efficiency
ratio (2) 57.58 % 57.66 %
Mortgage Banking Data:
For the Year
Ended:
Applications $ 5,825,000 $ 5,211,000 Loans closed $ 4,067,984
3,602,075 Loans sold $ 4,145,467 3,534,175 Realized gain on sales
and fees as a % of loan sold(3) 2.75 % 2.60 %
(1)
The average yields for loans receivable
and investment securities available-for-sale are reported on a
fully taxable-equivalent basis at a rate of 36% for 2016 and 35%
for 2015.
(2)
Efficiency ratio is calculated as total
non-interest expense divided by the total of net interest income
and non-interest income. For the year ended December 31, 2016,
non-interest expense excludes a $3.6 million loss on extinguishment
of debt and $4.1 million of merger and acquisition expense.
Non-interest income excludes $3.6 million in realized gains on
investment securities. For the year ended December 31, 2015,
non-interest income excludes a $2.9 million litigation settlement
and non-interest expense excludes the associated legal expenses of
$500,000 related to that same settlement.
(3)
Realized gains are those gains recognized
on the date the loan is sold and do not include the unrealized
gains recognized at the loan commitment date.
Table 6.
Cardinal Financial Corporation and Subsidiaries Mortgage
Revenue Recognition Impact of SAB 109 (Written Loan Commitments
Recorded at Fair Value Through Earnings) (Dollars in
thousands, except per share data and ratios) (Unaudited)
For the Three Months Ended % Change %
Change Current From
12/31/16
09/30/16 Quarter
06/30/16
03/31/16
12/31/15 Year Ago
Net Gains from
Mortgage Banking Activities **(see note below):
As
Reported
Fair Value of LCs / Unrealized Gains Recognized @ LC date $ 18,742
$ 32,035 -41.5 % $ 34,613 $ 27,041 $ 19,939 -6.0 % Loan origination
expenses recognized @ Loan Sale Date 12,543
16,412 -23.6 % 19,304 12,902
11,874 5.6 %
Reported Net Gains from
Mortgage Banking Activities 6,199 15,623
-60.3 % 15,309 14,139
8,065 -23.1 %
As
Adjusted
Realized Gains Recognized @ Loan Sale Date 29,614 34,277 -13.6 %
31,111 21,159 21,125 40.2 % Loan origination expenses recognized @
Loan Sale Date 12,543 16,412
-23.6 % 19,304 12,902 11,874
5.6 %
Adjusted Net Gains from Mortgage Banking
Activities 17,071 17,865
-4.4 % 11,807 8,257 9,251
84.5 %
Impact of SAB 109
on Net Gains from Mortgage Banking Activities:
Increase/(Decrease) in Unrealized Gains on Mortgage Banking
Activities Related to SAB 109 $ (10,872 ) $ (2,242 ) 384.9 %
$ 3,502 $ 5,882 $ (1,186 ) 816.7 %
Net Income
Reconciliation:
Reported Net Income $ 10,801 $ 12,522 -13.7 % $ 14,101 $ 13,067 $
9,015 19.8 % After-tax Merger and Acquisition Expense 1,646
1,644 0.0 % - -
- 0.0 % Adjusted Net Income $ 12,447 $
14,166 -12.1 % $ 14,101 $ 13,067 $ 9,015 38.1 % After-tax Net
Increase / (Decrease) in Unrealized Gains on Mortgage Banking
Activities Related to SAB 109 (7,012 ) (1,446 )
384.9 % 2,259 3,794 (765
) 816.7 %
Operating Net Income $ 19,459 $
15,612 24.6 % $ 11,842 $ 9,273 $ 9,780
99.0 %
Diluted Earnings
per Share (EPS) Reconciliation:
Reported Net Income $ 0.32 $ 0.37 -14.6 % $ 0.42 $ 0.39 $ 0.27 17.3
% After-tax Merger and Acquisition Expense $ 0.05
0.05 0.0 % - - -
0.0 % Adjusted Net Income $ 0.37 0.42
-13.0 % 0.42 0.39
0.27 35.2 % After-tax Net Increase / (Decrease) in
Unrealized Gains on Mortgage Banking Activities Related to SAB 109
(0.21 ) (0.04 ) 380.2 % 0.07
0.11 (0.02 ) 838.4 %
Operating Net
Income $ 0.58 $ 0.46 25.6 % $ 0.35
$ 0.28 $ 0.29 98.9 %
Performance
Ratios (adjusted for change in unrealized mortgage banking
gains):
Return on average assets 1.88 % 1.48 % 1.17 % 0.93 % 1.00 % Return
on average equity 16.91 % 13.84 % 10.85 % 8.76 % 9.46 % Efficiency
ratio 54.00 % 57.56 % 62.08 % 65.58 % 62.04 % Non-interest income
to average assets 1.93 % 1.87 % 1.67 % 0.94 % 1.05 % ** Per
the accounting guidance set forth by SEC Staff Accounting Bulletin
(SAB) 109 regarding mortgage lending activities, the fair value of
a "locked" commitment, or an unrealized gain, is recognized in
income on the day of the locked commitment (LC). As a result of
this revenue recognition, the unrealized gains then become part of
the basis of the ensuing loan held for sale (LHFS) when the loan is
