UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 22, 2015
CARDINAL FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia (State or other jurisdiction of incorporation) |
|
0-24557 (Commission File Number) |
|
54-1874630 (I.R.S. Employer Identification No.) |
8270 Greensboro Drive, Suite 500 McLean, Virginia (Address of principal executive offices) |
|
22102 (Zip Code) |
Registrants telephone number, including area code: (703) 584-3400
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On April 22, 2015, Cardinal Financial Corporation (Cardinal) issued a press release reporting its financial results for the period ended March 31, 2015. A copy of the press release is being furnished as an exhibit to this report and is incorporated by reference into this Item 2.02.
Item 5.07 Submission of Matters to a Vote of Security Holders.
Cardinal Financial Corporation (the Company) held its Annual Meeting of Shareholders on April 24, 2015 (the Annual Meeting). At the Annual Meeting, the shareholders of the Company elected four directors to serve a term of three-year terms each, approved the non-binding resolution to endorse the Companys executive compensation program, and ratified the Companys appointment of KPMG LLP as the Companys independent auditors for 2015. The voting results for each proposal are as follows:
1. To elect as directors for a term of three years each, expiring at the 2018 annual meeting of shareholders:
|
|
For |
|
Withhold |
|
Broker |
Bernard H. Clineburg |
|
25,126,742 |
|
2,690,105 |
|
3,029,936 |
Michael A. Garcia |
|
24,048,020 |
|
3,768,827 |
|
3,029,936 |
J. Hamilton Lambert |
|
26,432,080 |
|
1,384,767 |
|
3,029,936 |
Barbara B. Lang |
|
26,967,488 |
|
849,359 |
|
3,029,936 |
2. To approve the following advisory (non-binding) proposal:
RESOLVED, that the compensation paid to the Companys named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.
For |
|
Against |
|
Abstain |
|
Broker |
|
14,396,185 |
|
13,295,824 |
|
124,838 |
|
3,029,936 |
|
3. To ratify the appointment of KPMG LLP as the Companys independent auditors for 2015:
For |
|
Against |
|
Abstain |
|
Broker |
|
30,633,753 |
|
199,610 |
|
13,420 |
|
|
|
Item 8.01 Other Events.
On April 22, 2015, Cardinals Board of Directors declared a cash dividend of $0.11 for each share of its common stock outstanding. The dividend is payable on May 22, 2015 to shareholders of record on May 7, 2015. Based on the current number of shares outstanding, the aggregate payment will be approximately $3,358,000.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. |
|
Description |
|
|
|
99.1 |
|
Press Release dated April 22, 2015. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
CARDINAL FINANCIAL CORPORATION | |
|
(Registrant) | ||
|
|
| |
|
|
| |
Date: April 27, 2015 |
By: |
/s/ Mark A. Wendel | |
|
|
Mark A. Wendel | |
|
|
Executive Vice President and | |
|
|
Chief Financial Officer | |
Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE |
Contact: |
Bernard H. Clineburg, |
Tysons Corner, Virginia |
|
Chairman, Chief Executive Officer |
April 22, 2015 |
|
or |
|
|
Mark A. Wendel, |
|
|
EVP, Chief Financial Officer |
|
|
703-584-3400 |
CARDINAL ANNOUNCES FIRST QUARTER 2015 EARNINGS
Cardinal Financial Corporation (NASDAQ: CFNL) (the Company) today reported a 220% increase in reported earnings to $13.7 million, or $0.42 per diluted share, for the quarterly period ended March 31, 2015, compared to reported earnings of $4.3 million, or $0.13 per diluted share, for the first quarter of 2014.
Selected Highlights
· Operating net income (a non-GAAP measure) increased 137% to $9.7 million, or $0.30 per share, for the current quarter versus $4.1 million, or $0.13 per share, for the year ago quarter. Operating net income for the first quarter of 2015 excludes $313,000 of after-tax acquisition expenses and eliminates a $4.3 million after-tax increase in unrealized gains from recognizing revenue on forward commitments to sell its locked mortgage loan pipeline. Operating net income for the year ago quarter excludes $2.2 million of after-tax acquisition expenses and a $2.4 million increase in unrealized gains. Management believes operating net income more accurately reflects the performance of the Company.
· Loans held for investment grew $44 million during the quarter, or 7% annualized. Asset quality remains excellent. At March 31, 2015, nonperforming assets decreased to $2.0 million, or 0.06% of total assets. For the quarter, the Company had net loan recoveries of 0.07% of average loans outstanding.
· Net income for the commercial banking segment, before $313,000 after-tax acquisition expenses, was $9.2 million for the current quarter, versus $7.4 million for the year ago quarter, an increase of 25%.
· The Companys mortgage banking subsidiary, George Mason Mortgage, continued its solid performance. It reported net income of $6.0 million and delivered operating net income of $1.7 million for the current quarter after eliminating the $4.3 million after-tax increase in unrealized gains.
· All capital ratios exceed the requirements of banking regulators to be considered well-capitalized. Tangible common equity capital (TCE) as a percentage of total assets was 10.00% at March 31, 2015.
