BNK C1 Financial, Inc.

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

  

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 15, 2015

 

C1 FINANCIAL, INC.
(Exact name of registrant as specified in its charter)

 

Florida	001-36595	46-4241720
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

 

100 5^th Street South

St. Petersburg, Florida 33701

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (877) 266-2265

  

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02 Results of Operations and Financial Condition

 

On October 15, 2015, C1 Financial, Inc. (the “Registrant”) issued a press release announcing the results of the Registrant for the quarter ended September 30, 2015. The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference.

 

The information in this Current Report on Form 8-K and in Exhibit 99.1 hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 8.01 Other Events

 

C1 Bank (the “Bank”), a wholly owned subsidiary of the Registrant, is subject to supervision and examination by the Federal Reserve. The Bank is required to submit to the Federal Deposit Insurance Corporation (the “FDIC”) certain reports entitled “Consolidated Reports of Condition and Income” (each, a “Call Report” and collectively, the “Call Reports”). The Bank's Call Reports are prepared in accordance with regulatory instructions issued by the Federal Financial Institutions Examination Council. The publicly available portions of the Bank's Call Reports are on file with the FDIC and are publicly available on the FDIC's website at www.fdic.gov. The contents of the FDIC’s website are not incorporated by reference into, and are not otherwise a part of, this Form 8-K.

 

On October 16, 2015, the Bank filed its Call Report for the period ended September 30, 2015. The Registrant anticipates that the publicly available portions of the Call Report will be available on the FDIC's website on or about October 20, 2015.

 

Item 9.01 Financial Statements and Exhibits

 

The following exhibit is furnished herewith.

 

(d) Exhibits.

 

Exhibit Number		Description
99.1		C1 Financial, Inc. Earnings Release – Third Quarter 2015 Results

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	C1 FINANCIAL, INC.
	By:	/s/ Trevor R. Burgess
		Trevor R. Burgess
		President & Chief Executive Officer

 

Date: October 16, 2015

 

  

index to exhibits

  

Exhibit Number		Description
99.1		C1 Financial, Inc. Earnings Release – Third Quarter 2015 Results

 

 

 

Exhibit 99.1

  

C1 Financial Reports 2015 Third Quarter Results

 

St. Petersburg, FL, October 15, 2015 - C1 Financial, Inc. (NYSE:BNK) today reported net income of $5.0 million, or $0.31 per diluted common share for the third quarter of 2015 (“3Q15”), compared to net income of $4.7 million, or $0.29 per diluted common share for the second quarter of 2015 (“2Q15”), a 5.5% increase in net income, and compared to net income of $2.6 million, or $0.18 per diluted common share for the third quarter of 2014 (“3Q14”), a 90.6% increase in net income.

 

MESSAGE FROM PRESIDENT & CHIEF EXECUTIVE OFFICER

 

Trevor Burgess, President & Chief Executive Officer of C1 Financial, Inc. stated, “We are excited by our strong results in the third quarter as we grow our earning assets and leverage our infrastructure. Our deposit growth in the third quarter will provide needed funding for the strong pipeline of new loan relationships as we head into the end of the year. C1 Labs technology has contributed to productivity gains that has allowed us to reduce our retail network headcount by approximately 10%, which should allow us to reach best in class levels of assets and revenue per employee over the long term.”

 

3Q15 showed several positive trends in our results:

 

1.

We originated $93 million in new loans in the quarter, resulting in C1 Bank originated loans outstanding up $49 million (+5%) from the prior quarter and $338 million (+45%) year-over-year. Loan originations year to date were $447 million, up $97 million (+28%) compared to last year. Overall loans outstanding (including acquired loans) were $1.390 billion at the end of 3Q15 (up 2% from the prior quarter and up 23% year-over-year). July and September were strong months for new originations while August was seasonally low, further affected by extensive rain that delayed many construction projects;

 

2.

During the quarter, core deposits grew $44 million (+4.6%) compared to the prior quarter and reached $998 million. Core deposits were 78.9% of total deposits at the end of 3Q15, compared to 78.5% at the end of 2Q15. Noninterest-bearing deposits represented 26.6% of total deposits at the end of 3Q15, slightly higher than at the end of the previous quarter. Our cost of total deposits grew 2 basis points (“bps”) to 0.46% when compared to 2Q15, as this mix change took place late in the quarter;

 

3.

Adjusted net interest margin (a non-GAAP measure which excludes the impact of purchase accounting accretion income) improved by 4 bps (from 4.60% for 2Q15 to 4.64% for 3Q15), reflecting another quarter of high loan fees (resulting primarily from management’s successful implementation and collection of loan prepayment related fees) and enhanced by the use of excess cash. On a GAAP basis, net interest margin was 4.75% for 3Q15, compared to 4.71% for 2Q15;

 

4.

Net interest income was up $1.2 million when compared to 2Q15, driven mainly by an increase in average loan balances which improved the earning asset mix;

 

5.

In 3Q15, sales of other real estate owned (“OREO”) reduced our OREO balance by $1.2 million. Including the decrease in nonperforming loans, total nonperforming assets declined $1.9 million when compared to the previous quarter. Our Texas Ratio (a non-GAAP measure) was 21.0% at the end of 3Q15, improved from 22.4% at the end of 2Q15;

 

6.

C1 Bank originated nonperforming assets accounted for less than 5% of our total nonperforming assets (with C1 Bank originated nonperforming loans below 0.2% of C1 Bank originated loans outstanding). Our allowance for loan losses was 0.57% of total loans at the end of 3Q15 and 0.56% at the end of 2Q15;

 

7.

Our headcount ended the quarter at 239, down from 247 at the end of 2Q15 as a result of a restructuring of our retail network staffing. Such restructuring was in part made possible because of technology based productivity innovation coming out of our C1 Labs group.

 

  

ASSETS

 

Total assets at the end of 3Q15 were $1.712 billion, $34.7 million higher (+2.1%) than at the end of 2Q15, primarily funded by deposit growth ($48.4 million) net of a decline in Federal Home Loan Bank (“FHLB”) advances ($19 million).

