Once again I have the pleasure of providing an update on the progress of our Company for the third quarter of 2011 and also to provide you with more information on the significant events of the two months after the quarter-end related to our acquisition of Central Progressive Bank (CPB) in an FDIC failed bank transaction. This acquisition is a major stride forward for our Company providing it access to the north shore of Lake Pontchartrain through 17 branches which stretch from the eastern section of St. Tammany Parish all the way to Denham Springs on the outskirts of Baton Rouge. The branch network covers St. Tammany, Tangipahoa and Livingston parishes. CPB had approximately $400MM in assets and $347MM in deposits at September 30, 2011. We acquired it in an FDIC assisted transaction in the form of a whole bank acquisition. At the same time, we agreed to sell all of the non-performing assets as of September 30th to two buyers for a total of approximately $39MM leaving First NBC with only performing loans and no other real estate.
In preparation for the acquisition of CPB, your company raised $37,606,000 of equity in the form of 1) a Small Business Lending Fund (SBLF) preferred stock investment of $37,935,000, of which $18,195,000 was used to pay off the TARP preferred stock sold in 2009 to the U.S. Treasury, providing a net equity addition of $19,740,000, and 2) a continuation of our common stock offering begun in June 2011 which produced $17,866,000 in proceeds by September 30, 2011. The really good news regarding the SBLF equity is that it bears a 1% dividend rate due to our strong small business lending activities. The combination of these two offerings substantially increased our Bank’s capital ratios as follows:
6/30/11
9/30/11
Leverage
10.88%
12.37%
Tier 1 Risk Based
13.06%
14.96%
Total Risk Based
14.10%
16.04%
Our Company had a very strong quarter with assets increasing to $1,778,000, an increase of $124,000,000, or 7.5%, over that of June 30, 2011 and $404,000,000, or 29%, over that of September 30, 2010. For the nine months ended September 30, 2011, your Company earned $14,233,000, an increase of $7,286,000, or 105%, over that of the same period of 2010. Earnings per share for the year to date were $1.29, an increase of $.44, or 52%, over that for 2010. For the third quarter, our annualized asset growth rate was 30% and our earnings growth rate over that of the second quarter was 14% despite the large sale of stock in June and September of 2011. The following will provide more detailed information regarding the changes in our financial position and our results of operations.
FIRST NBC BANK
Financial Position
First NBC Bank ended the quarter with total assets of $1,777,000,000, an increase of $123,684,000, over that of June 30, 2011, and $399,291,000, over that of September 30, 2010. This growth was funded as follows (in thousands):
Quarter
Year
$
%
$
%
Demand Deposits
6,082
5
46,712
52
NOW Deposits
22,845
15
61,677
56
MMA Deposits
22,590
7
46,942
16
Savings Deposits
<6>
-
1,143
8
Certificates of Deposit
19,393
3
72,012
10
Total Deposits
70,904
5
228,486
19
Other Liabilities
11,284
12
83,896
425
Equity
41,496
24
86,909
67
123,684
8
399,291
29
Our success in growing our transaction accounts results from our expanded branch network providing more convenient banking for our customer base. Our branch expansion has continued with our most recent addition on the historical Canal Street in the Mid City area of New Orleans, which is in the process of seeing a $2 billion expansion centered in a new regional VA hospital and a new LSU medical hospital. We also are adding a third branch along the major retail corridor in the New Orleans area, Veterans Highway in the Metairie area of Jefferson Parish, where our first two branches now exceed $360 million in deposits.
Our asset growth during the quarter and for the past year has been as follows (in thousands):
Increase <Decrease>
Quarter
Year
$
%
$
%
Cash
3,795
42
<1,101>
<8>
Short-term Investments
<13,422>
<9>
22,063
18
Investments
38,293
33
50,199
49
Loans
64,159
5
294,990
29
Property
1
-
2,248
8
Tax Credit Investments
4,497
9
21,751
68
Other Assets
27,934
57
13,265
21
125,257
8
403,415
29
A comparison of our loans from June 30, 2011 to September 30, 2011 is as follows (in thousands):
9/30/11
6/30/11
Construction and Development
$119,565
$109,638
1 to 4 Family Residential
173,619
175,870
Multi-family Residential
70,356
67,364
Commercial
518,831
470,679
Total Real Estate
882,371
823,551
Commercial
430,256
425,325
Consumer
8,232
7,788
Other
180
218
Total
$1,321,039
$1,256,882
Our construction and development loans are over 50% tax credit projects which will be reduced by approximately $40MM when the Louisiana Office of Community Development funds the amount of CDBG loans now that the house projects are complete. The growth in this segment reflects the continued rebuilding of the New Orleans area extensively damaged by Hurricane Katrina and the strong economic status of our local economy. The increase in our tax credit investments represents our investment in new quality projects that have been presented to us in the last quarter and over the past year.
The increase in other assets over the year is primarily due to a $10MM increase in our BOLI insurance program. The growth since June 30, 2011 is the result of recording our investment in certain subsidiaries on a gross basis at September 30; these subsidiaries had been recorded net prior to the change in presentation.
Results of Operations
For the first nine months of 2011, the Bank reported net income of $14,266,000, an increase of $7,107,000, or 99%, over that of the same period of 2010. The following provides a summary of the factors leading to this increase.
The Bank’s interest income increased to $55,941,000, an increase of $12,464,000, or 29%, over that of the same period in 2010.
Our net interest income was $37,011,000 for the first nine months of 2011, an increase of $11,491,000, or 45%, over that of the same period of 2010.
The Bank’s non-interest expense for the first nine months of 2011 was $25,742,000, an increase of $6,815,000, or 36%, over the same period for 2010. $2,100,000 of this increase resulted from salaries and wages to staff the new branches and process the increased volume of transactions as the Bank grows.
The provision for loan losses totaled $4,650,000 for the first nine months of 2011, an increase of $766,000, or 20%, over that of 2010. This increase reflects the increase in loans outstanding as well as our commitment to continue to expand the percentage of the reserve to loans outstanding despite our low level of historical losses.
Pretax income for the year to date was $9,437,000, an increase of $2,673,000, or 40%, over the same period of 2010. The provision for income taxes was a credit of $4,940,000 as opposed to a credit for $395,000 in 2010. The large increase in the credit reflects the continuation of our 2010 credits in 2011, new credits earned in 2011, and the change in accounting for tax credit amortization.
We are very proud of our results to date. We believe this is an exciting time for our Bank with a significant opportunity in front of us as we enter St. Tammany Parish. We now look forward to having the same success on the north shore as we have had on the south shore for the last five years.
