NewBridge Bancorp Reports Net Income of $1.4 Million for the Fourth Quarter and $4.7 Million for the Year
January 26, 2012
- Net income climbs 38% for the year and 29% for the quarter compared to the same periods a year ago
- Net interest margin improves, and averages 4.25% for the quarter and 4.22% for the year, 25 basis points and 22 basis points higher than the year ago periods, respectively
- Pre-tax, pre-securities gains and pre-credit related operating income totals $8.0 million for the quarter and $28.0 million for the year
- Non-accruing loans decline 9% for the quarter, 23% for the year and 41% from the peak level
- Total classified loans decline 6% for the quarter, 20% for the year and 24% from the
- Net loan charge-offs decline 41% for the year, or $11.6 million
- Provision expense declines $4.5 million for the year
- Allowance for credit losses as a percentage of loans increases from 2.15% to 2.39% year over year
- Core deposits increase $67.9 million, or 7.1%, for the year to $1.03 billion and represent 72% of total deposits
- Cost of interest bearing deposits declines to 0.63% for the quarter and 0.75% for the year
- Noninterest expense declines $1.2 million for the quarter and $3.5 million for the year
GREENSBORO, N.C. – NewBridge Bancorp (NASDAQ: NBBC), parent of NewBridge Bank, today reported results for the three and twelve month periods ended December 31, 2011.
For the three months ended December 31, 2011, net income totaled $1.4 million compared to $1.1 million for the quarter ended December 31, 2010. After dividends and accretion on preferred stock, the Company reported net income available to common shareholders of $714,000, or $0.04 per diluted share for the quarter ended December 31, 2011. For the prior year fourth quarter, net income available to common shareholders totaled $391,000, or $0.02 per diluted share. For the twelve months ended December 31, 2011, net income totaled $4.7 million, which compares to net income of $3.4 million for the prior year. After dividends and accretion on preferred stock, the Company reported net income available to common shareholders of $1.8 million, or $0.11 per diluted share, compared to $461,000, or $0.03 per diluted share in 2010.
Pressley A. Ridgill, President and Chief Executive Officer of NewBridge Bancorp, commented: “Our operating results for the December quarter and year were excellent considering the difficult economic environment. The credit trends continued to improve, our efficiency initiatives were effective and our net interest margin climbed to a robust 4.25%. We have been profitable for nine consecutive quarters, and for the second consecutive year. Our operating results closely tracked our profit plan, both before and after credit related costs. Excluding credit costs and securities gains, pre-tax operating income totaled $28.0 million, which is $138,000 higher than prior year results, even though average earning assets fell $170.6 million from the prior year. Our return on average assets before tax and credit costs climbed from 1.64% in 2010 to 1.71% in 2011. For the December quarter, our income before tax, securities gains and credit costs was $8.0 million, or a 1.85% annualized return on average assets.”
Mr. Ridgill continued, “During the second half of 2011, we announced the opening of three new loan production offices in Raleigh, Asheboro and Morganton, North Carolina in order to bolster the Company’s lending opportunities. I am pleased to announce that the early returns from these offices are encouraging. At December 31, these offices had $11.0 million in loan balances and over $40.0 million of loans in various stages of approval. We believe this strategy plays an important role in reversing the Company’s trends in loan production.”
Net interest income
Net interest income declined $525,000 or 3.1%, to $16.6 million for the quarter compared to $17.1 million a year ago. For the twelve-month period ending December 31, 2011, net interest income declined $2.3 million to $67.1 million. The Company’s average earning assets for the year declined $170.6 million from the prior year, primarily in loans, which declined $134.8 million to an average balance of $1.27 billion. The average balance of investment securities also fell $25.6 million to $305.1 million for the year. The net interest margin improved 22 basis points over the prior year to 4.22%, which partially offset the decline in net interest income due to fewer earning assets. For the three month period ended December 31, 2011, the net interest margin climbed to 4.25%, which compares favorably to the prior year three-month period margin of 4.00%. The improved margin for the three and twelve month periods is due primarily to lower cost on deposits.
