National Commerce Corporation Announces Third Quarter 2016 Earnings

BIRMINGHAM, Ala., Oct. 25, 2016 (GLOBE NEWSWIRE) -- National Commerce Corporation (Nasdaq:NCOM) (the “Company” or “NCC”), the parent company of National Bank of Commerce, today reported third quarter 2016 net income to common shareholders of $4.8 million, compared to $2.5 million for the third quarter of 2015. Diluted net earnings per share were $0.43 in the third quarter of 2016, compared to $0.39 in the second quarter of 2016 and $0.26 in the third quarter of 2015. For the nine months ended September 30, 2016, NCC earned $12.9 million, or $1.17 in diluted earnings per share, up from $6.7 million, or $0.74 per diluted share, for the nine months ended September 30, 2015.

“I am pleased with the continued growth in our profitability in 2016, with another quarter of Return on Average Assets above 1.0% and year-to-date diluted earnings per share growth of 58%,” said John H. Holcomb, III, Chairman and Chief Executive Officer of the Company. “Our asset quality, which is very important to the company’s ability to achieve its long term goals, also remains good, though we can never lose our focus on continued vigilance in that very critical component of our business. Our third quarter loan growth was below our long term expectations for ourselves, in part due to some expected payoffs, so we need to continue our focus on attracting additional high quality customer relationships to our bank.”

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

  • Net Interest Margin (taxable equivalent) of 4.18%, up 0.16% from the 4.02% reported for the third quarter of 2015. The margin decreased 0.05% compared to the 2016 second quarter.
  • Return on Average Assets of 1.08%, compared to 0.75% for the third quarter of 2015 and 1.00% for the second quarter of 2016.
  • Return on Average Equity of 8.36%, compared to 5.62% for the third quarter of 2015 and 7.84% for the second quarter of 2016.
  • Return on Average Tangible Common Equity of 10.90%, compared to 6.85% for the third quarter of 2015 and 10.31% for the 2016 second quarter.
  • Third quarter 2016 loan growth (excluding mortgage loans held-for-sale) of $5.8 million; non-acquired loans grew $30.8 million in the quarter.
  • Increase in deposits of $39.0 million.
  • $91.6 million in mortgage production, compared to $82.3 million for the third quarter of 2015.
  • $172.4 million in purchased volume in the factoring division, compared to $182.7 million for the third quarter of 2015.
  • Decrease in non-acquired non-performing assets to $2.4 million, from $2.7 million at June 30, 2016.
  • Annualized net charge-offs of 0.02% of average loans, compared to 0.03% for the third quarter of 2015.
  • Provision for loan losses of $0.4 million, compared to $0.9 million in the 2016 second quarter and $0.2 million in the third quarter of 2015.
  • Ending tangible book value per share of $16.37.
  • Ending book value per share of $21.26.

The Company will host a live audio webcast conference call beginning at 8:30 a.m. Central Time on October 26, 2016 to discuss earnings and operating results for the third quarter of 2016. Investors may call in (toll free) by dialing (844) 296-8205 (conference ID 90904212). A replay of the conference call will be available until October 28, 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.