 

LOANS

 

Total loans at the end of 3Q15 were $1.390 billion, up $28.8 million (+2.1%) from the end of 2Q15. Loan growth in 3Q15 was mainly driven by loan originations of $93.5 million and funding of unfunded commitments, partially offset by higher loan prepayments in the C1 Bank originated loan portfolio, and loans paying off in both the C1 Bank originated loan portfolio and in the acquired portfolio. The outstanding balance of C1 Bank originated loans grew $49.0 million (+4.7%) during 3Q15, while the outstanding balance of acquired loans decreased $20.2 million (-6.4%) to $295 million at the end of 3Q15. At the end of 3Q15, C1 Bank originated loans represented 79% of the loan portfolio, up from 77% at the end of 2Q15.

 

DEPOSITS

 

Total deposits at the end of 3Q15 were $1.264 billion, an increase of $48.4 million (+4.0%) from the end of 2Q15. Core deposits were $997.8 million, or 78.9% of total deposits at the end of 3Q15, compared to $954.1 million, or 78.5% of total deposits at the end of 2Q15. This positive shift in the average deposit mix took place later in the quarter and didn’t reflect in our cost of total deposits, which was up to 0.46% in 3Q15 from 0.44% in 2Q15. We are scheduled to open our new Ft. Lauderdale banking center location in November 2015.

 

ASSET QUALITY

 

Nonperforming assets totaled $43.3 million at the end of 3Q15, declining $1.9 million (-4.2%) when compared to the end of 2Q15. The decline in 3Q15 was driven primarily by a reduction of $1.2 million in OREO balances as we continued to sell properties. As a percentage of total assets, nonperforming assets decreased to 2.53% at the end of 3Q15 when compared to 2.69% at the end of 2Q15. Our Texas Ratio improved to 21.0% at the end of 3Q15 from 22.4% at the end of 2Q15. At the end of 3Q15, $2.0 million (less than 5.0%) of total nonperforming assets were related to loans originated by C1 Bank, compared to $340 thousand (less than 1%) at the end of 2Q15, the increase being primarily due to one loan relationship downgraded to nonperforming during the quarter.

 

Total recoveries of $418 thousand, net of charge-offs of $94 thousand, resulted in net recoveries of $324 thousand in 3Q15 (0.09% of total average loans on an annualized basis). Net recoveries reflected our continued effort to collect deficiencies and a lower level of charge-offs, and provided a $67 thousand reversal of provision for loan losses after covering the allowance for loan losses required for net loan growth.

 

  

Our allowance for loan losses at the end of 3Q15 was $7.9 million (representing 0.57% of total loans), compared to $7.7 million (representing 0.56% of total loans) at the end of 2Q15. On a non-GAAP basis (including remaining loan discount from acquired performing loans), the allowance plus discount amount totaled $10.8 million (representing 0.77% of total loans) at the end of 3Q15, compared to $10.7 million (representing 0.79% of total loans) at the end of 2Q15.

 

NET INTEREST INCOME AND MARGIN

 

Net interest income for 3Q15 totaled $18.0 million, up $1.2 million (+7.3%) from 2Q15, mainly driven by growth of our average loans balance which allowed for an improvement in our earning assets mix.

 

Net interest margin for 3Q15 increased 4 bps to 4.75% from 4.71% in 2Q15, mainly driven by a 5 bps higher yield on average earning assets as we redeployed lower-yielding cash investments into higher-yielding loans, partially offset by a shift in the average deposit mix (which resulted in a 2 bps increase in the cost of total deposits when compared to the previous quarter). Strong loan fees (driven primarily by prepayments) continued to enhance our yield on loans in the quarter. Adjusted net interest margin (which excludes the effect of purchase accounting) was 4.64% for 3Q15 and 4.60% in 2Q15.

 

Our excess cash (defined as our available cash above our target liquidity level – See explanation of non-GAAP financial measures) was $30.7 million at the end of 3Q15, while our average excess cash was $10.6 million for 3Q15 (down from $27.6 million in 2Q15), as we successfully deployed it into loans during the quarter.

 

NONINTEREST INCOME

 

Noninterest income for 3Q15 totaled $2.1 million, $2.2 million less when compared to 2Q15. The decrease was primarily due to a $2.6 million gain on the sale of land (included in gains on disposals of premises and equipment) in 2Q15 and a $505 thousand decline in gains on sales of loans (due to a lower volume of Small Business Administration (“SBA”) loans sold). Partially offsetting the reduction in noninterest income was a $670 thousand gain on the early redemption of long-term FHLB advances (included in other noninterest income) completed for asset-liability and liquidity management purposes, and a $129 thousand increase in gains on sales of OREO.

 

NONINTEREST EXPENSE & TAXES

 

Noninterest expense totaled $12.0 million in 3Q15, only $127 thousand more when compared to 2Q15. The increase was primarily due to higher professional fees of $164 thousand and loan collection expenses of $83 thousand (primarily due to activity relating to nonperforming assets), and OREO valuation allowance expense of $67 thousand. These higher expenses were mainly offset by lower advertising expenses of $180 thousand (primarily due to fewer promotional and seasonal activities).

 

Our income tax expense was $3.2 million for 3Q15 and $3.3 million for 2Q15. The effective tax rate for 3Q15 was 39.3%, which reflected the projected tax rate for 2015 that was updated in 3Q15. The effective tax rate for 2Q15 was 40.9%, which included a $163 thousand audit related tax adjustment.

 

  

EFFICIENCY

 

Our efficiency ratio was 59.4% in 3Q15, higher than the 56.0% in 2Q15 and substantially lower than the 71.3% in 3Q14. The unfavorable change in the efficiency ratio versus the prior quarter was impacted by the gain on sale of land during 2Q15. The improvement compared to same quarter last year was driven by strong revenue growth combined with controlled non-interest expense, as we leverage our existing infrastructure. We also closely track annualized revenue per employee and average assets per employee, as measures of efficiency. Annualized revenue per employee was $367 thousand in 3Q15, compared to $384 thousand in 2Q15 and $305 thousand in 3Q14, which reflected the impact of the gain on sale of land during 2Q15 and a substantial improvement year over year, while average assets per employee were $6.9 million in 3Q15, compared to $6.6 million in 2Q15 and $6.4 million in 3Q14, which reflected our efforts to grow our balance sheet and our headcount efficiency initiatives.

