EXHIBIT 99.1
News Release
Contacts: | Lonny Robinson | Angie Yang | ||
Chief Financial Officer | Investor Relations | |||
213.401.2311 | PondelWilkinson Inc. | |||
lonnyr@centerbank.com | 310.279.5967 | |||
ayang@pondel.com |
CENTER FINANCIAL REPORTS 2008 FOURTH QUARTER AND FULL YEAR
— Quarter’s Results Reflect Increased Loan Loss Provisioning and Additional OTTI Expenses —
— Company Posts Net Income of $7.0 Million for 2008 in Spite of $17.6 Million in Non-Core Expenses —
LOS ANGELES – January 29, 2009 – Center Financial Corporation (NASDAQ: CLFC), the holding company of Center Bank, today reported financial results for its fourth quarter and year ended December 31, 2008.
“2008 marked a year of significant achievements, as well as mounting challenges,” said Jae Whan (J.W.) Yoo, president and chief executive officer. “The strategic initiatives implemented earlier in the year, along with Center Financial’s participation in the U.S. Treasury’s Capital Purchase Program, fortified our foundation as we face what is now expected to be a more prolonged and deeper recessionary period. Notably, we completely resolved all potential liabilities under a major legal battle that weighed heavily on the organization for many years. Notwithstanding charges totaling $17.6 million during 2008 related to litigation settlement and other-than-temporary impairment expenses, Center Financial closed 2008 with net income of $7.0 million and well poised to report considerable reductions in our noninterest expense levels going forward.
“At the same time, we are of course disappointed to see signs of weakness in our asset quality late in the fourth quarter after having successfully maintained consistently healthy credit metrics throughout the subprime and financial crises to date, unlike many of our peers. We recognize, however, that the turbulent macroeconomic conditions will continue to adversely impact the overall credit markets for at least the near term and on a broader scale. Accordingly, we have initiated additional measures to even more closely, proactively and aggressively monitor our loan portfolio and believe that our stringent underwriting standards will sustain Center Bank’s positioning as one of the soundest financial institutions serving the Korean-American and ethnic communities,” Yoo said.
2008 Fourth Quarter and Full Year Summary:
• | Additional Other Than Temporary Impairment (OTTI) expense of $2.6 million in Q4, equal to $1.5 million net of tax, or $0.09 per share, reflecting the continued decline in the fair market valuation of the company’s bank collateralized pooled trust preferred security (CDO) |
• | 2008 OTTI charges total $9.9 million, effectively writing down the CDO to approximately 10% of the original value |
• | Settlement expense of $7.7 million in 2008, equal to $4.4 million net of tax, or $0.27 per share, associated with the complete resolution of the consolidated Korea Export Insurance Corporation (KEIC) litigation |
• | Q4 other expenses includes $100,000 related to the settlement of the First Intercontinental Bank dispute |
• | Nonperforming assets increased to 1.19% of total loans and OREO at year-end 2008 |
• | Net charge-offs of $3.2 million in Q4, totaling $8.5 million for 2008 |
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• | Q4 2008 provision increased to $8.5 million, raising the allowance for loan losses to gross loans to 1.56% at December 31, 2008 |
• | Net loans strategically reduced to $1.69 billion from $1.79 billion at December 31, 2007 |
• | Non-interest bearing deposits total $310.2 million, equal to 19% of total deposits as of December 31, 2008 |
• | Total deposits of $1.60 billion as of December 31, 2008 |
• | Issued preferred stock and common stock warrants as a participant in the U.S. Treasury’s Capital Purchase Program, received $55 million of new capital |
• | Total risk-based capital ratio, including the TARP funds, increased to 14.13% at December 31, 2008 |
• | Tangible common equity to total assets increased to 8.10% |
• | Net interest margin for Q4 compressed 25 basis points to 3.77% from Q3 2008 |
• | Q4 2008 noninterest expense, excluding OTTI charges, declined 11% from Q3 2008 and down 19%, compared with Q4 2007 |
• | Q4 2008 net income totaling $667,000, equal to $0.03 per diluted share; excluding OTTI charge, Q4 2008 net income totaled $2.2 million, equal to $0.12 per diluted share |
• | 2008 net income of $7.0 million, equal to $0.41 per diluted share; excluding KEIC settlement and OTTI charges, 2008 net income totaled $17.2 million, equal to $1.04 per diluted shares |
• | Q4 return on average assets of 0.13%, or 0.43% excluding OTTI charge |
• | Q4 return on average equity of 1.47%, or 4.82% excluding OTTI charge |
• | Maintained quarterly cash dividend at $0.05 per share |
BALANCE SHEET & CAPITAL
Total assets at December 31, 2008 equaled $2.06 billion, compared with $2.08 billion at year-end 2007, generally reflecting the successful completion of the company’s strategic plan to de-leverage its balance sheet in light of the current credit and interest rate environment. Average interest-earning assets for 2008 totaled $1.96 billion, compared with $1.80 billion for 2007.
