EXHIBIT 99.1
CENTER FINANCIAL REPORTS RECORD NET INCOME
FOR 2004 FOURTH QUARTER AND YEAR
— Strong Loan Production, Deposits Growth Contribute to Solid Interest and Noninterest Income Gains —
LOS ANGELES, CA – February 2, 2005 – Center Financial Corporation (NASDAQ NM: CLFC), the financial holding company of Center Bank, today reported record earnings for the fourth quarter and year ended December 31, 2004.
2004 fourth quarter highlights, compared with a year ago, include:
• | Net income increased 43% to $4.4 million, or $0.26 per diluted share |
• | Net loans rose 41% to $1.01 billion |
• | Total deposits grew 34% to $1.17 billion |
• | Total assets up 30% to $1.34 billion |
• | Revenues up 34% to $22.3 million |
• | Net interest income before provision for loan losses grew 39% to $12.5 million |
• | Noninterest income advanced 10% to $5.2 million |
• | Franchise expansion continued with the opening of a full-service branch office in San Fernando Valley and new loan production offices in Houston and Dallas |
• | Quarterly cash dividend declared of $0.04 per share |
“2004 marked another year of new levels of achievement for Center Financial,” said (Paul) Seon-Hong Kim, president and chief executive officer. “We continued to make progress throughout the year expanding the Center Bank franchise. Our first out-of-state full-service branch was opened in Chicago, and we strengthened our penetration in Southern California with our newest office in San Fernando Valley. We also entered four other high-growth niche markets with loan production offices opened in Atlanta, Honolulu, Houston and Dallas. We believe our enhanced focus on investor relations and a two-for-one stock split effected earlier this year contributed to improved liquidity of our shares on the NASDAQ market over the course of 2004. Acknowledging our financial performance, Sandler O’Neill identified Center Bank as one of the top 30 performing small capitalization banks in its ‘Class of 2004 Sm-All Stars’ survey.
“Our successes in 2004 also include reaching record levels in our loan portfolio and deposits, while maintaining excellent credit quality. These achievements, plus improved operating efficiencies and a more favorable interest rate environment, contributed to another consecutive year of record earnings, realized through strong performances each quarter throughout the year,” Kim said.
For the three months ended December 31, 2004, net interest income before provision for loan losses rose 39% to $12.5 million from $9.0 million in the corresponding period a year ago, benefiting from robust growth in net loans and the positive impact of the recent series of Federal Fund rate hikes. Net interest margin advanced 28 basis points to 4.45% from 4.17% in the prior-year period. Center Financial added $1.1 million to its provision for loan losses in the 2004 fourth quarter, reflecting the considerable expansion of its loan portfolio and lower levels of recoveries as compared to the corresponding prior-year period when the company added $250,000 to its provision for loan losses.
Noninterest income in the 2004 fourth quarter grew 10% to $5.2 million from $4.8 million a year earlier, principally benefiting from increases in SBA loan sales and trade finance transactions, as well as a greater number of customer account relationships, offset, in part, by a loss on interest rate swaps.
Total noninterest expenses in the 2004 fourth quarter rose 14% to $10.0 million from $8.7 million in the same prior-year period, reflecting higher staff, occupancy and operational costs associated with Center Bank’s expanding franchise, as well as increased professional fees. Compared with the 2003 fourth quarter, the current period includes the additional costs associated with operating four new loan production offices, along with the company’s full-service branches in Chicago and in San Fernando Valley. The company posted an impairment loss of securities available for sale of $394,000 in the 2004 fourth quarter related to a decline in the market value of its Fannie Mae and Freddie Mac preferred stocks, compared with an impairment loss of $880,000 in the 2003 fourth quarter. Center Financial’s efficiency ratio for the current quarter improved markedly to 56.27% from 63.46% in the same period a year ago. Excluding the securities impairment charges, the efficiency ratios would have been 54.05% and 57.06%, respectively, for the 2004 and 2003 fourth quarters.
Net income grew 43% to $4.4 million, or $0.26 per diluted share, for the fourth quarter of 2004, compared with $3.0 million, or $0.18 per diluted share, in the corresponding prior-year period. (All per share figures have been adjusted to reflect a two-for-one stock split in March 2004). Excluding the securities impairment charge in the 2004 fourth quarter, the company would have reported net income of $4.6 million, or $0.28 per diluted share.
