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CommunityOne Bancorp Announces Fourth Quarter Net Income of $144.6 Million, Reversal of $142.5 Million Deferred Tax Asset Valuation Allowance and Continued Strong Loan Growth

CHARLOTTE, N.C., Jan. 30, 2015 (GLOBE NEWSWIRE) -- CommunityOne Bancorp ("Company") (Nasdaq:COB), the holding company for CommunityOne Bank, N.A. ("Bank"), today announced its unaudited financial results for the quarter ended December 31, 2014. Highlights include:

  • Net income in 4Q 2014 was $144.6 million ($6.62 per diluted share) and $150.5 million ($6.88 per diluted share) for full year 2014. Fourth quarter results included the reversal of $142.5 million of the valuation allowance on the Company's deferred tax assets and a charge of $1.6 million for 6 branch closures announced during the quarter.
  • Excluding branch closure costs and the deferred tax asset valuation allowance reversal, adjusted net income was $3.7 million, or $0.17 per diluted share (non-GAAP), in 4Q 2014.
  • Loan growth continued to be strong and broad based in 4Q 2014. Loans held for investment grew $39.7 million, an annualized growth rate of 12%, and organic loans, which exclude purchased residential mortgage pools, grew at a 16% annualized growth rate during the quarter.
  • Deposit growth was also robust in 4Q 2014, growing at an 8% annualized growth rate, while the cost of interest-bearing deposits fell one basis point from the previous quarter.
  • Positive credit performance continued through 4Q 2014, with a net recovery of provision for loan losses of $1.3 million in 4Q 2014 and $5.4 million in full year 2014. Net charge-offs were a recovery of $0.1 million in 4Q 2014, and full year 2014 net charge-offs as a percent of average loans held for investment were 8 basis points, down from 26 basis points in full year 2013.
  • Nonperforming assets fell 6% from 3Q 2014 and 28% from a year ago, and were 2.1% of total assets.
  • Net interest income grew 6% in 4Q 2014 to $16.7 million. Net interest margin was improved at 3.49% in the fourth quarter, up 11 bps from the previous quarter. Earning assets grew at an annualized rate of 8% in 4Q 2014.
  • Noninterest expenses rose $0.4 million in 4Q 2014, excluding credit and nonrecurring expenses. Average full time equivalent employees fell 5% during 2014 and were unchanged from 3Q 2014.
  • Completion of a private placement of $25 million of common stock in 4Q 2014.

"We continued to execute our plan during the fourth quarter by growing loans and deposits, exceeding our 2014 goal with a 76% loan to deposit ratio," noted Bob Reid, President and CEO. "We added an SBA lending capability late in the fourth quarter and in January continued our external mortgage channel expansion with the addition of our first mortgage lenders in the Raleigh market. The year ended ahead of plan in terms of our credit quality and we expect that to continue."

"We continue to focus on reducing noninterest expense, and we announced the closing of six branches effective in the first quarter of 2015, even as we continue to make investments in new personnel, new markets and new products to drive growth. In addition, we were pleased to complete a $25 million private placement of common stock, which will continue to position our balance sheet for both organic growth and growth by acquisition should an opportunity present itself," added Bob Reid.

"We are very pleased that our consistent profitability since the third quarter of 2013, current forecasts of future profitability, and improvements in the asset quality of our loan portfolio have enabled us to take the important step of reversing $142.5 million of the deferred tax asset valuation allowance," said Dave Nielsen, Chief Financial Officer.

Fourth Quarter Financial Results

Results of Operations

Net income after tax was $144.6 million for the fourth quarter of 2014, compared to $1.8 million in the third quarter of 2014 and $2.3 million in the fourth quarter of 2013. Excluding the $1.6 million charge for the closure of six branches taken during the quarter and the impact of the $142.5 million release of deferred tax asset valuation allowance, net income was $3.7 million (non-GAAP). Fully diluted net income per share was $6.62 per share in the fourth quarter of 2014, compared to $0.08 per share and $0.11 per share in the third quarter of 2014 and the fourth quarter of 2013, respectively. Fully diluted net income per share in the fourth quarter, excluding the branch closure expenses and the deferred tax asset valuation allowance reversal, was $0.17 (non-GAAP). Pre-credit and nonrecurring items ("PCNR") earnings of $2.9 million, which exclude taxes, credit costs and provision, and nonrecurring income and expenses, were $0.9 million better than the $2.0 million in the third quarter of 2014, and $0.9 million lower than the $3.8 million in the fourth quarter of 2013.

Fourth quarter financial results included the reversal of $142.5 of valuation allowance on the Company's deferred tax assets as a result of consistent profitability since the third quarter of 2013, improvements in the asset quality of the loan portfolio and future earnings forecasts. In addition, results included a $1.3 million recovery of loan loss provision resulting from continued improvement in loss rates and credit quality of the non-purchased impaired loan portfolio and improvements in cash flow forecasts for the purchased impaired loan portfolio. Net interest income grew $0.9 million in the fourth quarter on an increase in average loans of $51.2 million and interest recoveries, and noninterest income grew $0.6 million on securities gains and debit and credit card income. Noninterest expense increased by $0.4 million in the quarter, primarily related to branch closure accruals of $1.6 million, year-end OREO holding expenses and year-end incentive and benefit expense adjustments.