Total shareholders’ equity at December 31, 2008 rose 41% to $221.4 million from $157.5 million at December 31, 2007 due largely to the $55.0 million of new capital received from the U.S. Treasury through the Capital Purchase Program. The company’s tangible book value at December 31, 2008 increased to $9.94 per share from $9.53 per share at year-end 2007 and tangible common equity to total assets rose to 8.10% from 7.49% at December 31, 2007. Center Financial remains strongly capitalized, exceeding all regulatory guidelines. At the end of 2008, the company’s Tier 1 risk-based capital ratio was 12.88%, total risk-based capital ratio equaled 14.13%, and a Tier 1 leverage ratio was 11.62%.
LOAN PORTFOLIO & ASSET QUALITY
Gross loans totaled $1.72 billion at December 31, 2008, down from $1.76 billion at September 30, 2008 and $1.81 billion at year-end 2007. Earlier in 2008, Center Financial announced its intent to strategically sell certain loans to the wholesale market in an effort to manage its commercial real estate and fixed-rate loan concentrations. As of December 31, 2008, the company’s total loan portfolio was comprised of 66% in commercial real estate loans, 4% of real estate construction loans, 25% in commercial and industrial loans, including commercial, trade finance and SBA loans, and 5% of consumer loans. Net loans as a percentage of total assets declined to 81.99% at December 31, 2008, versus 85.19% at September 30, 2008, and 86.01% at December 31, 2007.
Principally reflecting an increasingly challenging credit environment in the 2008 fourth quarter, nonperforming assets at December 31, 2008 increased to $20.5 million, or $18.3 million net of the SBA guarantee, from $8.4 million, or $5.9 million net of the SBA guarantee, at September 30, 2008. The increase was primarily attributed to two commercial real estate loans, one of which was originally a real estate construction loan that the company did the permanent financing. At the end of 2007, nonperforming assets
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equaled $6.6 million, or $3.9 million net of the SBA guarantee. As a percentage of total gross loans and other real estate owned, nonperforming loans at December 31, 2008 rose significantly to 1.19% from 0.48% at September 30, 2008 and 0.37% at December 31, 2007.
“While we are disappointed to see the deterioration in asset quality late in the year, based on a new appraisal received for one of the properties and a recent purchase offering price on the other, we believe we are well collateralized for each to avoid any significant losses,” Yoo said. “We anticipate the recession will take its toll on the credit environment and expect to see elevated levels of credit deterioration at least through the first half of 2009.”
During the 2008 fourth quarter, Center Financial charged off $3.2 million, increasing the year-to-date net charge-offs to $8.5 million. This compares with 2007 net charge-offs of $3.4 million. As a percentage of average loans, net charge-offs equaled 0.47% for 2008, versus 0.21% for 2007.
In light of the increased amount of nonperforming assets and the continuing challenges in the credit environment, Center Financial provided $8.5 million to its allowance for loan losses in the 2008 fourth quarter, exceeding the charge-offs in the quarter by $4.9 million. This compares with a $2.1 million provision in the immediately preceding third quarter and in the year-ago fourth quarter. The total allowance for loan losses as of December 31, 2008 equaled $26.8 million and represented 1.56% of gross loans. At December 31, 2007, allowance for loan losses totaled $20.5 million, or 1.13% of gross loans.
DEPOSITS
Total deposits of $1.60 billion at December 31, 2008 declined moderately from $1.62 at September 30, 2008. Total deposits at year-end 2007 equaled $1.58 billion. Non-interest bearing deposits at the end of 2008 equaled $310.2 million, or 19% of total deposits. This compares with $367.2 million at September 30, 2008, representing 23% of total deposits. At December 31, 2008, money market deposits totaled $447.3 million, or 28% of the company’s total deposits, versus $425.2 million, or 26% of total deposits, at the end of the preceding third quarter. Time deposits at December 31, 2008 accounted for 50% of total deposits and totaled $793.4 million, compared with 48%, or $772.4 million, at September 30, 2008. The company continued to improve its loan-to-deposit ratio, which equaled 105.4% at December 31, 2008, versus 107.1% at September 30, 2008 and 113.4% at December 31, 2007.
The company’s average cost of interest-bearing deposits improved as a result of reductions in the Fed Funds rate during 2008 and management’s continued efforts to minimize deposit costs. The average cost of interest-bearing deposits for the three months ended December 31, 2008 was 3.05%, reflecting a 30 basis point reduction from 3.35% for the 2008 third quarter and a decline of 173 basis points from 4.78% for the fourth quarter of 2007.