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

  • “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. This measure is important to investors because it disaggregates the acquired and non-acquired loans and provides a measure that may be more comparable to a bank that has no acquired loans. This measure also excludes the allowance and factored receivable balances at our Corporate Billing subsidiary, which is helpful to investors because of the somewhat unique nature of that business and the very rapid turnover of those receivables, and provides a measure that is more comparable to a bank that does not have a receivables factoring business.
  • “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
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Earnings Summary
Interest income $18,836 $18,382 $18,313 $16,488 $13,450
Interest expense 1,959 1,730 1,650 1,507 1,191
Net interest income 16,877 16,652 16,663 14,981 12,259
Provision for loan losses 373 901 1,533 631 201
Other noninterest income (1) 4,002 3,357 3,125 2,136 2,353
Merger/conversion-related expenses 160 12 138 395 122
Other noninterest expense (2) 12,472 12,242 11,915 11,049 9,773
Income before income taxes 7,874 6,854 6,202 5,042 4,516
Income tax expense 2,639 2,072 2,083 1,667 1,453
Net income before minority interest 5,235 4,782 4,119 3,375 3,063
Net income attributable to minority interest 422 428 340 437 573
Net income to common shareholders $4,813 $4,354 $3,779 $2,938 $2,490
Weighted average common and diluted shares outstanding
Basic 10,890,860 10,866,788 10,855,871 10,345,146 9,438,541
Diluted 11,115,134 11,067,972 11,039,208 10,552,871 9,594,472
Net earnings per common share
Basic $0.44 $0.40 $0.35 $0.28 $0.26
Diluted $0.43 $0.39 $0.34 $0.28 $0.26
September 30, June 30, March 31, December 31, September 30,
Selected Performance Ratios 2016 2016 2016 2015 2015
Return on average assets (ROAA) (3) 1.08 % 1.00 % 0.86 % 0.72 % 0.75 %
Return on average equity (ROAE) 8.36 7.84 6.95 5.76�� 5.62
Return on average tangible common equity
(ROATCE) 10.90 10.31 9.21 7.48 6.85
Net interest margin - taxable equivalent 4.18 4.23 4.21 4.06 4.02
Efficiency ratio 60.50 61.24 60.91 66.86 67.72
Operating efficiency ratio (2) 59.73 61.18 60.21 64.55 66.88
Noninterest income / average assets (annualized) 0.90 0.77 0.71 0.52 0.71
Noninterest expense / average assets (annualized) 2.85 2.83 2.76 2.80 2.99
Yield on loans 5.08 5.06 5.17 5.17 5.13
Cost of total deposits 0.40 % 0.40 % 0.42 % 0.40 % 0.39 %
September 30, June 30, March 31, December 31, September 30,
Factoring Metrics 2016 2016 2016 2015 2015
Recourse purchased volume $71,872 $68,567 $66,554 $74,922 $82,661
Non-recourse purchased volume 100,486 98,550 112,196 97,142 100,055
Total purchased volume $172,358 $167,117 $178,750 $172,064 $182,716
Average turn (days) 38.13 39.92 38.16 39.68 37.97
Net charge-offs / total purchased volume 0.05 % 0.07 % 0.27 % 0.12 % 0.06 %
Average discount rate 1.70 % 1.69 % 1.72 % 1.73 % 1.74 %
September 30, June 30, March 31, December 31, September 30,
Mortgage Metrics 2016 2016 2016 2015 2015
Total production ($) $91,613 $91,466 $63,802 $58,903 $82,276
Refinance (%) 30.4 % 17.2 % 18.2 % 26.0 % 19.1 %
Purchases (%) 69.6 % 82.8 % 81.8 % 74.0 % 80.9 %
NATIONAL COMMERCE CORPORATION
Unaudited Financial Highlights
(In thousands, except share and per share amounts and percentages)
As of
September 30, June 30, March 31, December 31, September 30,
Balance Sheet Highlights 2016 2016 2016 2015 2015
Cash and cash equivalents $122,920 $86,163 $123,853 $212,457 $192,882
Total securities 102,848 89,495 82,954 80,863 45,911
Mortgage loans held-for-sale 7,810 19,468 12,529 15,020 7,926
Acquired purchased credit-impaired loans 9,500 10,382 10,205 10,443 5,615
Acquired non-purchased credit-impaired loans 323,125 346,685 356,305 370,872 123,730
Nonacquired loans held for investment (4) 1,009,677 978,836 942,781 870,471 811,011
CBI loans (factoring receivables) 70,066 70,673 74,248 67,628 74,780
Total gross loans held for investment 1,412,368 1,406,576 1,383,539 1,319,414 1,015,136
Allowance for loan losses 11,950 11,642 10,927 9,842 9,391
Total intangibles 52,962 53,154 53,312 53,474 31,291
Total assets 1,779,278 1,735,782 1,735,940 1,763,369 1,350,781
Total deposits 1,499,879 1,460,877 1,498,197 1,514,458 1,141,837
FHLB and other borrowings 7,000 7,000 7,000 22,000 22,000
Subordinated debt 24,487 24,540 - - -
