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National Commerce Corporation Announces Second Quarter 2016 Earnings

BIRMINGHAM, Ala., July 26, 2016 (GLOBE NEWSWIRE) -- National Commerce Corporation (Nasdaq:NCOM) (the “Company” or “NCC”), the parent company of National Bank of Commerce, today reported second quarter 2016 net income to common shareholders of $4.4 million, compared to $2.3 million for the second quarter of 2015. Diluted net earnings per share were $0.39 in the second quarter of 2016, compared to $0.34 in the first quarter of 2016 and $0.24 in the second quarter of 2015.

“National Commerce had a good second quarter and first six months of 2016,” said John H. Holcomb, III, Chairman and Chief Executive Officer of the Company. “This quarter was the first quarter for us to achieve a Return on Average Assets of 1.0%, and we are pleased to achieve that milestone. With our consistent focus on asset quality, we are glad to see nice improvement in our asset quality metrics, though we remind ourselves that we need to continue to maintain focus in that area.”

Several important measures from the second quarter of 2016 are as follows:

  • Net Interest Margin (taxable equivalent) of 4.23%, up 0.01% from the 4.22% reported for the second quarter of 2015. The margin increased 0.02% compared to the 2016 first quarter.
  • Return on Average Assets of 1.00%, compared to 0.75% for the second quarter of 2015 and 0.86% for the first quarter of 2016.
  • Return on Average Equity of 7.84%, compared to 5.22% for the second quarter of 2015 and 6.95% for the first quarter of 2016.
  • Return on Average Tangible Common Equity of 10.31%, compared to 6.35% for the second quarter of 2015 and 9.21% for the first quarter of 2016.
  • Second quarter 2016 loan growth (excluding mortgage loans held-for-sale) of $23.0 million.
  • Decrease in deposits of $37.3 million.
  • $91.5 million in mortgage production, compared to $84.8 million for the second quarter of 2015.
  • $167.1 million in purchased volume in the factoring division, compared to $188.6 million for the second quarter of 2015.
  • Decrease in non-acquired non-performing assets to $2.7 million from $3.4 million at March 31, 2016.
  • Annualized net charge-offs of 0.05% of average loans, compared to 0.16% for the second quarter of 2015.
  • Provision for loan losses of $0.9 million, compared to $120 thousand in the second quarter of 2015 and $1.5 million in the first quarter of 2016.
  • Ending tangible book value per share of $15.87.
  • Ending book value per share of $20.80.

The Company will host a live audio webcast conference call beginning at 8:00 a.m. Central Time on July 27, 2016 to discuss earnings and operating results for the second quarter of 2016. Investors may call in (toll free) by dialing (855) 871-0559 (conference ID 46508527). A replay of the conference call will be available until July 29, 2016 and can be accessed by dialing (855) 859-2056.

Investors who plan to participate in the live webcast of the conference call should access the webcast by visiting www.nationalbankofcommerce.com, and then clicking on the “Investor Relations” link under the “Learn More” tab located on that webpage. A replay of the webcast will be available on the website for one year. A copy of the news release will also be available at the same location.

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 tangible common equity, return on average tangible common equity, tangible book value per share, allowance for loan losses to nonacquired loans, 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.

  • “Tangible common equity” is 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.
  • “Allowance for loan losses to nonacquired loans” is defined as the total allowance for loan losses, less the allowance for loan losses attributable to factored receivables, divided by nonacquired loans held for investment, excluding factored receivables at the end of the period.
  • “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 NCC’s financial condition, results of operations and cash flows computed in accordance with GAAP; however, NCC acknowledges that the non-GAAP financial measures have a number of limitations. As such, NCC 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. Substantially all of the operations of National Commerce Corporation are conducted through the company’s wholly owned subsidiary, National Bank of Commerce. National Bank of Commerce currently operates seven full-service banking offices in Alabama (in Birmingham, Huntsville, Auburn-Opelika, and Baldwin County) and ten full-service banking offices in central Florida (in Vero Beach through National Bank of Commerce; in Longwood, Winter Park, Orlando, and Oviedo through United Legacy Bank, a division of National Bank of Commerce; and in Tavares, Port Orange, St. Augustine, and Ormond Beach through Reunion Bank of Florida, a division of National Bank of Commerce), as well as a loan production office in Atlanta, Georgia. National Bank of Commerce provides a broad array of financial services for commercial and consumer customers.

