WILMINGTON, N.C., Nov. 1, 2006 (PRIMEZONE) -- Cape Fear Bank Corporation (Nasdaq:CAPE) reported third quarter 2006 net income of $533,000 compared with $422,000 for the third quarter of 2005, an increase of 26.3 percent. Diluted earnings per share were $0.14 compared with $0.11 for the prior-year third quarter, an increase of 27.3 percent. Performance reflects solid loan growth and excellent asset quality, partially offset by net interest margin pressure and expenses related to branch expansion.
For the first nine months of 2006, the Company reported net income of $1.6 million, compared with $1.0 million for the same period in 2005, an increase of $563,000, or 53.8 percent. Diluted earnings per share were $0.43 for the 2006 year-to-date period compared with $0.29 for the prior-year period, an increase of 48.3 percent.
Cameron Coburn, Chairman, President and CEO, commented, "This has been an eventful time for us at Cape Fear Bank. Our new name reflects our ongoing expansion in the Cape Fear region. With five full-service banking offices spanning three counties and over $400 million in total assets, our community bank has been gaining in regional stature. We are now the fifth-ranked bank in the Greater Wilmington MSA, up from number seven last year, with a 5.85 percent share of the deposits within that market."
Total revenue, consisting of net interest income and non-interest income, was $3.6 million for the third quarter, an increase of $885,000, or 32.4 percent over the $2.7 million reported for the prior-year period. Net interest income for the current quarter increased 35.7 percent over 2005 to $3.4 million, reflecting 44.0 percent growth in average earning assets, partially offset by a 21 basis point decline in the net interest margin to 3.33 percent. The net interest margin declined nine basis points from the 3.42 percent reported for the second quarter of 2006.
Third quarter 2006 non-interest income of $267,000 compares with $264,000 for the year-ago period and $337,000 for the second quarter of 2006, which included approximately $91,000 of recovered expenses related to a loan charged off in 2003. Excluding this one-time benefit, third quarter non-interest income increased $21,000, or 8.5 percent from the prior quarter, as newer branches contributed to fee-based income.
Non-interest expense increased $683,000, or 39.4 percent, from $1.7 million for the third quarter of 2005 to $2.4 million this quarter. Expansion-related expenses accounted for the majority of this increase. Salaries and benefits increased to $1.2 million, up $295,000 or 31.6 percent from a year ago, reflecting the addition of 32 full-time equivalent employees, up 59.3 percent year-over-year. In addition, newly-added costs associated with the expensing of stock options were $89,000 year-to-date, and $30,000 for the quarter. Occupancy and equipment expense grew $161,000, or 62.9 percent. Other expenses were $773,000, up $227,000, or 41.6 percent, from last year's third quarter. Due primarily to the effects of our expansion initiatives, the efficiency ratio deteriorated to 66.8 percent from 63.5 percent for the 2005 period.
Mr. Coburn commented, "Asset quality continues to be exceptionally sound, with minimal charge-offs and a consistently low level of non-performing assets. Although we expect our asset quality to remain strong, we have expanded our loan loss provision in anticipation of a possible slowdown in the economy and the potential impact on our loan portfolio." For the third quarter of 2006, net recoveries were $1,000, compared with net recoveries of $75,000 for the June 30, 2006 quarter, and net charge-offs of $1,000, for the year-ago quarter. Non-performing assets were $945,000, or 0.22 percent of total assets at September 30, 2006 compared with $920,000, or 0.23 percent of total assets at June 30, 2006, and $764,000, or 0.25 percent, twelve months ago. Loan loss reserves at September 30, 2006 were $4.3 million, or 1.31 percent of total loans compared with 1.23 percent of total loans at June 30, 2006 and 1.28 percent a year ago.
Total assets were $423.2 million at September 30, 2006, an increase of $111.3 million, or 35.7 percent, from twelve months ago. Year-over-year, loans outstanding grew $82.4 million, or 33.4 percent, from $246.8 million a year ago, to $329.2 million for the current quarter. Loans increased $14.1 million, or 4.5 percent, from the previous quarter; construction loans accounted for the majority, $13.7 million, of this growth.