Review of Balance Sheet
At March 31, 2015, total assets of the Company were $3.45 billion, an increase of 10% from total assets of $3.14 billion at March 31, 2014. Loans held for investment grew to $2.63 billion versus $2.35 billion a year ago, a 12% increase. Loans held for sale increased to $315 million at March 31, 2015 compared to $265 million at March 31, 2014. Deposit balances increased $268 million to $2.65 billion from $2.38 billion for these same periods, respectively, an increase of 11%. Non-interest bearing demand deposit accounts, which represented 21% of total deposits, increased $31 million to $565 million.
Net Interest Income
The Companys net interest income increased 7%, to $27.4 million from $25.7 million, for the three month periods ended March 31, 2015 and 2014, respectively. Average interest earning assets increased to $3.23 billion from $2.86 billion a year ago, and the yield on interest earning assets declined to 4.07% from 4.34%. For these same comparable periods, average loans held for investment increased to $2.58 billion from $2.24 billion, and the yield decreased to 4.27% from 4.45%. Average loans held for sale increased to $261 million from $218 million, and the yield decreased to 3.81% from 4.54%. Average interest bearing liabilities increased to $2.38 billion from $2.11 billion, and the average cost declined to 0.93% from 0.96%.
The Companys tax equivalent net interest margin was 3.45% for the current quarter and 3.64% for the same quarter of last year. The net interest margin for the fourth quarter of 2014 was 3.48%, and the slight sequential quarter decline was primarily the result of the fewer number of days in the current quarter.
In early February, the Company completed a restructuring of a portion of its $230 million fixed rate FHLB Advance portfolio, reducing the cost from 3.33% to 2.80% and having a positive impact on the net interest margin of approximately 0.03% for the quarter.
Commercial Banking Review
For the current quarter ended March 31, 2015, net income for the commercial banking segment was $8.9 million, an increase of 61% from $5.5 million for the year ago quarter. Before acquisition expenses, operating net income was $9.2 million for the current quarter, versus $7.4 million for the year ago quarter, an increase of 25%.
The allowance for loan losses was 1.10% of loans outstanding at March 31, 2015 versus 1.24% at March 31, 2014. This ratio decrease from a year ago is the result of improving credit quality. The Companys nonperforming assets were 0.06% of total assets at March 31, 2015 compared to 0.16% a year ago. For the quarter, there were recoveries from previously charged off loans in excess of current charge offs equal to 0.07% of average loans outstanding.
Non-interest income was $1.3 million for the current quarter compared to $0.9 million for the year ago quarter. Loan fees were $454,000 for the current quarter versus $212,000 for the same period of 2014. Securities gains totaled $202,000 for the current quarter versus $152,000 for the same year ago period.
Non-interest expense was $15.1 million for the current quarter versus $15.8 million for the prior year quarter. Before acquisition expenses, non interest expense was $14.7 million and $13.0 million for these same respective periods. Current quarter personnel expenses were $444,000 higher than the year ago quarter due to increased performance incentives. Marketing and advertising expenses increased approximately $370,000. FDIC insurance expenses increased $133,000 from a year ago. Beginning in 2015, the Company elected to change its parent company expense allocation associated with managing the bank which resulted in a bank expense increase of over $640,000 when compared to previous quarters.
Regarding cost savings, management has recently renegotiated certain data processing contracts which are expected to result in an annual expense reduction of approximately $230,000. The Company also recently completed the final branch closing associated with its acquisition of The Business Bank, resulting in expected annual savings of approximately $600,000.
Mortgage Banking Review
For the current quarter ended March 31, 2015, the mortgage banking segment reported a net profit of $6.0 million, and it delivered operating net income of $1.7 million. Operating net income (a non-GAAP measure) excludes the impact of the Staff Accounting Bulletin (SAB) 109 accounting requirement to record unrealized gains on forward commitments to sell its locked mortgage loan pipeline. Comparable quarterly results are shown below.
|
|
Q1 2015 |
|
Q1 2014 |
| ||
Mortgage Banking: (in 000s) |
|
|
|
|
| ||
Reported Net Income |
|
$ |
5,974 |
|
$ |
(167 |
) |
Reverse Impact of SAB 109 |
|
(4,313 |
) |
(2,353 |
) | ||
Operating Net Income |
|
$ |
1,661 |
|
$ |
(2,520 |
) |
The accompanying Table #7 provides additional recent quarterly information regarding the impact of SAB 109.
During the first quarter of 2015, closed loans were $844 million and loans sold to investors totaled $849 million, versus $551 million and $562 million, respectively, for the same quarter of 2014. Net realized gain on sales and other fees were $16.2 million for the current quarter versus
$7.4 million for the same period a year ago. The increase of 118% is primarily the result of increases in production due to refinance activity and a gain on sale margin increase to 2.58% from 2.17% a year ago.
Loan applications totaled $1.6 billion during the first quarter of 2015, up from $961 million for quarter ended March 31, 2014. Purchase money represented 49% of total application volume in the current quarter.
Managements actions have led to overall operating expense reductions of $406,000 in the current quarter when compared to the year ago quarter. Operating non-interest expenses were $9.7 million versus $10.1 million for the first quarter of 2015 and 2014, respectively. For these periods, operating expenses include $2.4 million and $1.8 million of fixed salary expenses associated with loan closings that are reported as contra-revenue under GAAP.
Capital Ratios
The Company remains in excess of all regulatory standards to be considered a well capitalized bank.
Other Events
Management has recently reached an agreement to settle litigation. As a result, Cardinal will be recording additional pretax income during the second quarter of 2015 of approximately $2.5 million.
