Crescent Financial Corp. Reports Operating Results (10-Q)
Crescent Financial Corp. has a market cap of $32.7 million; its shares were traded at around $3.4 with and P/S ratio of 0.5. 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 $21.7 million or 2% to $1.0 billion at March 31, 2010. Earning assets at both March 31, 2010 and December 31, 2009 were 95% of total assets and totaled $961.7 million at the end of the first quarter of 2010 compared with $986.7 million at year end. Components of earning assets at March 31, 2010 are $744.6 million in gross loans and loans and mortgage loans held for sale, $200.4 million in investment securities and Federal Home Loan Bank (FHLB) stock and $16.7 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 March 31, 2010 were $713.8 million and $90.5 million, respectively, compared to $722.6 million and $89.5 million at December 31, 2009.
Total deposits decreased by $8.9 million between December 31, 2009 and March 31, 2010 from $722.6 million to $713.8 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 $12.2 million from $203.4 million at year end 2009 to $191.2 million at March 31, 2010. Other retail time deposits decreased by $11.6 million from $234.1 million to $222.6 million. Total time deposits as a percentage of total deposits have declined from 61% to 58%. 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 statement receipt. As a result, interest-bearing checking balances increased during the first quarter by $19.0 million to $112.2 at March 31, 2010. Savings account balances have increased by $3.8 million and money market account balances have declined by $2.3 million over the first quarter of 2010. Total savings and money market account balances at March 31, 2010 were $61.9 million and $70.5 million, respectively. Non-interest bearing deposit balances have declined by $5.6 million from $61.0 million to $55.4 million. The decline is attributable primarily attributable to the business checking products as sales for many of our small business customers have been negatively impacted by the economy.
The Company had total borrowings of $202.8 million at March 31, 2010 compared with $216.7 million at December 31, 2009. The composition of borrowings is $130.0 million in long-term advances and $21.0 million in short-term advances from the Federal Home Loan Bank of Atlanta (FHLB), $36.0 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, 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. There were no Federal funds purchased at either balance sheet date.
Total average earning assets decreased $24.8 million or 3% from an average of $985.7 million to an average of $960.9 million for the current three-month period. The composition of the decrease was as follows: the average balance of loans outstanding decreased by 5% or $36.7 million from $788.8 million to $752.1 million, the average balance of the investment securities portfolio increased by 4% or $7.6 million from $191.9 million to $199.5 million and the average balance of federal funds sold and other interest-earning assets increased by $4.2 million to $9.3 million from $5.0 million. The average of gross loans outstanding has declined due to a combination of the Company trying to reduce its exposure to construction, land acquisition and development lending and the overall weakness for new loan demand due to economic conditions over the past eighteen months.
Average interest-bearing liabilities decreased by $9.7 million or 1% from $872.1 million for the quarter ended March 31, 2009 to $862.4 million for the current quarter. Total interest-bearing deposits increased by $5.2 million or 1% from $644.6 million to $649.8 million. Interest-bearing NOW account deposits increased by $54.0 million to $96.8 million largely due to the new checking product introduced in December 2008. Total average time deposits declined by over $38.8 million primarily due to the Company reducing its exposure to brokered deposits by $59.2 million over the last twelve months. Average total borrowings decreased by $14.8 million or 7% from $227.4 million to $212.6 million. The Company is making a concerted effort to reduce its exposure to wholesale funding. The reduction came in a borrowing category whose interest rate was short-term in nature, but was subject to significant volatility in a rising interest rate environment.
Non-Interest Income. Non-interest income increased by $258,000 or 33% to $1.0 million from $788,000 for the prior year period. The following categories experienced increases: investment services revenue, $34,000 or 126%; customer service fees, $33,000 or 10%; fees on deposit accounts, $11,000 or 21%; income on non-marketable equity investments, $12,000 or 377%; and earnings on cash value of bank owned life insurance, $10,000 or 5%. During the first quarter of 2010, the Company began transforming its mortgage loan division from a brokerage operation to a correspondent operation. This will allow Crescent to originate mortgages in our own name and sell them in the secondary market. For the three months ended March 31, 2010, we recognized $193,000 in origination revenue and $44,000 in gains on the sale of mortgages for a total of $237,000 attributable to mortgage activity. The Company recognized $296,000 in mortgage origination revenue for the prior year period as the level of interest rates during the first quarter of 2009 created a surge of refinance activity. During the first quarter of 2009, the Company recorded a $188,000 impairment loss on a non-marketable equity investment.
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