Highlights:
-First quarter 2017 net income of $3.4 million, an 18% increase over the same period in the prior year
-Fully diluted earnings per share of $0.62 consistent with the prior year despite shares added during the IPO in the second quarter of 2016
-Loan growth of $39.7 million in the first quarter of 2017, an annualized growth rate of 13%
-Credit quality remains strong with nonperforming loans at only 0.04% of total loans
-First quarter ROAA of 0.87% and ROAE of 9.86%
RALEIGH, NC / ACCESSWIRE / April 27, 2017 / Paragon Commercial Corporation (the “Company”) (NASDAQ: PBNC), parent company of Paragon Bank (the “Bank”), today reported unaudited financial results for the three-month period ended March 31, 2017. Net income during the three-month period increased 18% to $3.4 million compared to $2.8 million for the same period in 2016. The increase in earnings was primarily driven by an increase in net interest income which was a result of continued loan growth. The increase in net interest income was partially offset by a $159,000 loan loss provision as the Company increased its allowance for loan losses commensurate with loan growth. In addition, the first quarter of 2016 included $85,000 in securities gains compared to no such gains in the first quarter of 2017. However, the first quarter of 2016 did have a loss on write-down of foreclosed properties of $212,000 compared to no such losses for the same period in 2017. Fully diluted earnings per share (“EPS”) were $0.62 for the first quarters of both 2017 and 2016 despite the additional shares issued as a result of the Company’s initial public offering (“IPO”) and listing on Nasdaq during the second quarter of 2016. Despite increasing the share count by approximately 18% as a result of the IPO, the share addition only resulted in EPS dilution for one quarter, the third quarter of 2016.
“Paragon’s growth continues to be strong which reflects our dynamic markets and our ability to penetrate our markets with new and expanded relationships. This growth coupled with our outstanding credit quality, efficiency and local deposit all contribute to solid earnings growth. Our continued emphasis on the Extraordinary Client Experience resonates well with our clients and prospects,” said Robert C. Hatley, President and CEO.
The annualized return on average assets for the first quarter of 2017 was 0.87% and the annualized return on average equity was 9.86% compared to 0.86% and 11.46%, respectively, for the same ratios in the first quarter of 2016. Those ratios were impacted by the additional capital as a result of the IPO.
Consolidated Assets
Total consolidated assets on March 31, 2017 were $1.55 billion compared to $1.50 billion as of December 31, 2016. Assets increased during the quarter by $46.3 million primarily as a result of strong loan demand.
Loan Portfolio
Loans outstanding increased by $39.7 million during the first quarter from $1.19 billion at December 31, 2016 to $1.23 billion at March 31, 2017. Commercial real estate grew $26.2 million, owner occupied commercial real estate grew $6.4 million and consumer real estate grew $12.1 million during the period while commercial lending experienced a $9.2 million decrease and the other loan categories remained relatively flat. The Company continues to see strong loan growth throughout the Raleigh, Charlotte and Cary markets.
Deposit Portfolio
Total deposits increased by $92.6 million during the first quarter despite the Company’s continued effort to pay down wholesale deposits. During the first quarter, demand account balances increased $11.7 million and money market and interest checking accounts increased $106.7 million. The combined increase of $118.4 million represents a 50% annualized increase in these types of deposits. At the same time, time deposits decreased $25.8 million as the Company reduced its brokered deposit portfolio by $21.8 million or 28%. Growth in deposits allowed the Company to pay down its Federal Home Loan Bank advances by $50.0 million during the quarter.
Credit Quality
The Company recorded a $159,000 loan loss provision for the first quarter of 2017 as a result of the growth in total loans. There was no provision for loan losses for the quarter ended March 31, 2016. The allowance for loan losses as a percentage of total loans at March 31, 2017 and December 31, 2016 was 0.66%.
