ViewPoint Financial Group, Inc. Reports First Quarter 2013 Earnings, Continues Success of Commercial Loan Growth Strategy

PLANO, Texas, April 24, 2013 /PRNewswire/ -- ViewPoint Financial Group, Inc. (NASDAQ: VPFG) (the "Company"), the holding company for ViewPoint Bank, N.A. (the "Bank"), today announced first quarter net income of $8.1 million, an increase of $986,000, or 13.9%, from the quarter ended March 31, 2012.  Compared to the fourth quarter of 2012, net income declined by $2.3 million, or 22.2%.  Basic and diluted earnings per share of $0.21 for the quarter ended March 31, 2013, declined by $0.01 from basic and diluted earnings per share of $0.22 for the quarter ended March 31, 2012.  Compared to the fourth quarter of 2012, basic and diluted earnings per share declined by $0.07 and $0.06, respectively, from basic and diluted earnings per share of  $0.28 and $0.27.

First Quarter 2013 Results

  • Continued success in commercial loan growth strategy:  Our commercial loan portfolio, consisting of commercial real estate and commercial and industrial loans, provided solid growth as we continue to shift our focus to commercial lending.  The commercial loan portfolio totaled $1.20 billion at March 31, 2013, up $81.6 million, or 7.3%, from December 31, 2012, and up $505.6 million from March 31, 2012.
  • Linked quarter decline in Warehouse Purchase Program loans:  The average balance of Warehouse Purchase Program loans declined $170.4 million, or 18.8%, from the fourth quarter of 2012.  Compared to the first quarter of 2012, Warehouse Purchase Program loans increased by $100.7 million, or 15.8%.
  • Net interest margin increased by 34 basis points compared to first quarter 2012: Due to changes in the earning asset mix and lower deposit and borrowing rates, the net interest margin increased by 34 basis points to 3.64% for the three months ended March 31, 2013, compared to 3.30% for the same period in 2012.  Compared to fourth quarter 2012, the net interest margin decreased by 13 basis points from 3.77%.
  • Net charge-offs decline: Net charge-offs totaled $292,000 for the first quarter of 2013, down from $1.8 million and $359,000, respectively, for the quarters ended December 31, 2012 and March 31, 2012.
  • Strong capitalization and continued dividend performance: Tangible common equity grew to $499.8 million, or 15.0% of tangible assets, at March 31, 2013, compared to $489.6 million, or 13.5% of tangible assets, at December 31, 2012 .  The Company declared a quarterly cash dividend of $0.10 per common share to be paid in May 2013.

"ViewPoint has continued to execute on our transformation to a commercial bank," said President and CEO Kevin Hanigan. "Our lending teams produced outstanding commercial loan growth in this highly competitive environment, and the investment we made last year in commercial lending talent is paying off."

Financial Highlights




At or For the Quarters Ended


March


December


March

(unaudited)

2013


2012


2012


(Dollars in thousands, except per share amounts)

Net interest income

$

28,525



$

31,528



$

23,490


Provision (credit) for loan losses

883



(17)



895


Non-interest income

5,859



6,494



6,730


Non-interest expense

20,873



21,705



18,452


Income tax expense

4,570



5,973



3,801


Net income

$

8,058



$

10,361



$

7,072








Basic earnings per common share

$

0.21



$

0.28



$

0.22


Weighted average common shares outstanding - basic

37,529,793



37,460,539



31,545,748


Estimated Tier 1 risk-based capital ratio1

19.56

%


21.67

%


25.22

%

Tangible common equity to tangible assets - Non-GAAP 2

14.95

%


13.48

%


13.53

%

Net interest margin

3.64

%


3.77

%


3.30

%

 

1 Calculated at the ViewPoint Financial Group, Inc. level, which is subject to the capital adequacy requirements of the Federal Reserve. The decline in our March 2013 ratio is primarily the result of a risk weighting change from 50% to 100% on our Warehouse Purchase Program loans.

2 See the section labeled "Supplemental Information- Non-GAAP Financial Measures" at the end of this document.

 

Net Interest Income and Net Interest Margin




For the Quarters Ended


March


December


March

(unaudited)

2013


2012


2012


(Dollars in thousands)

Net interest income

$

28,525



$

31,528



$

23,490


Net interest margin

3.64

%


3.77

%


3.30

%

Selected average balances:






Total earning assets

$

3,134,030



$

3,341,960



$

2,844,466


Total loans

2,405,825



2,556,806



1,859,751


Total securities

674,109



734,598



950,906


Total deposits

2,160,363



2,180,354



1,918,594


Total borrowings

590,238



770,627



610,255


Total non-interest-bearing demand deposits

367,217



358,707



213,220


 

First quarter net interest income was $28.5 million, a $5.0 million increase from the first quarter of 2012 and a $3.0 million decrease from the fourth quarter of 2012.  The increase from the first quarter of 2012 was primarily due to a $6.1 million increase in interest income on loans, as the average balance of loans increased by $546.1 million, or 29.4%.  The increase in average loan balances was primarily driven by a $470.5 million increase in average commercial real estate and commercial and industrial loans (which includes the impact of loans acquired in the Highlands acquisition) and a $76.5 million increase in average loans held for sale.  Interest income for the first quarter of 2013 did not include the full impact of $72.6 million in commercial real estate and commercial and industrial loans that were originated during the last week of March 2013 and had an allocated provision expense at March 31, 2013.

