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National Commerce Corporation Announces Second Quarter 2018 Earnings

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BIRMINGHAM, Ala., July 24, 2018 (GLOBE NEWSWIRE) -- National Commerce Corporation (NASDAQ:NCOM) ("NCC" or the "Company"), the parent company of National Bank of Commerce ("NBC"), today reported second quarter 2018 net income to common shareholders of $10.7 million, compared to $6.4 million for the second quarter of 2017.  Diluted net earnings per share were $0.61 in the second quarter of 2018, compared to $0.52 in the first quarter of 2018 and $0.48 in the second quarter of 2017.

"We are pleased to report our second quarter results," said Richard Murray, IV, President and Chief Executive Officer of the Company.  "While we had good earnings performance, higher loan payoffs offset solid loan production during the quarter, resulting in lower overall loan growth.  Our 4.8% annualized growth in average loans for the quarter is below our long-term expectation. However, we did have a good quarter of deposit growth.  We also remain pleased with our asset quality."

During the second quarter of 2018, the Company announced the execution of a definitive agreement to acquire Landmark Bancshares, Inc. ("Landmark") and its wholly owned subsidiary, First Landmark Bank, headquartered in Marietta, Georgia. While all required regulatory approvals with respect to the transaction have been received, the transaction remains subject to the approval of Landmark's shareholders and the satisfaction or waiver of certain other closing conditions.  On July 1, 2018, the Company also successfully completed its previously announced acquisition of Premier Community Bank of Florida ("Premier"), headquartered in Bradenton, Florida.  Because the acquisition of Premier occurred after the end of the quarter, the Company's reported results for the second quarter do not include the results of operations of Premier.

Several important measures from the second quarter of 2018 are as follows:

  • Net Interest Margin (taxable equivalent) of 4.77% for the second quarter of 2018, compared to 4.80% for the first quarter of 2018 and 4.34% for the second quarter of 2017.  The second quarter 2018 margin decreased 0.03% compared to the first quarter of 2018.  Loan yields during the second quarter of 2018 were higher due to an increase in interest rates during the second quarter of 2018.  Excluding the impact of accretion from both periods, the 2018 second quarter margin would have been 4.50%, and the 2018 first quarter margin would have been 4.45%.  The higher loan yields during the second quarter of 2018 compared to the 2018 first quarter were offset by an increase in the rate paid on interest-bearing liabilities of 0.17%. 
     
  • Return on Average Assets ("ROAA") of 1.36% for the second quarter of 2018, compared to 1.18% for the first quarter of 2018 and 1.06% for the second quarter of 2017.

  • Return on Average Tangible Common Equity ("ROATCE") of 12.73% for the second quarter of 2018, compared to 11.27% for the first quarter of 2018 and 11.49% for the second quarter of 2017.
     
  • Second quarter 2018 loan growth (excluding mortgage loans held-for-sale) of $16.5 million.  Excluding factored receivables in the Company's factoring subsidiary, Corporate Billing, LLC, second quarter 2018 loan growth was approximately $11.3 million.
     
  • Deposits increased $92.2 million during the second quarter of 2018. 
     
  • $149.6 million in 2018 second quarter mortgage production, compared to $114.9 million during the first quarter of 2018 and $133.1 million during the second quarter of 2017.   
     
  • $309.5 million in 2018 second quarter purchased volume in the factoring division, compared to $283.0 million for the first quarter of 2018 and $251.0 million for the second quarter of 2017.
     
  • Non-acquired non-performing assets of $1.0 million at June 30, 2018, a decrease from $1.1 million at March 31, 2018 and $1.2 million at June 30, 2017.
     
  • Annualized net charge-offs of 0.11% of average loans outstanding for the second quarter of 2018, compared to net charge-offs of 0.08% for the first quarter of 2018 and 0.07% for the second quarter of 2017.
     
  • Provision for loan losses of $856 thousand for the second quarter of 2018, compared to $1.3 million for the first quarter of 2018 and $1.2 million for the second quarter of 2017.
     
  • Ending tangible book value per share of $19.86.
     
  • Ending book value per share of $29.97.

