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National Commerce Corporation Announces Third Quarter 2017 Earnings

BIRMINGHAM, Ala., Oct. 24, 2017 (GLOBE NEWSWIRE) -- National Commerce Corporation (Nasdaq:NCOM) (“NCC” or the “Company”), the parent company of National Bank of Commerce (“NBC”), today reported third quarter 2017 net income to common shareholders of $6.7 million, compared to $4.8 million for the third quarter of 2016. Diluted net earnings per share were $0.46 in the third quarter of 2017, compared to $0.48 in the second quarter of 2017 and $0.43 in the third quarter of 2016. In connection with the Company’s June 2017 public offering of common stock, the Company issued 1,104,000 additional shares that were outstanding for the entire third quarter of 2017, increasing the diluted share count and thereby decreasing diluted net earnings per share by approximately $0.04.

“We are pleased with the Company’s growth, profitability, and asset quality in the third quarter,” said President and Chief Executive Officer Richard Murray, IV. “With continued focus and hard work, we believe that we are in position to have a strong year in 2017.”

As previously announced, the Company closed the acquisition of Patriot Bank on August 31, 2017. Accordingly, the third quarter results include Patriot Bank’s operations for one month. In connection with the acquisition, the Company issued 706,702 shares of its common stock and approximately $3.0 million in cash to Patriot Bank shareholders for all of the outstanding shares of Patriot Bank common stock.

“We welcome the Patriot Bank shareowners, customers, and team members to our Company,” said Murray. “We are excited about our future growth in the greater Tampa Bay market under the leadership of David Key and his team.”

Several important measures from the third quarter of 2017 are as follows:

  • Net Interest Margin (taxable equivalent) of 4.58% for the third quarter of 2017, compared to 4.34% for the second quarter of 2017 and 4.18% for the third quarter of 2016. The third quarter 2017 margin increased 0.24% compared to the 2017 second quarter due to a change in the earning asset mix (lower levels of cash and cash equivalents) and a 0.07% increase in loan yields, offset slightly by a 0.01% increase in the cost of deposits. Interest income on loans for the third quarter of 2017 included $1.1 million in loan accretion income, compared to $1.2 million of loan accretion income for the second quarter of 2017.
  • Return on Average Assets of 1.08% for the third quarter of 2017, identical to the third quarter of 2016. Return on Average Tangible Common Equity of 9.94% for the third quarter of 2017, compared to 10.90% for the third quarter of 2016. The third quarter of 2017 measure includes the additional common stock issued in the Company’s June 2017 public offering.

  • Third quarter 2017 loan growth (excluding mortgage loans held-for-sale and $121.6 million of loans acquired from Patriot Bank) of $56.2 million. Excluding factored receivables in the Company’s factoring subsidiary, Corporate Billing, LLC, and loans acquired from Patriot Bank, third quarter 2017 loan growth was approximately $51.5 million.

  • Excluding the acquired deposits from Patriot Bank totaling $127.7 million, deposits decreased $34.9 million during the third quarter of 2017, primarily due to a decline in a few large deposit relationships and the maturity of a $9.8 million brokered certificate of deposit.

  • $122.7 million in 2017 third quarter mortgage production, compared to $133.1 million for the second quarter of 2017 and $91.6 million for the third quarter of 2016. The 2017 second and third quarter production totals include mortgages closed by the mortgage division that the Company acquired in the Private Bancshares, Inc. transaction.

  • $259.5 million in 2017 third quarter purchased volume in the factoring division, compared to $251.0 million for the second quarter of 2017 and $172.4 million for the third quarter of 2016.

  • An increase in non-acquired non-performing assets to $1.9 million at September 30, 2017, from $1.2 million at June 30, 2017.

  • Annualized net charge-offs of 0.05% of average loans for the third quarter of 2017, compared to net charge-offs of 0.07% for the second quarter of 2017 and 0.02% for the third quarter of 2016.

  • Provision for loan losses of $1.1 million during the third quarter of 2017, compared to $1.2 million in the second quarter of 2017 and $373 thousand in the third quarter of 2016. The increase during the third quarter of 2017 was attributable to growth in non-acquired loans.

  • During the third quarter of 2017, the Company recognized merger-related expenses of $417 thousand, for an after-tax impact of approximately $340 thousand (considering the non-deductibility of certain items), representing approximately $0.02 per diluted share.
  • Ending tangible book value per share of $18.84.

  • Ending book value per share of $26.97.