Net income after tax was $150.5 million, or $6.88 per diluted share in full year 2014, compared to a net loss of $(1.5) million, or $(0.07) per diluted share, in full year 2013. PCNR earnings, which exclude taxes, credit costs and provision, and nonrecurring income and expenses, was $9.1 million in full year 2014, down from $10.4 million in full year 2013.

The financial performance in 2014 was driven by the $142.5 million deferred tax asset valuation allowance reversal discussed earlier, a $5.9 million reduction in noninterest expenses primarily as a result of a $5.1 million decline in OREO and loan collection costs and $5.4 million in net recovery of provision during the year driven by improvements in asset quality, offset by a $1.8 million decline in gains on the sale of investment securities.

Loan and Deposits

Loan growth across all business lines continued to be very strong during the fourth quarter, reflecting good loan demand, portfolio growth across all our businesses and the impact of market expansion and recent personnel additions. Loans held for investment grew 3% in the fourth quarter, an annualized growth rate of 12%, a continuation of last quarter's 15% annualized growth rate. Loans held for investment grew by $39.7 million in the fourth quarter to $1.36 billion, compared to $1.32 billion at the end of the third quarter, and the Company exceeded its 2014 goal with a year-end loans to deposits ratio of 76%. Excluding our purchased residential mortgage loan pools, our total organic loan growth was even stronger at $42.7 million during the quarter, an annualized growth rate of 15%. Pass rated loans grew $45.7 million in the fourth quarter, an annualized growth rate of 15%, reflecting continued improvement in the asset quality of the loan portfolio.

Loans held for investment grew 12%, or $145.5 million, in 2014 to $1.36 billion, compared to $1.21 billion at the end of the 2013. Excluding purchased residential mortgage loan pools, organic loans grew 15%, or $150.3 million, during 2014. Pass rated loans grew 17%, or $183.8 million, in 2014.

Loan growth was in part the result of investments in expanded commercial, real estate and residential mortgage lending capacity through hiring and geographic expansion during 2014 in Raleigh, Greensboro and Winston-Salem. Late in the fourth quarter, we hired two Small Business Administration lenders and in early January we hired two new residential mortgage loan officers in our non-branch sales channel in Raleigh. We expect these new hires will sustain our accelerated pace of loan growth and enhance our mortgage loan sales income in 2015.

Total deposits increased $35.5 million, or 2%, in the fourth quarter, the result of an enhanced focus and promotional activities to support our accelerated loan growth. Deposits were $1.79 billion at the end of the quarter. Low cost core deposits, consisting of all non-time deposits, grew $29.1 million during the fourth quarter.

For the full year, total deposits grew $45.7 million, or 3%, reflecting the enhanced deposit focus in the fourth quarter, offset by the impact of the closure of four branches in the first quarter of 2014. Low cost core deposits, consisting of non-CD deposits, grew $39.7 million during 2014 to $1.21 billion, from $1.17 billion at December 31, 2013. Noninterest-bearing deposits grew $33.3 million, or 11%, in 2014 as a result of increased commercial relationships and investments in treasury management products.

Net Interest Income

Fourth quarter net interest income was $16.7 million, up 6% compared to $15.8 million in the third quarter of 2014, as a result of a $38.2 million, or 2%, increase in average earning assets in the quarter, and $0.5 million of incremental interest recoveries on nonaccrual loans during the quarter. Accretion, net of contractual interest collected, on purchased impaired loans was $0.7 million in the fourth quarter, compared to $0.8 million and $1.3 million in the third quarter of 2014 and the fourth quarter of 2013, respectively.

The Company's net interest margin was 3.49% for the fourth quarter of 2014, up 11 basis points from 3.38% in the third quarter of 2014, and lower by 3 basis points from 3.52% in the fourth quarter of last year. The 11 basis point increase in the net interest margin in the fourth quarter of 2014 over the third quarter was the result of the incremental increase in interest recoveries on nonaccrual loans noted above. The cost of interest-bearing deposits fell 1 basis point during the quarter from the previous quarter to 47 basis points, while the cost of all deposit funding was unchanged during the quarter at 39 basis points.

Net interest income was $63.8 million for the full year 2014, a decrease of 1% compared to $64.4 million in 2013, as a result of an $18.4 million decline in average earning assets during the year and a 27 basis point decline in average loan yield excluding the impact of a $2.6 million decline in non-cash loan accretion, offset by an improvement in loans as a percentage of earning assets from 62% in 2013 to 68% in 2014. The Company's net interest margin was 3.43% in 2014, down one basis point from 2013.

