Crescent Banking Company (CSNT) filed Quarterly Report for the period ended 2009-09-30.
Crescent Banking Co. is the holding company of Crescent Bank and Trust Company. The Bank is engaged in the general commercial banking business. Crescent Banking Company has a market cap of $5.02 million; its shares were traded at around $0.93 with and P/S ratio of 0.09. Crescent Banking Company had an annual average earning growth of 53.3% over the past 5 years.
Highlight of Business Operations:
In accordance with Financial Accounting Standards Board Interpretation No. 46R (FIN 46) (ASC 810, Consolidation), Crescent Capital Trust II, Crescent Capital Trust III and Crescent Capital Trust IV (together, the “Trusts”) are not consolidated with the Company. Accordingly, the Company does not report the securities issued by the Trusts as liabilities, and instead reports as liabilities the junior subordinated debentures issued by the Company and held by the Trusts. The Company further reports its investment in the common shares of the Trusts as other assets. The Company has fully and unconditionally guaranteed the payment of interest and principal on the trust preferred securities to the extent that the Trusts have sufficient assets to make such payments but fail to do so. Of the $21.5 million in trust preferred securities currently outstanding, approximately $4.0 million qualifies as tier 1 capital for regulatory capital purposes. During the second quarter of 2009, as part of the Company’s efforts to retain and increase its liquidity, we exercised our rights under the trust preferred securities agreements to defer our interest payments, and therefore, did not make any payments on the three Trusts that were due after May 2009. We currently anticipate that we will continue to exercise this right for our interest payments in 2009 and into 2010.
As of September 30, 2009, the Company had total consolidated assets of approximately $1.0 billion, total deposits of approximately $954.2 million, total consolidated liabilities, including deposits, of $1.0 billion and consolidated stockholders’ equity of approximately $12.4 million. The Company’s operations are discussed below under the section captioned “Results of Operations.”
Through the Bank, the Company provides a broad range of banking and financial services to those areas surrounding Jasper, Georgia. As its primary market area, the Bank focuses on Pickens, Bartow, Forsyth, Cherokee and north Fulton Counties, Georgia and nearby Dawson, Cobb, Walton and Gilmer Counties, Georgia, which are situated to the north of Atlanta, Georgia. The Bank’s commercial banking operations are primarily retail-oriented and focused on individuals and small to medium-sized businesses located within its primary market area. While the Bank provides most traditional banking services, its principal activities as a community bank are the taking of demand and time deposits and the making of secured and unsecured consumer loans and commercial loans to its target customers. The retail nature of the Bank’s commercial banking operations allows for diversification of depositors and borrowers, and the Bank’s management believes it is not dependent upon a single or a few customers. The Bank does not have a significant portion of commercial banking loans concentrated within a single industry or group of related industries. However, approximately 94% of the Bank’s loan portfolio is secured by commercial and residential real estate in its primary market area. Our entire market area has experienced a significant weakening in the real estate markets during 2008 and the first nine months of 2009, in particular with respect to real estate related to acquisition, development and construction, and we anticipate that such markets will continue to weaken into 2010. Acquisition, development and construction loans, or “ADC,” are cyclical and pose risks of possible loss due to concentration levels and similar risks of the asset. As of September 30, 2009, we had approximately $291.4 million in ADC loans, or approximately 39% of our loan portfolio. The Bank has limited any new ADC loans in 2008 and the first nine months of 2009 due to the declining real estate market and the Bank’s ADC loans have declined by approximately 30% since December 31, 2007. The Bank’s criticized loans (excluding non-performing loans), non-performing loans and foreclosed properties related to its ADC loan portfolio increased $105.1 million to $110.1 million, increased $26.6 million to $29.9 million and increased $29.4 million to $29.7 million, respectively, from December 31, 2007 compared to September 30, 2009. The deterioration in our ADC loan portfolio is due to the significant slowing of home and land sales, and subsequent decline in the prices of home and land in our market area during the last quarter
The third challenge for the Company’s commercial banking business is liquidity, or our ability to raise funds to support asset growth, meet deposit withdrawals and other borrowing needs, maintain adequate reserves and sustain our operations. Due to the competitive pricing by competitors in our primary market area, the Bank’s liquidity has, and will likely continue to, come under pressure. In addition, due to the decline in the confidence in the financial services industry, the Bank could see customers withdrawing their deposits, which would put additional pressure on the Bank’s liquidity. The Bank has had the ability to acquire out-of-market deposits that are not considered brokered deposits to supplement deposit growth in its market areas and can borrow an additional $1.8 million through the Federal Reserve Bank, if necessary. However, if access to these funds is limited in any way, then our liquidity could be adversely affected. Currently, because the Bank is below the well capitalized requirements of the Federal Deposit Insurance Corporation Improvement Act of 1991 (the “FDICIA”), the Bank cannot originate any deposits that qualify as brokered deposits, and is limited in the rates that it can offer on deposits generally. From October 2009 through September 2010, the Bank has approximately $153 million in brokered and out-of market deposits maturing, and, if the Bank does not return to a well capitalized position, then it will not be able to renew these deposits. Therefore, the Bank may have to
The fourth challenge for the Company’s commercial banking business is maintaining sound credit quality. During 2008 and the first nine months of 2009, the Bank’s loan portfolio declined 4% and 4%, respectively. However, the Bank’s loan portfolio grew 17% during 2007, 17% during 2006 and 37% during 2005. From 2005 to 2007, the Bank added approximately 26 new loan officers, which were mainly related to the addition of five full service branches and two loan production offices. The weakening of the real estate market had a significant effect on the Bank’s loan portfolio in 2008 and the first nine months of 2009, which led the Bank to slow down loan production in order to focus on asset quality. Approximately 94% of the Bank’s loan portfolio is secured by real estate at September 30, 2009. From December 31, 2007 to September 30, 2009, our non-performing assets increased from $11.0 million to $91.9 million, or 735%. Of the $91.9 million in non-performing assets at September 30, 2009, $59.6 million was related to ADC loans and $19.2 million was related to residential real estate. Our entire market area has experienced a significant weakening in the real estate markets during 2008 and the first nine months of 2009, in particular with respect to real estate related to ADC. As of September 30, 2009, ADC loans totaled approximately $291.4 million and represented approximately 39% of our loan portfolio. The Bank’s criticized loans (excluding non-performing loans), non-performing loans and foreclosed properties related to its ADC loan portfolio increased $105.1 million to $110.1 million, increased $26.6 million to $29.9 million and increased $29.4 million to $29.7 million, respectively, from December 31, 2007 compared to September 30, 2009. The deterioration in our ADC loan portfolio is due to an increased inability of some borrowers to make loan payments and the decrease in sales activity and property values within the residential real estate market in our market area during 2008 and the first nine months of 2009. The Bank has adopted procedures and policies in order to maintain and monitor loan growth, including the quality of the loans, and its concentration in real estate secured loans. The Bank has limited any new ADC loans in 2008 and 2009 due to the declining real estate market. Our ADC loans have declined by approximately 30% since December 31, 2007. Given the current condition of the credit, liquidity and real estate markets, we may experience further increases in non-performing assets. If this occurs, we may make additional provision for loan losses and experience an increase in charge-offs, either of which would adversely impact our capital and liquidity and our ability to pursue strategic alternatives.
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