The Company will host a live audio webcast conference call beginning at 8:30 a.m. Central Time on October 25, 2017 to discuss earnings and operating results for the 2017 third quarter. Investors may call in (toll free) by dialing (844) 296-8205 (conference ID 96826435). A replay of the conference call will be available until October 27, 2017 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 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, 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 that these 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.

  • “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 the Company’s financial condition, results of operations and cash flows computed in accordance with GAAP; however, the Company acknowledges that the non-GAAP financial measures have a number of limitations. As such, the Company 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, fourteen full-service banking offices in central and northeast Florida (including under the trade names United Legacy Bank, Reunion Bank of Florida and Patriot Bank) and two full-service banking offices in Atlanta, Georgia (including under the trade names Private Bank of Buckhead, Private Bank of Decatur and PrivatePlus Mortgage). 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 headquartered 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, 2016 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.

Contact:

National Commerce Corporation

William E. Matthews, V
Vice Chairman and Chief Financial Officer
(205) 313-8122

NATIONAL COMMERCE CORPORATION
Unaudited Financial Highlights
(In thousands, except share and per share amounts and percentages or as otherwise noted)
For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017
2016 2016
Earnings Summary
Interest income$28,202 $26,466 $24,899 $19,032 $18,836
Interest expense 2,561 2,513 2,469 2,042 1,959
Net interest income 25,641 23,953 22,430 16,990 16,877
Provision for loan losses 1,105 1,155 156 441 373
Gain on sale of securities - 28 - - -
Other noninterest income (1) 4,630 5,072 5,440 3,472 4,002
Merger/conversion-related expenses (2) 417 344 387 169 160
Other noninterest expense (3) 17,654 17,393 18,074 11,971 12,472
Income before income taxes 11,095 10,161 9,253 7,881 7,874
Income tax expense 3,828 3,281 2,841 2,600 2,639
Net income before minority interest 7,267 6,880 6,412 5,281 5,235
Net income attributable to minority interest 570 431 493 374 422
Net income to common shareholders$6,697 $6,449 $5,919 $4,907 $4,813
Weighted average common and diluted shares outstanding
Basic 14,300,974 13,190,582 12,901,040 10,930,309 10,890,860
Diluted 14,679,546 13,551,745 13,283,075 11,173,733 11,115,134
Net earnings per common share
Basic$0.47 $0.49 $0.46 $0.45 $0.44
Diluted$0.46 $0.48 $0.45 $0.44 $0.43
September 30, June 30, March 31, December 31, September 30,
Selected Performance Ratios2017 2017 2017
2016
2016
Return on average assets (ROAA) (4) 1.08% 1.06% 1.00 % 1.05 % 1.08%
Return on average equity (ROAE) 7.06 7.86 7.67 8.33 8.36
Return on average tangible common equity
(ROATCE) 9.94 11.49 11.45 10.78 10.90
Net interest margin - taxable equivalent 4.58 4.34 4.18 3.99 4.18
Efficiency ratio 59.70 61.11 66.24 59.33 60.50
Operating efficiency ratio (3) 58.32 59.92 64.85 58.50 59.73
Noninterest income / average assets (annualized) 0.75 0.83 0.92 0.74 0.90
Noninterest expense / average assets (annualized) 2.92 2.91 3.11 2.60 2.85
Yield on loans 5.45 5.38 5.29 4.95 5.08
Cost of total deposits 0.41% 0.40% 0.40 % 0.40 % 0.40%
September 30, June 30, March 31, December 31, September 30,
Factoring Metrics2017 2017 2017
2016
2016
Recourse purchased volume$104,304 $101,295 $127,882 $82,923 $71,872
Non-recourse purchased volume 155,157 149,740 125,751 104,797 100,486
Total purchased volume$259,461 $251,035 $253,633 $187,720 $172,358
Average turn (days) 41.11 38.47 35.61 38.35 38.13
Net charge-offs / total purchased volume 0.05% 0.12% 0.03 % 0.12 % 0.05%
Average discount rate 1.58% 1.52% 1.44 % 1.67 % 1.70%
September 30, June 30, March 31, December 31, September 30,
Mortgage Metrics2017 2017 2017
2016
2016
Total production ($)$122,656 $133,063 $130,875 $76,028 $91,613
Refinance (%) 23.6% 24.0% 27.4 % 40.2 % 30.4%
Purchases (%) 76.4% 76.0% 72.6 % 59.8 % 69.6%
As of
September 30, June 30, March 31, December 31, September 30,
Balance Sheet Highlights2017
2017
2017
2016
2016
Cash and cash equivalents$134,549 $224,760 $318,730 $217,293 $122,920
Total investment securities 111,158 101,569 98,390 99,709 102,848
Mortgage loans held-for-sale 15,278 19,482 19,517 15,373 7,810
Acquired purchased credit-impaired loans 26,924 21,065 22,465 11,975 11,995
Acquired non-purchased credit-impaired loans 561,118 490,198 539,056 313,399 320,630
Nonacquired loans held for investment (5) 1,349,254 1,252,970 1,153,897 1,076,209 1,009,677
CBI loans (factoring receivables) 119,110 114,361 99,317 83,901 70,066
Total gross loans held for investment 2,056,406 1,878,594 1,814,735 1,485,484 1,412,368
Allowance for loan losses 14,264 13,407 12,565 12,113 11,950
Total intangibles 119,688 103,270 103,519 52,803 52,962
Total assets 2,549,134 2,418,052 2,445,149 1,950,784 1,779,278
Total deposits 2,097,373 2,004,528 2,080,307 1,667,710 1,499,879
FHLB and other borrowings 7,941 7,000 7,000 7,000 7,000
Subordinated debt 24,540 24,527 24,513 24,500 24,487
Total liabilities 2,150,541 2,054,792 2,127,727 1,713,740 1,547,105
Minority interest 7,504 7,366 7,427 7,309 7,357
Common stock 148 141 129 109 109
Total shareholders' equity 398,593 363,260 317,422 237,044 232,173
Tangible common equity$278,335 $259,558 $213,410 $183,866 $178,788
End of period common shares outstanding 14,777,230 14,070,528 12,948,778 10,934,541 10,920,423
As of and For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
Asset Quality Analysis2017 2017 2017
2016
2016
Nonacquired
Nonaccrual loans$70 $50 $68 $69 $19
Other real estate and repossessed assets 150 - 1,849 2,068 2,068
Loans past due 90 days or more and still accruing 1,690 1,172 538 581 358
Total nonacquired nonperforming assets$1,910 $1,222 $2,455 $2,718 $2,445
Acquired
Nonaccrual loans$2,625 $2,827 $2,949 $2,768 $2,982
Other real estate and repossessed assets 1,021 - - - 92
Loans past due 90 days or more and still accruing - - - - -
Total acquired nonperforming assets$3,646 $2,827 $2,949 $2,768 $3,074
Selected asset quality ratios
Nonperforming assets / Assets 0.22% 0.17% 0.22 % 0.28 % 0.31%