Total liabilities 1,547,105 1,509,662 1,514,840 1,546,733 1,173,358
Minority interest 7,357 7,362 7,275 7,372 7,508
Common stock 109 109 109 108 94
Total shareholders' equity 232,173 226,120 221,100 216,636 177,423
Tangible common equity $178,788 $172,538 $167,447 $162,724 $145,558
End of period common shares outstanding 10,920,423 10,870,033 10,861,487 10,824,969 9,438,541
As of and For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
Asset Quality Analysis 2016 2016 2016 2015 2015
Nonacquired
Nonaccrual loans $19 $248 $184 $187 $829
Other real estate and repossessed assets 2,068 2,068 2,792 3,873 3,562
Loans past due 90 days or more and still accruing 358 406 452 252 148
Total nonacquired nonperforming assets $2,445 $2,722 $3,428 $4,312 $4,539
Acquired
Nonaccrual loans $2,982 $3,099 $3,617 $3,508 $2,829
Other real estate and repossessed assets 92 92 92 92 72
Loans past due 90 days or more and still accruing - - - - -
Total acquired nonperforming assets $3,074 $3,191 $3,709 $3,600 $2,901
Selected asset quality ratios
Nonperforming assets / Assets 0.31 % 0.34 % 0.41 % 0.45 % 0.55 %
Nonperforming assets / (Loans + OREO + repossessed assets) 0.39 0.42 0.51 0.60 0.73
Net charge-offs (recoveries) to average loans (annualized) 0.02 0.05 0.13 0.06 0.03
Allowance for loan losses to total loans 0.85 0.83 0.79 0.75 0.93
Nonacquired nonperforming assets / (Nonacquired loans +
nonacquired OREO + nonacquired repossessed assets) (4) 0.24 0.28 0.36 0.49 0.56
Allowance for loan losses to nonacquired nonperforming
loans 3,169.76 1,780.12 1,718.08 2,241.91 961.21
Allowance for loan losses to nonacquired loans (4) 1.13 % 1.14 % 1.11 % 1.07 % 1.10 %
For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
Taxable Equivalent Yields/Rates 2016 2016 2016 2015 2015
Interest income:
Loans 5.08 % 5.06 % 5.17 % 5.17 % 5.13 %
Mortgage loans held-for-sale 4.12 3.51 4.40 3.44 4.17
Interest on securities:
Taxable 2.55 1.95 2.68 3.05 3.30
Non-taxable 4.85 4.93 4.90 4.96 4.99
Cash balances in other banks 0.60 0.65 0.58 0.35 0.31
Total interest-earning assets 4.66 4.67 4.63 4.46 4.41
Interest expense:
Interest on deposits 0.54 0.54 0.56 0.54 0.50
Interest on FHLB and other borrowings 4.04 4.08 2.97 2.01 2.00
Interest on subordinated debt 6.32 6.34 - - -
Total interest-bearing liabilities 0.68 0.62 0.58 0.57 0.54
Net interest spread 3.98 4.05 4.05 3.89 3.87
Net interest margin 4.18 % 4.23 % 4.21 % 4.06 % 4.02 %
NATIONAL COMMERCE CORPORATION
Unaudited Financial Highlights
(In thousands, except share and per share amounts and percentages)
As of
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Shareholders' Equity and Capital Ratios
Tier 1 Leverage Ratio 9.74 % 9.51 % 9.13 % 9.68 % 10.39 %
Tier 1 Common Capital Ratio 11.63 11.25 11.18 11.18 12.88
Tier 1 Risk-based Capital Ratio 11.63 11.25 11.18 11.18 12.88
Total Risk-based Capital Ratio 14.18 13.79 11.97 11.91 13.79
Equity / Assets 13.05 13.03 12.74 12.29 13.13
Tangible common equity to tangible assets 10.36 % 10.25 % 9.95 % 9.52 % 11.03 %
Book value per share $21.26 $20.80 $20.36 $20.01 $18.80
Tangible book value per share $16.37 $15.87 $15.42 $15.03 $15.42
For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Detail of other noninterest expense
Salaries and employee benefits $6,948 $6,907 $6,945 $6,077 $5,186
Commission-based compensation 1,104 1,036 875 844 1,048
Occupancy and equipment expense 1,181 1,131 1,135 1,048 871
Data processing expenses 572 618 667 511 464
Advertising and marketing expenses 198 191 160 19 124
Legal fees 182 179 122 173 177
FDIC insurance assessments 246 257 263 242 205
Property and casualty insurance premiums 90 166 223 169 143
Accounting and audit expenses 252 249 250 332 211
Consulting and other professional expenses 330 184 243 387 238
Telecommunications expenses 146 140 159 132 144
ORE, Repo asset and other collection expenses 142 89 59 256 79
Core deposit intangible amortization 191 192 191 175 111
Other noninterest expense 1,050 915 761 1,079 894
Total noninterest expense $ 12,632 $ 12,254 $ 12,053 $ 11,444 $ 9,895
NATIONAL COMMERCE CORPORATION
Unaudited Financial Highlights
(In thousands, except share and per share amounts and percentages)
As of
September 30, June 30, March 31, December 31, September 30,
Non-GAAP Reconciliation 2016 2016 2016 2015 2015
Total shareholders' equity $232,173 $226,120 $221,100 $216,636 $177,423
Less: intangible assets 52,962 53,154 53,312 53,474 31,291
Less: minority interest not included in intangible assets 423 428 341 438 574
