Upward estimate revisions on the back of strong third quarter
results - including a 50% earnings surprise - and completion of
the VantageSouth Bank merger have helped
Crescent Financial Bancshares, Inc.
) achieve a Zacks #1 Rank (Strong Buy) on December 5. With a
solid year-to-date return of 53.4%, this commercial and retail
banking service provider offers an attractive investment
The Rank Drivers
Better-than-expected third quarter results, benefits from recent
mergers and fundamental strength - including improving credit
quality and strong capital ratios - are the primary rank drivers
for this stock.
Crescent Financial reported its third quarter results on October
30 with loss per share of 1 cent, beating the Zacks Consensus
Estimate of a loss of 2 cents by 50%. It also compared favorably
with the year-ago loss of 36 cents. Robust results for the
reported quarter were primarily aided by higher non-interest
income, elevated net interest income and reduced provision for
Non-interest expenses, which increased 29.4% on a year-over year
basis to $8.8 million, were a dampener in the quarter.
Net interest income increased 11.8% to $7.6 million from $6.8
million in the year-ago quarter. Net interest margin expanded 127
basis points on a year-over year basis to 4.44%. The rise was
primarily due to lower cost of funds. Non-interest income
jumped 64.3% year over year to $2.3 million. Provision for loan
losses skidded 78.7% from the year-ago quarter to $0.96 million.
Credit quality continued to exhibit improvement. Non-performing
loans as a percentage of total loans held for investment came in
at 1.65% as of September 30, 2012, down from 4.14% as of December
31, 2011. Non-performing assets for the quarter as a percentage
of total assets were 1.61% compared with 3.87% as of December 31,
As of September 30, 2012, Crescent Financial's total risk-based
capital ratio was 15.50%, Tier 1 risk-based capital ratio was
14.11% and Tier 1 leverage ratio was 12.43%, improving from
11.71%, 9.39% and 7.25%, respectively, in the prior-year quarter.
VantageSouth Bank Merger Completed
Earlier this week, Crescent Financial announced the completion of
the merger of VantageSouth Bank into Crescent State Bank, the
primary subsidiary of the company. The combined entity is
operating as VantageSouth Bank.
As per the terms off the deal, each outstanding share of
VantageSouth Bank was converted into shares of Crescent Financial
at an exchange ratio of 5.3278. Moreover, VantageSouth's 5 ATM
locations have been combined with Crescent State Bank's 15,
providing customers a total of 19 locations and expanding branch
ECB Bancorp Inc. (
In September 2012, Crescent Financial entered into a merger deal
with ECBE. As per the terms of the deal, Crescent Financial will
acquire ECBE for $17.75 per share or about $51.6 million.
Upon completion of the agreement, the combined entity will have
total assets of about $2.0 billion, total deposits of $1.7
billion, total loans of $1.2 billion and a branch network of 45
in North Carolina. The merger, subject to certain customary
condition, is anticipated to be completed in the first quarter of
Earnings Estimate Revisions
The only estimate for 2012 has moved higher over the last 30
days. The Zacks Consensus Estimate for this year is a loss of 4
cents per share. Further, for 2013, the Zacks Consensus Estimate
gained 53.8% to reach earnings of 20 cents. The Zacks Consensus
Estimate for 2012 reflects a year-over-year improvement of about
On a price-to-book basis, the shares of Crescent Financial are
trading at 1.2x, a 71.0% premium to the peer group average of
0.7x. Given the company's strong fundamentals, the valuation
About the Company
Headquartered in Raleigh, North Carolina, Crescent Financial
Bancshares, the primary subsidiary of Piedmont Community Bank
Holdings, Inc. serves as the bank holding company for Crescent
State Bank. It operates through 15 offices located in Cary, Apex,
Clayton, Garner, Holly Springs, Sanford, Southern Pines,
Pinehurst, Raleigh, Knightdale, and Wilmington in North Carolina
and offers an array of commercial and retail banking services.
The company, which was founded in 1998, has a market
capitalization of roughly $139.1 million.
Other Zacks #1 Rank bank stocks include
BANNER CORP (BANR): Free Stock Analysis
CRESCENT FINL (CRFN): Free Stock Analysis
ECB BANCORP INC (ECBE): Free Stock Analysis
To read this article on Zacks.com click here.