closed. When the loan is sold to investors, the “price" received is
equal to the basis of the loan held for sale, and there is no gain
or loss recognized. At any point in time (e.g. quarter end) the
fair value of the LCs and the premium to the par value of LHFS
represent unrealized gains that have been recognized in income,
either in the current period or prior periods. This accounting
creates a mismatch between the income recognition on loan
production and expense recognition for those same loans, which is
discussed below. In accordance with accounting rules (ASC
310-20, formerly FAS 91), direct (e.g. commissions) and indirect
loan expenses associated with originating, underwriting and closing
loans are deferred and amortized over the life of the loan. In
mortgage banking, this results in the mentioned expenses being
recognized at the time of investor purchase of the loan (i.e. loan
sale date) which often occurs in the quarter subsequent to the
original LC and creates a mismatch in the timing of the revenue and
expense. These expenses are “netted” from the gain on sale from
mortgage banking activities, which is included in non-interest
income. Table 7.
Cardinal Financial
Corporation and Subsidiaries Mortgage Revenue Recognition
Impact of SAB 109 (Written Loan Commitments Recorded at Fair Value
Through Earnings) (Dollars in thousands, except per share
data and ratios) (Unaudited) For the Years
Ended % Change From
12/31/16
12/31/15 Year Ago
Net Gains from
Mortgage Banking Activities **(see note below):
As
Reported
Fair Value of LCs / Unrealized Gains Recognized @ LC date $ 112,430
$ 95,693 17.5 % Loan origination expenses recognized @ Loan Sale
Date 61,161 52,237 17.1 %
Reported Net Gains from Mortgage Banking Activities
51,269 43,456 18.0 %
As
Adjusted
Realized Gains Recognized @ Loan Sale Date 116,159 91,945 26.3 %
Loan origination expenses recognized @ Loan Sale Date 61,161
52,237 17.1 %
Adjusted Net Gains
from Mortgage Banking Activities 54,998
39,708 38.5 %
Impact of SAB 109
on Net Gains from Mortgage Banking Activities:
Increase/(Decrease) in Unrealized Gains on Mortgage Banking
Activities Related to SAB 109 $ (3,729 ) $ 3,748
-199.5 %
Net Income
Reconciliation:
Reported Net Income $ 50,491 $ 47,334 6.7 % After-tax litigation
settlement (less associated legal expenses) - (1,592 ) -100.0 %
After-tax Merger and Acquisition Expense 3,290
314 947.8 % Adjusted Net Income $ 53,781 $ 46,056
16.8 % After-tax Net Increase / (Decrease) in Unrealized Gains on
Mortgage Banking Activities Related to SAB 109 (2,405 )
2,417 -199.5 %
Operating Net Income $
56,186 $ 43,639 28.8 %
Diluted Earnings
per Share (EPS) Reconciliation:
Reported Net Income $ 1.50 $ 1.43 5.1 % After-tax litigation
settlement (less associated legal expenses) - (0.05 ) -100.0 %
After-tax Merger and Acquisition Expense 0.10
0.01 932.8 % Adjusted Net Income 1.60
1.39 15.1 % After-tax Net Increase /
(Decrease) in Unrealized Gains on Mortgage Banking Activities
Related to SAB 109 (0.07 ) 0.07 -198.1
%
Operating Net Income $ 1.67 $ 1.32 26.8 %
Performance
Ratios (adjusted for change in unrealized mortgage banking
gains):
Return on average assets 1.37 % 1.19 % Return on average equity
12.68 % 10.84 % Efficiency ratio 59.38 % 58.24 % Non-interest
income to average assets 1.61 % 1.33 % ** Per the accounting
guidance set forth by SEC Staff Accounting Bulletin (SAB) 109
regarding mortgage lending activities, the fair value of a "locked"
commitment, or an unrealized gain, is recognized in income on the
day of the locked commitment (LC). As a result of this revenue
recognition, the unrealized gains then become part of the basis of
the ensuing loan held for sale (LHFS) when the loan is closed. When
the loan is sold to investors, the “price" received is equal to the
basis of the loan held for sale, and there is no gain or loss
recognized. At any point in time (e.g. quarter end) the fair value
of the LCs and the premium to the par value of LHFS represent
unrealized gains that have been recognized in income, either in the
current period or prior periods. This accounting creates a mismatch
between the income recognition on loan production and expense
recognition for those same loans, which is discussed below.