Asset quality continued to remain strong as nonperforming loans were 0.04% of total loans at March 31, 2017. Loans past due 30 days or greater at quarter end were $59,000 or 0.00% of total loans and the ratio of total nonperforming assets to total assets including foreclosed real estate was 0.34%.
Net Interest Income
Net interest income increased by $1.8 million during the first quarter of 2017 compared to the first quarter of 2016. Net interest income totaled $12.3 million during the period, representing a net interest margin of 3.44% on a tax equivalent basis, which was down 0.10% when compared to 3.54% in the first quarter of 2016. Net interest margin decreased primarily as a result of a larger balance in lower yielding interest-earning cash. Despite the strong 13% annualized loan growth rate, deposit growth well outpaced loan growth for the quarter. Average interest-earning cash was $75.7 million in the first quarter of 2017 compared to $35.5 million in the first quarter of 2016.
Non-Interest Income
For the first quarter of 2017, non-interest income was $503,000 compared to $266,000 for the same period in 2016. The first quarter of 2016 was negatively impacted by $212,000 in write-downs or loss on sale of foreclosed real estate. There were no losses on foreclosed real estate in the first quarter of 2017. Conversely, the first quarter of 2016 was also positively impacted by $85,000 in gains on sales of securities. There were no gains on sales of securities in the first quarter of 2017.
Non-Interest Expense
Non-interest expenses in the first quarter of 2017 were $7.6 million compared to $6.6 million in the first quarter of 2016. Personnel expense increased by $595,000 as the Company added lenders and staff to support its strong growth. In addition, data processing costs increased by $146,000 partially reflecting the growth in the number of accounts at the Bank and partially due to additional cyber-security enhancements implemented during the period.
MEDIA INQUIRIES:
Blair Kelly – MMI Public Relations, 919.233.6600 or BKelly@MMIpublicrelations.com
Scott Williams – Paragon Bank, SVP/Director of Marketing & Public Relations, 919.534.7385 or SWilliams@ParagonBank.com
INVESTOR INQUIRIES:
Steve Crouse – Paragon Bank, Chief Financial Officer, 919.534.7404 or SCrouse@ParagonBank.com
NEW MEDIA CONTENT:
Paragon Bank LinkedIn Page: http://linkd.in/P0o9Wc
ABOUT PARAGON COMMERCIAL CORPORATION
Paragon Commercial Corporation is the parent company of Paragon Bank, which provides a private banking experience to businesses, professionals, executives, entrepreneurs and other individuals. Founded in Raleigh, North Carolina in 1999, Paragon Bank provides banking services through highly responsive professionals, an extensive courier service, online and mobile technologies, free worldwide ATM access, and a select number of strategically placed offices in Raleigh, Cary and Charlotte, NC. For more information, visit http://ParagonBank.com.
FORWARD-LOOKING STATEMENTS
Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements. Actual results might differ materially from those explicit or implicit in the forward-looking statements. Important factors that could cause actual results to differ materially include, without limitation: the effects of future economic conditions; governmental fiscal and monetary policies; legislative and regulatory changes; the risks of changes in interest rates; management of growth; fluctuations in our financial results; reliance on key personnel; our ability to compete effectively; privacy, security and other risks associated with our business; and the other factors set forth from time to time in our SEC filings, copies of which are available free of charge within the Investor Relations section of our website at https://paragonbank.com/investor-relations/ or upon request from our investor relations department. Paragon Commercial Corporation assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
USE OF NON-GAAP FINANCIAL MEASURES
Some of the financial measures included in this press release are not measures of financial performance recognized by United States generally accepted accounting principles, or GAAP. These non-GAAP financial measures are “overhead to average assets” and “efficiency ratio.” Our management uses these non-GAAP financial measures in its analysis of our performance and because of market expectations of use of these ratios to evaluate the Company. Management believes each of these non-GAAP financial measures provides useful information about our financial condition and results of operation.