Total deposits increased $19.8 million for the year to $1.42 billion after considering the $54.1 million of deposits sold in May as part of our Harrisonburg, VA sale of operations. Core deposits, defined as noninterest bearing demand accounts, savings, NOW and money market deposit accounts, increased 7.1%, or $67.9 million, during the year. Growth in core deposits would have been greater during the year had the Company not transferred $24.9 million of core deposits in its sale of the Harrisonburg operations. At December 31, 2011, core deposit accounts totaled 72% of the Company’s total deposits, or $1.025 billion, and had a weighted average interest rate of 0.40%, down 20 basis points from the prior year end. The Company continues to focus on growing profitable, low-cost core deposits. Time deposits declined $102.2 million for the year to $393.4 million at December 31, 2011. Brokered and wholesale deposits were $43.6 million at December 31, 2011. For the fourth quarter, the weighted average cost of interest bearing deposits was 0.63%.
Loans held for investment declined $17.0 million to $1.20 billion during the fourth quarter of 2011. For the year, loan balances have declined $60.5 million. New portfolio loan production totaled $65.4 million for the three-months and $219.3 million for the twelve-months ended December 31, 2011.
Investment securities increased $42.4 million to $337.8 million during the fourth quarter. The Company had a net unrealized gain in its investment portfolio at December 31, 2011 of $808,000. As of that date, the weighted average duration was 3.21 years and the weighted average yield was 4.23%.
The Company’s available liquidity was extensive during the fourth quarter due primarily to the Company’s strong core deposit mix, coupled with modest lending opportunities. Available borrowings, unencumbered investments and access to wholesale deposits exceeded $500 million at December 31, 2011. Brokered and wholesale deposits totaled 3.1% of deposits at December 31, 2011.
Shareholders’ equity declined $2.5 million for the year to $163.4 million, due primarily to a $4.8 million decrease in comprehensive income resulting from a fair market value actuarial change in the Company’s pension obligation as well as changes in the fair market value of the Company’s investment portfolio. The Company’s pension plan was frozen in 2007, so no new obligations are being formed under the plan. A precipitous drop in long term interest rates, however, changed actuarial estimates about the funding status of the plan. The change in the value of the funding status was reflected as a charge against the Company’s comprehensive income. In addition, during the fourth quarter of 2011, the Company made an adjustment to deferred tax assets and retained earnings to correct an immaterial misstatement of deferred tax assets arising from the merger in 2007. Prior period amounts have been restated accordingly. The correction increased deferred taxes and retained earnings by $2.7 million in all periods.
Excluding gains and losses on sales of securities and other real estate owned (“OREO”), noninterest income declined $339,000 to $4.3 million for the three months ending December 31, 2011, and declined $1.3 million for the year. Retail and mortgage revenue totaled $3.1 million for the quarter, but was a combined $598,000 lower than the prior year quarter. For the year, mortgage banking and retail banking revenue was lower by $2.4 million or approximately 20%. This revenue stream was negatively impacted by ongoing regulatory changes, changes in consumer behavior, and a lower level of mortgage production.
Losses on sales and writedowns of OREO declined by $418,000 for the quarter ended December 31, 2011 to $1.4 million from $1.8 million for the quarter ended December 31, 2010. For the year, OREO losses and writedowns totaled $5.2 million, compared to $5.5 million in 2010.
Security gains totaled $2.0 million for the twelve-month period ending December 31, 2011, a decline of $1.6 million from the prior year.
Noninterest expense declined $1.2 million, or 8%, to $13.5 million for the fourth quarter compared to $14.7 million for the prior year’s fourth quarter, and declined $1.4 million from the third quarter of 2011, which included non-recurring expense of $435,000, principally severance-related. The quarter ended December 31, 2011 benefitted from a reduction in the Company’s actuarial estimate of employee health care liability and other one-time items that netted to approximately $400,000. The lower noninterest expense in the December quarter was due in large part to lower personnel costs related to the efficiency study initiative conducted earlier this year. Excluding other real estate owned cost, the operating efficiency percentage improved to 61.80% for the December quarter from 66.11% for the same period a year ago. FDIC insurance premiums declined in the December quarter due to an improvement in the FDIC’s assessment rating for our Company.
