WILMINGTON, N.C., Feb. 7, 2007 (PRIME NEWSWIRE) -- Cape Fear Bank Corporation (Nasdaq:CAPE) today reported net income for the fiscal year 2006 of $2.3 million compared with $1.7 million for the fiscal year 2005, an increase of 35.1 percent. Diluted earnings per share were $0.61 compared with $0.46 for the prior year, an increase of 32.6 percent. Performance reflects a strong growth in average earning assets, tempered by margin pressures and expenses associated with branch expansion.
For the fourth quarter of 2006, the Company reported net income of $588,000 compared with $637,000 for the fourth quarter of 2005, a decrease of 7.7 percent. Diluted earnings per share were $0.16, down $0.01 from the prior-year quarter, or 5.9 percent. Earnings were impacted by growth in branch and administrative services facilities, along with personnel increases to support the expansion initiatives.
Cameron Coburn, Chairman, President and CEO, commented, "2006 marked another year of solid earnings, driven by double-digit loan and deposit growth. This year we embarked on several initiatives to enhance our presence within our region, including the addition of two new full-service banking offices. The Surf City branch marked our second location in Pender County, serving the growing residential and vacation-home communities in that area. The Waterford branch represents our expansion into a new market, Brunswick County. This county is experiencing exceptional population and economic growth; it presents our bank with outstanding opportunities to grow our loan and deposit base. We also changed our name to Cape Fear Bank to reflect our growing presence in the broader market of the Cape Fear Region."
Total revenue, comprised of net interest income and non-interest income, was $14.0 million for fiscal year 2006, an increase of 35.2 percent over the $10.3 million reported for the prior year. Net interest income for the current 12-month period increased 38.7 percent over 2005 to $12.9 million, primarily due to a 47.1 percent growth in average earning assets partially offset by a 20 basis point decline in the net interest margin to 3.34 percent. Non-interest income was $1.1 million, a 4.3 percent increase over the 2005 period. Excluding non-recurring net losses of $59,000 for 2006 and $10,000 for 2005 from the sale of securities, fiscal year 2006 non-interest income rose 9.0 percent. Mr. Coburn commented, "Strong loan production has supported net interest income growth, more than offsetting the 20 basis point decline in our margin year-over-year. Although loan growth has slowed from the robust pace of 2005, we have experienced increases in our core deposits through our branching efforts."
Revenue for the fourth quarter of 2006 was $3.5 million compared with $3.1 million for the fourth quarter of 2005, an increase of 14.4 percent. Net interest income increased 17.5 percent to $3.3 million from the prior-year fourth quarter, derived from a combination of strong growth in average earning assets, offset by a decline in net interest margin. The mix of earning assets shifted to include higher levels of investment securities in the fourth quarter, primarily from a slowdown in fourth quarter construction loan growth. Non-interest income was $248,000 in the current quarter, compared with $292,000 for the prior-year fourth quarter, down 15.1 percent. Excluding non-recurring net losses of $41,000 for fourth quarter 2006 and $12,000 for fourth quarter 2005 from the sale of securities, non-interest income decreased 4.9 percent from the year-earlier quarter.
Non-interest expense for the fiscal year 2006 was $9.3 million, an increase of 46.1 percent over the 2005 period. Expansion-related expenses accounted for the majority of the $2.9 million increase, with salaries and benefits, up $1.5 million or 43.9 percent, representing 51.3 percent of the increase. The Company added 28 employees over the course of 2006, bringing the total to 90 FTE, a 45.2 percent increase over 2005; this includes back office support staff as well as staffing for the two branches opened in 2006. Mr. Coburn added, "We do not anticipate any major support staff increases for 2007. We have strengthened our infrastructure this past year, and we are well positioned for additional growth." Other expenses grew $876,000 or 44.6 percent, reflecting costs associated with expenses related to branch expansion, the name change, higher costs of regulation, and additional growth-related processing costs, which included a $91,000 non-recurring charge. The expansion costs had an impact on the efficiency ratio, which rose to 66.66 percent for 2006 compared with 61.67 percent for the prior fiscal year.