Nonperforming assets / (Loans + OREO + repossessed assets) 0.27 0.22 0.30 0.37 0.39
Net charge-offs (recoveries) to average loans (annualized) 0.05 0.07 (0.07) 0.08 0.02
Allowance for loan losses to total loans 0.69 0.71 0.69 0.82 0.85
Nonacquired nonperforming assets / (Nonacquired loans +
nonacquired OREO + nonacquired repossessed assets) (5) 0.14 0.10 0.21 0.25 0.24
Allowance for loan losses to nonacquired nonperforming
loans 810.45 1,097.14 2,073.43 1,863.54 3,169.76
As of
September 30, June 30, March 31, December 31, September 30,
Additional Information - Allowance for Loan Losses2017 2017 2017
2016
2016
Allowance for loan losses excluding CBI loans (factoring receivables) 13,764 12,907 12,065 11,613 11,450
Nonacquired loans held for investment (5) 1,349,254 1,252,970 1,153,897 1,076,209 1,009,677
Allowance for loan losses allocated to CBI loans (factoring receivables) 500 500 500 500 500
CBI loans (factoring receivables) 119,110 114,361 99,317 83,901 70,066
For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
Taxable Equivalent Yields/Rates2017 2017 2017
2016
2016
Interest income:
Loans 5.45% 5.38% 5.29 % 4.95 % 5.08%
Mortgage loans held-for-sale 3.56 3.72 4.13 2.99 4.12
Interest on securities:
Taxable 3.03 2.98 2.63 2.52 2.55
Non-taxable 4.86 4.91 4.98 4.90 4.85
Cash balances in other banks 1.32 1.09 0.84 0.63 0.60
Total interest-earning assets 5.04 4.79 4.64 4.47 4.66
Interest expense:
Interest on deposits 0.59 0.57 0.56 0.55 0.54
Interest on FHLB and other borrowings 3.95 4.01 3.19 4.04 4.04
Interest on subordinated debt 6.27 6.36 6.42 6.30 6.32
Total interest-bearing liabilities 0.70 0.68 0.68 0.69 0.68
Net interest spread 4.34 4.11 3.96 3.78 3.98
Net interest margin 4.58% 4.34% 4.18 % 3.99 % 4.18%
As of
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017
2016
2016
Shareholders' Equity and Capital Ratios
Tier 1 Leverage Ratio 11.42% 10.69% 8.86 % 9.57 % 9.74%
Tier 1 Common Capital Ratio 12.78 13.17 11.06 11.46 11.64
Tier 1 Risk-based Capital Ratio 12.78 13.17 11.06 11.46 11.64
Total Risk-based Capital Ratio 14.64 15.18 13.07 13.90 14.19
Equity / Assets 15.64 15.02 12.98 12.15 13.05
Tangible common equity to tangible assets 11.46% 11.21% 9.11 % 9.69 % 10.36%
Book value per share$26.97 $25.82 $24.51 $21.68 $21.26
Tangible book value per share$18.84 $18.45 $16.48 $16.82 $16.37
For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017
2016
2016
Detail of noninterest income
Service charges and fees on deposit accounts$671 $640 $667 $523 $511
Mortgage origination and fee income 2,780 3,154 3,145 1,711 2,245
Merchant sponsorship revenue 622 602 744 613 542
Income from bank-owned life insurance 210 219 216 196 206
Rental income 84 - - - -
Wealth management fees 12 14 10 10 15
Gain on sale of other real estate 6 105 (1) (31) -
Gain on sale of investments - 28 - - -
Other noninterest income 245 338 659 450 483
Total noninterest income$4,630 $5,100 $5,440 $3,472 $4,002
For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017
2016
2016
Detail of noninterest expense
Salaries and employee benefits$9,804 $9,663 $10,073 $6,935 $6,948
Commission-based compensation 1,748 1,684 1,723 1,076 1,104
Occupancy and equipment expense 1,692 1,479 1,473 1,193 1,181
Data processing expenses 976 1,007 948 568 572
Advertising and marketing expenses 309 327 468 156 198
Legal fees 204 193 233 163 182
FDIC insurance assessments 351 408 258 234 246
Property and casualty insurance premiums 229 209 143 95 90
Accounting and audit expenses 288 294 318 211 252
Consulting and other professional expenses 510 517 497 201 330
Telecommunications expenses 203 169 186 114 146
ORE, Repo asset and other collection expenses 26 49 272 41 142
Core deposit intangible amortization 366 348 348 182 191
Other noninterest expense 1,365 1,390 1,521 971 1,050
Total noninterest expense$18,071 $17,737 $18,461 $12,140 $12,632
As of
September 30, June 30, March 31, December 31, September 30,
Non-GAAP Reconciliation2017 2017 2017
2016
2016
Total shareholders' equity$398,593 $363,260 $317,422 $237,044 $232,173
Less: intangible assets 119,688 103,270 103,519 52,803 52,962
Less: minority interest not included in intangible assets 570 432 493 375 423
Tangible common equity$278,335 $259,558 $213,410 $183,866 $178,788
Common shares outstanding at year or period end 14,777,230 14,070,528 12,948,778 10,934,541 10,920,423
Tangible book value per share$18.84 $18.45 $16.48 $16.82 $16.37
Total assets at end of period$2,549,134 $2,418,052 $2,445,149 $1,950,784 $1,779,278
Less: intangible assets 119,688 103,270 103,519 52,803 52,962
Adjusted total assets at end of period$2,429,446 $2,314,782 $2,341,630 $1,897,981 $1,726,316
Tangible common equity to tangible assets 11.46% 11.21% 9.11 % 9.69 % 10.36%
For the Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017
2016
2016
Non-GAAP Reconciliation
Total average shareholders' equity$376,129 $328,886 $312,971 $234,249 $228,953
Less: average intangible assets 108,553 103,403 103,004 52,872 53,056
Less: average minority interest not included
in intangible assets 356 318 295 262 282
Average tangible common equity$267,220 $225,165 $209,672 $181,115 $175,615
Net income to common shareholders 6,697 6,449 5,919 4,907 4,813
Return on average tangible common equity (ROATCE) 9.94% 11.49% 11.45 % 10.78 % 10.90%
Efficiency ratio:
Net interest income$25,641 $23,953 $22,430 $16,990 $16,877
Total noninterest income 4,630 5,100 5,440 3,472 4,002
Less: gain (loss) on sale of securities - 28 - - -
Operating revenue$30,271 $29,025 $27,870 $20,462 $20,879
Expenses:
Total noninterest expenses$18,071 $17,737 $18,461 $12,140 $12,632
Efficiency ratio 59.70% 61.11% 66.24 % 59.33 % 60.50%
Operating efficiency ratio:
Net interest income$25,641 $23,953 $22,430 $16,990 $16,877
Total noninterest income 4,630 5,100 5,440 3,472 4,002
Less: gain (loss) on sale of securities - 28 - - -
Operating revenue$30,271 $29,025 $27,870 $20,462 $20,879
Expenses:
Total noninterest expenses$18,071 $17,737 $18,461 $12,140 $12,632
Less: merger/conversion-related expenses 417 344 387 169 160
Adjusted noninterest expenses$17,654 $17,393 $18,074 $11,971 $12,472
Operating efficiency ratio 58.32% 59.92% 64.85 % 58.50 % 59.73%
(1) Excludes securities gains
(2) After-tax impact of merger conversion-related exenses of $340, $248, $300, $168, $154, respectively, for the periods presented
(3) Excludes merger/conversion-related expenses
(4) Net income to common shareholders / average assets
(5) Excludes CBI loans (factoring receivables)



NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Balance Sheets
(In thousands, except share and per share data)
Assets
September 30, 2017 December 31, 2016
Cash and due from banks$44,111 $35,897
Interest-bearing deposits with banks 90,438 181,396
Cash and cash equivalents 134,549 217,293
Investment securities held-to-maturity (fair value of $26,076 and $25,894 at September 30, 2017
and December 31, 2016, respectively) 25,820 26,329
Investment securities available-for-sale 85,338 73,380
Other investments 10,740 7,879
Mortgage loans held-for-sale 15,278 15,373
Loans, net of unearned income 2,056,406 1,485,484
Less: allowance for loan losses 14,264 12,113
Loans, net 2,042,142 1,473,371
Premises and equipment, net 52,593 31,884
Accrued interest receivable 5,781 4,129
Bank-owned life insurance 31,973 28,034
Other real estate 1,171 2,068
Deferred tax assets, net 17,739 13,486
Goodwill 114,840 50,771
Core deposit intangible, net 4,848 2,032
Other assets 6,322 4,755
Total assets$2,549,134 $1,950,784
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand$621,916 $429,030
Interest-bearing demand 322,273 262,261
Savings and money market 863,421 703,289
Time 289,763 273,130
Total deposits 2,097,373 1,667,710
Federal Home Loan Bank advances and other borrowings 7,941 7,000
Subordinated debt 24,540 24,500
Accrued interest payable 1,136 829
Other liabilities 19,551 13,701
Total liabilities 2,150,541 1,713,740
Shareholders’ equity:
Preferred stock, 250,000 shares authorized, no shares issued or outstanding - -
Common stock, $0.01 par value, 30,000,000 shares authorized, 14,777,230 and 10,934,541
shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 148 109
Additional paid-in capital 347,371 205,372
Retained earnings 43,070 24,005
Accumulated other comprehensive income 500 249
Total shareholders' equity attributable to National Commerce Corporation 391,089 229,735
Noncontrolling interest 7,504 7,309
Total shareholders' equity 398,593 237,044
Total liabilities and shareholders' equity$2,549,134 $1,950,784


NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Statements of Earnings
(In thousands, except share and per share data)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Interest and dividend income:
Interest and fees on loans$ 26,780 $ 17,991 $ 75,360 $ 53,143
Interest and dividends on taxable investment securities 694 493 1,871 1,288
Interest on non-taxable investment securities 195 200 592 601
Interest on interest-bearing deposits and federal funds sold 533 152 1,744 499
Total interest income 28,202 18,836 79,567 55,531
Interest expense:
Interest on deposits 2,101 1,499 6,165 4,544
Interest on borrowings 72 71 213 223
Interest on subordinated debt 388 389 1,165 572
Total interest expense 2,561 1,959 7,543 5,339
Net interest income 25,641 16,877 72,024 50,192
Provision for loan losses 1,105 373 2,416 2,807
Net interest income after provision for loan losses 24,536 16,504 69,608 47,385
Other income:
Service charges and fees on deposit accounts 671 511 1,978 1,496
Mortgage origination and fee income 2,780 2,245 9,079 5,264
Merchant sponsorship revenue 622 542 1,968 1,555
Income from bank-owned life insurance 210 206 645 614
Rental income 84 - 84 -
Wealth management fees 12 15 36 39
Gain on other real estate 6 - 110 275
Gain on sale of investment securities available-for-sale - - 28 -
Other 245 483 1,242 1,241
Total other income 4,630 4,002 15,170 10,484
Other expense:
Salaries and employee benefits 9,804 6,948 29,540 20,800
Commission-based compensation 1,748 1,104 5,155 3,015
Occupancy and equipment 1,692 1,181 4,644 3,447
Core deposit intangible amortization 366 191 1,062 574
Other operating expense 4,461 3,208 13,868 9,103
Total other expense 18,071 12,632 54,269 36,939
Earnings before income taxes 11,095 7,874 30,509 20,930
Income tax expense 3,828 2,639 9,950 6,794
Net earnings 7,267 5,235 20,559 14,136
Less: Net earnings attributable to noncontrolling interest 570 422 1,494 1,190
Net earnings attributable to National Commerce Corporation $ 6,697 $ 4,813 $ 19,065 $ 12,946
Weighted average common and diluted shares outstanding
Basic 14,300,974 10,890,860 13,469,327 10,871,245
Diluted 14,679,546 11,115,134 13,854,074 11,080,746
Basic earnings per common share$ 0.47 $ 0.44 $ 1.42 $ 1.19
Diluted earnings per common share$ 0.46 $ 0.43 $ 1.38 $ 1.17