2008 FOURTH QUARTER OPERATIONAL HIGHLIGHTS
For the three months ended December 31, 2008, net interest income before provision for loan losses totaled $18.1 million, compared with $19.8 million in the immediately preceding 2008 third quarter and $19.1 million in the fourth quarter of 2007. The company’s yield on interest-earning assets averaged 6.22% for the 2008 fourth quarter, down 47 basis points from the immediately preceding 2008 third quarter, principally due to reductions in the Fed Funds rate during the 2008 fourth quarter totaling the 175 basis points. Compared with the year-ago fourth quarter, the company’s yield on interest-earning assets declined 144 basis points, primarily reflecting a total of 400 basis point reduction in the Fed Funds rate during 2008.
The company’s net interest margin for three months ended December 31, 2008 was pressured by the 175 basis point reduction in the Fed Funds rate during the fourth quarter and declined 25 basis points to 3.77% from 4.02% in the immediately preceding third quarter. In the 2007 fourth quarter, the company’s net interest margin equaled 3.95%.
Noninterest income totaled $3.6 million in the 2008 fourth quarter, up moderately from $3.4 million in the preceding third quarter and $3.3 million in the 2007 fourth quarter.
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Noninterest expense for the 2008 fourth quarter totaled $12.8 million, including a $2.6 million non-cash charge related to Other Than Temporary Impairment (OTTI) expense recognizing the additional decline in the fair market valuation of its bank collateralized pooled trust preferred security. Excluding the OTTI expense, the company’s core noninterest expense for the 2008 fourth quarter narrowed to $10.2 million from comparable core noninterest expense of $12.0 million in the preceding third quarter and $12.6 million in the 2007 fourth quarter.
Yoo attributed the reduction in noninterest expenses to two primary factors. First, the company’s right-sizing of the organization throughout the year in anticipation of a slow down in business activities resulted in a sizable reduction in salary and employee benefit expenses for the 2008 fourth quarter versus the year-ago period. The 2008 fourth quarter compensation expense also benefited from a reversal of previously accrued discretionary employee incentive bonus. Second, the company’s resolution of both the KEIC litigation and the First Intercontinental Bank dispute during 2008 eliminated the requisite professional legal fees to defend the company’s position.
For the 2008 fourth quarter, the efficiency ratio equaled 58.88%, or non-GAAP 46.84% excluding the impact of the OTTI expense. This compares with the non-GAAP efficiency ratio for the preceding 2008 third quarter of 51.80%.
Center Financial’s net income was $667,000, or $0.03 per diluted share, for the 2008 fourth quarter, including an income tax benefit of $245,000 and distributions of $155,000 to preferred shareholder. Non-GAAP net income, excluding the OTTI expense, equaled $2.2 million, or $0.12 per diluted share, for the 2008 fourth quarter, compared with $5.5 million, or $0.34 per diluted share, for the immediately preceding third quarter. In the 2007 fourth quarter, net income totaled $3.9 million, or $0.23 per diluted share.
Including the adverse impact of the OTTI expense, the company’s return on average assets (ROAA) and return on average equity (ROAE) for the fourth quarter of 2008 equaled 0.13% and 1.47%, respectively. Excluding the OTTI impact, non-GAAP ROAA and ROAE amounted to 0.43% and 4.82%, respectively, for the 2008 fourth quarter.
Use of Non-GAAP Financial Measures
This news release includes “non-GAAP financial measures” within the meaning of the Securities and Exchange Commission rules. Center Financial believes that meaningful analysis of its financial performance requires an understanding of the factors underlying that performance and management’s judgments about the likelihood that particular factors will repeat. Short-term patterns and long-term trends may be obscured by the impact of certain items in the company’s 2008 financial results. For this reason, the company has disclosed certain core operating results for the 2008 fourth quarter and full year, including noninterest expense, net income, earnings per share, efficiency ratio, return on average assets and return on average equity, adjusted to exclude the impact of the KEIC settlement and OTTI impairment expenses. The company has provided this information because such adjustments make performance information more comparable to prior disclosures for investors, and may enhance the ability of investors to analyze the company’s performance. This information is not intended to be considered in isolation or as a substitute for the relevant measures calculated in accordance with U.S. GAAP. The reconciliations of these non-GAAP financial measures to GAAP financial measures included in this news release are attached herein.