The Bank continues to maintain a sound loan portfolio with low levels of non-performing assets. Net charge-offs for 2006 were $314,000 or 0.10 percent of average loans, compared with $95,000 or 0.04 percent for fiscal 2005. The increased charge-off activity in 2006 resulted from one large commercial loan relationship. "We manage our loan portfolio very conservatively," added Coburn, "and our loan loss experience reflects our continuing monitoring of credit quality." The $616,000 of foreclosed real estate has been written down to its net realizable value, and is currently under contract. Non-performing assets remained flat at $1.2 million, accounting for 0.27 percent of total assets at December 31, 2006, compared with 0.34 percent twelve months ago. Loan loss reserves were $4.5 million, or 1.36 percent of total loans, at December 31, 2006; this compares with a reserve of $3.5 million at December 31, 2005, equivalent to 1.26 percent of year-end loans.
Approximately $450,000 of the increase in loan loss reserves throughout the year was related to the bank's recognition of its increased concentration in construction and commercial real estate loans. "We have traditionally focused on residential construction and land loans at Cape Fear Bank, since that is an important driver in our economy," Coburn explained. "It currently accounts for 45.9 percent of our loan portfolio. Population growth in our Wilmington MSA has been 2.3 times the national average for the past five years, and is forecasted to remain at that level for the next five years as well, so there will be a high level of demand for residential construction."
Total assets were $424.9 million at December 31, 2006, an increase of $81.6 million, or 23.8 percent, from twelve months ago. Loans outstanding totaled $334.4 million, an increase of $56.0 million, or 20.1 percent, during the 2006 12-month period; 85.5% of the growth, or $47.9 million, was derived from increases in commercial real estate and construction loans. The majority of loan growth occurred in the first three quarters of 2006; fourth quarter loan growth moderated to $5.2 million, or 1.6 percent (6.4 percent annualized) compared to the third quarter of 2006, primarily from a lower level of construction loan growth than in earlier quarters.
Loan growth was funded primarily by a $69.5 million, or 24.5 percent, increase in deposits, to $353.6 million at December 31, 2006. Core deposits, including retail CDs, increased 1.3 percent or $2.5 million year-over-year; however, the mix shifted toward non-maturity funds (DDA, Savings, NOW and MM) which grew $21.6 million, or 33.7 percent, to $85.5 million, enabling Cape Fear Bank to reduce retail CDs by $19.1 million, or 15.6 percent, to $103.1 million. Growth was funded through wholesale deposits, which increased $67.0 million, or 68.5 percent. Mr. Coburn commented, "We are seeing good deposit growth in our branches, and the new branches should contribute increasingly in 2007. The combination of slower loan growth and growing branch deposits should contribute to a lower dependence on wholesale funding going forward."
Shareholders' equity at December 31, 2006 was $27.1 million, a twelve-month increase of $2.4 million, or 9.8 percent. The Company's total risk-based capital ratio at year-end was 11.80 percent. Total shares outstanding at December 31, 2006 were 3,586,780. Mr. Coburn concluded, "2006 was an eventful year at Cape Fear Bank. We expect the name change will enhance our identity in the communities we serve, and the investments we made in bank infrastructure, staffing and branch expansion should provide additional growth and profit opportunities in our attractive franchise."