In accordance with accounting rules (ASC 310-20, formerly FAS 91),
direct (e.g. commissions) and indirect loan expenses associated
with originating, underwriting and closing loans are deferred and
amortized over the life of the loan. In mortgage banking, this
results in the mentioned expenses being recognized at the time of
investor purchase of the loan (i.e. loan sale date) which often
occurs in the quarter subsequent to the original LC and creates a
mismatch in the timing of the revenue and expense. These expenses
are “netted” from the gain on sale from mortgage banking
activities, which is included in non-interest income.
Table 8.
Cardinal Financial Corporation and Subsidiaries Average
Statements of Condition and Yields on Earning Assets and
Interest-Bearing Liabilities (Dollars in thousands)
(Unaudited) For the Three Months Ended
12/31/2016 9/30/2016 6/30/2016
3/31/2016 12/31/2015
AverageBalance
AverageYield
AverageBalance
AverageYield
AverageBalance
AverageYield
AverageBalance
AverageYield
AverageBalance
AverageYield
Interest-earning assets: Loans receivable, net of fees (1)
Commercial and industrial $ 250,362 3.82 % $ 243,678 3.75 % $
258,678 3.74 % $ 266,353 3.74 % $ 255,255 3.66 % Commercial and
industrial - tax exempt(1) 96,842 2.95 % 101,749 2.90 % 103,221
2.82 % 105,386 2.80 % 103,456 2.50 % Real estate - commercial(1)
1,699,067 4.23 % 1,659,767 4.27 % 1,563,089 4.37 % 1,532,293 4.28 %
1,361,134 4.27 % Real estate - construction 578,744 4.63 % 572,704
4.60 % 556,939 4.37 % 549,907 4.62 % 661,665 4.59 % Real estate -
residential 442,922 3.58 % 445,848 3.53 % 448,453 3.57 % 441,134
3.67 % 423,533 3.65 % Home equity lines 159,837 3.35 % 160,877 3.28
% 160,303 3.23 % 160,240 3.16 % 153,366 3.10 % Consumer
5,214 5.11 % 5,246 5.01 %
5,239 4.91 % 5,284 4.72 %
4,739 5.44 % Total loans 3,232,988 4.10 % 3,189,869
4.10 % 3,095,922 4.09 % 3,060,597 4.10 % 2,963,148 4.08 %
Loans held for sale 332,728 3.51 % 421,843 3.65 % 365,520 3.71 %
304,653 3.88 % 339,793 3.87 % Investment securities (1) 390,538
3.67 % 400,936 3.67 % 400,085 3.82 % 419,678 3.76 % 426,776 3.52 %
Federal funds sold 38,445 0.48 % 41,050
0.50 % 33,435 0.45 %
55,018 0.47 % 45,307 0.25 %
Total interest-earning assets 3,994,699 3.98 % 4,053,698 3.97 %
3,894,962 3.99 % 3,839,946 3.99 % 3,775,024 3.95 %
Non-interest earning assets: Cash and due from banks 20,982
21,764 21,899 21,169 22,226 Premises and equipment, net 23,774
24,399 24,642 25,185 25,498 Goodwill and intangibles, net 36,050
36,189 36,333 36,498 36,662 Accrued interest and other assets
98,318 124,196 119,723 105,663 102,977 Allowance for loan losses
(33,265 ) (33,461 ) (32,702 ) (32,113 ) (31,515 )
TOTAL ASSETS $ 4,140,558 $ 4,226,785
$ 4,064,857 $ 3,996,348 $ 3,930,872
Interest-bearing liabilities: Interest checking $
441,472 0.35 % $ 432,246 0.36 % $ 445,991 0.36 % $ 457,528 0.40 % $
438,527 0.48 % Money markets 490,461 0.41 % 479,455 0.39 % 438,863
0.36 % 451,303 0.37 % 466,452 0.36 % Statement savings 342,699 0.44
% 327,653 0.43 % 315,804 0.42 % 301,734 0.42 % 285,257 0.40 %
Certificates of deposit 751,633 1.22 % 773,912 1.23 % 773,053 1.23
% 784,306 1.23 % 752,104 1.23 % Brokered certificates of deposit