Investor Conference Call
The company will host an investor conference call at 9:00 a.m. PST (12:00 noon EST) on Thursday, January 29, 2009 to review the financial results for its 2008 fourth quarter ended December 31, 2008. The call will be open to all interested investors through a live, listen-only audio Web broadcast via the Internet at www.centerbank.com. Listeners are encouraged to visit the Web site at least 15 minutes prior to the start of the scheduled presentation to register, download and install any necessary audio software. For those who are not available to listen to the live broadcast, the audio broadcast will be archived for one year. A telephone replay of the call will be available through 11:59 p.m. PST, Thursday, February 5, 2009 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering passcode 31997901.
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About Center Financial Corporation
Center Financial Corporation is the holding company of Center Bank, a community bank offering a full range of financial services for diverse ethnic and small business 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 soundest financial institutions focusing on the Korean-American community, with total assets of $2.06 billion at December 31, 2008. Headquartered in Los Angeles, Center Bank operates a total of 19 full-service branches and one loan production office. The company has 16 full-service branches located throughout Southern California. Center Bank also operates two branches and one loan production office in the Seattle area, along with one branch in Chicago. Center Bank is a California state-chartered institution and its deposits are insured by the FDIC to the extent provided by law. For additional information on Center Bank, visit the company’s Web site at www.centerbank.com.
This release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding the next phase of growth for Center Financial and Center Bank, integration risks associated with the First Intercontinental Bank acquisitions, satisfaction of various closing conditions and receipt of all regulatory approvals. The forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and 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. Factors that might cause such differences include, but are not limited to, those identified in our cautionary statements contained in Center Financial Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (See Business, and Management’s Discussion and Analysis), and other filings with the Securities and Exchange Commission (SEC) are incorporated herein by reference. These factors include, but are not limited to: competition in the financial services market for both deposits and loans; the ability of Center Financial and its subsidiaries to increase its customer base; changes in interest rates; new litigation or changes or adverse developments in existing litigation; and regional and general economic conditions. 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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CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Unaudited)
(Dollars in thousands)
12/31/2008 | 12/31/2007 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 45,129 | $ | 58,339 | ||||
Federal funds sold | 50,435 | 7,125 | ||||||
Money market funds and interest-bearing deposits in other banks | 2,647 | 2,825 | ||||||
Cash and cash equivalents | 98,211 | 68,289 | ||||||
Securities available for sale, at fair value | 173,833 | 128,778 | ||||||
Securities held to maturity, at amortized cost (fair value of $8,879 as of December 31, 2008 and $10,961 as of December 31, 2007) | 8,861 | 10,932 | ||||||
Federal Home Loan Bank and Pacific Coast Bankers Bank stock, at cost | 15,673 | 15,219 | ||||||
Loans, net of allowance for loan losses of $26,820 as of December 31, 2008 and $20,477 as of December 31, 2007 | 1,680,828 | 1,748,143 | ||||||
