A surge in mortgage lending powered Cardinal Financial (CFNL) in McLean, Va., to a $7.7 million profit in the first quarter, an increase of nearly 47% from the same period in 2011, Earnings per share rose 44%, to 26 cents, or two cents better than the estimates of analysts polled by Thomson Reuters.
The $2.6 billion-asset company has been aggressively ramping up its mortgage business over the last year to take advantage of an increase in home buying and strong refinancing activity. Fee income from mortgage activities more than doubled, to $6.9 million, while income from services provided to other mortgage firms more than tripled, to $1 million.
Meanwhile, net interest income rose 23% year over year, to $21.7 million, as the company's total loan portfolio grew by nearly 18%. The loan growth was funded largely by a 34% jump in deposits, to nearly $1.9 billion.
Credit quality, while still strong, weakened somewhat as assets grew. Nonperforming assets equaled 0.62% of total assets, up 11 basis points from a year earlier, and Cardinal increased its provision for loan losses by 73%, to $1.9 million.
Expenses climbed 28%, to $18.1 million, as the company added dozens of mortgage lenders — many from larger competitors — and opened six new lending offices in the Washington, D.C., region. Despite the increased overhead, Cardinal's efficiency ratio improved from 61.2% in last year's first quarter to 57.6% this year.