3rd Quarter 2016 Shareholder Communication
CHARLOTTE, N.C., Oct. 26, 2016 /PRNewswire/ --
Dear Shareholders:
On behalf of the all of the professionals at Premara Financial, Inc. (the "Company") and Carolina Premier Bank (the "Bank"), I am pleased to outline our financial progress in the third quarter of 2016. Balancing our goals of quality, profitability, and growth while remaining true to our Purpose—We are your Catalyst for Excellence—remains critical to moving our Company toward high-performing.
GROWTH
Loan Production: Through the third quarter of 2016, our loan production (including participations but excluding purchased loan pools) is up 82% over all of 2015. Gross loan outstandings were up 3.6% over the second quarter and 11.6% over the same period of 2015. We are pleased with the momentum that started to build in the third quarter. The 3.6% growth came on top of a $1.9 million paydown of a non- performing loan.
In addition, a portion of our third quarter production was commercial construction related. We will witness an increase in loan outstandings as these loans fund up over the next few quarters. We are still within regulatory guidance on both our construction and commercial real estate (CRE) concentrations.
Professionals: During the third quarter, we hired Don Jackson to lead our SBA Lending efforts. Don brings 27 years of banking experience and recently served in the SBA unit of a local community bank. The SBA platform allows us to serve more small business clients, build loan volume, and enhance fee income. Don has already built a solid loan pipeline and is looking to add another banker to his team in the near future. We also hired Alan Fletcher, a 31-year banker, to serve as City Executive and Commercial Banker in our Rock Hill, SC office. Rock Hill and York County are great markets for a community bank focusing on small businesses. We are pleased that we now have the manpower to focus on business development for both loans and deposits in this important market.
In addition to Don and Alan, we added several other new professionals to our commercial banking team during 2015-2016. We recognize that these professionals need to be actively contacting our existing client base in order to increase client retention and identify further opportunities to solve their financial needs. To this end, our commercial team is engaged in an active client calling program. This effort, combined with new prospect opportunities, results in a loan pipeline that remains strong.
Deposits: Total deposits are up slightly on a linked quarter basis and down slightly over the same period last year. We continue to enjoy a healthy mix of demand deposits, which were over 24% of total deposits at quarter end.
We do have efforts underway to increase our core deposit base; this is a major initiative in our 2017 operating plan. A re-defined Retail Banking strategy and the addition of a strong calling officer in our Rock Hill office are two action items that will drive this increase in the fourth quarter of 2016 and in 2017.
QUALITY
With the aforementioned payoff of a $1.9 million non-performing loan, our quality metrics showed marked improvement in the third quarter. Non-performing assets as a percentage of total assets stood at 0.84% at the end of the third quarter, compared to 1.46% in the second quarter of 2016 and 1.77% in the third quarter of last year.
Year-to-date net charge-offs as a percentage of average loans totaled 18 basis points through the third quarter of 2016, compared to 21 basis points during the same period of 2015. We maintain the appropriate level of reserves, which cover non-performing loans by 103% at quarter end.
PROFITABILITY
Net Interest Margin: It is not news that we remain in a low interest rate environment and that margins are squeezed as loans reprice. We are no exception. Our NIM was 3.69% (YTD) through the third quarter of 2016, down from 3.78% in 2015. On a stand-alone quarterly basis, we did improve our margin to 3.74% over the second quarter margin of 3.69%. This squeeze in NIM, combined with fluctuating loan outstandings, resulted in a 1.2% decrease in the year-to-date net interest income.
Non-Interest Income: As a small community bank, we are predominately a "spread lender," and do not report a large non-interest income figure. As mentioned above, the launching of our SBA platform will result in increased fee income, as we sell the guaranteed portion of the loans on the secondary market. We continue to explore other strategies to generate non-interest income while not losing our focus on our core business.
The year-to-date non-interest income for 2016 is skewed by $147 thousand related to the subleasing of our Washington, DC office. Recall that we exited DC at the end of 2015 and subleased our space to another bank. We report lease income and an equal offsetting lease expense related to this transaction.
Non-Interest Expense: Our professionals continue to look for ways to manage our expenses. Our year-to-date non-interest expense was down 12% over the same period last year. In early 2017, we will realize some additional savings as we consolidate two offices in Charlotte.
At this point, we believe we have the infrastructure necessary to grow our Company for the next several years. While we will continue to explore new opportunities, we have the professionals, the branch network, and the operating systems for growth. Realizing this growth in 2017 and beyond will result in improved financial metrics.
Pre-tax profit: We recognize that we are not yet a high-performing bank. However, we are pleased that our year-to-date pre-tax profit totals $697 thousand compared to a pre-tax loss of $171 thousand for the same period of 2015. The resulting return on average assets is 0.39% year-to-date.
