INVESTOR RELATIONS

Press Release

National Commerce Corporation Announces 2018 Fourth Quarter and Fiscal Year End Earnings

Company Release - 1/22/2019 6:00 PM ET

BIRMINGHAM, Ala., Jan. 22, 2019 (GLOBE NEWSWIRE) -- National Commerce Corporation (Nasdaq: NCOM) (the “Company” or “NCC”), the parent company of National Bank of Commerce, today reported fourth quarter 2018 net income to common shareholders of $10.7 million, compared to $1.0 million for the fourth quarter of 2017. Diluted net earnings per share were $0.51 in the fourth quarter of 2018, compared to $0.59 in the third quarter of 2018 and $0.07 in the fourth quarter of 2017.  The 2017 results include a write-down of the Company’s deferred tax asset (“DTA”) due to the enactment of the Tax Cuts and Jobs Act of 2017, which increased income tax expense for the 2017 fourth quarter and full year by $6.2 million.  The DTA write-down reduced fourth quarter 2017 diluted net earnings per share by approximately $0.41.

For the year ended December 31, 2018, NCC earned $42.4 million, or $2.21 in diluted net earnings per share, compared to $20.1 million, or $1.41 per diluted share, for the year ended December 31, 2017.   The DTA write-down reduced 2017 diluted net earnings per share by approximately $0.44.

NCC’s 2018 fourth quarter and full year results include $2.4 million and $5.4 million, respectively, in after-tax merger- and conversion-related expenses, reducing diluted net earnings per share by approximately $0.11 and $0.28 for the 2018 fourth quarter and full year, respectively.  Additionally, the Company recorded additional incentive compensation expense in the fourth quarter totaling $3.8 million, or $0.13 per diluted share after tax, which included payments made to certain executive officers in December 2018 in lieu of equity incentive awards that would otherwise be granted in January 2019 in accordance with the Company’s annual equity grant schedule, which awards will not be granted due to the pending merger with CenterState Bank Corporation (“CenterState”).

“We are pleased to close out 2018 with a quarter of solid growth and profitability,” said Richard Murray, IV, Chairman and Chief Executive Officer.  “We are encouraged by the low double-digit growth rate and the consistency in the net interest margin.  We are also pleased to experience another quarter and year of low credit losses.  We are excited about our pending merger with CenterState and the ability to serve our customers with a broader product set and a larger balance sheet that will result from the merger.  Our team is excited about the opportunity, and we remain focused on doing our part to ensure a successful merger and integration.”

Several important measures from the 2018 fourth quarter and full year are as follows:

  • Net Interest Margin (taxable equivalent) of 4.74% for the fourth quarter of 2018 and 4.75% for the year ended December 31, 2018.  The fourth quarter 2018 margin increased 0.05%, compared to 4.69% reported for the third quarter of 2018, and increased 0.11%, compared to 4.63% reported for the fourth quarter of 2017.  For the year ended December 31, 2018, the margin increased by 0.31% compared to the year ended December 31, 2017.  Excluding the impact of accretion income, the 2018 fourth quarter margin was flat compared with the 2018 third quarter.  Loan yields and interest-earning asset yields during the fourth quarter of 2018 improved by 0.14% and 0.15%, respectively, from the third quarter of 2018.  These earning asset yield improvements were offset by an increase in interest-bearing deposit costs of 0.14% during the fourth quarter of 2018 compared to the third quarter of 2018.  Total deposit costs during the fourth quarter of 2018 (including noninterest-bearing deposit balances) increased 0.10% compared to the third quarter of 2018.  Fourth quarter 2018 total interest-bearing liability costs increased 0.15% compared to the third quarter of 2018. 
     
  • Return on Average Assets (“ROAA”) of 1.02% for the fourth quarter of 2018, compared to 0.15% for the fourth quarter of 2017.  For the year, ROAA was 1.19%, compared to 0.81% in 2017.  The 2017 ROAA figures were negatively impacted by the DTA write-down.
     
  • Return on Average Equity (“ROAE”) of 6.14% for the fourth quarter of 2018, compared to 0.99% for the fourth quarter of 2017.  For the year, ROAE was 7.23%, compared to 5.65% in 2017.  The 2017 ROAE figures were negatively impacted by the DTA write-down.
     
  • Return on Average Tangible Common Equity (“ROATCE”) of 10.06% for the fourth quarter of 2018 and 11.47% for the year ended December 31, 2018, compared to 1.41% for the fourth quarter of 2017 and 8.10% for the year ended December 31, 2017.  The 2017 ROATCE figures were negatively impacted by the DTA write-down.
     
  • Fourth quarter and full year 2018 loan growth (excluding mortgage loans held-for-sale) of $87.6 million and $1.18 billion, respectively.  The 2018 fourth quarter loan growth represents a 10.8% annualized growth rate.  Non-acquired loans grew $178.9 million during the fourth quarter of 2018 and $498.3 million for the year ended December 31, 2018.  The full year loan growth figures for 2018 include loans acquired in the Company’s acquisitions of FirstAtlantic Financial Holdings, Inc., Premier Community Bank of Florida and Landmark Bancshares, Inc.  
     