Nonperforming loans declined 6.7% or $2.9 million during the quarter and 19.9% or $10.1 million for the year to $40.5 million at December 31, 2011. Since the peak level at June 30, 2009, nonperforming loans have declined 37% or $23.5 million. Nonperforming loans represent 3.38% of total loans held for investment. Including other real estate owned (OREO), which increased $4.1 million during the quarter, total nonperforming assets increased $1.2 million to $71.1 million, or 4.10% of total assets, at December 31, 2011. The duration of property held in OREO averaged 14 months at year end. During 2011, $11.6 million of property was sold out of OREO, the Company recorded $5.1 million in writedowns and $122,000 was realized as a net loss on sales. Troubled debt restructured loans totaled $14.9 million of the $40.5 million of nonperforming loans. Accruing restructured loans totaled $7.4 million and non-accruing restructured loans totaled $7.5 million. The Company evaluates all troubled debt restructured loans at the time of the restructure for impairment, which typically results in the asset being moved to non-accrual. The Company’s highest risk and most closely monitored non-performing assets are non-accruing loans excluding troubled debt restructures. These loans totaled $25.6 million at December 31, 2011, down $34.4 million, or 57%, since June 30, 2009. Impaired and potential problem loans (or total classified loans) continued to rise until the September quarter of 2010. Over the last five quarters, potential problem credits have declined 24.5%, or $41.6 million. In the fourth quarter of 2011, the classified loan balances declined 7%, or $8.4 million, from $136.9 million. The expected default rates and the anticipated loss given default experience remains around 4% of the potential problem portfolio.
The allowance for credit losses totaled $28.8 million at December 31, 2011, or 2.39% of loans held for investment, an increase of approximately $1.1 million from the previous quarter end September 30, 2011. The increase in reserves is due primarily to an increase in specific reserves. The Company’s allowance for loan loss consists of general reserves totaling 86% and specific reserves totaling 14%, compared to 93% general and 7% specific at September 30, 2011. The Company’s allowance for credit loss as a percentage of nonperforming loans (“the coverage percentage”) increased to 71.16% in the December 2011 quarter, compared to 63.9% at September 30, 2011 and 56.8% at December 31, 2010. The majority of estimated losses from the Company’s $40.5 million of non-performing loans have been previously recognized through charge-offs. Consequently, the Company’s allowance for loan loss is generally applicable to the 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 $139.3 million of loans and OREO, or 8.6% of our highest/peak level of loan balances.
The Company is materially below the FFIEC high CRE concentration guidelines in land acquisition, development and construction (the “AD&C portfolio”) loans as well as total commercial real estate loans. At December 31, 2011, the Company’s concentrations were 39% of tier 1 regulatory capital and 134% of total regulatory capital, respectively, which compares favorably to the published interagency regulatory guidance of 100% and 300%, respectively. The AD&C portfolio totaled $65.4 million at December 31, 2011 and includes just $30.9 million of speculative residential construction and residential acquisition and development loans. This portfolio is largely graded as impaired or potential problem loans.
Mr. Ridgill stated “Our financial results for 2011 and 2010 closely tracked our profit plan, both before and after credit related costs. This gives me great confidence in stating that our 2012 plan is conservative and achievable. We anticipate solid core earnings enhancement primarily from a continued decline in credit related costs and a lower base of operating expenses. While the margin will be under pressure in the coming year due to assets maturing and repricing, we anticipate higher earning assets from an increase in the investment portfolio and some positive momentum in loan growth. While the current strategy to progress organically is a priority; we believe it is also likely that other paths will be available to us in the coming year. The Company’s capital levels are strong and provide us with many options. We are excited by the opportunity of the coming year and look forward to providing you with timely progress reports.”
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 to 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 NewBridge 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’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 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 release.
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