 

NET INCOME

 

Net income was $5.0 million for 3Q15, compared to $4.7 million for 2Q15. This corresponded to a return on average assets of 1.18% for both 3Q15 and 2Q15 and a return on average equity of 10.02% and 9.88% for 3Q15 and 2Q15, respectively.

 

CAPITAL

 

Our consolidated Tier 1 leverage ratio was 11.79% and total risk-based capital ratio was 14.04% as of the end of 3Q15, reflecting that we remained well capitalized under Interim Final Basel III rules. Additional capital ratios are presented in the financial tables.

 

OTHER EVENTS DURING 3Q15

 

On July 1, C1 Bank announced that Diane Morton joined its executive management team as EVP, Chief Human Capital Officer & General Counsel and Dustin Symes joined as EVP, Retail Lending Executive.

 

WEBCAST AND CONFERENCE CALL INFORMATION

 

C1 Financial, Inc. will host a webcast and conference call at 8:30 a.m. (ET) on October 16, 2015 to discuss third quarter 2015 results and other matters. To access the conference call, please dial 1-855-209-8212. The live webcast audio can be heard at http://services.choruscall.com/links/bnk151016. For those unable to participate in the webcast, it will be archived on C1 Financial’s website at investors.c1bank.com.

 

C1 Financial, Inc. Information

 

Our name expresses our ideals to put our Clients 1^st and our Community 1^st. We are focused on serving the needs of entrepreneurs, tailoring a wide range of relationship banking services to entrepreneurs and their families, including commercial loans and a full line of depository products. We are based in St. Petersburg, Florida and operate from 31 banking centers and one loan production office on the West Coast of Florida and in Miami-Dade and Orange Counties. As of December 31, 2014, we were the 18^th largest bank headquartered in the state of Florida by assets and the 16^th largest by equity, having grown both organically and through acquisitions, and we were the sixth fastest-growing bank in the country as measured by asset growth for the five-year period ending June 30, 2014. Additional information is available at www.c1bank.com.

 

  

Forward-Looking Statements

 

In addition to historical information, this earnings release contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or “may,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. There are a number of potential factors, risks and uncertainties that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. These potential factors, risks and uncertainties are discussed in our Prospectus filed with the Securities and Exchange Commission on August 13, 2015.

 

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, we do not assume responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this earnings release to conform our prior statements to actual results or revised expectations.

 

  

C1 Financial, Inc.

Consolidated Balance Sheets - Unaudited

(Dollars in thousands, except per share data)

 

		September 30,				June 30,				September 30,
		2015				2015				2014
ASSETS
Cash and cash equivalents		$	175,289			$	165,200			$	283,741
Time deposits in other financial institutions			247				247				-
Federal Home Loan Bank stock, at cost			11,668				12,476				9,696
Loans receivable, net			1,376,617				1,348,185				1,125,151
Premises and equipment, net			63,613				63,576				63,592
Other real estate owned, net			26,490				27,686				37,956
Bank-owned life insurance			43,018				42,743				8,867
Accrued interest receivable			4,269				3,953				3,131
Core deposit intangible			754				824				1,074
Prepaid expenses			4,778				4,983				5,961
Other assets			5,740				7,933				8,876
Total assets		$	1,712,483			$	1,677,806			$	1,548,045
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Noninterest bearing		$	336,361			$	322,173			$	294,144
Interest bearing			928,019				893,815				870,820
Total deposits			1,264,380				1,215,988				1,164,964
Federal Home Loan Bank advances			242,000				261,000				189,000
Other borrowings			-				-				3,000
Other liabilities			6,543				6,263				5,785
Total liabilities			1,512,923				1,483,251				1,362,749
Stockholders’ equity
Common stock, par value $1.00; 100,000,000 shares authorized			16,101				16,101				16,101
Additional paid-in capital			148,122				148,122				148,122
Retained earnings			35,337				30,332				21,073
Accumulated other comprehensive income			-				-				-
Total stockholders’ equity			199,560				194,555				185,296
Total liabilities and stockholders’ equity		$	1,712,483			$	1,677,806			$	1,548,045
Period-end shares outstanding			16,100,966				16,100,966				16,100,966
Book value per share		$	12.39			$	12.08			$	11.51

 

  

C1 Financial, Inc.

Consolidated Income Statements - Unaudited

(Dollars in thousands, except per share data)

 