  • Increase in deposits of $100.6 million during the 2018 fourth quarter, representing a 12.0% annualized growth rate, and $1.15 billion for the year ended December 31, 2018.  The full year deposit growth figures for 2018 include deposits acquired in the Company’s acquisitions of FirstAtlantic Financial Holdings, Inc., Premier Community Bank of Florida and Landmark Bancshares, Inc.
     
  • During the fourth quarter of 2018, mortgage production totaled $109.7 million, compared to $121.0 million during the fourth quarter of 2017.  For the year ended December 31, 2018, mortgage production volume totaled $490.8 million, compared to $507.6 million during the year ended December 31, 2017.  The 2018 mortgage production was negatively impacted by rising rates.  For the 2018 fourth quarter, approximately $70 million of production was sold in the secondary market.  The mortgage division reported break-even profitability for the fourth quarter of 2018 and pre-tax profit of $360 thousand for the year ended December 31, 2018.
     
  • The factoring division reported a record quarter and year for revenues and profits. During the fourth quarter of 2018, purchased volume in the factoring division totaled $304.6 million, compared to $267.2 million during the fourth quarter of 2017.   For the year ended December 31, 2018, purchase volume totaled $1.21 billion, compared to the $1.03 billion for the year ended December 31, 2017. Factoring net charge-offs were $344 thousand for the year ended December 31, 2018 (less than 0.03% of purchase volume), and the division reported net recoveries of $321 thousand for the fourth quarter of 2018. 
     
  • The Company had a record quarter and full year in the merchant sponsorship business, with 2018 fourth quarter revenue of $835 thousand, bringing 2018 full year merchant sponsorship revenue to $3.0 million. 
     
  • The Company’s tax rate in the 2018 fourth quarter benefited from the exercise of options by employees, net of some non-deductible compensation, resulting in a net reduction in income tax expense of approximately $700 thousand.
     
  • Increase in non-acquired non-performing assets to $5.7 million, from $1.1 million at September 30, 2018.  The increase was almost entirely associated with one commercial borrower that filed Chapter 11 bankruptcy during the fourth quarter of 2018.  The loan is secured by real estate with an appraised value in excess of the loan balance.  Total nonperforming assets, including acquired nonperforming assets, were 0.37% of loans plus other real estate at December 31, 2018.
     
  • Annualized net charge-offs of 0.02% of average loans outstanding for the fourth quarter of 2018 and 0.05% for the year ended December 31, 2018.
     
  • Provision for loan losses of $1.5 million during the fourth quarter of 2018, the same amount recorded during the fourth quarter of 2017.  Provision for loan losses for the year ended December 31, 2018 totaled $4.7 million, compared to $3.9 million for the year ended December 31, 2017.
     
  • At December 31, 2018, the Company’s tier 1 leverage ratio was 10.85%, essentially flat compared to 10.89% at December 31, 2017.  At December 31, 2018, the Company’s common equity Tier 1 ratio was 13.10%, an increase of 0.56% from December 31, 2017.  At December 31, 2018, total risk-based capital was 14.81%, up 0.44% from December 31, 2017.  At December 31, 2018, the Company’s tangible book value per share was $20.63, an increase of $1.58 from $19.05 at December 31, 2017.  At December 31, 2018, the Company’s book value per share was $33.57.

A copy of this news release may be accessed by visiting www.nationalbankofcommerce.com, and then clicking on the “Investor Relations” link under the “Learn More” tab located on that webpage.  The Company will not host a live audio webcast conference this quarter.

Use of Non-GAAP Financial Measures

Some of the financial measures presented in this press release and included in the accompanying unaudited financial statements are not measures prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).  These non-GAAP financial measures include adjusted net earnings per diluted share, return on average assets (excluding merger/conversion-related expenses), return on average tangible common equity (excluding merger/conversion-related expenses), tangible common equity, average tangible common equity, return on average tangible common equity, tangible book value per share, efficiency ratio and operating efficiency ratio.  The Company’s management uses the non-GAAP financial measures set forth below in its analysis of the Company’s performance.

  • “Adjusted net earnings per diluted share” is defined as net income to common shareholders adjusted for the after-tax effect of merger/conversion-related expenses during the period divided by diluted shares outstanding.
     
  • “Return on average assets (excluding merger/conversion-related expenses)” is defined as net income to common shareholders adjusted for the after-tax effect of merger/conversion-related expenses during the period divided by average assets for the period.
     
  • “Return on average tangible common equity (excluding merger/conversion-related expenses)” is defined as net income to common shareholders adjusted for the after-tax effect of merger/conversion-related expenses during the period divided by average tangible common equity for the period.

The Company’s management believes that these measures provide useful information to management and investors because they eliminate the impact of merger/conversion-related expenses from each period to provide a meaningful comparison to other periods and other companies that might not have this category of expenses.  The Company’s management believes that it is appropriate to exclude merger/conversion-related expenses in its presentation because the costs vary based on factors specific to each acquisition and are not indicative of the costs of operating the Company’s core business.

  • “Tangible common equity” is defined as total shareholders’ equity less goodwill, other intangible assets and minority interest not included in intangible assets. 

  • “Average tangible common equity” is defined as the average of tangible common equity for the applicable period.

  • “Return on average tangible common equity,” or ROATCE, is defined as net income available to common shareholders divided by average tangible common equity.

