Crescent Financial Corporation is a bank holding company. They conduct almost all of their business through Crescent State Bank which is in the commercial banking business. Crescent Financial Corp. has a market cap of $38.5 million; its shares were traded at around $4 with a P/E ratio of 25 and P/S ratio of 0.6. Crescent Financial Corp. had an annual average earning growth of 23.8% over the past 5 years.
Highlight of Business Operations:Total assets increased by $124.0 million to $1.1 billion at March 31, 2009 from $968.3 million at December 31, 2008. At March 31, 2009, earning assets are $1.0 billion or 94% of total assets compared to $898.7 million or 92% at December 31, 2008. Components of earning assets at March 31, 2009 are $787.7 million in gross loans, $209.9 million in investment securities and Federal Home Loan Bank (FHLB) stock and $24.3 in overnight investments and interest bearing deposits with correspondent banks. Earning assets at December 31, 2008 consisted of $785.4 million in gross loans, $112.9 million in investment securities and FHLB stock and $366,000 in overnight investments and interest bearing deposits. Total deposits and stockholders equity at March 31, 2009 were $731.6 million and $120.5 million, respectively, compared to $714.9 million and $95.1 million at December 31, 2008.
During the first quarter of 2009, gross loans outstanding increased by $2.3 million or 0.29%. In conjunction with a core data processing conversion occurring in early March, we have reclassified certain loans within our portfolio so that reporting is more consistent with the collateral of a particular loan rather than the purpose. For instance, loans secured by homes purchased as investment property were previously reported as commercial real estate whereas they are now reported as residential real estate mortgages. Loans secured by commercial building lots were previously reported as commercial real estate and are now reported as construction and land development. As a result, the comparison of the loan compositions at March 31, 2009 and December 31, 2008 can be misleading. Reclassifications of loan types through the conversion process resulted in $164.6 million of commercial real estate loans and $2.1 million consumer loans being shifted to $81.8 million of construction and land development, $70.7 million residential mortgages, $9.3 million home equity loans and $4.9 million commercial and industrial. When considering these reclassifications, the net growth in the portfolio for the quarter by category was as follows: increases in commercial real estate, residential mortgage, home equity lines and loans and consumer loans of $8.4 million, $3.6 million, $1.2 million and $1.5 million, respectively, and a decrease in construction and land development of $12.4 million. The composition of the loan portfolio, by category, as of March 31, 2009 is 40% commercial mortgage loans, 29% construction loans, 12% residential mortgage loans. 10% commercial loans, 8% home equity loans and lines, and 1% consumer loans. The composition of the loan portfolio, by category, as of December 31, 2008 and before conversion was 60% commercial mortgage loans, 20% construction loans, 10% commercial loans, 7% home equity loans and lines, 2% residential real estate mortgage loans and 1% consumer loans.
The Company had an allowance for loan losses at March 31, 2009 of $13.9 million or 1.76% of outstanding loans compared to $12.6 million or 1.60% at December 31, 2008. At March 31, 2009, there were fifty-five loans totaling $16.4 million in non-accrual status. Thirty-one loans totaling $5.4 million represent one borrowing relationship. Of the $16.4 million in non-accrual loans, $5.8 million are one-to-four family residential. There were two loans past due 90 days or more totaling $4,000 that were still accruing interest at March 31, 2009. Non-performing loans as a percentage of total loans at March 31, 2009 were 2.08%. At December 31, 2008, there were fifty loans totaling approximately $13.1 million in non-accrual status. Thirty-five of those loans totaling approximately $5.7 million represent one borrowing relationship. Of the remaining $7.4 million, an additional $4.5 million of loans were to land developers or residential builders. The remaining $2.9 million of non-accrual loans were spread between commercial loans and residential investment properties. The percentage of non-performing loans to total loans at December 31, 2008 was 1.67%. For a more detailed discussion, see the section entitled Non-Performing Assets.
Total deposits increased by $16.7 million between December 31, 2008 and March 31, 2009 from $714.9 million to $731.6 million. The largest dollar increase occurred in the time deposit category, which grew by $11.5 million or 3% to $473.1 million at March 31, 2009 from $461.6 million at year end 2008. Interest-bearing demand deposit balances increased by $11.3 million or 26% to $53.9 million, non-interest bearing demand deposits increased by $1.0 million or 1% to $65.0 million and savings deposits increased by $559,000 or 1% to $59.4 million. During January, we lost one account with a $14.0 million balance which contributed to a quarterly decline in money market of $7.6 million from $87.9 million to $80.3 million.
The Company had total borrowings of $236.5 million at March 31, 2009 compared with $154.5 million at December 31, 2008. The composition of borrowings at March 31, 2009 is $106.0 million in long-term advances and $114.0 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, $7.5 million in a subordinated term loan issued to a non-affiliated financial institution and $758,000 in federal funds purchased from a correspondent bank. Borrowings at December 31, 2008 included $99.0 million in long-term FHLB advances, $29.0 million in short-term FHLB advances, $8.2 million in junior subordinated debt, $7.5 million in a subordinated term loan, $2.0 million outstanding on a holding company line of credit and $8.7 million in federal funds purchased. Of the $82.0 million increase in total borrowings, $75.0 million in short-term advances were attributable to the leverage strategy previously discussed.
Occupancy and equipment expenses increased by $88,000 or 13% from $663,000 for the three-month period ended March 31, 2008 to $751,000 for the current year period. Data processing expenses increased by $178,000 or 66% from $271,000 to $449,000. During the first quarter of 2009, the Company converted all core and ancillary data processing systems to a new provider. The non-recurring, one-time costs associated with the conversion were approximately $235,000 of which $156,000 was recorded in data processing, $40,000 was consulting, $26,000 was printing and postage for various communications to customers and $13,000 was employee travel and training expense. The after-tax impact of the conversion was approximately $144,000. Deposit insurance assessments from the Federal Deposit Insurance Corporation increased by $153,000 or 159% over insurance expense for the prior year.
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