		For the Three Months Ended												For the Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2015				2015				2014				2015				2014
Interest income
Loans, including fees		$	20,340			$	18,899			$	16,028			$	56,803			$	46,481
Securities			3				3				2				9				59
Federal funds sold and other			203				213				215				618				612
Total interest income			20,546				19,115				16,245				57,430				47,152
Interest expense
Savings and interest-bearing demand deposits			654				631				546				1,887				1,572
Time deposits			795				677				953				2,256				2,919
Federal Home Loan Bank advances			1,057				996				709				2,861				1,852
Other borrowings			-				-				15				-				44
Total interest expense			2,506				2,304				2,223				7,004				6,387
Net interest income			18,040				16,811				14,022				50,426				40,765
Provision (reversal of provision) for loan losses			(67	)			1,276				207				1,400				4,815
Net interest income after provision for loan losses			18,107				15,535				13,815				49,026				35,950
Noninterest income
Gains on sales of securities			-				-				-				-				241
Gains on sales of loans			79				584				775				893				2,323
Service charges and fees			602				581				526				1,750				1,658
Bargain purchase gain			-				-				37				-				48
Gains on sales of other real estate owned, net			177				48				68				573				720
Bank-owned life insurance			276				258				41				626				118
Mortgage banking fees			-				-				-				-				47
Gains (losses) on disposals of premises and equipment, net			-				2,588				(12	)			2,590				(12	)
Other noninterest income			980				276				362				1,619				1,041
Total noninterest income			2,114				4,335				1,797				8,051				6,184
Noninterest expense
Salaries and employee benefits			5,276				5,229				4,777				15,722				13,526
Occupancy expense			1,388				1,360				1,138				3,960				3,310
Furniture and equipment			779				740				673				2,275				1,954
Regulatory assessments			349				390				362				1,100				1,067
Network services and data processing			1,075				1,080				1,033				3,239				2,824
Printing and office supplies			54				71				77				183				270
Postage and delivery			78				80				52				242				181
Advertising and promotion			873				1,053				812				2,752				2,634
Other real estate owned related expense, net			468				498				511				1,559				1,625
Other real estate owned - valuation allowance expense			102				35				45				168				609
Amortization of intangible assets			70				80				117				233				412
Professional fees			673				509				750				1,880				2,174
Loan collection expenses			86				3				140				173				463
Other noninterest expense			701				717				793				2,166				2,178
Total noninterest expense			11,972				11,845				11,280				35,652				33,227
Income before income taxes			8,249				8,025				4,332				21,425				8,907
Income tax expense			3,244				3,282				1,706				8,503				3,525
Net Income		$	5,005			$	4,743			$	2,626			$	12,922			$	5,382
Weighted average shares outstanding - basic			16,100,966				16,100,966				14,572,140				16,100,966				13,442,318
Weighted average shares outstanding - diluted			16,100,966				16,100,966				14,572,140				16,100,966				13,442,318
Basic net income per share		$	0.31			$	0.29			$	0.18			$	0.80			$	0.40
Diluted net income per share			0.31				0.29				0.18				0.80				0.40

 

  

C1 Financial, Inc.

Average Balance Sheets - Unaudited

(Dollars in thousands)

 

		For the Three Months Ended
		September 30, 2015												June 30, 2015												September 30, 2014
		Average Balances (1)				Income/ Expense				Yields/ Rates				Average Balances (1)				Income/ Expense				Yields/ Rates				Average Balances (1)				Income/ Expense				Yields/ Rates
Interest-earning assets
Loans receivable (2)		$	1,374,425			$	20,340				5.87	%		$	1,286,665			$	18,899				5.89	%		$	1,098,466			$	16,028				5.79	%
Securities available for sale and other securities			250				3				4.56	%			250				3				4.56	%			250				2				4.56	%
Federal funds sold and balances at Federal Reserve Bank			121,155				68				0.22	%			132,527				93				0.28	%			222,894				129				0.23	%
Time deposits in other financial institutions			247				-				0.42	%			147				-				0.43	%			-				-				0.00	%
FHLB stock			11,824				135				4.51	%			11,300				120				4.26	%			9,152				86				3.71	%
Total interest-earning assets			1,507,901				20,546				5.41	%			1,430,889				19,115				5.36	%			1,330,762				16,245				4.84	%
Noninterest-earning assets
Cash and due from banks			38,612												36,213												39,723
Other assets (3)			141,149												148,366												123,182
Total noninterest-earning assets			179,761												184,579												162,905
Total assets		$	1,687,662											$	1,615,468											$	1,493,667
Interest-bearing liabilities
Interest-bearing deposits:
Time		$	274,925				795				1.15	%		$	235,998				677				1.15	%		$	346,037				953				1.09	%
Money market			443,152				490				0.44	%			440,430				476				0.43	%			354,146				390				0.44	%
Interest-bearing demand			155,418				142				0.36	%			145,027				133				0.37	%			139,175				135				0.38	%
Savings			38,921				22				0.22	%			39,039				22				0.22	%			38,130				21				0.22	%
Total interest-bearing deposits			912,416				1,449				0.63	%			860,494				1,308				0.61	%			877,488				1,499				0.68	%
Other interest-bearing liabilities:
FHLB advances			245,847				1,057				1.71	%			233,065				996				1.72	%			176,964				709				1.59	%
Other borrowings			-				-				0.00	%			-				-				0.00	%			3,000				15				1.96	%
Total interest-bearing liabilities			1,158,263				2,506				0.86	%			1,093,559				2,304				0.85	%			1,057,452				2,223				0.83	%
Noninterest-bearing liabilities and stockholders' equity:
Demand deposits			325,044												324,831												270,328
Other liabilities			6,127												4,467												4,954
Stockholders' equity			198,228												192,611												160,933
Total noninterest-bearing liabilities and stockholder's equity			529,399												521,909												436,215
Total liabilities and stockholders' equity		$	1,687,662											$	1,615,468											$	1,493,667
Interest rate spread (taxable-equivalent basis)											4.55	%											4.51	%											4.01	%
Net interest income (taxable-equivalent basis)						$	18,040											$	16,811											$	14,022
Net interest margin (taxable-equivalent basis)											4.75	%											4.71	%											4.18	%
Average interest-earning assets to interest-bearing liabilities											130.2	%											130.8	%											125.8	%

 

(1)

Calculated using daily averages.

 

(2)

Average loans are gross, including nonaccrual loans and overdrafts (net of deferred loan fees and before the allowance for loan losses). Interest on loans includes net deferred fees and costs, and other loan fees of $1.4 million, $1.2 million and $515 thousand in the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively.

 

(3)

Other assets include bank-owned life insurance, tax lien certificates, OREO, fixed assets, interest receivable, prepaid expense and others.

 

  

C1 Financial, Inc.