  • “Tangible book value per share” is defined as tangible common equity divided by total common shares outstanding.  This measure is important to investors interested in changes from period to period in book value per share, exclusive of changes in intangible assets.

The Company’s management believes that these measures, each of which utilizes the concept of tangible common equity rather than total common equity, provide useful information to management and investors because they eliminate the impact of goodwill and other intangible assets created in an acquisition. These measures are commonly used by investors when assessing financial institutions.

  •  “Efficiency ratio” is defined as noninterest expense divided by operating revenue (which is equal to net interest income plus noninterest income), excluding one-time gains and losses on sales of securities. This measure is important to investors looking for a measure of efficiency in productivity based on the amount of revenue generated for each dollar spent.

  • “Operating efficiency ratio” is defined as noninterest expense divided by operating revenue, excluding one-time gains and losses on sales of securities and one-time gains and expenses related to merger and acquisition activities. This measure is important to investors looking for a measure of efficiency in productivity based on the amount of revenue generated for each dollar spent.             

The Company’s management believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company’s financial condition, results of operations and cash flows computed in accordance with GAAP; however, the Company acknowledges that these non-GAAP financial measures have a number of limitations.  As such, the Company cautions readers that these disclosures should not be viewed as a substitute for results determined in accordance with GAAP, and that these disclosures are not necessarily comparable to non-GAAP financial measures that other companies use.  These non-GAAP financial measures exclude various items detailed in the attached “Non-GAAP Reconciliation.”

About National Commerce Corporation

National Commerce Corporation (Nasdaq: NCOM), a Delaware corporation, is a financial holding company headquartered in Birmingham, Alabama.  Its wholly-owned subsidiary, National Bank of Commerce, provides a broad array of financial services for commercial and consumer customers through seven full-service banking offices in Alabama, twenty-four full-service banking offices in Florida and five full-service banking offices in the Atlanta, Georgia metro area.  National Bank of Commerce conducts business under a number of trade names unique to its local markets, including United Legacy Bank, Reunion Bank of Florida, Private Bank of Buckhead, Private Bank of Decatur, PrivatePlus Mortgage, Patriot Bank, FirstAtlantic Bank, Premier Community Bank of Florida and First Landmark Bank.

Additionally, National Bank of Commerce owns a majority stake in Corporate Billing, LLC, a transaction-based finance company headquartered in Decatur, Alabama that provides factoring, invoicing, collection and accounts receivable management services to transportation companies and automotive parts and service providers throughout the United States and parts of Canada.

National Commerce Corporation files periodic reports with the U.S. Securities and Exchange Commission (the “SEC”).  Copies of its filings may be obtained through the SEC’s website at www.sec.gov or at www.nationalbankofcommerce.com.  More information about National Commerce Corporation and National Bank of Commerce may be obtained at www.nationalbankofcommerce.com.

Forward-Looking Statements

Certain statements contained in this press release that are not statements of historical fact constitute forward-looking statements for which NCC claims the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in NCC’s future filings with the SEC, in press releases and in oral and written statements made by NCC or with NCC’s approval that are not statements of historical fact and that constitute forward-looking statements within the meaning of the Act.  Examples of forward-looking statements include, but are not limited to: (a) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (b) statements of NCC’s plans, objectives and expectations or those of its management or Board of Directors, including those relating to the pending merger with CenterState; (c) statements of future economic performance; and (d) statements of assumptions underlying such statements.  Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.  Forward-looking statements are subject to various risks and uncertainties, including those risks and uncertainties described under the heading “Risk Factors” in NCC’s Annual Report on Form 10-K for the year ended December 31, 2017, and described in any subsequent reports that NCC has filed with the SEC.  With respect to the pending merger with CenterState, these risks include, among others: (1) the risk that the cost savings and any revenue synergies from the merger may not be realized or take longer than anticipated to be realized; (2) disruption from the merger with customers, suppliers, employees or other business partners; (3) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (4) the risk of successful integration of NCC’s businesses into CenterState; (5) the failure to obtain required governmental approvals of the merger; (6) the failure to obtain the necessary stockholder approvals in connection with the merger; (7) the amount of the costs, fees, expenses and charges related to the merger; (8) reputational risk and the reaction of each company’s customers, suppliers, employees or other business partners to the merger; (9) the failure of the closing conditions in the merger agreement to be satisfied, or any unexpected delay in closing the merger; (10) the risk that the integration of NCC’s operations into the operations of CenterState will be materially delayed or will be more costly or difficult than expected; (11) the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; and (12) general competitive, economic, political and market conditions.  There are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in forward-looking statements, and these forward-looking statements should not be relied upon as predictions of future events.  NCC undertakes no obligation to update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. In that respect, NCC cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

Additional Information About the Merger with CenterState and Where to Find It

CenterState has filed a registration statement on Form S-4 with the SEC to register the shares of CenterState’s common stock that will be issued to NCC’s stockholders in connection with the proposed merger. The registration statement includes a joint proxy statement of CenterState and NCC and a prospectus of CenterState. A definitive joint proxy statement-prospectus will be sent to the stockholders of each of CenterState and NCC in connection with the proposed merger. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND DEFINITIVE JOINT PROXY STATEMENT-PROSPECTUS WHEN IT BECOMES AVAILABLE (AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT-PROSPECTUS) BECAUSE SUCH DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED MERGER. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC on its website at www.sec.gov.  Investors and security holders may also obtain free copies of the documents filed with the SEC by CenterState on its website at www.centerstatebanks.com and by NCC on its website at www.nationalbankofcommerce.com.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Before making any voting or investment decision, investors and security holders of CenterState and NCC are urged to read carefully the entire registration statement and joint proxy statement-prospectus when it becomes available, including any amendments thereto, because such documents will contain important information about the proposed transaction.  Free copies of these documents may be obtained as described above.

