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National Commerce Corporation Announces Fourth Quarter and Fiscal Year End 2017 Earnings

BIRMINGHAM, Ala., Jan. 24, 2018 (GLOBE NEWSWIRE) -- National Commerce Corporation (Nasdaq:NCOM) (the “Company” or “NCC”), the parent company of National Bank of Commerce, today reported fourth quarter 2017 net income to common shareholders of $1.0 million, compared to $4.9 million for the fourth quarter of 2016.

The 2017 results include a write-down of the Company’s deferred tax asset (“DTA”) due to the enactment of the Tax Cuts and Jobs Act of 2017, increasing income tax expense for the fourth quarter and the year by $6.2 million. Diluted net earnings per share were $0.07 in the fourth quarter of 2017, compared to $0.46 in the third quarter of 2017 and $0.44 in the fourth quarter of 2016. The DTA write-down reduced fourth quarter 2017 diluted net earnings per share by approximately $0.41.

For the year ended December 31, 2017, NCC earned $20.0 million, or $1.41 in diluted net earnings per share, compared to $17.9 million, or $1.61 per diluted share, for the year ended December 31, 2016. The DTA write-down reduced 2017 diluted net earnings per share by approximately $0.44.

NCC’s 2017 fourth quarter and full year 2017 results include $815 thousand and $1.7 million, respectively, in after-tax merger- and conversion-related expenses, reducing diluted net earnings per share by approximately $0.05 and $0.12 for the 2017 fourth quarter and full year, respectively.

“We are pleased to report another good year of profitability, growth and strong asset quality,” said Richard Murray, IV, President and Chief Executive Officer of the Company. “Like many companies, our fourth quarter earnings were impacted by the need to write down our deferred tax asset to reflect the December enactment of the federal tax bill, but we were pleased with our overall operating performance. We are also encouraged about the positive impact that the tax bill is expected to have on our profitability in 2018.”

“With the January 1, 2018 closing of our acquisition of FirstAtlantic Financial Holdings, Inc., we added some great bankers operating in an excellent market,” continued Murray. “We are excited about our future with Mitch Hunt and the FirstAtlantic family. As always, I remind myself and all of our team that our future success is dependent upon our continued focus on the Company’s core values of asset quality, risk management, growth, candor, and accountability, while maintaining an appropriate sense of humility.”

Several important measures from the 2017 fourth quarter and full year are as follows:

  • Net Interest Margin (taxable equivalent) of 4.63% for the fourth quarter of 2017 and 4.44% for the year ended December 31, 2017. The fourth quarter 2017 margin increased 0.05% compared to 4.58% reported for the third quarter of 2017, and increased 0.64% compared to 3.99% reported for the fourth quarter of 2016. For the year ended December 31, 2017, the margin increased by 0.29% compared to the year ended December 31, 2016.
  • Return on Average Assets (“ROAA”) of 0.15% for the fourth quarter of 2017, compared to 1.05% for the fourth quarter of 2016. For the year, ROAA was 0.81%, compared to 1.00% in 2016. The 2017 ROAA figures were negatively impacted by the DTA write-down.
  • Return on Average Equity (“ROAE”) of 0.99% for the fourth quarter of 2017, compared to 8.33% for the fourth quarter of 2016. For the year, ROAE was 5.65%, compared to 7.89% in 2016. The 2017 ROAE figures were negatively impacted by the DTA write-down.
  • Return on Average Tangible Common Equity (“ROATCE”) of 1.41% for the fourth quarter of 2017 and 8.10% for the year ended December 31, 2017, compared to 10.78% for the fourth quarter of 2016 and 10.32% for the year ended December 31, 2016. The 2017 ROATCE figures were negatively impacted by the DTA write-down.
  • Fourth quarter and full year 2017 loan growth (excluding mortgage loans held-for-sale) of $81.7 million and $652.6 million, respectively; non-acquired loans grew $106.1 million during the fourth quarter of 2017 and $379.2 million during the year ended December 31, 2017. Factored receivables declined $0.4 million during the fourth quarter of 2017 and increased $34.8 million during the year ended December 31, 2017. The full year loan growth figures for 2017 include loans acquired in the Company’s acquisitions of Private Bancshares, Inc. and Patriot Bank.
  • Increase in deposits of $188.5 million during the 2017 fourth quarter and $618.1 million during the year ended December 31, 2017. The full year deposit growth figures for 2017 include deposits acquired in the Company’s acquisitions of Private Bancshares, Inc. and Patriot Bank.
  • For the fourth quarter of 2017, mortgage production volume totaled $121.0 million, compared to $76.0 million for the fourth quarter of 2016. For the year ended December 31, 2017, mortgage production volume totaled $507.6 million, compared to $322.9 million for the year ended December 31, 2016. The 2017 mortgage production volume benefitted from the addition of the PrivatePlus Mortgage division added in the Private Bancshares, Inc. acquisition.
  • For the fourth quarter of 2017, purchased volume in the factoring division totaled $267.2 million, compared to $187.7 million for the fourth quarter of 2016. For the year ended December 31, 2017, purchase volume totaled $1.03 billion, compared to $705.9 million for the year ended December 31, 2016.
  • Decrease in non-acquired non-performing assets to $0.8 million at December 31, 2017, from $1.9 million at September 30, 2017.
  • Annualized net charge-offs of 0.14% of average loans outstanding for the fourth quarter of 2017 and 0.05% for the year ended December 31, 2017.
  • Provision for loan losses of $1.5 million for the fourth quarter of 2017, compared to $0.4 million for the fourth quarter of 2016. Provision for loan losses for the year ended December 31, 2017 totaled $3.9 million, compared to $3.2 million for the year ended December 31, 2016.
  • Ending tangible book value per share of $19.05.
  • Ending book value per share of $27.05.