439,499 0.95 % 538,130
0.89 % 454,152 0.93 % 398,455
0.91 % 400,793 0.88 % Total
interest-bearing deposits 2,465,764 0.75 % 2,551,396 0.75 %
2,427,863 0.75 % 2,393,326 0.75 % 2,343,133 0.76 % Other
borrowed funds 394,356 1.49 % 441,576
1.39 % 456,044 1.69 %
487,087 1.87 % 470,416 1.82 %
Total interest-bearing liabilities 2,860,120 0.85 % 2,992,972 0.84
% 2,883,907 0.90 % 2,880,413 0.94 % 2,813,549 0.93 %
Noninterest-bearing liabilities: Noninterest-bearing
deposits 776,242 732,506 698,123 653,432 660,236 Other liabilities
43,990 50,098 46,193 38,986 43,357 Shareholders' equity
460,206 451,209 436,634 423,517 413,730
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 4,140,558
$ 4,226,785 $ 4,064,857 $ 3,996,348 $
3,930,872 NET INTEREST MARGIN (1) 3.37 % 3.35 % 3.33
% 3.31 % 3.25 % (1) The average yields for loans receivable
and investment securities available-for-sale are reported on a
fully taxable-equivalent basis at a rate of 36% for 2016 and 35%
for 2015. Table 9.
Cardinal
Financial Corporation and Subsidiaries Average Statements of
Condition and Yields on Earning Assets and Interest-Bearing
Liabilities (Dollars in thousands) (Unaudited)
For the Years Ended 12/31/2016
12/31/2015
AverageBalance
AverageYield
AverageBalance
AverageYield
Interest-earning assets: Loans receivable, net of fees (1)
Commercial and industrial $ 254,725 3.76 % $ 272,026 3.87 %
Commercial and industrial - tax exempt(1) 101,786 2.87 % 73,460
2.88 % Real estate - commercial(1) 1,577,443 4.29 % 1,305,202 4.37
% Real estate - construction 601,106 4.54 % 554,527 4.67 % Real
estate - residential 444,588 3.59 % 405,517 3.73 % Home equity
lines 160,315 3.25 % 143,180 3.17 % Consumer 5,245
4.96 % 4,819 5.64 % Total loans
3,145,208 4.10 % 2,758,731 4.18 % Loans held for sale
360,147 3.64 % 344,501 3.85 % Investment securities (1) 402,763
3.73 % 366,611 3.18 % Federal funds sold 41,973
0.48 % 41,167 0.22 % Total
interest-earning assets 3,950,091 3.98 % 3,511,010 4.06 %
Non-interest earning assets: Cash and due from banks 21,453
21,069 Premises and equipment, net 24,498 25,191 Goodwill and
intangibles, net 36,267 36,943 Accrued interest and other assets
108,134 104,991 Allowance for loan losses (32,888 ) (30,346 )
TOTAL ASSETS $ 4,107,555 $ 3,668,858
Interest-bearing liabilities: Interest checking $
444,269 0.37 % $ 430,276 0.49 % Money markets 465,129 0.38 %
411,369 0.34 % Statement savings 322,044 0.43 % 275,567 0.36 %
Certificates of deposit 770,683 1.22 % 691,026 1.22 % Brokered
certificates of deposit 457,730 0.92 %
404,293 0.80 % Total interest-bearing deposits
2,459,855 0.75 % 2,212,531 0.73 % Other borrowed funds
444,619 1.62 % 394,536
2.00 % Total interest-bearing liabilities 2,904,474 0.88 %
2,607,067 0.92 %
Noninterest-bearing liabilities:
Noninterest-bearing deposits 715,291 618,988 Other liabilities
44,829 40,264 Shareholders' equity 442,961 402,539
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 4,107,555
$ 3,668,858 NET INTEREST MARGIN (1) 3.33 %
3.37 %
(1)
The average yields for loans receivable
and investment securities available-for-sale are reported on a
fully taxable-equivalent basis at a rate of 36% for 2016 and 35%
for 2015.
