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 $40.8 million; its shares were traded at around $4.24 with a P/E ratio of 424 and P/S ratio of 0.7. 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 $95.4 million to $1.1 billion at September 30, 2009 from $968.3 million at December 31, 2008. Earning assets are $992.1 million or 93% of total assets compared to $898.7 million or 92% at December 31, 2008. Components of earning assets at September 30, 2009 are $772.0 million in gross loans, $210.1 million in investment securities and Federal Home Loan Bank (FHLB) stock and $10.0 in overnight investments and interest–earning 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–earning deposits. Total deposits and stockholders equity at September 30, 2009 were $714.2 million and $123.5 million, respectively, compared to $714.9 million and $95.1 million at December 31, 2008.
Gross loans outstanding declined by $13.4 million over the first nine months of 2009. In conjunction with a core data processing conversion occurring in early March, the Company reclassified certain loans within the 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 or for a commercial business purpose 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. 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 2009, by category, was as follows: increases in commercial real estate, residential mortgage and consumer loans of $51.4 million, $5.7 million and $1.6 million, respectively, and decreases in construction and land development, commercial & industrial loans and home equity loans and lines of $63.5 million, $7.5 million and $1.2 million, respectively. The composition of the loan portfolio, by category, as of September 30, 2009 is 46% commercial mortgage loans, 23% 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 and as adjusted for the reclassifications, as of December 31, 2008 was 39% commercial mortgage loans, 31% construction loans, 11% residential real estate mortgage loans, 10% commercial loans, 8% home equity loans and lines and 1% consumer loans.
The Company had total borrowings of $221.7 million at September 30, 2009 compared with $154.5 million at December 31, 2008. The composition of borrowings is $118.0 million in long-term advances and $33.0 million in short-term advances from the Federal Home Loan Bank of Atlanta (FHLB), $55.0 million in Federal Reserve Bank discount window funds, $8.2 million in junior subordinated debt issued to an unconsolidated subsidiary and $7.5 million in a subordinated term loan issued to a non-affiliated financial institution. 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.
Non-Interest Expenses. For the current three-month period, non-interest expenses increased by $819,000 or 16% from $5.1 million to $5.9 million. The categories experiencing the greatest increases were personnel, occupancy, FDIC deposit insurance premium expense and loan related professional and collection expenses. Total occupancy expenses have increased by 34% or $242,000 to $951,000 from $709,000. The Company opened two new facilities during the second quarter of 2009, one of which serves as our main location for the City of Raleigh, North Carolina and houses a branch, the Raleigh Commercial Lending team, our mortgage and investment divisions as well as the human resource staff. FDIC deposit insurance premiums increased by 201% or $207,000. The increase reflects the higher insurance assessment rates on deposits. Despite opening two new offices during the quarter and hiring additional support staff, total personnel expenses have increased by only 5% or $149,000 to $3.0 million compared to $2.9 million. Loan and collection expenses have increased by $114,000 or 172% primarily as a result of expenses related to collections, foreclosures and losses pursuant to the disposition of assets acquired. As previously mentioned, $2,000 in losses on the sale of other real estate was reclassified from non-interest income to non-interest expense for the three month period ended September 30, 2008.
Non-Interest Income. For the current nine-month period, non-interest income decreased by $88,000 to $2.7 million from $2.8 million. The decline in non-interest income is primarily attributable to transactions within our investment portfolio and non-recurring revenue recorded in the prior year period. In the current year, the Company recorded a write-down of $407,000 on a non-marketable equity security, which was partially offset by a $110,000 realized gain on the sale of available for sale debt securities, compared with a gain on sale of $16,000 in the prior year. Several components of non-interest income have experienced period-over-period increases as follows: $229,000 in earnings on cash value of bank owned life insurance, $224,000 in mortgage loan origination fees, $25,000 in customer service fees and $5,000 in service charges on deposit accounts. The increase in bank owned life insurance cash value is attributable to exchanging several older policies into higher yielding products and the increase in mortgage loan origination fee income is attributable to increasing the number of loan officers over the past twelve months. During 2008, there were three items totaling $238,000 reported as non-recurring revenue. Losses on the sale of other real estate owned amounting to $75,000 in 2008 were reclassified from non-interest income to non-interest expense.
Non-Interest Expenses. Non-interest expenses increased by 17% to $17.8 million for the period ended September 30, 2009 compared with $15.3 million for the prior year period. The Company has added two branch locations and increased support staff during the past twelve months. The four largest components of non-interest expense, personnel, occupancy, data processing and FDIC deposit insurance premiums, represent $14.1 million of total non-interest expenses. Increases in these four categories accounted for 92% of the increase in non-interest expenses. Due to changes in the regular quarterly premiums and a $493,000 special assessment, FDIC deposit insurance premiums increased 351% from $295,000 to $1.3 million. Occupancy and equipment expenses increased by $579,000 or 29% from $2.0 million to $2.6 million due to the opening of two new branch offices during the first half of 2009. Due to the new offices and the hiring of additional support staff, salaries and benefits expense increased by 5% or $416,000 from $8.6 million to $9.0 million. The Company converted all data processing platforms in March 2009 and incurred some one-time, non-recurring expenses of $156,000 which was the partially explains the $308,000 increase in data processing costs.
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