MANAGEMENT COMMENTS
Bernard H. Clineburg, Chairman and Chief Executive Officer of the Company, said:
I am extremely pleased with how our Company performed during the first quarter of 2015, which reflected solid earnings, expected loan growth and ongoing pristine credit quality.
Before M&A expenses, commercial banking net income improved 25% year over year. Our business development efforts and commitment to the local markets continued to drive new relationships and account growth for both loans and deposits.
Our mortgage banking division had a strong first quarter as it benefited from higher refinance volumes. Notwithstanding these opportunities, we remained focused on increasing operating efficiencies and continuing to build on our already outstanding purchase money market share.
As always, we will continue to concentrate on gaining profitable market share, either through de novo expansion or acquisition, which will increase our franchise value. We remain committed to maintaining and growing a strong financial services company for our shareholders, employees, clients and the communities we serve.
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 Companys intent, belief or expectation with regard to such matters as financial and operational performance, credit quality and branch expansion. Such statements are necessarily based on managements assumptions and estimates and are inherently subject to a variety of risks and uncertainties concerning the Companys 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. For an explanation of some of the risks and uncertainties associated with forward-looking statements, please refer to the Companys Annual Report on Form 10-K for the year ended December 31, 2014 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 $3.45 billion at March 31, 2015, 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 Companys stock is traded on NASDAQ (CFNL). For additional information please visit our Web site at www.cardinalbank.com or call (703) 584-3400.
Table 1.
Cardinal Financial Corporation and Subsidiaries
Summary Statements of Condition
(Dollars in thousands)
|
|
|
|
|
|
|
|
% Change |
| |||||
|
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2014 |
|
Current Year |
|
Year Over Year |
| |||
|
|
(Unaudited) |
|
|
|
(Unaudited) |
|
|
|
|
| |||
Cash and due from banks |
|
$ |
21,780 |
|
$ |
20,298 |
|
$ |
29,211 |
|
7.3 |
% |
-25.4 |
% |
Federal funds sold |
|
38,675 |
|
17,891 |
|
9,745 |
|
116.2 |
% |
296.9 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Investment securities available-for-sale |
|
314,260 |
|
339,131 |
|
352,805 |
|
-7.3 |
% |
-10.9 |
% | |||
Investment securities held-to-maturity |
|
4,019 |
|
4,024 |
|
6,351 |
|
-0.1 |
% |
-36.7 |
% | |||
Investment securities trading |
|
5,453 |
|
5,067 |
|
4,673 |
|
7.6 |
% |
16.7 |
% | |||
Total investment securities |
|
323,732 |
|
348,222 |
|
363,829 |
|
-7.0 |
% |
-11.0 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Other investments |
|
15,049 |
|
15,941 |
|
15,455 |
|
-5.6 |
% |
-2.6 |
% | |||
Loans held for sale |
|
315,014 |
|
315,323 |
|
265,313 |
|
-0.1 |
% |
18.7 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Loans receivable, net of fees: |
|
|
|
|
|
|
|
|
|
|
| |||
Commercial and industrial |
|
324,692 |
|
354,693 |
|
291,490 |
|
-8.5 |
% |
11.4 |
% | |||
Real estate - commercial |
|
1,265,128 |
|
1,254,270 |
|
1,188,440 |
|
0.9 |
% |
6.5 |
% | |||
Real estate - construction |
|
487,678 |
|
432,171 |
|
412,177 |
|
12.8 |
% |
18.3 |
% | |||
Real estate - residential |
|
407,634 |
|
403,744 |
|
333,191 |
|
1.0 |
% |
22.3 |
% | |||
Home equity lines |
|
135,531 |
|
131,156 |
|
115,364 |
|
3.3 |
% |
17.5 |
% | |||
Consumer |
|
4,767 |
|
5,080 |
|
5,040 |
|
-6.2 |
% |
-5.4 |
% | |||
Loans receivable, net of fees |
|
2,625,430 |
|
2,581,114 |
|
2,345,702 |
|
1.7 |
% |
11.9 |
% | |||
Allowance for loan losses |
|
(28,884 |
) |
(28,275 |
) |
(29,093 |
) |
2.2 |
% |
-0.7 |
% | |||
Loans receivable, net |
|
2,596,546 |
|
2,552,839 |
|
2,316,609 |
|
1.7 |
% |
12.1 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Premises and equipment, net |
|
25,139 |
|
25,253 |
|
27,000 |
|
-0.5 |
% |
-6.9 |
% | |||
Goodwill and intangibles, net |
|
37,115 |
|
37,312 |
|
37,390 |
|
-0.5 |
% |
-0.7 |
% | |||
Bank-owned life insurance |
|
32,664 |
|
32,546 |
|
32,181 |
|
0.4 |
% |
1.5 |
% | |||
Other assets |
|
41,056 |
|
33,509 |
|
46,604 |
|
22.5 |
% |
-11.9 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
TOTAL ASSETS |
|
$ |
3,446,770 |
|
$ |
3,399,134 |
|
$ |
3,143,337 |
|
1.4 |
% |
9.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
| |||
Non-interest bearing deposits |
|
$ |
564,583 |
|
$ |
572,071 |
|
$ |
534,064 |
|
-1.3 |
% |
5.7 |
% |
Interest checking |
|
448,702 |
|
422,291 |
|
448,163 |
|
6.3 |
% |
0.1 |
% | |||
Money markets |
|
365,978 |
|
372,591 |
|
327,977 |
|
-1.8 |
% |
11.6 |
% | |||
Statement savings |
|
270,495 |
|
254,722 |
|
258,825 |
|
6.2 |
% |
4.5 |
% | |||
Certificates of deposit |
|
610,358 |
|
603,237 |
|
519,806 |
|
1.2 |
% |
17.4 |
% | |||
Brokered certificates of deposit |
|
385,015 |
|
310,418 |
|
288,093 |
|
24.0 |
% |
33.6 |
% | |||
Total deposits |
|
2,645,131 |
|
2,535,330 |
|
2,376,928 |
|
4.3 |
% |
11.3 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Other borrowed funds |
|
356,322 |
|
437,995 |
|
382,854 |
|
-18.6 |
% |
-6.9 |
% | |||
Mortgage funding checks |
|
23,031 |
|
19,469 |
|
6,474 |
|
18.3 |
% |
255.7 |
% | |||
Escrow liabilities |
|
2,611 |
|
2,035 |
|
1,670 |
|
28.3 |
% |
56.3 |
% | |||
Other liabilities |
|
30,399 |
|
26,984 |
|
22,966 |
|
12.7 |
% |
32.4 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Shareholders equity |
|
389,276 |
|
377,321 |
|
352,445 |
|
3.2 |
% |
10.5 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
TOTAL LIABILITIES & SHAREHOLDERS EQUITY |
|
$ |
3,446,770 |
|
$ |
3,399,134 |
|
$ |
3,143,337 |
|
1.4 |
% |
9.7 |
% |
Table 2.
