NEWS RELEASE

 

FOR IMMEDIATE RELEASE

Tysons Corner, Virginia

October 19, 2016

 

CARDINAL ANNOUNCES THIRD QUARTER 2016 EARNINGS

 

Cardinal Financial Corporation (NASDAQ: CFNL) (the “Company”) today reported that earnings for the quarter ended September 30, 2016 were $12.5 million, compared to $11.2 million for the year ago quarter ended September 30, 2015.   Diluted earnings per share were $0.37 and $0.34 for these same respective periods.

 

During the current quarter, the Company incurred $1.5 million after-tax expense, equal to $0.04 per share, related to the August 17th announcement of the merger with United Bankshares.  Before these expenses, the Company had adjusted net income of $14.0 million, or $0.41 per share, for the most recent quarter.

 

For the year to date period ended September 30, 2016, net income was $39.7 million, compared to $38.3 million for the nine month period ended September 30, 2015. Diluted earnings per share were $1.18 and $1.15 for these same respective periods.  Before merger expenses, the Company had adjusted net income of $41.2 million, or $1.22 per share, current year to date.

 

Selected Highlights

 

·                  Return on average assets (“ROAA”) and average equity (“ROAE”) were 1.19% and 11.10% for the third quarter 2016 and 1.29% and 12.11% for the nine months ending September 30, 2016, respectively.  Before merger expenses, ROAA was 1.32% and ROAE was 12.41% for the current quarter.

 

·                  Net income before the provision for loan losses, taxes and merger expenses was $22.4 million for the quarter ended September 30, 2016, versus $15.9 million for the year ago same quarter, an increase of 40.9%.

 

·                  Total assets of the Company grew above $4.20 billion, increasing 9% from September 30, 2015.

 

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·                  Loans held for investment were $3.22 billion, increasing 11% from a year ago.

 

·                  Customer deposits, including customer repurchase agreements, were $2.90 billion, increasing 10% from a year ago.    Non-interest bearing demand deposit accounts increased 22% over the past year and now total $757 million.

 

·                  For the third consecutive quarter, the Company had no nonaccrual loans and no other real estate owned at quarter end.

 

·                  Net interest margin was 3.35% for the third quarter of 2016, an increase from 3.33% for the prior quarter.

 

·                  Total mortgage loan closings were $1.20 billion for the quarter, an increase of $313 million from $886 million in the third quarter 2015. Closed purchase money mortgages represented 65% of the quarter’s volume and 68% year to date.

 

·                  Mortgage application volume was $1.58 billion, an increase of $426 million from the third quarter of 2015.  Purchase money mortgage applications were approximately 63% of total volume.

 

Review of Balance Sheet

 

At September 30, 2016, total assets of the Company were $4.22 billion, an increase of 9% from total assets of $3.88 billion at September 30, 2015. Average interest earning assets for the third quarter increased to $4.05 billion from $3.58 billion a year ago, and average interest bearing liabilities for the third quarter increased to $2.99 billion from $2.65 billion.

 

Loans held for investment grew to $3.22 billion at September 30, 2016 versus $2.92 billion a year ago, an 11% increase.  Balances increased $68 million, or 9% annualized, during the third quarter of the year.  Loans held for sale were $432 million at September 30, 2016, compared to $456 million at June 30, 2016, and increased from the third quarter 2015 balance of $378 million.  The Company’s investment securities portfolio decreased slightly to $398 million from $413 million at the end of the previous quarter, and from $430 million a year ago.

 

Over the past year, deposit balances increased $286 million to $3.22 billion from $2.94 billion, an increase of 10%.  Non-interest bearing demand deposit accounts, which totaled $757 million and represented 23% of deposits, increased $137 million since September 30, 2015, or 22%.  The increase in deposits is due primarily to continued growth in the number of accounts and balances in consumer and business non maturing accounts.

 

Net Interest Income

 

The Company’s net interest income increased 11%, to $33.0 million from $29.6 million, for the quarters ended September 30, 2016 and 2015, respectively.  For the current quarter, the

 

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Company’s tax equivalent net interest margin was 3.35%, an increase from 3.33% for the prior sequential quarter and up from 3.31% for the first quarter 2016.