Premara Financial, Inc.: Growing our tangible book value and earnings per share remains a focus. All professionals understand that we work for you, our shareholders, and are charged with growing shareholder value. At the end of the third quarter of 2016, the tangible book value per share was $7.68, compared to $7.69 in the third quarter of 2015. Recall, however, that the remaining capital raise took place in the fourth quarter of 2015. Tangible book value at year end 2015 was $7.43/share; therefore, book value growth for the year is $0.25/share (3.3%).
Conclusion: We are pleased with the progress shown through the third quarter. It does take time to re- focus a company, hire new members of the leadership team and commercial banking team, and establish a plan for quality, profitability, and growth. We are excited about the possibilities in 2017— continuing our progress on growth and enhancing our existing processes to serve our clients and produce solid returns for our shareholders.
We stated before that 2015 was a "rebuilding year" that would produce results in subsequent years.
We do believe that our momentum is picking up in 2016, and we look forward to our continued progress toward a high-performing bank. We are your Catalyst for Excellence!
Sincerely,
David P. Barksdale
Chief Executive Officer
Forward-looking statements: We have included in this letter "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act relating to our operations, results of operations and other matters that are based on our current expectations, estimates, assumptions and projections. Words such as "will," "expect," "believe" and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. Our forward-looking statements speak only as of the date of this letter or as of the date they are made, and we undertake no obligation to update them.
Premara Financial, Inc. | ||||||||
Consolidated Balance Sheet | ||||||||
September 30, 2016 and 2015 | ||||||||
ASSETS | 2016 | 2015 | ||||||
Cash and cash equivalents: | ||||||||
Cash and due from banks | $ 2,814,887 | $ 2,916,368 | ||||||
Interest-bearing bank deposits | 10,361,288 | 24,234,891 | ||||||
Total cash and cash equivalents | 13,176,175 | 27,151,259 | ||||||
Time deposits - Financial institutions | 500,000 | - | ||||||
Securities available-for-sale | 32,076,067 | 35,212,049 | ||||||
Securities held-to-maturity | 1,250,000 | - | ||||||
Nonmarketable equity securities | 1,340,067 | 1,306,513 | ||||||
Loans | 185,315,120 | 166,022,845 | ||||||
Allowance for loan and lease losses | (2,051,365) | (2,242,782) | ||||||
Net loans | 183,263,755 | 163,780,063 | ||||||
Premises and equipment, net | 1,451,748 | 2,846,172 | ||||||
Deferred tax asset | 2,666,208 | 2,625,023 | ||||||
Other real estate owned | 54,119 | 74,264 | ||||||
Intangible assets | 625,553 | 686,931 | ||||||
Bank owned life insurance | 5,490,359 | 5,417,209 | ||||||
Accrued interest receivable | 816,136 | 831,695 | ||||||
Other assets | 1,151,239 | 2,277,185 | ||||||
Total assets | $243,861,426 | $242,208,363 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Deposits: | ||||||||
Demand: | ||||||||
Noninterest-bearing | $ 46,387,315 | $ 44,621,224 | ||||||
Interest-bearing | 18,757,221 | 19,027,913 | ||||||
Savings and money market | 75,707,523 | 76,953,190 | ||||||
Time, $100,000 and over | 19,646,682 | 18,761,343 | ||||||
Other time deposits | 41,452,857 | 39,564,946 | ||||||
Total deposits | 201,951,598 | 198,928,616 | ||||||
FHLB advances | 15,000,000 | 14,000,000 | ||||||
Accrued interest payable | 45,662 | 46,460 | ||||||
Other liabilities | 1,981,715 | 1,945,278 | ||||||
Total liabilities | 218,978,975 | 214,920,354 | ||||||
Stockholders' equity | ||||||||
Preferred stock, $0.01 par value, 6,238 shares issued and outstanding at September 30, 2015 | - | 6,238,000 | ||||||
Common stock, $0.01 par value; 3,160,268 and 2,646,911 shares issued and outstanding at September 30, 2016 and 2015, respectively | 31,603 | 26,469 | ||||||
Additional paid in capital | 23,551,711 | 20,156,268 | ||||||
Undivided profits | 1,130,296 | 1,045,380 | ||||||
Accumulated other comprehensive income | 168,841 | (178,108) | ||||||
Total stockholders' equity | 24,882,451 | 27,288,009 | ||||||
Total liabilities and stockholders' equity | $243,861,426 | $242,208,363 | ||||||
Premara Financial, Inc. | ||||||||
Consolidated Income Statement | ||||||||
Three months ended September 30, 2016 and 2015 | ||||||||