Loan growth over the past twelve months was funded primarily by a $102.8 million or 39.8 percent increase in deposits, to $360.8 million. Compared with the previous quarter, deposits grew $31.6 million, or 9.6 percent. Quarter-over-quarter, core deposits, including retail CDs, increased 4.6 percent, while lower-cost accounts (transaction accounts plus money market and savings) increased by $6.9 million or 8.4 percent and now constitute 24.6 percent of the deposit mix compared to 22.5 percent at December 31, 2005. According to Mr. Coburn, "We are making progress building core deposits as our newer branches mature. We are focused on building profitable relationships by providing our customers with a combination of loan and deposit products along with quality service."
Shareholders' equity at September 30, 2006 was $26.4 million, a twelve-month increase of $2.2 million, or 9.1 percent. The Company's total risk-based capital ratio at quarter-end was 11.77 percent. Total shares outstanding at September 30, 2006 were 3,586,780. Mr. Coburn concluded, "We continue to benefit from a committed customer base and a solid regional economy. We are pleased with our progress and look forward to fulfilling the banking needs of the Cape Fear region."
About the Company
Cape Fear Bank (the "Bank"), formerly known as Bank of Wilmington, was established in 1998 as a community bank, developed and managed by local residents of the communities it serves, who are committed to improving the quality of life and the quality of the local banking experience. Cape Fear Bank Corporation, the parent company, was formed in June 2005. The Bank serves the southeastern North Carolina market area with five full-service banking offices, including two in New Hanover County, two in Pender County, and one in Brunswick County. The Company's stock is listed on the Nasdaq Capital Market under the symbol CAPE.
Forward-Looking Statements
Statements in this news release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, expectations or beliefs about future events or results, and other statements that are not descriptions of historical facts, may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in reports we file with the U. S. Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "forecasts," "potential" or "continue," or similar terms or the negative of these terms, or other statements concerning opinions or judgments of our management about future events. Factors that could influence the accuracy of those forward-looking statements include, but are not limited to, the financial success or changing strategies of our customers, customer acceptance of our services, products and fee structure, the competitive nature of the financial services industry and our ability to compete effectively against other financial institutions in our banking market, actions of government regulators, our ability to manage our growth and to underwrite increasing volumes of loans, the impact on our profits of increased staffing and expenses resulting from expansion; the level of market interest rates and our ability to manage our interest rate risk, weather and similar conditions, particularly the effect of hurricanes on our banking and operations facilities and on our customers and the coastal communities in which we do business, changes in general economic conditions and the real estate market in our banking market (particularly changes that affect our loan portfolio, the abilities of our borrowers to repay their loans, and the values of loan collateral), and other developments or changes in our business that we do not expect. Although our management believes that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.
CAPE FEAR BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
---------------------------------------------------------------------
Quarterly
---------------------------------------------------
2006 2006 2006 2005 2005
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
------- ------- ------- ------- -------