Asset Quality and Provision for Loan Losses

Nonperforming assets, including nonaccruing loans, loans over 90 days delinquent and still accruing not accounted for under purchased impaired loan accounting, and other real estate owned and repossessed loan collateral, continued to improve and fell to the lowest level since the recapitalization in 2011. These assets fell to $45.8 million, or 2.1% of total assets at the end of the fourth quarter, compared to $48.8 million, or 2.4% of total assets, at the end of the third quarter. Other real estate owned and repossessed loan collateral was essentially unchanged during the fourth quarter at $20.4 million, and fell by $8.0 million, or 28%, compared to the same quarter last year. For the fourth quarter, the Company had net OREO write-downs of $111 thousand, which included gains on the sale of OREO of $44 thousand.

The allowance for loan losses was $20.3 million, or 1.50% of loans held for investment, at the end of the fourth quarter, compared to $21.5 million, or 1.63%, at the end of the previous quarter, and $26.8 million, or 2.21%, at year-end 2013. Recovery of provision for loan losses was $1.3 million in the fourth quarter compared to a recovery of provision of $1.7 million in the third quarter, and a provision for loan losses of $1.8 million in the fourth quarter of 2013. The recovery of provision for loan losses in the fourth quarter includes a $0.6 million recovery of provision for loan losses in the non-purchased impaired loan portfolio as a result of continued improvements in historical loss rates utilized in our allowance for loan loss model, and $0.7 million recovery of provision for loan losses related to improvements in the cash flow forecast during the quarter on the purchased impaired loan portfolio. Recovery of provision for loan losses was $5.4 million for full year 2014 compared to a provision for loan losses of $0.5 million for full year 2013 as asset quality continued to improve.

The Company had a net recovery of charge-offs in the fourth quarter of $141 thousand, and $1.1 million in net charge-offs in full year 2014, a 65% decline from $3.1 million in full year 2013. The full year 2014 net charge-offs as a percentage of average loans fell to 0.08%, compared to 0.26% in full year 2013.

Noninterest Income

For the fourth quarter, PCNR noninterest income was $4.3 million, an increase of $0.4 million compared to $4.0 million in the previous quarter. Total noninterest income was $4.5 million in the fourth quarter, compared to $4.0 million in the third quarter of 2014, principally related to $0.2 million of securities gains and an increase of $0.1 million in debit and credit card income during the quarter.

Other components of noninterest income were also improved in the fourth quarter, including a $35 thousand, or 17%, increase in mortgage loan income and $50 thousand, or 15%, increase in trust and investment services income. Mortgage loan income rose based on an increase in origination of loans sold to Fannie Mae. During the quarter, we originated $39.5 million of mortgage loans, a seasonal decrease of 2% from the third quarter, including $16.7 million of loans for sale to Fannie Mae, an increase of 14% from the third quarter.

PCNR noninterest income fell $1.3 million in full year 2014 to $16.4 million, compared to $17.6 million in full year 2013. Decreases of $1.4 million in mortgage loan income and $0.4 million in service charges on deposits were offset by $0.3 million growth in card and merchant services income, on increased activity volumes, and a $0.2 million increase in trust and investment services income as a result of increases in assets under management and investment sales activity.

Noninterest Expense

Noninterest expense increased by $0.4 million in the quarter, primarily related to branch closure accruals of $1.6 million, year-end OREO holding expenses and year-end incentive and benefit expense adjustments. PCNR noninterest expense, which excludes merger, OREO, collection, and other nonrecurring expenses, was $18.1 million, an increase of $0.4 million in the fourth quarter from the prior quarter, primarily as a result of the impact of $0.3 million in year-end incentive and benefit expense accruals and $0.1 million cost of deposit campaign advertising. Average full time equivalent employees were 568, unchanged in the fourth quarter, and 5% lower than 596 at year-end 2013.

Total noninterest expense in full year 2014 fell $5.9 million, or 7%, from full year 2013 on a $5.1 million reduction in OREO and loan collection costs. PCNR noninterest expense fell by 1%, or $0.7 million, to $71.0 million in 2014, compared to $71.7 million in 2013, primarily as a result of a $0.6 million of declines in occupancy, furniture, equipment and data processing expenses, as a result of four branch closures in the first quarter of 2014, and $0.6 million decline in professional expenses.

Conference Call

A pre-recorded conference call will be held at 11:00 a.m., Eastern time this morning January 30th, 2015. Interested parties should dial in five to ten minutes prior to the scheduled start time to 1-866-235-9913. The webcast may be accessed via the Investor Relations section of the Company's website at www.community1.com. The webcast replay will be available until January 30, 2016. The teleconference replay will be available one hour after the end of the conference through February 14, 2015. To access the teleconference replay, dial toll free in the U.S. to 1-877-344-7529 or outside the U.S. to 1-412-317-0088 and provide Conference ID Number 10059200.

About CommunityOne Bancorp

CommunityOne Bancorp is the North Carolina-based bank holding company for CommunityOne Bank, N.A., a $2 billion community bank, operating 50 branches throughout North Carolina, offering a wide variety of consumer, mortgage and commercial banking services to retail and business customers, including loans, deposits, treasury management, wealth and online banking. Investors can obtain additional information about the Company and the Bank through reviewing its website at www.community1.com.