Cardinal Financial Corporation and Subsidiaries
Summary Income Statements
(Dollars in thousands, except share and per share data)
(Unaudited)
|
|
For the Three Months Ended |
|
|
| ||||
|
|
March 31 |
|
|
| ||||
|
|
2015 |
|
2014 |
|
% Change |
| ||
|
|
|
|
|
|
|
| ||
Net interest income |
|
$ |
27,439 |
|
$ |
25,667 |
|
6.9 |
% |
Provision for loan losses |
|
(130 |
) |
(1,926 |
) |
-93.3 |
% | ||
Net interest income after provision for loan losses |
|
27,309 |
|
23,741 |
|
15.0 |
% | ||
|
|
|
|
|
|
|
| ||
Non-interest income: |
|
|
|
|
|
|
| ||
Service charges on deposit accounts |
|
544 |
|
535 |
|
1.7 |
% | ||
Loan fees |
|
454 |
|
212 |
|
114.2 |
% | ||
Income from bank owned life insurance |
|
118 |
|
119 |
|
-0.8 |
% | ||
Net realized gains on investment securities |
|
202 |
|
152 |
|
32.9 |
% | ||
Other non-interest income |
|
5 |
|
24 |
|
-79.2 |
% | ||
Commercial banking & other non-interest income |
|
1,323 |
|
1,042 |
|
27.0 |
% | ||
|
|
|
|
|
|
|
| ||
Management fee income |
|
|
|
21 |
|
-100.0 |
% | ||
Gains from mortgage banking activities |
|
28,549 |
|
15,818 |
|
80.5 |
% | ||
Less: mortgage loan origination expenses |
|
(12,383 |
) |
(8,435 |
) |
46.8 |
% | ||
Mortgage banking non-interest income |
|
16,166 |
|
7,404 |
|
118.3 |
% | ||
|
|
|
|
|
|
|
| ||
Wealth management non-interest income |
|
115 |
|
222 |
|
-48.2 |
% | ||
Total non-interest income |
|
17,604 |
|
8,668 |
|
103.1 |
% | ||
|
|
|
|
|
|
|
| ||
Net interest income and non-interest income |
|
44,913 |
|
32,409 |
|
38.6 |
% | ||
|
|
|
|
|
|
|
| ||
Salaries and benefits |
|
12,081 |
|
11,389 |
|
6.1 |
% | ||
Occupancy |
|
2,484 |
|
2,630 |
|
-5.6 |
% | ||
Depreciation |
|
876 |
|
966 |
|
-9.3 |
% | ||
Data processing & communications |
|
1,504 |
|
1,615 |
|
-6.9 |
% | ||
Professional fees |
|
1,589 |
|
818 |
|
94.3 |
% | ||
FDIC insurance assessment |
|
516 |
|
383 |
|
34.7 |
% | ||
Merger and acquisition expense |
|
468 |
|
3,212 |
|
-85.4 |
% | ||
Other operating expense |
|
4,625 |
|
4,777 |
|
-3.2 |
% | ||
Total non-interest expense |
|
24,143 |
|
25,790 |
|
-6.4 |
% | ||
Income before income taxes |
|
20,770 |
|
6,619 |
|
213.8 |
% | ||
Provision for income taxes |
|
7,038 |
|
2,329 |
|
202.2 |
% | ||
NET INCOME |
|
$ |
13,732 |
|
$ |
4,290 |
|
220.1 |
% |
|
|
|
|
|
|
|
| ||
Earnings per common share - basic |
|
$ |
0.42 |
|
$ |
0.13 |
|
215.1 |
% |
Earnings per common share - diluted |
|
$ |
0.42 |
|
$ |
0.13 |
|
215.6 |
% |
Weighted-average common shares outstanding - basic |
|
32,635,120 |
|
32,127,188 |
|
1.6 |
% | ||
Weighted-average common shares outstanding - diluted |
|
33,071,317 |
|
32,608,599 |
|
1.4 |
% |
Table 3.