The Company will host a live audio webcast conference call beginning at 8:30 a.m. Central Time on July 25, 2018 to discuss earnings and operating results for the 2018 second quarter.  Investors may call in (toll free) by dialing (844) 296-8205 (conference ID 5084466).  A replay of the conference call will be available until July 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, 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 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.  Its wholly-owned subsidiary, National Bank of Commerce, provides a broad array of financial services for commercial and consumer customers through seven full-service banking offices in Alabama, twenty-five full-service banking offices in Florida and two full-service banking offices in the Atlanta, Georgia metro area.  National Bank of Commerce conducts business under a number of trade names unique to its local markets, including United Legacy Bank, Reunion Bank of Florida, Private Bank of Buckhead, Private Bank of Decatur, PrivatePlus Mortgage, Patriot Bank, FirstAtlantic Bank and Premier Community Bank of Florida.

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, 2017 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  
    June 30,   March 31,   December 31,   September 30,   June 30,    
      2018       2018     2017       2017     2017    
Earnings Summary                        
Interest income   $   37,713     $   36,320   $   30,224     $   28,202   $   26,466    
Interest expense       4,310         3,420       2,824         2,561       2,513    
Net interest income       33,403         32,900       27,400         25,641       23,953    
Provision for loan losses        856         1,318       1,478         1,105       1,155    
Gain (loss) on sale of securities        2         191       (119 )       -       28    
Other noninterest income (1)       4,673         4,517       4,744         4,546       5,072    
Merger/conversion-related expenses (2)       542         2,396       1,172         417       344    
Other noninterest expense (3)       22,077         21,579       17,838         17,570       17,393    
  Income before income taxes       14,603         12,315       11,537         11,095       10,161    
Income tax expense        3,303         2,776       3,890         3,828       3,281    
Deferred tax asset write-down       -         -       6,231         -       -    
  Total income tax expense       3,303         2,776       10,121         3,828       3,281    
  Net income before minority interest        11,300         9,539       1,416         7,267       6,880    
  Net income attributable to minority interest        616         456       413         570       431    
Net income to common shareholders   $   10,684     $   9,083   $   1,003     $   6,697   $   6,449    
                         
Weighted average common and diluted shares outstanding                      
    Basic       17,236,525         17,209,551       14,783,597         14,300,974       13,190,582    
    Diluted       17,642,926         17,612,298       15,173,984         14,679,546       13,551,745    
                         
Net earnings per common share                        
    Basic   $   0.62     $   0.53   $   0.07     $   0.47   $   0.49    
    Diluted   $   0.61     $   0.52   $   0.07     $   0.46   $   0.48    
                         
                         
    June 30,   March 31,   December 31,   September 30,   June 30,    
Selected Performance Ratios     2018       2018     2017       2017     2017    
Return on average assets (ROAA) (4)       1.36   %     1.18  %     0.15   %     1.08  %     1.06  %  
Return on average equity (ROAE)       8.39         7.35       0.99         7.06       7.86    
Return on average tangible common equity                        
  (ROATCE)       12.73         11.27       1.41         9.94       11.49    
Net interest margin - taxable equivalent       4.77         4.80       4.63         4.58       4.34    
Efficiency ratio       59.40         64.08       59.14         59.59       61.11    
Operating efficiency ratio (3)       57.98         57.67       55.49         58.20       59.92    
Noninterest income / average assets (annualized)       0.60         0.59       0.72         0.73       0.83    
Noninterest expense / average assets (annualized)       2.88         3.12       2.88         2.90       2.91    
Yield on loans       5.74         5.66       5.45         5.45       5.38    
Cost of total deposits       0.60   %     0.47  %     0.43   %     0.41  %     0.40  %  
                         
                         
    June 30,   March 31,   December 31,   September 30,   June 30,    
Factoring Metrics     2018       2018     2017       2017     2017    
Recourse purchased volume   $   127,680     $   115,970   $   108,628     $   104,304   $   101,295    
Non-recourse purchased volume       181,835         167,015       158,565         155,157       149,740    
Total purchased volume   $   309,515     $   282,985   $   267,193     $   259,461   $   251,035    
Average turn (days)       42.85         42.25       43.59         41.11       38.47    
Net charge-offs / total purchased volume       0.06   %     0.14  %     0.18   %     0.05  %     0.12  %  
Average discount rate       1.63   %     1.64  %     1.59   %     1.58  %     1.52  %  
                         
