EXHIBIT 99.1
CENTER FINANCIAL MAINTAINS MOMENTUM IN 2003 THIRD QUARTER
—Results Reflect Double-Digit Growth of Loans, Deposits and Assets —
LOS ANGELES, CA—October 21, 2003—Center Financial Corporation (NASDAQ NM: CLFC), the holding company of Center Bank, a community bank focused on the Korean-American niche market, today reported continued momentum in the third quarter ended September 30, 2003, characterized by strong loan and deposit growth and higher fee income contributions.
Compared to a year ago, 2003 third quarter highlights include:
• | Revenues increased 13% to $12.3 million |
• | Net interest income before loan loss provision increased 15% to $8.0 million |
• | Noninterest income increased by 9% to $4.2 million |
• | Customer service fees and other income advanced 22% and 65%, respectively |
• | Total gross and net loans increased 44% to $669.3 million and $661.3 million, respectively |
• | Total deposits grew 27% to $825.8 million |
• | Total assets were up 27% to $928.1 million |
Net income for the third quarter ended September 30, 2003 totaled $3.0 million, or $0.38 per diluted share, compared with $2.8 million, or $0.36 per diluted share, in the corresponding 2002 period. (All per share figures have been adjusted to reflect the 8% stock dividend paid on March 28, 2003.) Return on average assets for the current third quarter was 1.30% and return on average equity was 16.53%, compared to 1.58% and 18.95% for the third quarter of 2002.
“We are very pleased with our third quarter performance, particularly against a backdrop of sluggish economic conditions and interest rate volatility in the U.S.,” said Paul Seon-Hong Kim, president and chief executive officer. “We remained focused on our long-term strategic objective of healthy growth of our balance sheets and achieved double-digit expansion of our loans, deposits and total assets, as compared to a year ago.”
Net interest income before loan loss provision rose 15% in the current third quarter to $8.0 million from $7.0 million in the corresponding year-ago period. This increase is attributed principally to loan growth and a change in the interest-earning asset composition. Low yield interest-earning assets were replaced by higher yield loans, partially offsetting compression of net interest margins due to federal fund rate cuts of 50 and 25 basis points in November 2002 and late June 2003. Net interest margins contracted 48 basis points to 3.80% in the current quarter, as compared to 4.28% in third quarter of 2002. Center Financial added $800,000 to its provision for loan losses, compared to $400,000 in the third quarter a year ago.
“To compensate for the expected industry-wide decline in net interest margins, we made a concerted effort to increase noninterest income and introduced innovative niche products that generated additional customer service fees and implemented a fee-based mortgage lending program,” said Mr. Kim.
Noninterest income in the 2003 third quarter increased 9% to $4.2 million, benefiting from a 65% rise in other income and a 22% gain in service fee income over the past year, primarily due to an increase in the number of account relationships. The company posted noninterest income of $3.9 million in the third quarter of 2002.
Operating expenses rose 14% to $6.8 million over the year-ago period reflecting increased legal fees, as well as additional expenses related to the company’s new Fullerton branch opening at the beginning of the quarter and the
recently announced relocation of the Western branch office. As a result, the efficiency ratio for the 2003 third quarter was slightly deteriorated at 55.35%, compared with 54.94% a year earlier.
For the nine-month period ended September 30, 2003, net income rose 25% to $8.6 million, or $1.08 per diluted share, from $6.9 million, or $0.90 per diluted share, a year ago. Return on average assets for the year-to-date period was 1.34% and return on average equity was 16.50%, as compared to 1.43% and 16.55% a year ago.
Net interest income before provisions for loan losses grew 18% to $23.0 million for the 2003 nine-month period from $19.5 million for the same period a year ago. Net interest income after provisions for loan losses rose 14% to $21.3 million from $18.6 million in the first nine months of 2002. Noninterest income was $11.8 million for the year-to-date period, up from $9.5 million for the comparable 2002 period. Noninterest expense grew to $19.5 million from $17.0 million in first nine months of 2002, primarily due to branch expansion and addition of highly experienced personnel. The efficiency ratio improved to 55.99% from 58.61%. This improvement in the efficiency ratio primarily resulted from the increased profit contributions and operating efficiencies at the six new branches opened during 2000 and 2001.
Net loans grew to $661.3 million at September 30, 2003, representing a 44% increase from a year ago and a 27% increase from year-end 2002. The company recorded strong year-over-year growth across all loan categories, with the exception of real estate construction lending. Commercial real estate loans, the bulk of which represent owner-occupied business properties secured by first deeds of trust, showed particular strength growing 41% over last year and representing 50.5% of Center Financial’s loan portfolio. The balance of the portfolio included the following: commercial loans totaled 20.2%, SBA loans amounted to 12.2%, trade finance and consumer loans each equaled 6.7%, and real estate construction contributed 2.6%.