The Company will host a live audio webcast conference call beginning at 8:30 a.m. Central Time on January 25, 2018 to discuss earnings and operating results for the 2017 fourth quarter and full year. Investors may call in (toll free) by dialing (844) 296-8205 (conference ID 5036417). A replay of the conference call will be available until January 27, 2018 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, average 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 these non-GAAP financial measures in its analysis of the Company’s performance.

  • “Tangible common equity” is defined as 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, twenty-one full-service banking offices in central and northeast Florida (including under the trade names United Legacy Bank, Reunion Bank of Florida, Patriot Bank and FirstAtlantic 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.

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
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
Earnings Summary
Interest income $30,224 $28,202 $26,466 $24,899 $19,032
Interest expense 2,824 2,561 2,513 2,469 2,042
Net interest income 27,400 25,641 23,953 22,430 16,990
Provision for loan losses 1,478 1,105 1,155 156 441
(Loss) gain on sale of securities (119) - 28 - -
Other noninterest income (1) 4,984 4,630 5,072 5,440 3,472
Merger/conversion-related expenses (2) 1,172 417 344 387 169
Other noninterest expense (3) 18,078 17,654 17,393 18,074 11,971
Income before income taxes 11,537 11,095 10,161 9,253 7,881
Income tax expense 3,890 3,828 3,281 2,841 2,600
Deferred tax asset write-down 6,231 - - - -
Total income tax expense 10,121 3,828 3,281 2,841 2,600
Net income before minority interest 1,416 7,267 6,880 6,412 5,281
Net income attributable to minority interest 413 570 431 493 374
Net income to common shareholders $1,003 $6,697 $6,449 $5,919 $4,907
Weighted average common and diluted shares outstanding
Basic 14,783,597 14,300,974 13,190,582 12,901,040 10,930,309
Diluted 15,173,984 14,679,546 13,551,745 13,283,075 11,173,733
Net earnings per common share
Basic $0.07 $0.47 $0.49 $0.46 $0.45
Diluted $0.07 $0.46 $0.48 $0.45 $0.44
December 31, September 30, June 30, March 31, December 31,
Selected Performance Ratios 2017 2017 2017 2017 2016
Return on average assets (ROAA) (4) 0.15 % 1.08% 1.06% 1.00 % 1.05 %
Return on average equity (ROAE) 0.99 7.06 7.86 7.67 8.33
Return on average tangible common equity
(ROATCE) 1.41 9.94 11.49 11.45 10.78
Net interest margin - taxable equivalent 4.63 4.58 4.34 4.18 3.99
Efficiency ratio 59.44 59.70 61.11 66.24 59.33
Operating efficiency ratio (3) 55.82 58.32 59.92 64.85 58.50
Noninterest income / average assets (annualized) 0.76 0.75 0.83 0.92 0.74
Noninterest expense / average assets (annualized) 2.92 2.92 2.91 3.11 2.60
Yield on loans 5.45 5.45 5.38 5.29 4.95
Cost of total deposits 0.43 % 0.41% 0.40% 0.40 % 0.40 %
December 31, September 30, June 30, March 31, December 31,
Factoring Metrics 2017 2017 2017 2017 2016
Recourse purchased volume $108,628 $104,304 $101,295 $127,882 $82,923
Non-recourse purchased volume 158,565 155,157 149,740 125,751 104,797
Total purchased volume $267,193 $259,461 $251,035 $253,633 $187,720
Average turn (days) 43.59 41.11 38.47 35.61 38.35
Net charge-offs / total purchased volume 0.18 % 0.05% 0.12% 0.03 % 0.12 %
Average discount rate 1.59 % 1.58% 1.52% 1.44 % 1.67 %
December 31, September 30, June 30, March 31, December 31,
Mortgage Metrics 2017 2017 2017 2017 2016
Total production ($) $120,969 $122,656 $133,063 $130,875 $76,028
Refinance (%) 22.1 % 23.6% 24.0% 27.4 % 40.2 %
Purchases (%) 77.9 % 76.4% 76.0% 72.6 % 59.8 %
As of
December 31, September 30, June 30, March 31, December 31,
Balance Sheet Highlights 2017 2017 2017 2017 2016
Cash and cash equivalents $235,288 $134,549 $224,760 $318,730 $217,293
Total investment securities 111,396 111,158 101,569 98,390 99,709
Mortgage loans held-for-sale 29,191 15,278 19,482 19,517 15,373
Acquired purchased credit-impaired loans 25,696 26,924 21,065 22,465 11,975
Acquired non-purchased credit-impaired loans 538,276 561,118 490,198 539,056 313,399
