EX-99.1 2 a5382171ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 FNB United Earns Record First Quarter Profits Fueled by Strong Loan and Deposit Growth ASHEBORO, N.C.--(BUSINESS WIRE)--April 20, 2007--FNB United Corp. (NASDAQ: FNBN), the holding company for First National Bank and Trust Company and Dover Mortgage Company, today reported that strong loan and deposit growth, both organically and through its acquisitions of United Financial and Integrity Financial Corporation, contributed to a 57% increase in net interest income and a 63% increase in its loan portfolio for the first quarter ended March 31, 2007 compared to the same period the prior year. Net income increased 40% to $3.8 million, or $0.33 per diluted share, in the first quarter of 2007, compared to $2.7 million, or $0.42 per diluted share, in the first quarter of 2006. "First quarter profits, per our plan, strongly reflect the initiatives commenced in 2006 to streamline our operations and improve efficiencies," said Michael Miller, President. "We continue to be on track with progress in the integration of our mergers from last year, and we are taking care to do things right in order to foster shareholder value. Numerous efficiency-related projects and growth initiatives are underway and we look forward to seeing the fruits of these labors in the second half of 2007." First quarter 2007 Highlights (compared to first quarter 2006) -- Net income increased 40% to $3.8 million. -- Net interest income before provision for loan losses grew 57% to $15.8 million. -- Revenues advanced 53% to $20.8 million. -- Total deposits increased 72% to $1.47 billion. -- Non-interest-bearing deposits increased 53%. -- Loans increased 63% to $1.32 billion. Balance Sheet "Loan production for the quarter was strong and the major components of the loan portfolio showed significant growth over the prior year's balances," Miller said. "Compared to a year ago, we increased commercial real estate loans 63%, construction loans 69%, commercial business loans 81%, and residential real estate loans 47%. A portion of the production was offset by the payout of a large commercial credit." Gross loans increased $519 million, or 63%, to $1.34 billion at March 31, 2007, compared to $821 million a year earlier. "The loans added from United Financial and Integrity have undergone a thorough underwriting by our lenders and credit administrators to make sure they conform to our standards," added Miller. Total deposits increased $615 million, or 72%, to $1.47 billion at March 31, 2007, compared to $851 million at the end of March 2006. Non-interest bearing deposits increased 53% at quarter-end compared to a year earlier. Interest-bearing transaction and savings accounts increased 100% during the twelve months ending March 31, 2007, while certificates of deposit increased 63%. "We have seen a shift towards certificates of deposits as interest rates have risen to a level customers find attractive; however, we continue to have significant success in adding lower-cost transaction and savings accounts as well," noted Miller. Assets increased 69% to $1.87 billion at March 31, 2007, from $1.11 billion a year earlier. Book value per share improved to $18.54 at March 31, 2007, from $16.27 a year earlier, and tangible book value per share was $8.13 at quarter-end, compared to $11.16 a year earlier. Operating Results Total revenues (net interest income before the provision for loan losses plus non-interest income) increased 53% to $20.8 million in the first quarter compared to $13.6 million in the like quarter a year ago. The net interest margin was 4.15% for the first quarter, unchanged from the preceding quarter, but down from 4.25% in the first quarter a year ago. First quarter net interest income increased 57% to $15.8 million, with interest income rising 80% and interest expense increasing 114%. Non-interest income increased 41% to $4.9 million compared to $3.5 million in the first quarter a year ago. The increase was largely due to the jump in deposit account fees, which were up 45% from the first quarter a year ago. For the first quarter of 2007, noninterest expense was $14.6 million, compared to $16.2 million in the preceding quarter and $9.4 million in the first quarter a year ago. "Our noninterest expense was up significantly over last year due to the expanded size of the bank resulting from our acquisitions," said Miller. "We anticipate additional merger-related expenditures during the next few quarters including replacement of signage, office supplies and some remaining systems conversions. In addition, we are near the conclusion of a branding study to determine the advisability of adopting a new bank name this year. Currently, the merged bank operates under its existing