                         
    June 30,   March 31,   December 31,   September 30,   June 30,    
Mortgage Metrics     2018       2018     2017       2017     2017    
Total production ($)   $   149,640     $   114,850   $   120,969     $   122,656   $   133,063    
 Refinance (%)       17.0    %      27.8  %      22.1    %      23.6  %      24.0  %  
 Purchases (%)       83.0    %      72.2  %      77.9    %      76.4  %      76.0  %  
                         
    As of  
    June 30,   March 31,   December 31,   September 30,   June 30,    
Balance Sheet Highlights     2018       2018     2017       2017     2017    
Cash and cash equivalents   $   217,773     $   132,825   $   235,288     $   134,549   $   224,760    
Total investment securities       161,542         169,868       111,396         111,158       101,569    
Mortgage loans held-for-sale       24,455         21,077       29,191         15,278       19,482    
Acquired purchased credit-impaired loans       26,942         29,359       25,696         26,924       21,065    
Acquired non-purchased credit-impaired loans       714,359         783,556       538,276         561,118       490,198    
Nonacquired loans held for investment (5)       1,614,376         1,531,475       1,455,376         1,349,254       1,252,970    
CBI loans (factoring receivables)        141,455         136,194       118,710         119,110       114,361    
Total gross loans held for investment       2,497,132         2,480,584       2,138,058         2,056,406       1,878,594    
Allowance for loan losses       15,997         15,839       14,985         14,264       13,407    
Total intangibles        173,590         174,225       117,849         119,688       103,270    
Total assets       3,214,367         3,113,766       2,737,676         2,549,134       2,418,052    
Total deposits       2,643,713         2,551,517       2,285,831         2,097,373       2,004,528    
FHLB and other borrowings       7,000         7,000       7,000         7,941       7,000    
Subordinated debt       24,580         24,567       24,553         24,540       24,527    
Total liabilities        2,697,563         2,608,040       2,337,718         2,150,541       2,054,792    
Minority interest        7,551         7,391       7,348         7,504       7,366    
Common stock       172         172       148         148       141    
Total shareholders' equity       516,804         505,726       399,958         398,593       363,260    
Tangible common equity   $   342,597     $   331,044   $   281,695     $   278,335   $   259,558    
End of period common shares outstanding       17,246,659         17,229,043       14,788,436         14,777,230       14,070,528    
                         
                         
    As of and For the Three Months Ended  
    June 30,   March 31,   December 31,   September 30,   June 30,    
Asset Quality Analysis     2018       2018     2017       2017     2017    
Nonacquired                         
Nonaccrual loans   $   294     $   367   $   82     $   70   $   50    
Other real estate and repossessed assets       340         -       -         150       -    
Loans past due 90 days or more and still accruing       408         723       677         1,690       1,172    
Total nonacquired nonperforming assets    $   1,042     $   1,090   $   759     $   1,910   $   1,222    
                         
Acquired                        
Nonaccrual loans   $   2,461     $   2,412   $   2,640     $   2,625   $   2,827    
Other real estate and repossessed assets       999         999       1,094         1,021       -    
Loans past due 90 days or more and still accruing       -         -       -         -       -    
Total acquired nonperforming assets    $   3,460     $   3,411   $   3,734     $   3,646   $   2,827    
                         
Selected asset quality ratios                        
Nonperforming assets / Assets       0.14   %     0.14  %     0.16   %     0.22  %     0.17  %  
Nonperforming assets / (Loans + OREO + repossessed assets)     0.18         0.18       0.21         0.27       0.22    
Net charge-offs (recoveries) to average loans (annualized)     0.11         0.08       0.14         0.05       0.07    
Allowance for loan losses to total loans       0.64         0.64       0.70         0.69       0.71    
Nonacquired nonperforming assets / (Nonacquired loans +                      
  nonacquired OREO + nonacquired repossessed assets) (5)     0.06         0.07       0.05         0.14       0.10    
Allowance for loan losses / (Nonacquired nonaccrual loans +                        
  nonacquired loans past due 90 days or more and still accruing)       2,278.77         1,453.12       1,974.31         810.45       1,097.14    
                         
