News Column

Cardinal Updates on Fourth Quarter Results

January 31, 2014

Cardinal Financial Corp. announced quarterly earnings of $5.5 million , or $0.18 per diluted share, for the period ended December 31, 2013 . In a release on January 23 , the Company noted that for the fiscal year, earnings were $25.5 million , or $0.82 per diluted share. This compares to earnings of $13.0 million , or $0.43 per diluted share, and $45.3 million , or $1.51 per diluted share, for the comparable three and twelve month periods of 2012. Quarterly results were again influenced by the mortgage banking segment of the Company's business, which reported a net loss of $1.6 million for the fourth quarter of 2013 compared to net income of $3.7 million in the year ago quarter. Additionally, the Company had a write down of $300,000 on investments as a result of the Volcker rule. Cardinal also incurred approximately $160,000 of merger expenses in the fourth quarter 2013 and $464,000 for the 2013 year related to its acquisition of United Financial Banking Companies, Inc. (UFBC). Selected Highlights -For the full year, the commercial banking business segment reported net income of $33.9 million in 2013 versus $30.5 million in 2012, an 11 percent increase. -During the most recent quarter, loans held for investment grew $76.6 million , or 16 percent annualized, and balances now surpass $2.0 billion . For the year, loans grew $236.7 million , or 13 percent. -Asset quality remains excellent. Nonperforming loans decreased to 0.08 percent of total assets, and the Company had net loan recoveries of 0.03 percent of average loans outstanding for the year ended December 31, 2013 . The Company continued to have $0 real estate owned and $0 loans 90 days or more past due and still accruing at December 31, 2013 . Non-accruing loans totaled $2.3 million at year end. -Total deposits were $2.06 billion , a decrease of $184.9 million , or 8 percent, compared to December 31, 2012 . Consistent with our focus of growing core, non-maturing deposits, demand deposit and interest checking account balances increased $132.4 million , or 19 percent, year over year. Brokered deposits decreased $334.7 million from a year ago, which is correlated to a $411.8 million reduction of mortgage loans held for sale. -Mortgage loan applications decreased 18 percent to $886 million for the current quarter versus $1.08 billion for the prior quarter. Refinance volume was 22 percent of total applications, up slightly from 19 percent in the prior quarter, but significantly down from 67 percent for the year ago quarter. In 2013, purchase money originations were over $3.4 billion , an increase of approximately $1.5 billion over 2012 levels. -All capital ratios exceed the regulatory requirements to be considered well-capitalized. Tangible common equity capital (TCE) as a percentage of total assets was 10.58 percent at December 31, 2013 . -In December 2013 , the Company received all regulatory approvals to complete the acquisition of UFBC, the holding company of The Business Bank . The acquisition became effective January 16 . Commercial Banking Segment Income Review For the current quarter ended December 31, 2013 , net income for the commercial banking segment decreased 23 percent to $7.8 million from $10.2 million for the year ago quarter. The fourth quarter 2012 included approximately $2.4 million of net proceeds from bank owned life insurance. Net interest income for the current quarter was $23.2 million compared to $23.9 million for the year ago quarter. The decrease in net interest income for the comparable quarters was due to lower average balances of interest earning assets resulting from a $341.3 million decline in the quarterly average of mortgage loans held for sale. The Company's tax equivalent net interest margin was 3.65 percent, equal to the previous quarter, and up from 3.57 percent for the year ago quarter. Over the last quarter, the yield on interest earning assets decreased 0.01 percent, while the cost of interest bearing liabilities also decreased 0.01 percent. For the comparable annual periods ended December 31, 2013 and 2012, net income increased 11 percent to $33.9 million from $30.5 million . Although the net interest margin has declined over the comparable periods from 3.61 percent in 2012 to 3.52 percent in 2013, net interest income increased to $90.6 million versus $89.5 million a year ago due to the growth in average earning assets of approximately $115.4 million for the year 2013. The allowance for loan losses decreased to 1.37 percent of loans outstanding at December 31, 2013 . The Company's nonperforming assets decreased to 0.08 percent of total assets compared to 0.09 percent at the previous quarter end and 0.25 percent a year ago. For the year of 2013, net loan recoveries were 0.03 percent of average loans outstanding, compared to net charge offs of 0.35 percent for 2012. The provision for loan losses was $400,000 for the current quarter and was a negative provision of $117,000 year to date, versus a provision for loan losses of $1.5 million and $6.9 million for the three month and annual periods ended December 31, 2012 , respectively. Non-interest expense increased 11.7 percent to $12.5 million for the current quarter compared to $11.2 million for the fourth quarter 2012. The current quarter includes approximately $160,000 of merger expenses and an impairment charge on certain pooled trust preferred securities of approximately $300,000 resulting from the Volcker rule. During 2013, the Company added commercial lenders, other key positions and opened two de novo banking offices, which accounts for the