Total deposits increased 14% to $825.8 million at September 30, 2003, compared with $727.0 million at December 31, 2002. The Bank posted balanced growth in the range of 35% to 37% in all categories of core deposits, which represented 56% of total deposits, up from 53% a year earlier.
Total assets increased 13% to $928.1 million, compared with $818.6 million at December 31, 2002. Interest-earning assets grew 10% to $828.1 million and fee-generating assets, which are included in cash and due from bank, rose 3% to $20.0 million, compared with $753.5 million and none, respectively, at December 31, 2002.
Total non-performing assets were $3.9 million at September 30, 2003, or 0.42% of total assets, compared to $2.4 million, or 0.30% of total assets at December 31, 2002, an increase of $1.5 million primarily because of one large construction loan in the amount of $2.2 million, which the company is optimistic will be current by the year end. Center Financial increased its provision for loan losses to cover future losses by $850,000 to $1.8 million for the nine months ended September 30, 2003, as compared to $900,000 for same period a year ago. The allowance for loan losses also increased to $8.0 million primarily due to a growth in the loan portfolio, and represented 1.20% of gross loans at September 30, 2003, as compared to 1.28% at December 31, 2002.
At September 30, 2003, Center Financial remains “well-capitalized” under all regulatory categories, with a Tier 1 risk-based capital ratio of 10.18%, a total risk-based capital ratio of 11.30%, and a Tier 1 capital ratio of 8.62%. Shareholders’ equity increased 16% to $75.8 million, from $65.2 million on December 31, 2002, and book value increased to $9.53 at September 30, 2003, compared to $8.48 per share at year-end 2002.
Mr. Kim added: “Solid execution, even under difficult economic conditions, has resulted in continued momentum and growth, delivering quantifiable value for our shareholders. We believe developing deep community relationships through outreach efforts, as in our commitment to FDIC’s Money Smart financial education program, provides competitive advantage for Center Bank and positions us well to capitalize on a growing niche market, particularly when the economy rebounds. Our confidence in Center Bank’s market position is underscored by our ongoing investment in the skills and talent of our team.”
About Center Financial Corporation
Center Financial Corporation is a financial holding company formed in 2002 and is the parent company of Center Bank. Founded in 1986, Center Bank is a community bank offering a full-range of financial services. Center Bank changed its name from California Center Bank in December of 2002. It specializes in commercial and SBA loans and trade finance products for multi-ethnic and small business customers. The Bank operates 13 branches throughout Southern California and four Loan Production Offices located in Phoenix, Seattle, Denver and Washington D.C. It is one of the largest financial institutions in the nation focusing on the Korean-American community. Further information about the Company can be found at www.centerbank.com.
This release may contain forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and accordingly, the cautionary statements contained in Center Financial Corp’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2002 (See Business, and Management’s Discussion and Analysis), and other filings with the Securities and Exchange Commission are incorporated herein by reference. These factors include, but are not limited to: the effect of interest rate and currency exchange fluctuations; competition in the financial services market for both deposits and loans; Center Financial’s ability to efficiently incorporate acquisitions into its operations; the ability of Center Financial and its subsidiaries to increase its customer base; and regional and general economic conditions. Actual results and performance in future periods may be materially different from any future results or performance suggested by the forward-looking statements in this release. Such forward-looking statements speak only as of the date of this release. Center Financial expressly disclaims any obligation to update or revise any forward-looking statements found herein to reflect any changes in the Company’s expectations of results or any change in events.
