NewBridge Bancorp Reports 49% Increase in Net Income to $1.5 Million
April 25, 2012
- Net income climbs 49% over the prior year’s first quarter
- Net interest margin averages 4.15% for the first quarter
- Total classified loans decline 7% in the first quarter and 30% from the peak level
- Provision expense declines 43%, or $2.6 million, from the prior year’s first quarter
- Core deposits increase to 75% of total deposits
- Average cost of interest bearing deposits declines to 0.56% for the quarter
- Mortgage revenues and wealth management fees climb 32% and 9%, respectively, over the prior year’s first quarter
- Non-interest expense declines 6%, or $793,000, compared to the prior year’s first quarter
- Tier 1 Leverage Capital and Total Risk Based Capital of 10.62% and 14.45%, respectively at quarter end
GREENSBORO, N.C. – NewBridge Bancorp (NASDAQ: NBBC), parent of NewBridge Bank, today reported results for the three month period ended March 31, 2012.
For the three months ended March 31, 2012 net income totaled $1.5 million compared to $1.0 million for the quarter ended March 31, 2011. After dividends and accretion on preferred stock, the Company reported net income available to common shareholders of $781,000, or $0.05 per diluted share, for the quarter ended March 31, 2012, compared to $282,000, or $0.02 per diluted share, for the quarter ended March 31, 2011.
Pressley A. Ridgill, President and Chief Executive Officer of NewBridge Bancorp, commented: “It is satisfying to see year-over-year operating improvement, resulting in nearly a 50% increase in net income. The positive trends include core deposit growth that exceeds our expectations, and allows us to maintain a strong and stable net interest margin that averaged 4.15% for the first quarter. Classified loans continue to decline resulting in a lower provision for credit losses that fell 43% or $2.6 million from last year’s first quarter. Mortgage and Wealth Management revenues continue to climb, while at the same time nearly $1 million of annual operating expenses have been eliminated from these two areas. Finally, our on-going focus on lowering controllable costs resulted in non-interest expense declining $793,000, or 6%, from the prior year first quarter.”
Net interest income
Despite some encouraging economic trends, soft loan demand continues to adversely affect the Company’s main source of revenue, interest income. Net interest income declined $1.2 million, or 6.9%, to $16.2 million for the quarter compared to $17.4 million a year ago. The Company’s net interest margin remained strong at 4.15% for the quarter ended March 31, 2012, declining 13 basis points from the prior year. However average loan balances declined $144.0 million, or 10.8%, over the same period. This resulted in a $2.3 million decline in interest income from loans. Interest income on investments declined 2.2%, or $80,000, due primarily to a 77 basis point decline in the average investment yield to 4.08% in the quarter ended March 31, 2012, compared to 4.85% in the same period a year ago. The decline in interest income from loans and investments was partially offset by lower interest expense on interest bearing liabilities, which fell by $1.2 million for the quarter ending March 31, 2012, compared to the prior year. This reduction in interest expense is reflected in the lower cost of interest bearing liabilities which fell 29 basis points from the prior year.
Total assets increased $11.4 million during the quarter to $1.75 billion at March 31, 2012. Loan balances declined $26.4 million to $1.17 billion during the quarter in spite of new commercial loan originations of $43.2 million, which included strong production at the recently opened Raleigh loan production office. Cash flow from loans and deposit growth was used to purchase investment securities, which increased $57.1 million during the quarter to $394.9 million. The Company had a net unrealized gain in its investment portfolio at March 31, 2012 of $5.5 million. At March 31, 2012, the weighted average duration of the investment portfolio was 3.38 years and the weighted average yield was 4.08%.
Total deposits increased $30.5 million during the quarter to $1.45 billion. Core deposits, defined as noninterest bearing demand accounts, savings, NOW and money market deposit accounts, increased 5.6%, or $57.8 million, but were partially offset by a $27.2 million decline in time deposits. Time deposits totaled $366.1 million at quarter end and represented 25% of the Company’s total deposits. Non-interest bearing deposits increased $38.9 million to $211.2 million at March 31, 2012, however a large percentage of this increase is expected to be of a temporary nature. The weighted average cost of interest bearing deposits was 0.56% during the quarter ended March 31, 2012.
Shareholders’ equity increased $3.7 million during the quarter to $167.0 million. This improvement was the result of a $2.9 million increase in comprehensive income from changes in the value of investment securities, as well as a $781,000 increase in retained earnings as a result of quarterly earnings. Tangible book value increased $0.24 during the quarter to $7.09 per share at March 31, 2012.
