Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
BEND, Ore., Aug. 14, 2014 /PRNewswire/ -- Cascade Bancorp, (NASDAQ: CACB) ("Company" or "Cascade") the holding company for Bank of the Cascades ("Bank"), today announced its financial results for the second quarter of 2014.
The Company reported a net loss for the second quarter of 2014 of $4.7 million, or $0.08 per share as compared to net income of $46.4 million or $0.98 per share for the second quarter of 2013. The net loss for the second quarter of 2014 was primarily due to merger-related expenses recorded of $9.9 million related to the acquisition of Home Federal Bancorp, Inc. ("Home") which was completed in the second quarter and other one-time charges. The net income in the second quarter of 2013 was mainly attributable to the release of the Company's valuation allowance on its deferred tax asset ("DTA"). Net income for the first quarter of 2014 was $0.9 million or $0.02 per common share.
On May 16, 2014 the Company completed its acquisition of Home resulting in a $2.3 billion banking franchise with top community bank market share in growth markets of Oregon and Idaho. At June 30, 2014, total deposits increased 66.4% from December 31, 2013 to $1.9 billion with cost of deposits under 0.15%. As of June 30, 2014, 52.1% of total deposits are in checking account balances. Net loans increased 41.0% from December 31, 2013 to $1.4 billion as of June 30, 2014 with the addition of Home loans.
Systems integration was completed on May 27, 2014 which was a main step to enabling the projected right-sizing of the combined branch network and the realization of overhead and operational efficiencies. The combination is expected to significantly enhance future profitability, with improved revenue and cost structure efficiencies. Customer benefits include access to a broader offering including mobile banking, cash management, card services and stronger lending capabilities.
"We are extremely pleased with having both closed and integrated Home Federal Bancorp during the last two weeks of May," commented Terry Zink, President and Chief Executive Officer of Cascade Bancorp. "As anticipated, our second quarter loss resulted from acquisition related charges. While there is still more to do, we expect the third and fourth quarters of 2014 will demonstrate the potential earnings power of the combined banks as we build momentum in loan balances funded by a strong and stable core deposit franchise."
Zink continued, "The cost savings anticipated in the Home transaction are on track and I am also pleased that the loans acquired with Home are satisfactory in terms of credit quality. With the acquisition largely behind us, we look forward to expanding banking relationships with our new Home customers across the Cascade footprint."
The financial statements as of June 30, 2014 are inclusive of purchase accounting adjustments to Home assets and liabilities as of the acquisition date. The financial results for the second quarter of 2014 include Home income and expense for approximately one-half of this quarterly period. The comparative changes described below arise mainly from the benefits and costs related to the Home acquisition.
Second Quarter 2014 Financial Highlights
Acquisition of Home Federal Bancorp
The table below summarizes the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed. Generally accepted accounting principles require the recording of acquired assets at fair value; preliminary fair value estimates are subject to adjustment for a period of one year post acquisition date should subsequent events or information indicates that an adjustment of such estimates is necessary.
Purchase Price (in thousands, except per share data)
Cascade Bancorp common stock shares issued for Home Federal shares
Cascade share price as calculated in the Merger Agreement
Consideration from common stock conversion (1.6772 ratio)
Consideration paid in cash ($8.43 per share)
Total purchase price
Cash and cash equivalents
Premises and equipment
Other real estate owned
Deferred tax asset
Bank owned life insurance
Intangible asset acquired
Net identifiable assets acquired
Total assets at June 30, 2014 were $2.3 billion, compared with $1.4 billion at December 31, 2013. The increase from year-end 2013 mainly reflects the $946.1 million in tangible net assets at fair value acquired in the Home acquisition.
Cash and cash equivalents at June 30, 2014 were $164.3 million compared to $81.8 million at December 31, 2013. The increased liquidity at June 30, 2014 as compared to year-end 2013 was the result of the acquisition of Home, and includes the effect of a post-closing sale of certain long-duration Home investment securities. Cascade intends to opportunistically redeploy its increased liquidity into organic loans and certain wholesale assets over the balance of the year. Cascade's strategic aim is to reduce duration risk in the combined balance sheet by replacing the longest duration Home investment securities with a combination of floating and adjustable-rate assets. Investment securities classified as available-for-sale and held-to-maturity were $430.8 million at June 30, 2014 as compared to $195.8 million at December 31, 2013 and $218.6 million at June 30, 2013. The increase in investment securities classified as available-for-sale and held-to-maturity at June 30, 2014 was a result of the Home combination.