                         
    As of  
    June 30,   March 31,   December 31,   September 30,   June 30,    
Additional Information - Allowance for Loan Losses   2018       2018     2017       2017     2017    
Allowance for loan losses excluding CBI loans (factoring receivables)     15,397         15,239       14,385         13,764       12,907    
Nonacquired loans held for investment (5)       1,614,376         1,531,475       1,455,376         1,349,254       1,252,970    
Allowance for loan losses allocated to CBI loans (factoring receivables)     600         600       600         500       500    
CBI loans (factoring receivables)        141,455         136,194       118,710         119,110       114,361    
                         
    For the Three Months Ended  
    June 30,   March 31,   December 31,   September 30,   June 30,    
Taxable Equivalent Yields/Rates     2018       2018     2017       2017     2017    
Interest income:                        
   Loans       5.74   %     5.66  %     5.45   %     5.45  %     5.38  %  
   Mortgage loans held-for-sale       3.71         4.85       2.96         3.56       3.72    
   Interest on securities:                        
       Taxable       3.14         3.11       3.09         3.03       2.98    
       Non-taxable       4.23         4.06       4.81         4.86       4.91    
Cash balances in other banks       1.80         1.55       1.37         1.32       1.09    
Funds sold       -         1.38       -         -       -    
Total interest-earning assets       5.38         5.29       5.10         5.04       4.79    
                         
Interest expense:                        
   Interest on deposits       0.84         0.67       0.62         0.59       0.57    
   Interest on FHLB and other borrowings       3.99         4.00       3.82         3.95       4.01    
   Interest on subordinated debt       6.30         6.41       6.27         6.27       6.36    
   Total interest-bearing liabilities       0.93         0.76       0.73         0.70       0.68    
   Net interest spread       4.45         4.53       4.37         4.34       4.11    
   Net interest margin       4.77   %     4.80  %     4.63   %     4.58  %     4.34  %  
                         
    As of  
    June 30,   March 31,   December 31,   September 30,   June 30,    
      2018       2018     2017       2017     2017    
Shareholders' Equity and Capital Ratios                        
Tier 1 leverage ratio       11.24   %     10.98  %     10.89   %     11.42  %     10.69  %  
Tier 1 common capital ratio       13.44         13.03       12.54         12.78       13.17    
Tier 1 risk-based capital ratio       13.44         13.03       12.54         12.78       13.17    
Total risk-based capital ratio       15.06         14.66       14.37         14.64       15.18    
Equity / Assets       16.08         16.24       14.61         15.64       15.02    
Tangible common equity to tangible assets       11.27   %     11.26  %     10.75   %     11.46  %     11.21  %  
Book value per share   $   29.97     $   29.35   $   27.05     $   26.97   $   25.82    
Tangible book value per share   $   19.86     $   19.21   $   19.05     $   18.84   $   18.45    
                         
    For the Three Months Ended  
    June 30,   March 31,   December 31,   September 30,   June 30,    
      2018       2018     2017       2017     2017    
Detail of Noninterest Income                        
Service charges and fees on deposit accounts   $   1,029     $   1,012   $   733     $   671   $   640    
Mortgage origination and fee income       2,262         1,895       2,450         2,780       3,154    
Merchant sponsorship revenue       675         720       592         622       602    
Income from bank-owned life insurance       276         286       210         210       219    
Wealth management fees       15         15       11         12       14    
(Loss) gain on sale of other real estate       (32 )       171       (66 )       6       105    
Gain (loss) on sale of investments       2         191       (119 )       -       28    
Other noninterest income       448         418       814         245       338    
  Total noninterest income   $   4,675     $   4,708   $   4,625     $   4,546   $   5,100    
                             
