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| FNBN > SEC Filings for FNBN > Form 10-Q on 10-Aug-2009 | All Recent SEC Filings |
10-Aug-2009
Quarterly Report
The following presents management's discussion and analysis of the financial condition, changes in financial condition and results of operations of FNB United Corp. ("FNB United") and its wholly owned subsidiary, CommunityONE Bank, National Association (the "Bank"). FNB United and its subsidiary are collectively referred to as the "Company." This discussion should be read in conjunction with the financial statements and related notes included elsewhere in the quarterly report. This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in forward-looking statements as a result of various factors. The following discussion is intended to assist in understanding the financial condition and results of operations of the Company.
Executive Overview
Description of Operations
FNB United is a bank holding company with a full-service subsidiary bank, CommunityONE Bank, National Association, which offers a complete line of consumer, mortgage and business banking services, including loan, deposit, cash management, investment management and trust services, to individual and business customers. The Bank has offices in Alamance, Alexander, Ashe, Catawba, Chatham, Gaston, Guilford, Iredell, Mecklenburg, Montgomery, Moore, Orange, Randolph, Richmond, Rowan, Scotland, Watauga and Wilkes counties in North Carolina.
Additionally, the Bank has a mortgage banking subsidiary, Dover Mortgage Company, which originates, underwrites and closes loans for sale into the secondary market. Dover has a retail origination network based in Charlotte and conducts wholesale operations in North Carolina, South Carolina, Georgia, Maine, Maryland, Mississippi, Tennessee, and Virginia.
Executive Summary
The Company's total assets at June 30, 2009, were $2.2 billion, an increase of 8%, or $155.2 million from year-end 2008. Investments grew $122.1 million, or 52%, reflecting the Company's leveraging strategy to offset the earnings dilution resulting from participation in the Capital Purchase Program. Loans held for sale increased $28.9 million, or 80%, due to refinancing of residential mortgages. Gross loans held for investment totaled $1.6 billion at June 30, 2009, essentially flat from the prior year end.
Total deposits grew $125.0 million, to $1.6 billion in 2009, representing an 8% increase due primarily to increased consumer use of deposit account products in the current economic environment and an increase in the general consumer rate of savings. Borrowings decreased $12.2 million or 3%, during the first six months of 2009, compared to the period ended December 31, 2008. Total shareholders' equity increased $44.8 million compared to December 31, 2008 primarily as a result of $51.5 million of capital invested by the U.S. Treasury in the first quarter of 2009 partially offset by the $7.4 million net loss for the first six months.
The Company experienced a net loss of $7.4 million in the first six months of 2009 compared to net income of $2.5 million for the same period in 2008 and is primarily the result of a $16.7 million increase in the provision for loan losses. These losses were partially offset by $6.8 million in lower income taxes.
Noninterest income increased 8% to $11.1 million for the first six months in 2009, compared to $10.3 million for the same period in 2008. Cardholder and merchant services income increased $0.1 million due to increased interchange fees and surcharge fees, and income from mortgage loan income increased by $1.7 million attributable to sizable increases in 2009 production driven by refinancing activity.
Noninterest expense year-to-date decreased 2% to $32.0 million in 2009 from $32.8 million in 2008. The Company undertook a major noninterest expense improvement project during the second half of 2008, which included consolidation of operational functions, strong vendor management and tighter staffing models. This effort resulted in a 9%, or $1.6 million decrease in personnel expense when comparing the first six months of 2009 to the same period in 2008. This reduction was offset by increases in other expenses, primarily auditing fees and FDIC insurance costs, which were $0.3 million and $1.5 million, respectively, of which $1.0 million represented a one-time special FDIC assessment. The Company also incurred noninterest expense of $0.3 million in the first quarter of 2009 related to its write-off of an investment in a failed banker's bank.
Financial highlights are presented in the accompanying table.
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