 

The yield on loans held for investment was 4.10% for the third quarter of 2016 versus 4.09% for the second quarter of 2016, while the yield on loans held for sale decreased to 3.65% for the third quarter of 2016 versus 3.71% for the second quarter, reflecting the lower interest rate environment for mortgage loans. The average balance of loans held for sale increased to $422 million in the most recent quarter, versus $366 million in the second quarter of 2016.  The yield on total interest earning assets was 3.97% for the third quarter of 2016, compared to 3.99% for the previous quarter.  For these same respective periods, the Company’s total cost of interest bearing liabilities decreased to 0.84% from 0.90%.  Including DDAs, the Company’s total cost of funds decreased to 0.68% from 0.73%.

 

Commercial Banking Review

 

For the quarter ended September 30, 2016, net income for the commercial banking segment (the Bank) was $11.5 million, an increase of 4% from $11.0 million for the third quarter of last year.  During the current quarter, the provision for loan losses was $990,000 versus a negative provision of $547,000 during the year ago quarter due to recoveries of charged-off loans. Before taxes and the provision for loan losses, the Bank’s income for the current quarter was a record $18.4 million.

 

For the current year to date period ended September 30, 2016, the Bank’s net income increased 10% to $32.5 million versus $29.6 million for the year to date period ended September 30, 2015.  The year to date provision expense was $1.7 million versus $939,000 for the first nine months of 2015.

 

For the current quarter, there were net charge offs of 0.04% (annualized) of average loans outstanding.  The allowance for loan losses was 1.04% of loans outstanding at September 30, 2016 versus 1.08% at September 30, 2015.  This ratio decrease from a year ago is primarily the result of continued improvement of credit quality.  The Company had no nonperforming loans at September 30, 2016 versus nonperforming loans of 0.02% of total assets at September 30, 2015.

 

Non-interest income was $1.4 million for the current quarter compared to $954,000 for the year ago quarter.  Before gains on securities sales of $3.7 million, current year to date non-interest income was $3.6 million versus $3.2 million for the 2015 year to date period.

 

For the third quarter of 2016, non-interest expense was $15.9 million, compared to $15.8 million for the prior sequential quarter and $16.5 million for the first quarter of 2016. The efficiency ratio for the Bank was 46.4%, 48.7% and 52.2% for these respective quarters, which reflects the Company’s continued focus on expense controls.   Comparing total non-interest expenses to $15.3 million for the third quarter of 2015, the increase is primarily the result of increases in personnel expense to support the Bank’s growth, including quarterly accruals for performance based compensation.  At the end of September, the Bank closed its office in Tyson’s Corner, Virginia, and it expects to realize approximately $50,000 of expense savings per quarter.

 

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Mortgage Banking Review

 

The Company’s mortgage banking subsidiary, George Mason Mortgage (GMM), was again extremely active as it accepted approximately $1.58 billion of loan applications during the quarter and $4.8 billion year to date.  For the quarter ended September 30, 2016, GMM reported a net profit of $2.8 million and operating net income of $4.3 million.  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.  Comparable recent quarterly results are shown below.

 

		Q3 2016			Q2 2016			Q1 2016			Q4 2015			Q3 2015
Mortgage Banking: (in 000’s)
Reported Net Income		$	2,816		$	3,994		$	3,553		$	164		$	631
Reverse Impact of SAB 109		1,446			(2,259		)	(3,794		)	765			1,760
Operating Net Income (Loss)		$	4,262		$	1,735		$	(241	)	$	929		$	2,391

 

The net realized gain on sales and other fees, before the impact of SAB 109, was $17.9 million for the three months ended September 30, 2016 versus $10.8 million for the same quarter of 2015.  The gain on sale margin was 2.78% for the quarter versus 2.71% last quarter and 2.61% for the year ago quarter. The increase from previous periods is primarily due to the success of selling a majority of its production on a mandatory delivery basis.

 

Operating expenses were $11.5 million for the most recent quarter compared to $9.4 million last quarter and $7.9 million for the year ago quarter.  The sequential quarter increase in expenses reflects $1.3 million and $3.0 million, respectively, of salary expenses associated with loans held for sale that are deducted from expense and reported as contra-revenue under GAAP.  The expense increase over the same quarter of 2015 reflects added personnel costs related to compliance with the new TILA/RESPA Integrated Disclosure (TRID) regulations.  All other fixed expenses are consistent with the year ago period.