    For the Three Months Ended  
    June 30,   March 31,   December 31,   September 30,   June 30,    
      2018       2018     2017       2017     2017    
Detail of Noninterest Expense                        
Salaries and employee benefits   $   12,498     $   12,460   $   10,016     $   9,804   $   9,663    
Commission-based compensation       1,825         1,501       1,700         1,748       1,684    
Occupancy and equipment, net       2,025         1,994       1,649         1,608       1,479    
Data processing expenses       1,369         3,356       1,437         976       1,007    
Advertising and marketing expenses       361         268       349         309       327    
Legal fees       496         160       219         204       193    
FDIC insurance assessments       226         281       145         351       408    
Property and casualty insurance premiums       251         224       253         229       209    
Accounting and audit expenses       332         335       209         288       294    
Consulting and other professional expenses       568         538       888         510       517    
Telecommunications expenses       227         229       217         203       169    
ORE, Repo asset and other collection expenses       71         69       75         26       49    
Core deposit intangible amortization       738         739       393         366       348    
Other noninterest expense       1,632         1,821       1,460         1,365       1,390    
  Total noninterest expense   $   22,619     $   23,975   $   19,010     $   17,987   $   17,737    
                             
    As of  
    June 30,   March 31,   December 31,   September 30,   June 30,    
Non-GAAP Reconciliation     2018       2018     2017       2017     2017    
Total shareholders' equity   $   516,804     $   505,726   $   399,958     $   398,593   $   363,260    
Less: intangible assets       173,590         174,225       117,849         119,688       103,270    
Less: minority interest not included in intangible assets       617         457       414         570       432    
Tangible common equity   $   342,597     $   331,044   $   281,695     $   278,335   $   259,558    
Common shares outstanding at year or period end        17,246,659         17,229,043       14,788,436         14,777,230       14,070,528    
Tangible book value per share   $   19.86     $   19.21   $   19.05     $   18.84   $   18.45    
Total assets at end of period   $   3,214,367     $   3,113,766   $   2,737,676     $   2,549,134   $   2,418,052    
Less: intangible assets       173,590         174,225       117,849         119,688       103,270    
Adjusted total assets at end of period   $   3,040,777     $   2,939,541   $   2,619,827     $   2,429,446   $   2,314,782    
Tangible common equity to tangible assets       11.27   %     11.26  %     10.75   %     11.46  %     11.21  %  
                         
    For the Three Months Ended  
    June 30,   March 31,   December 31,   September 30,   June 30,    
      2018       2018     2017       2017     2017    
Non-GAAP Reconciliation                        
Total average shareholders' equity   $   510,958     $   500,901   $   402,317     $   376,129   $   328,886    
Less: average intangible assets       173,953         173,766       119,415         108,553       103,403    
Less: average minority interest not included                         
   in intangible assets       366         326       357         356       318    
Average tangible common equity   $   336,639     $   326,809   $   282,545     $   267,220   $   225,165    
Net income to common shareholders       10,684         9,083       1,003         6,697       6,449    
Return on average tangible common equity (ROATCE)       12.73   %     11.27  %     1.41   %     9.94  %     11.49  %  
Efficiency ratio:                        
Net interest income   $   33,403     $   32,900   $   27,400     $   25,641   $   23,953    
Total noninterest income       4,675         4,708       4,625         4,546       5,100    
Less:  Gain (loss) on sale of securities        2         191       (119 )       -       28    
Operating revenue   $   38,076     $   37,417   $   32,144     $   30,187   $   29,025    
Expenses:                        
Total noninterest expenses   $   22,619     $   23,975   $   19,010     $   17,987   $   17,737    
Efficiency ratio       59.40   %     64.08  %     59.14   %     59.59  %     61.11  %  
Operating efficiency ratio:                        
Net interest income   $   33,403     $   32,900   $   27,400     $   25,641   $   23,953    
Total noninterest income       4,675         4,708       4,625         4,546       5,100    
Less:  Gain (loss) on sale of securities        2         191       (119 )       -       28    
Operating revenue   $   38,076     $   37,417   $   32,144     $   30,187   $   29,025    
Expenses:                        
Total noninterest expenses   $   22,619     $   23,975   $   19,010     $   17,987   $   17,737    
Less: merger/conversion-related expenses       542         2,396       1,172         417       344    
Adjusted noninterest expenses   $   22,077     $   21,579   $   17,838     $   17,570   $   17,393    
Operating efficiency ratio       57.98   %     57.67  %     55.49   %     58.20  %     59.92  %  
                         