Non-GAAP Financial Measures

Statements in this press release include certain non-GAAP financial measures, which should be read along with the accompanying tables that provide a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. The non-GAAP financial measures referenced in this press release include: tangible shareholders' equity, PCNR earnings, PCNR noninterest expense, and PCNR noninterest income. The Company believes that these non-GAAP financial measures provide information useful to investors in understanding our underlying performance and business trends as they facilitate comparisons with the performance of others in the financial services industry. However, these non-GAAP financial measures should not be considered an alternative to GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP as well as other relevant information when assessing the overall performance and financial condition of the Company.

Forward Looking Statements

Information in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include projections, predictions, expectations, or beliefs about events or results or otherwise are not statements of historical facts, and usually can be identified by the use of forward-looking terminology, such as "believes," "expects," or "are expected to," "plans," "projects," "goals," "estimates," "may," "should," "could," "would," "intends to," "outlook" or "anticipates," or variations of these and similar words, or by discussions of strategies that involve risks and uncertainties that could cause actual results to differ materially, including, without limitation, having financial resources in the amount, at the times and on the terms required to support our future business; adverse changes in financial performance or condition of our borrowers, which could affect repayment of such borrowers' outstanding loans; changes in interest rates, spreads on earning assets and interest-bearing liabilities, the shape of the yield curve and interest rate sensitivity; a continued prolonged period of low interest rates; credit losses and material changes in the quality of our loan portfolio; new declines in the value of our OREO; increased competitive pressures in the banking industry or in our markets; less favorable general economic conditions, either nationally or regionally, resulting in, among other things, a reduced demand for credit or other services; a slowdown in the housing markets, or an increase in interest rates, either of which may reduce demand for mortgages; repurchase risk in connection with our mortgage line of business; reducing costs and expenses; our ability to raise capital in amounts, on terms and at times that will support our business needs and meet our Business Plan; increasing price and product/service competition by competitors; rapid technological development and changes; the inaccuracy of assumptions underlying the establishment of our ALL; loss of additional members of executive management; disruptions in or manipulations of our operating systems or the systems of our vendors due to, among other things, cybersecurity risks or otherwise; changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board and Federal, State and local taxing authorities; the outcome of legislation and regulation affecting the financial services industry, including COB, including the effects resulting from the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III capital rules; changes in accounting principles and standards; the effect of any mergers, acquisitions or other transactions to which we or our subsidiaries may from time to time be a party; and our success at managing the risks involved in the foregoing.

Although the Company believes that its expectations with respect to such forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results of the Company will not differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual events or results to differ significantly from those described in the forward-looking statements include, but are not limited to those described in the cautionary language included under the headings "Risk Factors" and in other sections of the Company's filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its quarterly reports on Form 10-Q. The forward looking statements in this press release speak only as of the date of the press release and the Company does not assume any obligation to update them after such date.