Nonacquired loans held for investment (5) 1,455,376 1,349,254 1,252,970 1,153,897 1,076,209
CBI loans (factoring receivables) 118,710 119,110 114,361 99,317 83,901
Total gross loans held for investment 2,138,058 2,056,406 1,878,594 1,814,735 1,485,484
Allowance for loan losses 14,985 14,264 13,407 12,565 12,113
Total intangibles 117,849 119,688 103,270 103,519 52,803
Total assets 2,737,676 2,549,134 2,418,052 2,445,149 1,950,784
Total deposits 2,285,831 2,097,373 2,004,528 2,080,307 1,667,710
FHLB and other borrowings 7,000 7,941 7,000 7,000 7,000
Subordinated debt 24,553 24,540 24,527 24,513 24,500
Total liabilities 2,337,718 2,150,541 2,054,792 2,127,727 1,713,740
Minority interest 7,348 7,504 7,366 7,427 7,309
Common stock 148 148 141 129 109
Total shareholders' equity 399,958 398,593 363,260 317,422 237,044
Tangible common equity $281,695 $278,335 $259,558 $213,410 $183,866
End of period common shares outstanding 14,788,436 14,777,230 14,070,528 12,948,778 10,934,541
As of and For the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
Asset Quality Analysis 2017 2017 2017 2017 2016
Nonacquired
Nonaccrual loans $82 $70 $50 $68 $69
Other real estate and repossessed assets - 150 - 1,849 2,068
Loans past due 90 days or more and still accruing 677 1,690 1,172 538 581
Total nonacquired nonperforming assets $759 $1,910 $1,222 $2,455 $2,718
Acquired
Nonaccrual loans $2,640 $2,625 $2,827 $2,949 $2,768
Other real estate and repossessed assets 1,094 1,021 - - -
Loans past due 90 days or more and still accruing - - - - -
Total acquired nonperforming assets $3,734 $3,646 $2,827 $2,949 $2,768
Selected asset quality ratios
Nonperforming assets / Assets 0.16 % 0.22% 0.17% 0.22 % 0.28 %
Nonperforming assets / (Loans + OREO + repossessed assets) 0.21 0.27 0.22 0.30 0.37
Net charge-offs (recoveries) to average loans (annualized) 0.14 0.05 0.07 (0.07) 0.08
Allowance for loan losses to total loans 0.70 0.69 0.71 0.69 0.82
Nonacquired nonperforming assets / (Nonacquired loans +
nonacquired OREO + nonacquired repossessed assets) (5) 0.05 0.14 0.10 0.21 0.25
Allowance for loan losses / (Nonacquired nonaccrual loans +
nonacquired loans past due 90 days or more and still accruing) 1,974.31 810.45 1,097.14 2,073.43 1,863.54
As of
December 31, September 30, June 30, March 31, December 31,
Additional Information - Allowance for Loan Losses 2017 2017 2017 2017 2016
Allowance for loan losses excluding CBI loans (factoring receivables) 14,385 13,764 12,907 12,065 11,613
Nonacquired loans held for investment (5) 1,455,376 1,349,254 1,252,970 1,153,897 1,076,209
Allowance for loan losses allocated to CBI loans (factoring receivables) 600 500 500 500 500
CBI loans (factoring receivables) 118,710 119,110 114,361 99,317 83,901
For the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
Taxable Equivalent Yields/Rates 2017 2017 2017 2017 2016
Interest income:
Loans 5.45 % 5.45% 5.38% 5.29 % 4.95 %
Mortgage loans held-for-sale 2.96 3.56 3.72 4.13 2.99
Interest on securities:
Taxable 3.09 3.03 2.98 2.63 2.52
Non-taxable 4.81 4.86 4.91 4.98 4.90
Cash balances in other banks 1.37 1.32 1.09 0.84 0.63
Total interest-earning assets 5.10 5.04 4.79 4.64 4.47
Interest expense:
Interest on deposits 0.62 0.59 0.57 0.56 0.55
Interest on FHLB and other borrowings 3.82 3.95 4.01 3.19 4.04
Interest on subordinated debt 6.27 6.27 6.36 6.42 6.30
Total interest-bearing liabilities 0.73 0.70 0.68 0.68 0.69
Net interest spread 4.37 4.34 4.11 3.96 3.78
Net interest margin 4.63 % 4.58% 4.34% 4.18 % 3.99 %
As of
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
Shareholders' Equity and Capital Ratios
Tier 1 Leverage Ratio 10.89 % 11.42% 10.69% 8.86 % 9.57 %
Tier 1 Common Capital Ratio 12.31 12.78 13.17 11.06 11.46
Tier 1 Risk-based Capital Ratio 12.31 12.78 13.17 11.06 11.46
Total Risk-based Capital Ratio 14.10 14.64 15.18 13.07 13.90
Equity / Assets 14.61 15.64 15.02 12.98 12.15
Tangible common equity to tangible assets 10.75 % 11.46% 11.21% 9.11 % 9.69 %
Book value per share $27.05 $26.97 $25.82 $24.51 $21.68
Tangible book value per share $19.05 $18.84 $18.45 $16.48 $16.82