(1) Excludes securities gains                        
(2) After-tax impact of merger conversion-related expenses of $445, $1,826, $815, $340 and $248, 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  
  June 30, 2018 December 31, 2017  
 Cash and due from banks  $   51,360   $   36,246  
 Interest-bearing deposits with banks      166,413       199,042  
        Cash and cash equivalents      217,773       235,288  
 Investment securities held-to-maturity (fair value of $24,690 and $25,932 at June 30, 2018       
    and December 31, 2017, respectively)      24,948       25,562  
 Investment securities available-for-sale      136,594       85,834  
 Other investments      13,154       11,350  
 Mortgage loans held-for-sale      24,455       29,191  
 Loans, net of unearned income      2,497,132       2,138,058  
 Less: allowance for loan losses      15,997       14,985  
         Loans, net      2,481,135       2,123,073  
 Premises and equipment, net      67,841       52,455  
 Accrued interest receivable      7,537       6,157  
 Bank-owned life insurance      42,420       31,584  
 Other real estate      1,339       1,094  
 Deferred tax assets, net      14,958       12,041  
 Goodwill      164,360       113,394  
 Core deposit intangible, net      9,230       4,455  
 Other assets      8,623       6,198  
         Total assets  $   3,214,367   $   2,737,676  
           
 Liabilities and Shareholders' Equity   
 Deposits:       
     Noninterest-bearing demand  $   802,273   $   697,144  
     Interest-bearing demand      518,370       362,266  
     Savings and money market      982,026       951,846  
     Time      341,044       274,575  
         Total deposits      2,643,713       2,285,831  
 Federal Home Loan Bank advances and other borrowings      7,000       7,000  
 Subordinated debt      24,580       24,553  
 Accrued interest payable      900       900  
 Other liabilities      21,370       19,434  
         Total liabilities      2,697,563       2,337,718  
       
 Shareholders' equity:       
     Preferred stock, 250,000 shares authorized, no shares issued or outstanding      -       -  
     Common stock, $0.01 par value, 30,000,000 shares authorized, 17,246,659 and 14,788,436       
       shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively      172       148  
     Additional paid-in capital      447,061       347,999  
     Retained earnings      63,756       43,989  
     Accumulated other comprehensive income      (1,736 )     474  
         Total shareholders' equity attributable to National Commerce Corporation      509,253       392,610  
     Noncontrolling interest      7,551       7,348  
         Total shareholders' equity      516,804       399,958  
         Total liabilities and shareholders' equity  $   3,214,367   $   2,737,676  
           

 

   
NATIONAL COMMERCE CORPORATION  
Unaudited Consolidated Statements of Earnings  
(In thousands, except share and per share data)  
             