CenterState, NCC and certain of their directors and executive officers may be deemed participants in the solicitation of proxies from the stockholders of each of CenterState and NCC in connection with the proposed merger.  Information regarding the directors and executive officers of CenterState and NCC and other persons who may be deemed participants in the solicitation of the stockholders of CenterState or of NCC in connection with the proposed merger will be included in the joint proxy statement-prospectus for each of CenterState’s and NCC’s special meeting of stockholders, which will be filed by CenterState and NCC with the SEC.  Information about the directors and officers of CenterState and their ownership of CenterState common stock can also be found in CenterState’s definitive proxy statement in connection with its 2018 annual meeting of stockholders, as filed with the SEC on March 12, 2018, and other documents subsequently filed by CenterState with the SEC.  Information about the directors and officers of NCC and their ownership of NCC common stock can also be found in NCC’s definitive proxy statement in connection with its 2018 annual meeting of stockholders, as filed with the SEC on April 20, 2018, and other documents subsequently filed by NCC with the SEC. Additional information regarding the interests of such participants will be included in the joint proxy statement-prospectus and other relevant documents regarding the merger filed with the SEC when they become available.                             


 
 
NATIONAL COMMERCE CORPORATION
Unaudited Financial Highlights
(In thousands, except share and per share amounts and percentages or as otherwise noted)
           
  For the Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
   2018  2018  2018  2018  2017 
Earnings Summary          
Interest income $ 51,430 $ 46,195 $ 37,713 $ 36,320 $ 30,224 
Interest expense   7,533   6,174   4,310   3,420   2,824 
Net interest income   43,897   40,021   33,403   32,900   27,400 
Provision for loan losses   1,548   1,001   856   1,318   1,478 
Gain (loss) on sale of securities   -   -   2   191   (119)
Other noninterest income (1)   5,130   4,768   4,673   4,517   4,744 
Merger/conversion-related expenses (2)   2,810   897   542   2,396   1,172 
Additional incentive compensation expenses (3)   3,776   -   -   -   - 
Other noninterest expense (4)   26,799   26,199   22,077   21,579   17,838 
  Income before income taxes   14,094   16,692   14,603   12,315   11,537 
Income tax expense   2,672   4,040   3,303   2,776   3,890 
Deferred tax asset write-down   -   -   -   -   6,231 
  Total income tax expense   2,672   4,040   3,303   2,776   10,121 
  Net income before minority interest   11,422   12,652   11,300   9,539   1,416 
  Net income attributable to minority interest   721   676   616   456   413 
Net income to common shareholders $ 10,701 $ 11,976 $ 10,684 $ 9,083 $ 1,003 
           
Weighted average common and diluted shares outstanding         
  Basic   20,676,626   19,838,772   17,236,525   17,209,551   14,783,597 
  Diluted   21,169,085   20,360,770   17,642,926   17,612,298   15,173,984 
           
Net earnings per common share          
  Basic $ 0.52 $ 0.60 $ 0.62 $ 0.53 $ 0.07 
  Diluted $ 0.51 $ 0.59 $ 0.61 $ 0.52 $ 0.07 
           
Adjusted net earnings per diluted share (excluding          
  merger/conversion-related expenses) $ 0.62 $ 0.63 $ 0.63 $ 0.62 $ 0.12 
           
           


  December 31, September 30, June 30, March 31, December 31, 
Selected Performance Ratios  2018   2018  2018  2018  2017 
Return on average assets (ROAA) (5)   1.02   1.23%  1.36%  1.18%  0.15
ROAA (excluding merger/conversion-related expenses)   1.24    1.31   1.42   1.42   0.28 
Return on average equity (ROAE)   6.14    7.40   8.39   7.35   0.99 
Return on average tangible common equity (ROATCE)   10.06    12.09   12.73   11.27   1.41 
ROATCE (excluding merger/conversion-related expenses)   12.28    12.85   13.26   13.54   2.55 
Net interest margin - taxable equivalent   4.74    4.69   4.77   4.80   4.63 
Efficiency ratio   68.10    60.50   59.40   64.08   59.14 
Operating efficiency ratio (4)   62.36    58.49   57.98   57.67   55.49 
Noninterest income / average assets (annualized)   0.49    0.49   0.60   0.59   0.72 
Noninterest expense / average assets (annualized)   2.82    2.78   2.88   3.12   2.88 
Yield on loans   5.88    5.74   5.74   5.66   5.45 
Cost of total deposits   0.80   0.70%  0.60%  0.47%  0.43
            
