CommunityOne Bancorp fka COB

[Enterprising Investor]

CommunityOne Bancorp Announces Return to Profitability With Net Income of $4.0 million in the Third Quarter of 2013 (10/31/13)

CHARLOTTE, N.C., Oct. 31, 2013 (GLOBE NEWSWIRE) -- CommunityOne Bancorp (Nasdaq:COB), the holding company for CommunityOne Bank, N.A. ("Bank"), today reported unaudited financial results for the quarter ended September 30, 2013. Highlights for the third quarter of 2013 include:

•Net income was $4.0 million in 3Q 2013 compared to net losses of $(3.2) million in 2Q 2013 and $(4.7) million in 3Q 2012. This was the first quarter of operating profitability since the recapitalization in October of 2011 and the first for the Company since 2Q 2008.

•Core earnings, which excludes taxes, credit costs and provision, and non-recurring income and expense items, rose 158% to $4.7 million in 3Q 2013, compared to $1.8 million in 2Q 2013 and $0.9 million in 3Q 2012.

•Return on average assets was 0.79% and return on average equity was 21% for the quarter

•Net interest margin increased by 49 basis points to 3.76% in 3Q 2013, from 3.27% in 2Q 2013 and 2.95% in 3Q 2012.

•Noninterest expenses fell 27% from 2Q 2013 on reduced OREO, personnel and occupancy expenses. Core noninterest expenses, which excludes credit and non-recurring items, fell $1.4 million, or 7%, from 2Q 2013 and, $1.8 million, or 10%, from 3Q 2012.

•Positive credit performance in Q3 2013 with recovery of loan losses of $0.4 million, OREO recoveries net of expenses of $0.1 million and net recovery of charge-offs of $0.7 million.

•Asset quality continued to improve as nonperforming assets fell 11% from 2Q 2013 and 49% from 3Q 2012. 2013 year to date annualized net charge-offs fell to 0.31%, from 0.59% in the prior quarter.

•US Department of Justice terminated the Deferred Prosecution Agreement relating to the Bank's Bank Secrecy Act/Anti-Money Laundering program and the related case against the Bank that was pending in the U.S. District Court for the Western District of NC was dismissed.

"Obviously we are very pleased with our return to profitability," said Brian Simpson, CEO. "This quarter marks an inflection point for our Company and reflects the progress we have made over the past 2 years in reducing problem assets, merging and integrating Bank of Granite into CommunityOne and implementing operational improvements throughout the organization."

"With our return to financial health," said Bob Reid, President, "we have been able to fully engage in our markets, capitalize on new opportunities with our existing customer base and attract new customers to our Company."

Third Quarter 2013 Financial Results

Results of Operations

Net income was $4.0 million for the third quarter of 2013, compared to net losses of $(3.2) million in the second quarter of 2013 and $(4.7) million in the third quarter of 2012. Net income available to common shareholders was also $4.0 million, or $0.18 per common share, in the third quarter of 2013 compared to losses of ($3.2) million, or $(0.15) per common share, and $(4.7) million, or $(0.22) per common share, in the second quarter of 2013 and the third quarter of 2012, respectively. Core earnings, which exclude taxes, credit costs and provision, and non-recurring income and expenses, increased to $4.7 million in the third quarter, from $1.8 million in the second quarter of this year and $0.9 million in the third quarter of 2012. The improved financial performance in the third quarter was driven by a $2.0 million increase in net interest income as a result of increases in average loan and securities balances, continued reductions in the cost of deposits and an increase in the accretion of purchase accounting marks stemming from improved cash flow estimates in the Purchased Impaired loan portfolio. In addition, noninterest expense declined by $6.7 million during the quarter as the result of improvements in asset quality and the completion of the merger of Bank of Granite into CommunityOne Bank in June of this year.

Net Interest Income

Third quarter 2013 net interest income was $17.4 million, an increase of 13% compared to $15.4 million in the preceding quarter, and an increase of 14% compared to $15.2 million in the same quarter of 2012. The Company's net interest margin was 3.76% for the third quarter of 2013, increased by 15% from 3.27% in the second quarter of 2013, and by 27% from 2.95% in the third quarter of last year.

The 49 basis point increase in the net interest margin in the third quarter of 2013 over the second quarter was the result of an increase of $91.8 million in average loans and investment securities and a reduction of $148.5 million in lower yielding cash balances, that combined drove a 44 basis point increase in the average yield on earning assets. The cost of interest bearing deposits also continued to decline during the third quarter from the previous quarter, to 51 basis points, and the total cost of interest-bearing liabilities fell by 4 basis points, to 61 basis points, from the third quarter of 2013.

Net accretion of purchase accounting marks on loans and deposits acquired in the merger with Bank of Granite was $2.2 million, $2.0 million and $1.4 million in the third quarter of 2013, the second quarter of 2013 and the third quarter of 2012, respectively.