 

Loan applications totaled $1.58 billion during the third quarter of 2016, a slight decrease from $1.70 billion last quarter and up from $1.15 billion for the year ago quarter. Applications to refinance represented 37% for the current quarter, versus 25% of total applications last quarter and 26% for the year ago quarter.  Although refi activity has been strong, GMM continues to focus on the more stable purchase money mortgage business.

 

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Monthly Mortgage Loan Applications (in millions)

 

		JUL			AUG			SEP			Total
Third Quarter 2016		$	575.50		$	512.50		$	487.20		$	1,575.20
Purchase Money %		58		%	67		%	64		%	63		%
# of Units		1,622			1,500			1,410			4,532

 

		APR			MAY			JUN			Total
Second Quarter 2016		$	571.80		$	569.30		$	562.40		$	1,703.50
Purchase Money %		75		%	79		%	70		%	75		%
# of Units		1,626			1,585			1,546			4,757

 

		JAN			FEB			MAR			Total
First Quarter 2016		$	333.80		$	551.70		$	617.80		$	1,503.30
Purchase Money %		74		%	56		%	75		%	68		%
# of Units		975			1,590			1,837			4,402

 

		OCT			NOV			DEC			Total
Fourth Quarter 2015		$	397.00		$	335.40		$	331.00		$	1,063.40
Purchase Money %		71		%	77		%	74		%	74		%
# of Units		1,117			935			953			3,005

 

Parent Company Only Review

 

For the quarter ended September 30, 2016, Cardinal’s parent company reported a net loss of $1.8 million versus a net loss of $702,000 for the previous quarter and a net loss of $413,000 for the year ago quarter. The current quarter includes approximately $1.5 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 9.68% at September 30, 2016.

 

MANAGEMENT COMMENTS

 

Bernard H. Clineburg, Executive Chairman, said:

 

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“We have always remained committed to maintaining and growing a strong financial services company for our employees, clients, the communities we serve, and especially our shareholders.

 

“In adhering to that mission, we recently announced our intention to merge with United Bankshares.  Richard Adams, United’s CEO, and I have had a long standing relationship, and we believe that this merger represents a tremendous opportunity to create a dominant bank in the Washington DC metropolitan area which will benefit our customers and shareholders.  The process to seek required approvals from shareholders and regulators has begun, and we have commenced to collaborate on integration plans.

 

“Our third quarter results are indicative of our commitment to continue our positive momentum as we begin to focus on combining our companies. The quarterly results show improving profitability metrics while maintaining pristine asset quality levels. Increased balances in the loan portfolio combined with an increasing net interest margin resulted in revenue growth over both the previous quarter and same quarter last year.  George Mason continued to have strong activity as applications for loan originations were almost $1.6 billion, which is reflective of our ongoing commitment to building a quality team of mortgage bankers with deep ties to the realtor and builder communities.”

 

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,

 

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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 $4.22 billion at September 30, 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 that United will file 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.

 

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Contact:

 

Bernard H. Clineburg

Executive Chairman

or

 

Christopher Bergstrom

Chief Executive Officer

 

or

Mark A. Wendel,

EVP, Chief Financial Officer

 

703-584-3400

 

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Table 1.

 

Cardinal Financial Corporation and Subsidiaries

Summary Consolidated Statements of Condition

(Dollars in thousands)

(Unaudited)

 