            
  December 31, September 30, June 30, March 31, December 31, 
Factoring Metrics  2018   2018  2018  2018  2017 
Recourse purchased volume $ 129,388  $ 132,531 $ 127,680 $ 115,970 $ 108,628 
Non-recourse purchased volume   175,220    182,742   181,835   167,015   158,565 
Total purchased volume $ 304,608  $ 315,273 $ 309,515 $ 282,985 $ 267,193 
Average turn (days)   44.79    44.56   42.85   42.25   43.59 
Net (recoveries) charge-offs / total purchased volume   (0.11)%   0.03%  0.06%  0.14%  0.18
Average discount rate   1.53   1.64%  1.63%  1.64%  1.59
            
            
  December 31, September 30, June 30, March 31, December 31, 
Mortgage Metrics  2018   2018  2018  2018  2017 
Total production ($) $ 109,740  $ 116,540 $ 149,640 $ 114,850 $ 120,969 
 Refinance (%)   31.4   23.4%  17.0%  27.8%  22.1
 Purchases (%)   68.6   76.6%  83.0%  72.2%  77.9
            
  As of 
  December 31, September 30, June 30, March 31, December 31, 
Balance Sheet Highlights  2018   2018  2018  2018  2017 
Cash and cash equivalents $ 217,130  $ 200,291 $ 217,773 $ 132,825 $ 235,288 
Total investment securities   212,561    211,182   161,542   169,868   111,396 
Mortgage loans held-for-sale   15,031    15,533   24,455   21,077   29,191 
Acquired purchased credit-impaired loans   39,536    40,922   26,942   29,359   25,696 
Acquired non-purchased credit-impaired loans   1,198,058    1,262,636   714,359   783,556   538,276 
Nonacquired loans held for investment (6)   1,953,685    1,774,835   1,614,376   1,531,475   1,455,376 
CBI loans (factoring receivables)   126,686    151,985   141,455   136,194   118,710 
Total gross loans held for investment   3,317,965    3,230,378   2,497,132   2,480,584   2,138,058 
Allowance for loan losses   18,176    16,759   15,997   15,839   14,985 
Total intangibles   267,984    269,297   173,590   174,225   117,849 
Total assets   4,210,541    4,103,345   3,214,367   3,113,766   2,737,676 
Total deposits   3,432,289    3,331,682   2,643,713   2,551,517   2,285,831 
FHLB advances   2,000    2,000   7,000   7,000   7,000 
Securities sold under agreements to repurchase   18,851    18,340   -   -   - 
Subordinated debt   37,235    37,211   24,580   24,567   24,553 
Total liabilities   3,513,483    3,418,534   2,697,563   2,608,040   2,337,718 
Minority interest   7,655    7,611   7,551   7,391   7,348 
Common stock   208    206   172   172   148 
Total shareholders' equity   697,058    684,811   516,804   505,726   399,958 
Tangible common equity $ 428,353  $ 414,837 $ 342,597 $ 331,044 $ 281,695 
End of period common shares outstanding   20,762,084    20,649,948   17,246,659   17,229,043   14,788,436 
            
            
  As of and For the Three Months Ended 
  December 31, September 30, June 30, March 31, December 31, 
Asset Quality Analysis  2018   2018  2018  2018  2017 
Nonacquired            
Nonaccrual loans $ 4,807  $ 231 $ 294 $ 367 $ 82 
Other real estate and repossessed assets   75    340   340   -   - 
Loans past due 90 days or more and still accruing   818    484   408   723   677 
Total nonacquired nonperforming assets $ 5,700  $ 1,055 $ 1,042 $ 1,090 $ 759 
            
Acquired           
Nonaccrual loans $ 5,612  $ 4,050 $ 2,461 $ 2,412 $ 2,640 
Other real estate and repossessed assets   899    999   999   999   1,094 
Loans past due 90 days or more and still accruing   -    -   -   -   - 
Total acquired nonperforming assets $ 6,511  $ 5,049 $ 3,460 $ 3,411 $ 3,734 
            
Selected asset quality ratios           
Nonperforming assets / Assets   0.29   0.15%  0.14%  0.14%  0.16
Nonperforming assets / (Loans + OREO + repossessed assets)  0.37    0.19   0.18   0.18   0.21 
Net charge-offs (recoveries) to average loans (annualized)   0.02    0.03   0.11   0.08   0.14 
Allowance for loan losses to total loans   0.55    0.52   0.64   0.64   0.70 
Nonacquired nonperforming assets / (Nonacquired loans +          
  nonacquired OREO + nonacquired repossessed assets) (6)  0.29    0.06   0.06   0.07   0.05 
Allowance for loan losses / (Nonacquired nonaccrual loans +          
  nonacquired loans past due 90 days or more and still accruing)  323.13    2,343.92   2,278.77   1,453.12   1,974.31 
            

 

  As of
  December 31, September 30, June 30, March 31, December 31,
Additional Information - Allowance for Loan Losses 2018   2018  2018   2018  2017 
Allowance for loan losses excluding CBI loans (factoring receivables)  17,576    16,159   15,397    15,239   14,385 
Nonacquired loans held for investment (6)   1,953,685    1,774,835   1,614,376    1,531,475   1,455,376 
Allowance for loan losses allocated to CBI loans (factoring receivables)  600    600   600    600   600 
CBI loans (factoring receivables)   126,686    151,985   141,455    136,194   118,710 
           