remaining modest increase in expenses during the fourth quarter of 2013 as compared to the 2012 fourth quarter. For the current quarter versus the third quarter 2013, non-interest expense increased $1.4 million due to the mentioned items and accruals related to performance compensation. On an annual basis, non interest expense remained relatively flat at $43.8 million for the 2013 year compared to $43.5 million for the year ended 2012. In November, the bank completed its branch profitability analysis and decided to close two low performing offices during the 1st quarter of 2014. Mortgage Banking Segment Income Review For the current quarter ended December 31, 2013 , George Mason Mortgage , the Company's mortgage banking subsidiary, reported a net loss of $1.6 million versus net income of $3.7 million for the year ago quarter. For the comparable 2013 and 2012 annual periods, the Company reported a net loss of $5.2 million versus net income of $17.6 million , respectively. Non-interest income, which is reported net of commissions and incentives, was $4.8 million in the current quarter versus $441,000 last quarter and $10.9 million for the fourth quarter of 2012. For the comparable annual periods ended December 31, 2013 and 2012, noninterest income for the mortgage banking segment was $24.8 million versus $54.8 million , respectively. The SAB 109 accounting adjustment, as reported in Table 4, resulted in a material decrease of $30.8 million in reported gains from mortgage banking activities in fiscal 2013 versus 2012. George Mason originators produced $4.2 billion of closed loans in 2013 versus $4.1 billion in 2012. Of this amount, purchase money represents $2.8 billion of closed loans in 2013 versus $1.5 billion in 2012. For the current quarter, non-interest expense decreased to $8.0 million compared to $8.8 million for the prior quarter. For the annual periods ended December 31, 2013 and 2012, expenses increased to $35.2 million from $29.5 million , respectively. The increase in non-interest expense is attributable to the expansion of the Company's mortgage banking operations during the first six months of the year. The mortgage banking segment currently has 192 loan officers, up from 160 officers a year ago. Over the past year, the Company added 4 offices and now operates in 20 mortgage banking locations. Mortgage banking originations and related revenues were significantly impacted by the increase in interest rates during the last half of 2013. Although the average margin on loans sold to investors increased during the current quarter to 2.24 percent from 1.91 percent for the third quarter of 2013, overall loan origination volume continued to decline. As previously discussed, certain cost control programs and margin enhancement measures were enacted as a result of the current operating environment. The impact of these actions began to be realized during the current quarter. The Company continues to take action to return the mortgage banking segment to profitability based upon market conditions and its projected production volumes. Review of Balance Sheet At December 31, 2013 , total assets of the Company decreased $143.7 million to $2.90 billion , a decrease of 5 percent from total assets of $3.04 billion at December 31, 2012 . Loans held for investment grew 13 percent to $2.04 billion at December 31, 2013 , from $1.80 billion at December 31, 2012 . During this period, the Bank's investment portfolio increased to $360.0 million compared to $286.4 million a year ago. Loans held for sale decreased to $374.0 million compared to $785.8 million at December 31, 2012 . The decrease in total assets is primarily the result of the $411.8 million decrease in mortgage loans held for sale, which was partially offset by a $236.7 million increase in loans held for investment and a $73.3 million increase in total investment securities. Total deposits were $2.06 billion , a decrease of $185.0 million , or 8 percent, compared to December 31, 2012 . The Company uses short term brokered CDs as a source of funding for its mortgage loans held for sale portfolio. As these assets have declined, there has been an associated reduction of its brokered CD portfolio from $616.6 million a year ago to $282.0 million at December 31, 2013 . However, demand deposits and interest checking deposits grew $132.4 million over the past year, increasing 19 percent and reflecting the success of the Bank's strategic initiatives to generate core deposits. Dividend Announcement The Company today also announced that its Board of Directors has declared an increase of $0.02 to its quarterly cash dividend. A dividend of $0.08 per share will be paid on February 24 , to shareholders of record as of the close of business on February 6 . Bernard H. Clineburg , Chairman and Chief Executive Officer of the Company, said, "I'm pleased with the overall performance of our Company. Moving forward, we will continue to concentrate on gaining market share, either through de novo expansion or acquisition, which will increase our franchise value. We remain committed to building and maintaining a strong financial services company for our shareholders, employees, clients and the communities we serve." Cardinal Financial Corp. is a financial holding with assets of $2.90 billion at December 31, 2013 , serves the Washington Metropolitan region through its subsidiary, Cardinal Bank , with 29 conveniently located banking offices. More information: www.cardinalbank.com ((Comments on this story may be sent to newsdesk@closeupmedia.com ))


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Professional Services Close - Up


Story Tools