Return on average assets for the fourth quarter of 2004 increased to 1.38% from 1.26% in the year-ago period and from 1.33% in the immediately preceding 2004 third quarter. Return on average equity was 19.33%, improved from 15.71% in the year-ago fourth quarter and from 19.19% in the 2004 third quarter, reflecting higher interest income due, in part, to Federal Fund rate hikes and increases in average earning assets. The company’s yield on interest earning assets rose to 6.04% in the 2004 fourth quarter from 5.51% in the same year-ago period, and the average yield on net loans improved to 6.57% from 6.25% in the 2003 fourth quarter.
For the full year ended December 31, 2004, net interest income before provision for loan losses grew 33% to $42.7 million from $32.0 million a year ago. The net interest margin for the 2004 year improved to 4.03% from 3.96% last year. The company posted $3.3 million in its provision for loan losses to cover the significant expansion of its loan portfolio, compared with $2.0 million recorded in 2003.
Noninterest income for 2004 increased 27% to $21.1 million from $16.6 million a year ago, reflecting strong gains in all core fee income categories, as well as a 72% increase in gain on sale of loans.
Total noninterest expenses for 2004 increased 30% to $36.6 million from $28.2 million a year earlier. The efficiency ratio improved to 57.34% for the 2004 full year from 58.10% last year. Excluding an impairment loss of securities available for sale of $2.3 million in 2004 and $880,000 in 2003, the efficiency ratio for 2004 would have been 53.79%, and 56.29% in 2003.
For the 2004 full year, net income rose 29% to $15.0 million, or $0.91 per diluted share, from $11.7 million, or $0.72 per diluted share, a year earlier. Excluding the securities impairment charge, the company would have reported full year net income of $16.4 million, or $1.00 per diluted share.
Return on average assets and return on average equity for 2004 were 1.29% and 17.82%, respectively, compared with 1.32% and 16.28% in 2003. The company’s yield on interest earning assets rose to 5.49% for 2004 from 5.40% a year ago. The average yield on net loans for 2004 totaled 6.10%, compared with 6.25% in 2003.
Gross and net loans at year-end 2004 advanced 41% each to $1.03 billion and $1.01 billion, respectively, from $728.7 million and $717.0 million at December 31, 2003. Commercial real estate loans increased 58% from a year ago and accounted for 59% of the company’s gross loans at the end of 2004. Commercial loans rose 42% from prior-year levels and totaled 20% of the loan portfolio. Trade finance loans increased 35% from year-end 2003 and represented 8% of gross loans. SBA, consumer and real estate construction loans, respectively, totaled 5%, 6% and 2% of Center Financial’s loan portfolio at December 31, 2004.
Total deposits at the end of 2004 grew 34% to $1.17 billion from $867.9 million at December 31, 2003. Core deposits represented 54% of total deposits at year-end 2004. Non-interest bearing, interest bearing and savings deposits increased 29%, 34% and 20%, respectively, from prior-year levels. Non-interest bearing deposits accounted for 30% of the company’s total deposits at December 31, 2004. Time deposits rose 40% to $533.8 million from $381.2 million at year-end 2003.
The average cost of interest-bearing deposits for the 2004 fourth quarter and full year were 2.16% and 1.97%, respectively, compared with 1.86% and 2.02% in the corresponding prior-year periods. The average cost of total deposits were 1.50% and 1.29% for the 2004 fourth quarter and full year, respectively. The average cost of funds for the fourth quarter of 2004 increased to 2.22% from 1.89% in the year-ago period, but was slightly lower for the full year at 2.04%, compared with 2.05% in 2003.
Total assets at December 31, 2004 equaled $1.34 billion, compared with $1.03 billion at year-end 2003. Interest-earning assets grew to $1.22 billion from $906.6 million at December 31, 2003. The company continued to finance its growth of total assets through increased deposits collected by its expanded network of branch offices.
Total non-performing assets equaled $3.4 million, or 0.26% of total assets, at December 31, 2004, compared with $3.3 million, or 0.32% of total assets, at December 31, 2003. Net charge-offs for the full year totaled $827,000, compared with net recoveries of $44,000 in 2003. The allowance for loan losses was increased to $11.2 million in accordance with the expansion of the company’s loan portfolio. The improving loan quality allowed the company to slightly decrease the allowance for loan losses to total gross loans ratio to 1.10% at December 31, 2004, compared with 1.21% at year-end 2003.