Average Balance Sheets - Unaudited

(Dollars in thousands)

 

		For the Nine Months Ended
		September 30, 2015												September 30, 2014
		Average Balances (1)				Income/ Expense				Yields/ Rates				Average Balances (1)				Income/ Expense				Yields/ Rates
Interest-earning assets
Loans receivable (2)		$	1,290,074			$	56,803				5.89	%		$	1,065,815			$	46,481				5.83	%
Securities available for sale and other securities			250				9				4.56	%			520				59				15.25	%
Federal funds sold and balances at Federal Reserve Bank			139,866				259				0.25	%			195,850				355				0.24	%
Time deposits in other financial institutions			132				-				0.44	%			-				-				0.00	%
FHLB stock			11,048				359				4.35	%			8,554				257				4.01	%
Total interest-earning assets			1,441,370				57,430				5.33	%			1,270,739				47,152				4.96	%
Noninterest-earning assets
Cash and due from banks			37,668												41,739
Other assets (3)			147,886												121,089
Total noninterest-earning assets			185,554												162,828
Total assets		$	1,626,924											$	1,433,567
Interest-bearing liabilities
Interest-bearing deposits:
Time		$	267,148				2,256				1.13	%		$	359,436				2,919				1.09	%
Money market			431,168				1,411				0.44	%			342,898				1,103				0.43	%
Interest-bearing demand			148,831				411				0.37	%			142,661				405				0.38	%
Savings			38,917				65				0.22	%			38,344				64				0.22	%
Total interest-bearing deposits			886,064				4,143				0.63	%			883,339				4,491				0.68	%
Other interest-bearing liabilities:
FHLB advances			225,483				2,861				1.70	%			162,499				1,852				1.52	%
Other borrowings			-				-				0.00	%			3,000				44				1.96	%
Total interest-bearing liabilities			1,111,547				7,004				0.84	%			1,048,838				6,387				0.81	%
Noninterest-bearing liabilities and stockholders' equity:
Demand deposits			317,078												236,666
Other liabilities			4,967												4,902
Stockholders' equity			193,332												143,161
Total noninterest-bearing liabilities and stockholder's equity			515,377												384,729
Total liabilities and stockholders' equity		$	1,626,924											$	1,433,567
Interest rate spread (taxable-equivalent basis)											4.49	%											4.15	%
Net interest income (taxable-equivalent basis)						$	50,426											$	40,765
Net interest margin (taxable-equivalent basis)											4.68	%											4.29	%
Average interest-earning assets to interest-bearing liabilities											129.7	%											121.2	%

 

(1)

Calculated using daily averages.

 

(2)

Average loans are gross, including nonaccrual loans and overdrafts (net of deferred loan fees and before the allowance for loan losses). Interest on loans includes net deferred fees and costs, and other loan fees of $3.5 million and $1.6 million in the nine months ended September 30, 2015 and September 30, 2014, respectively.

 

(3)

Other assets include bank-owned life insurance, tax lien certificates, OREO, fixed assets, interest receivable, prepaid expense and others.

 

  

C1 Financial, Inc.

Selected Quarterly Financial Data - Unaudited

(In thousands, except per share and employee data)

 

		3Q15				2Q15				1Q15				4Q14				3Q14
Statement of Income Data
Interest income		$	20,546			$	19,115			$	17,769			$	17,158			$	16,245
Interest expense			2,506				2,304				2,194				2,239				2,223
Net interest income			18,040				16,811				15,575				14,919				14,022
Provision (reversal of provision) for loan losses			(67	)			1,276				191				(1	)			207
Bargain purchase gain			-				-				-				-				37
Total noninterest income			2,114				4,335				1,602				1,554				1,797
Total noninterest expense			11,972				11,845				11,835				14,005				11,280
Income before income taxes			8,249				8,025				5,151				2,469				4,332
Income tax expense			3,244				3,282				1,977				1,127				1,706
Net income			5,005				4,743				3,174				1,342				2,626
Selected Performance Metrics
Return on average assets			1.18	%			1.18	%			0.82	%			0.34	%			0.70	%
Return on average equity			10.02	%			9.88	%			6.81	%			2.84	%			6.47	%
Efficiency ratio (1)			59.4	%			56.0	%			68.9	%			85.0	%			71.3	%
Full-time equivalent employees at period end			239				247				244				238				246
Revenue per average number of employees (1)		$	367			$	384			$	326			$	307			$	305
Average assets per average number of employees (1)			6,888				6,594				6,541				6,414				6,356
Per Share Outstanding Data
Net earnings per share		$	0.31			$	0.29			$	0.20			$	0.08			$	0.18
Diluted net earnings per share		$	0.31			$	0.29			$	0.20			$	0.08			$	0.18
Weighted average shares			16,101				16,101				16,101				16,101				14,572
Weighted average shares - diluted			16,101				16,101				16,101				16,101				14,572
Book value per share		$	12.39			$	12.08			$	11.79			$	11.59			$	11.51
Tangible book value per share (1)		$	12.33			$	12.02			$	11.72			$	11.51			$	11.43
Common shares outstanding at period end			16,101				16,101				16,101				16,101				16,101
Market value per share at period end		$	19.05			$	19.38			$	18.75			$	18.29			$	18.13
Market range per share:
High			19.77				19.84				19.10				19.70				18.77
Low			17.66				17.81				16.25				15.98				16.66
Balance Sheet Data
Cash and cash equivalents		$	175,289			$	165,200			$	182,824			$	185,703			$	283,741
Other securities (included in Other assets in consolidated balance sheet)			250				250				250				250				250
Total loans			1,390,275				1,361,459				1,256,606				1,188,522				1,134,351
Loans originated by C1 Bank (Nonacquired)			1,095,247				1,046,227				925,511				840,275				757,529
Loans not originated by C1 Bank (Acquired)			295,028				315,232				331,095				348,247				376,822
Net deferred loan fees			(5,726	)			(5,599	)			(4,881	)			(4,142	)			(3,759	)
Loans receivable, gross (2)			1,384,549				1,355,860				1,251,725				1,184,380				1,130,592
Allowance for loan losses			(7,932	)			(7,675	)			(5,787	)			(5,324	)			(5,441	)
Loans receivable, net			1,376,617				1,348,185				1,245,938				1,179,056				1,125,151
Total assets			1,712,483				1,677,806				1,596,739				1,536,691				1,548,045
Total interest-bearing deposits			928,019				893,815				881,318				888,959				870,820
Total deposits			1,264,380				1,215,988				1,199,828				1,167,502				1,164,964