Provision for Loan Losses and Asset Quality

Provision for loan losses was a recovery of $0.4 million in the third quarter of 2013 compared to a recovery of $1.1 million in the previous quarter, and a provision of $32 thousand in the third quarter of 2012.

The allowance for loan losses was $25.4 million, or 2.12% of loans held for investment at the end of the third quarter of 2013, compared to $25.1 million, or 2.11%, at the end of the previous quarter, and $30.9 million, or 2.51%, at the end of the third quarter of 2012. The recovery of provision in the third quarter was the result of continued improvements in credit quality and improved loss experience. The year to date annualized loss rate declined to 0.31% through the third quarter of 2013, compared to 0.59% through the second quarter of 2013 and 2.06% through the third quarter of 2012. For the third quarter of 2013, the Company had net loan recoveries of $0.7 million.

Nonperforming assets, including nonaccruing loans, loans over 90 days delinquent and still accruing not accounted for under Purchase Impaired Loan accounting, and other real estate owned and repossessed loan collateral, fell to $84.4 million, or 4.1% of total assets at the end of the third quarter, compared to $94.8 million, or 4.7% of total assets, last quarter and $167.0 million, or 7.5% of total assets, at the end of the third quarter of 2012. Other real estate owned and repossessed loan collateral fell by 7% during the quarter to $33.2 million at quarter-end, compared to $35.8 million in the previous quarter, and fell by 59% from $80.8 million at the end of the third quarter of 2012. For the third quarter of 2013 the Company had gain on sale / recoveries on OREO, net of OREO expenses, of $0.1 million.

Noninterest Income

Core noninterest income, which excludes non-recurring securities gains and losses, fell $0.5 million to $4.4 million in the third quarter of 2013, compared to $4.9 million in the previous quarter and $4.7 million in the third quarter a year ago. A decrease in the mortgage loan pipeline and sales of mortgage loans to Fannie Mae contributed to a $0.5 million decrease in mortgage loan income from last quarter, and $0.3 million from the third quarter of 2012. Service charges grew by 11% in the third quarter of 2013 compared to the prior quarter, as the second quarter included the impact of service charge waivers associated with the Bank of Granite merger and the third quarter of 2013 included a full quarter of the positive impact of revised product and fee schedules implemented during the Granite merger.

Noninterest Expense

Total noninterest expense fell $6.7 million, or 27%, from the prior quarter on reduced OREO, personnel and occupancy expenses. Core noninterest expense fell 7% to $17.1 million in the third quarter of 2013, compared to $18.5 million in the preceding quarter and $18.9 million in the third quarter a year ago. The decrease this quarter of $1.4 million was primarily the result of reductions in personnel and occupancy expense synergies as a result of the Bank of Granite merger.

Balance Sheet Review

Loans held for investment grew at an annualized rate of 2% in the third quarter to $1.20 billion, compared to $1.19 billion at the end of the second quarter, and $1.23 billion at the end of the third quarter last year.

Total deposits fell $20.9 million, or 1%, during the third quarter to $1.79 billion, compared to $1.81 billion at the end of last quarter, and $1.98 billion at the end of the third quarter last year. The decline in the third quarter of this year was primarily the result of the maturity of $18.0 million of higher cost brokered CDs. Low cost core deposits, consisting of non-CD deposits, grew 2% during the third quarter to $1.18 billion, from $1.16 billion at June 30, 2013 and $1.15 billion at September 30, 2012.

Regulatory Matters

During the third quarter, the U.S. Department of Justice terminated its deferred prosecution agreement with the Bank relating to the Bank's Bank Secrecy Act/Anti-Money Laundering program at the same time as the U.S. District Court for the Western District of North Carolina dismissed the United States' case against the Bank.

Conference Call

A conference call will be held at 11:00 a.m., Eastern time this morning October 31st , 2013. Interested parties should dial in five to ten minutes prior to the scheduled start time to 1-888-317-6016. International callers should dial in to 1-412-317-6016. Canadian callers may dial in to 1-855-669-9657. To join the call, participants will be required to provide conference ID number 10035405. The webcast may be accessed via the Investor Relations section of the Company's website at www.community1.com. The webcast replay will be available until October 31, 2014. The teleconference replay will be available one hour after the end of the conference through December 2, 2013 at 9:00 a.m. Eastern Time. To access the teleconference replay, dial toll free in the U.S. to 1-877-344-7529 or outside the U.S. to 1-412-317-0088 and provide Conference ID Number 10035405.

About CommunityOne Bancorp

CommunityOne Bancorp is the North Carolina-based bank holding company for CommunityOne Bank, N.A. , a $2 billion community bank, operating 53 branches in 42 communities throughout central, southern and western North Carolina, offering a wide variety of consumer, mortgage and commercial banking services to retail and business customers, including loans, deposits, cash management, wealth and online banking. Investors can obtain additional information about the Company and the Bank through reviewing its website at www.community1.com.

http://www.nasdaq.com/press-release/communityone-bancorp-announces-return-to-profitability-with-net-income-of-40-million-in-the-third-quarter-of-2013-20131031-00831