Goodwill recorded in connection with Home acquisition totaled $75.8 million. There was no goodwill in prior periods. The deferred tax asset is $70.0 million at June 30, 2014 compared to $50.1 million at December 31, 2013.
Total net loans at June 30, 2014 were $1.4 billion which includes Home's acquired loans. Net loans at the end of the second quarter of 2014 are up 41.0% compared to December 31, 2013 and 54.6% on a year-over-year basis. Organic loan growth during the second quarter of 2014 was muted because production was largely offset by the payoff of a top 10 customer loan related to the customer's excess liquidity. The organic loan pipeline at June 30, 2014 was at its strongest level in a year, mainly in commercial and industrial ("C&I") loans and owner-occupied commercial real estate. The C&I loan portfolio was $300.7 million at June 30, 2014 compared to $254.2 million at December 31, 2013 and $197.0 million a year earlier and includes Cascade's shared national credit portfolio of floating rate participations that have been acquired with the strategic aim of diversifying credit risk while improving the Company's interest rate risk profile.
Total deposits were $1.9 billion at June 30, 2014, including $760.6 million of Home acquired deposits, a 66.4% increase over the balance at December 31, 2013 and 75.9% on a year-over-year basis.
Total stockholders' equity at June 30, 2014 was $306.9 million compared to $188.7 million at December 31, 2013. The increase was predominately due to the effect of Home acquisition. Tangible capital2 was $223.0 million at June 30, 2014 and $188.2 million at December 31, 2013. The total common equity ratio to total assets and tangible common equity ratio1 to total assets were 13.41% and 9.74% at June 30, 2014 and 13.42% and 13.38%, at December 31, 2013, respectively.
The Company reported a net loss for the second quarter of 2014 of $4.7 million, or $0.08 per share due primarily to Home acquisition-related expenses of $9.9 million and other one-time charges of $2.4 million. This compares to net income for the first quarter of 2014 ("linked quarter") of $0.9 million or $0.02 per share, and $46.4 million or $0.98 per share in the second quarter of 2013. The linked quarter period included $0.9 million in transaction related expenses related to the acquisition of Home.
Net interest income was $15.7 million for the quarter ending June 30, 2014 as compared to $11.7 million for the first quarter of 2014, and to $11.5 million in the year ago quarter. The comparative increase was related to inclusion of earnings on Home acquired assets for approximately half of the second quarter of 2014.
Total interest income was $16.2 million for the quarter ending June 30, 2014 as compared to $12.1 million in the first quarter of 2014 and $12.4 million in the year ago quarter. The comparative increase was related to inclusion of earnings on Home acquired assets for approximately half of the second quarter of 2014.
Total interest expense for the second quarter of 2014 was $0.5 million compared to $0.4 million in the first quarter of 2014 and $0.9 million for the second quarter of 2013. The increase in the second quarter of 2014 over the first quarter of 2014 was a result of the inclusion of Home deposit expense for approximately half of the second quarter of 2014.
The NIM for the second quarter of 2014 was 3.98%, this compares to the prior quarter net interest margin of 3.83%. As described above, the Company's strategic aim is to moderate duration risk in the combined balance sheet and better position the bank to benefit from rising market interest rates. In part, this strategy will include redeployment of long duration Home investment securities into a combination of floating and adjustable-rate assets. These actions are expected to occur over the next several quarters. Internal forecasts as to the effect of this strategy will be a NIM estimated between 3.65% to 3.75% by the fourth quarter of 2014 (inclusive of discount accretion of fair value marks). Because future interest rates are unpredictable and the execution of the Company's redeployment strategy is uncertain no assurance can be given as to the achievement of the NIM forecast.
Non-interest income for the second quarter 2014 was $4.8 million compared to $3.4 million in the first quarter 2014 and $3.5 million for the second quarter of 2013. This relates mainly to the inclusion of Home revenues for half of the current quarter as well as increased card revenue.
