NewBridge Bancorp Announces Net Income Increases 230% to $4.8 Million
January 29, 2013
Earnings per diluted share total $0.19 for the quarter
Total classified assets decrease $32 million for the quarter and $106 million year to date to $53 million
Nonperforming assets decline $11.4 million to $26.7 million, or 1.56% of assets, for the quarter
Other real estate owned declines $5.1 million, for the quarter or 49%, to $5.4 million
Provision for credit losses totals $1.2 million for the quarter, or 72% below prior year
Total risk based capital was 16.48% and leverage capital was 10.00% at quarter end
Net interest margin averages 3.91% for the quarter and 4.06% for the year
Cost of interest bearing deposits drops to 0.31% for the quarter
Retail banking fees increase $437,000 over prior year quarter on changes in fee structures
Quarterly mortgage banking revenues increase 23% over same period a year ago
Nonclassified loans increase 6% for the quarter and 5% year-to-date
Portfolio loan production climbs 30% over 2011 to $280 million
GREENSBORO, N.C. - NewBridge Bancorp (NASDAQ: NBBC), parent of NewBridge Bank, today announced net income of $4.8 million for the three months ended December 31, 2012 compared to $1.4 million for the three months ended December 31, 2011. After dividends and accretion on preferred stock, the Company reported net income of $0.19 per diluted common share. For the year ending December 31, 2012, the Company reported a net loss of $25.3 million compared to net income of $4.7 million for the prior year. The Company experienced a loss of $1.80 per diluted share in 2012 compared to net income of $0.11 in 2011. The results for 2012 were impacted by the Company's previously disclosed plan to accelerate the disposition of problem assets. Results for the year also include $1.8 million of onetime items to write down facilities and other assets, as well as a $10 million valuation allowance against the Company's deferred tax asset. The results for 2011 benefitted from a onetime gain of $2.0 million on the sale of investment securities. On November 30, 2012, the Company issued $56.3 of convertible preferred equity to select investors. Upon approval at a special Shareholders Meeting on February 20, 2013, the preferred shares will convert into 9,601,273 shares of Class A common stock and 3,186,750 shares of Class B common stock.
Pressley A. Ridgill, President and Chief Executive Officer, commented: "The events of 2012, which culminated in earnings for the fourth quarter of $4.8 million, were very positive for our Company. In November we completed a $56 million capital raise, which sufficiently bolsters the balance sheet for the future, including the anticipated repurchase of the $52 million of TARP preferred shares. Classified assets fell by $106 million during the year, resulting in non-performing assets declining to $26.7 million, or 1.56% of total assets at year end. In addition, loan growth trends turned positive as we expanded our loan production teams in the Piedmont Triad and Research Triangle markets and added a Charlotte loan production team in mid-year. Excluding the $81 million reduction of classified loans from asset disposition, nonclassified loan balances increased 5% for the year, or approximately $50 million. Despite our renewed lending efforts, we remained focused on controlling costs and expanding other revenues. For the year, personnel costs increased less than 2% and excluding $1.8 million of onetime expenses in the third quarter, total operating expense declined $1.3 million, or 2.3% from 2011. We experienced increased revenue growth from other revenue sources during the year. Mortgage revenue climbed 53% to $2.6 million, and retail banking revenues made sizable gains in the fourth quarter, increasing 18% over the prior year."
Mr. Ridgill continued, "Our fourth quarter operating performance is the result of new balance sheet dynamics. Our successful asset disposition plan means that future earnings will be far less encumbered by high credit related costs. Like all banks, we do, however, remain in a challenging low interest rate environment with heightened competition for quality loans. For the third consecutive quarter, our net interest margin declined partially as a result of the disposition of high risk loans with high yields and limited opportunities to reinvest proceeds from the capital raise and maturing investments at attractive rates. We are facing these challenges by continuing to invest in highly regarded loan officers, minimizing costs and planning for disciplined growth."
Net interest income
Net interest income declined $1.2 million to $15.4 million for the quarter compared to $16.6 million a year ago. Year to date net interest income declined 5.3%, or $3.6 million, to $63.6 million. The Company's net interest margin declined to 3.91% for the quarter compared to 4.25% for the same period last year. The net interest margin for the twelve month period ending December 31, 2012 was 4.06%, down from 4.22% for the prior year. The 2012 average balance of loans declined $95.9 million from the prior year's average, and the average yield on loans declined 28 basis points to 4.90%, resulting in an $8.2 million annual reduction in interest income. Investment yields fell more dramatically, dropping from 4.55% in 2011 to 3.59%, as roughly one third of the prior year's long duration investment portfolio matured and was reinvested into lower yielding short duration investments. Interest income on investments declined $150,000 for the year, or 1.1%, despite a $77 million increase in the average balance of investments. The decline in interest income from earning assets was partially offset by lower interest expense on interest bearing liabilities, which fell by $4.8 million during the year. The decline was due primarily to a reduction in deposit rates from 0.75% in 2011 to 0.42% in 2012. At December 31, 2012, the weighted average cost of the Company's $1.33 billion of deposits was 0.26%.