Shareholders’ equity at the end of 2004 increased 16% to $90.7 million from $78.3 million at year-end 2003. At December 31, 2004, Center Financial remained “well-capitalized” under all regulatory categories, with a Tier 1 risk-based capital ratio of 9.61%, a total risk-based capital ratio of 10.63%, and a Tier 1 leverage ratio of 9.12%.
Investor Conference Call
Center Financial management will host an investor conference call on Wednesday, February 2, at 8:00 a.m. PST (11:00 a.m. EST) to review the company’s financials and operations for the fiscal fourth quarter and year ended December 31, 2004. The call will be open to all interested parties through a live, listen-only audio Web broadcast via the Internet at www.centerbank.com and www.fulldisclosure.com. For those who are not available to listen to the live broadcast, the call will be archived for one year at both Web sites. A telephonic playback of the conference call also will be available from 10:00 a.m. PST, Wednesday, February 2, through 5:00 p.m. PST, Friday, October February 4, by calling 888-286-8010 (domestic) or 617-801-6888 (international) and using Reservation No. 61999375.
About Center Financial Corporation
Center Financial Corporation is the financial holding company of Center Bank, a community bank offering a full range of financial services for a diverse ethnic base of small business and individual customers. Founded in 1986 and specializing in commercial and SBA loans and trade finance products, Center Bank has grown to be one of the nation’s largest financial institutions focusing on the Korean-American community, with total assets of $1.34 billion at December 31, 2004. Headquartered in Los Angeles, Center Bank operates 24 branch and loan production offices across the nation, of which 15 full-service branches are located throughout Southern California and in Chicago, plus nine loan production offices in Phoenix, Seattle, Denver, Washington D.C., Las Vegas, Atlanta, Honolulu, Houston and Dallas. Center Bank is a California state-chartered and a member of FDIC. For additional information on Center Bank, visit the company’s Web site 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, 2003 (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; the company’s ability to successfully operate new loan production offices; 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)
12/31/04 | 12/31/03 | |||||||
Assets | ||||||||
Cash and due from banks | $ | 63,458 | $ | 76,926 | ||||
Federal funds sold | 39,578 | 41,635 | ||||||
Money market funds and interest-bearing deposits in other banks | — | 22,400 | ||||||
Securities available-for-sale | 157,027 | 110,126 | ||||||
Securities held-to-maturity | 11,396 | 15,390 | ||||||
Loans (net of unearned income) | 1,021,359 | 725,812 | ||||||
Allowance for loan losses | (11,227 | ) | (8,804 | ) | ||||
Net loans | 1,010,132 | 717,008 | ||||||
Fixed assets | 11,695 | 11,063 | ||||||
Bank-owned life insurance - cash surrender value | 10,430 | 10,034 | ||||||
Goodwill | 1,253 | — | ||||||
Other assets | 33,508 | 22,784 | ||||||
Total Assets | $ | 1,338,477 | $ | 1,027,366 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Deposits | ||||||||
Non-interest bearing deposits | $ | 347,195 | $ | 268,534 | ||||
Interest bearing deposits | 818,341 | 599,331 | ||||||
Total deposits | 1,165,536 | 867,865 | ||||||
Borrowed funds | 44,854 | 50,671 | ||||||
Long-term subordinated debenture | 18,557 | 18,557 | ||||||
Other liabilities | 18,810 | 12,012 | ||||||
Total Liabilities | 1,247,757 | 949,105 | ||||||
Shareholders’ Equity | 90,720 | 78,261 | ||||||
Total Liabilities & Shareholders’ Equity | $ | 1,338,477 | $ | 1,027,366 | ||||