Quarterly Results of Operations
(in thousands, except per share data) 4Q 2014 3Q 2014 2Q 2014 1Q 2014 4Q 2013
Interest Income
Interest and fees on loans $ 15,871 $ 14,855 $ 14,376 $ 14,081 $ 14,976
Interest and dividends on investment securities 3,242 3,400 3,731 3,695 3,815
Other interest income 158 140 156 151 141
Total interest income 19,271 18,395 18,263 17,927 18,932
Interest Expense
Deposits 1,741 1,725 1,741 1,702 1,839
Retail repurchase agreements 5 5 3 3 7
Federal Home Loan Bank advances 516 521 514 469 340
Other borrowed funds 288 296 287 274 282
Total interest expense 2,550 2,547 2,545 2,448 2,468
Net interest income before provision for loan losses 16,721 15,848 15,718 15,479 16,464
Provision for (recovery of) loan losses (1,323) (1,679) (1,685) (684) 1,820
Net interest income after provision for loan losses 18,044 17,527 17,403 16,163 14,644
Noninterest Income
Service charges on deposit accounts 1,585 1,583 1,619 1,564 1,798
Mortgage loan income 241 205 261 174 235
Cardholder and merchant services income 1,298 1,183 1,209 1,113 1,127
Trust and investment services 394 344 399 358 341
Bank owned life insurance 350 273 278 252 267
Other service charges, commissions and fees 366 290 332 352 356
Securities gains, net 220 34 720 -- --
Other income 89 73 75 130 23
Total noninterest income 4,543 3,985 4,893 3,943 4,147
Noninterest Expense
Personnel expense 10,717 12,616 9,956 10,393 9,512
Net occupancy expense 1,526 1,521 1,512 1,553 1,331
Furniture, equipment and data processing expense 2,078 2,208 2,047 2,003 2,126
Professional fees 671 699 467 633 625
Stationery, printing and supplies 162 149 173 162 135
Advertising and marketing 274 142 147 153 141
Other real estate owned expense (recovery) 572 (29) 954 261 21
Credit/debit card expense 568 520 604 595 618
FDIC insurance 422 412 595 639 663
Loan collection expense 170 198 551 657 548
Core deposit intangible amortization 351 352 352 352 351
Other expense 2,935 1,227 1,910 1,405 1,479
Total noninterest expense 20,446 20,015 19,268 18,806 17,550
Income before income taxes 2,141 1,497 3,028 1,300 1,241
Income tax expense (benefit) (142,475) (276) 236 23 (1,049)
Net Income $ 144,616 $ 1,773 $ 2,792 $ 1,277 $ 2,290
Weighted average shares outstanding - basic 21,846 21,739 21,889 21,936 21,756
Weighted average shares outstanding - diluted 21,858 21,747 21,900 21,936 21,756
Net income per share - basic $ 6.62 $ 0.08 $ 0.13 $ 0.06 $ 0.11
Net income per share - diluted 6.62 0.08 0.13 0.06 0.11
Quarterly Balance Sheets
(in thousands) 4Q 2014 3Q 2014 2Q 2014 1Q 2014 4Q 2013
Assets
Cash and due from banks $ 29,202 $ 26,411 $ 30,377 $ 31,591 $ 31,917
Interest-bearing bank balances 66,680 33,669 40,100 73,360 35,513
Investment securities:
Available-for-sale 350,040 363,296 399,110 402,468 414,614
Held-to-maturity 142,461 144,684 147,055 149,060 151,795
Loans held for sale 2,796 2,268 1,765 1,961 1,836
Loans held for investment 1,357,788 1,318,117 1,269,865 1,219,785 1,212,248
Less: Allowance for loan losses (20,345) (21,525) (23,975) (26,039) (26,785)
Net loans held for investment 1,337,443 1,296,592 1,245,890 1,193,746 1,185,463
Premises and equipment, net 46,782 47,416 47,855 48,172 50,889
Other real estate owned 20,411 20,289 21,871 24,624 28,395
Core deposit premiums and other intangibles 5,681 5,986 6,296 6,597 6,914
Goodwill 4,205 4,205 4,205 4,205 4,205
Bank-owned life insurance 39,946 40,797 40,504 40,210 39,940
Deferred tax asset, net 146,432 5,564 5,188 8,153 10,215
Other assets 23,435 24,616 23,297 24,334 23,336
Total Assets $ 2,215,514 $ 2,015,793 $ 2,013,513 $ 2,008,481 $ 1,985,032
Liabilities
Deposits:
Noninterest-bearing demand deposits $ 323,776 $ 317,981 $ 321,829 $ 315,515 $ 290,461
Interest-bearing deposits:
Demand, savings and money market deposits 882,332 859,003 850,514 879,419 875,970
Time deposits 588,312 581,946 591,422 572,996 582,274
Total deposits 1,794,420 1,758,930 1,763,765 1,767,930 1,748,705
Retail repurchase agreements 9,076 12,217 8,333 5,152 6,917
Federal Home Loan Bank advances 68,234 73,246 73,259 73,271 73,283
Junior subordinated debentures 56,702 56,702 56,702 56,702 56,702
Long term notes payable 5,338 5,319 5,300 5,281 5,263
Other liabilities 14,828 14,889 13,457 14,814 13,801
Total Liabilities 1,948,598 1,921,303 1,920,816 1,923,150 1,904,671
Shareholders' Equity
Preferred Stock, 10,000,000 authorized