For the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
Detail of noninterest income
Service charges and fees on deposit accounts $733 $671 $640 $667 $523
Mortgage origination and fee income 2,450 2,780 3,154 3,145 1,711
Merchant sponsorship revenue 592 622 602 744 613
Income from bank-owned life insurance 210 210 219 216 196
Rental income 240 84 - - -
Wealth management fees 11 12 14 10 10
(Loss) gain on sale of other real estate (66) 6 105 (1) (31)
(Loss) gain on sale of investments (119) - 28 - -
Other noninterest income 814 245 338 659 450
Total noninterest income $ 4,865 $ 4,630 $ 5,100 $ 5,440 $ 3,472
For the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
Detail of noninterest expense
Salaries and employee benefits $10,016 $9,804 $9,663 $10,073 $6,935
Commission-based compensation 1,700 1,748 1,684 1,723 1,076
Occupancy and equipment expense 1,889 1,692 1,479 1,473 1,193
Data processing expenses 1,437 976 1,007 948 568
Advertising and marketing expenses 349 309 327 468 156
Legal fees 219 204 193 233 163
FDIC insurance assessments 145 351 408 258 234
Property and casualty insurance premiums 253 229 209 143 95
Accounting and audit expenses 209 288 294 318 211
Consulting and other professional expenses 888 510 517 497 201
Telecommunications expenses 217 203 169 186 114
ORE, Repo asset and other collection expenses 75 26 49 272 41
Core deposit intangible amortization 393 366 348 348 182
Other noninterest expense 1,460 1,365 1,390 1,521 971
Total noninterest expense $ 19,250 $ 18,071 $ 17,737 $ 18,461 $ 12,140
As of
December 31, September 30, June 30, March 31, December 31,
Non-GAAP Reconciliation 2017 2017 2017 2017 2016
Total shareholders' equity $399,958 $398,593 $363,260 $317,422 $237,044
Less: intangible assets 117,849 119,688 103,270 103,519 52,803
Less: minority interest not included in intangible assets 414 570 432 493 375
Tangible common equity $281,695 $278,335 $259,558 $213,410 $183,866
Common shares outstanding at year or period end 14,788,436 14,777,230 14,070,528 12,948,778 10,934,541
Tangible book value per share $ 19.05 $ 18.84 $ 18.45 $ 16.48 $ 16.82
Total assets at end of period $2,737,676 $2,549,134 $2,418,052 $2,445,149 $1,950,784
Less: intangible assets 117,849 119,688 103,270 103,519 52,803
Adjusted total assets at end of period $2,619,827 $2,429,446 $2,314,782 $2,341,630 $1,897,981
Tangible common equity to tangible assets 10.75 % 11.46% 11.21% 9.11 % 9.69 %
For the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
Non-GAAP Reconciliation
Total average shareholders' equity $402,317 $376,129 $328,886 $312,971 $234,249
Less: average intangible assets 119,415 108,553 103,403 103,004 52,872
Less: average minority interest not included
in intangible assets 357 356 318 295 262
Average tangible common equity $282,545 $267,220 $225,165 $209,672 $181,115
Net income to common shareholders 1,003 6,697 6,449 5,919 4,907
Return on average tangible common equity (ROATCE) 1.41 % 9.94% 11.49% 11.45 % 10.78 %
Efficiency ratio:
Net interest income $27,400 $25,641 $23,953 $22,430 $16,990
Total noninterest income 4,865 4,630 5,100 5,440 3,472
Less: gain (loss) on sale of securities (119) - 28 - -
Operating revenue $ 32,384 $ 30,271 $ 29,025 $ 27,870 $ 20,462
Expenses:
Total noninterest expenses $ 19,250 $ 18,071 $ 17,737 $ 18,461 $ 12,140
Efficiency ratio 59.44 % 59.70% 61.11% 66.24 % 59.33 %
Operating efficiency ratio:
Net interest income $27,400 $25,641 $23,953 $22,430 $16,990
Total noninterest income 4,865 4,630 5,100 5,440 3,472
Less: (Loss) gain on sale of securities (119) - 28 - -
Operating revenue $ 32,384 $ 30,271 $ 29,025 $ 27,870 $ 20,462
Expenses:
Total noninterest expenses $19,250 $18,071 $17,737 $18,461 $12,140
Less: merger/conversion-related expenses 1,172 417 344 387 169
Adjusted noninterest expenses $ 18,078 $ 17,654 $ 17,393 $ 18,074 $ 11,971
Operating efficiency ratio 55.82 % 58.32% 59.92% 64.85 % 58.50 %
(1) Excludes securities gains
(2) After-tax impact of merger conversion-related expenses of $815, $340, $248, $300, and $168, 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
December 31, 2017
December 31, 2016