Loans held for sale, at the lower of cost or fair value | 9,864 | 41,492 | ||||||
Premises and equipment, net | 14,739 | 13,585 | ||||||
Customers’ liability on acceptances | 4,503 | 3,292 | ||||||
Other real estate owned, net | — | 380 | ||||||
Accrued interest receivable | 7,477 | 8,886 | ||||||
Deferred income taxes, net | 15,700 | 13,142 | ||||||
Investments in affordable housing partnerships | 11,587 | 11,911 | ||||||
Cash surrender value of life insurance | 11,992 | 11,583 | ||||||
Goodwill | 1,253 | 1,253 | ||||||
Intangible assets, net | 213 | 267 | ||||||
Other assets | 7,314 | 3,511 | ||||||
Total Assets | $ | 2,062,048 | $ | 2,080,663 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities | ||||||||
Deposits: | ||||||||
Noninterest-bearing | $ | 310,154 | $ | 363,465 | ||||
Interest-bearing | 1,293,365 | 1,214,209 | ||||||
Total deposits | 1,603,519 | 1,577,674 | ||||||
Acceptances outstanding | 4,503 | 3,292 | ||||||
Accrued interest payable | 7,268 | 13,213 | ||||||
Other borrowed funds | 193,021 | 299,606 | ||||||
Long-term subordinated debentures | 18,557 | 18,557 | ||||||
Accrued expenses and other liabilities | 13,823 | 10,868 | ||||||
Total liabilities | 1,840,691 | 1,923,210 | ||||||
Commitments and contingencies | — | — | ||||||
Shareholders’ equity | ||||||||
Preferred stock, par value of $1,000 per share; authorized 10,000,000 shares; issued and outstanding, 55,000 shares and none as of | ||||||||
December 31, 2008 and 2007, respectively | 52,959 | — | ||||||
Common stock, no par value; authorized 40,000,000 shares; issued and outstanding, 16,789,080 shares and 16,366,791 shares (including 10,400 shares and 8,850 shares of unvested restricted stock) as of December 31, 2008 and December 31, 2007, respectively | 74,254 | 67,006 | ||||||
Retained earnings | 92,636 | 90,541 | ||||||
Accumulated other comprehensive income (loss), net of tax | 1,508 | (94 | ) | |||||
Total shareholders’ equity | 221,357 | 157,453 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 2,062,048 | $ | 2,080,663 | ||||
Tangible book value per common share | $ | 9.94 | $ | 9.53 | ||||
Tangible common equity to total assets1 | 8.10 | % | 7.49 | % |
1 | Tangible common equity represents total shareholders’ equity less preferred stock, goodwill and intangible assets |
CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended | Twelve Months Ended | ||||||||||||||||
12/31/08 | 9/30/08 | 12/31/07 | 2008 | 2007 | |||||||||||||
Interest and Dividend Income: | |||||||||||||||||
Interest and fees on loans | $ | 27,714 | $ | 30,574 | $ | 35,038 | $ | 123,267 | $ | 135,290 | |||||||
Interest on federal funds sold | 15 | 24 | 75 | 105 | 255 | ||||||||||||
Interest on investment securities | 2,169 | 2,314 | 1,987 | 8,678 | 7,696 | ||||||||||||
Total interest and dividend income | 29,898 | 32,912 | 37,100 | 132,050 | 143,241 | ||||||||||||
Interest Expense: | |||||||||||||||||
Interest on deposits | 9,266 | 10,666 | 14,421 | 46,126 | 54,195 | ||||||||||||
Interest expense on long-term subordinated debentures | 344 | 259 | 373 | 1,187 | 1,493 | ||||||||||||
Interest on borrowed funds | 2,165 | 2,225 | 3,178 | 9,294 | 11,298 | ||||||||||||
Total interest expense | 11,775 | 13,150 | 17,972 | 56,607 | 66,986 | ||||||||||||
Net interest income before provision for loan losses | 18,123 | 19,762 | 19,128 | 75,443 | 76,255 | ||||||||||||
Provision for loan losses | 8,495 | 2,121 | 2,125 | 14,825 | 6,494 | ||||||||||||
Net interest income after provision for loan losses | 9,628 | 17,641 | 17,003 | 60,618 | 69,761 | ||||||||||||
Noninterest Income: | |||||||||||||||||
Customer service fees | 2,014 | 1,918 | 1,725 | 7,658 | 6,940 | ||||||||||||
Fee income from trade finance transactions | 572 | 675 | 574 | 2,520 | 2,621 | ||||||||||||
Wire transfer fees | 332 | 269 | 256 | 1,153 | 899 | ||||||||||||
Gain on sale of loans | (2 | ) | 59 | — | 1,017 | 618 | |||||||||||
Loan service fees | 69 | 144 | 322 | 514 | 1,720 | ||||||||||||