  

 

Borrowings			242,000				261,000				202,500				178,500				192,000
Federal Home Loan Bank			242,000				261,000				202,500				178,500				189,000
Other			-				-				-				-				3,000
Total liabilities			1,512,923				1,483,251				1,406,927				1,350,053				1,362,749
Total stockholders’ equity			199,560				194,555				189,812				186,638				185,296
Tangible stockholders’ equity (1)			198,557				193,482				188,659				185,402				183,973
Selected Average Balance Sheet Data
Loans receivable, gross (2)		$	1,374,425			$	1,286,665			$	1,207,295			$	1,145,230			$	1,098,466
Securities available for sale and other securities			250				250				250				250				250
Earning assets			1,507,901				1,430,889				1,383,959				1,395,052				1,330,762
Total assets			1,687,662				1,615,468				1,576,419				1,552,264				1,493,667
Total interest-bearing deposits			912,416				860,494				884,979				883,373				877,488
Total deposits			1,237,460				1,185,325				1,186,076				1,174,001				1,147,816
Borrowings			245,847				233,065				197,000				186,306				179,964
Total stockholders’ equity			198,228				192,611				189,054				187,270				160,933
Yields Earned and Rates Paid
Loans receivable, gross (2)			5.87	%			5.89	%			5.90	%			5.84	%			5.79	%
Adjusted loans receivable, gross (1),(3)			5.77	%			5.79	%			5.76	%			5.65	%			5.65	%
Securities available for sale and other securities			4.56	%			4.56	%			4.56	%			4.56	%			4.56	%
Earning assets			5.41	%			5.36	%			5.21	%			4.88	%			4.84	%
Total interest-bearing deposits			0.63	%			0.61	%			0.64	%			0.66	%			0.68	%
Total deposits			0.46	%			0.44	%			0.47	%			0.50	%			0.52	%
Adjusted total deposits (1),(4)			0.46	%			0.45	%			0.48	%			0.50	%			0.53	%
Borrowings			1.71	%			1.72	%			1.66	%			1.63	%			1.59	%
Total interest-bearing liabilities			0.86	%			0.85	%			0.82	%			0.83	%			0.83	%
Net interest margin (NIM)			4.75	%			4.71	%			4.56	%			4.24	%			4.18	%
Adjusted NIM (1),(5)			4.64	%			4.60	%			4.41	%			4.05	%			4.03	%
Capital Ratios
Total capital to risk-weighted assets (6)			14.04	%			13.60	%			14.01	%			14.74	%			15.45	%
Tier 1 capital to risk-weighted assets (6)			13.51	%			13.08	%			13.59	%			14.33	%			14.96	%
Common equity tier 1 capital to risk-weighted assets (6)			13.51	%			13.08	%			13.59	%			N/A				N/A
Tier 1 leverage ratio (6)			11.79	%			12.01	%			12.01	%			11.95	%			12.32	%
Tangible Equity / Tangible Assets (1)			11.60	%			11.54	%			11.82	%			12.07	%			11.89	%
Equity / Assets			11.65	%			11.60	%			11.89	%			12.15	%			11.97	%
Average Equity / Average Assets			11.75	%			11.92	%			11.99	%			12.06	%			10.77	%

  

 

Asset Quality Data
Nonacquired nonperforming assets		$	2,008			$	340			$	428			$	487			$	567
Nonaccrual loans			2,008				340				428				443				523
Other real estate owned (OREO)			-				-				-				44				44
Nonacquired restructured loans (7)			-				-				-				-				-
Nonacquired nonperforming assets to nonacquired loans plus OREO			0.18	%			0.03	%			0.05	%			0.06	%			0.07	%
Acquired nonperforming assets		$	41,256			$	44,804			$	49,597			$	55,323			$	58,004
Nonaccrual loans			14,766				17,118				19,276				20,451				20,092
OREO			26,490				27,686				30,321				34,872				37,912
Acquired restructured loans			961				891				900				906				913
Acquired nonperforming assets to acquired loans plus OREO			12.83	%			13.07	%			13.72	%			14.44	%			13.99	%
Total nonperforming assets		$	43,264			$	45,144			$	50,025			$	55,810			$	58,571
Nonaccrual loans			16,774				17,458				19,704				20,894				20,615
OREO			26,490				27,686				30,321				34,916				37,956
Total restructured loans			961				891				900				906				913
Total nonperforming assets to total loans plus OREO			3.05	%			3.25	%			3.89	%			4.56	%			5.00	%
Net charge-offs (recoveries)		$	(324	)		$	(612	)		$	(272	)		$	116			$	(641	)
Charge-offs			94				69				4				552				157
Recoveries			(418	)			(681	)			(276	)			(436	)			(798	)
Asset Quality Ratios
Total nonperforming loans to loans receivable			1.21	%			1.28	%			1.57	%			1.76	%			1.82	%
Total nonperforming assets to total assets			2.53	%			2.69	%			3.13	%			3.63	%			3.78	%
Allowance for loan losses to nonperforming loans			47.29	%			43.96	%			29.37	%			25.48	%			26.39	%
Annualized net charge-offs (recoveries) to total average loans			(0.09	)%			(0.19	)%			(0.09	)%			0.04	%			(0.23	)%
Annualized nonacquired net charge-offs (recoveries) to average nonacquired loans			(0.01	)%			(0.14	)%			(0.01	)%			0.02	%			(0.08	)%
Allowance for loan losses to total loans receivable			0.57	%			0.56	%			0.46	%			0.45	%			0.48	%
Allowance for loan losses to nonacquired loans			0.72	%			0.73	%			0.63	%			0.63	%			0.72	%
Texas ratio (8)			21.0	%			22.4	%			25.7	%			29.3	%			30.9	%

  

 