Series A, $10.00 par value, 51,500 issued and no shares outstanding -- -- -- -- --
Series B, no par value, 250,000 authorized, no shares issued or outstanding -- -- -- -- --
Common stock 487,603 462,357 462,206 462,037 461,636
Accumulated deficit (213,212) (357,828) (359,601) (362,393) (363,670)
Accumulated other comprehensive loss (7,475) (10,039) (9,908) (14,313) (17,605)
Total Shareholders' Equity 266,916 94,490 92,697 85,331 80,361
Total Liabilities and Shareholders' Equity $ 2,215,514 $ 2,015,793 $ 2,013,513 $ 2,008,481 $ 1,985,032
Quarterly Supplemental Data
(in thousands, except per share data) 4Q 2014 3Q 2014 2Q 2014 1Q 2014 4Q 2013
Income Statement Data
Net interest income $ 16,721 $ 15,848 $ 15,718 $ 15,479 $ 16,464
Provision for (recovery of) loan losses (1,323) (1,679) (1,685) (684) 1,820
Noninterest income 4,543 3,985 4,893 3,943 4,147
Noninterest expense 20,446 20,015 19,268 18,806 17,550
Income before taxes 2,141 1,497 3,028 1,300 1,241
Net income 144,616 1,773 2,792 1,277 2,290
Period End Balances
Assets $ 2,215,514 $ 2,015,793 $ 2,013,513 $ 2,008,481 $ 1,985,032
Loans held for sale 2,796 2,268 1,765 1,961 1,836
Loans held for investment 1,357,788 1,318,117 1,269,865 1,219,785 1,212,248
Allowance for loan losses (20,345) (21,525) (23,975) (26,039) (26,785)
Goodwill 4,205 4,205 4,205 4,205 4,205
Deposits 1,794,420 1,758,930 1,763,765 1,767,930 1,748,705
Borrowings 139,350 147,484 143,594 140,406 142,165
Shareholders' equity 266,916 94,490 92,697 85,331 80,361
Average Balances
Assets $ 2,042,109 $ 2,004,071 $ 1,997,909 $ 1,979,036 $ 2,015,219
Loans held for sale 1,997 1,446 1,664 1,298 2,529
Loans held for investment 1,338,877 1,288,272 1,237,183 1,208,416 1,196,780
Allowance for loan losses (21,552) (24,110) (26,544) (26,942) (25,675)
Goodwill 4,205 4,205 4,205 4,205 4,205
Deposits 1,785,575 1,753,380 1,755,127 1,739,354 1,770,018
Borrowings 144,315 144,830 141,390 142,244 146,721
Shareholders' equity 99,445 93,051 88,140 83,776 82,216
Per Share Data
Net income per share - basic $ 6.62 $ 0.08 $ 0.13 $ 0.06 $ 0.11
Net income per share - diluted 6.62 0.08 0.13 0.06 0.11
Book value (Shareholders' Equity) 11.04 4.35 4.26 3.88 3.68
Tangible book value (Tangible Shareholders' Equity) 1 10.63 3.88 3.78 3.39 3.17
Performance Ratios
Return on average assets 28.10% 0.35% 0.56% 0.26% 0.45%
Return on average equity 577.0% 7.6% 12.7% 6.2% 11.0%
Net interest margin (tax equivalent) 3.49% 3.38% 3.40% 3.43% 3.52%
PCNR noninterest expense to average assets1 3.55% 3.55% 3.47% 3.59% 3.34%
Asset Quality Ratios
Allowance for loan losses to loans held for investment 1.50% 1.63% 1.89% 2.13% 2.21%
Net annualized charge-offs (recoveries) to average loans held for investment (0.04%) 0.24% 0.12% 0.02% 0.14%
Nonperforming assets to total assets 2.1% 2.4% 2.7% 2.9% 3.2%
Capital and Other Ratios
CommunityOne Bancorp leverage capital 9.78% 6.48% 6.35% 6.20% 5.96%
CommunityOne Bank, N.A. leverage capital 9.94% 7.97% 7.86% 7.74% 7.49%
Loans held for investment to deposits 76% 75% 72% 69% 69%
1 Non-GAAP measure. See Quarterly Non-GAAP Measures table for reconciliation to the most directly comparable GAAP measure.
Annual Results of Operations
(in thousands, except per share data) 2014 2013 2012
Interest Income
Interest and fees on loans $ 59,183 $ 60,147 $ 65,987
Interest and dividends on investment securities 14,068 14,180 10,778
Other interest income 605 665 1,223
Total interest income 73,856 74,992 77,988
Interest Expense
Deposits 6,909 8,070 14,074
Retail repurchase agreements 16 21 29
Federal Home Loan Bank advances 2,020 1,376 1,448
Other borrowed funds 1,145 1,092 1,157
Total interest expense 10,090 10,559 16,708
Net interest income before provision for loan losses 63,766 64,433 61,280
Provision for (recovery of) loan losses (5,371) 523 14,049
Net interest income after provision for loan losses 69,137 63,910 47,231
Noninterest Income
Service charges on deposit accounts 6,351 6,714 7,080
Mortgage loan income 881 2,319 2,065
Cardholder and merchant services income 4,803 4,531 4,579
Trust and investment services 1,495 1,305 1,036
Bank owned life insurance 1,153 1,073 1,195
Other service charges, commissions and fees 1,340 1,315 1,128
Securities gains, net 974 2,772 4,121
Other income 367 385 754
Total noninterest income 17,364 20,414 21,958
Noninterest Expense
Personnel expense 43,682 40,661 40,051
Net occupancy expense 6,112 6,391 6,461
