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Crescent Financial Corp. Reports Operating Results (10-Q)

August 13, 2010 | About:
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10qk

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Crescent Financial Corp. (CRFN) filed Quarterly Report for the period ended 2010-06-30.

Crescent Financial Corp. has a market cap of $25.5 million; its shares were traded at around $2.65 with and P/S ratio of 0.4. Crescent Financial Corp. had an annual average earning growth of 7.9% over the past 10 years.

Highlight of Business Operations:

Total assets decreased by $47.1 million or 5% to $985.7 million at June 30, 2010 from $1.0 billion at December 31, 2009. Earning assets at June 30, 2010 were 94% or $926.8 million compared with 95% or $986.7 million at December 31, 2009. Components of earning assets at June 30, 2010 are $710.8 million in gross loans and mortgage loans held for sale, $197.9 million in investment securities and Federal Home Loan Bank (FHLB) stock and $18.1 in overnight investments and interest-earning deposits with correspondent banks. Earning assets at December 31, 2009 consisted of $759.3 million in gross loans, $204.9 million in investment securities and FHLB stock and $22.4 million in overnight investments and interest-earning deposits. Total deposits and stockholders equity at June 30, 2010 were $722.2 million and $87.1 million, respectively, compared to $722.6 million and $89.5 million at December 31, 2009.

Gross loans held for investment declined by $49.9 million between December 31, 2009 and June 30, 2010. Mortgage loans held for sale increased by $1.3 million. The Company just began originating mortgage loans for sale in March 2010 and therefore no loans were held for sale at December 31, 2009. All loan categories experienced a decline due to normal principal payments, the continued softness in loan demand and the transfer of assets from loans to other real estate owned and repossessions. The net decline by loan category is as follows: $21.9 million in construction, land acquisition and development, $13.9 million in commercial real estate, $6.2 million in residential mortgage, $4.0 million in home equity loans and lines, $3.4 million in commercial and industrial and $480,000 in consumer loans. Of the total $49.9 million decline, $24.5 million is attributed to transferring assets from the loan account into other asset categories and charge-offs related to those accounts. The remaining $25.4 million is the net of $21.7 million in new loans and $47.1 million in normal principal payoffs and curtailments. See the discussions on Nonperforming Assets and Allowance for Loan Losses for additional details. The composition of the loan portfolio, by category, as of June 30, 2010 is 49% commercial mortgage loans, 22% 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, 2009 was 47% commercial mortgage loans, 24% construction loans, 13% residential real estate mortgage loans, 8% home equity loans and lines, 7% commercial loans and 1% consumer loans.

Total deposits decreased by $409,000 between December 31, 2009 and June 30, 2010 from $722.6 million to $722.2 million. The Company has continued to focus on reducing its reliance on brokered deposits and shifting its deposit mix more in favor of non-maturity deposit types. Brokered time deposits have decreased by $22.5 million from $203.4 million at year end 2009 to $180.9 million at June 30, 2010. Other retail time deposits decreased by $11.2 million from $234.1 million to $222.9 million. Time deposits as a percentage of total deposits have declined from 61% to 56%. In an effort to improve core deposit volumes, the Company introduced a new interest-bearing checking account in December 2008 that rewards depositors with a higher rate of interest if they modify their account activity behavior to include more electronic methods of transactions and account statement receipt. As a result, interest-bearing checking balances increased by $31.4 million to $124.5 at June 30, 2010. Savings account balances have increased by $7.6 million and money market account balances have declined by $6.1 million over the first half of 2010. The decline in money market balances is in both business and personal account types. The decline in personal is due in part to disintermediation related to the new interest-bearing checking product and business declines are driven by economic conditions and seasonal fluctuations. Non-interest bearing deposit balances have increased by $483,000 from $61.0 million to $61.5 million.

Average interest-bearing liabilities decreased by $41.1 million or 5% from $882.1 million for the quarter ended June 30, 2009 to $841.0 million for the current quarter. Total interest-bearing deposits increased by $19.1 million or 3% from $660.5 million to $641.4 million. Due to the introduction of a new high yield interest checking product, average NOW account balances have increased by $63.3 million. Average time deposits have declined by $45.2 million from $455.2 million to $410.0 million. Total borrowings decreased by 25% or $61.2 million from $240.7 million to $180.5 million. The decreases in both time deposits and borrowings can be attributed to utilizing the liquidity provided from the decline in earning assets and the increase in non-maturity, core deposits to reduce the these categories of funding.

Average interest-bearing liabilities decreased by $25.5 million or 3% from $877.1 million for the six-month period ended June 30, 2009 to $851.6 million for the period ended June 30, 2010. Total interest-bearing deposits increased by $12.2 million or 2% from $643.0 million to $655.2 million. Average balances of interest-bearing NOW accounts increased by 121% or $58.7 million from $48.4 million to $107.1 million largely due to the success of the new high-yield interest checking product. Total average time deposits declined by over $42.1 million primarily due to the Company reducing its exposure to brokered deposits by $39.1 million over the last twelve months. Average total borrowings decreased by $37.6 million or 16% from $234.1 million to $196.5 million. The Company is making a concerted effort to reduce its exposure to wholesale funding. The decrease in borrowings came in a category whose interest rate was short-term in nature, but was subject to significant volatility in a rising interest rate environment.

Non-Interest Expenses. Non-interest expenses increased by 12% or $1.4 million to $13.3 million for the six-month period ended June 30, 2010 compared with $11.9 million for the prior year period. The five largest components of non-interest expense are personnel, occupancy, loan collection related expenses, data processing and FDIC deposit insurance premiums. The net increases in these categories accounted for virtually all of the total increase in non-interest expenses for the comparative periods. Loan collection related expenses were $1.7 million, up $1.3 million or 398% over the $336,000 in expenses for the prior year period. Within this expense category, the Company had valuation write-downs on foreclosed assets of $901,000 and professional expenses related to the acquisition and servicing of foreclosed assets of $683,000. These expenses were partially offset by a net gain on the disposition of foreclosed assets owned of $72,000. Total occupancy expenses have increased by 18% or $296,000 due to the 2009 opening of two new branch offices in Raleigh, North Carolina and the expansion of our operations facility in Cary, NC. The new facilities and the expansion of the Company s mortgage operations accounted for the 3% or $190,000 increase in personnel expenses. Data processing expenses increased by $28,000 as the volume of deposit accounts increased significantly. For the six-month period ended June 30, 2009; $156,000 of expense was considered non-recurring data conversion related expenses. FDIC deposit insurance premiums decline by 43% or $438,000 primarily due to the recognition of a $493,000 special assessment during the second quarter of 2009.

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