(Dollars in thousands except per share data)
EARNINGS
Net interest
income $ 3,351 3,170 3,087 2,797 2,469
Provision for
loan and lease
losses $ 436 391 293 388 355
NonInterest
income $ 267 337 240 292 264
NonInterest
expense $ 2,418 2,305 2,099 1,794 1,735
Net income $ 533 497 579 637 422
Basic earnings
per share(a) $ 0.15 0.14 0.16 0.18 0.12
Diluted earnings
per share(a) $ 0.14 0.13 0.16 0.17 0.11
Average shares
out-
standing(a) 3,586,743 3,586,518 3,586,518 3,586,518 3,586,518
Average diluted
shares out-
standing(a) 3,725,888 3,712,586 3,680,149 3,678,552 3,684,443
Actual common
shares out-
standing(a) 3,586,780 3,586,518 3,586,518 3,586,518 3,586,518
PERFORMANCE RATIOS
Return on
average assets 0.52% 0.52% 0.63% 0.77% 0.59%
Return on
average common
equity 8.28% 7.99% 9.17% 10.34% 6.92%
Net interest
margin (fully
tax-equivalent) 3.33% 3.42% 3.49% 3.47% 3.54%
Efficiency ratio 66.83% 65.73% 63.09% 58.08% 63.48%
Full-time
equivalent
employees 86 74 73 62 54
CAPITAL
Equity to assets 6.25% 6.32% 6.58% 7.18% 7.78%
Regulatory
leverage ratio 8.80% 9.14% 9.33% 10.69% 8.59%
Tier 1 capital
ratio 10.24% 10.68% 11.23% 12.09% 9.43%
Total risk-based
capital ratio 11.77% 12.23% 12.80% 13.29% 10.65%
Book value
per share(a) $ 7.37 7.00 7.00 6.87 6.76
ASSET QUALITY
Gross loan
charge-offs $ 3 0 402 53 45
Net loan
charge-offs
(recoveries) $ (1) (75) 401 42 1
Net loan
charge-offs to
average loans 0.00% -0.10% 0.56% 0.06% 0.00%
Allowance for
loan losses $ 4,305 3,868 3,402 3,510 3,165
Allowance for
losses to total
loans 1.31% 1.23% 1.17% 1.26% 1.28%
Nonperforming
loans $ 329 920 948 1,174 751
Other real
estate and
repossessed
assets $ 616 0 0 0 13
Nonperforming
assets to total
assets 0.22% 0.23% 0.25% 0.34% 0.25%
END OF PERIOD
BALANCES
Loans $ 329,163 315,113 290,524 278,386 246,757
Total earning
assets (before
allowance) $ 410,667 386,167 371,661 334,053 303,134
Total assets $ 423,151 397,321 381,777 343,327 311,813
Deposits $ 360,846 329,248 322,634 284,134 258,084
Shareholders'
equity $ 26,443 25,097 25,110 24,635 24,245
AVERAGE BALANCES
Loans $ 325,044 302,759 285,654 261,652 230,140
Total earning
assets (before
allowance) $ 398,712 371,984 358,991 320,139 276,848
Total assets $ 407,156 383,697 368,403 329,152 285,444
Deposits $ 343,788 318,983 308,702 269,824 238,439
Shareholders'
equity $ 25,737 24,894 25,270 24,642 24,383
------------------------
Year to Date
------------------------
2006 2005
---------- ---------
EARNINGS
Net interest income $ 9,606 6,502
Provision for loan and lease losses $ 1,120 1,112
NonInterest income $ 846 758
NonInterest expense $ 6,822 4,587
Net income $ 1,609 1,046
Basic earnings per share(a) $ 0.45 0.29
Diluted earnings per share(a) $ 0.43 0.29
Average shares outstanding(a) 3,586,594 3,586,190
Average diluted shares outstanding(a) 3,706,209 3,669,306
Actual common shares outstanding(a) 3,586,780 3,586,518
PERFORMANCE RATIOS
Return on average assets 0.83% 0.55%
Return on average common equity 12.72% 5.81%
Net interest margin (fully tax-equivalent) 3.41% 3.57%
Efficiency ratio 65.27% 63.18%
Full-time equivalent employees 86 54
CAPITAL
Equity to assets 6.25% 7.78%
Regulatory leverage ratio 8.80% 8.59%
Tier 1 capital ratio 10.24% 9.43%
Total risk-based capital ratio 11.77% 10.65%
Book value per share(a) $ 7.37 6.76
ASSET QUALITY
Gross loan charge-offs $ 405 131
Net loan charge-offs (recoveries) $ 325 53
Net loan charge-offs to average loans 0.21% 0.03%
Allowance for loan losses $ 4,305 3,165
Allowance for losses to total loans 1.31% 1.28%
Nonperforming loans $ 329 751
Other real estate and repossessed assets $ 616 13
Nonperforming assets to total assets 0.22% 0.25%
END OF PERIOD BALANCES
Loans $ 329,163 246,757
Total earning assets (before allowance) $ 410,667 303,134
Total assets $ 423,151 311,813
Deposits $ 360,846 258,084
Shareholders' equity $ 26,443 24,245
AVERAGE BALANCES
Loans $ 304,630 202,760
Total earning assets (before allowance) $ 376,708 243,302
Total assets $ 386,561 251,748
Deposits $ 323,953 212,332
Shareholders' equity $ 25,302 24,007