Other income | 579 | 321 | 457 | 1,671 | 2,065 | ||||||||||||
Total noninterest income | 3,564 | 3,386 | 3,334 | 14,533 | 14,863 | ||||||||||||
Noninterest Expense: | |||||||||||||||||
Salaries and employee benefits | 4,545 | 6,137 | 6,432 | 23,726 | 25,650 | ||||||||||||
Occupancy | 1,206 | 1,115 | 1,154 | 4,480 | 4,176 | ||||||||||||
Furniture, fixtures, and equipment | 565 | 546 | 533 | 2,103 | 2,072 | ||||||||||||
Data processing | 543 | 527 | 495 | 2,169 | 2,062 | ||||||||||||
Legal fees | 73 | 529 | 472 | 2,203 | 1,493 | ||||||||||||
Accounting and other professional service | 321 | 323 | 301 | 1,362 | 1,730 | ||||||||||||
Business promotion and advertising | 477 | 469 | 841 | 1,900 | 2,390 | ||||||||||||
Stationery and supplies | 131 | 140 | 144 | 560 | 553 | ||||||||||||
Telecommunications | 220 | 188 | 195 | 757 | 637 | ||||||||||||
Postage and courier service | 205 | 192 | 173 | 789 | 738 | ||||||||||||
Security service | 280 | 283 | 251 | 1,131 | 1,031 | ||||||||||||
Impairment loss on securities available for sale | 2,611 | 7,279 | 1,328 | 9,889 | 1,328 | ||||||||||||
Regulatory assessment | 312 | 312 | 288 | 1,265 | 765 | ||||||||||||
Other operating expenses | 1,281 | 8,929 | 1,314 | 12,891 | 4,410 | ||||||||||||
Total noninterest expense | 12,770 | 26,969 | 13,921 | 65,225 | 49,035 | ||||||||||||
Income (loss) before income tax provision | 422 | (5,942 | ) | 6,416 | 9,926 | 35,589 | |||||||||||
Income tax (benefit) provision | (245 | ) | (2,783 | ) | 2,510 | 2,916 | 13,646 | ||||||||||
Net income (loss) | 667 | (3,159 | ) | 3,906 | 7,010 | 21,943 | |||||||||||
Other comprehensive income - unrealized gain on available-for-sale securities, net of income tax expense | 1,464 | 1,484 | 141 | 1,602 | 644 | ||||||||||||
Comprehensive income (loss) | $ | 2,131 | $ | (1,675 | ) | $ | 4,047 | $ | 8,612 | $ | 22,587 | ||||||
Earnings (loss) per share: | |||||||||||||||||
Basic | $ | 0.03 | $ | (0.19 | ) | $ | 0.23 | $ | 0.41 | $ | 1.32 | ||||||
Diluted | $ | 0.03 | $ | (0.19 | ) | $ | 0.23 | $ | 0.41 | $ | 1.31 | ||||||
Weighted average shares outstanding - basic | 16,788,000 | 16,577,000 | 16,680,000 | 16,526,000 | 16,649,000 | ||||||||||||
Weighted average shares outstanding - diluted | 16,815,000 | 16,577,000 | 16,725,000 | 16,560,000 | 16,732,000 | ||||||||||||
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
Three Months Ended | ||||||||||||||||||
12/31/08 | 9/30/08 | 12/31/07 | ||||||||||||||||
Average Balance | Rate/ Yield | Average Balance | Rate/ Yield | Average Balance | Rate/ Yield | |||||||||||||
Assets: | ||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||
Loans | $ | 1,712,834 | 6.44 | % | $ | 1,766,415 | 6.89 | % | $ | 1,756,464 | 7.91 | % | ||||||
Federal funds sold | 10,664 | 0.56 | 4,387 | 2.18 | 5,781 | 5.15 | ||||||||||||
Investments | 188,268 | 4.58 | 185,109 | 4.97 | 157,999 | 4.98 | ||||||||||||
Total interest-earning assets | 1,911,766 | 6.22 | 1,955,911 | 6.69 | 1,920,244 | 7.66 | ||||||||||||
Noninterest - earning assets: | ||||||||||||||||||
Cash and due from banks | 45,105 | 49,557 | 68,245 | |||||||||||||||
Bank premises and equipment, net | 14,814 | 14,703 | 13,598 | |||||||||||||||
Customers’ acceptances outstanding | 4,081 | 3,750 | 3,004 | |||||||||||||||
Accrued interest receivables | 7,365 | 7,547 | 8,003 | |||||||||||||||
Other assets | 43,344 | 42,872 | 35,674 | |||||||||||||||
Total noninterest-earning assets | 114,709 | 118,429 | 128,524 | |||||||||||||||
Total assets | $ | 2,026,475 | $ | 2,074,340 | $ | 2,048,768 | ||||||||||||
Liabilities and Shareholders’ Equity: | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||
Deposits: | ||||||||||||||||||
Money market and NOW accounts | $ | 402,482 | 2.52 | % | $ | 393,830 | 2.88 | % | $ | 262,331 | 4.00 | % | ||||||
Savings | 51,731 | 3.48 | 54,424 | 3.52 | 56,755 | 3.17 | ||||||||||||
Time certificates of deposit over $100,000 | 615,768 | 3.25 | 688,610 | 3.63 | 772,459 | 5.16 | ||||||||||||