The asset disposition plan eliminated $81 million of classified loans during 2012. These loans had higher than acceptable credit risk characteristics, but also carried higher yields. The weighted average yield was approximately 6.2% on the disposed loans. Proceeds from the disposition of these loans have been largely reinvested in short-term agency securities yielding less than 1%.
Total assets decreased $5.2 million during the fourth quarter and $25.9 million for the year to $1.71 billion at December 31, 2012. Loans held for investment decreased $13.3 million for the quarter and $44.6 million for the year. The decline in loans was due primarily to our asset disposition plan, which eliminated $81 million of classified loans and $25 million of other real estate owned. For the quarter, classified loans declined $27 million and other real estate owned declined $5 million. During the quarter, $9.6 million of net chargeoffs were recorded. Our 2012 portfolio loan production totaled $280 million, or 30% more than in 2011. Cash and cash equivalents decreased $3.0 million for the quarter and $14.2 million for the twelve months. Investment securities increased $6.4 million for the quarter to $393.8 million and increased $56.0 million since the beginning of the year.
Total deposits declined $57.2 million for the quarter and $86.2 million for the year to $1.33 billion. The decline in deposits was due primarily to lower time deposit balances, which fell $45.8 million for the quarter and $59.4 million for the year. In the recent quarter, the decline was due primarily to lower brokered deposits; however, retail time deposits declined $75.9 million for the year as the Company has chosen not to compete for high priced time deposits. Excluding time deposits, core deposits remained steady for the year at $1.0 billion. Noninterest bearing deposits increased $33.7 million for the year to $206.0 million. In the fourth quarter, noninterest bearing accounts increased $21.1 million due in part to changes in rate and fee structures the Company applied to certain product offerings. These changes resulted in an 18% increase in retail banking fees, or $437,000, during the fourth quarter. The weighted average rate on the Company's $1.0 billion of core deposits was 0.16% at December 31, 2012. The weighted average cost of time deposits at that date was 0.54% on $334.0 million.
Shareholders' equity increased $56.6 million during the quarter due to the Company's issuance of $56.3 million of convertible preferred equity in November and $4.0 million of retained earnings, which was partially offset by a $4.1 million reduction in additional paid-in capital from cost incurred in the issuance of the preferred equity. For the year, shareholders' equity increased $32.6 million, due to the Company's operating loss and other changes in equity of $28.2 million for the year. Pro-forma tangible book value per common share at December 31, 2012 was $4.94 on a fully converted basis.
Noninterest income climbed 63%, or $1.8 million, to $4.8 million for the fourth quarter. The change was due primarily to a $1.4 million improvement in writedowns and losses on disposals of foreclosed properties (OREO). Previously discussed changes in retail banking revenue drove fee income $437,000 higher for the quarter. For the year, mortgage banking activities capitalized on the favorable interest rate environment, increasing revenues 53%, or $908,000, due to a higher volume of production. Wealth management fees were down slightly for the year; however, lower costs resulted in more than a $200,000 increase in contributions from these services. Securities gains totaled $3,000 during 2012 compared to $2.0 million during 2011.
Noninterest expense increased $524,000 from the prior year to $57.9 million in 2012. Excluding $1.8 million of onetime expense in the third quarter, noninterest expense declined $1.3 million, for the year, or 2.3%. The Company continues to analyze its branch locations and footprint to achieve greater efficiency and penetration in our target markets. This has led to the addition of 12 commercial and private bankers during the year, primarily in Raleigh and Charlotte, and the announced closing of two locations in the Piedmont Triad area where the Company currently operates 27 full service bank locations. Combined personnel, furniture and equipment, technology and OREO expense fell $264,000 from the prior year, while occupancy, legal, professional and other expenses rose $1.4 million. The rise in occupancy and other expenses were due primarily to the onetime charges taken in the third quarter that are largely associated with the planned closing of the two Piedmont Triad locations.