Loan Composition
Nonacquired loans by type
1-4 family residential real estate		$	181,431			$	146,192			$	132,253			$	123,421			$	116,244
Owner occupied commercial real estate			154,748				136,789				139,780				124,067				107,530
Nonowner occupied commercial real estate			385,605				407,654				343,539				311,239				275,598
Secured by farmland commercial real estate			51,452				52,876				54,774				57,825				59,009
Multifamily commercial real estate			26,812				26,721				26,993				27,385				26,256
Construction			152,442				135,586				92,389				88,072				75,126
Commercial			63,972				63,190				57,683				58,809				58,450
Consumer			78,785				77,219				78,100				49,457				39,316
Acquired loans by type
1-4 family residential real estate		$	85,807			$	90,516			$	96,758			$	100,995			$	105,083
Owner occupied commercial real estate			89,642				95,445				99,859				107,169				113,957
Nonowner occupied commercial real estate			76,579				83,227				86,089				88,363				95,549
Secured by farmland commercial real estate			1,907				1,941				1,977				2,013				3,242
Multifamily commercial real estate			4,924				5,040				5,140				5,516				5,941
Construction			16,381				16,985				18,738				19,364				20,069
Commercial			12,968				14,556				14,704				16,551				24,423
Consumer			6,820				7,522				7,830				8,276				8,558
New loan originations (9)		$	93,459			$	177,090			$	176,356			$	139,009			$	141,436
Unfunded commitments (includes loans, unused lines and standby letters of credit)			210,389				237,877				245,051				189,049				181,224
Deposit Composition
Noninterest-bearing demand		$	336,361			$	322,173			$	318,510			$	278,543			$	294,144
Interest-bearing demand			177,688				148,724				146,873				140,598				135,623
Money market and savings			483,745				483,157				460,933				435,105				398,000
Retail time			246,913				247,700				251,825				286,979				310,243
Jumbo time (10)			19,673				14,234				21,687				26,277				26,954

 

(1) See below for the Generally Accepted Accounting Principles (GAAP) reconciliation and explanation of non-GAAP financial measures.

 

(2) Total loans, net of deferred loan fees and before the allowance for loan losses. Yield on gross loans is calculated on a 365-day basis and may differ from regulatory “Uniform Bank Performance Report” (UBPR) yield, which annualizes quarterly data by a factor of 4 (Section II, UBPR User’s Guide).

 

(3) Adjusted yield earned on loans receivable excludes loan accretion from the acquired loan portfolio.

 

(4) Adjusted rate paid on total deposits excludes amortization of premium for acquired time deposits.

 

(5) Adjusted net interest margin excludes loan accretion from the acquired loan portfolio, and amortization of premiums for acquired time deposits and Federal Home Loan Bank advances.

 

(6) Ratios are calculated under Interim Final Basel III rules beginning in 1Q15. Ratios are calculated under Basel I rules prior to 1Q15.

 

(7) Restructured loans include accruing and nonaccrual troubled debt restructurings. Nonaccrual restructured loans are included in nonaccrual loans.

 

(8) Texas ratio is calculated as nonperforming assets divided by tangible stockholders’ equity plus allowance for loan losses.

 

(9) New loan originations represent new loan commitments during the periods presented.

 

(10) Jumbo time deposits are deposits over $250 thousand.

 

  

C1 Financial, Inc.

Generally Accepted Accounting Principles (GAAP) Reconciliation and

  Explanation of Non-GAAP Financial Measures

(In thousands, except per share and employee data)

 

Some of the financial measures included in this earnings release are not measures of financial performance recognized by GAAP. We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition and results of operations computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP measures that other companies use. The following tables provide a more detailed analysis of these non-GAAP financial measures.

 

		3Q15				2Q15				1Q15				4Q14				3Q14
Loan loss reserves
Allowance for loan losses		$	7,932			$	7,675			$	5,787			$	5,324			$	5,441
Acquired performing loans discount			2,830				3,047				3,242				3,532				3,811
Total		$	10,762			$	10,722			$	9,029			$	8,856			$	9,252
Loans receivable, gross		$	1,390,275			$	1,361,459			$	1,256,606			$	1,188,522			$	1,134,351
Allowance for loan losses to total loans receivable			0.57	%			0.56	%			0.46	%			0.45	%			0.48	%
Allowance plus performing loans discount to total loans receivable			0.77	%			0.79	%			0.72	%			0.75	%			0.82	%
Efficiency ratio
Noninterest expense		$	11,972			$	11,845			$	11,835			$	14,005			$	11,280
Taxable-equivalent net interest income		$	18,040			$	16,811			$	15,575			$	14,919			$	14,022
Noninterest income		$	2,114			$	4,335			$	1,602			$	1,554			$	1,797
Gains on sales of securities			-				-				-				-				-
Adjusted noninterest income		$	2,114			$	4,335			$	1,602			$	1,554			$	1,797
Efficiency ratio			59.4	%			56.0	%			68.9	%			85.0	%			71.3	%
Revenue and average assets per average number of employees
Interest income		$	20,546			$	19,115			$	17,769			$	17,158			$	16,245
Noninterest income			2,114				4,335				1,602				1,554				1,797
Total revenue		$	22,660			$	23,450			$	19,371			$	18,712			$	18,042
Total revenue annualized		$	89,901			$	94,058			$	78,560			$	74,238			$	71,580
Total average assets		$	1,687,662			$	1,615,468			$	1,576,419			$	1,552,264			$	1,493,667
Average number of employees			245				245				241				242				235
Revenue per average number of employees		$	367			$	384			$	326			$	307			$	305
Average assets per average number of employees		$	6,888			$	6,594			$	6,541			$	6,414			$	6,356
Tangible stockholders' equity and Tangible book value per share
Total stockholders' equity		$	199,560			$	194,555			$	189,812			$	186,638			$	185,296
Less:  Goodwill			(249	)			(249	)			(249	)			(249	)			(249	)
Other intangible assets			(754	)			(824	)			(904	)			(987	)			(1,074	)
Tangible stockholders' equity		$	198,557			$	193,482			$	188,659			$	185,402			$	183,973
Common shares outstanding			16,101				16,101				16,101				16,101				16,101
Book value per share		$	12.39			$	12.08			$	11.79			$	11.59			$	11.51
Tangible book value per share			12.33				12.02				11.72				11.51				11.43
Adjusted yield earned on loans
Reported yield on loans			5.87	%			5.89	%			5.90	%			5.84	%			5.79	%
Effect of accretion income on acquired loans			(0.10	)%			(0.10	)%			(0.14	)%			(0.19	)%			(0.14	)%
Adjusted yield on loans			5.77	%			5.79	%			5.76	%			5.65	%			5.65	%
Adjusted rate paid on total deposits
Reported rate paid on total deposits			0.46	%			0.44	%			0.47	%			0.50	%			0.52	%
Effect of premium amortization on acquired deposits			0.00	%			0.01	%			0.01	%			0.00	%			0.01	%
Adjusted rate paid on total deposits			0.46	%			0.45	%			0.48	%			0.50	%			0.53	%