“Overhead to average assets” reflects the amount of non-interest expenses incurred in comparison to the total size of the Company and provides investors with an additional measure of our productivity.
The efficiency ratio shows the amount of revenue generated for each dollar spent and provides investors with a measure of our productivity.
These non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release under the caption “Reconciliation of Non-GAAP Financial Measures.”
PARAGON COMMERCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(Dollars in thousands, except per share data)
2017
2016
2016
2016
2016
Loans and loan fees
$
13,070
$
13,261
$
12,544
$
11,840
$
11,190
Investment securities
1,403
1,264
1,214
1,369
1,219
Federal funds and other interest income
159
48
97
63
58
Total Interest and Dividend Income
14,632
14,573
13,855
13,272
12,467
Interest-bearing checking and money markets
1,074
1,064
966
836
857
Time deposits
511
560
588
556
567
Borrowings and repurchase agreements
728
530
534
579
492
Total Interest Expense
2,313
2,154
2,088
1,971
1,916
Net Interest Income
12,319
12,419
11,767
11,301
10,551
Provision for loan losses
159
200
391
–
–
Net Interest Income after Provision for Loan Losses
12,160
12,219
11,376
11,301
10,551
Non-interest Income
Increase in cash surrender value of bank owned life insurance
258
247
220
226
223
Net gain (loss) on sale of securities
–
21
–
–
85
Deposit service charges and other fees
62
64
65
56
58
Mortgage banking revenues
51
48
59
33
32
Net loss on sale or write-down of other real estate
–
(443
)
–
(45
)
(212
)
Other non-interest income
132
272
94
111
80
Total Non-interest Income
503
209
438
381
266
Non-interest Expense
Salaries and employee benefits
4,462
4,083
3,912
3,742
3,867
Occupancy
359
393
362
342
344
Furniture and equipment
502
560
456
502
458
Data processing
530
270
270
279
384
Directors fees and expenses
224
193
219
219
252
Professional fees
203
429
208
182
237
FDIC and other supervisory assessments
166
71
220
217
195
Advertising and public relations
221
210
239
234
188
Unreimbursed loan costs and foreclosure related expenses
174
145
172
142
69
Other expenses
771
654
720
629
606
Total Non-interest Expense
7,612
7,008
6,778
6,488
6,600
Income before income taxes
5,051
5,420
5,036
5,194
4,217
Income tax expense
1,697
1,798
1,581
1,719
1,379
Net income
$
3,354
$
3,622
$
3,455
$
3,475
$
2,838
Basic earnings per share
$
0.62
$
0.67
$
0.64
$
0.76
$
0.62
Diluted earnings per share
$
0.62
$
0.67
$
0.64
$
0.75
$
0.62
PARAGON COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(Dollars and shares in thousands)
2017
2016
2016
2016
2016
Assets
Cash and due from banks
$
56,478
$
43,005
$
73,706
$
100,115
$
51,559
Investment securities – available for sale, at fair value
194,008
197,441
178,606
186,323
182,157
Loans-net of unearned income and deferred fees
1,230,953
1,191,280
1,165,345
1,105,344
1,044,981
Allowance for loan losses
(8,125
)
(7,909
)
(7,925
)
(7,986
)
(7,931
)
1,222,828
1,183,371
1,157,420
1,097,358
1,037,050
Premises and equipment, net
15,420
15,642
15,858
16,124
16,281
Bank owned life insurance
34,448
34,190
28,943
28,723
28,497
Federal Home Loan Bank stock, at cost
5,603
8,400
5,425
8,613
7,232
Accrued interest receivable
4,403
4,368
4,022
4,092
3,858
Deferred tax assets
4,734
4,841
3,361
3,264
4,304
Other real estate owned and repossessed property
4,740
4,740
5,183
5,183
5,228