Total classified loans decreased $26.7 million, during the quarter and $80.6 million during the year. At December 31, 2012, total classified loans were $47.9 million, including $21.4 million of nonperforming loans. The nonperforming loans have been charged down a combined $7.9 million and are being carried at 69% of their contractual value. Including OREO, total classified assets declined $106 million during the year and totaled $53.2 million at December 31, 2012. OREO was written down to estimated liquidation value of $5.4 million in the third quarter. Total classified loans crested later than many of the Company's other credit metrics, rising until the third quarter of 2010. Since then, classified loans have declined 71%, or $119.7 million. As a percentage of the Bank's tier one capital plus reserves, classified assets declined to 31% at December 31, 2012 from 78% at December 31, 2011 and 93% at September 30, 2010. Nonperforming loans declined 23%, or $6.3 million, during the quarter. Nonperforming loans peaked at June 30, 2009 at $64.1 million. Since then, they have declined 67%, or $42.7 million. Nonperforming loans represent 1.85% of loans held for investment. Including OREO, total nonperforming assets were $26.7 million, or 1.56% of total assets, at December 31, 2012.
The allowance for credit losses totaled $26.6 million at December 31, 2012, or 2.30% of loans held for investment, compared to $35.0 million (3.00%) at September 30, 2012. The Company's allowance for credit losses as a percentage of nonperforming loans totaled 125% at December 31, 2012, compared to 126% at September 30, 2012 and 71% at December 31, 2011. The allowance consists of general reserves of 94.1% and specific reserves of 5.9%. The confirmed losses from the Company's nonperforming loans have been previously recognized through chargeoffs. Consequently, the Company's allowance for credit losses is generally applicable to inherent losses within the Company's watch list and other performing loans portfolio. Net charge offs were $9.6 million for the fourth quarter and $19.1 million for the third quarter of 2012. Since the current adverse credit cycle began in 2007, the Company has charged off $194.4 million of loans and OREO, or 12.0% of our highest/peak level of loan balances of $1.627 billion at September 30, 2008. The annualized average quarterly net loss percentages over the past five year period for commercial loans, mortgage loans, credit reserves and home equity lines, retail loans and credit cards were 2.29%, 0.83%, 1.66%, 2.28% and 1.51%, respectively.
The Bank is well within the regulatory commercial real estate high concentration guidelines in land acquisition, development and construction (the "AD&C portfolio") loans, as well as total commercial real estate loans. At December 31, 2012, the Bank's concentration levels were 38.43% and 165.74%, respectively, of total regulatory capital, which compares favorably to the interagency regulatory guidance maximum concentrations of 100% and 300%, respectively. The AD&C portfolio totaled $63.4 million at December 31, 2012, including $17 million of speculative residential construction and residential acquisition and development.
Mr. Ridgill stated that "the fourth quarter of 2012 was a positive turning point for our Company. With the reduction of problem assets, our focus has shifted to the pursuit of disciplined growth. For the current year, we averaged 5% core organic loan growth. We anticipate continued growth in 2013. While margin compression will remain a challenge, redeployment of lower yielding investment proceeds into higher yielding loan assets should mitigate that pressure. Cost management practices will continue and should result in expense levels very similar in 2013 to those of 2012, despite the planned opening of the two new Bank locations, one each in Charlotte and Raleigh. Finally, we will strive for continued expansion of our fee income businesses. The changes in our retail banking product structure in the fourth quarter should benefit the full year in 2013. We also believe that our mortgage banking and wealth management activities will continue to grow. While our capital structure is enhanced and provides us the ability to be acquisitive, we will take a conservative approach as we evaluate opportunities."
Disclosures About Forward Looking Statements
The discussions included in this document and its exhibits may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. For the purposes of these discussions, any statements that are not statements of historical fact may be deemed to be forward looking statements. Such statements are often characterized by the use of qualifying words such as "expects," "anticipates," "believes," "estimates," "plans," "projects," or other statements concerning opinions or judgments of NewBridge and its management about future events. The accuracy of such forward looking statements could be affected by factors including, but not limited to, receipt of the shareholder approval referenced above, the financial success or changing conditions or strategies of NewBridge Bancorp's clients or vendors, fluctuations in interest rates, actions of government regulators, the availability of capital and personnel or general economic conditions. Additional factors that could cause actual results to differ materially from those anticipated by forward looking statements are discussed in NewBridge's filings with the Securities and Exchange Commission, including without limitation its annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. NewBridge undertakes no obligation to revise or update these statements following the date of this press release.
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