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(TABLES FOLLOW)
CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(In thousands, except share and per share data)
09/30/03 | 09/30/02 | 12/31/02 | ||||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 68,336 | $ | 32,515 | $ | 38,877 | ||||||
Federal funds sold | 21,270 | 37,535 | 35,500 | |||||||||
Money market funds and interest-bearing deposits in other banks | 21,300 | 20,000 | 40,000 | |||||||||
Securities available-for-sale | 115,046 | 141,753 | 140,998 | |||||||||
Securities held-to-maturity | 9,212 | 15,746 | 15,741 | |||||||||
Loans (net of unearned income) | 669,290 | 465,194 | 527,977 | |||||||||
Allowance for loan losses | (8,017 | ) | (6,216 | ) | (6,760 | ) | ||||||
Net loans | 661,273 | 458,978 | 521,217 | |||||||||
Fixed assets | 10,831 | 8,960 | 9,988 | |||||||||
Other assets | 20,851 | 16,419 | 16,303 | |||||||||
Total assets | $ | 928,119 | $ | 731,906 | $ | 818,624 | ||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Deposits | ||||||||||||
Non-interest bearing deposits | $ | 259,724 | $ | 189,448 | $ | 207,092 | ||||||
Interest bearing deposits | 566,064 | 458,789 | 519,928 | |||||||||
Total deposits | 825,788 | 648,237 | 727,020 | |||||||||
Borrowed funds | 15,904 | 12,295 | 17,565 | |||||||||
Other liabilities | 10,589 | 9,525 | 8,833 | |||||||||
Total Liabilities | 852,281 | 670,057 | 753,418 | |||||||||
Shareholders’ Equity | 75,838 | 61,849 | 65,206 | |||||||||
Total Liabilities & Shareholders’ Equity | $ | 928,119 | $ | 731,906 | $ | 818,624 | ||||||
Book value per share1 | $ | 9.53 | $ | 8.08 | $ | 8.48 | ||||||
Number of common shares outstanding at period end1 | 7,956,329 | 7,655,678 | 7,692,421 | |||||||||
1 | Adjusted to reflect eight percent stock dividend paid in 2003. |
CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(In thousands, except share and per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||||
Interest income | $ | 10,916 | $ | 9,967 | $ | 31,758 | $ | 27,496 | |||||||
Interest expense | 2,905 | 3,007 | 8,744 | 8,007 | |||||||||||
Net interest income before provision for loan losses | 8,011 | 6,960 | 23,014 | 19,489 | |||||||||||
Provision for loan losses | 800 | 400 | 1,750 | 900 | |||||||||||
Net interest income after provision for loan losses | 7,211 | 6,560 | 21,264 | 18,589 | |||||||||||
Noninterest income | |||||||||||||||
Customer service fees | 1,900 | 1,555 | 5,254 | 4,441 | |||||||||||
Fee income from trade finance transactions | 691 | 740 | 1,966 | 2,106 | |||||||||||
Wire transfer fees | 170 | 153 | 501 | 440 | |||||||||||
Gain on sale of loans | 656 | 710 | 1,593 | 1,051 | |||||||||||
Net (loss) gain on sale of securities available for sale | (9 | ) | 172 | 330 | 172 | ||||||||||
Loan service fees | 322 | 252 | 948 | 671 | |||||||||||
Other income | 510 | 309 | 1,205 | 608 | |||||||||||
Total noninterest income | 4,240 | 3,891 | 11,797 | 9,489 | |||||||||||
Noninterest expenses | |||||||||||||||
Salaries and employee benefits | 3,160 | 3,126 | 9,767 | 9,191 | |||||||||||
Occupancy | 537 | 436 | 1,480 | 1,302 | |||||||||||
Furniture, fixtures, and equipment | 347 | 276 | 988 | 769 | |||||||||||
Net other real estate owned expense (income) | — | — | — | (98 | ) | ||||||||||
Data processing | 445 | 382 | 1,278 | 1,149 | |||||||||||
Professional service fees | 757 | 491 | 1,422 | 1,087 | |||||||||||
Business promotion and advertising | 467 | 355 | 1,321 | 1,070 | |||||||||||
Stationery and supplies | 146 | 116 | 450 | 276 | |||||||||||
Telecommunications | 122 | 113 | 359 | 310 | |||||||||||
Postage and courier service | 135 | 119 | 386 | 346 | |||||||||||
Security service | 157 | 148 | 451 | 417 | |||||||||||
Other operating expenses | 508 | 399 | 1,588 | 1,166 | |||||||||||
Total noninterest expenses | 6,781 | 5,961 | 19,490 | 16,985 | |||||||||||
INCOME BEFORE INCOME TAX PROVISION | 4,670 | 4,490 | 13,571 | 11,093 | |||||||||||
INCOME TAX PROVISION | 1,666 | 1,683 | 4,963 | 4,230 | |||||||||||
Net income | $ | 3,004 | $ | 2,807 | $ | 8,608 | $ | 6,863 | |||||||
Other comprehensive (loss) income1 | (138 | ) | 1,057 | (514 | ) | 1,590 | |||||||||
Total comprehensive income | $ | 2,866 | $ | 3,864 | $ | 8,094 | $ | 8,453 | |||||||