(a) Restated for 5% stock dividend for shareholders of record
6/22/06, paid out effective 6/30/06
CAPE FEAR BANK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
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Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2006 2005 2006 2005
--------- --------- --------- ---------
(In thousands, except share and per share data)
INTEREST INCOME
Loans $ 6,647 $ 3,985 $ 18,032 $ 9,947
Investment securities
available for sale 733 376 2,017 961
Federal funds sold and
interest-earning deposits 97 57 350 141
--------- --------- --------- ---------
TOTAL INTEREST INCOME 7,477 4,418 20,399 11,049
--------- --------- --------- ---------
INTEREST EXPENSE
Money market, NOW and
savings deposits 466 177 1,144 393
Time deposits 3,177 1,553 8,285 3,755
Short-term borrowings 46 45 103 84
Long-term borrowings 437 174 1,261 315
--------- --------- --------- ---------
TOTAL INTEREST EXPENSE 4,126 1,949 10,793 4,547
--------- --------- --------- ---------
NET INTEREST INCOME 3,351 2,469 9,606 6,502
PROVISION FOR LOAN LOSSES 436 355 1,120 1,112
--------- --------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,915 2,114 8,486 5,390
--------- --------- --------- ---------
NON-INTEREST INCOME 267 264 846 758
--------- --------- --------- ---------
NON INTEREST EXPENSE
Salaries and employee
benefits 1,228 933 3,511 2,484
Occupancy and equipment 417 256 1,118 695
Other 773 546 2,193 1,408
--------- --------- --------- ---------
TOTAL NON-INTEREST
EXPENSE 2,418 1,735 6,822 4,587
--------- --------- --------- ---------
INCOME BEFORE
INCOME TAXES 764 643 2,510 1,561
INCOME TAXES 231 221 901 515
--------- --------- --------- ---------
NET INCOME $ 533 $ 422 $ 1,609 $ 1,046
========= ========= ========= =========
NET INCOME PER
COMMON SHARE(a)
Basic $ 0.15 $ 0.12 $ 0.45 $ 0.29
========= ========= ========= =========
Diluted $ 0.14 $ 0.11 $ 0.43 $ 0.29
========= ========= ========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING(a)
Basic 3,586,743 3,586,518 3,586,594 3,586,190
Effect of dilutive
stock options 139,145 97,925 119,615 83,116
--------- --------- --------- ---------
Diluted 3,725,888 3,684,443 3,706,209 3,669,306
========= ========= ========= =========
(a) All per share and outstanding share data has been restated for
the 5% stock dividend distributed 6/30/06
CAPE FEAR BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------
September 30, December 31,
2006 2005(a)
(Unaudited)
-------- --------
(In thousands, except
ASSETS share data)
Cash and due from banks $ 3,330 $ 1,854
Interest earning deposits in other banks 16,159 5,419
Investment securities available for sale,
at fair value 63,326 48,655
Time deposits in other banks 298 199
Loans 329,163 278,386
Allowance for loan losses (4,305) (3,510)
-------- --------
NET LOANS 324,858 274,876
Accrued interest receivable 2,158 1,645
Premises and equipment, net 2,790 1,845
Stock in Federal Home Loan Bank
of Atlanta, at cost 1,721 1,394
Foreclosed real estate and repossessions 616 --
Bank owned life insurance 5,440 5,296
Other assets 2,455 2,144
-------- --------
TOTAL ASSETS $423,151 $343,327
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand $ 34,791 $ 26,025
Savings 7,972 2,594
Money market and NOW 46,055 35,339
Time 272,028 220,176
-------- --------
TOTAL DEPOSITS 360,846 284,134
Long-term borrowings 33,310 32,310
Accrued interest payable 834 457
Accrued expenses and other liabilities 1,718 1,791
-------- --------
TOTAL LIABILITIES 396,708 318,692
Shareholders' Equity
Common stock, $3.50 par value,
12,500,000 shares authorized;
3,586,780 and 3,416,068 shares issued
and outstanding at September 30, 2006
and December 31, 2005, respectively 12,554 11,956
Additional paid-in capital 12,710 11,052
Accumulated retained earnings 1,592 2,153
Accumulated other comprehensive loss (413) (526)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 26,443 24,635
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $423,151 $343,327
======== ========
(a) Derived from audited financial statements