Cardinal Financial Corporation and Subsidiaries
Selected Financial Information
(Dollars in thousands, except per share data and ratios)
(Unaudited)
|
|
For the Three Months Ended |
| ||||
|
|
2015 |
|
2014 |
| ||
Performance Ratios: |
|
|
|
|
| ||
Return on average assets |
|
1.62 |
% |
0.57 |
% | ||
Return on average equity |
|
14.13 |
% |
4.79 |
% | ||
Net interest margin (1) |
|
3.45 |
% |
3.64 |
% | ||
Efficiency ratio (2) |
|
53.60 |
% |
75.11 |
% | ||
Non-interest income to average assets |
|
2.08 |
% |
1.15 |
% | ||
Non-interest expense to average assets |
|
2.86 |
% |
3.41 |
% | ||
|
|
|
|
|
| ||
Mortgage Banking Select Data: |
|
|
|
|
| ||
$ of loan applications - George Mason Mortgage |
|
$ |
1,595,000 |
|
$ |
960,600 |
|
$ of loan applications - Managed Mortgage Company Affiliates |
|
|
|
1,400 |
| ||
Total |
|
1,595,000 |
|
962,000 |
| ||
|
|
|
|
|
| ||
Refi % of loan applications - George Mason Mortgage |
|
51 |
% |
18 |
% | ||
Refi % of loans applications- Managed Mortgage Company Affiliates |
|
0 |
% |
0 |
% | ||
Total |
|
51 |
% |
18 |
% | ||
|
|
|
|
|
| ||
$ of loans closed - George Mason Mortgage |
|
$ |
843,734 |
|
$ |
551,443 |
|
$ of loans closed - Managed Mortgage Company Affiliates |
|
|
|
13,034 |
| ||
Total |
|
843,734 |
|
564,477 |
| ||
|
|
|
|
|
| ||
# of loans closed - George Mason Mortgage |
|
2,454 |
|
1,689 |
| ||
# of loans closed - Managed Mortgage Company Affiliates |
|
|
|
30 |
| ||
Total |
|
2,454 |
|
1,719 |
| ||
|
|
|
|
|
| ||
$ of loans sold - George Mason Mortgage |
|
$ |
848,559 |
|
$ |
561,956 |
|
$ of loans sold - Managed Mortgage Company Affiliates |
|
|
|
71,504 |
| ||
Total |
|
848,559 |
|
633,460 |
| ||
|
|
|
|
|
| ||
$ of locked commitments - George Mason Mortgage |
|
$ |
1,098,680 |
|
$ |
667,778 |
|
$ locked commitments at period end - George Mason Mortgage |
|
$ |
449,865 |
|
$ |
327,243 |
|
$ of loans held for sale at period end - George Mason Mortgage |
|
$ |
264,494 |
|
$ |
224,248 |
|
Realized gain on sales and fees as a % of loan sold (3) |
|
2.58 |
% |
2.17 |
% | ||
Net realized gains as a % of realized gains (Gain on sale margin) (4) |
|
43.36 |
% |
30.69 |
% | ||
|
|
|
|
|
| ||
Asset Quality Data: |
|
|
|
|
| ||
Net charge-offs (recoveries) to average loans receivable, net of fees |
|
-0.07 |
% |
0.12 |
% | ||
Total nonaccrual loans |
|
$ |
1,983 |
|
$ |
4,947 |
|
Real estate owned |
|
$ |
|
|
$ |
|
|
Nonperforming loans to loans receivable, net of fees |
|
0.08 |
% |
0.21 |
% | ||
Nonperforming loans to total assets |
|
0.06 |
% |
0.16 |
% | ||
Nonperforming assets to total assets |
|
0.06 |
% |
0.16 |
% | ||
Total loans receivable past due 30 to 89 days |
|
$ |
1,426 |
|
$ |
2,954 |
|
Total loans receivable past due 90 days or more |
|
$ |
|
|
$ |
|
|
Allowance for loan losses to loans receivable, net of fees |
|
1.10 |
% |
1.24 |
% | ||
Allowance for loan losses to nonperforming loans |
|
1456.58 |
% |
588.09 |
% | ||
|
|
|
|
|
| ||
Capital Ratios: |
|
|
|
|
| ||
Common equity tier 1 capital |
|
9.91 |
% |
N/A |
| ||
Tier 1 risk-based capital |
|
10.63 |
% |
10.72 |
% | ||
Total risk-based capital |
|
11.48 |
% |
11.71 |
% | ||
Leverage capital ratio |
|
11.02 |
% |
10.82 |
% | ||
Book value per common share |
|
$ |
12.11 |
|
$ |
11.03 |
|
Tangible book value per common share (5) |
|
$ |
10.95 |
|
$ |
9.86 |
|
Common shares outstanding |
|
32,155 |
|
31,962 |
|
(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 33% for 2014 and 2013.
(2) Efficiency ratio is calculated as total non-interest expense divided by the total of net interest income and non-interest income.
(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.
(4) Net realized gains are gains net of loan origination expense recognized on the date the loan is sold and do not include the unrealized gains recognized at the loan commitment date.
(5) Tangible book value is calculated as total shareholders equity less goodwill and other intangible assets, divided by common shares outstanding.