Cash and due from banks$36,246 $35,897
Interest-bearing deposits with banks 199,042 181,396
Cash and cash equivalents 235,288 217,293
Investment securities held-to-maturity (fair value of $25,932 and $25,894 at December 31, 2017
and December 31, 2016, respectively) 25,562 26,329
Investment securities available-for-sale 85,834 73,380
Other investments 11,350 7,879
Mortgage loans held-for-sale 29,191 15,373
Loans, net of unearned income 2,138,058 1,485,484
Less: allowance for loan losses 14,985 12,113
Loans, net 2,123,073 1,473,371
Premises and equipment, net 52,455 31,884
Accrued interest receivable 6,157 4,129
Bank-owned life insurance 31,584 28,034
Other real estate 1,094 2,068
Deferred tax assets, net 12,041 13,486
Goodwill 113,394 50,771
Core deposit intangible, net 4,455 2,032
Other assets 6,198 4,755
Total assets$ 2,737,676 $ 1,950,784
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand$697,144 $429,030
Interest-bearing demand 362,266 262,261
Savings and money market 951,846 703,289
Time 274,575 273,130
Total deposits 2,285,831 1,667,710
Federal Home Loan Bank advances and other borrowings 7,000 7,000
Subordinated debt 24,553 24,500
Accrued interest payable 900 829
Other liabilities 19,434 13,701
Total liabilities 2,337,718 1,713,740
Shareholders’ equity:
Preferred stock, 250,000 shares authorized, no shares issued or outstanding - -
Common stock, $0.01 par value, 30,000,000 shares authorized, 14,788,436 and 10,934,541
shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively 148 109
Additional paid-in capital 347,999 205,372
Retained earnings 43,989 24,005
Accumulated other comprehensive income 474 249
Total shareholders equity attributable to National Commerce Corporation 392,610 229,735
Noncontrolling interest 7,348 7,309
Total shareholders equity 399,958 237,044
Total liabilities and shareholders equity$ 2,737,676 $ 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 Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
Interest and dividend income:
Interest and fees on loans$28,834 $18,082 $104,194 $71,225
Interest and dividends on taxable investment securities 756 525 2,627 1,813
Interest on non-taxable investment securities 191 201 783 802
Interest on interest-bearing deposits and federal funds sold 443 224 2,187 723
Total interest income 30,224 19,032 109,791 74,563
Interest expense:
Interest on deposits 2,365 1,583 8,530 6,127
Interest on borrowings 71 71 284 294
Interest on subordinated debt 388 388 1,553 960
Total interest expense 2,824 2,042 10,367 7,381
Net interest income 27,400 16,990 99,424 67,182
Provision for loan losses 1,478 441 3,894 3,248
Net interest income after provision for loan losses 25,922 16,549 95,530 63,934
Other income:
Service charges and fees on deposit accounts 733 523 2,711 2,019
Mortgage origination and fee income 2,450 1,711 11,529 6,975
Merchant sponsorship revenue 592 613 2,560 2,168
Income from bank-owned life insurance 210 196 855 810
Rental income 240 - 324 -
Wealth management fees 11 10 47 49
(Loss) gain on other real estate (66) (31) 44 244
Loss on sale of investment securities available-for-sale (119) - (91) -
Other 814 450 2,056 1,691
Total other income 4,865 3,472 20,035 13,956
Other expense:
Salaries and employee benefits 10,016 6,935 39,556 27,735
Commission-based compensation 1,700 1,076 6,855 4,091
Occupancy and equipment 1,889 1,193 6,533 4,640
Core deposit intangible amortization 393 182 1,455 756
Other operating expense 5,252 2,754 19,120 11,857
Total other expense 19,250 12,140 73,519 49,079
Earnings before income taxes 11,537 7,881 42,046 28,811
Income tax expense 10,121 2,600 20,071 9,394
Net earnings 1,416 5,281 21,975 19,417
Less: Net earnings attributable to noncontrolling interest 413 374 1,907 1,564
Net earnings attributable to National Commerce Corporation$ 1,003 $ 4,907 $ 20,068 $ 17,853
Weighted average common and diluted shares outstanding
Basic 14,783,597 10,930,309 13,800,595 10,886,092
Diluted 15,173,984 11,173,733 14,193,433 11,093,987
Basic earnings per common share$0.07 $0.45 $1.45 $1.64
Diluted earnings per common share$0.07 $0.44 $1.41 $1.61