Table 10.
Cardinal Financial Corporation and Subsidiaries Segment
Reporting - as Reported and Non-GAAP Reconciliation (Dollars
in thousands) (Unaudited) For the Three Months
Ended % Change % Change Current
From 12/31/2016
9/30/2016 Quarter
6/30/2016 3/31/2016
12/31/2015 Year Ago
Commercial
Banking:
Net interest income $ 32,758 $ 32,980 -0.7 % $ 31,442 $ 30,545 $
30,042 9.0 % Non-interest income 2,050 1,391 47.4 % 1,056 1,104 963
112.9 % Net realized gain on available-for-sale securities 868 -
100.0 % 3,614 112 - 100.0 % Loss on extinguishment of debt - - 0.0
% 3,638 - - 0.0 % Non-interest expense 14,794
15,940 -7.2 % 15,823 16,514
15,734 -6.0 % Net income before
provision for loan losses and taxes 20,882 18,431 13.3 % 16,651
15,247 15,271 36.7 % Provision for loan losses (1,934 ) 990 -295.4
% 430 250 449 -530.7 % Provision for income taxes 6,993
5,978 17.0 % 5,464
4,757 5,238 33.5 % Net income $ 15,823
$ 11,463 38.0 % $ 10,757 $ 10,240 $
9,584 65.1 % Average Assets $ 4,059,989 $ 4,140,341 $
3,998,824 $ 3,937,805 $ 3,866,407 Commercial Banking Segment
Contribution to earnings 146 % 92 % 76 % 78 % 106 %
Mortgage
Banking:
Net interest income $ 128 $ 196 -34.7 % $ 283 $ 358 $ 619 -79.3 %
Non-interest income 6,198 15,669 -60.4 % 15,344 14,158 8,115 -23.6
% Non-interest expense 11,042 11,464
-3.7 % 9,382 8,963 8,589
28.6 % Net income before provision for taxes (4,716 )
4,401 -207.2 % 6,245 5,553 145 -3352.4 % Provision for income taxes
(1,699 ) 1,585 -207.2 % 2,251
2,000 (19 ) 8842.1 % Net income
(loss) $ (3,017 ) $ 2,816 -207.1 % $ 3,994 $ 3,553
$ 164 -1939.6 % Add:decrease in unrealized gains (or
(Less):increase in unrealized gains) on mortgage banking activities
(SAB 109) 10,872 2,242 384.9 % (3,502 ) (5,882 ) 1,186 816.7 % Add
/ (Less): provision for income taxes associated with SAB 109
(3,860 ) (796 ) 384.9 % 1,243
2,088 (421 ) 816.7 % Operating net income
(loss) $ 3,995 $ 4,262 -6.3 % $ 1,735 $ (241 )
$ 929 330.1 % Average Assets $ 347,419 $ 455,608 -23.7 % $
382,899 $ 317,034 $ 351,129 -1.1 % Mortgage Banking Segment
Contribution to earnings -28 % 22 % 28 % 27 % 2 %
Wealth
Management/Other:
Net interest income $ (223 ) $ (211 ) 5.7 % $ (201 ) $ (197 ) $
(190 ) 17.4 % Non-interest income (10 ) 431 -102.3 % 473 (105 ) 14
-171.4 % Non-interest expense 2,591 2,931
-11.6 % 1,273 815
959 170.2 % Net income (loss) before provision for
taxes (2,824 ) (2,711 ) 4.2 % (1,001 ) (1,117 ) (1,135 ) 148.8 %
Provision for income taxes (819 ) (954 ) -14.2
% (351 ) (391 ) (402 ) 103.7 % Net
income (loss) $ (2,005 ) $ (1,757 ) 14.1 % $ (650 ) $ (726 ) $ (733
) 173.5 % Add: merger & acquisition (M&A) expense 1,809
2,284 -20.8 % - - - 100.0 % Subtract: provision for income taxes
associated with M&A expense (163 ) (640 )
-74.5 % -100.0 % Operating net income
(loss) $ (359 ) $ (113 ) 217.7 % $ (650 ) $ (726 ) $ (733 ) -51.0 %
Average Assets / Intersegment Eliminations $ (266,850 ) $ (369,164
) -27.7 % $ (316,866 ) $ (258,491 ) $ (286,664 ) -6.9 % Wealth
Management/Other Segments Contribution to earnings -18 % -14 % 27.0