  For the Three Months Ended   For the Six Months Ended  
  June 30,   June 30,  
    2018     2017     2018     2017  
Interest and dividend income:            
      Interest and fees on loans $   35,713   $   24,987   $   70,136   $   48,580  
     Interest and dividends on taxable investment securities     1,212       606       2,382       1,177  
    Interest on non-taxable investment securities     192       197       380       397  
    Interest on interest-bearing deposits and federal funds sold     596       676       1,135       1,211  
      Total interest income     37,713       26,466       74,033       51,365  
Interest expense:            
    Interest on deposits     3,852       2,054       6,813       4,064  
    Interest on borrowings     72       70       143       141  
    Interest on subordinated debt     386       389       774       777  
      Total interest expense     4,310       2,513       7,730       4,982  
      Net interest income     33,403       23,953       66,303       46,383  
Provision for loan losses     856       1,155       2,174       1,311  
      Net interest income after provision for loan losses     32,547       22,798       64,129       45,072  
Other income:            
    Service charges and fees on deposit accounts     1,029       640       2,041       1,307  
    Mortgage origination and fee income     2,262       3,154       4,157       6,299  
    Merchant sponsorship revenue     675       602       1,395       1,346  
    Income from bank-owned life insurance     276       219       562       435  
    Wealth management fees     15       14       30       24  
    Gain (loss) on other real estate     (32 )     105       139       104  
    Gain on sale of investment securities available-for-sale     2       28       193       28  
    Other     448       338       866       997  
      Total other income     4,675       5,100       9,383       10,540  
Other expense:            
    Salaries and employee benefits     12,498       9,663       24,958       19,736  
    Commission-based compensation     1,825       1,684       3,326       3,407  
    Occupancy and equipment, net     2,025       1,479       4,019       2,952  
    Core deposit intangible amortization     738       348       1,477       696  
    Other operating expense     5,533       4,563       12,814       9,407  
      Total other expense     22,619       17,737       46,594       36,198  
      Earnings before income taxes     14,603       10,161       26,918       19,414  
Income tax expense     3,303       3,281       6,079       6,122  
      Net earnings      11,300       6,880       20,839       13,292  
      Less: Net earnings attributable to noncontrolling interest     616       431       1,072       924  
      Net earnings attributable to National Commerce Corporation $   10,684   $   6,449   $   19,767   $   12,368  
             
Weighted average common and diluted shares outstanding            
     Basic     17,236,525       13,190,582       17,223,112       13,046,611  
     Diluted     17,642,926       13,551,745       17,633,029       13,422,704  
             
Basic earnings per common share $   0.62   $   0.49   $   1.15   $   0.95  
Diluted earnings per common share $   0.61   $   0.48   $   1.12   $   0.92  
             

 

   
NATIONAL COMMERCE CORPORATION  
Average Balance Sheets and Net Interest Analysis  
   
                                 
  For the Three Months Ended  
(Dollars in thousands) June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017  
Interest-earning assets 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
Average
Balance
Interest
Income/
Expense
Average
Yield/ Rate
 
Loans $ 2,480,578 $ 35,501 5.74 % $ 2,451,352 $ 34,220 5.66 % $ 2,091,443 $ 28,704 5.45 % $ 1,937,115 $ 26,634 5.45 % $ 1,849,258 $ 24,823 5.38 %  
Mortgage loans held-for-sale   23,247   215 3.71     17,402   208 4.85     18,237   136 2.96     16,811   151 3.56     18,321   170 3.72    
Securities:                                
Taxable securities   155,062   1,212 3.14     152,748   1,170 3.11     97,175   756 3.09     90,969   694 3.03     81,645   606 2.98    
Tax-exempt securities   24,393   257 4.23     25,169   252 4.06     25,005   303 4.81     25,286   310 4.86     25,573   313 4.91    
Cash balances in other banks   132,868   596 1.80     138,358   529 1.55     128,606   443 1.37     159,973   533 1.32     249,361   676 1.09    
Funds sold   -   - 0.00     2,946   10 1.38     -   - 0.00     -   - 0.00     -   - 0.00    
Total interest-earning assets   2,816,148 $ 37,781 5.38     2,787,975 $ 36,389 5.29     2,360,466 $ 30,342 5.10     2,230,154 $ 28,322 5.04     2,224,158 $ 26,588 4.79    
Noninterest-earning assets   333,297       328,605       255,239       228,231       218,088      
Total assets $ 3,149,445     $ 3,116,580     $ 2,615,705     $ 2,458,385     $ 2,442,246      
                                 