Non-interest expense for the second quarter 2014 was $30.2 million and includes $12.3 million of acquisition related and one-time charges. Acquisition expenses are related to severance, branch consolidation costs, contract termination, disposal of excess equipment, and professional and legal services rendered in connection with the acquisition. Other items include charges related to occupancy and certain incentive plan accruals in the period. Home operating expenses are included for approximately half of the current quarter. Non-interest expense for the first quarter of 2014 was $13.9 million and $19.3 million for the year ago period.
Acquired loans are recorded at fair value with no allowance for loan losses brought forward in accordance with purchase accounting principles. The net fair value adjustment to acquired loans from the Home acquisition was $6.1 million, consisting of an interest rate and a credit mark which will be accreted over the life of the loans (approximately 10 years).
The Company has determined it will report on a cash basis any potential future benefits and/or costs incurred with respect to Home's remaining Federal Deposit Insurance Commission ("FDIC") loss share receivables (or payables). The remaining benefit and/or cost of the FDIC Agreements are not expected to be material to the Company's financial condition. In the acquired loan portfolio, $53.6 million in loans remain covered loans at June 30, 2014 of which 91.6 % are currently performing. Estimated future losses on acquired covered loans are included in the fair value purchase accounting mark. Home had two acquired loss sharing agreements that the Company now holds, which expire in the third quarter of 2014 and 2015, respectively.
At June 30, 2014, delinquent loans were 0.27% of the loan portfolio, inclusive of Home delinquencies. This compares to 0.33% as of March 31, 2014 and 0.51% for the year ago period. Net loan charge-offs totaled $1.3 million for the second quarter of 2014 compared to $2.9 million for the second quarter of 2013.
Non-performing assets as a percentage of total assets was 0.80% at June 30, 2014, as compared to 0.65% at the end of the first quarter 2014 and 1.01% a year ago. The increase in the current quarter relates to the inclusion of Home non-performing assets, of which 22.1% of current non performing Home loans are subject to FDIC loss sharing agreements.
The Company made no provision for loan losses as management believes the reserve for loan losses of $20.5 million at June 30, 2014 is adequate.
About Cascade Bancorp and Bank of the Cascades
Cascade Bancorp (NASDAQ: CACB), headquartered in Bend, Oregon, and its wholly owned subsidiary, Bank of the Cascades, operate in Oregon and Idaho markets. Founded in 1977, Bank of the Cascades offers full-service community banking through 40 branches in Central, Southern and Northwest Oregon, as well as in the greater Boise/Treasure Valley, Idaho area. The Bank has a business strategy that focuses on delivering the best in community banking for the financial well-being of customers and shareholders. It executes its strategy through the consistent delivery of full relationship banking focused on attracting and retaining value-driven customers. For further information, please visit our website at www.botc.com.
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements about Cascade Bancorp's plans and anticipated results of operations and financial condition. These statements include, but are not limited to, our plans, objectives, expectations, and intentions and are not statements of historical fact. When used in this report, the word "expects," "believes," "anticipates," "could," "may," "will," "should," "plan," "predicts," "projections," "continue" and other similar expressions constitute forward-looking statements, as do any other statements that expressly or implicitly predict future events, results or performance, and such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain risks and uncertainties and Cascade Bancorp's success in managing such risks and uncertainties could cause actual results to differ materially from those projected, including among others, the following factors: local and national economic conditions could be less favorable than expected or could have a more direct and pronounced effect on us than expected and adversely affect our results of operations and financial condition; the local housing/real estate market could continue to decline for a longer period than we anticipate; the risks presented by a continued economic recession, which could continue to adversely affect credit quality, collateral values, including real estate collateral and OREO properties, investment values, liquidity and loan originations, reserves for loan losses and charge offs of loans and loan portfolio delinquency rates and may be exacerbated by our concentration of operations in the States of Oregon and Idaho generally, and Central, Southern and Northwest Oregon, as well as the greater Boise/Treasure Valley, Idaho area, specifically; interest rate changes could significantly reduce net interest income and negatively affect funding sources; competition among financial institutions could increase significantly; competition or changes in interest rates could negatively affect net interest margin, as could other factors listed from time to time in Cascade Bancorp'sSEC reports; the reputation of the financial services industry could further deteriorate, which could adversely affect our ability to access markets for funding and to acquire and retain customers; and existing regulatory requirements, changes in regulatory requirements and legislation (including without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act) and our inability to meet those requirements, including capital requirements and increases in our deposit insurance premium, could adversely affect the businesses in which we are engaged, our results of operations and financial condition. Such forward-looking statements also include, but are not limited to, statements about the expected cost savings, synergies, and other financial benefits from the recently completed merger of Cascade and Home Federal Bancorp might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; and our ability to execute our business plan Additional risks and uncertainties are identified and discussed in Cascade's reports filed with the SEC and available at the SEC's website at www.sec.gov. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations. These forward-looking statements speak only as of the date of this release. Cascade Bancorp undertakes no obligation to publish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof. Readers should carefully review all disclosures filed by Cascade Bancorp from time to time with the SEC.