Income per share, basic2 | $ | 0.39 | $ | 0.37 | $ | 1.11 | $ | 0.93 | |||||||
Income per share, diluted2 | $ | 0.38 | $ | 0.36 | $ | 1.08 | $ | 0.90 | |||||||
Basic average common shares outstanding2 | 7,793,301 | 7,406,086 | 7,758,196 | 7,374,543 | |||||||||||
Diluted average common shares outstanding2 | 8,040,932 | 7,744,263 | 7,965,016 | 7,636,018 |
1 | Comprehensive income represents the change in unrealized gain (loss) on securities available for sale and, interest rate swaps, net of tax, from the previous period end. |
2 | Adjusted to reflect eight percent stock dividend paid in 2003. |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(In thousands)
For the nine months ended September 30, | For the year ended December 31, | |||||||||||||||||
2003 | 2002 | 2002 | ||||||||||||||||
Average gross loans outstanding during period | $ | 597,064 | $ | 422,427 | $ | 439,493 | ||||||||||||
Total loans outstanding at end of period1 | 669,290 | 465,194 | 527,977 | |||||||||||||||
Non-performing assets | ||||||||||||||||||
Loans past due 90 days or more and still accruing interest | $ | — | $ | — | $ | — | ||||||||||||
Non-accrual loans | 3,905 | 2,032 | 2,428 | |||||||||||||||
Total non-performing loans | 3,905 | 2,032 | 2,428 | |||||||||||||||
Other Real Estate Owned | — | — | — | |||||||||||||||
Total Non-performing assets | $ | 3,905 | $ | 2,032 | $ | 2,428 | ||||||||||||
Allowance for Loan Losses | ||||||||||||||||||
Balance as of January 1, | $ | (6,760 | ) | $ | (5,540 | ) | $ | (5,540 | ) | |||||||||
Reserve for losses on commitments to extend credit2 | — | 43 | 43 | |||||||||||||||
Provision for loan losses | (1,750 | ) | (900 | ) | (2,100 | ) | ||||||||||||
Net loan charge-offs and (recoveries) | 493 | 181 | 837 | |||||||||||||||
Balance as of September 30, | $ | (8,017 | ) | $ | (6,216 | ) | $ | (6,760 | ) | |||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2002 | ||||||||||||||
Selected Ratios | ||||||||||||||||||
For the Period | ||||||||||||||||||
Return on average assets | 1.30 | % | 1.58 | % | 1.34 | % | 1.43 | % | 1.39 | % | ||||||||
Return on average equity | 16.53 | 18.95 | 16.50 | 16.55 | 16.27 | |||||||||||||
Interest rate spread | 3.22 | 3.49 | 3.25 | 3.62 | 3.52 | |||||||||||||
Net interest margin | 3.80 | 4.28 | 3.88 | 4.44 | 4.30 | |||||||||||||
Yield on earning assets | 5.18 | 6.13 | 5.36 | 6.27 | 6.11 | |||||||||||||
Cost of deposits | 1.93 | 2.63 | 2.08 | 2.64 | 2.59 | |||||||||||||
Cost of funds | 1.96 | 2.64 | 2.11 | 2.65 | 2.60 | |||||||||||||
Noninterest expense/average assets | 0.74 | 0.85 | 2.26 | 2.65 | 3.80 | |||||||||||||
Efficiency ratio | 55.35 | 54.94 | 55.99 | 58.61 | 58.00 | |||||||||||||
Net charge-offs/(recoveries) to average loans | 0.02 | 0.01 | 0.08 | 0.04 | 0.19 | |||||||||||||
Period Ended September 30, | Year Ended December 31, | |||||||||||||||||
2003 | 2002 | 2002 | ||||||||||||||||
Period End | ||||||||||||||||||
Tier 1 risk-based capital ratio | 10.18 | % | 10.99 | % | 10.34 | % | ||||||||||||
Total risk-based capital ratio | 11.30 | 12.14 | 11.44 | |||||||||||||||
Tier 1 leverage ratio | 8.62 | 8.55 | 9.48 | |||||||||||||||
Non-accrual loans to gross loans | 0.58 | 0.44 | 0.46 | |||||||||||||||
Non-performing assets to total loans and OREO | 0.58 | 0.44 | 0.46 | |||||||||||||||
Non-performing assets to total assets | 0.42 | 0.28 | 0.30 | |||||||||||||||
Allowance for loan loss to gross loans | 1.20 | 1.34 | 1.28 | |||||||||||||||
Allowance for loan losses to nonperforming assets | 205.30 | 305.91 | 278.42 |
1 | Total loans are net of deferred loan fees and discount on SBA loan sold. |
2 | The reserve for losses on commitments to extend credit and letters of credit is primarily related to lines of credit. The Company evaluates credit risk associated with the loan portfolio at the same time it evaluates credit risk associated with commitments to extend credit and letters of credits. However, as of December 31, 2002 and thereafter, the reserve necessary for the commitments is reported separately in other liabilities in the accompanying statements of financial condition, and not as part of the allowance for loan losses, as presented above. |