Additionally, National Bank of Commerce owns a majority stake in Corporate Billing, LLC, a transaction-based finance company based 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: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of NCC’s plans, objectives and expectations or those of its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) 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, 2015 and described in any subsequent reports that NCC has filed with the SEC. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements, and these 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.

NATIONAL COMMERCE CORPORATION
Unaudited Financial Highlights
(In thousands, except share and per share amounts and percentages)
For the Three Months Ended
June 30, March 31, December 31, September 30, June 30,
2016 2016 2015 2015 2015
Earnings Summary
Interest income $ 18,382 $ 18,313 $ 16,488 $ 13,450 $ 12,714
Interest expense 1,730 1,650 1,507 1,191 1,071
Net interest income 16,652 16,663 14,981 12,259 11,643
Provision for loan losses 901 1,533 631 201 120
Other noninterest income (1) 3,357 3,125 2,136 2,353 2,206
Merger/conversion-related expenses 12 138 395 122 168
Other noninterest expense (2) 12,242 11,915 11,049 9,773 9,448
Income before income taxes 6,854 6,202 5,042 4,516 4,113
Income tax expense 2,072 2,083 1,667 1,453 1,264
Net income before minority interest 4,782 4,119 3,375 3,063 2,849
Net income attributable to minority interest 428 340 437 573 593
Net income to common shareholders $ 4,354 $ 3,779 $ 2,938 $ 2,490 $ 2,256
Weighted average common and diluted shares outstanding
Basic 10,866,788 10,855,871 10,345,146 9,438,541 9,438,541
Diluted 11,067,972 11,039,208 10,552,871 9,594,472 9,569,695
Net earnings per common share
Basic $ 0.40 $ 0.35 $ 0.28 $ 0.26 $ 0.24
Diluted $ 0.39 $ 0.34 $ 0.28 $ 0.26 $ 0.24
June 30, March 31, December 31, September 30, June 30,
Selected Performance Ratios 2016 2016 2015 2015 2015
Return on average assets (ROAA) (3) 1.00% 0.86% 0.72% 0.75% 0.75 %
Return on average equity (ROAE) 7.84 6.95 5.76 5.62 5.22
Return on average tangible common equity
(ROATCE) 10.31 9.21 7.48 6.85 6.35
Net interest margin - taxable equivalent 4.23 4.21 4.06 4.02 4.22
Efficiency ratio 61.24 60.91 66.86 67.72 69.43
Operating efficiency ratio (2) 61.18 60.21 64.55 66.88 68.22
Noninterest income / average assets (annualized) 0.77 0.71 0.52 0.71 0.73
Noninterest expense / average assets (annualized) 2.83 2.76 2.80 2.99 3.19
Yield on loans 5.06 5.17 5.17 5.13 5.15
Cost of total deposits 0.40% 0.42% 0.40% 0.39% 0.38 %
June 30, March 31, December 31, September 30, June 30,
Factoring Metrics 2016 2016 2015 2015 2015
Recourse purchased volume $ 68,567 $ 66,554 $ 74,922 $ 82,661 $ 89,009
Non-recourse purchased volume 98,550 112,196 97,142 100,055 99,614
Total purchased volume $ 167,117 $ 178,750 $ 172,064 $ 182,716 $ 188,623
Average turn (days) 39.92 38.16 39.68 37.97 37.66
Net charge-offs / total purchased volume 0.07% 0.27% 0.12% 0.06% (0.04)%
Average discount rate 1.69% 1.72% 1.73% 1.74% 1.67 %
June 30, March 31, December 31, September 30, June 30,
Mortgage Metrics 2016 2016 2015 2015 2015
Total production ($) $ 91,466 $ 63,802 $ 58,903 $ 82,276 $ 84,796
Refinance (%) 17.2% 18.2% 26.0% 19.1% 18.6 %
Purchases (%) 82.8% 81.8% 74.0% 80.9% 81.4 %
NATIONAL COMMERCE CORPORATION
Unaudited Financial Highlights
(In thousands, except share and per share amounts and percentages)
As of
June 30, March 31, December 31, September 30, June 30,
Balance Sheet Highlights 2016 2016 2015 2015 2015
Cash and cash equivalents $ 86,163 $ 123,853 $ 212,457 $ 192,882 $ 142,393
Total securities 89,495 82,954 80,863 45,911 42,586
Mortgage loans held-for-sale 19,468 12,529 15,020 7,926 13,750
Acquired purchased credit-impaired loans 10,382 10,205 10,443 5,615 5,724
Acquired non-purchased credit-impaired loans 346,685 356,305 370,872 123,730 131,953
Nonacquired loans held for investment (4) 978,836 942,781 870,471 811,011 757,976
CBI loans (factoring receivables) 70,673 74,248 67,628 74,780 75,000
Total gross loans held for investment 1,406,576 1,383,539 1,319,414 1,015,136 970,653
Allowance for loan losses 11,642 10,927 9,842 9,391 9,274
Total intangibles 53,154 53,312 53,474 31,291 31,310
Total assets 1,735,782 1,735,940 1,763,369 1,350,781 1,256,614
Total deposits 1,460,877 1,498,197 1,514,458 1,141,837 1,051,483
FHLB and other borrowings 7,000 7,000 22,000 22,000 22,000
Subordinated debt 24,540 - - - -
Total liabilities 1,509,662 1,514,840 1,546,733 1,173,358 1,081,985
Minority interest 7,362 7,275 7,372 7,508 7,527
Common stock 109 109 108 94 94
Total shareholders' equity 226,120 221,100 216,636 177,423 174,629
Tangible common equity $ 172,538 $ 167,447 $ 162,724 $ 145,558 $ 142,726
End of period common shares outstanding 10,870,033 10,861,487 10,824,969 9,438,541 9,438,541
As of and For the Three Months Ended
June 30, March 31, December 31, September 30, June 30,
Asset Quality Analysis 2016 2016 2015 2015 2015
Nonacquired
Nonaccrual loans $ 248 $ 184 $ 187 $ 829 $ 2,688
Other real estate and repossessed assets 2,068 2,792 3,873 3,562 1,494
Loans past due 90 days or more and still accruing 406 452 252 148 44
Total nonacquired nonperforming assets $ 2,722 $ 3,428 $ 4,312 $ 4,539 $ 4,226
Acquired
Nonaccrual loans $ 3,099 $ 3,617 $ 3,508 $ 2,829 $ 2,795
Other real estate and repossessed assets 92 92 92 72 142
Loans past due 90 days or more and still accruing - - - - -
Total acquired nonperforming assets $ 3,191 $ 3,709 $ 3,600 $ 2,901 $ 2,937
Selected asset quality ratios
Nonperforming assets / Assets 0.34% 0.41% 0.45% 0.55% 0.57 %
Nonperforming assets / (Loans + OREO + repossessed assets) 0.42 0.51 0.60 0.73 0.74
Net charge-offs (recoveries) to average loans (annualized) 0.05 0.13 0.06 0.03 0.16
Allowance for loan losses to total loans 0.83 0.79 0.75 0.93 0.96
Nonacquired nonperforming assets / (Nonacquired loans +