Book value per share1 | $ | 5.57 | $ | 4.88 | ||||
Number of common shares outstanding at period end1 | 16,283,496 | 16,048,520 | ||||||
1 | Adjusted to reflect 2 for 1 stock split in 2004. |
CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(In thousands, except share and per share data)
Quarter Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Interest income | $ | 17,081 | $ | 11,900 | $ | 58,117 | $ | 43,658 | ||||||||
Interest expense | 4,561 | 2,899 | 15,381 | 11,643 | ||||||||||||
Net interest income before provision for loan losses | 12,520 | 9,001 | 42,736 | 32,015 | ||||||||||||
Provision for loan losses | 1,100 | 250 | 3,250 | 2,000 | ||||||||||||
Net interest income after provision for loan losses | 11,420 | 8,751 | 39,486 | 30,015 | ||||||||||||
Noninterest income | ||||||||||||||||
Customer service fees | 2,319 | 1,910 | 8,569 | 7,164 | ||||||||||||
Fee income from trade finance transactions | 925 | 723 | 3,596 | 2,689 | ||||||||||||
Wire transfer fees | 227 | 197 | 829 | 698 | ||||||||||||
Gain on sale of loans | 946 | 1,088 | 4,616 | 2,681 | ||||||||||||
Net (loss) gain on sale of securities available for sale | — | — | (15 | ) | 330 | |||||||||||
Loan service fees | 602 | 348 | 2,125 | 1,296 | ||||||||||||
Gain (loss) on interest rate swaps | (208 | ) | — | (208 | ) | — | ||||||||||
Other income | 420 | 489 | 1,566 | 1,694 | ||||||||||||
Total noninterest income | 5,231 | 4,755 | 21,078 | 16,552 | ||||||||||||
Noninterest expenses | ||||||||||||||||
Salaries and employee benefits | 4,517 | 3,691 | 16,361 | 13,458 | ||||||||||||
Occupancy | 634 | 518 | 2,477 | 1,998 | ||||||||||||
Furniture, fixtures, and equipment | 383 | 333 | 1,385 | 1,321 | ||||||||||||
Data processing | 389 | 335 | 2,038 | 1,613 | ||||||||||||
Professional service fees | 1,126 | 782 | 3,612 | 2,204 | ||||||||||||
Business promotion and advertising | 1,038 | 474 | 2,543 | 1,795 | ||||||||||||
Stationery and supplies | 170 | 136 | 550 | 586 | ||||||||||||
Telecommunications | 120 | 103 | 517 | 462 | ||||||||||||
Postage and courier service | 163 | 159 | 621 | 545 | ||||||||||||
Security service | 152 | 122 | 695 | 573 | ||||||||||||
Impairment loss of securities available for sale | 394 | 880 | 2,263 | 880 | ||||||||||||
Other operating expenses | 902 | 1,196 | 3,526 | 2,784 | ||||||||||||
Total noninterest expenses | 9,988 | 8,729 | 36,588 | 28,219 | ||||||||||||
INCOME BEFORE INCOME TAX PROVISION | 6,663 | 4,777 | 23,976 | 18,348 | ||||||||||||
INCOME TAX PROVISION | 2,298 | 1,733 | 8,962 | 6,696 | ||||||||||||
Net income | $ | 4,365 | $ | 3,044 | $ | 15,014 | $ | 11,652 | ||||||||
Other comprehensive (loss) income1 | $ | (669 | ) | $ | (1,031 | ) | $ | (376 | ) | $ | (1,544 | ) | ||||
Total comprehensive income | $ | 3,696 | $ | 2,013 | $ | 14,638 | $ | 10,108 | ||||||||
Earning per share, basic2 | $ | 0.27 | $ | 0.19 | $ | 0.93 | $ | 0.74 | ||||||||
Earning per share, diluted2 | $ | 0.26 | $ | 0.18 | $ | 0.91 | $ | 0.72 | ||||||||
Basic average common shares outstanding2 | 16,255,621 | 16,024,691 | 16,157,581 | 15,675,650 | ||||||||||||
Diluted average common shares outstanding2 | 16,768,425 | 16,469,663 | 16,525,865 | 16,184,253 |
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 2 for 1 stock split in 2004. |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited) (In thousands)
For the year ended December 31, | ||||||||
2004 | 2003 | |||||||
Average gross loans outstanding during period | $ | 878,819 | $ | 620,302 | ||||
Total loans outstanding at end of period1 | 1,021,359 | 725,812 | ||||||
Non-performing assets | ||||||||
Loans past due 90 days or more and still accruing interest | $ | — | $ | — | ||||