								% Change											% Change
								Current											From
		09/30/16			06/30/16			Quarter		03/31/16			12/31/15			09/30/15			Year Ago
Cash and due from banks		$	23,928		$	24,081		-0.6	%	$	19,379		$	24,760		$	18,744		27.7	%
Federal funds sold		23,481			11,481			104.5	%	41,489			14,577			13,692			71.5	%
Investment securities available-for-sale		387,150			402,522			-3.8	%	407,980			414,077			421,214			-8.1	%
Investment securities held-to-maturity		3,780			3,796			-0.4	%	3,814			3,836			3,857			-2.0	%
Investment securities — trading		6,958			6,489			7.2	%	6,221			5,881			5,274			31.9	%
Total investment securities		397,888			412,807			-3.6	%	418,015			423,794			430,345			-7.5	%
Other investments		18,736			18,136			3.3	%	19,411			20,967			16,111			16.3	%
Loans held for sale		432,350			456,359			-5.3	%	365,489			383,768			377,878			14.4	%
Loans receivable, net of fees:
Commercial and industrial		336,444			350,206			-3.9	%	363,405			379,414			347,914			-3.3	%
Real estate - commercial		1,690,305			1,605,868			5.3	%	1,555,985			1,372,627			1,356,821			24.6	%
Real estate - construction		570,776			570,269			0.1	%	560,114			694,408			620,982			-8.1	%
Real estate - residential		460,400			463,394			-0.6	%	455,952			448,168			436,832			5.4	%
Home equity lines		161,515			161,658			-0.1	%	161,691			156,852			150,769			7.1	%
Consumer		5,383			5,476			-1.7	%	4,831			4,841			4,739			13.6	%
Total loans, net of fees		3,224,823			3,156,871			2.2	%	3,101,978			3,056,310			2,918,057			10.5	%
Allowance for loan losses		(33,641		)	(32,984		)	2.0	%	(32,407		)	(31,723		)	(31,572		)	6.6	%
Loans receivable, net		3,191,182			3,123,887			2.2	%	3,069,571			3,024,587			2,886,485			10.6	%
Premises and equipment, net		24,190			24,273			-0.3	%	24,845			25,163			25,398			-4.8	%
Goodwill and intangibles, net		36,115			36,262			-0.4	%	36,415			36,576			36,747			-1.7	%
Bank-owned life insurance		33,314			33,213			0.3	%	33,102			32,978			32,876			1.3	%
Other real estate owned		—			—			0.0	%	—			253			—			0.0	%
Other assets		38,464			56,667			-32.1	%	46,829			42,498			43,460			-11.5	%
TOTAL ASSETS		$	4,219,648		$	4,197,166		0.5	%	$	4,074,545		$	4,029,921		$	3,881,736		8.7	%
Non-interest bearing deposits		$	757,184		$	710,318		6.6	%	$	687,493		$	657,398		$	620,630		22.0	%
Interest checking		437,358			437,724			-0.1	%	459,377			451,545			433,372			0.9	%
Money markets		492,547			445,639			10.5	%	447,565			448,888			447,536			10.1	%
Statement savings		333,272			319,116			4.4	%	310,055			291,484			278,871			19.5	%
Certificates of deposit		756,991			763,013			-0.8	%	788,756			776,413			738,878			2.5	%
Brokered certificates of deposit		447,148			568,996			-21.4	%	451,781			407,043			419,461			6.6	%
Total deposits		3,224,500			3,244,806			-0.6	%	3,145,027			3,032,771			2,938,748			9.7	%
Other borrowed funds		464,876			450,696			3.1	%	437,065			537,965			469,019			-0.9	%
Mortgage funding checks		36,740			23,921			53.6	%	28,765			12,554			20,418			79.9	%
Escrow liabilities		3,653			2,491			46.6	%	2,777			2,676			2,861			27.7	%
Other liabilities		38,042			37,320			1.9	%	34,366			30,808			45,467			-16.3	%
Shareholders’ equity		451,837			437,932			3.2	%	426,545			413,147			405,223			11.5	%
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY		$	4,219,648		$	4,197,166		0.5	%	$	4,074,545		$	4,029,921		$	3,881,736		8.7	%

 

 