Accretion of interest associated with the Highlands acquisition, which was completed on April 2, 2012, contributed $945,000 to the increase in interest income on loans from the first quarter of 2012.  The increase in interest income on loans in the first quarter of 2013 compared to the same period last year was partially offset by a $2.0 million decline in interest income earned on securities, as the average balance of the securities portfolio decreased by $276.8 million, or 29.1%, for the first quarter of 2013 compared to the same period in 2012.  The decline in the securities portfolio was due to the sale of securities and normal paydowns.

The decrease in net interest income for the current period compared to the fourth quarter of 2012 was primarily due to a $2.9 million decrease in interest income earned on loans, driven primarily by a lower average balance in loans held for sale and lower yields earned on all loan portfolios.  The decline in net interest income from the fourth quarter of 2012 was partially offset by a $39.8 million increase in average commercial loans (including commercial real estate and commercial and industrial balances.)  The average balance in loans held for sale decreased by $170.4 million, or 18.8%, for the first quarter of 2013, compared to the fourth quarter of 2012.  Additionally, the average yield earned on loans decreased by 15 basis points, to 5.05% for the first quarter of 2013, compared to 5.20% for the fourth quarter of 2012.  

Interest expense for the first quarter of 2013 decreased by $992,000, or 16.9%, compared to the first quarter of 2012, primarily due to lower interest expense paid on deposits.  The average rate paid on interest-bearing demand deposits declined by 54 basis points to 0.40% for the quarter ended March 31, 2013, from 0.94% for the quarter ended March 31, 2012, resulting in a $638,000 decrease in interest expense.  Additionally, interest expense on time accounts decreased by $261,000, resulting from a $22.0 million decline in the average balance during the quarter ended March 31, 2013, compared to the same period in 2012, and a 17 basis point decline in the average rate for the comparable periods.  Deposit costs have continued to decline due to rate reductions in Absolute Checking and other interest-bearing accounts.  Compared to the fourth quarter of 2012, interest expense remained relatively flat, declining by $59,000, or 1.2%.

The net interest margin for the first quarter of 2013 was 3.64%, a 34 basis point increase from the first quarter of 2012 and a 13 basis point decrease from the fourth quarter of 2012.  The increase in the net interest margin for the first quarter of 2013 compared to the same period last year was primarily attributable to changes in the earning asset mix, lower deposit and borrowing rates paid and 11 basis points of accretion of interest related to the Highlands acquisition.  The decrease in the net interest margin compared to the fourth quarter of 2012 was primarily attributable to lower yields earned on commercial real estate and commercial and industrial loans, as well as the decline in the balance of loans held for sale. 

Non-interest Income

First quarter non-interest income was $5.9 million, an $871,000 decrease from the first quarter of 2012 and a $635,000 decrease from the fourth quarter of 2012.  The decrease from the first quarter of 2012 was primarily attributable to a $2.2 million gain on the sale of mortgage loans in the 2012 period, with no comparable gain in the 2013 period due to the sale of our mortgage loan company, ViewPoint Mortgage ("VPM"), in the third quarter of 2012.  The decrease from the fourth quarter of 2012 was primarily due to a $1.3 million decline in service charges and fees, which was driven by commercial loan prepayment penalty fees collected in the fourth quarter of 2012 that were not repeated in the first quarter of 2013, as well as a decline in Warehouse Purchase Program fee income as volume declined in that loan portfolio. 

These decreases were partially offset by increases in the value of an investment in a community development-oriented private equity fund used for Community Reinvestment Act purposes recognized in the first quarter of 2013 and the fourth quarter of 2012 of $784,000 and $388,000, respectively.

Non-interest Expenses

First quarter non-interest expense was $20.9 million, a $2.4 million increase from the first quarter of 2012 and a $832,000 decrease from the fourth quarter of 2012.  The increase in non-interest expense compared to the first quarter of 2012 was primarily due to a $1.2 million increase in salary and benefits expense, as a result of adding experienced staff through the Highlands acquisition, as well as new hires.  This increase was partially offset by salary and benefits savings resulting from the sale of VPM.  Compared to the first quarter of 2012, occupancy and equipment expense increased primarily due to the impact of the Highlands acquisition, while data processing and advertising expense increased as we continue the focus to improve our franchise value by investing in marketing, branding awareness and technology. 