Other assets
7,365
7,769
6,335
4,538
5,011
Total Assets
$
1,550,027
$
1,503,767
$
1,478,859
$
1,454,333
$
1,341,177
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Demand, non-interest bearing
$
222,904
$
211,202
$
188,398
$
179,070
$
166,556
Money market accounts and interest checking
848,705
742,046
767,124
654,954
624,199
Time deposits
193,249
219,007
243,563
266,177
256,378
Total deposits
1,264,858
1,172,255
1,199,085
1,100,201
1,047,133
Repurchase agreements and federal funds purchased
19,529
20,174
19,796
22,690
24,494
Borrowings
100,000
150,000
100,000
175,000
146,673
Subordinated debentures
18,558
18,558
18,558
18,558
18,558
Other liabilities
6,937
6,679
6,398
6,175
4,147
Total Liabilities
1,409,882
1,367,666
1,343,837
1,322,624
1,241,005
Stockholders’ Equity
Common stock, $0.008 par value
44
44
44
43
37
Additional paid in capital
80,323
80,147
80,015
79,845
53,235
Retained earnings
62,104
58,750
55,128
51,673
48,198
Accumulated other comprehensive (loss) income
(2,326
)
(2,840
)
(165
)
148
(1,298
)
Total Stockholders’ Equity
140,145
136,101
135,022
131,709
100,172
Total Liabilities and Stockholders’ Equity
$
1,550,027
$
1,503,767
$
1,478,859
$
1,454,333
$
1,341,177
PARAGON COMMERCIAL CORPORATION
LOANS
(Unaudited)
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(In thousands except per share data)
2017
2016
2016
2016
2016
Loans
Construction and land development
$
78,552
$
79,738
$
74,605
$
63,819
$
68,316
Commercial real estate:
Commercial real estate
391,795
365,569
355,839
340,475
320,791
Commercial real estate – owner occupied
193,291
186,892
178,631
158,612
144,168
Farmland
–
–
994
1,002
1,313
Multifamily, nonresidential and junior liens
91,368
89,191
96,643
93,945
86,610
Total commercial real estate
676,454
641,652
632,107
594,034
552,882
Consumer real estate:
Home equity lines
86,550
87,489
86,361
85,883
80,940
Secured by 1-4 family residential, secured by 1st deeds of trust
208,504
195,343
190,913
186,054
171,355
Secured by 1-4 family residential, secured by 2nd deeds of trust
4,247
4,289
4,358
3,656
3,731
Total consumer real estate
299,301
287,121
281,632
275,593
256,026
Commercial and industrial loans
162,580
170,709
164,913
157,640
153,159
Consumer and other
14,066
12,060
12,088
14,258
14,598
Total loans
1,230,953
1,191,280
1,165,345
1,105,344
1,044,981
PARAGON COMMERCIAL CORPORATION
OTHER FINANCIAL HIGHLIGHTS
(Unaudited)
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(In thousands, except per share data)
2017
2016
2016
2016
2016
Selected Average Balances:
Average total assets
$
1,557,830
$
1,489,487
$
1,452,526
$
1,393,722
$
1,323,397
Average earning assets
1,492,181
1,409,467
1,378,081
1,310,510
1,235,237
Average loans
1,209,314
1,184,790
1,135,448
1,071,325
1,019,396
Average total deposits
1,165,010
1,169,062
1,123,277
1,019,133
994,219
Average stockholders’ equity
138,005
135,656
133,494
103,682
99,090
Performance Ratios:
Return on average assets
0.87
%
0.97
%
0.95
%
1.00
%
0.86
%
Return on average equity
9.86
%
10.68
%
10.35
%
13.41
%
11.46
%
Tangible common equity ratio
9.04
%
9.05
%
9.13
%
9.06
%
7.47
%
Total interest-earning assets
$
1,482,570
$
1,435,505
$
1,408,456
$
1,373,728
$
1,257,254
Tax equivalent net interest margin
3.44
%
3.58
%
3.47
%
3.55
%
3.54
%
Overhead to average assets (1)
1.98
%
1.88
%
1.87
%
1.86
%
1.99
%
Efficiency ratio (1)
57.88
%
52.66
%
54.38
%
54.13
%
59.04
%
Credit Ratios:
Non-accrual loans
$
500
$
968
$
948
$
1,220
$
487
Other real estate owned
$
4,740
$
4,740
$
5,183
$
5,183
$
5,228
Nonperforming assets to total assets
0.34
%
0.38
%
0.41
%
0.44
%
0.43
%
Nonperforming loans to total loans
0.04
%
0.08
%
0.08
%
0.11
%
0.05
%
Loans past due >30 days and still accruing
$
59
$
–
$
499
$
346
$
127
Net loan charge-offs (recoveries)
$
(57
)
$
216
$
452
$
(56
)
$
(289
)
Annualized net charge-offs (recoveries)/average loans
-0.02
%
0.07
%
0.16
%
-0.02
%
-0.11
%
Allowance for loan losses/total loans
0.66
%
0.66
%
0.68
%
0.72
%
0.76
%
Allowance for loan losses/nonperforming loans
1625
%
817
%
836
%
655
%
1629
%
Per share data:
Average diluted common shares outstanding
5,422,590
5,422,817
5,445,641
4,624,326
4,574,455
End of quarter common shares outstanding
5,452,088
5,450,713
5,450,042
5,449,886
4,581,334
Book value per common share
$
25.70
$
24.97
$
24.77
$
24.17
$
21.87
(1) This measure is not a measure recognized under United States generally accepted accounting principles, or GAAP, and is therefore considered to be a non-GAAP financial measure. Please see “Reconciliation of Non-GAAP Financial Measures” below for a reconciliation of this measure to the most directly comparable GAAP measure.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
“Overhead to average assets” is defined as non-interest expense divided by total average assets. We believe overhead to average assets is an important indicator of the Company’s level of non-interest expenses relative to the Company’s overall size, which assists in the evaluation of our productivity. While the overhead to average assets ratio is a measure of productivity, its value reflects the attributes of the business model we employ.
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(Dollars in thousands)
2017
2016
2016
2016
2016
Overhead to Average Assets
Non-interest expense
$
7,612
$
7,008
$
6,778
$
6,488
$
6,600
Average Assets
1,557,830
1,489,487
1,452,526
1,393,722
1,323,397
Overhead to Average Assets
1.98
%
1.88
%
1.87
%
1.86
%
1.99
%
“Efficiency ratio” is defined as total non-interest expense divided by adjusted operating revenue. Adjusted operating revenue is equal to net interest income (taxable equivalent) plus non-interest income, adjusted to exclude the impacts of gains and losses on the sale of securities and gains and losses on the sale or write-down of foreclosed real estate because we believe the timing of the recognition of those items to be discretionary. We believe the efficiency ratio is important as an indicator of productivity because it shows the amount of revenue generated by our operations for each dollar spent. While the efficiency ratio is a measure of productivity, its value reflects the attributes of the business model we employ.
Three Months Ended
March 31,
Dec. 31,
Sept. 30,
June 30,
March 31,
(Dollars in thousands)
2017
2016
2016
2016
2016
Efficiency Ratio
Non-interest expense
$
7,612
$
7,008
$
6,778
$
6,488
$
6,600
Net interest taxable equivalent income
$
12,649
$
12,676
$
12,026
$
11,560
$
10,785
Non-interest income
503
209
438
381
266
Net gain (loss) on investment securities
–
(21
)
–
–
(85
)
Net loss on sale or write-down of foreclosed real estate
–
443
–
45
212
Adjusted operating revenue
$
13,152
$
13,307
$
12,464
$
11,986
$
11,178
Efficiency ratio
57.88
%
52.66
%
54.38
%
54.13
%
59.04
%
SOURCE: Paragon Commercial Corporation
ReleaseID: 460739
