Paragon Commercial Corporation Reports 18% Increase in Earnings for the First Quarter of 2017

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

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

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

–

Deposit service charges and other fees

Mortgage banking revenues

Net loss on sale or write-down of other real estate

–

(443
)

–

(45
)

(212
)

Other non-interest income

132

272

111

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

279

384

Directors fees and expenses

224

193

219

252

Professional fees

203

429

208

182

237

FDIC and other supervisory assessments

166

220

217

195

Advertising and public relations

221

210

239

234

188

Unreimbursed loan costs and foreclosure related expenses

174

145

172

142

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

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

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

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

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

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

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

$
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
%

0.11
%

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
%

0.68
%

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

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

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

–

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

Go Top