  For the Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
Taxable Equivalent Yields/Rates  2018   2018  2018   2018  2017 
Interest income:          
  Loans   5.88   5.74%  5.74   5.66%  5.45
  Mortgage loans held-for-sale   4.68    4.92   3.71    4.85   2.96 
  Interest on securities:          
  Taxable   3.45    3.10   3.14    3.11   3.09 
  Non-taxable   4.07    4.01   4.23    4.06   4.81 
Cash balances in other banks   2.27    2.13   1.80    1.55   1.37 
Funds sold   -    -   -    1.38   - 
Total interest-earning assets   5.56    5.41   5.38    5.29   5.10 
           
Interest expense:          
  Interest on deposits   1.11    0.97   0.84    0.67   0.62 
  Interest on FHLB advances   4.17    2.98   4.13    4.11   4.02 
  Interest on securities sold under agreements to repurchase  1.48    1.07   -    -   - 
  Interest on subordinated debt   6.50    6.47   6.30    6.41   6.27 
  Total interest-bearing liabilities   1.20    1.05   0.93    0.76   0.73 
  Net interest spread   4.36    4.36   4.45    4.53   4.37 
  Net interest margin   4.74   4.69%  4.77   4.80%  4.63
           
  As of
  December 31, September 30, June 30, March 31, December 31,
   2018   2018  2018   2018  2017 
Shareholders' Equity and Capital Ratios          
Tier 1 leverage ratio   10.85   11.40%  11.24   10.98%  10.89
Common equity tier 1 capital ratio   13.10    13.03   13.43    13.03   12.54 
Tier 1 risk-based capital ratio   13.10    13.03   13.43    13.03   12.54 
Total risk-based capital ratio   14.81    14.74   15.06    14.66   14.37 
Equity / Assets   16.56    16.69   16.08    16.24   14.61 
Tangible common equity to tangible assets   10.86   10.82%  11.27   11.26%  10.75
Book value per share $ 33.57  $ 33.16 $ 29.97  $ 29.35 $ 27.05 
Tangible book value per share $ 20.63  $ 20.09 $ 19.86  $ 19.21 $ 19.05 
           
  For the Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
   2018   2018  2018   2018  2017 
Detail of Noninterest Income          
Service charges and fees on deposit accounts $ 1,165  $ 1,166 $ 1,029  $ 1,012 $ 733 
Mortgage origination and fee income   1,882    1,825   2,262    1,895   2,450 
Merchant sponsorship revenue   835    749   675    720   592 
Income from bank-owned life insurance   340    323   276    286   210 
Wealth management fees   27    16   15    15   11 
(Loss) gain on sale of other real estate   (83)   -   (32)   171   (66)
Gain (loss) on sale of investments   -    -   2    191   (119)
Other noninterest income   964    689   448    418   814 
  Total noninterest income $ 5,130  $ 4,768 $ 4,675  $ 4,708 $ 4,625 
           
  For the Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
   2018   2018  2018   2018  2017 
Detail of Noninterest Expense          
Salaries and employee benefits $ 18,872  $ 14,336 $ 12,498  $ 12,460 $ 10,016 
Commission-based compensation   1,753    1,876   1,825    1,501   1,700 
Occupancy and equipment, net   2,536    2,439   2,025    1,994   1,649 
Data processing expenses   2,520    1,820   1,369    3,356   1,437 
Advertising and marketing expenses   340    296   361    268   349 
Legal fees   1,001    384   496    160   219 
FDIC insurance assessments   265    267   226    281   145 
Property and casualty insurance premiums   217    232   251    224   253 
Accounting and audit expenses   328    388   332    335   209 
Consulting and other professional expenses   1,450    1,347   568    538   888 
Telecommunications expenses   350    295   227    229   217 
ORE, Repo asset and other collection expenses   80    61   71    69   75 
Core deposit intangible amortization   1,466    1,306   738    739   393 
Other noninterest expense   2,207    2,049   1,632    1,821   1,460 
  Total noninterest expense $ 33,385  $ 27,096 $ 22,619  $ 23,975 $ 19,010 
  As of
  December 31, September 30, June 30, March 31, December 31,
Non-GAAP Reconciliation  2018   2018  2018   2018  2017 
Total shareholders' equity $ 697,058  $ 684,811 $ 516,804  $ 505,726 $ 399,958 
Less: intangible assets   267,984    269,297   173,590    174,225   117,849 
Less: minority interest not included in intangible assets   721    677   617    457   414 
Tangible common equity $ 428,353  $ 414,837 $ 342,597  $ 331,044 $ 281,695 
Common shares outstanding at year or period end   20,762,084    20,649,948   17,246,659    17,229,043   14,788,436 
Tangible book value per share $ 20.63  $ 20.09 $ 19.86  $ 19.21 $ 19.05 
Total assets at end of period $ 4,210,541  $ 4,103,345 $ 3,214,367  $ 3,113,766 $ 2,737,676 
Less: intangible assets   267,984    269,297   173,590    174,225   117,849 
Adjusted total assets at end of period $ 3,942,557  $ 3,834,048 $ 3,040,777  $ 2,939,541 $ 2,619,827 
Tangible common equity to tangible assets   10.86   10.82%  11.27   11.26%  10.75
           