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
		09/30/16			06/30/16			Quarter		03/31/16			12/31/15			09/30/15			Year Ago
Net interest income		$	32,965		$	31,523		4.6	%	$	30,706		$	30,471		$	29,634		11.2	%
Provision for loan losses		990			430			130.2	%	250			449			(547		)	-281.0	%
Net interest income after provision for loan losses		31,975			31,093			2.8	%	30,456			30,022			30,181			5.9	%
Non-interest income:
Service charges on deposit accounts		612			581			5.3	%	551			590			584			4.8	%
Loan fees		596			359			66.0	%	309			307			344			73.3	%
Income from bank-owned life insurance		101			111			-9.0	%	124			102			118			-14.4	%
Net realized gains (losses) on investment securities		331			3,918			-91.6	%	(84		)	(127		)	960			-65.5	%
Other non-interest income		134			127			5.5	%	145			22			6			2133.3	%
Commercial banking & other segment non-interest income		1,774			5,096			-65.2	%	1,045			894			2,012			-11.8	%
Gains from mortgage banking activities		32,035			34,613			-7.4	%	27,041			19,939			22,915			39.8	%
Less: mortgage loan origination expenses		(16,412		)	(19,304		)	-15.0	%	(12,902		)	(11,874		)	(14,802		)	10.9	%
Mortgage banking segment non-interest income		15,623			15,309			2.1	%	14,139			8,065			8,113			92.6	%
Wealth management segment non-interest income		94			84			11.9	%	85			133			142			-33.8	%
Total non-interest income		17,491			20,489			-14.6	%	15,269			9,092			10,267			70.4	%
Net interest income and non-interest income		49,466			51,582			-4.1	%	45,725			39,114			40,448			22.3	%
Salaries and benefits		17,331			16,037			8.1	%	15,497			14,391			13,409			29.2	%
Occupancy		2,577			2,448			5.3	%	2,592			2,501			2,492			3.4	%
Depreciation		764			833			-8.3	%	844			853			828			-7.7	%
Data processing & communications		1,542			1,517			1.6	%	1,346			1,273			1,373			12.3	%
Professional fees		727			549			32.4	%	1,135			1,034			852			-14.7	%
FDIC insurance assessment		516			516			0.0	%	516			516			516			0.0	%
Loss on extinguishment of debt		—			3,638			100.0	%	—			—			—			100.0	%
Mortgage loan repurchases and settlements		—			—			0.0	%	100			350			47			0.0	%
Merger and acquisition expense		2,284			—			0.0	%	—			—			—			0.0	%
Other operating expense		4,594			4,579			0.3	%	4,262			4,364			4,478			2.6	%
Total non-interest expense		30,335			30,117			0.7	%	26,292			25,282			23,995			26.4	%
Income before income taxes		19,131			21,465			-10.9	%	19,433			13,832			16,453			16.3	%
Provision for income taxes		6,609			7,364			-10.3	%	6,366			4,817			5,244			26.0	%
NET INCOME		$	12,522		$	14,101		-11.2	%	$	13,067		$	9,015		$	11,209		11.7	%
Earnings per common share - basic		$	0.38		$	0.43		-11.6	%	$	0.40		$	0.27		$	0.34		10.3	%
Earnings per common share - diluted		$	0.37		$	0.42		-11.7	%	$	0.39		$	0.27		$	0.34		10.2	%
Weighted-average common shares outstanding - basic		33,200,426			33,032,595			0.5	%	32,977,970			32,844,212			32,766,772			1.3	%
Weighted-average common shares outstanding - diluted		33,767,143			33,569,058			0.6	%	33,435,858			33,379,656			33,311,261			1.4	%

 

 

Table 3.

 

Cardinal Financial Corporation and Subsidiaries

Summary Consolidated Income Statements

(In thousands, except share data and per share data)

(Unaudited)

 

		For the Nine Months Ended
								% Change
								From
		09/30/16			09/30/15			Year Ago
Net interest income		$	95,195		$	85,923		10.8	%
Provision for loan losses		1,670			939			77.8	%
Net interest income after provision for loan losses		93,525			84,984			10.1	%
Non-interest income:
Service charges on deposit accounts		1,744			1,705			2.3	%
Loan fees		1,264			1,289			-1.9	%
Income from bank-owned life insurance		336			330			1.8	%
Net realized gains on investment securities		4,164			1,518			174.3	%
Litigation recovery		—			2,950			-100.0	%
Other non-interest income		406			17			2288.2	%
Commercial banking & other segment non-interest income		7,914			7,809			1.3	%
Gains from mortgage banking activities		93,688			75,754			23.7	%
Less: mortgage loan origination expenses		(48,618		)	(40,363		)	20.5	%
Mortgage banking segment non-interest income		45,070			35,391			27.3	%
Wealth management segment non-interest income		263			400			-34.3	%
Total non-interest income		53,247			43,600			22.1	%
Net interest income and non-interest income		146,772			128,584			14.1	%
Salaries and benefits		48,864			37,453			30.5	%
Occupancy		7,617			7,323			4.0	%
Depreciation		2,441			2,550			-4.3	%
Data processing & communications		4,405			4,336			1.6	%
Professional fees		2,411			3,577			-32.6	%
FDIC insurance assessment		1,548			1,548			0.0	%
Loss on extinguishment of debt		3,638			—			100.0	%
Mortgage loan repurchases and settlements		100			47			112.8	%
Merger and acquisition expense		2,284			472			383.9	%
Other operating expense		13,435			13,710			-2.0	%
Total non-interest expense		86,743			71,016			22.1	%
Income before income taxes		60,029			57,568			4.3	%
Provision for income taxes		20,339			19,249			5.7	%
NET INCOME		$	39,690		$	38,319		3.6	%
Earnings per common share - basic		$	1.20		$	1.17		2.4	%
Earnings per common share - diluted		$	1.18		$	1.15		2.4	%
Weighted-average common shares outstanding - basic		33,070,838			32,710,435			1.1	%
Weighted-average common shares outstanding - diluted		33,576,873			33,191,915			1.2	%