NATIONAL COMMERCE CORPORATION
Average Balance Sheets and Net Interest Analysis
For the Three Months Ended
(Dollars in thousands)December 31, 2017
September 30, 2017
June 30, 2017
March 31, 2017
December 31, 2016
Interest-earning assetsAverage Balance
Interest Income/ Expense
Average Yield/ Rate
Average Balance
Interest Income/ Expense
Average Yield/ Rate
Average Balance
Interest Income/ Expense
Average Yield/ Rate
Average Balance
Interest Income/ Expense
Average Yield/ Rate
Average Balance
Interest Income/ Expense
Average Yield/ Rate
Loans$2,091,443 $28,704 5.45% $1,937,115 $26,634 5.45% $1,849,258 $24,823 5.38% $1,793,241 $23,377 5.29% $1,446,629 $18,012 4.95%
Mortgage loans held-for-sale 18,237 136 2.96 16,811 151 3.56 18,321 170 3.72 21,809 222 4.13 10,366 78 2.99
Securities:
Taxable securities 97,175 756 3.09 90,969 694 3.03 81,645 606 2.98 88,062 571 2.63 82,881 525 2.52
Tax-exempt securities 25,005 303 4.81 25,286 310 4.86 25,573 313 4.91 25,824 317 4.98 25,910 319 4.90
Cash balances in other banks 128,606 443 1.37 159,973 533 1.32 249,361 676 1.09 258,672 535 0.84 140,813 224 0.63
Total interest-earning assets 2,360,466 $30,342 5.10 2,230,154 $28,322 5.04 2,224,158 $ 26,588 4.79 2,187,608 $ 25,022 4.64 1,706,599 $19,158 4.47
Noninterest-earning assets 255,239 228,231 218,088 220,006 149,709
Total assets$2,615,705 $2,458,385 $2,442,246 $2,407,614 $1,856,308
Interest-bearing liabilities
Interest-bearing transaction accounts$331,876 $277 0.33% $314,925 $207 0.26% $341,238 $243 0.29% $332,361 $217 0.26% $235,340 $149 0.25%
Savings and money market deposits 884,660 1,381 0.62 827,526 1,233 0.59 821,130 1,138 0.56 804,537 1,096 0.55 633,765 791 0.50
Time deposits 285,669 707 0.98 273,630 661 0.96 290,097 673 0.93 306,404 697 0.92 273,293 643 0.94
Federal Home Loan Bank and other borrowed money 7,381 71 3.82 7,228 72 3.95 7,000 70 4.01 9,016 71 3.19 7,000 71 4.04
Subordinated debt 24,547 388 6.27 24,533 388 6.27 24,520 389 6.36 24,507 388 6.42 24,494 388 6.30
Total interest-bearing liabilities 1,534,133 $2,824 0.73 1,447,842 $2,561 0.70 1,483,985 $2,513 0.68 1,476,825 $2,469 0.68 1,173,892 $2,042 0.69
Noninterest-bearing deposits 657,786 615,130 612,910 600,897 431,253
Total funding sources 2,191,919 2,062,972 2,096,895 2,077,722 1,605,145
Noninterest-bearing liabilities 21,469 19,284 16,465 16,921 16,914
Shareholders' equity 402,317 376,129 328,886 312,971 234,249
$2,615,705 $2,458,385 $2,442,246 $2,407,614 $1,856,308
Net interest rate spread 4.37% 4.34% 4.11% 3.96% 3.78%
Net interest income/margin (taxable equivalent) 27,518 4.63% 25,761 4.58% 24,075 4.34% 22,553 4.18% 17,116 3.99%
Tax equivalent adjustment 118 120 122 123 126
Net interest income/margin $27,400 4.61% $25,641 4.56% $23,953 4.32% $22,430 4.16% $16,990 3.96%


