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

May 10, 2010 | About:
10qk

10qk

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Cardinal Financial Corp. (CFNL) filed Quarterly Report for the period ended 2010-03-31.

Cardinal Financial Corp. has a market cap of $288.07 million; its shares were traded at around $10.03 with a P/E ratio of 23.88 and P/S ratio of 2.62. The dividend yield of Cardinal Financial Corp. stocks is 0.8%.CFNL is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Our credit quality remains strong despite the challenges we face during the current economic environment. At March 31, 2010, we have non-accrual loans totaling $4.7 million and no loans contractually past due 90 days or more as to principal or interest. Annualized net charge-offs were 0.55% of our average loans receivable for the three months ended March 31, 2010. Loan originations from our mortgage banking segment have decreased compared to the first quarter of 2009, even though the first-time home buyers credit was extended to April 30, 2010. Net income from our mortgage banking segment decreased to $559,000 for the three months ended March 31, 2010, respectively, compared to net income of $1.3 million for the same period of 2009.

For the three months ended March 31, 2010 and 2009, we reported net income of $3.8 million and $2.2 million, respectively. Net interest income after the provision for loan losses increased $3.4 million to $12.8 million for the three months ended March 31, 2010 compared to $9.4 million for the three months ended March 31, 2009. Despite an increase in our provision for loan losses, the increase in net interest income after provision for loan losses increased due to an increase in our net interest income of $4.6 million to $15.3 million for the three months ended March 31, 2010. Provision for loan losses for the three months ended March 31, 2010 was $2.4 million, an increase of $1.2 million, compared to $1.2 million for the same period of 2009. Noninterest income for each of the three months ended March 31, 2010 and 2009 was $5.8 million. Realized and unrealized gains on mortgage banking activities decreased $521,000 for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009, a result of decreased loan origination activity. This decrease was offset by increases in our investment fee income and management fee income. For the three months ended March 31, 2010, noninterest expense increased to $13.1 million, compared to $12.0 million for the same period of 2009. The increase in noninterest expense is attributable to increases in salary and benefits expense as we have added personnel in our wealth management and mortgage banking operations.

We operate in three business segments: commercial banking, mortgage banking, and wealth management and trust services. Net income attributable to the commercial banking segment for the three months ended March 31, 2010 was $3.6 million compared to net income of $1.7 million for the three months ended March 31, 2009. Net interest income increased $4.9 million to $15.0 million for the three months ended March 31, 2010, compared to $10.1 million for the same period of 2009. Provision for loan losses increased $1.2 million to $2.4 million for the three months ended March 31, 2010 compared to $1.2 million for the same period of 2009. The increase in provision expense is related to current economic and market conditions and an increase in loan charge-offs during 2010. Noninterest income decreased to $1.0 million for the three months ended March 31, 2010 compared to $1.3 million for the three months ended March 31, 2009. During the first quarter of 2010, gains of $264,000 were recorded on sales of investment securities available-for-sale, compared to $552,000 for the three months ended March 31, 2009. Noninterest expense was $8.3 million for the three months ended March 31, 2010, compared to $7.9 million for the same period of 2009. The increase in noninterest expense for the first quarter of 2010 as compared to the same period of 2009 is primarily due to expenses related to our core system conversion and increases in our FDIC insurance premiums and bank franchise tax assessments.

The wealth management and trust services segment, which includes CWS, Wilson/Bennett and the trust division of the Bank, recorded net income of $127,000 and $10,000 for the three month periods ended March 31, 2010 and 2009, respectively. The increase in net income is primarily attributable to an increase in noninterest income of $193,000 during 2010 as compared to 2009, a result of an increase in fees earned through expanded customer relationships and increases in the market values of managed and custodial assets in this business segment.

Net interest income is our primary source of revenue, representing the difference between interest and fees earned on interest-earning assets and the interest paid on deposits and other interest-bearing liabilities. The level of net interest income is impacted primarily by variations in the volume and mix of these assets and liabilities, as well as changes in interest rates. We report our net interest income on a tax equivalent basis as a result of certain tax-exempt investments we hold on our balance sheet. Net interest income for the three months ended March 31, 2010 and 2009 was $15.2 million and $10.6 million, respectively, a period-to-period increase of $4.6 million, or 44%. The net yields on our assets increased as a result of our moderately increasing interest-earning assets and lowering rates on our deposit liabilities.

Specifically, interest income on loans receivable increased $2.3 million for the three months ended March 31, 2010 compared to the same three month period of 2009. The increase in interest income on loans receivable is a result of an increase in the volume of our loans receivable portfolio. Interest income on loans held for sale decreased $520,000 to $1.3 million for the three months ended March 31, 2010, a direct result of a period-to-period decrease in loan originations in our held for sale portfolio. Interest income on investment securities, on a tax-equivalent basis, increased $673,000 for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009. The increase in interest income on investment securities is directly related to an increase of purchases of investment securities over the past year. Total interest expense has decreased $2.2 million for the three months ended March 31, 2010 as compared to the same period of 2009. The decrease in total interest expense is mostly related to the decreases we have taken in the interest rates we pay on our interest checking and savings deposit accounts. In addition, our certificates of deposit are repricing at lower interest rates.

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