Tangible common equity $178,788 $172,538 $167,447 $162,724 $145,558
Common shares outstanding at year or period end 10,920,423 10,870,033 10,861,487 10,824,969 9,438,541
Tangible book value per share $ 16.37 $ 15.87 $ 15.42 $ 15.03 $ 15.42
Total assets at end of period $1,779,278 $1,735,782 $1,735,940 $1,763,369 $1,350,781
Less: intangible assets 52,962 53,154 53,312 53,474 31,291
Adjusted total assets at end of period $1,726,316 $1,682,628 $1,682,628 $1,709,895 $1,319,490
Tangible common equity to tangible assets 10.36 % 10.25 % 9.95 % 9.52 % 11.03 %
Total allowance for loan losses $11,950 $11,642 $10,927 $9,842 $9,391
Less: allowance for loan losses attributable to
CBI (factoring receivables) 500 500 500 500 500
Adjusted allowance for loan losses at end of period $11,450 $11,142 $10,427 $9,342 $8,891
Nonacquired loans held for investment (4) 1,009,677 978,836 942,781 870,471 811,011
Allowance for loan losses to nonacquired loans (4) 1.13 % 1.14 % 1.11 % 1.07 % 1.10 %
For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Non-GAAP Reconciliation
Total average shareholders' equity $228,953 $223,357 $218,730 $202,299 $175,821
Less: average intangible assets 53,056 53,234 53,388 46,113 31,158
Less: average minority interest not included
in intangible assets 282 284 231 331 371
Average tangible common equity $175,615 $169,839 $165,111 $155,855 $144,292
Net income to common shareholders 4,813 4,354 3,779 2,938 2,490
Return on average tangible common equity (ROATCE) 10.90 % 10.31 % 9.21 % 7.48 % 6.85 %
Efficiency ratio:
Net interest income $16,877 $16,652 $16,663 $14,981 $12,259
Total noninterest income 4,002 3,357 3,125 2,136 2,353
Less: gain (loss) on sale of securities - - - - -
Operating revenue $ 20,879 $ 20,009 $ 19,788 $ 17,117 $ 14,612
Expenses:
Total noninterest expenses $ 12,632 $ 12,254 $ 12,053 $ 11,444 $ 9,895
Efficiency ratio 60.50 % 61.24 % 60.91 % 66.86 % 67.72 %
Operating efficiency ratio:
Net interest income $16,877 $16,652 $16,663 $14,981 $12,259
Total noninterest income 4,002 3,357 3,125 2,136 2,353
Less: gain (loss) on sale of securities - - - - -
Operating revenue $ 20,879 $ 20,009 $ 19,788 $ 17,117 $ 14,612
Expenses:
Total noninterest expenses $12,632 $12,254 $12,053 $11,444 $9,895
Less: merger/conversion-related expenses 160 12 138 395 122
Adjusted noninterest expenses $ 12,472 $ 12,242 $ 11,915 $ 11,049 $ 9,773
Operating efficiency ratio 59.73 % 61.18 % 60.21 % 64.55 % 66.88 %
(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
September 30, 2016
December 31, 2015
Cash and due from banks$27,187 $27,173
Interest-bearing deposits with banks 95,733 185,284
Cash and cash equivalents 122,920 212,457
Investment securities held-to-maturity (fair value of $27,594 and $27,843 at September 30, 2016
and December 31, 2015, respectively) 26,666 27,458
Investment securities available-for-sale 76,182 53,405
Other investments 7,715 6,235
Mortgage loans held-for-sale 7,810 15,020
Loans, net of unearned income 1,412,368 1,319,414
Less: allowance for loan losses 11,950 9,842
Loans, net 1,400,418 1,309,572
Premises and equipment, net 32,158 31,432
Accrued interest receivable 3,442 3,510
Bank-owned life insurance 27,837 27,223
Other real estate 2,160 3,965
Deferred tax assets, net 13,820 14,190
Goodwill 50,748 50,686
Core deposit intangible, net 2,214 2,788
Other assets 5,188 5,428
Total assets$ 1,779,278 $ 1,763,369
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand$382,924 $382,946
Interest-bearing demand 220,488 202,649
Savings and money market 618,040 611,887
Time 278,427 316,976
Total deposits 1,499,879 1,514,458
Federal Home Loan Bank advances 7,000 22,000
Subordinated debt 24,487 -
Accrued interest payable 1,083 627
Other liabilities 14,656 9,648
Total liabilities 1,547,105 1,546,733
Commitments and contingencies
Shareholders’ equity:
Preferred stock, 250,000 shares authorized, no shares issued or outstanding - -
Common stock, $0.01 par value, 30,000,000 shares authorized, 10,870,033 and 10,824,969
shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively 109 108
Additional paid-in capital 204,551 202,456
Retained earnings 19,098 6,152
Accumulated other comprehensive income 1,058 548
Total shareholders' equity attributable to National Commerce Corporation 224,816 209,264
Noncontrolling interest 7,357 7,372
Total shareholders' equity 232,173 216,636
Total liabilities and shareholders' equity$ 1,779,278 $ 1,763,369

NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Statements of Earnings
(In thousands, except per share data)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Interest and dividend income:
Interest and fees on loans$17,991 $12,925 $53,143 $36,943
Interest and dividends on taxable investment securities 493 259 1,288 784
Interest on non-taxable investment securities 200 137 601 293
Interest on interest-bearing deposits and federal funds sold 152 129 499 337
Total interest income 18,836 13,450 55,531 38,357
Interest expense:
Interest on deposits 1,499 1,080 4,544 2,959
Interest on borrowings 71 111 223 330
Interest on subordinated debt 389 - 572 -
Total interest expense 1,959 1,191 5,339 3,289
Net interest income 16,877 12,259 50,192 35,068
Provision for loan losses 373 201 2,807 482
Net interest income after provision for loan losses 16,504 12,058 47,385 34,586
Other income:
Service charges and fees on deposit accounts 511 311 1,496 886
Mortgage origination and fee income 2,245 1,439 5,264 4,215
Merchant sponsorship revenue 542 305 1,555 496
Income from bank-owned life insurance 206 86 614 251
Wealth management fees 15 11 39 43
Gain (loss) on other real estate - - 275 (24)
Other 483 201 1,241 456
Total other income 4,002 2,353 10,484 6,323
Other expense:
Salaries and employee benefits 6,948 5,186 20,800 15,287
Commission-based compensation 1,104 1,048 3,015 2,900
Occupancy and equipment 1,181 871 3,447 2,536
Core deposit intangible amortization 191 111 574 333
Other operating expense 3,208 2,679 9,103 7,745
Total other expense 12,632 9,895 36,939 28,801
Earnings before income taxes 7,874 4,516 20,930 12,108
Income tax expense 2,639 1,453 6,794 3,809
Net earnings 5,235 3,063 14,136 8,299
Less: Net earnings attributable to noncontrolling interest 422 573 1,190 1,632
Net earnings attributable to National Commerce Corporation$ 4,813 $ 2,490 $ 12,946 $ 6,667
Weighted average common and diluted shares outstanding
Basic 10,890,860 9,438,541 10,871,245 8,865,944
Diluted 11,115,134 9,594,472 11,080,746 9,002,885
Basic earnings per common share$0.44 $0.26 $1.19 $0.75
Diluted earnings per common share$0.43 $0.26 $1.17 $0.74

