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Crescent Financial Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 13, 2011 11:16AM
Crescent Financial Corp. (CRFN) filed Quarterly Report for the period ended 2011-03-31. Crescent Financial Corp. has a market cap of $38.8 million; its shares were traded at around $4.01 with and P/S ratio of 0.7.
Highlight of Business Operations:
Total assets decreased by approximately $13.5 million or 1% to $959.6 million at March 31, 2011 compared to $973.0 million at December 31, 2010. Earning assets are $910.5 million or 95% of total assets at March 31, 2011 compared to $915.7 million or 94% at December 31, 2010. Components of earning assets at March 31, 2011 are $652.8 million in gross loans held for investment, $198.5 million in investment securities and Federal Home Loan Bank (FHLB) stock and $58.4 in overnight investments and interest-earning deposits with correspondent banks and $805,000 in mortgage loans held for sale. Earning assets at December 31, 2010 consisted of $676.8 million in gross loans held for investment, $192.4 million in investment securities and FHLB stock and $40.7 million in overnight investments and interest-earning deposits and $5.7 million in mortgage loans held for sale. Total deposits and stockholders equity at March 31, 2011 are $725.2 million and $71.7 million, respectively, compared to $724.4 million and $79.0 million at December 31, 2010.
Gross loans held for investment, net of deferred loan fees declined by $24.0 million over the first three months of 2011. All loan categories with the exception of residential one-to-four family first trust mortgage experienced a decline due in part to normal principal payments and the continued softness in loan demand. The net decline by loan category is as follows: $9.9 million in commercial real estate, $7.8 million in construction, land acquisition and development, $4.5 million in commercial and industrial, $2.2 million in home equity loans and lines and $157,000 in consumer loans. The residential one-to-four family first trust mortgage category experienced a net increase of $427,000. The net $24.0 million decrease is comprised of $28.4 million in normal principal payments and payoffs, $4.6 million in loan charge-offs, $1.6 million in loan sales and $368,000 of loans transferred to foreclosed property, and are partially offset by $11.0 million in new loan production. The composition of the loan portfolio, by category, as of March 31, 2011 is 51% commercial mortgage loans, 20% construction loans, 13% residential mortgage loans, 8% home equity loans and lines, 7% commercial loans and 1% consumer loans. The composition of the loan portfolio, by category, as of December 31, 2010 was 51% commercial real estate mortgage loans, 21% construction and land development loans, 12% residential one-to-four family first deed of trust mortgage loans, 8% home equity lines and loans, 7% commercial and industrial loans and 1% consumer loans.
Non-earning and other assets declined by approximately $5.5 million from $78.1 million at December 31, 2010 to $72.5 million at March 31, 2011. There were decreases in accrued interest receivable, cash and noninterest bearing deposits and premises and equipment of $610,000, $387,000 and $192,000, respectively. Foreclosed property declined by $1.4 million as the net result of receiving $1.6 million in proceeds from dispositions, plus $166,000 in net losses on dispositions and valuation write-downs less $367,000 of new transfers into other real estate owned. The deferred tax asset increased by $209,000 during the first quarter of 2011. The increase was the net result of an increase to the combined deferred tax asset associated with taxes, available for sale securities and interest rate derivatives of $3.0 million, offset by an increase in the deferred tax asset valuation allowance of $2.8 million. The cash surrender value of bank owned life insurance increased by $194,000 during the three-month period.
Total deposits increased by $822,000 between December 31, 2010 and March 31, 2011 from $724.4 million to $725.2 million. The Company has continued to focus on reducing its reliance on brokered deposits and shifting its deposit mix to favor more stable, core deposit types. Brokered time deposits have decreased by $11.3 million from $160.5 million at year end 2010 to $149.2 million at March 31, 2011. Other retail time deposits increased by $12.3 million from $197.2 million to $209.5 million. Interest bearing demand deposits have increased by $6.6 million during the first quarter primarily as a result of a $3.3 million increase in Crescent Rewards checking, a premium-yielding checking account for individuals, and a $3.5 million increase related to property tax receipts for a municipal customer. Money market balances have increased by $3.1 million and savings balances have declined by $7.5 million between year-end 2010 and March 31, 2011. We made a strategic decision to lower our business and personal premium savings rates and transition business customers into a money market account. The $3.4 million decline in business savings is offset by a $3.5 million increase in business money market. Both personal savings and other nonpersonal savings balances declined by $2.2 million each. The nonpersonal savings decline was primarily due to the funding needs of one municipality during the first quarter. Non-interest bearing deposit balances declined by $2.8 million due primarily to a $3.0 million reduction in one governmental account.
Average interest-bearing liabilities decreased by $40.0 million or 5% from $862.4 million for the quarter ended March 31, 2010 to $822.4 million for the current quarter. Total interest-bearing deposits increased by $14.0 million or 2% from $649.8 million to $663.8 million. Interest-bearing NOW account deposits increased by $53.6 million from $96.8 million to $150.4 million largely due to the premium-yield checking product introduced in December 2008. Total average time deposits declined by over $42.8 million primarily due to the Company reducing its exposure to brokered deposits by $42.0 million over the last twelve months. Average total borrowings decreased by $54.0 million or 25% from $212.6 million to $158.6 million. The significant reduction in borrowings was attributable to the $50.0 million payoff of borrowings with the Federal Reserve Bank discount window in April 2010. The Company is making a concerted effort to reduce its exposure to wholesale funding.
Non-Interest Income. Non-interest income was $1.0 million of both three-month periods ended March 31, 2011 and 2010. Revenue from service charges and other customer service and activity fees on deposit accounts increased by $15,000 in the current three-month period compared to the prior three-month period. Total service charges and other deposit related revenue was $447,000 for the three-month period ended March 31, 2011 compared to $432,000 for the prior year three-month period. The $15,000 net improvement reflects increases primarily in service charges, ATM and debit card related revenue and safe deposit fees, offset by a decrease in NSF processing fees. The Company experienced a decrease in mortgage loan related revenue of $71,000. For the three-months ended March 31, 2011, we recognized $75,000 in origination revenue and $91,000 in gains on the sale of mortgages for a total of $166,000 of mortgage related income compared to $193,000 in origination revenue and $44,000 in gains on the sale of mortgages for a total of $237,000 for the prior period. Due to lower housing valuations and the expiration of the first-time homebuyer program, mortgage activity for both purchase money and refinance opportunities is slow. Other noninterest income declined by $36,000 for the current three-month period due in part to a $14,000 decline in brokerage referral revenue, an $8,000 decrease in revenue from nonmarketable equity investments and a $5,000 decrease in earnings on cash value of bank owned life insurance. In February 2011, the Company realized $101,000 in gains on the sale of available for sale securities. No such gains were recognized during 2010. The Company recorded $1,000 in losses on the disposition of fixed assets for the current three-month period compared to $7,000 in gains for the period ended March 31, 2010.
Stocks Discussed: CRFN,