  For the Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
   2018   2018  2018   2018  2017 
Non-GAAP Reconciliation          
Net income to common shareholders $ 10,701  $ 11,976 $ 10,684  $ 9,083 $ 1,003 
Plus: merger/conversion-related expenses (net of tax)   2,353    752   445    1,826   815 
Adjusted net income to common shareholders $ 13,054  $ 12,728 $ 11,129  $ 10,909 $ 1,818 
Net earnings per common share $ 0.51  $ 0.59 $ 0.61  $ 0.52 $ 0.07 
Effect to adjust for merger/conversion-related  expenses          
  (net of tax)   0.11    0.04   0.02    0.10   0.05 
Adjusted net earnings per diluted share $ 0.62  $ 0.63 $ 0.63  $ 0.62 $ 0.12 
Total average shareholders' equity $ 690,986  $ 642,367 $ 510,958  $ 500,901 $ 402,317 
Less: average intangible assets   268,619    248,900   173,953    173,766   119,415 
Less: average minority interest not included          
  in intangible assets   465    435   366    326   357 
Average tangible common equity $ 421,902  $ 393,032 $ 336,639  $ 326,809 $ 282,545 
Net income to common shareholders   10,701    11,976   10,684    9,083   1,003 
Return on average tangible common equity (ROATCE)   10.06   12.09%  12.73   11.27%  1.41
Return on average tangible common equity   10.06   12.09%  12.73   11.27%  1.41
Effect of merger/conversion-related expenses (net of tax)   2.22    0.76   0.53    2.27   1.14 
ROATCE (excluding merger/conversion-related expenses)   12.28   12.85%  13.26   13.54%  2.55
Return on average assets   1.02   1.23%  1.36   1.18%  0.15 
Effect of merger/conversion-related expenses (net of tax)   0.22    0.08   0.06    0.24   0.12 
ROAA (excluding merger/conversion related-expenses)   1.24   1.31%  1.42   1.42%  0.28
Efficiency ratio:          
Net interest income $ 43,897  $ 40,021 $ 33,403  $ 32,900 $ 27,400 
Total noninterest income   5,130    4,768   4,675    4,708   4,625 
Less:  Gain (loss) on sale of securities   -    -   2    191   (119)
Operating revenue $ 49,027  $ 44,789 $ 38,076  $ 37,417 $ 32,144 
Expenses:          
Total noninterest expenses $ 33,385  $ 27,096 $ 22,619  $ 23,975 $ 19,010 
Efficiency ratio   68.10   60.50%  59.40   64.08%  59.14
Operating efficiency ratio:          
Net interest income $ 43,897  $ 40,021 $ 33,403  $ 32,900 $ 27,400 
Total noninterest income   5,130    4,768   4,675    4,708   4,625 
Less:  Gain (loss) on sale of securities   -    -   2    191   (119)
Operating revenue $ 49,027  $ 44,789 $ 38,076  $ 37,417 $ 32,144 
Expenses:          
Total noninterest expenses $ 33,385  $ 27,096 $ 22,619  $ 23,975 $ 19,010 
Less: merger/conversion-related expenses   2,810    897   542    2,396   1,172 
Adjusted noninterest expenses $ 30,575  $ 26,199 $ 22,077  $ 21,579 $ 17,838 
Operating efficiency ratio   62.36   58.49%  57.98   57.67%  55.49
           
(1) Excludes securities gains          
(2) After-tax impact of merger/conversion-related expenses of $2,353, $752, $445, $1,826 and $815, respectively, for the periods presented  
(3) After-tax impact of additional compensation expenses of $2,823 shown in three months ended December 2018     
(4) Excludes merger/conversion-related expenses          
(5) Net income to common shareholders / average assets          
(6) Excludes CBI loans (factoring receivables)          


NATIONAL COMMERCE CORPORATION 
Unaudited Consolidated Balance Sheets 
(In thousands, except share and per share data) 
    
Assets 
 December 31, 2018December 31, 2017 
 Cash and due from banks $  50,628 $  36,246 
 Interest-bearing deposits with banks    166,502    199,042 
  Cash and cash equivalents    217,130    235,288 
 Investment securities held-to-maturity (fair value of $24,821 and $25,932 at December 31, 2018    
  and December 31, 2017, respectively)    25,045    25,562 
 Investment securities available-for-sale    187,516    85,834 
 Other investments    16,946    11,350 
 Mortgage loans held-for-sale    15,031    29,191 
 Loans, net of unearned income    3,317,965    2,138,058 
 Less: allowance for loan losses    18,176    14,985 
  Loans, net    3,299,789    2,123,073 
 Premises and equipment, net    86,658    52,455 
 Accrued interest receivable    10,348    6,157 
 Bank-owned life insurance    55,114    31,584 
 Other real estate    974    1,094 
 Deferred tax assets, net    17,405    12,041 
 Goodwill    249,612    113,394 
 Core deposit intangible, net    18,372    4,455 
 Other assets    10,601    6,198 
  Total assets $  4,210,541 $  2,737,676 
    