2016 - QTD | 2015 - QTD | |||||||
Interest income: | ||||||||
Loans, including fees | $ 2,265,372 | $ 2,052,038 | ||||||
Securities income | 228,342 | 236,020 | ||||||
Other interest and dividend income | 32,867 | 105,401 | ||||||
Total interest income | 2,526,581 | 2,393,459 | ||||||
Interest expense: | ||||||||
Time deposits, $100,000 and over | 71,227 | 53,663 | ||||||
Other deposits | 238,558 | 202,085 | ||||||
Other borrowings | 44,986 | 57,854 | ||||||
Total interest expense | 354,771 | 313,602 | ||||||
Net interest income | 2,171,810 | 2,079,857 | ||||||
Provision for loan losses | - | 250,000 | ||||||
Net int. inc. after prov. for loan losses | 2,171,810 | 1,829,857 | ||||||
Other operating income: | ||||||||
Debit and ATM income | 40,614 | 37,653 | ||||||
Bank owned life insurance | 41,055 | 36,032 | ||||||
Mortgage broker fees | - | 14,666 | ||||||
Mortgage banking income | - | - | ||||||
Gain on sale of available-for-sale securities | 5,451 | - | ||||||
Gain on sale of fixed assets | 2,097 | 6,398 | ||||||
Gain on sale of other real estate owned | - | 310,760 | ||||||
Service charges and other income | 155,409 | 90,335 | ||||||
Total non-interest income | 244,626 | 495,844 | ||||||
Other operating expenses: | ||||||||
Compensation and employee benefits | 1,113,348 | 1,144,219 | ||||||
Occupancy | 268,896 | 303,842 | ||||||
Furniture and equipment | 94,477 | 112,963 | ||||||
Professional services | 123,797 | 104,515 | ||||||
Data processing | 145,526 | 148,062 | ||||||
Office supplies and printing | 13,342 | 20,485 | ||||||
Software | 46,981 | 51,858 | ||||||
Advertising and marketing | 39,162 | 19,783 | ||||||
FDIC insurance premiums | 52,930 | 54,966 | ||||||
Telecommunications | 44,787 | 30,812 | ||||||
Debit and ATM fees | 33,168 | 45,463 | ||||||
Other | 179,900 | 258,898 | ||||||
Total other operating expenses | 2,156,314 | 2,295,866 | ||||||
Income before income tax expense | 260,122 | 29,835 | ||||||
Income tax expense (benefit) | 27,760 | (59,310) | ||||||
Net income | $ 232,362 | $ 89,145 | ||||||
Premara Financial, Inc. | ||||||||
Consolidated Income Statement | ||||||||
Nine months ended September 30, 2016 and 2015 | ||||||||
2016 - YTD | 2015 - YTD | |||||||
Interest income: | ||||||||
Loans, including fees | $ 6,487,232 | $ 6,500,508 | ||||||
Securities income | 759,853 | 698,727 | ||||||
Other interest and dividend income | 145,382 | 179,714 | ||||||
Total interest income | 7,392,467 | 7,378,949 | ||||||
Interest expense: | ||||||||
Time deposits, $100,000 and over | 198,379 | 146,975 | ||||||
Other deposits | 687,364 | 622,958 | ||||||
Other borrowings | 151,720 | 171,672 | ||||||
Total interest expense | 1,037,463 | 941,605 | ||||||
Net interest income | 6,355,004 | 6,437,344 | ||||||
Provision for loan losses | 25,000 | 250,000 | ||||||
Net int. inc. after prov. for loan losses | 6,330,004 | 6,187,344 | ||||||
Other operating income: | ||||||||
Debit and ATM income | 150,556 | 115,907 | ||||||
Bank owned life insurance | 113,162 | 108,308 | ||||||
Mortgage broker fees | - | 25,219 | ||||||
Mortgage banking income | - | 32,688 | ||||||
Gain on sale of available-for-sale securities | 15,371 | - | ||||||
Gain on sale of fixed assets | 2,097 | 14,422 | ||||||
Gain on sale of other real estate owned | - | 310,760 | ||||||
Service charges and other income | 446,907 | 243,780 | ||||||
Total non-interest income | 728,093 | 851,084 | ||||||
Other operating expenses: | ||||||||
Compensation and employee benefits | 3,151,967 | 3,470,140 | ||||||
Occupancy | 778,940 | 930,059 | ||||||
Furniture and equipment | 283,939 | 351,776 | ||||||
Professional services | 445,340 | 415,522 | ||||||
Data processing | 440,061 | 437,027 | ||||||
Office supplies and printing | 46,210 | 60,201 | ||||||
Software | 160,041 | 151,910 | ||||||
Advertising and marketing | 77,238 | 42,188 | ||||||
FDIC insurance premiums | 162,729 | 149,363 | ||||||
Telecommunications | 114,349 | 116,036 | ||||||
Debit and ATM fees | 127,712 | 121,852 | ||||||
Other | 572,680 | 963,427 | ||||||
Total other operating expenses | 6,361,206 | 7,209,501 | ||||||
Income (loss) before income tax expense | 696,891 | (171,073) | ||||||
Income tax expense (benefit) | 42,416 | (296,042) | ||||||
Net income | $ 654,475 | $ 124,969 | ||||||
Media contact: David Barksdale, 704-697-5053
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SOURCE Premara Financial, Inc.