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 their 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)
(dollars in thousands except per share data)
Quarterly
2006 2006 2006 2006 2005
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
------- ------- ------- ------- -------
EARNINGS
Net interest
income $ 3,287 3,351 3,170 3,087 2,797
Provision
for loan
and lease
losses $ 220 436 391 293 388
NonInterest
income $ 248 267 337 240 292
NonInterest
expense $ 2,577 2,393 2,280 2,074 1,794
Net income $ 588 558 522 604 637
*Basic
earnings
per share $ 0.16 0.16 0.15 0.17 0.18
*Diluted
earnings
per share $ 0.16 0.15 0.14 0.16 0.17
*Average
shares
outstanding 3,586,780 3,586,743 3,586,518 3,586,518 3,586,518
*Average
diluted
shares
outstanding 3,718,317 3,725,888 3,712,586 3,680,149 3,678,552
*Actual
common
shares
outstanding 3,586,780 3,586,780 3,586,518 3,586,518 3,586,518
PERFORMANCE RATIOS
Return on
average
assets 0.55% 0.55% 0.54% 0.66% 0.77%
Return on
average
common
equity 8.77% 8.60% 8.30% 9.65% 10.34%
Net interest
margin
(fully
tax-
equivalent) 3.14% 3.33% 3.42% 3.49% 3.47%
Efficiency
ratio 72.90% 66.14% 65.01% 62.34% 58.08%
Full-time
equivalent
employees 90 86 74 73 62
CAPITAL
Equity to
assets 6.37% 6.21% 6.28% 6.53% 7.18%
Regulatory
leverage
ratio 8.52% 8.80% 9.14% 9.33% 10.69%
Tier 1
capital
ratio 10.12% 10.24% 10.68% 11.23% 12.09%
Total
risk-based
capital
ratio 11.80% 11.77% 12.23% 12.80% 13.29%
*Book value
per share $ 7.54 7.33 6.95 6.96 6.87
ASSET QUALITY
Gross loan
charge-offs $ 2 3 0 402 53
Net loan
charge-offs
(recoveries) $ (12) (1) (75) 401 42
Net loan
charge-offs
to average
loans -0.01% 0.00% -0.10% 0.56% 0.06%
Allowance
for loan
losses $ 4,536 4,305 3,868 3,402 3,510
Allowance
for losses
to total
loans 1.36% 1.31% 1.23% 1.17% 1.26%
Nonperforming
loans $ 548 329 920 948 1,174
Other real
estate and
repossessed
assets $ 616 616 0 0 0
Nonperforming
assets
to total
assets 0.27% 0.22% 0.23% 0.25% 0.34%
END OF PERIOD
BALANCES
Loans $334,409 329,163 315,113 290,524 278,386
Total
earning
assets
(before
allowance) $408,176 410,667 386,167 371,661 334,053
Total assets $424,885 423,151 397,321 381,777 343,327
Deposits $353,617 360,846 329,248 322,634 284,134
Shareholders'
equity $ 27,052 26,281 24,935 24,948 24,635
AVERAGE BALANCES
Loans $330,799 325,044 302,759 285,654 261,652
Total
earning
assets
(before
allowance) $414,855 398,712 371,984 358,991 320,139
Total assets $425,089 407,156 383,697 368,403 329,152
Deposits $365,293 343,788 318,983 308,702 269,824
Shareholders'
equity $ 26,811 25,966 25,145 25,041 24,642
Year to Date
------------------------
2006 2005
---------- ----------
EARNINGS
Net interest income $ 12,894 9,299
Provision for loan and lease losses $ 1,340 1,499
NonInterest income $ 1,093 1,048
NonInterest expense $ 9,324 6,381
Net income $ 2,272 1,682
*Basic earnings per share $ 0.63 0.47
*Diluted earnings per share $ 0.61 0.46
*Average shares outstanding 3,586,641 3,586,361
*Average diluted shares outstanding 3,709,236 3,671,619
*Actual common shares outstanding 3,586,780 3,586,518
PERFORMANCE RATIOS
Return on average assets 0.57% 0.62%
Return on average common equity 8.86% 6.96%
Net interest margin (fully tax-equivalent) 3.34% 3.54%
Efficiency ratio 66.66% 61.67%
Full-time equivalent employees 90 62
CAPITAL
Equity to assets 6.37% 7.18%
Regulatory leverage ratio 8.52% 10.69%
Tier 1 capital ratio 10.12% 12.09%
Total risk-based capital ratio 11.80% 13.29%
*Book value per share $ 7.54 6.87
ASSET QUALITY
Gross loan charge-offs $ 408 184
Net loan charge-offs (recoveries) $ 314 95
Net loan charge-offs to average loans 0.10% 0.04%
Allowance for loan losses $ 4,536 3,510
Allowance for losses to total loans 1.36% 1.26%
Nonperforming loans $ 548 1,174
Other real estate and repossessed assets $ 616 0
Nonperforming assets to total assets 0.27% 0.34%
END OF PERIOD BALANCES
Loans $ 334,409 278,386
Total earning assets (before allowance) $ 408,176 334,053
Total assets $ 424,885 343,327
Deposits $ 353,617 284,134
Shareholders' equity $ 27,052 24,635
AVERAGE BALANCES
Loans $ 311,226 217,604
Total earning assets (before allowance) $ 386,323 262,669