NATIONAL COMMERCE CORPORATION
Average Balance Sheets and Net Interest Analysis
For the Three Months Ended
(Dollars in thousands)September 30, 2017June 30, 2017March 31, 2017December 31, 2016September 30, 2016
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$1,937,115 $26,6345.45% $1,849,258 $24,8235.38% $1,793,241 $23,3775.29% $1,446,629 $18,0124.95% $1,399,016 $17,8535.08%
Mortgage loans held-for-sale 16,811 1513.56 18,321 1703.72 21,809 2224.13 10,366 782.99 13,986 1454.12
Securities:
Taxable securities 90,969 6943.03 81,645 6062.98 88,062 5712.63 82,881 5252.52 76,787 4932.55
Tax-exempt securities 25,286 3104.86 25,573 3134.91 25,824 3174.98 25,910 3194.90 26,029 3174.85
Cash balances in other banks 159,973 5331.32 249,361 6761.09 258,672 5350.84 140,813 2240.63 101,422 1520.60
Total interest-earning assets 2,230,154 $28,3225.04 2,224,158 $26,5884.79 2,187,608 $25,0224.64 1,706,599 $19,1584.47 1,617,240 $18,9604.66
Noninterest-earning assets 228,231 218,088 220,006 149,709 148,275
Total assets$2,458,385 $2,442,246 $2,407,614 $1,856,308 $1,765,515
Interest-bearing liabilities
Interest-bearing transaction accounts$314,925 $2070.26% $341,238 $2430.29% $332,361 $2170.26% $235,340 $1490.25% $214,439 $1250.23%
Savings and money market deposits 827,526 1,2330.59 821,130 1,1380.56 804,537 1,0960.55 633,765 7910.50 612,618 7130.46
Time deposits 273,630 6610.96 290,097 6730.93 306,404 6970.92 273,293 6430.94 283,022 6610.93
Federal Home Loan Bank and other borrowed money 7,228 723.95 7,000 704.01 9,016 713.19 7,000 714.04 7,000 714.04
Subordinated debt 24,533 3886.27 24,520 3896.36 24,507 3886.42 24,494 3886.30 24,498 3896.32
Total interest-bearing liabilities 1,447,842 $2,5610.70 1,483,985 $2,5130.68 1,476,825 $2,4690.68 1,173,892 $2,0420.69 1,141,577 $1,9590.68
Noninterest-bearing deposits 615,130 612,910 600,897 431,253 381,205
Total funding sources 2,062,972 2,096,895 2,077,722 1,605,145 1,522,782
Noninterest-bearing liabilities 19,284 16,465 16,921 16,914 13,780
Shareholders' equity 376,129 328,886 312,971 234,249 228,953
$2,458,385 $2,442,246 $2,407,614 $1,856,308 $1,765,515
Net interest rate spread 4.34% 4.11% 3.96% 3.78% 3.98%
Net interest income/margin (taxable equivalent) 25,7614.58% 24,0754.34% 22,5534.18% 17,1163.99% 17,0014.18%
Tax equivalent adjustment 120 122 123 126 124
Net interest income/margin $25,6414.56% $23,9534.32% $22,4304.16% $16,9903.96% $16,8774.15%

Source:National Commerce Corporation