Table 4.
Cardinal Financial Corporation and Subsidiaries
(Dollars in thousands, except share and per share data)
(Unaudited)
Mortgage Revenue Recognition Impact of SAB 109 (Written Loan Commitments Recorded at Fair Value Through Earnings)
|
|
For the Three Months Ended |
|
|
| ||||
|
|
2015 |
|
2014 |
|
% Change |
| ||
Net Gains from Mortgage Banking Activities: |
|
|
|
|
|
|
| ||
As Reported |
|
|
|
|
|
|
| ||
Fair Value of LCs / Unrealized Gains Recognized @ LC date **(see note below) |
|
$ |
28,549 |
|
$ |
15,818 |
|
80.48 |
% |
Loan origination expenses recognized @ Loan Sale Date |
|
12,383 |
|
8,435 |
|
46.80 |
% | ||
Reported Net Gains from Mortgage Banking Activities |
|
16,166 |
|
7,383 |
|
118.96 |
% | ||
|
|
|
|
|
|
|
| ||
As Adjusted |
|
|
|
|
|
|
| ||
Realized Gains Recognized @ Loan Sale Date |
|
21,862 |
|
12,170 |
|
79.64 |
% | ||
Loan origination expenses recognized @ Loan Sale Date |
|
12,383 |
|
8,435 |
|
46.80 |
% | ||
Adjusted Net Gains from Mortgage Banking Activities |
|
9,479 |
|
3,735 |
|
153.79 |
% | ||
|
|
|
|
|
|
|
| ||
Impact of SAB 109 on Net Gains from Mortgage Banking Activities: |
|
|
|
|
|
|
| ||
Increase/(Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB 109 |
|
$ |
6,687 |
|
$ |
3,648 |
|
83.31 |
% |
Net Income Reconciliation for the Impact of Merger and Acquisition Expenses and SAB 109
|
|
For the Three Months Ended |
|
|
| ||||
|
|
2015 |
|
2014 |
|
% Change |
| ||
Net Income Reconciliation: |
|
|
|
|
|
|
| ||
Reported Net Income |
|
$ |
13,732 |
|
$ |
4,290 |
|
220.09 |
% |
Aftertax Merger and Acquisition Expense |
|
313 |
|
2,162 |
|
-85.52 |
% | ||
Adjusted Net Income |
|
14,045 |
|
6,452 |
|
117.68 |
% | ||
Aftertax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB109 |
|
4,313 |
|
2,353 |
|
83.31 |
% | ||
Operating Net Income |
|
$ |
9,732 |
|
$ |
4,099 |
|
137.42 |
% |
|
|
|
|
|
|
|
| ||
Earnings per Share (EPS) Reconciliation: |
|
|
|
|
|
|
| ||
Reported Net Income |
|
$ |
0.42 |
|
$ |
0.13 |
|
215.61 |
% |
Aftertax Merger and Acquisition Expense |
|
0.01 |
|
0.07 |
|
-85.73 |
% | ||
Adjusted Net Income |
|
0.43 |
|
0.20 |
|
115.14 |
% | ||
Aftertax Net Increase / (Decrease) in Unrealized Gains on Mortgage Banking Activities Related to SAB109 |
|
0.13 |
|
0.07 |
|
80.74 |
% | ||
Operating Net Income |
|
$ |
0.30 |
|
$ |
0.13 |
|
134.89 |
% |
|
|
|
|
|
|
|
| ||
Performance Ratios (adjusted for change in unrealized mortgage banking gains): |
|
|
|
|
|
|
| ||
Return on average assets |
|
1.15 |
% |
0.54 |
% |
|
| ||
Return on average equity |
|
10.01 |
% |
4.58 |
% |
|
| ||
Efficiency ratio |
|
62.94 |
% |
84.04 |
% |
|
| ||
Non-interest income to average assets |
|
1.29 |
% |
0.66 |
% |
|
|
**
Per the accounting guidance set forth by SEC Staff Accounting Bulleting (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 (formally 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 5.