% -5 % -5 % -8 % 116.0 %
Consolidated:
Net interest income $ 32,663 $ 32,965 -0.9 % $ 31,524 $ 30,706 $
30,471 7.2 % Non-interest income 8,238 17,491 -52.9 % 16,873 15,157
9,092 -9.4 % Net realized gain on available-for-sale securities 868
- 100.0 % 3,614 112 - 100.0 % Loss on extinguishment of debt - -
0.0 % 3,638 - - 0.0 % Non-interest expense 28,427
30,335 -6.3 % 26,478
26,292 25,282 12.4 % Net income before
provision for loan losses and taxes 13,342 20,121 -33.7 % 21,895
19,683 14,281 -6.6 % Provision for loan losses (1,934 ) 990 -295.4
% 430 250 449 -530.7 % Provision for income taxes 4,475
6,609 -32.3 % 7,364
6,366 4,817 -7.1 % Net income $
10,801 $ 12,522 -13.7 % $ 14,101 $ 13,067
$ 9,015 19.8 % Add: merger & acquisition
(M&A) expense 1,809 2,284 -20.8 % - - - 100.0 % Add:decrease in
unrealized gains (or (Less): increase in unrealized gains) on
mortgage banking activities (SAB 109) 10,872 2,242 384.9 % (3,502 )
(5,882 ) 1,186 816.7 % Add/(Less): provision for income taxes
associated with M&A expenses & SAB 109 (4,023 )
(1,436 ) 180.1 % 1,243 2,088
(421 ) 855.4 % Operating net income $ 19,459
$ 15,612 24.6 % $ 11,842 $ 9,273 $
9,780 99.0 % Average Assets $ 4,140,558 $ 4,226,785 -2.0 % $
4,064,857 $ 3,996,348 $ 3,930,872 5.3 %
Table 11.
Cardinal Financial Corporation and Subsidiaries
Segment Reporting - as Reported and Non-GAAP Reconciliation
(Dollars in thousands) (Unaudited) For the
Years Ended % Change From
12/31/2016 12/31/2015
Year Ago
Commercial
Banking:
Net interest income $ 127,726 $ 114,674 11.4 % Non-interest income
5,602 5,293 5.8 % Net realized gain on available-for-sale
securities 4,594 - 100.0 % Loss on extinguishment of debt 3,638 -
100.0 % Non-interest expense 63,072 59,956
5.2 % Net income before provision for loan losses and
taxes 71,212 60,011 18.7 % Provision for loan losses (264 ) 1,388
-119.0 % Provision for income taxes 23,192
19,448 19.3 % Net income $ 48,284 $ 39,175
23.3 % Add: merger & acquisition (M&A) expense - 472
-100.0 % Less: provision for income taxes associated with M&A
expense - (158 ) -100.0 % Operating net income
$ 48,284 $ 39,489 Average Assets $ 4,026,960 $
3,604,942 Commercial Banking Segment Contribution to earnings 96 %
83 %
Mortgage
Banking:
Net interest income $ 964 $ 2,454 -60.7 % Non-interest income
51,369 43,700 17.5 % Non-interest expense 40,850
31,806 28.4 % Net income before provision for
taxes 11,483 14,348 -20.0 % Provision for income taxes 4,137
5,168 -19.9 % Net income $ 7,346
$ 9,180 -20.0 % Add:decrease in unrealized gains (or
(Less):increase in unrealized gains) on mortgage banking activities
(SAB 109) 3,729 (3,748 ) -199.5 % Add / (Less): provision for
income taxes associated with SAB 109 (1,324 ) 1,331
-199.5 % Operating net income $ 9,751 $ 6,763
44.2 % Average Assets $ 383,520 $ 357,145 7.4 % Mortgage
Banking Segment Contribution to earnings 14 % 19 %
Wealth
Management/Other:
Net interest income $ (833 ) $ (734 ) 13.5 % Non-interest income
789 3,699 -78.7 % Non-interest expense 7,610