The $832,000 decrease in non-interest expense for the first quarter of 2013 compared to the fourth quarter of 2012 reflected decreases in most non-interest expense categories.  In the fourth quarter of 2012, the Company increased its performance-based compensation resulting from improvements in all performance metrics, which led to higher salary expense for that period, as well as lower health care costs in the first quarter of 2013 compared to the fourth quarter of 2012. 

Financial Condition

Total loans held for investment increased by $54.3 million, or 3.2%, from December 31, 2012,  reflecting a 39.5% increase from March 31, 2012.  Loans held for sale decreased by $303.2 million, or 28.6%, from December 31, 2012.  Compared to March 31, 2012, loans held for sale increased by 3.1%. Compared to December 31, 2012, commercial real estate loans increased by $57.6 million, or 6.9%, reflecting a 43.8% increase from March 31, 2012, while commercial and industrial loans increased by $23.9 million, or 8.6%, reflecting a 330.2% increase from March 31, 2012.  Commercial real estate and commercial and industrial loans increased a combined 72.8% from the same period last year and a combined 7.3% compared to the fourth quarter of 2012.  

Total deposits increased by $35.3 million, or 1.6%, to $2.21 billion at March 31, 2013, from $2.18 billion at December 31, 2012.  On a year over year basis, deposits increased by $279.5 million, or 14.5%, which includes the impact of deposits acquired from Highlands.  Non-interest-bearing demand and savings and money market deposits increased by $35.0 million and $8.0 million, respectively, compared to December 31, 2012, which was partially offset by decreases of $6.8 million in interest-bearing demand deposits and $843,000 in time deposits.  

Total shareholders' equity increased by $10.1 million, or 1.9%, to $531.0 million at March 31, 2013, from $520.9 million at December 31, 2012.  The Company's tangible common equity ratio was 15.0% at March 31, 2013, an increase of 147 basis points from December 31, 2012 and an increase of 142 basis points from March 31, 2012.  

Credit Quality




At or For the Quarters Ended


March


December


March

(unaudited)

2013


2012


2012


(Dollars in thousands)

Net charge-offs

$

292



$

1,767



$

359


Net charge-offs/Average loans held for investment

0.07

%


0.43

%


0.12

%

Provision (credit) for loan losses

$

883



$

(17)



$

895


Non-performing loans ("NPLs")

27,721



27,203



22,427


NPLs/Total loans held for investment 1

1.59

%


1.61

%


1.79

%

Non-performing assets ("NPAs")

$

29,226



$

29,104



$

24,448


NPAs/Total assets

0.87

%


0.79

%


0.80

%

NPAs/Loans held for investment and foreclosed assets

1.67



1.72



1.94


Allowance for loan losses

$

18,642



$

18,051



$

18,023


Allowance for loan losses/Total loans held for investment 1

1.07

%


1.07

%


1.43

%

Allowance for loan losses/Total loans held for investment excluding acquired loans 2

1.19



1.23



1.43


Allowance for loan losses/NPLs 1

67.25



66.36



80.36


 

1 The March 2013 and December 2012 quarters reflect the impact of loans acquired in the Highlands acquisition, which were initially recorded at fair value, with no allocated allowance for loan losses.

2 For this ratio, total loans held for investment for the March 2013 and December 2012 periods exclude loans acquired from Highlands, which were initially recorded at fair value.

 

Our non-performing loans to total loans ratio at March 31, 2013, was 1.59%, compared to 1.61%  at December 31, 2012, and 1.79% at March 31, 2012.  Non-performing loans increased by $518,000 to $27.7 million at March 31, 2013, from $27.2 million at December 31, 2012.  Of the $27.7 million, $6.3 million consisted of loans acquired from Highlands, including three commercial lines of credit totaling $2.8 million.  Non-performing loans increased by $5.3 million from March 31, 2012, primarily due to the Highlands acquired loans referenced above.  Net charge-offs totaled $292,000 for the first quarter of 2013, compared to $1.8 million for the fourth quarter of 2012 and $359,000 for the first quarter of 2012. 

Subsequent Events

The Company is required under generally accepted accounting principles to evaluate subsequent events through the filing of its consolidated financial statements for the quarter ended March 31, 2013 on Form 10-Q.  As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of March 31, 2013, and will adjust amounts preliminarily reported, if necessary.

