NEWS RELEASE

 

FOR IMMEDIATE RELEASE

Tysons Corner, Virginia

January 25, 2017

 

CARDINAL’S 2016 RECORD EARNINGS SURPASS $50 MILLION

 

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.

 

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·                  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

 

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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.

 

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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.

 

		Q4 2016			Q3 2016			Q2 2016			Q1 2016			Q4 2015			YTD 2016			YTD 2015
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.

 

		Q4 2016			Q3 2016			Q2 2016			Q1 2016			Q4 2015			YTD 2016			YTD 2015
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

 

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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

 

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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

 

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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.

 

Contact:

Bernard H. Clineburg

Executive Chairman

or

Christopher Bergstrom

 

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Chief Executive Officer

or

Mark A. Wendel,

EVP, Chief Financial Officer

703-584-3400

 

8

 

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	%

 

 

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	%

 

 

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	%

 

 

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.