four trade names, First National Bank and Trust Company, First Gaston Bank, Catawba Valley Bank and Northwestern Bank, over the near-term. Regardless of what we do, the YES YOU CAN(R) and YES WE CAN(R) trademarks owned by First National will continue to be utilized." Provision for loan losses In the first quarter of 2007, FNB United added $524,000 to its provision for loan losses compared to $77,000 in the same period of 2006. The allowance for loan losses was $15.8 million, or 1.20% of loans held for investment at March 31, 2007 compared to $9.7 million or 1.21% a year earlier. As of March 31, 2007, nonperforming assets were $15.8 million, or 0.85% of total assets, compared to $14.5 million or .80% of total assets at December 31, 2006 and $10.9 million, or 0.98% of total assets at March 31, 2006. Performance Ratios Return on average assets and return on average equity were 0.83% and 7.28%, respectively, for the first quarter of 2007 compared to 0.99% and 10.40 % for the first quarter of 2006. Return on tangible assets and equity (calculated by deducting average goodwill and core deposit premiums from average equity and from average assets) were 0.89% and 16.72%, respectively for the first quarter of 2007. FNB United Corp. is the central North Carolina-based bank holding company for First National Bank and Trust Company (including its divisions, First Gaston Bank, Catawba Valley Bank and Northwestern Bank) and Dover Mortgage Company. Opened in 1907, First National (MyYesBank.com) operates 26 community Yes! Banks, five community offices as First Gaston Bank (firstgaston.com), six community offices as Catawba Valley Bank (catawbavalleybank.com) and six community offices as Northwestern Bank of Wilkesboro (nwesternbank.com). Dover Mortgage Company operates nine mortgage production offices. Through its subsidiaries, FNB United offers a complete line of consumer, mortgage and business banking services, including loan, deposit, cash management, wealth management and internet banking services. This news release contains forward-looking statements, including estimates of future operating results and other forward-looking financial information for FNB United. These estimates constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve various risks and uncertainties. Actual results may differ materially due to such factors as: (1) expected cost savings from the mergers not materializing within the expected time frame; (2) revenues following the mergers not meeting expectations; (3) competitive pressures among financial institutions increasing significantly; (4) costs or difficulties related to the integration of the businesses of FNB United, United Financial and Integrity being greater than anticipated; (5) general economic conditions being less favorable than anticipated; and (6) changes in accounting principles, policies or guidelines; (7) changes in the securities markets; (8) legislation or regulatory changes adversely affecting the business in which the FNB United will be engaged; and (9) other economic, competitive, governmental, regulatory and technological factors affecting FNB United specifically or the banking industry or economy generally. FNB United does not assume any obligation to update these forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. RESULTS OF OPERATIONS Quarters Ended Percent Change --------------- ------------------------------------- ---------------- ( In thousands March 31, December 31, March 31, December- March- except share 2007 2006 2006 06 06 and per share data ) ------------ ------------ ----------- --------- ------ INTEREST INCOME: Interest and fees on loans $ 27,870 $ 27,633 $ 15,206 1% 83% Interest and dividends on investments securities: Taxable income 1,656 1,269 1,296 30% 28% Non-taxable income 553 536 460 3% 20% Other interest income 818 1,052 164 -22% 399% ------------ ------------ ----------- Total interest income 30,897 30,490 17,126 1% 80% INTEREST EXPENSE: Deposits 12,798 12,267 5,503 4% 133% Borrowed funds 2,274 2,347 1,542 -3% 47% ------------ ------------ ----------- 15,072 14,614 7,045 3% 114% ------------ ------------ ----------- Net interest income before provision for loan losses 15,825 15,876 10,081 0% 57% PROVISION FOR LOAN LOSSES 524 220 77 138% 581% ------------ ------------ ----------- Net interest income 15,301 15,656 10,004 -2% 53% Noninterest Income Service charges on deposit accounts 2,050 2,386 1,418 -14% 45% Mortgage loan sales 1,138 1,343 963 -15% 18% Cardholder and merchant services income 507 512 369 -1% 37% Trust and investment services 371 481 293 -23% 27% Other service charges, commissions and fees 336 244 249 38% 35% Bank owned life insurance 236 597 159 -60% 48% Factoring operations 122 117 - 4% n/a Other income 182 2 59 9000% 