nonacquired OREO + nonacquired repossessed assets) (4) 0.28 0.36 0.49 0.56 0.56
Allowance for loan losses to nonacquired nonperforming
loans 1,780.12 1,718.08 2,241.91 961.21 339.46
Allowance for loan losses to nonacquired loans (4) 1.14% 1.11% 1.07% 1.10% 1.13 %
For the Three Months Ended
June 30, March 31, December 31, September 30, June 30,
Taxable Equivalent Yields/Rates 2016 2016 2015 2015 2015
Interest income:
Loans 5.06% 5.17% 5.17% 5.13% 5.15 %
Mortgage loans held-for-sale 3.51 4.40 3.44 4.17 4.02
Interest on securities:
Taxable 1.94 2.68 3.05 3.30 3.33
Non-taxable 5.01 4.90 4.96 4.99 5.08
Cash balances in other banks 0.65 0.58 0.35 0.31 0.38
Total interest-earning assets 4.67 4.63 4.46 4.41 4.60
Interest expense:
Interest on deposits 0.54 0.56 0.54 0.50 0.50
Interest on FHLB and other borrowings 4.08 2.97 2.01 2.00 2.01
Interest on subordinated debt 6.34 - - - -
Total interest-bearing liabilities 0.62 0.58 0.57 0.54 0.54
Net interest spread 4.05 4.05 3.89 3.87 4.06
Net interest margin 4.23% 4.21% 4.06% 4.02% 4.22 %
NATIONAL COMMERCE CORPORATION
Unaudited Financial Highlights
(In thousands, except share and per share amounts and percentages)
As of
June 30, March 31, December 31, September 30, June 30,
2016 2016 2015 2015 2015
Shareholders' Equity and Capital Ratios
Tier 1 Leverage Ratio 9.51% 9.13% 9.68% 10.39% 11.09 %
Tier 1 Common Capital Ratio 11.25 11.18 11.18 12.88 12.86
Tier 1 Risk-based Capital Ratio 11.25 11.18 11.18 12.88 12.86
Total Risk-based Capital Ratio 13.79 11.97 11.91 13.79 13.78
Equity / Assets 13.03 12.74 12.29 13.13 13.90
Tangible common equity to tangible assets 10.25% 9.95% 9.52% 11.03% 11.65 %
Book value per share $ 20.80 $ 20.36 $ 20.01 $ 18.80 $ 18.50
Tangible book value per share $ 15.87 $ 15.42 $ 15.03 $ 15.42 $ 15.12
For the Three Months Ended
June 30, March 31, December 31, September 30, June 30,
2016 2016 2015 2015 2015
Detail of other noninterest expense
Salaries and employee benefits $ 6,907 $ 6,945 $ 6,077 $ 5,186 $ 5,114
Commission-based compensation 1,036 875 844 1,048 1,056
Occupancy and equipment expense 1,131 1,135 1,048 871 829
Data processing expenses 618 667 511 464 487
Advertising and marketing expenses 191 160 19 124 125
Legal fees 179 122 173 177 135
FDIC insurance assessments 257 263 242 205 152
Property and casualty insurance premiums 166 223 169 143 146
Accounting and audit expenses 249 250 332 211 212
Consulting and other professional expenses 184 243 387 238 164
Telecommunications expenses 140 159 132 144 135
ORE, Repo asset and other collection expenses 89 59 256 79 71
Core deposit intangible amortization 192 191 175 111 111
Other noninterest expense 915 761 1,079 894 879
Total noninterest expense $ 12,254 $ 12,053 $ 11,444 $ 9,895 $ 9,616
NATIONAL COMMERCE CORPORATION
Unaudited Financial Highlights
(In thousands, except share and per share amounts and percentages)
As of
June 30, March 31, December 31, September 30, June 30,
Non-GAAP Reconciliation 2016 2016 2015 2015 2015
Total shareholders' equity $ 226,120 $ 221,100 $ 216,636 $ 177,423 $ 174,629
Less: intangible assets 53,154 53,312 53,474 31,291 31,310
Less: minority interest not included in intangible assets 428 341 438 574 593
Tangible common equity $ 172,538 $ 167,447 $ 162,724 $ 145,558 $ 142,726
Common shares outstanding at year or period end 10,870,033 10,861,487 10,824,969 9,438,541 9,438,541
Tangible book value per share $ 15.87 $ 15.42 $ 15.03 $ 15.42 $ 15.12
Total assets at end of period $ 1,735,782 $ 1,735,940 $ 1,763,369 $ 1,350,781 $ 1,256,614
Less: intangible assets 53,154 53,312 53,474 31,291 31,310
Adjusted total assets at end of period $ 1,682,628 $ 1,682,628 $ 1,709,895 $ 1,319,490 $ 1,225,304
Tangible common equity to tangible assets 10.25% 9.95% 9.52% 11.03% 11.65 %
Total allowance for loan losses $ 11,642 $ 10,927 $ 9,842 $ 9,391 $ 9,274
Less: allowance for loan losses attributable to
CBI (factoring receivables) 500 500 500 500 715
Adjusted allowance for loan losses at end of period $ 11,142 $ 10,427 $ 9,342 $ 8,891 $ 8,559
Nonacquired loans held for investment (4) 978,836 942,781 870,471 811,011 757,976
Allowance for loan losses to nonacquired loans (4) 1.14% 1.11% 1.07% 1.10% 1.13 %
For the Three Months Ended
June 30, March 31, December 31, September 30, June 30,
2016 2016 2015 2015 2015
Non-GAAP Reconciliation
Total average shareholders' equity $ 223,357 $ 218,730 $ 202,299 $ 175,821 $ 173,354
Less: average intangible assets 53,234 53,388 46,113 31,158 30,555
Less: average minority interest not included
in intangible assets 284 231 331 371 315
Average tangible common equity $ 169,839 $ 165,111 $ 155,855 $ 144,292 $ 142,484
Net income to common shareholders 4,354 3,779 2,938 2,490 2,256
Return on average tangible common equity (ROATCE) 10.31% 9.21% 7.48% 6.85% 6.35 %
Efficiency ratio:
Net interest income $ 16,652 $ 16,663 $ 14,981 $ 12,259 $ 11,643
Total noninterest income 3,357 3,125 2,136 2,353 2,206
Less: gain (loss) on sale of securities - - - - -
Operating revenue $ 20,009 $ 19,788 $ 17,117 $ 14,612 $ 13,849
Expenses:
Total noninterest expenses $ 12,254 $ 12,053 $ 11,444 $ 9,895 $ 9,616
Efficiency ratio 61.24% 60.91% 66.86% 67.72% 69.43 %
Operating efficiency ratio:
Net interest income $ 16,652 $ 16,663 $ 14,981 $ 12,259 $ 11,643
Total noninterest income 3,357 3,125 2,136 2,353 2,206
Less: gain (loss) on sale of securities - - - - -
Operating revenue $ 20,009 $ 19,788 $ 17,117 $ 14,612 $ 13,849
Expenses:
Total noninterest expenses $ 12,254 $ 12,053 $ 11,444 $ 9,895 $ 9,616
Less: merger/conversion-related expenses 12 138 395 122 168
Adjusted noninterest expenses $ 12,242 $ 11,915 $ 11,049 $ 9,773 $ 9,448
Operating efficiency ratio 61.18% 60.21% 64.55% 66.88% 68.22 %
(1) Excludes securities gains
(2) Excludes merger/conversion-related expenses
(3) Net income to common shareholders / average assets
(4) Excludes CBI loans


NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Balance Sheets
(In thousands, except share and per share data)
Assets
June 30, 2016
December 31, 2015
Cash and due from banks $27,283 $27,173
Interest-bearing deposits with banks 58,880 185,284
Cash and cash equivalents 86,163 212,457
Investment securities held-to-maturity (fair value of $28,215 and $27,843 at June 30, 2016
and December 31, 2015, respectively) 26,993 27,458
Investment securities available-for-sale 62,502 53,405
Other investments 7,715 6,235
Mortgage loans held-for-sale 19,468 15,020
Loans, net of unearned income 1,406,576 1,319,414
Less: allowance for loan losses 11,642 9,842
Loans, net 1,394,934 1,309,572
Premises and equipment, net 32,496 31,432
Accrued interest receivable 3,690 3,510
Bank-owned life insurance 27,631 27,223
Other real estate 2,160 3,965
Deferred tax assets, net 13,853 14,190
Goodwill 50,748 50,686
Core deposit intangible, net 2,406 2,788
Other assets 5,023 5,428
Total assets $1,735,782 $1,763,369
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand $384,854 $382,946
Interest-bearing demand 207,673 202,649
Savings and money market 584,347 611,887
Time 284,003 316,976
Total deposits 1,460,877 1,514,458
Federal Home Loan Bank advances 7,000 22,000
Subordinated debt 24,540 -
Accrued interest payable 671 627
Other liabilities 16,574 9,648
Total liabilities 1,509,662 1,546,733
Commitments and contingencies
Shareholders’ equity:
Preferred stock, 250,000 shares authorized, no shares issued or outstanding - -
Common stock, $0.01 par value, 30,000,000 shares authorized, 10,870,033 and 10,824,969
shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively 109 108
Additional paid-in capital 203,370 202,456
Retained earnings 14,285 6,152
Accumulated other comprehensive income 994 548
Total shareholders' equity attributable to National Commerce Corporation 218,758 209,264
Noncontrolling interest 7,362 7,372
Total shareholders' equity 226,120 216,636
Total liabilities and shareholders' equity $1,735,782 $1,763,369

NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Statements of Earnings
(In thousands, except per share data)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Interest and dividend income:
Interest and fees on loans $17,669 $12,226 $35,152 $24,018
Interest and dividends on taxable investment securities 380 269 792 525
Interest on non-taxable investment securities 204 114 404 156
Interest on interest-bearing deposits and federal funds sold 129 105 347 208
Total interest income 18,382 12,714 36,695 24,907
Interest expense:
Interest on deposits 1,476 961 3,045 1,879
Interest on borrowings 71 110 152 219
Interest on subordinated debt 183 - 183 -
Total interest expense 1,730 1,071 3,380 2,098
Net interest income 16,652 11,643 33,315 22,809
Provision for loan losses 901 120 2,434 281
Net interest income after provision for loan losses 15,751 11,523 30,881 22,528
Other income:
Service charges and fees on deposit accounts 505 308 985 575
Mortgage origination and fee income 1,627 1,505 3,019 2,776
Merchant sponsorship revenue 491 191 1,013 191
Income from bank-owned life insurance 204 86 408 165
Wealth management fees 11 13 24 32
Gain (loss) on other real estate 119 (11) 275 (24)
Other 400 114 758 255
Total other income 3,357 2,206 6,482 3,970
Other expense:
Salaries and employee benefits 6,907 5,114 13,852 10,101
Commission-based compensation 1,036 1,056 1,911 1,852
Occupancy and equipment 1,131 829 2,266 1,665
Core deposit intangible amortization 192 111 383 222
Other operating expense 2,988 2,506 5,895 5,066
Total other expense 12,254 9,616 24,307 18,906
Earnings before income taxes 6,854 4,113 13,056 7,592
Income tax expense 2,072 1,264 4,155 2,356
Net earnings 4,782 2,849 8,901 5,236
Less: Net earnings attributable to noncontrolling interest 428 593 768 1,059
Net earnings attributable to National Commerce Corporation $ 4,354 $ 2,256 $ 8,133 $ 4,177
Weighted average common and diluted shares outstanding
Basic 10,866,788 9,438,541 10,861,330 8,574,900
Diluted 11,067,972 9,569,695 11,059,906 8,687,986
Basic earnings per common share $0.40 $0.24 $0.75 $0.49
Diluted earnings per common share $0.39 $0.24 $0.74 $0.48