Cardinal Financial Corporation and Subsidiaries
Average Statements of Condition and Yields on Earning Assets and Interest-Bearing Liabilities
Three Months Ended March 31, 2015, December 31, 2014, and March 31, 2014
(Dollars in thousands)
(Unaudited)
|
|
For the Three Months Ended |
| |||||||||||||
|
|
March 31, 2015 |
|
December 31, 2014 |
|
March 31, 2014 |
| |||||||||
|
|
Average |
|
Average Yield |
|
Average |
|
Average Yield |
|
Average |
|
Average Yield |
| |||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Loans receivable, net of fees (1) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Commercial and industrial |
|
$ |
349,942 |
|
3.64 |
% |
$ |
341,186 |
|
3.71 |
% |
$ |
259,650 |
|
4.96 |
% |
Real estate - commercial |
|
1,258,988 |
|
4.53 |
% |
1,209,418 |
|
4.52 |
% |
1,159,091 |
|
4.36 |
% | |||
Real estate - construction |
|
445,913 |
|
4.70 |
% |
423,666 |
|
5.05 |
% |
397,199 |
|
4.86 |
% | |||
Real estate - residential |
|
391,070 |
|
3.80 |
% |
377,226 |
|
3.82 |
% |
304,546 |
|
4.08 |
% | |||
Home equity lines |
|
133,737 |
|
3.31 |
% |
128,384 |
|
3.44 |
% |
114,720 |
|
3.70 |
% | |||
Consumer |
|
4,807 |
|
5.56 |
% |
4,936 |
|
5.70 |
% |
6,465 |
|
5.21 |
% | |||
Total loans |
|
2,584,457 |
|
4.27 |
% |
2,484,816 |
|
4.34 |
% |
2,241,671 |
|
4.45 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Loans held for sale |
|
260,524 |
|
3.81 |
% |
278,549 |
|
4.09 |
% |
218,094 |
|
4.54 |
% | |||
Investment securities - available-for-sale (1) |
|
315,532 |
|
3.87 |
% |
320,753 |
|
3.96 |
% |
342,127 |
|
3.98 |
% | |||
Investment securities - held-to-maturity |
|
4,021 |
|
2.09 |
% |
5,773 |
|
2.32 |
% |
8,306 |
|
1.87 |
% | |||
Other investments |
|
13,248 |
|
4.66 |
% |
14,563 |
|
4.48 |
% |
15,521 |
|
3.40 |
% | |||
Federal funds sold |
|
52,022 |
|
0.22 |
% |
65,322 |
|
0.26 |
% |
31,790 |
|
0.40 |
% | |||
Total interest-earning assets |
|
3,229,804 |
|
4.07 |
% |
3,169,776 |
|
4.19 |
% |
2,857,509 |
|
4.34 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Non-interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Cash and due from banks |
|
20,232 |
|
|
|
19,902 |
|
|
|
35,831 |
|
|
| |||
Premises and equipment, net |
|
25,208 |
|
|
|
25,395 |
|
|
|
24,849 |
|
|
| |||
Goodwill and intangibles, net |
|
37,235 |
|
|
|
37,226 |
|
|
|
32,849 |
|
|
| |||
Accrued interest and other assets |
|
98,009 |
|
|
|
96,392 |
|
|
|
100,878 |
|
|
| |||
Allowance for loan losses |
|
(28,828 |
) |
|
|
(29,645 |
) |
|
|
(30,043 |
) |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
TOTAL ASSETS |
|
$ |
3,381,660 |
|
|
|
$ |
3,319,046 |
|
|
|
$ |
3,021,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest checking |
|
$ |
424,284 |
|
0.50 |
% |
$ |
425,298 |
|
0.50 |
% |
$ |
420,285 |
|
0.52 |
% |
Money markets |
|
367,485 |
|
0.31 |
% |
367,501 |
|
0.33 |
% |
312,656 |
|
0.30 |
% | |||
Statement savings |
|
263,938 |
|
0.30 |
% |
252,195 |
|
0.26 |
% |
247,568 |
|
0.27 |
% | |||
Certificates of deposit |
|
974,901 |
|
1.03 |
% |
895,821 |
|
1.04 |
% |
754,081 |
|
1.01 |
% | |||
Total interest-bearing deposits |
|
2,030,608 |
|
0.70 |
% |
1,940,815 |
|
0.69 |
% |
1,734,590 |
|
0.66 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Other borrowed funds |
|
350,331 |
|
2.29 |
% |
384,453 |
|
2.32 |
% |
375,775 |
|
2.34 |
% | |||
Total interest-bearing liabilities |
|
2,380,939 |
|
0.93 |
% |
2,325,268 |
|
0.96 |
% |
2,110,365 |
|
0.96 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Non-interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Non-interest bearing deposits |
|
579,059 |
|
|
|
580,720 |
|
|
|
519,016 |
|
|
| |||
Other liabilities |
|
32,926 |
|
|
|
34,837 |
|
|
|
34,529 |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Shareholders equity |
|
388,736 |
|
|
|
378,221 |
|
|
|
357,963 |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
TOTAL LIABILITIES & SHAREHOLDERS EQUITY |
|
$ |
3,381,660 |
|
|
|
$ |
3,319,046 |
|
|
|
$ |
3,021,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
NET INTEREST MARGIN (1) |
|
|
|
3.45 |
% |
|
|
3.48 |
% |
|
|
3.64 |
% |
(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 33% for 2015 and 2014.
Table 6.