208% ------------ ------------ ----------- 4,942 5,682 3,510 -13% 41% ------------ ------------ ----------- Total other operating income (loss) 4,942 5,682 3,510 -13% 41% OTHER OPERATING EXPENSE: Salary and employee benefits 8,419 7,741 5,270 9% 60% Net occupancy expense 1,178 1,238 602 -5% 96% Furniture and equipment expense 1,113 1,051 645 6% 73% Data processing services 532 436 593 22% -10% Goodwill impairment - 1,625 - -100% n/a Other expense 3,338 4,134 2,305 -19% 45% ------------ ------------ ----------- Total other operating expense 14,580 16,225 9,415 -10% 55% ------------ ------------ ----------- Income (loss) before provision for income taxes 5,663 5,113 4,099 11% 38% PROVISION FOR INCOME TAXES 1,910 2,115 1,422 -10% 34% ------------ ------------ ----------- NET INCOME $ 3,753 $ 2,998 $ 2,677 25% 40% ============ ============ =========== Earnings per common share Basic $ 0.33 $ 0.27 $ 0.42 24% -21% Diluted $ 0.33 $ 0.27 $ 0.42 25% -20% Cumulative dividends declared per common share $ 0.15 $ 0.17 $ 0.15 -12% 0% Weighted average shares outstanding Basic 11,263,325 11,196,885 6,380,077 Diluted 11,295,221 11,287,752 6,445,107 Shares repurchased during the period - - - FINANCIAL CONDITION Quarters Ended Percent Change --------------- ------------------------------------- ---------------- ( In thousands March 31, December 31, March 31, December- March- except share 2007 2006 2006 06 06 and per share data ) ------------ ------------ ----------- --------- ------ ASSETS --------------- Cash and due from banks $ 38,905 $ 35,225 $ 20,751 10% 87% Interest- bearing bank balances 10,757 42,929 1,207 Federal funds sold 50,130 30,186 17,829 Securities available for sale 182,552 128,945 114,689 42% 59% Securities held to maturity 42,318 42,870 43,593 -1% -3% Loans receivable: Held for sale 26,497 20,862 16,215 27% 63% Held for portfolio 1,313,168 1,301,840 804,495 1% 63% Allowance for loan losses (15,757) (15,926) (9,713) -1% 62% ------------ ------------ ----------- 1,323,908 1,306,776 810,997 1% 63% Property and equipment, net 45,780 45,691 25,422 0% 80% Goodwill and other intangibles, net 110,961 110,956 31,389 0% 254% Core deposit premiums 7,173 7,378 1,285 -3% 458% Other assets 61,920 66,618 39,353 -7% 57% ------------ ------------ ----------- $ 1,874,404 $ 1,817,574 $1,106,515 3% 69% ============ ============ =========== LIABILITIES --------------- Deposits: Non- interest- bearing $ 161,909 $ 158,856 $ 105,823 2% 53% Interest- bearing deposits: Demand 174,014 177,434 109,456 -2% 59% Money market 255,051 235,404 81,209 8% 214% Savings 50,938 50,517 48,983 1% 4% Time deposits 823,800 798,720 505,089 3% 63% ------------ ------------ ----------- 1,465,712 1,420,931 850,560 3% 72% Retail repurchase agreements 27,225 23,161 15,642 18% 74% Federal Home Loan Bank advances 65,866 65,825 84,676 0% -22% Other borrowed funds 83,439 78,032 39,559 7% 111% Other liabilities 21,739 21,957 12,143 -1% 79% ------------ ------------ ----------- 1,663,981 1,609,906 1,002,580 3% 66% STOCKHOLDERS' EQUITY --------------- Common stock 28,371 28,235 15,968 0% 78% Surplus 112,872 112,213 23,870 1% 373% Retained earnings 70,716 68,662 64,429 3% 10% Accumulated other comprehensive income(loss) (1,536) (1,442) (332) 7% 363% ------------ ------------ ----------- 210,423 207,668 103,935 1% 102% ------------ ------------ ----------- $ 1,874,404 $ 1,817,574 $1,106,515 3% 69% ============ ============ =========== Shares Issued: Shares outstanding at end of period 11,348,201 11,293,992 6,387,146 0% 78% ============ ============ =========== Book value per share (1) $ 18.54 $ 18.39 $ 16.27 1% 13% Tangible book value per share (1) $ 8.13 $ 7.91 $ 11.16 3% -29% Consolidated Tier 1 leverage capital ratio 7.24% 7.16% 8.63% 1% -17% (1) - Calculation is based on number of shares outstanding at the end of the period rather than weighted average shares outstanding ADDITIONAL FINANCIAL INFORMATION ( Dollars in Percent Change thousands ) Quarters Ended from ----------------------------------- ---------------- March 31, December 31, March 31, December- March- 2007 2006 2006 06 06 ----------- ------------- --------- --------- ------ LOANS ( including loans held for sale ): ----------------- Commercial real estate $ 324,277 $ 304,546 $198,516 6% 63% Multifamily real estate 37,316 34,048 18,783 10% 99% Commercial & multifamily construction (1) 43,883 n/a n/a n/a n/a One- to four- family construction (1) 86,051 n/a n/a n/a n/a Land and land development (1) 117,425 n/a n/a n/a n/a Construction loans (1) - 278,124 146,548 -100% -100% Commercial business 307,753 310,130 169,858 -1% 81% Agricultural business including secured by farmland 20,097 16,708 11,805 20% 70% One- to four- family real estate 367,631 340,044 250,069 8% 47% Consumer 35,232 39,102 