NATIONAL COMMERCE CORPORATION
Average Balance Sheets and Net Interest Analysis
For the Three Months Ended
(Dollars in thousands) June 30, 2016March 31, 2016December 31, 2015September 30, 2015June 30, 2015
Interest-earning assets Average 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 $1,391,789 $17,523 5.06%$1,352,737 $17,373 5.17%$1,204,437 $15,699 5.17%$992,223 $12,826 5.13%$944,373 $12,116 5.15%
Mortgage loans held-for-sale 17,288 151 3.51 10,503 115 4.40 9,697 84 3.44 9,890 104 4.17 11,180 112 4.02
Securities:
Taxable securities 78,907 380 1.94 61,764 412 2.68 48,097 370 3.05 31,132 259 3.30 32,402 269 3.33
Tax-exempt securities 26,036 324 5.01 26,041 317 4.90 21,982 275 4.96 17,245 217 4.99 14,297 181 5.08
Cash balances in other banks 80,140 129 0.65 151,318 218 0.58 191,077 168 0.35 166,715 129 0.31 112,081 105 0.38
Total interest-earning assets 1,594,160 $18,507 4.67 1,602,363 $18,435 4.63 1,475,290 $16,596 4.46 1,217,205 $13,535 4.41 1,114,333 $12,783 4.60
Noninterest-earning assets 148,959 156,260 145,791 96,824 95,949
Total assets $1,743,119 $1,758,623 $1,621,081 $1,314,029 $1,210,282
Interest-bearing liabilities
Interest-bearing transaction accounts $210,776 $124 0.24%$204,339 $123 0.24%$196,140 $129 0.26%$182,056 $118 0.26%$157,261 $97 0.25%
Savings and money market deposits 603,173 698 0.47 620,429 762 0.49 542,631 612 0.45 443,306 486 0.43 408,117 417 0.41
Time deposits 288,350 654 0.91 306,106 684 0.90 291,399 654 0.89 228,298 476 0.83 208,388 447 0.86
Federal Home Loan Bank and other borrowed money 7,000 71 4.08 10,959 81 2.97 22,104 112 2.01 22,000 111 2.00 22,000 110 2.01
Subordinated debt 11,605 183 6.34 - - -
- - - - - -
- - -
Total interest-bearing liabilities 1,120,904 $1,730 0.62 1,141,833 $1,650 0.58 1,052,274 $1,507 0.57 875,660 $1,191 0.54 795,766 $1,071 0.54
Noninterest-bearing deposits 388,363 386,674 354,812 254,402 233,136
Total funding sources 1,509,267 1,528,507 1,407,086 1,130,062 1,028,902
Noninterest-bearing liabilities 10,495 11,386 11,696 8,146 8,026
Shareholders' equity 223,357 218,730 202,299 175,821 173,354
$1,743,119 $1,758,623 $1,621,081 $1,314,029 $1,210,282
Net interest rate spread 4.05% 4.05% 3.89% 3.87% 4.06%
Net interest income/margin (taxable equivalent) 16,777 4.23% 16,785 4.21% 15,089 4.06% 12,344 4.02% 11,712 4.22%
Tax equivalent adjustment 125 122 108 85 69
Net interest income/margin $16,652 4.20% $16,663 4.18% $14,981 4.03% $12,259 4.00% $11,643 4.19%

Contact: National Commerce Corporation William E. Matthews, V Vice Chairman and Chief Financial Officer (205) 313-8122

Source:National Commerce Corporation