Total assets $ 396,272 271,258
Deposits $ 334,373 226,823
Shareholders' equity $ 25,643 24,167
*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)
---------------------------------------------------------------------
Three Months Ended Years Ended
December 31, December 31,
--------------------- --------------------
2006 2005 2006 2005
--------- --------- -------- --------
(In thousands, except share and per share data)
INTEREST INCOME
Loans $ 6,825 $ 4,781 $24,857 $14,728
Investment securities
available for sale 799 508 2,816 1,453
Federal funds sold and
interest-earning
deposits 172 74 523 231
------- ------- ------- -------
TOTAL INTEREST
INCOME 7,796 5,363 28,196 16,412
------- ------- ------- -------
INTEREST EXPENSE
Money market, NOW and
savings deposits 537 225 1,681 619
Time deposits 3,515 1,947 11,800 5,702
Short-term borrowings 10 10 115 94
Long-term borrowings 447 384 1,706 698
------- ------- ------- -------
TOTAL INTEREST
EXPENSE 4,509 2,566 15,302 7,113
------- ------- ------- -------
NET INTEREST INCOME 3,287 2,797 12,894 9,299
PROVISION FOR LOAN
LOSSES 220 388 1,340 1,499
------- ------- ------- -------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 3,067 2,409 11,554 7,800
------- ------- ------- -------
NON-INTEREST INCOME 248 292 1,093 1,048
------- ------- ------- -------
NON INTEREST EXPENSE
Salaries and employee
benefits 1,439 956 4,949 3,438
Occupancy and
equipment 489 283 1,533 977
Other 649 555 2,842 1,966
------- ------- ------- -------
TOTAL NON-INTEREST
EXPENSE 2,577 1,794 9,324 6,381
------- ------- ------- -------
INCOME BEFORE INCOME
TAXES 738 907 3,323 2,467
INCOME TAXES 150 270 1,051 785
------- ------- ------- -------
NET INCOME $ 588 $ 637 $ 2,272 $ 1,682
======= ======= ======= =======
NET INCOME PER COMMON
SHARE
Basic $ 0.16 $ 0.18 $ 0.63 $ 0.47
======= ======= ======= =======
Diluted $ 0.16 $ 0.17 $ 0.61 $ 0.46
======= ======= ======= =======
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
Basic 3,586,780 3,586,518 3,586,641 3,586,361
Effect of
dilutive
stock options 131,537 92,034 122,595 85,258
--------- --------- --------- ---------
Diluted 3,718,317 3,678,552 3,709,236 3,671,619
========= ========= ========= =========
*All per share and outstanding share data has been restated
for the 5% stock dividend effective 6/30/06
CAPE FEAR BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------
December 31, December 31,
2006 2005*
(Unaudited)
--------------------------------
(In thousands, except share data)
ASSETS
Cash and due from banks $ 7,209 $ 1,854
Interest earning deposits in other
banks 1,639 5,419
Investment securities available
for sale, at fair value 69,565 48,655
Time deposits in other banks 298 199
Loans 334,409 278,386
Allowance for loan losses (4,536) (3,510)
--------- ---------
NET LOANS 329,873 274,876
Accrued interest receivable 2,195 1,645
Premises and equipment, net 2,954 1,845
Stock in Federal Home Loan Bank of
Atlanta, at cost 2,081 1,394
Foreclosed real estate and
repossessions 616 --
Bank owned life insurance 5,491 5,296
Other assets 2,964 2,144
--------- ---------
TOTAL ASSETS $ 424,885 $ 343,327
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand $ 33,066 $ 26,025
Savings 11,154 2,594
Money market and NOW 41,317 35,339
Time 268,080 220,176
--------- ---------
TOTAL DEPOSITS 353,617 284,134
Short-term borrowings 3,000 --
Long-term borrowings 38,310 32,310
Accrued interest payable 745 457
Accrued expenses and other
liabilities 2,161 1,791
--------- ---------
TOTAL LIABILITIES 397,833 318,692
Shareholders' Equity
Common stock, $3.50 par value,
12,500,000 shares authorized;
3,586,780 and 3,586,518 shares
issued and outstanding at
December 31, 2006 and December 31,
2005, respectively 12,554 11,956
Additional paid-in capital 12,739 11,052
Accumulated retained earnings 2,092 2,153
Accumulated other comprehensive loss (333) (526)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 27,052 24,635
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 424,885 $ 343,327
========== ==========
*Derived from audited financial statements