Furniture, equipment and data processing expense 8,336 8,638 8,721
Professional fees 2,470 3,100 5,266
Stationery, printing and supplies 646 644 637
Advertising and marketing 716 1,135 957
Other real estate owned expense (recovery) 1,758 4,138 27,883
Credit/debit card expense 2,287 2,143 1,717
FDIC insurance 2,068 2,643 3,499
Loan collection expense 1,576 4,333 3,274
Merger-related expense -- 3,498 3,241
Core deposit intangible amortization 1,407 1,407 1,407
Other expense 7,477 5,750 7,092
Total noninterest expense 78,535 84,481 110,206
Net income (loss) before taxes 7,966 (157) (41,017)
Income tax expense (benefit) (142,492) 1,326 (1,039)
Net income (loss) from continuing operations, net of tax 150,458 (1,483) (39,978)
Net income (loss) from discontinued operations, net of tax -- -- (27)
Net Income (Loss) $ 150,458 $ (1,483) $ (40,005)
Weighted average shares outstanding - basic 21,852 21,731 21,368
Weighted average shares outstanding - diluted 21,864 21,731 21,368
Net income (loss) per share - basic $ 6.89 $ (0.07) $ (1.87)
Net income (loss) per share - diluted 6.88 (0.07) (1.87)
Annual Balance Sheets
(in thousands) 2014 2013 2012
Assets
Cash and due from banks $ 29,202 $ 31,917 $ 38,552
Interest-bearing bank balances 66,680 35,513 201,058
Investment securities:
Available-for-sale 350,040 414,614 564,850
Held-to-maturity 142,461 151,795 --
Loans held for sale 2,796 1,836 6,974
Loans held for investment 1,357,788 1,212,248 1,177,035
Less: Allowance for loan losses (20,345) (26,785) (29,314)
Net loans held for investment 1,337,443 1,185,463 1,147,721
Premises and equipment, net 46,782 50,889 52,725
Other real estate owned 20,411 28,395 63,131
Core deposit premiums and other intangibles 5,681 6,914 7,495
Goodwill 4,205 4,205 4,205
Bank-owned life insurance 39,946 39,940 38,792
Deferred tax asset, net 146,432 10,215 788
Other assets 23,435 23,336 25,274
Total Assets $ 2,215,514 $ 1,985,032 $ 2,151,565
Liabilities
Deposits:
Noninterest-bearing demand deposits $ 323,776 $ 290,461 $ 251,235
Interest-bearing deposits:
Demand, savings and money market deposits 882,332 875,970 892,576
Time deposits 588,312 582,274 763,177
Total deposits 1,794,420 1,748,705 1,906,988
Retail repurchase agreements 9,076 6,917 8,675
Federal Home Loan Bank advances 68,234 73,283 58,328
Junior subordinated debentures 56,702 56,702 56,702
Long term notes payable 5,338 5,263 --
Other liabilities 14,828 13,801 22,427
Total Liabilities 1,948,598 1,904,671 2,053,120
Shareholders' Equity
Preferred Stock, 10,000,000 authorized
Series A, $10.00 par value, 51,500 issued and no shares outstanding -- -- --
Series B, no par value, 250,000 authorized, no shares issued or outstanding -- -- --
Common stock 487,603 461,636 460,955
Accumulated deficit (213,212) (363,670) (362,187)
Accumulated other comprehensive loss (7,475) (17,605) (323)
Total Shareholders' Equity 266,916 80,361 98,445
Total Liabilities and Shareholders' Equity $ 2,215,514 $ 1,985,032 $ 2,151,565
Annual Supplemental Data
(in thousands, except share and per share data) 2014 2013 2012
Income Statement Data
Net interest income $ 63,766 $ 64,433 $ 61,280
Provision for (recovery of) loan losses (5,371) 523 14,049
Noninterest income 17,364 20,414 21,958
Noninterest expense 78,535 84,481 110,206
Income before income taxes 7,966 (157) (41,017)
Loss from discontinued operations, net of tax -- -- (27)
Net income (loss) 150,458 (1,483) (40,005)
Period End Balances
Assets $ 2,215,514 $ 1,985,032 $ 2,151,565
Loans held for sale 2,796 1,836 6,974
Loans held for investment 1,357,788 1,212,248 1,177,035
Allowance for loan losses (20,345) (26,785) (29,314)
Goodwill 4,205 4,205 4,205
Deposits 1,794,420 1,748,705 1,906,988
Borrowings 139,350 142,165 123,705
Shareholders' equity 266,916 80,361 98,445
Average Balances
Assets $ 2,005,948 $ 2,047,146 $ 2,291,541
Loans held for sale 1,603 3,693 5,312
Loans held for investment 1,268,599 1,158,985 1,240,550
Allowance for loan losses (24,770) (27,596) (36,738)
Goodwill 4,205 4,205 4,130
Deposits 1,758,471 1,809,575 2,027,425
Borrowings 143,206 131,710 124,914
Shareholders' equity 91,151 85,576 114,684
Per Share Data
Net income (loss) per share - basic $ 6.89 $ (0.07) $ (1.87)
Net income (loss) per share - diluted 6.88 (0.07) (1.87)
Book value (Shareholders' equity) 11.04 3.68 4.54
Tangible book value (Tangible shareholders' equity) 1 10.63 3.17 4.00
Performance Ratios