For the quarter ending March 31, 2012, non-interest operating income, which excludes gains and losses on sales of securities and other real estate owned (“OREO”), totaled $4.0 million or $51,000 less than non-interest operating income from the prior year period. Retail banking revenue declined $246,000 from a year ago to $2.3 million for the quarter ended March 31, 2012, however this decline was largely offset by higher mortgage and wealth management revenues, which increased $138,000 and $48,000, respectively.
Losses on the sale and write-down of OREO declined by $478,000 to $1.0 million for the quarter ended March 31, 2012, from $1.5 million for the quarter ended March 31, 2011.
There were no gains from sales of investments during the quarter ended March 31, 2012, compared to gains of $2.0 million during the quarter ended March 31, 2011.
Noninterest expense declined $793,000, or 5.5%, to $13.6 million for the quarter just ended compared to $14.4 million for the prior year’s first quarter. The lower noninterest expense was due in large part to management’s on-going efforts to reduce controllable expense. Since the Company was formed in a merger of equals in 2007, approximately $16.5 million of annual expense has been eliminated.
Total classified loans decreased 7.4%, or $9.5 million, during the quarter ended March 31, 2012, and 30%, or $51.1 million, since the peak level in September 2010. As a percentage of Tier 1 capital plus reserves, total classified assets declined to 72% at March 31, 2012, from 78% at December 31, 2011, and 93% at their peak level at September 30, 2010. Nonperforming loans increased 7.8%, or $3.2 million, during the quarter. This increase was due primarily to slower than usual movement of property into OREO during the latter part of the quarter. Since the peak level, nonperforming loans have declined 31.8%, or $20.4 million, from $64.1 million at June 30, 2009. Nonperforming loans represent 3.72% of total loans held for investment. OREO decreased $555,000 during the quarter to $30.0 million. Including OREO, total nonperforming assets increased $2.6 million to $73.7 million, or 4.22% of total assets, at March 31, 2012. The average duration that property is held in OREO is 17 months. Troubled debt restructured loans totaled $15.7 million of the $43.7 million of nonperforming loans at March 31, 2012. Accruing restructured loans totaled $6.6 million and non-accruing restructured loans totaled $9.1 million. The Company evaluates all troubled debt restructured loans at the time of the restructuring for impairment, which typically results in the asset being moved to non-accrual. The Company’s highest risk and most closely monitored nonperforming assets are non-accruing loans excluding troubled debt restructures. These loans totaled $27.9 million at March 31, 2012, down $28.3 million, or 50.3%, since their peak level at June 30, 2009. Total classified loans crested later than many of the Company’s other credit metrics, rising until the September quarter of 2010. Over the last six quarters, classified loans declined 24.8%, or $39.3 million.
The allowance for credit losses totaled $27.9 million at March 31, 2012, or 2.38% of loans held for investment. The Company’s allowance for credit losses as a percentage of nonperforming loans (the “coverage percentage”) totaled 63.9% at March 31, 2012, compared to 71.2% at December 31, 2011 and 58.1% at March 31, 2011. The Company’s allowance for credit losses consists of general reserves totaling 83.7%, and specific reserves of 16.3%. The majority of current estimated losses from the Company’s nonperforming loans have been previously recognized through charge-offs. 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. Since the current adverse credit cycle began in 2007, the Company has charged off $145.1 million of loans and OREO, or 9.0% of our highest/peak level of loan balances.
The Company 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 March 31, 2012, the Company’s concentration levels were 36.84% and 95.43%, 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 million at March 31, 2012, including $34 million of speculative residential construction and residential acquisition and development loans. This portfolio is largely graded as classified loans.
Non-GAAP Financial Information
In addition to results presented in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release includes non-GAAP financial measures such as the operating efficiency percentage and pre-tax, pre-securities gains and pre-credit related operating income. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in understanding its underlying performance, business, and performance trends and such measures help facilitate performance comparisons with others in the banking industry. Non-GAAP measures have inherent limitations, are not required to be uniformly applied, and are not audited. Readers should be aware of these limitations and should be cautious in their use of such measures. To mitigate these limitations, the Company has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that its performance is properly reflected to facilitate consistent period-to-period comparisons. Although management believes the above non-GAAP financial measures enhance investors’ understanding of the Company’s business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.
Please refer to the Non-GAAP Measures section later in this release for additional information.
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 the Company and its management about future events. The accuracy of such forward looking statements could be affected by factors including, but not limited to, the financial success or changing conditions or strategies of NewBridge Bancorp’s customers 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 the Company’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 Bancorp undertakes no obligation to revise or update these statements following the date of this press release.
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