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Crescent Financial Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 15, 2011 06:20AM
Crescent Financial Corp. (CRFN) filed Quarterly Report for the period ended 2011-06-30.
Highlight of Business Operations:
Total assets decreased by approximately $26.1 million or 3% to $946.9 million at June 30, 2011 from $973.0 million at December 31, 2010. Earning assets are $891.4 million at June 30, 2011 compared to $915.7 at December 31, 2010 and comprised 94% of total assets at both dates. Components of earning assets at June 30, 2011 are $636.4 million in gross loans held for investment, $210.5 million in investment securities and Federal Home Loan Bank (FHLB) stock, $42.6 in overnight investments and interest-earning deposits with correspondent banks and $1.9 million in 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, $40.7 million in overnight investments and interest-earning deposits and $5.7 million in loans held for sale. Total deposits and stockholders equity at June 30, 2011 are $714.6 million and $69.4 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 $40.4 million over the first six months of 2011. All loan categories with the exception of commercial and industrial loans experienced a decline due in part to normal principal payments, continued softness in loan demand, loan sales and loan charge-offs. The net decline by loan category is as follows: $23.8 million in construction, land acquisition and development, $14.2 million in commercial real estate, $3.4 million in home equity loans and lines, $3.0 million in residential first trust mortgages, and $215,000 in consumer loans. The commercial and industrial loan category experienced a net increase of $4.3 million. The net $40.4 million decrease is comprised of $49.6 million in normal principal payments and payoffs, $10.1 million in loan sales, $8.9 million in loan charge-offs, $3.5 million of loans transferred to other asset categories, and are partially offset by $31.7 million in new loan production. The composition of the loan portfolio, by category, as of June 30, 2011 is 52% commercial mortgage loans, 18% construction loans, 12% residential mortgage loans, 9% home equity loans and lines, 8% 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.
Total deposits declined by $9.8 million between December 31, 2010 and June 30, 2011 from $724.4 million to $714.6 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 $19.5 million from $160.5 million at year end 2010 to $141.1 million at June 30, 2011. Other retail time deposits increased by $6.5 million from $216.3 million to $222.8 million. Noninterest bearing demand deposits have increased by $5.6 million to $67.6 million at June 30, 2011 compared to $62.0 million at December 31, 2010 primarily as a result of our efforts to focus on small business relationships. Interest bearing demand deposits have increased by $1.1 million to $149.2 million primarily as a result of a $5.4 million increase in Crescent Rewards checking, a premium-yielding checking account for individuals. The increase in Rewards checking was somewhat offset by declines in regular NOW accounts, IOLTA (Interest On Lawyer Trust Accounts) accounts and a shift in public unit deposits from interest bearing to noninterest bearing. Money market balances have increased by $6.2 million and savings balances have declined by $9.7 million between year-end 2010 and June 30, 2011. We made a strategic decision to lower our business premium savings rates and transition business customers into money market accounts.
Non-Interest Income. Non-interest income decreased by $15,000 and was $1.1 million for both three-month periods ended June 30, 2011 and 2010. Total service charges and other deposit related revenue declined by $17,000 and was $457,000 for the three-month period ended June 30, 2011 compared to $474,000 for the prior year three-month period. The decrease was primarily the net result of a $41,000 decline in NSF processing fees and a $34,000 increase in ATM network and debit card commissions. Mortgage loan related revenue was basically flat at $259,000 for the current three-month period compared to $260,000 for the prior year period. Mortgage loan activity has been soft since the expiration of the first-time home buyers program in the spring of 2010. Other noninterest income declined by $5,000 for the current three-month period due in part to a $33,000 decrease in loan modification fees offset by a $29,000 increase in brokerage referral revenue. During the second quarter of 2011, the Company recorded $189,000 in gains on the sale of available for sale securities and a $179,000 partial impairment write-down of a nonmarketable equity security. There were no securities transactions during the second quarter of 2010.
Non-Interest Expenses. For the current three-month period, non-interest expenses increased by $677,000 or 10% from $7.2 million to $7.8 million. The Company experienced a $330,000 increase in loan related expenses to $1.6 million for the current three-month period compared to $1.3 million a year ago. Loan related expenses were primarily attributable to foreclosed assets including $992,000 in valuation write-downs, $399,000 in expenses related to acquisition and servicing and $195,000 in net losses on disposition. For the quarter ended June 30, 2010, loan related expenses on foreclosed assets included $901,000 in impairment write-downs, $442,000 in expenses related to acquisition and servicing, less $64,000 in net gains on disposition. The Company had increases in professional fees, FDIC insurance, personnel and data processing expenses of $144,000, $102,000, $88,000 and $56,000, respectively. During the second quarter of 2011, we incurred approximately $133,000 in legal expenses related to our pending recapitalization transaction with Piedmont Community Bank Holdings, Inc. (“Piedmont”). Total occupancy expenses for the current period declined by $14,000.
Non-Interest Expenses. Non-interest expenses increased by 12% or $1.6 million to $14.9 million for the six-month period ended June 30, 2011 compared to $13.3 million for the prior year period. The six largest components of non-interest expense are professional fees, loan related expenses, personnel, FDIC deposit insurance, data processing and occupancy. The largest increase came in the professional fees category which was up $515,000 from $881,000 to over $1.4 million. Professional fees incurred over the first six months directly associated with the pending recapitalization transaction with Piedmont total $515,000. Loan related expenses increased by $468,000 from $1.7 million to $2.1 million and were primarily attributed to the disposition and revaluation of foreclosed assets. Net losses on disposal and additional impairment write-downs of foreclosed assets increased by $476,000. Net losses on disposal of other real estate owned and repossessed collateral totaled $169,000 for the current six-month period compared to a net gain of $31,000 for the prior year period. Valuation write-downs on foreclosed assets were $1.2 million for the current period compared to $901,000 in the prior year period. Increases in personnel, FDIC insurance, data processing and occupancy were $305,000, $242,000, $91,000 and $40,000, respectively.
Stocks Discussed: CRFN,