Other time certificates of deposit | 137,787 | 3.58 | 128,155 | 3.26 | 105,525 | 4.79 | ||||||||||||
1,207,768 | 3.05 | 1,265,019 | 3.35 | 1,197,070 | 4.78 | |||||||||||||
Other borrowed funds | 266,839 | 3.23 | 244,059 | 3.63 | 273,914 | 4.60 | ||||||||||||
Long-term subordinated debentures | 18,557 | 7.37 | 18,557 | 5.55 | 18,557 | 7.97 | ||||||||||||
Total interest-bearing liabilities | 1,493,164 | 3.14 | 1,527,635 | 3.42 | 1,489,541 | 4.79 | ||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||
Demand deposits | 329,467 | 357,145 | 374,589 | |||||||||||||||
Total funding liabilities | 1,822,631 | 2.57 | % | 1,884,780 | 2.78 | % | 1,864,130 | 3.82 | % | |||||||||
Other liabilities | 23,810 | 23,973 | 24,085 | |||||||||||||||
Total noninterest-bearing liabilities | 353,277 | 381,118 | 398,674 | |||||||||||||||
Shareholders’ equity | 180,034 | 165,587 | 160,553 | |||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,026,475 | $ | 2,074,340 | $ | 2,048,768 | ||||||||||||
Cost of deposits | 2.40 | % | 2.62 | % | 3.64 | % | ||||||||||||
Net interest spread | 3.08 | % | 3.27 | % | 2.88 | % | ||||||||||||
Net interest margin | 3.77 | % | 4.02 | % | 3.95 | % | ||||||||||||
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
Twelve Months Ended December 31, | ||||||||||||
2008 | 2007 | |||||||||||
Average Balance | Rate/ Yield | Average Balance | Rate/ Yield | |||||||||
Assets: | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans | $ | 1,779,420 | 6.93 | % | $ | 1,640,425 | 8.25 | % | ||||
Federal funds sold | 6,144 | 1.71 | 4,609 | 5.53 | ||||||||
Investments | 179,066 | 4.85 | 159,364 | 4.83 | ||||||||
Total interest-earning assets | 1,964,630 | 6.72 | 1,804,398 | 7.94 | ||||||||
Noninterest - earning assets: | ||||||||||||
Cash and due from banks | 52,851 | 67,373 | ||||||||||
Bank premises and equipment, net | 14,509 | 13,534 | ||||||||||
Customers’ acceptances outstanding | 4,156 | 3,580 | ||||||||||
Accrued interest receivables | 7,651 | 7,955 | ||||||||||
Other assets | 40,675 | 33,394 | ||||||||||
Total noninterest-earning assets | 119,842 | 125,836 | ||||||||||
Total assets | $ | 2,084,472 | $ | 1,930,234 | ||||||||
Liabilities and Shareholders’ Equity: | ||||||||||||
Interest-bearing liabilities: | ||||||||||||
Deposits: | ||||||||||||
Money market and NOW accounts | $ | 363,356 | 2.94 | % | $ | 233,984 | 3.93 | % | ||||
Savings | 53,601 | 3.42 | 64,906 | 3.35 | ||||||||
Time certificates of deposit over $100,000 | 724,384 | 3.98 | 731,034 | 5.22 | ||||||||
Other time certificates of deposit | 124,741 | 3.86 | 99,624 | 4.71 | ||||||||
1,266,082 | 3.64 | 1,129,548 | 4.80 | |||||||||
Other borrowed funds | 258,151 | 3.60 | 224,860 | 5.02 | ||||||||
Long-term subordinated debentures | 18,557 | 6.40 | 18,557 | 8.05 | ||||||||
Total interest-bearing liabilities | 1,542,790 | 3.67 | 1,372,965 | 4.88 | ||||||||
Noninterest-bearing liabilities: | ||||||||||||
Demand deposits | 349,902 | 382,071 | ||||||||||
Total funding liabilities | 1,892,692 | 2.99 | % | 1,718,272 | 3.82 | % | ||||||
Other liabilities | 24,020 | 22,080 | ||||||||||
Total noninterest-bearing liabilities | 373,922 | 404,151 | ||||||||||
Shareholders’ equity | 167,760 | 153,118 | ||||||||||
Total liabilities and shareholders’ equity | $ | 2,084,472 | $ | 1,930,234 | ||||||||
Cost of deposits | 2.85 | % | 3.59 | % | ||||||||
Net interest spread | 3.05 | % | 3.06 | % | ||||||||
Net interest margin | 3.84 | % | 4.23 | % | ||||||||
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
As of the Dates Indicated | ||||||||||||||||||||
12/31/08 | 9/30/08 | 6/30/08 | 3/31/08 | 12/31/07 | ||||||||||||||||
Real Estate: | ||||||||||||||||||||
Construction | $ | 61,983 | $ | 62,296 | $ | 62,072 | $ | 76,243 | $ | 68,143 | ||||||||||
Commercial | 1,134,793 | 1,157,286 | 1,191,097 | 1,222,385 | 1,197,104 | |||||||||||||||
Commercial | 334,350 | 336,929 | 352,220 | 332,950 | 310,962 | |||||||||||||||