  

 

Adjusted net interest margin
Reported net interest margin			4.75	%			4.71	%			4.56	%			4.24	%			4.18	%
Effect of accretion income on acquired loans			(0.09	)%			(0.09	)%			(0.12	)%			(0.16	)%			(0.11	)%
Effect of premium amortization on acquired deposits and borrowings			(0.02	)%			(0.02	)%			(0.03	)%			(0.03	)%			(0.04	)%
Adjusted net interest margin			4.64	%			4.60	%			4.41	%			4.05	%			4.03	%
Average excess cash
Average total deposits		$	1,237,460			$	1,185,325			$	1,186,076			$	1,174,001			$	1,147,816
Borrowings due in one year or less			16,136				17,750				25,189				28,940				34,753
Total base for liquidity		$	1,253,596			$	1,203,075			$	1,211,265			$	1,202,941			$	1,182,569
Minimum liquidity level (10% of base) (a)		$	125,360			$	120,308			$	121,127			$	120,294			$	118,257
Average cash and cash equivalents (b)			159,767				168,740				204,588				271,827				262,617
Cash above liquidity level (b)-(a)			34,407				48,432				83,461				151,533				144,360
Less estimated short-term deposits			(23,834	)			(20,823	)			(11,353	)			(24,421	)			(28,440	)
Average excess cash		$	10,573			$	27,609			$	72,108			$	127,112			$	115,920
Tangible equity to tangible assets
Total stockholders' equity		$	199,560			$	194,555			$	189,812			$	186,638			$	185,296
Less:  Goodwill			(249	)			(249	)			(249	)			(249	)			(249	)
Other intangible assets			(754	)			(824	)			(904	)			(987	)			(1,074	)
Tangible stockholders' equity		$	198,557			$	193,482			$	188,659			$	185,402			$	183,973
Total assets		$	1,712,483			$	1,677,806			$	1,596,739			$	1,536,691			$	1,548,045
Less:  Goodwill			(249	)			(249	)			(249	)			(249	)			(249	)
Other intangible assets			(754	)			(824	)			(904	)			(987	)			(1,074	)
Tangible assets		$	1,711,480			$	1,676,733			$	1,595,586			$	1,535,455			$	1,546,722
Equity/Assets			11.65	%			11.60	%			11.89	%			12.15	%			11.97	%
Tangible Equity/Tangible Assets			11.60	%			11.54	%			11.82	%			12.07	%			11.89	%

 

Definitions of Non-GAAP financial measures

 

Allowance for loan losses plus performing loans discount to total loans receivable adds the remaining discount on acquired performing loans to the allowance for loan losses to determine the total reserves and loan discounts established against our loans. Our management believes that this metric provides useful information for investors to analyze the overall level of reserves in banks that have completed acquisitions with no allowance carryover.

 

  

Efficiency ratio is defined as total noninterest expense divided by the sum of taxable-equivalent net interest income and noninterest income. Noninterest income is adjusted for nonrecurring gains and losses on sales of securities. This ratio is important to investors looking for a measure of efficiency in the Company's productivity measured by the amount of revenue generated for each dollar spent.

 

Revenue per average number of employees is annualized total interest income and total noninterest income divided by the average number of employees during the period and measures the Company's productivity by calculating the average amount of revenue generated per employee. Average assets per average number of employees is average assets divided by the average number of employees during the period and measures the average value of assets per employee.

 

Tangible stockholders' equity is defined as total equity reduced by goodwill and other intangible assets. Tangible book value per share is tangible stockholders' 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. We have not considered loan servicing rights as an intangible asset for purposes of this calculation.

 

Adjusted yield earned on loans is our yield on loans after excluding loan accretion from our acquired loan portfolio. Our management uses this metric to better assess the impact of purchase accounting on yield on loans, as the effect of loan discounts accretion is expected to decrease as the acquired loans mature or roll off of our balance sheet.

 

Adjusted rate paid on total deposits is our cost of deposits after excluding amortization of premiums for acquired time deposits. Our management uses this metric to better assess the impact of purchase accounting on cost of deposits, as the effect of amortization of premiums related to deposits is expected to decrease as the acquired deposits mature or roll off of our balance sheet.

 

Adjusted net interest margin is net interest margin after excluding loan accretion from the acquired loan portfolio and amortization of premiums for acquired time deposits and Federal Home Loan Bank advances. Our management uses this metric to better assess the impact of purchase accounting on net interest margin, as the effect of loan discounts accretion and amortization of premiums related to deposits or borrowings is expected to decrease as the acquired loans and deposits mature or roll off of our balance sheet.

 

Average excess cash represents the cash and cash equivalents in excess of our minimum liquidity level (defined as 10% of average total deposits plus borrowings due in one year or less), minus Company estimated short-term deposits. In 2015, based on an historical analysis, we changed our methodology for estimating short-term deposits, which reduced the results beginning in 1Q15.

 

Tangible equity to tangible assets is defined as total equity reduced by goodwill and other intangible assets, divided by total assets reduced by goodwill and other intangible assets. This measure is important to investors interested in relative changes from period-to-period in total equity and total assets, each exclusive of changes in intangible assets. We have not considered loan servicing rights as an intangible asset for purposes of this calculation.