Non-accrual loans | 3,431 | 3,327 | ||||||
Total non-performing loans | 3,431 | 3,327 | ||||||
Other Real Estate Owned | — | — | ||||||
Total Non-performing assets | $ | 3,431 | $ | 3,327 | ||||
Allowance for Loan Losses | ||||||||
Balance as of January 1, | $ | (8,804 | ) | $ | (6,760 | ) | ||
Reserve for losses on commitments to extend credit2 | — | — | ||||||
Provision for loan losses | (3,250 | ) | (2,000 | ) | ||||
Net loan charge-offs and (recoveries) | 827 | (44 | ) | |||||
Balance as of December 31, | $ | (11,227 | ) | $ | (8,804 | ) | ||
Selected Ratios | Quarter Ended December 31, | Year Ended December 31, | ||||||||||
For the Period | 2004 | 2003 | 2004 | 2003 | ||||||||
Return on average assets | 1.38 | % | 1.26 | % | 1.29 | % | 1.32 | % | ||||
Return on average equity | 19.33 | 15.71 | 17.82 | 16.28 | ||||||||
Interest rate spread | 3.82 | 3.62 | 3.45 | 3.35 | ||||||||
Net interest margin | 4.45 | 4.17 | 4.03 | 3.96 | ||||||||
Yield on earning assets | 6.04 | 5.51 | 5.49 | 5.40 | ||||||||
Cost of interest-bearing deposits | 2.16 | 1.86 | 1.97 | 2.02 | ||||||||
Cost of deposits | 1.50 | 1.29 | 1.37 | 1.41 | ||||||||
Cost of funds | 2.22 | 1.89 | 2.04 | 2.05 | ||||||||
Noninterest expense/average assets | 0.79 | 0.91 | 3.13 | 3.49 | ||||||||
Efficiency ratio | 56.27 | 63.46 | 57.34 | 58.10 | ||||||||
Net charge-offs/(recoveries) to average loans | 0.02 | (0.08 | ) | 0.09 | (0.01 | ) |
Year Ended December 31, | ||||||
2004 | 2003 | |||||
Tier 1 risk-based capital ratio | 9.61 | % | 11.56 | % | ||
Total risk-based capital ratio | 10.63 | 12.67 | ||||
Tier 1 leverage ratio | 9.12 | 10.69 | ||||
Non-accrual loans to gross loans | 0.34 | 0.46 | ||||
Non-performing assets to total loans and OREO | 0.34 | 0.46 | ||||
Non-performing assets to total assets | 0.26 | 0.32 | ||||
Allowance for loan loss to gross loans | 1.10 | 1.21 | ||||
Allowance for loan losses to nonperforming assets | 327.22 | 264.62 |
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. |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA(Unaudited)(In thousands)
For the twelve months ended December 31, | |||||||||||
Loans | 2004 | 2003 | % chg | ||||||||
Real estate–construction | $ | 16,919 | $ | 18,464 | -8.4 | % | |||||
Real estate–commercial | 607,296 | 384,824 | 57.8 | % | |||||||
Commercial | 208,995 | 147,368 | 41.8 | % | |||||||
Consumer | 58,178 | 49,530 | 17.5 | % | |||||||
Trade finance | 83,763 | 61,886 | 35.4 | % | |||||||
SBA | 49,027 | 66,487 | -26.3 | % | |||||||
Other | 864 | 179 | 382.7 | % | |||||||
Total loans-gross | 1,025,042 | 728,738 | 40.7 | % | |||||||
Unearned income | (3,683 | ) | (2,926 | ) | 25.9 | % | |||||
Allowance for loan losses | (11,227 | ) | (8,804 | ) | 27.5 | % | |||||
Total loans–net | $ | 1,010,132 | $ | 717,008 | 40.9 | % | |||||
Deposits | |||||||||||
Non-interest bearing | $ | 347,195 | $ | 268,534 | 29.3 | % | |||||
Interest bearing checking | 210,842 | 156,928 | 34.4 | % | |||||||
Savings | 73,733 | 61,251 | 20.4 | % | |||||||
Time deposits | 533,765 | 381,152 | 40.0 | % | |||||||
Total deposits | $ | 1,165,535 | $ | 867,865 | 34.3 | % |
Average Balances | Quarter Ended December 31, | Year Ended December 31, | ||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||
Average assets | $ | 1,259,382 | $ | 955,984 | $ | 1,167,961 | $ | 885,734 | ||||
Average equity | 89,854 | 76,868 | 84,239 | 71,561 | ||||||||
Average net loans (including LFHS) | 963,906 | 681,593 | 868,915 | 612,779 | ||||||||
Average deposits (including non-interest bearing) | 1,123,198 | 854,839 | 1,033,570 | 788,475 | ||||||||
Average interest earning assets | 1,138,795 | 856,809 | 1,059,288 | 808,831 |