NATIONAL COMMERCE CORPORATION
Average Balance Sheets and Net Interest Analysis
For the Three Months Ended
(Dollars in thousands)September 30, 2016June 30, 2016March 31, 2016December 31, 2015September 30, 2015
Interest-earning assetsAverage BalanceInterest Income/ ExpenseAverage Yield/ RateAverage BalanceInterest Income/ ExpenseAverage Yield/ RateAverage BalanceInterest Income/ ExpenseAverage Yield/ RateAverage BalanceInterest Income/ ExpenseAverage Yield/ RateAverage BalanceInterest Income/ ExpenseAverage Yield/ Rate
Loans$1,399,016 $17,853 5.08%$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%
Mortgage loans held-for-sale 13,986 145 4.12 17,288 151 3.51 10,503 115 4.40 9,697 84 3.44 9,890 104 4.17
Securities:
Taxable securities 76,787 493 2.55 78,907 383 1.95 61,764 412 2.68 48,097 370 3.05 31,132 259 3.30
Tax-exempt securities 26,029 317 4.85 26,036 319 4.93 26,041 317 4.90 21,982 275 4.96 17,245 217 4.99
Cash balances in other banks 101,422 152 0.60 80,140 129 0.65 151,318 218 0.58 191,077 168 0.35 166,715 129 0.31
Total interest-earning assets 1,617,240 $18,960 4.66 1,594,160 $18,505 4.67 1,602,363 $18,435 4.63 1,475,290 $16,596 4.46 1,217,205 $13,535 4.41
Noninterest-earning assets 148,275 148,959 156,260 145,791 96,824
Total assets$1,765,515 $1,743,119 $1,758,623 $1,621,081 $1,314,029
Interest-bearing liabilities
Interest-bearing transaction accounts$214,439 $125 0.23%$210,776 $124 0.24%$204,339 $123 0.24%$196,140 $129 0.26%$182,056 $118 0.26%
Savings and money market deposits 612,618 713 0.46 603,173 698 0.47 620,429 762 0.49 542,631 612 0.45 443,306 486 0.43
Time deposits 283,022 661 0.93 288,350 654 0.91 306,106 684 0.90 291,399 654 0.89 228,298 476 0.83
Federal Home Loan Bank and other borrowed money 7,000 71 4.04 7,000 71 4.08 10,959 81 2.97 22,104 112 2.01 22,000 111 2.00
Subordinated debt 24,498 389 6.32 11,605 183 6.34 - - - - - - - - -
Total interest-bearing liabilities 1,141,577 $1,959 0.68 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
Noninterest-bearing deposits 381,205 388,363 386,674 354,812 254,402
Total funding sources 1,522,782 1,509,267 1,528,507 1,407,086 1,130,062
Noninterest-bearing liabilities 13,780 10,495 11,386 11,696 8,146
Shareholders' equity 228,953 223,357 218,730 202,299 175,821
$1,765,515 $1,743,119 $1,758,623 $1,621,081 $1,314,029
Net interest rate spread 3.98% 4.05% 4.05% 3.89% 3.87%
Net interest income/margin (taxable equivalent) 17,001 4.18% 16,775 4.23% 16,785 4.21% 15,089 4.06% 12,344 4.02%
Tax equivalent adjustment 124 123 122 108 85
Net interest income/margin $16,877 4.15% $16,652 4.20% $16,663 4.18% $14,981 4.03% $12,259 4.00%

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

Source:National Commerce Corporation