Cardinal Financial Corporation and Subsidiaries
Segment Reporting
(Dollars in thousands)
(Unaudited)
|
|
Commercial |
|
Mortgage |
|
Wealth |
|
|
|
Intersegment |
|
|
| ||||||
|
|
Banking |
|
Banking |
|
Management |
|
Other |
|
Elimination |
|
Consolidated |
| ||||||
At and for the Three Months Ended March 31, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net interest income |
|
$ |
27,105 |
|
$ |
511 |
|
$ |
|
|
$ |
(177 |
) |
$ |
|
|
$ |
27,439 |
|
Non-interest income |
|
1,278 |
|
16,216 |
|
105 |
|
5 |
|
|
|
17,604 |
| ||||||
Non-interest expense |
|
15,146 |
|
7,319 |
|
104 |
|
1,574 |
|
|
|
24,143 |
| ||||||
Net income (loss) before provision and taxes |
|
13,237 |
|
9,408 |
|
1 |
|
(1,746 |
) |
|
|
20,900 |
| ||||||
Provision for loan losses |
|
130 |
|
|
|
|
|
|
|
|
|
130 |
| ||||||
Provision for income taxes |
|
4,215 |
|
3,434 |
|
|
|
(611 |
) |
|
|
7,038 |
| ||||||
Net income (loss) |
|
$ |
8,892 |
|
$ |
5,974 |
|
$ |
1 |
|
$ |
(1,135 |
) |
$ |
|
|
$ |
13,732 |
|
Add: merger & acquisition expense reported above |
|
468 |
|
|
|
|
|
|
|
|
|
468 |
| ||||||
Less: Increase/(Decrease) in Unrealized Gains on Mortgage Banking Activities (SAB 109) |
|
|
|
(6,687 |
) |
|
|
|
|
|
|
(6,687 |
) | ||||||
Less: provision for income taxes associated with merger & acquisition expense & SAB 109 |
|
(155 |
) |
2,374 |
|
|
|
|
|
|
|
2,219 |
| ||||||
Net income, excluding above merger and acquisition charges |
|
$ |
9,205 |
|
$ |
1,661 |
|
$ |
1 |
|
$ |
(1,135 |
) |
$ |
|
|
$ |
9,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Average Assets |
|
$ |
3,322,472 |
|
$ |
267,313 |
|
$ |
2,409 |
|
$ |
417,547 |
|
$ |
(628,081 |
) |
$ |
3,381,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
At and for the Three Months Ended March 31, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net interest income |
|
$ |
25,193 |
|
$ |
638 |
|
$ |
|
|
$ |
(164 |
) |
$ |
|
|
$ |
25,667 |
|
Non-interest income |
|
932 |
|
7,391 |
|
167 |
|
178 |
|
|
|
8,668 |
| ||||||
Non-interest expense |
|
15,792 |
|
8,293 |
|
112 |
|
1,593 |
|
|
|
25,790 |
| ||||||
Net income (loss) before provision and taxes |
|
10,333 |
|
(264 |
) |
55 |
|
(1,579 |
) |
|
|
8,545 |
| ||||||
Provision for loan losses |
|
1,926 |
|
|
|
|
|
|
|
|
|
1,926 |
| ||||||
Provision for income taxes |
|
2,895 |
|
(97 |
) |
19 |
|
(488 |
) |
|
|
2,329 |
| ||||||
Net income (loss) |
|
$ |
5,512 |
|
$ |
(167 |
) |
$ |
36 |
|
$ |
(1,091 |
) |
$ |
|
|
$ |
4,290 |
|
Add: merger & acquisition expense reported above |
|
2,772 |
|
|
|
|
|
440 |
|
|
|
3,212 |
| ||||||
Less: Increase/(Decrease) in Unrealized Gains on Mortgage Banking Activities (SAB 109) |
|
|
|
(3,648 |
) |
|
|
|
|
|
|
(3,648 |
) | ||||||
Less: provision for income taxes associated with merger & acquisition expense & SAB 109 |
|
(908 |
) |
1,295 |
|
|
|
(142 |
) |
|
|
245 |
| ||||||
Net income, excluding above merger and acquisition charges |
|
$ |
7,376 |
|
$ |
(2,520 |
) |
$ |
36 |
|
$ |
(793 |
) |
$ |
|
|
$ |
4,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Average Assets |
|
$ |
2,943,545 |
|
$ |
230,424 |
|
$ |
2,300 |
|
$ |
379,810 |
|
$ |
(534,206 |
) |
$ |
3,021,873 |
|
Table 7.
Cardinal Financial Corporation and Subsidiaries
Mortgage Banking Segment Supplemental Information
Summary of Activity and Impact of SAB 109 on Net Income
(Dollars in thousands)
(Unaudited)
|
|
3/31/15 |
|
12/31/14 |
|
09/30/14 |
|
06/30/14 |
|
03/31/14 |
| |||||
For the Three Months Ended: |
|
|
|
|
|
|
|
|
|
|
| |||||
Applications |
|
$ |
1,595,000 |
|
$ |
922,000 |
|
$ |
973,000 |
|
$ |
1,120,000 |
|
$ |
960,600 |
|
Loans closed |
|
843,734 |
|
778,586 |
|
826,786 |
|
842,089 |
|
551,443 |
| |||||
Loans sold |
|
848,559 |
|
768,971 |
|
889,549 |
|
743,871 |
|
561,956 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
At Period End: |
|
|
|
|
|
|
|
|
|
|
| |||||
Locked Pipeline |
|
$ |
449,865 |
|
$ |
194,919 |
|
$ |
265,443 |
|
$ |
331,092 |
|
$ |
327,243 |
|
Loans Held for Sale |
|
264,494 |
|
269,319 |
|
259,703 |
|
322,466 |
|
224,248 |
| |||||
SAB 109 Total Unrealized Gains Recognized |
|
19,510 |
|
12,823 |
|
13,734 |
|
17,094 |
|
13,084 |
| |||||
Change in Unrealized Gains |
|
6,687 |
|
(910 |
) |
(3,360 |
) |
4,010 |
|
3,648 |
| |||||
Change in Aftertax Income |
|
4,313 |
|
(587 |
) |
(2,167 |
) |
2,586 |
|
2,353 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
REPORTED NET INCOME |
|
$ |
5,974 |
|
$ |
762 |
|
$ |
(76 |
) |
$ |
2,139 |
|
$ |
(167 |
) |
OPERATING NET INCOME |
|
1,661 |
|
1,349 |
|
2,091 |
|
(447 |
) |
(2,520 |
) |
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end