Interest-bearing liabilities                                
Interest-bearing transaction accounts $ 517,769 $ 632 0.49 % $ 423,537 $ 322 0.31 % $ 331,876 $ 277 0.33 % $ 314,925 $ 207 0.26 % $ 341,238 $ 243 0.29 %  
Savings and money market deposits   975,986   2,182 0.90     1,038,751   1,816 0.71     884,660   1,381 0.62     827,526   1,233 0.59     821,130   1,138 0.56    
Time deposits   342,890   1,038 1.21     327,011   823 1.02     285,669   707 0.98     273,630   661 0.96     290,097   673 0.93    
Federal Home Loan Bank and other borrowed money   7,243   72 3.99     7,200   71 4.00     7,381   71 3.82     7,228   72 3.95     7,000   70 4.01    
Subordinated debt   24,574   386 6.30     24,560   388 6.41     24,547   388 6.27     24,533   388 6.27     24,520   389 6.36    
Total interest-bearing liabilities   1,868,462 $ 4,310 0.93     1,821,059 $ 3,420 0.76     1,534,133 $ 2,824 0.73     1,447,842 $ 2,561 0.70     1,483,985 $ 2,513 0.68    
Noninterest-bearing deposits   746,940       772,358       657,786       615,130       612,910      
Total funding sources   2,615,402       2,593,417       2,191,919       2,062,972       2,096,895      
Noninterest-bearing liabilities   23,085       22,262       21,469       19,284       16,465      
Shareholders' equity   510,958       500,901       402,317       376,129       328,886      
  $ 3,149,445     $ 3,116,580     $ 2,615,705     $ 2,458,385     $ 2,442,246      
Net interest rate spread     4.45 %     4.53 %     4.37 %     4.34 %     4.11 %  
Net interest income/margin (taxable equivalent)     33,471 4.77 %     32,969 4.80 %     27,518 4.63 %     25,761 4.58 %     24,075 4.34 %  
Tax equivalent adjustment     68       69       118       120       122    
Net interest income/margin   $ 33,403 4.76 %   $ 32,900 4.79 %   $ 27,400 4.61 %   $ 25,641 4.56 %   $ 23,953 4.32 %  
                                 

 

               
AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS  
For the Six Months Ended  
               
(Dollars in thousands, except yields and rates) June 30, 2018 June 30, 2017  
Interest-earning assets Average
Balance
Interest
Income/
Expense
Average Yield/
Rate
Average
Balance
Interest
Income/
Expense
Average Yield/
Rate
 
Loans $ 2,466,046 $ 69,720 5.70 % $ 1,821,404 $ 48,201 5.34 %  
Mortgage loans held for sale   20,341   423 4.19     20,055   392 3.94    
Securities:              
Taxable securities   153,912   2,382 3.12     84,836   1,177 2.80    
Tax-exempt securities   24,778   508 4.13     25,698   630 4.94    
Cash balances in other banks   135,598   1,125 1.67     253,991   1,211 0.96    
Funds sold   1,465   10 1.38     -   - 0.00    
Total interest-earning assets   2,802,140 $ 74,168 5.34     2,205,984 $ 51,611 4.72    
Non-interest earning assets   330,963       219,041      
Total assets $ 3,133,103     $ 2,425,025      
               
Interest-bearing liabilities              
Interest-bearing transactions accounts $ 470,913 $ 954 0.41 % $ 336,824 $ 460 0.28 %  
Savings and money market deposits   1,007,195   3,998 0.80     812,879   2,234 0.55    
Time deposits   334,994   1,861 1.12     298,205   1,370 0.93    
Federal Home Loan Bank and other borrowed money   7,222   143 3.99     8,002   141 3.55    
Subordinated debt   24,567   774 6.35     24,514   777 6.39    
Total interest-bearing liabilities   1,844,891 $ 7,730 0.84     1,480,424 $ 4,982 0.68    
Non-interest bearing deposits   759,579       606,937      
Total funding sources   2,604,470       2,087,361      
Non-interest bearing liabilities   22,676       16,692      
Shareholders' equity   505,957       320,972      
  $ 3,133,103     $ 2,425,025      
Net interest rate spread     4.50 %     4.04 %  
Net interest income/margin (taxable equivalent)     66,438 4.78 %     46,629 4.26 %  
Tax equivalent adjustment     135       246    
Net interest income/margin   $ 66,303 4.77 %   $ 46,383 4.24 %  
               

Contact:

National Commerce Corporation

William E. Matthews, V                                                         Lowell Womack, Jr.
Vice Chairman and Chief Financial Officer                           Director of Financial Reporting
(205) 313-8100                                                                     (205) 313-8100

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