Return on average assets 7.50% (0.07%) (1.75%)
Return on average equity 165.1% (1.7%) (34.9%)
Net interest margin (tax equivalent) 3.43% 3.44% 2.95%
PCNR noninterest expense to average assets 1 3.54% 3.50% 3.24%
Asset Quality Ratios
Allowance for loan losses to loans held for investment 1.50% 2.21% 2.49%
Net annualized charge-offs (recoveries) to average loans held for investment 0.08% 0.26% 1.94%
Nonperforming assets to total assets 2.1% 3.2% 6.6%
Capital and Other Ratios
CommunityOne Bancorp leverage capital 9.78% 5.96% 5.45%
CommunityOne Bank, N.A. leverage capital 9.94% 7.49% 6.17%
Loans held for investment to deposits 76% 69% 62%
1 Non-GAAP measure. See Annual Non-GAAP Measures table for reconciliation to the most directly comparable GAAP measure.
Quarterly Non-GAAP Measures
(in thousands) 4Q 2014 3Q 2014 2Q 2014 1Q 2014 4Q 2013
Book Value (Shareholders' Equity) $ 266,916 $ 94,490 $ 92,697 $ 85,331 $ 80,361
Less:
Goodwill (4,205) (4,205) (4,205) (4,205) (4,205)
Core deposit and other intangibles (5,681) (5,986) (6,296) (6,597) (6,914)
Tangible Book Value (Tangible Shareholders' Equity) (Non-GAAP) $ 257,030 $ 84,299 $ 82,196 $ 74,529 $ 69,242
Net Income $ 144,616 $ 1,773 $ 2,792 $ 1,277 $ 2,290
Less taxes, credit costs and nonrecurring items:
Income tax benefit (expense) 142,475 276 (236) (23) 1,049
Securities gains, net 220 34 720 -- --
Other real estate owned expense (572) 29 (954) (261) (21)
Recovery of (provision for) loan losses 1,323 1,679 1,685 684 (1,820)
Mortgage and litigation accruals -- -- (7) 75 --
US Treasury sale expenses -- -- (409) -- --
Loan collection expense (170) (198) (551) (657) (548)
Branch closure and restructuring expenses (1,566) -- (7) (183) (178)
Executive severance -- (2,060) -- -- --
PCNR Earnings (Non-GAAP) $ 2,906 $ 2,013 $ 2,551 $ 1,642 $ 3,808
Noninterest Expense $ 20,446 $ 20,015 $ 19,268 $ 18,806 $ 17,550
Less credit costs and nonrecurring items:
Other real estate owned expense (572) 29 (954) (261) (21)
Mortgage and litigation accruals -- -- (7) 75 --
Loan collection expense (170) (198) (551) (657) (548)
Branch closure and restructuring expenses (1,566) -- (7) (183) (178)
US Treasury sale expenses -- -- (409) -- --
Executive severance -- (2,060) -- -- --
PCNR Noninterest Expense (Non-GAAP) $ 18,138 $ 17,786 $ 17,340 $ 17,780 $ 16,803
Noninterest Income $ 4,543 $ 3,985 $ 4,893 $ 3,943 $ 4,147
Less nonrecurring items:
Securities gains, net 220 34 720 -- --
PCNR Noninterest Income (Non-GAAP) $ 4,323 $ 3,951 $ 4,173 $ 3,943 $ 4,147
Annual Non-GAAP Measures
(in thousands) 2014 2013 2012
Book Value (Shareholders' Equity) $ 266,916 $ 80,361 $ 98,445
Less:
Goodwill (4,205) (4,205) (4,205)
Core deposit and other intangibles (5,681) (6,914) (7,495)
Tangible Book Value (Tangible Shareholders' Equity) (Non-GAAP) $ 257,030 $ 69,242 $ 86,745
Net Income (Loss) $ 150,458 $ (1,483) $ (40,005)
Less taxes, credit costs and nonrecurring items:
Loss on discontinued operations, net -- -- (27)
Securities gains, net 974 2,772 4,121
Income tax benefit (expense) 142,492 (1,326) 1,039
Other real estate owned expense (1,758) (4,138) (27,883)
Recovery of (provision for) loan losses 5,371 (523) (14,049)
Mortgage and litigation accruals 68 487 (1,100)
US Treasury sale expenses (409) -- --
Loan collection expense (1,576) (4,333) (3,274)
Branch closure and restructuring expenses (1,756) (675) (96)
Rebranding expense -- (616) (397)
Executive severance (2,060) -- --
Merger-related expense -- (3,498) (3,241)
PCNR Earnings (Non-GAAP) $ 9,112 $ 10,367 $ 4,902
Noninterest Expense $ 78,535 $ 84,481 $ 110,206
Less credit costs and nonrecurring items:
Other real estate owned expense (1,758) (4,138) (27,883)
Mortgage and litigation accruals 68 487 (1,100)
Loan collection expense (1,576) (4,333) (3,274)
Branch closure and restructuring expenses (1,756) (675) (96)
US Treasury sale expenses (409) -- --
Rebranding expense -- (616) (397)
Executive severance (2,060) -- --
Merger-related expense -- (3,498) (3,241)
PCNR Noninterest Expense (Non-GAAP) $ 71,044 $ 71,708 $ 74,215
Noninterest Income $ 17,364 $ 20,414 $ 21,958
Less nonrecurring items:
Securities gains, net 974 2,772 4,121
PCNR Noninterest Income (Non-GAAP) $ 16,390 $ 17,642 $ 17,837

CONTACT: For more information: David Nielsen, CFO, 980.819.6220 investorrelations@community1.com Kim Graham, 980.819.6278 kim.graham@community1.comSource:CommunityOne Bancorp