0001104659-15-030575.txt : 20150427 0001104659-15-030575.hdr.sgml : 20150427 20150427170003 ACCESSION NUMBER: 0001104659-15-030575 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20150422 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Submission of Matters to a Vote of Security Holders ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20150427 DATE AS OF CHANGE: 20150427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL FINANCIAL CORP CENTRAL INDEX KEY: 0001060523 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 541874630 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24557 FILM NUMBER: 15795777 BUSINESS ADDRESS: STREET 1: 8270 GREENSBORO DRIVE STREET 2: SUITE 500 CITY: MCLEAN STATE: VA ZIP: 22102 BUSINESS PHONE: 7035843400 MAIL ADDRESS: STREET 1: 8270 GREENSBORO DRIVE STREET 2: SUITE 500 CITY: MCLEAN STATE: VA ZIP: 22102 8-K 1 a15-10028_18k.htm 8-K

 

 

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)

 

Registrant’s 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 Company’s executive compensation program, and ratified the Company’s appointment of KPMG LLP as the Company’s 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
Non-Vote

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 Company’s 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
Non-Vote

 

14,396,185

 

13,295,824

 

124,838

 

3,029,936

 

 

3.              To ratify the appointment of KPMG LLP as the Company’s independent auditors for 2015:

 

For

 

Against

 

Abstain

 

Broker
Non-Vote

 

30,633,753

 

199,610

 

13,420

 

 

 

2



 

Item 8.01                                           Other Events.

 

On April 22, 2015, Cardinal’s 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.

 

3



 

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

 

4



 

Exhibit Index

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release dated April 22, 2015.

 

5


EX-99.1 2 a15-10028_1ex99d1.htm EX-99.1

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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 000’s)

 

 

 

 

 

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.

 

Management’s 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 Company’s 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 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. For an explanation of some of the 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, 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 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.

 



 

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
March 31

 

 

 

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
March 31

 

 

 

 

 

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
March 31

 

 

 

 

 

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
Balance

 

Average Yield

 

Average
Balance

 

Average Yield

 

Average
Balance

 

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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