 

 

Table 4.

 

Cardinal Financial Corporation and Subsidiaries

Selected Financial Information

(In thousands, except per share data and ratios)

(Unaudited)

 

		09/30/16			06/30/16			03/31/16			12/31/15			09/30/15
Capital Ratios:
At Period End:
Common equity tier 1 capital		10.58		%	10.33		%	9.99		%	9.86		%	9.91		%
Tier 1 risk-based capital		11.23		%	10.99		%	10.64		%	10.52		%	10.59		%
Total risk-based capital		12.11		%	11.86		%	11.50		%	11.37		%	11.47		%
Leverage capital ratio		10.33		%	10.38		%	10.28		%	10.18		%	10.46		%
Book value per common share		$	13.77		$	13.50		$	13.16		$	12.76		$	12.58
Tangible book value per common share (1)		$	12.67		$	12.38		$	12.04		$	11.63		$	11.44
Common shares outstanding		32,803			32,441			32,415			32,373			32,209
Performance Ratios (annualized):
For the Three Months Ended:
Return on average assets		1.19		%	1.39		%	1.31		%	0.92		%	1.20		%
Return on average equity		11.10		%	12.92		%	12.34		%	8.72		%	11.02		%
Net interest margin (2)		3.35		%	3.33		%	3.31		%	3.25		%	3.37		%
Efficiency ratio (3)		55.59		%	54.71		%	57.19		%	63.90		%	60.14		%
Asset Quality Data:
For the Three Months Ended:
Net charge-offs (recoveries) to average loans receivable, net of fees (annualized)		0.04		%	-0.02		%	-0.06		%	0.04		%	-0.27		%
At Period End:
Total nonaccrual loans		$	—		$	—		$	—		$	520		$	721
Other real estate owned		$	—		$	—		$	—		$	253		$	—
Nonperforming loans to loans receivable, net of fees		0.00		%	0.00		%	0.00		%	0.02		%	0.02		%
Nonperforming loans to total assets		0.00		%	0.00		%	0.00		%	0.01		%	0.02		%
Nonperforming assets to total assets		0.00		%	0.00		%	0.00		%	0.02		%	0.02		%
Total loans receivable past due 30 to 89 days		$	394		$	736		$	163		$	938		$	56
Total loans receivable past due 90 days or more		$	—		$	41		$	—		$	—		$	—
Allowance for loan losses to loans receivable, net of fees		1.04		%	1.04		%	1.04		%	1.04		%	1.08		%
Mortgage Banking Data:
For the Three Months Ended:
Applications		$	1,575,200		$	1,703,500		$	1,503,300		$	1,063,400		$	1,149,000
Loans closed		1,198,737			1,172,339			769,080			786,363			885,715
Loans sold		1,233,801			1,073,282			791,680			778,854			983,355
Purchase money % of loans closed - George Mason Mortgage		65		%	76		%	62		%	74		%	74		%
Realized gain on sales and fees as a % of loan sold(4)		2.78		%	2.71		%	2.67		%	2.71		%	2.61		%
At Period End:
Locked Pipeline		$	411,245		$	458,555		$	451,905		$	247,448		$	316,684
SAB 109 Total Unrealized Gains Recognized		23,713			25,955			22,453			16,571			17,757
Change in Unrealized Gains		(2,242		)	3,502			5,882			(1,186		)	(2,728		)
Change in After-tax Income		(1,446		)	2,259			3,794			(765		)	(1,760		)

 

(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 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.