4,536 67.8 % Net income (loss) before provision for
taxes (7,654 ) (1,571 ) 387.2 % Provision for income taxes
(2,515 ) (550 ) 357.3 % Net income (loss) $ (5,139 )
$ (1,021 ) 403.3 % Add: merger & acquisition (M&A) expense
4,093 - 100.0 % Add: legal expense associated with litigation
settlement - 500 -100.0 % Less: litigation settlement - (2,950 )
-100.0 % Less: provision for income taxes associated with
litigation settlement and M&A expense (803 ) 858
-193.6 % Operating net income (loss) $ (1,849 ) $
(2,613 ) -29.2 % Average Assets / Intersegment Eliminations $
(302,925 ) $ (293,229 ) 3.3 % Wealth Management/Other Segments
Contribution to earnings -10 % -2 % 371.9 %
Consolidated:
Net interest income $ 127,857 $ 116,394 9.8 % Non-interest income
57,760 52,692 9.6 % Net realized gain on available-for-sale
securities 4,594 - 100.0 % Loss on extinguishment of debt 3,638 -
100.0 % Non-interest expense 111,532 96,298
15.8 % Net income before provision for loan losses
and taxes 75,041 72,788 3.1 % Provision for loan losses (264 )
1,388 -119.0 % Provision for income taxes 24,814
24,066 3.1 % Net income $ 50,491 $
47,334 6.7 % Add: merger & acquisition (M&A) expense
4,093 472 767.2 % Add: legal expense associated with litigation
settlement - 500 -100.0 % Less: litigation settlement - (2,950 )
-100.0 % Add:decrease in unrealized gains (or Less: increase in
unrealized gains) on mortgage banking activities (SAB 109) 3,729
(3,748 ) -199.5 % Less: provision for income taxes associated with
M&A expense, litigation settlement & SAB 109 (2,127
) 2,031 -204.7 % Operating net income $ 56,186
$ 43,639 28.8 % Average Assets $ 4,107,555 $
3,668,858 12.0 % Table 12.
Cardinal Financial Corporation and Subsidiaries
Historical Segment Performance (Dollars in thousands,
except per share data) (Unaudited) Wealth
Commercial Mortgage Management/ Banking
Banking Other Consolidated For the Three
Months Ended December 31, 2016: Net income (loss) $ 15,823 $
(3,017) $ (2,005) $ 10,801 Earnings per common share - diluted $
0.46 $ (0.09) $ (0.05) $ 0.32 Segment Contribution to Earnings
146.0% -28.4% -17.6% 100%
For the Three Months Ended
December 31, 2015: Net income (loss) $ 9,584 $ 164 $ (733) $
9,015 Earnings per common share - diluted $ 0.29 $ 0.00 $ (0.02) $
0.27 Segment Contribution to Earnings 106.3%
1.8% -8.1% 100%
For the Year
Ended December 31, 2016: Net income (loss) $ 48,284 $ 7,346 $
(5,139) $ 50,491 Earnings per common share - diluted $ 1.43 $ 0.22
$ (0.15) $ 1.50 Segment Contribution to Earnings 95.7% 14.5% -10.2%
100%
For the Year Ended December 31, 2015: Net income
(loss) $ 39,175 $ 9,180 $ (1,021) $ 47,334 Earnings per common
share - diluted $ 1.18 $ 0.28 $ (0.03) $ 1.43 Segment Contribution
to Earnings 82.8% 19.4% -2.2% 100.0%
For the Year Ended
December 31, 2014: Net income (loss) $ 34,351 $ 2,658 $ (4,326)
$ 32,683 Earnings per common share - diluted $ 1.05 $ 0.08 $ (0.13)
$ 1.00 Segment Contribution to Earnings 105.1% 8.1% -13.2% 100%
For the Year Ended December 31, 2013: Net income