25,131 -10% 40% ----------- ------------- --------- Total loans outstanding $1,339,665 $1,322,702 $820,710 1% 63% =========== ============= ========= (1) Construction loan individual categories not available prior to 3/31/07 NON-PERFORMING March 31, December 31, March 31, December- March- ASSETS: 2007 2006 2006 06 06 -------------------- --------- ------------ --------- --------- ------ Loans on non-accrual status $10,176 $ 8,282 $ 8,549 23% 19% Loans more than 90 days delinquent, still on accrual 2,594 2,852 1,551 -9% 67% --------- ------------ --------- Total non-performing loans 12,770 11,134 10,100 15% 26% Real estate owned ( REO ) / Repossessed assets 3,073 3,361 767 -9% 301% --------- ------------ --------- Total non- performing assets $15,843 $14,495 $10,867 9% 46% ========= ============ ========= Total non-performing assets / Total assets 0.85% 0.80% 0.98% 6% -14% Quarters Ended Percent Change -------------------------------- ---------------- CHANGE IN THE ALLOWANCE FOR LOAN March 31, December 31, March 31, December- March- LOSSES: 2007 2006 2006 06 06 -------------------- --------- ------------ --------- --------- ------ Balance, beginning of period $16,620 $16,318 $9,945 $ 2% 67% Provision 524 220 77 138% 581% Adjustment for reserve for unfunded commitments (677) (694) (247) -2% 174% Recoveries of loans previously charged off 488 642 487 -24% 0% Loans charged-off (1,198) (560) (549) 114% 118% --------- ------------ --------- Net ( charge-offs ) recoveries (710) 82 (62) -966% 1045% --------- ------------ --------- Balance, end of period $15,757 $15,926 $9,713 -1% 62% ========= ============ ========= Net charge-offs / Average loans outstanding (annualized) 0.21% (0.03%) 0.03% -953% 597% Allowance for loan losses / Loans held for investment 1.20% 1.22% 1.21% -2% -1% DEPOSITS March 31, December 31, March 31, December- March- 2007 2006 2006 06 06 ------------------ ----------- ------------ --------- --------- ------ Non-interest- bearing $ 161,908 $ 158,856 $105,823 2% 53% Interest-bearing checking 174,014 177,434 109,456 -2% 59% Regular savings accounts 50,938 50,517 48,983 1% 4% Money market accounts 255,051 235,404 81,209 8% 214% ----------- ------------ --------- Interest-bearing transaction & savings accounts 641,911 622,211 345,471 3% 86% Interest-bearing certificates 823,800 798,720 505,089 3% 63% ----------- ------------ --------- Total deposits $1,465,711 $1,420,931 $850,560 3% 72% ================================== ADDITIONAL FINANCIAL INFORMATION ( Dollars in thousands ) ( Rates / Ratios Annualized ) Percent Change Quarters Ended from ------------------------------------ ---------------- OPERATING March 31, December 31, March 31, December- March- PERFORMANCE: 2007 2006 2006 06 06 ---------------- ----------- ------------ ----------- --------- ------ Average loans $1,330,199 $1,311,120 $ 809,513 1% 64% Average securities and deposits 251,093 240,935 176,890 4% 42% Average non- interest- earning assets 246,303 245,269 105,470 0% 134% ----------- ------------ ----------- Total average assets $1,827,595 $1,797,324 $1,091,873 2% 67% =========== ============ =========== Average interest- bearing deposits $1,270,650 $1,243,478 $ 736,984 2% 72% Average non- interest bearing deposits 155,990 160,666 99,438 -3% 57% Average borrowings 170,629 168,963 140,478 1% 21% Average non- interest- earning liabilities 21,148 13,144 10,590 61% 100% ----------- ------------ ----------- Total average liabilities 1,618,417 1,586,251 987,490 2% 64% Total average stockholders' equity 209,178 211,073 104,383 -1% 100% ----------- ------------ ----------- ` Total average liabilities and equity $1,827,595 $1,797,324 $1,091,873 2% 67% =========== ============ =========== Interest rate yield on loans 8.51% 8.38% 7.63% Interest rate yield on securities and deposits 5.37% 5.18% 4.95% Interest rate yield on interest- earning assets 8.01% 7.88% 7.15% ----------- ------------ ----------- Interest rate expense on deposits 4.08% 3.91% 3.03% Interest rate expense on borrowings 5.40% 5.51% 4.45% Interest rate expense on interest- bearing liabilities 4.24% 4.10% 3.26% ----------- ------------ ----------- Interest rate spread 3.77% 3.78% 3.89% =========== ============ =========== Net interest margin 4.15% 4.15% 4.25% =========== ============ =========== Other operating income / Average assets 1.10% 1.25% 1.30% Other operating expense / Average assets 3.24% 3.58% 3.50% Efficiency ratio ( other operating expense / revenue ) 70.21% 75.26% 69.27% Return on average assets 0.83% 0.66% 0.99% Return on tangible assets 0.89% 0.71% 1.02% Return on average equity 7.28% 5.64% 10.40% Return on tangible equity 16.72% 12.83% 15.14% Average equity / Average assets 11.45% 11.74% 9.56% CONTACT: FNB United Corp. Robert O. Bratton, 336-318-7883