Q1 Earnings Out:
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JACKSONVILLE, Fla., May 9, 2013 /PRNewswire/ -- Jacksonville Bancorp, Inc. (the "Company") (NASDAQ: JAXB), holding company for The Jacksonville Bank (the "Bank"), reported net income for the three months ended March 31, 2013 of $199 thousand compared to $1.3 million of net income for the three months ended March 31, 2012. Book value and tangible book value per common share as of March 31, 2013 were $0.32 and $0.30, respectively.
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Net income for the first quarter of 2013 was driven primarily by (i) net interest income of $5.2 million, (ii) provision for loan losses of $0.2 million, (iii) noninterest income of $0.4 million, and (iv) noninterest expenses of $5.2 million. The slight decrease in net interest income when compared to the same period in the prior year was due to a decrease in interest earned on interest-earning assets, driven primarily by a decrease in average earning assets (in particular average loan balances) slightly offset by an increase in the average yield on loans.
Total interest income decreased $0.3 million for the three months ended March 31, 2013 when compared to the same period in 2012. This decrease was primarily driven by a decrease in average earning assets, in particular, average loan balances which declined by $63.6 million when compared to the same period in the prior year. The decrease in average loan balances was partially offset by an increase in the average yield on loans to 6.03% for the three months ended March 31, 2013 compared to 5.41% for the three months ended March 31, 2012. The increase in the loan yield was driven by an increase in accretion recognized on acquired loans of approximately $0.4 million as well as a decrease in total nonperforming loans of $29.0 million for the three months ended March 31, 2013 when compared to the same period in 2012.
Interest expense decreased by $0.3 million to $1.1 million for the three months ended March 31, 2013 from $1.4 million for the three months ended March 31, 2012. This was primarily due to a decrease in the average cost of interest-bearing liabilities to 1.11% for the three months ended March 31, 2013, compared to 1.20% for the same period in 2012. This decrease reflects the ongoing reduction in interest rates paid on interest-bearing liabilities (particularly on deposits) as a result of repricing activities in the current low interest rate environment coupled with an increase in noninterest-bearing deposits to $89.9 million as of March 31, 2013 from $80.8 million as of March 31, 2012.
Noninterest income remained relatively consistent period-over-period, with $0.4 million in service charges and other income for the three months ended March 31, 2013 and 2012. The Company sold $2.2 million of its municipal securities at a $37 thousand realized gain during the three months ended March 31, 2013.
Noninterest expense increased to $5.2 million for the three months ended March 31, 2013, compared to $4.4 million for the three months ended March 31, 2012. This increase was mainly due to an increase in professional fees of $0.3 million and other expenses of $0.5 million, primarily loan-related expenses, while the remainder of components of noninterest expense remained relatively flat period-over-period.
There was no income tax expense recorded during the three months ended March 31, 2013 and 2012. The Company recorded a full valuation allowance against its deferred taxes as of December 31, 2011. This was substantially due to the fact that it was more-likely-than-not that the benefit would not be realized in future periods due to Section 382 of the Internal Revenue Code. Based on an analysis performed as of March 31, 2013 and December 31, 2012, it was determined that the need for a full valuation allowance still existed.
During the second quarter of 2012, the Company adopted a new overall strategy to accelerate the disposition of substandard assets on an individual customer basis. This strategy is ongoing and supports the continued reduction of problem assets as needed. In addition, the Company has been and will continue to fine tune the current credit processes. The Company is working to reposition its loan and deposit portfolio mix to better align with our targeted market segment of professional services, wholesalers, distributors and other service industries resulting in greater diversification in our balance sheet mix. The capital received late in 2012 is being deployed into short-term investments to maximize earnings while the desired loan growth is achieved.
During the fourth quarter of 2012, the Company completed a $50.0 million capital raise through the private placement of 50,000 shares of the Company's Mandatorily Convertible, Noncumulative, Nonvoting, Perpetual Preferred Stock, Series A ("Series A Preferred Stock"), at a purchase price of $1,000 per share. Consideration in the private placement included cash, the one-for-one exchange of Series B preferred stock sold in the $5.0 million bridge financing completed during the third quarter of 2012 and $1.8 million in the cancellation of outstanding debt under the Company's revolving loan agreements held by certain purchasers in the private placement and/or their related interests. Net proceeds from the issuance of preferred stock in the amount of $45.1 million were used for general operating expenses, mainly for the subsidiary bank, to improve capital ratios and will be used to support the Company's business strategy going forward. On February 19, 2013, after receiving requisite shareholder approvals, all issued and outstanding shares of Series A Preferred Stock automatically converted into an aggregate of 47.6 million shares of common stock and 52.4 million shares of the Company's newly authorized nonvoting common stock. Book value and tangible book value per common share as of December 31, 2012 were $2.55 and $2.34, respectively. Book value and tangible book value per common share as of December 31, 2012, adjusted for the conversion, were $0.32 and $0.31, respectively. Please refer to the Company's Non-GAAP Reconciliations for additional information related to these non-GAAP financial measures. In addition, on December 31, 2012, the Bank completed the sale of $25.1 million in assets, including non-accrual loans and other loans with a history of being past due of $24.6 million and other real estate owned ("OREO") of $0.5 million, to a real estate investment firm, for a purchase price of $11.7 million.