(loss) $ 33,881 $ (5,215) $ (3,156) $ 25,510 Earnings per common
share - diluted $ 1.09 $ (0.17) $ (0.10) $ 0.82 Segment
Contribution to Earnings 132.8% -20.4% -12.4% 100.0%
For
the Year Ended December 31, 2012: Net income (loss) $ 30,544 $
17,608 $ (2,855) $ 45,297 Earnings per common share - diluted $
1.02 $ 0.59 $ (0.10) $ 1.51 Segment Contribution to Earnings 67.4%
38.9% -6.3% 100.0%
For the Year Ended December 31,
2011: Net income (loss) $ 23,063 $ 7,791 $ (2,856) $ 27,998
Earnings per common share - diluted $ 0.77 $ 0.26 $ (0.09) $ 0.94
Segment Contribution to Earnings 82.4% 27.8% -10.2% 100.0%
Table 13.
Cardinal Financial Corporation and Subsidiaries
Loan Fundings and Payoffs (Dollars in thousands)
(Unaudited) Net Draws/Pay Downs
Ending
Balance Ending Balance 12/31/2015 New Loans
Loan Payoffs and Transfers
12/31/2016 Commercial and industrial $
379,414 $ 59,523 $ (30,287 ) $ (35,013 )
$ 373,637
Real estate - commercial 1,372,627 477,445 (140,785 ) (24,286 )
$ 1,685,001 Real estate - construction 694,408 69,017
(262,695 ) 86,359
$ 587,089 Real estate - residential
448,168 96,299 (64,559 ) (11,445 )
$ 468,463 Home
equity lines 156,852 29,014 (29,242 ) 4,511
$ 161,135
Consumer 4,841 8,582
(3,039 ) (4,550 )
$ 5,834 Total loans, net of fees $
3,056,310 $ 739,880 $ (530,607
) $ 15,576 $ 3,281,159
Table 14.
Cardinal Financial
Corporation and Subsidiaries Commercial Real Estate ("CRE")
Concentrations (Dollars in thousands) (Unaudited)
12/31/16
09/30/16 06/30/16
03/31/16 12/31/15
Construction, land development, and other land loans $ 461,898 $
470,914 $ 443,879 $ 497,691 $ 459,261 Owner-occupied construction,
land development loans (85,529 ) (105,709 )
(89,225 ) (76,351 ) (83,237 ) Construction loans
concentration less owner-occupied $ 376,369 $ 365,205
$ 354,654 $ 421,340 $ 376,024
As a percentage
of risk-based capital (consolidated):
Construction loans concentration 97.4 % 100.8 % 98.3 % 113.2 %
107.2 % Construction loans concentration less owner-occupied 79.4 %
78.2 % 78.6 % 95.8 % 87.7 % Loans secured by
commercial real estate properties $ 2,231,663 $ 2,228,820 $
2,146,775 $ 2,105,479 $ 2,079,265 Owner-occupied commercial real
estate properties (436,697 ) (426,048 ) (409,772 ) (392,514 )
(421,278 ) Owner-occupied construction, land development loans
(85,529 ) (105,709 ) (89,225 ) (76,351
) (83,237 ) Commercial real estate concentration less
owner-occupied construction $ 1,709,437 $ 1,697,063 $
1,647,778 $ 1,636,614 $ 1,574,750
As a percentage
of risk-based capital (consolidated):
Commercial real estate concentration 378.7 % 386.0 % 384.7 % 389.5
% 386.9 % Commercial real estate concentration less owner-occupied
construction 360.6 % 363.4 % 365.0 % 372.1 % 367.5 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170125005920/en/
Cardinal Financial CorporationBernard H.
ClineburgExecutive
Chairman703-584-3400orChristopher
BergstromChief Executive
Officer703-584-3400orMark A.
Wendel,EVP, Chief Financial
Officer703-584-3400
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