Information contained herein, other than information at December 31, 2013, and for the twelve months then ended, is unaudited. All financial data should be read in conjunction with the notes to the consolidated financial statements of Cascade Bancorp and subsidiary as of and for the fiscal year ended December 31, 2013, as contained in the Company's Annual Report on Form 10-K for such fiscal year.
Tangible common equity ratio to total assets is a non-GAAP measure defined as Total stockholders' equity, less the sum of Goodwill and Core deposit intangible ("CDI"), divided by Total assets. See the bottom of this release for a reconciliation to total common equity ratio to total assets.
Tangible capital is a non-GAAP measure defined as Total stockholders' equity, less the sum of Goodwill and CDI. See the bottom of this release for a reconciliation to total stockholders' equity.
CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
June 30, 2014
December 31, 2013
June 30, 2013
Cash and cash equivalents:
Cash and due from banks
Interest bearing deposits
Federal funds sold
Total cash and cash equivalents
Investment securities available-for-sale
Investment securities held-to-maturity
Federal Home Loan Bank (FHLB) stock
Loans held for sale
Premises and equipment, net
Bank-owned life insurance
Other real estate owned, net
Deferred tax asset, net
Core deposit intangible
LIABILITIES & STOCKHOLDERS' EQUITY
Interest bearing demand
Preferred stock, no par value; 5,000,000 shares authorized; none issued or outstanding
Common stock, no par value; 100,000,000 shares authorized
Accumulated other comprehensive income (loss)
Total stockholders' equity
Total liabilities and stockholders' equity
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, 2014
Three Months Ended June 30, 2013
Three Months Ended March 31, 2014
Three Months Ended March 31, 2013
Interest and fees on loans
Interest on investments
Other interest income
Total interest income
Total interest expense
Net interest income
Loan loss provision
Net interest income after loan loss provision
Service charges on deposit accounts
Card issuer and merchant services fees, net
Earnings on bank owned life insurance
Mortgage banking income, net
Swap fee income
Total non-interest income
Salaries and employee benefits
Prepayment penalties on FHLB advances
Total non-interest expense
Loss before income taxes
Income tax benefit
Net (loss) income
ADDITIONAL FINANCIAL INFORMATION
(In thousands, except per share data) (Unaudited)
Basic net income per common share
Diluted net income per common share
Book value per basic common share
Basic average shares outstanding
Fully diluted average shares outstanding
Return on average total stockholders' equity
Return on average total assets
Total common equity ratio
Total tangible common equity ratio 1
Net interest spread
Net interest margin
Efficiency ratio 2
Credit Quality Ratios
Reserve for credit losses
Reserve for credit losses to ending gross loans
Non-performing assets ("NPAs")
NPAs to total assets
Delinquent > 30 days to total loans (excld. NPAs)
Net loan charge-offs to average total loans
Bank Capital Ratios
Tier 1 capital leverage ratio
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Bancorp Capital Ratios
Tangible common equity ratio to total assets is a non-GAAP measure defined as total stockholders' equity, less the sum of goodwill and core deposit intangible ("CDI"), divided by total assets. See below for a reconciliation to total common equity ratio to total assets.
The efficiency ratio is a non-GAAP ratio that is calculated by dividing non-interest expense by the sum of net interest income and non-interest income. Other companies may define and calculate this data differently.
Reconciliation of period end stockholders' equity to period end tangible stockholders' equity:
March 31, 2014
Tangible stockholders' equity
Reconciliation of period end stockholders' common equity ratio to period end tangible stockholders' common equity ratio:
Common stockholders' equity ratio
Tangible common stockholders' equity ratio
Logo - http://photos.prnewswire.com/prnh/20140814/136351
SOURCE Cascade Bancorp