Total assets were $520.9 million as of March 31, 2013, compared to $585.3 million as of March 31, 2012. The decrease in total assets was largely due to the decrease in net loans as a result of the Company's execution of its overall strategy to accelerate the disposition of substandard assets as discussed above. To a lesser extent, the write-off of the Company's goodwill also decreased total assets period-over-period. Total assets decreased $44.2 million as of March 31, 2013 from December 31, 2012. This decrease in total assets was due to the Company experiencing a significant decrease in cash and cash equivalents as a result of a reduction in federal funds sold in the amount of $47.3 million due to the purchase of investment securities available-for-sale and the timing of the natural maturity of deposit accounts, particularly time deposits. In addition, there was a decrease in net loans of $4.7 million, primarily due to foreclosure activities during the three months ended March 31, 2013. These amounts were offset by an increase in securities available-for-sale of $7.3 million during the three months ended March 31, 2013.
Total deposits were $446.2 million as of March 31, 2013, a decrease of $67.3 million compared to total deposits of $513.5 million as of March 31, 2012. The decrease in total deposits during the first quarter of 2013 when compared to the first quarter of 2012 was driven primarily by a decrease in time deposits of $54.5 million due largely to a reduction in national and brokered CDs (the Company is currently not offering or renewing national or brokered CDs). This decrease was offset slightly by a $9.1 million increase in noninterest-bearing demand deposits.
As of March 31, 2013, nonperforming assets were $30.0 million, or 5.76% of total assets, compared to $56.7 million, or 9.68% of total assets, as of March 31, 2012. The decrease in nonperforming assets was driven primarily by an increase in loan charge-offs, specifically during 2012, write-downs on OREO, the disposition of OREO via sale or substandard assets via short sales, and the disposition of substandard assets via the asset sale completed late in the fourth quarter of 2012. This is consistent with the Company's overall strategy to accelerate the disposition of substandard assets.
The following table presents information concerning nonperforming assets as of the last five quarters:
For the Period Ended
(Dollars in thousands)
March 31,
2013
December 31,
2012
September 30,
2012
June 30,
2012
March 31,
2012
Nonperforming Assets
Total nonperforming loans
$
20,067
$
22,747
$
35,168
$
46,407
$
49,066
Foreclosed assets, net
9,920
6,971
4,599
7,508
7,667
Total nonperforming assets
$
29,987
$
29,718
$
39,767
$
53,915
$
56,733
Nonperforming loans and foreclosed
assets as a percent of total assets
5.76
%
5.26
%
7.21
%
9.25
%
9.68
%
Nonperforming loans as a percent of
gross loans
5.10
%
5.71
%
8.05
%
10.24
%
10.69
%
Loans past due 30-89 days, still
accruing interest
$
8,246
$
4,622
$
11,372
$
4,628
$
10,917
Total loans past due still accruing interest increased $3.6 million to $8.2 million as of March 31, 2013 from $4.6 million as of December 31, 2012. This increase was driven primarily by several larger loans in process of renewal as well as one relationship that is being orderly liquidated. Nonperforming loans decreased $2.6 million to $20.1 million as of March 31, 2013 from $22.7 million as of December 31, 2012.
The allowance for loan losses was 5.04% of total loans as of March 31, 2013, compared to 2.85% as of March 31, 2012 and 5.07% as of December 31, 2012. Provision for loan loss expense was $217 thousand for the three months ended March 31, 2013, compared to $72 thousand in 2012. The Company recorded net charge-offs of $595 thousand for the three months ended March 31, 2013, compared to $14 thousand in 2012. The higher level of charge-offs for the three months ended March 31, 2013 was primarily due to the Company's continued disposition of distressed assets on an individual customer basis. This fits with the Company's strategy to accelerate the disposition of substandard assets as discussed above.
On a diluted per common share basis, the Company had a net loss of $0.61 for the three months ended March 31, 2013, compared to net income of $0.22 for the same period in the prior year. The Company experienced a net loss per diluted common share due to the reduction of net income available to common shareholders in the amount of $31.5 million as a result of the noncash, implied preferred stock dividend recognized in conjunction with the mandatory conversion of the Company's Series A Preferred Stock into approximately 47.6 million shares of common stock and 52.4 million shares of a new class of nonvoting common stock (the "Conversion"), during the three months ended March 31, 2013. As adjusted to reflect earnings (loss) per common share less the impact of the noncash, implied preferred stock dividend, basic and diluted earnings per common share was $0.00 for the three months ended March 31, 2013. Please refer to the Company's Non-GAAP Reconciliations for additional information related to this non-GAAP financial measure.
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