 Liabilities and Shareholders’ Equity  
 Deposits:    
  Noninterest-bearing demand $  929,820 $  697,144 
  Interest-bearing demand    692,725    362,266 
  Savings and money market    1,315,337    951,846 
  Time    494,407    274,575 
  Total deposits    3,432,289    2,285,831 
 Federal Home Loan Bank advances    2,000    7,000 
 Securities sold under agreements to repurchase    18,851    - 
 Subordinated debt    37,235    24,553 
 Accrued interest payable    1,437    900 
 Other liabilities    21,671    19,434 
  Total liabilities    3,513,483    2,337,718 
    
 Shareholders’ equity:    
  Preferred stock, 250,000 shares authorized, no shares issued or outstanding    -    - 
  Common stock, $0.01 par value, 30,000,000 shares authorized, 20,762,084 and 14,788,436    
  shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively    208    148 
  Additional paid-in capital    604,965    347,999 
  Retained earnings    86,433    43,989 
  Accumulated other comprehensive (loss) income    (2,203)   474 
  Total shareholders' equity attributable to National Commerce Corporation    689,403    392,610 
  Noncontrolling interest    7,655    7,348 
  Total shareholders' equity    697,058    399,958 
  Total liabilities and shareholders' equity $  4,210,541 $  2,737,676 
    

 

NATIONAL COMMERCE CORPORATION 
Unaudited Consolidated Statements of Earnings 
(In thousands, except share and per share data) 
       
 For the Three Months Ended For the Twelve Months Ended 
 December 31, December 31, 
  2018  2017   2018 2017  
Interest and dividend income:      
  Interest and fees on loans$  48,505 $  28,834  $  162,332$  104,194  
  Interest and dividends on taxable investment securities   1,776    756     5,654   2,627  
  Interest on non-taxable investment securities   181    191     751   783  
  Interest on interest-bearing deposits and federal funds sold   968    443     2,921   2,187  
  Total interest income   51,430    30,224     171,658   109,791  
Interest expense:      
  Interest on deposits   6,831    2,365     19,205   8,530  
  Interest on FHLB advances   21    71     190   283  
  Interest on securities sold under agreements to repurchase   71    -     121   1  
  Interest on subordinated debt   610    388     1,921   1,553  
  Total interest expense   7,533    2,824     21,437   10,367  
  Net interest income   43,897    27,400     150,221   99,424  
Provision for loan losses   1,548    1,478     4,723   3,894  
  Net interest income after provision for loan losses   42,349    25,922     145,498   95,530  
Other income:      
  Service charges and fees on deposit accounts   1,165    733     4,372   2,711  
  Mortgage origination and fee income   1,882    2,450     7,864   11,529  
  Merchant sponsorship revenue   835    592     2,979   2,560  
  Income from bank-owned life insurance   340    210     1,225   855  
  Wealth management fees   27    11     73   47  
  Gain (loss) on other real estate   (83)   (66)    56   44  
  Gain on sale of investment securities available-for-sale   -    (119)    193   (91) 
  Other   964    814     2,519   2,056  
  Total other income   5,130    4,625     19,281   19,711  
Other expense:      
  Salaries and employee benefits   18,872    10,016     58,166   39,556  
  Commission-based compensation   1,753    1,700     6,955   6,855  
  Occupancy and equipment, net   2,536    1,649     8,994   6,209  
  Core deposit intangible amortization   1,466    393     4,249   1,455  
  Other operating expense   8,758    5,252     28,711   19,120  
  Total other expense   33,385    19,010     107,075   73,195  
  Earnings before income taxes   14,094    11,537     57,704   42,046  
Income tax expense   2,672    10,121     12,791   20,071  
  Net earnings    11,422    1,416     44,913   21,975  
  Less: Net earnings attributable to noncontrolling interest   721    413     2,469   1,907  
  Net earnings attributable to National Commerce Corporation$  10,701 $  1,003  $  42,444$  20,068  
       
Weighted average common and diluted shares outstanding      
  Basic   20,676,626    14,783,597     18,753,066   13,800,595  
  Diluted   21,169,085    15,173,984     19,230,190   14,193,433  
       
Basic earnings per common share$  0.52 $  0.07  $  2.26$  1.45  
Diluted earnings per common share$  0.51 $  0.07  $  2.21$  1.41  

 

NATIONAL COMMERCE CORPORATION 
Average Balance Sheets and Net Interest Analysis 
  
                 
 For the Three Months Ended 
(Dollars in thousands)December 31, 2018September 30, 2018June 30, 2018March 31, 2018December 31, 2017 
Interest-earning assetsAverage BalanceInterest Income/ ExpenseAverage Yield/ RateAverage BalanceInterest Income/ ExpenseAverage Yield/ RateAverage BalanceInterest Income/ ExpenseAverage Yield/ RateAverage BalanceInterest Income/ ExpenseAverage Yield/ RateAverage BalanceInterest Income/ ExpenseAverage Yield/ Rate 
Loans$  3,263,797$  48,3325.88%$  3,002,640$  43,4595.74%$  2,480,578$  35,5015.74%$  2,451,352$  34,2205.66%$  2,091,443$  28,7045.45% 
Mortgage loans held-for-sale   14,909   176 4.68     18,935   235 4.92     23,247   215 3.71     17,402