NATIONAL COMMERCE CORPORATION
Average Balance Sheets and Net Interest Analysis
(Dollars in thousands)December 31, 2017
December 31, 2016
Interest-earning assetsAverage
Balance

Interest Income/
Expense

Average Yield/
Rate

Average
Balance

Interest Income/
Expense

Average Yield/
Rate

Loans$1,918,634 $103,539 5.40% $1,397,681 $70,761 5.06%
Mortgage loans held for sale 18,779 679 3.62 13,031 489 3.75
Securities:
Taxable securities 89,492 2,627 2.94 75,110 1,813 2.41
Tax-exempt securities 25,420 1,243 4.89 26,004 1,273 4.90
Cash balances in other banks 198,689 2,187 1.10 118,438 723 0.61
Total interest-earning assets 2,251,014 $ 110,275 4.90 1,630,264 $ 75,059 4.60
Non-interest earning assets 230,482 150,703
Total assets$ 2,481,496 $ 1,780,967
Interest-bearing liabilities
Interest-bearing transactions accounts$330,057 $944 0.29% $216,271 $521 0.24%
Savings and money market deposits 834,664 4,848 0.58 617,527 2,964 0.48
Time deposits 288,851 2,738 0.95 287,641 2,642 0.92
Federal Home Loan Bank and other borrowed money 7,651 284 3.71 7,985 294 3.68
Subordinated debt 24,527 1,553 6.33 15,200 960 6.32
Total interest-bearing liabilities 1,485,750 $ 10,367 0.70 1,144,624 $ 7,381 0.64
Non-interest bearing deposits 621,819 396,925
Total funding sources 2,107,569 1,541,549
Non-interest bearing liabilities 18,549 13,067
Shareholders' equity 355,378 226,351
$ 2,481,496 $ 1,780,967
Net interest rate spread 4.20% 3.96%
Net interest income/margin (taxable equivalent) 99,908 4.44% 67,678 4.15%
Tax equivalent adjustment 484 496
Net interest income/margin $ 99,424 4.42% $ 67,182 4.12%

Contact: National Commerce Corporation William E. Matthews, V Vice Chairman and Chief Financial Officer (205) 313-8122 Lowell Womack, Jr. Director of Financial Reporting (205) 313-8147

Source:National Commerce Corporation