Conference Call

The Company will also host an investor conference call to review these results on Thursday, April 25, 2013, at 2 p.m. Central Time. Participants are asked to call (toll-free) 1-888-317-6016 at least five minutes prior to the call.  International participants are asked to call 1-412-317-6016 and participants in Canada are asked to call (toll-free) 1-855-669-9657.  The call and corresponding presentation slides will be webcast live on the home page of the Company's website, www.viewpointfinancialgroup.com.  An audio replay will be available one hour after the conclusion of the call at 1-877-344-7529, Conference #10024997. This replay, as well as the webcast, will be available until the Company's next quarterly webcast/conference call. 

About ViewPoint Financial Group, Inc.

ViewPoint Financial Group, Inc. is the holding company for ViewPoint Bank, N.A. ViewPoint Bank, N.A. operates 31 banking offices in the Dallas/Fort Worth metropolitan area, including two First National Bank of Jacksboro locations in Jack and Wise Counties. For more information, please visit www.viewpointbank.com or www.viewpointfinancialgroup.com.

When used in filings by the Company with the Securities and Exchange Commission (the "SEC") in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things: changes in economic conditions; legislative changes; changes in policies by regulatory agencies; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; the industry-wide decline in mortgage production; competition; changes in management's business strategies; our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we have acquired or may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; and other factors set forth under Risk Factors in the Company's Form 10-K that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The factors listed above could materially affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake - and specifically declines any obligation - to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances occurring after the date of such statements. 

 

VIEWPOINT FINANCIAL GROUP, INC.

Consolidated Balance Sheets



March 31, 2013


December 31, 2012


September 30, 2012


June 30, 2012


March 31, 2012


(Dollars in thousands)

ASSETS

(unaudited)




(unaudited)


(unaudited)


(unaudited)

Cash and due from financial institutions

$

25,724



$

34,227



$

24,429



$

30,407



$

16,507


Short-term interest-bearing deposits in other financial institutions

26,783



34,469



36,301



39,571



28,000


Total cash and cash equivalents

52,507



68,696



60,730



69,978



44,507


Securities available for sale, at fair value

315,438



287,034



316,780



467,515



411,515


Securities held to maturity

329,993



360,554



396,437



430,368



465,957


Total securities

645,431



647,588



713,217



897,883



877,472


Loans held for sale 1

757,472



1,060,720



1,014,445



925,637



734,408


Loans held for investment

1,745,737



1,690,769



1,651,639



1,600,556



1,256,113


Gross loans

2,503,209



2,751,489



2,666,084



2,526,193



1,990,521


Less: allowance for loan losses and deferred fees on loans held for investment

(18,282)



(17,565)



(19,719)



(18,822)



(17,627)


Net loans

2,484,927



2,733,924



2,646,365



2,507,371



1,972,894


FHLB and Federal Reserve Bank stock, at cost

31,607



45,025



43,383



45,241



32,924


Bank-owned life insurance

35,078



34,916



34,701



34,491



29,116


Premises and equipment, net

53,050



53,160



53,348



53,725



49,721


Goodwill

29,650



29,650



29,650



29,203



818


Other assets

41,386



50,099



54,639



54,964



33,660


Total assets

$

3,373,636



$

3,663,058



$

3,636,033



$

3,692,856



$

3,041,112


LIABILITIES AND SHAREHOLDERS' EQUITY










Non-interest-bearing demand

$

392,759



$

357,800



$

349,880



$

342,228



$

231,768


Interest-bearing demand

481,966



488,748



471,672



509,650



488,807


Savings and money market

888,874



880,924



897,515



885,550



762,089


Time

449,491



450,334



473,834



491,978



450,955


Total deposits

2,213,090



2,177,806



2,192,901



2,229,406



1,933,619


FHLB advances

564,221



892,208



852,168



875,102



632,512


Repurchase agreement and other borrowings

25,000



25,000



25,000



38,682



25,000


Accrued expenses and other liabilities

40,358



47,173



49,611



44,091



37,376


Total liabilities

2,842,669



3,142,187



3,119,680



3,187,281



2,628,507












Shareholders' equity










Common stock

399



396



396



393



337


Additional paid-in capital

373,492



372,168



369,904



367,938



280,139


Retained earnings

172,386



164,328



161,887



153,722



149,585


Accumulated other comprehensive income, net

2,239



1,895



2,449



2,171



1,560


Unearned Employee Stock Ownership Plan (ESOP) shares

(17,549)



(17,916)



(18,283)



(18,649)



(19,016)


Total shareholders' equity

530,967



520,871



516,353



505,575



412,605


Total liabilities and shareholders' equity

$

3,373,636



$

3,663,058



$

3,636,033



$

3,692,856



$

3,041,112


 


1 Loans held for sale for the June 2012 and March 2012 periods include loans originated by ViewPoint Mortgage.