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

November 15, 2010 | About:
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10qk

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Crescent Financial Corp. (CRFN) filed Quarterly Report for the period ended 2010-09-30.

Crescent Financial Corp. has a market cap of $22.71 million; its shares were traded at around $2.35 with and P/S ratio of 0.38. Crescent Financial Corp. had an annual average earning growth of 7.9% over the past 10 years.

Highlight of Business Operations:

Total assets at September 30, 2010 are $972.5 million reflecting a $60.3 million decline from $1.0 billion at December 31, 2009. Earning assets at September 30, 2010 are 94% or $915.6 million compared to 95% or $986.7 million at December 31, 2009. Components of earning assets at September 30, 2010 are $694.5 million in gross loans held for investment, $2.0 million in mortgage loans held for sale, $197.5 million in investment securities and Federal Home Loan Bank (FHLB) stock and $21.6 in overnight investments and interest-earning deposits with correspondent banks. Earning assets at December 31, 2009 consisted of $759.3 million in gross loans held for investment, $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 September 30, 2010 are $717.0 million and $85.6 million, respectively, compared to $722.6 million and $89.5 million at December 31, 2009.

Gross loans held for investment declined by $64.9 million between December 31, 2009 and September 30, 2010. 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, a reduction in new originations due to continued softness in loan demand and the transfer of assets from loans to foreclosed assets. The net decline by loan category is as follows: $28.1 million in construction, land acquisition and development, $14.1 million in commercial real estate, $10.7 million in residential mortgage, $6.3 million in home equity loans and lines, $4.6 million in commercial and industrial and $1.1 million in consumer loans. Of the total $64.9 million decline, $16.6 million is attributed to transferring assets from the loan account into other asset categories, $15.1 million has been charged-off and $69.7 million represent normal principal payments on the loan portfolio. These declines have been partially offset through the production and funding of $36.5 million in new loans. See the discussions on Nonperforming Assets and Allowance for Loan Losses for additional details on nonperforming assets and charge-offs. The composition of the loan portfolio, by category, as of September 30, 2010 is 50% commercial mortgage loans, 22% construction loans, 12% 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 $5.6 million between December 31, 2009 and September 30, 2010 from $722.6 million to $717.0 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 $39.4 million from $203.4 million at year end 2009 to $164.0 million at September 30, 2010. Customer reciprocal time deposits entered into the CDARS (Certificate of Deposit Account Registry Service) program have declined by $3.3 million from $23.6 million to $20.3 million. Other retail time deposits decreased by $6.3 million from $210.6 million to $204.3 million. Time deposits as a percentage of total deposits have declined from 61% to 54%. 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 have increased by $45.8 million to $138.9 at September 30, 2010 compared to $93.2 million at year end. Savings account balances have increased by $7.6 million and money market account balances have declined by $11.0 million over the first nine months of 2010. The increase in savings is due primarily to customers desire to keep their deposits in more liquid, short-term deposit types in anticipation of future interest rate increases. 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 $920,000 from $61.0 million to $62.0 million.

The Company has total borrowings of $164.7 million at September 30, 2010 compared with $216.7 million at December 31, 2009. The composition of borrowings is $142.0 million in long-term advances and $7.0 million in short-term advances from the Federal Home Loan Bank of Atlanta (FHLB), $8.2 million in junior subordinated debt issued to an unconsolidated subsidiary and $7.5 million in a subordinated term loan from a non-affiliated financial institution. Borrowings at December 31, 2009 consisted of $127.0 million in long-term FHLB advances, $24.0 million in short-term FHLB advances, $50.0 million in short-term Fed Discount Window advances, $8.2 million in junior subordinated debt issued to an unconsolidated subsidiary, and $7.5 million in a subordinated term loan. The $50.0 million in Fed Discount Window advances at December 31, 2009 were part of the Company s strategy to leverage the funds received through the Capital Purchase Program. As additional liquidity has been made available through deposit gathering and normal principal pay downs from loan portfolio, we were able to repay the $50.0 million during the first nine months of 2010. There were no Federal funds purchased at either balance sheet date.

Non-Interest Expenses. Non-interest expenses increased by 13% or $749,000 from $5.9 million to $6.6 million. The categories experiencing the greatest increases were loan related professional and collection expense, personnel, FDIC deposit insurance premium expense and other professional fees. Loan related professional and collection expenses increased by $309,000 from $180,000 to $489,000. Of the total increase, $246,000 is related to the costs associated with the acquisition and ongoing servicing of foreclosed assets and $42,000 was due to valuation write-downs. The net loss on disposal of foreclosed assets during the current three-month period was $39,000 compared to $5,000 in the prior period. Personnel expenses were up $193,000 due primarily to salary expenses related to the increased level of mortgage loan origination activity. FDIC deposit premiums were up $119,000 from $310,000 in the prior year s quarter compared to $429,000 for the current three month period. Other professional fees were $89,000 higher due to the payment of consulting fees related to the FHLB advance restructuring.

Non-Interest Income. For the current nine-month period, non-interest income increased by $783,000 or 29% to $3.5 million from $2.7 million. The components of non-interest income experiencing the largest period-over-period increases are as follows: mortgage related revenue has increased by $239,000 to $974,000 from $735,000, service charges and other customer service fees on deposit accounts increased by $163,000 to $1.4 million from $1.2 million and brokerage referral fees have increased by $48,000 to $148,000 from $100,000. The non-recurring items impacting the comparison of noninterest income for the two periods include $8,000 in net losses on the disposal of fixed assets for the current nine-month period and an impairment charge of $407,000 on a non-marketable equity security, partially offset by a $110,000 realized gain on the sale of available for sale debt securities, for the nine-month period ended September 30, 2009.

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