Trade Finance | 63,479 | 70,395 | 81,399 | 83,418 | 66,964 | |||||||||||||||
SBA | 37,027 | 38,069 | 39,310 | 61,583 | 70,517 | |||||||||||||||
Consumer and other | 88,423 | 93,053 | 92,157 | 96,717 | 98,969 | |||||||||||||||
Total Gross Loans | 1,720,055 | 1,758,028 | 1,818,255 | 1,873,296 | 1,812,659 | |||||||||||||||
Less: | ||||||||||||||||||||
Allowance for Loan Losses | 26,820 | 21,485 | 21,499 | 21,685 | 20,477 | |||||||||||||||
Deferred Loan Fees | 1,359 | 1,488 | 1,688 | 1,561 | 1,847 | |||||||||||||||
Discount on SBA Loans Retained | 1,184 | 1,284 | 1,296 | 880 | 700 | |||||||||||||||
Total Net Loans and Loans Held for Sale | $ | 1,690,692 | $ | 1,733,771 | $ | 1,793,772 | $ | 1,849,170 | $ | 1,789,635 | ||||||||||
As a percentage of total gross loans: | ||||||||||||||||||||
Real estate: | ||||||||||||||||||||
Construction | 3.6 | % | 3.5 | % | 3.4 | % | 4.1 | % | 3.8 | % | ||||||||||
Commercial | 66.0 | 65.8 | 65.5 | 65.3 | 66.0 | |||||||||||||||
Commercial | 19.4 | 19.2 | 19.4 | 17.8 | 17.2 | |||||||||||||||
Trade finance | 3.7 | 4.0 | 4.5 | 4.5 | 3.7 | |||||||||||||||
SBA | 2.2 | 2.2 | 2.2 | 3.3 | 3.9 | |||||||||||||||
Consumer and other | 5.1 | 5.3 | 5.0 | 5.0 | 5.4 | |||||||||||||||
Total gross loans | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
As of the Dates Indicated | ||||||||||||||||||||
12/31/08 | 9/30/08 | 6/30/08 | 3/31/08 | 12/31/07 | ||||||||||||||||
Demand deposits (noninterest-bearing) | $ | 310,154 | $ | 367,171 | $ | 378,835 | $ | 357,422 | $ | 363,465 | ||||||||||
Money market accounts and NOW | 447,275 | 425,156 | 375,606 | 337,678 | 244,233 | |||||||||||||||
Savings | 52,692 | 54,520 | 55,281 | 55,265 | 54,838 | |||||||||||||||
810,121 | 846,847 | 809,722 | 750,365 | 662,536 | ||||||||||||||||
Time deposits | ||||||||||||||||||||
Less than $100,000 | 143,221 | 132,074 | 117,068 | 117,550 | 112,614 | |||||||||||||||
$100,000 or more | 650,177 | 640,355 | 731,900 | 810,026 | 802,524 | |||||||||||||||
Total | $ | 1,603,519 | $ | 1,619,276 | $ | 1,658,690 | $ | 1,677,941 | $ | 1,577,674 | ||||||||||
As a percentage of total deposits: | ||||||||||||||||||||
Demand deposits (noninterest-bearing) | 19.3 | % | 22.7 | % | 22.8 | % | 21.3 | % | 23.0 | % | ||||||||||
Money market accounts and NOW | 27.9 | 26.3 | 22.6 | 20.1 | 15.5 | |||||||||||||||
Savings | 3.3 | 3.4 | 3.3 | 3.3 | 3.5 | |||||||||||||||
50.5 | 52.4 | 48.7 | 44.7 | 42.0 | ||||||||||||||||
Time deposits | ||||||||||||||||||||
Less than $100,000 | 8.9 | 8.2 | 7.1 | 7.0 | 7.1 | |||||||||||||||
$100,000 or more | 40.6 | 39.4 | 44.2 | 48.3 | 50.9 | |||||||||||||||
Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
December 31, 2008 | September 30, 2008 | December 31, 2007 | ||||||||||
Nonperforming loans: | ||||||||||||
Construction Real Estate | $ | 1,951 | $ | 2,152 | $ | — | ||||||
Commercial Real Estate | 13,128 | — | — | |||||||||
Commercial | 2,272 | 1,557 | 1,775 | |||||||||
Consumer | 369 | 307 | 457 | |||||||||
Trade Finance | 1,196 | 2,301 | — | |||||||||
SBA | 1,538 | 2,061 | 4,033 | |||||||||
Total nonperforming loans | 20,454 | 8,378 | 6,265 | |||||||||
Other real estate owned | — | — | 380 | |||||||||
Total nonperforming assets | 20,454 | 8,378 | 6,645 | |||||||||
Guaranteed portion of nonperforming loans with SBA guarantee | 2,110 | 2,485 | 2,740 | |||||||||
Total nonperforming assets, net of SBA guarantee | $ | 18,344 | $ | 5,893 | $ | 3,905 | ||||||
Nonperforming loans as a percent of total gross loans | 1.19 | % | 0.48 | % | 0.35 | % | ||||||
Nonperforming assets as a percent of total loans and other real estate owned | 1.19 | % | 0.48 | % | 0.37 | % | ||||||
Year Ended December 31, 2008 | Nine Months Ended September 30, 2008 | Year Ended December 31, 2007 | ||||||||||
Balances | ||||||||||||
Average total loans outstanding during the period | $ | 1,800,972 | $ | 1,821,449 | $ | 1,656,842 | ||||||
Total loans outstanding at end of period(1) | $ | 1,717,511 | $ | 1,755,137 | $ | 1,810,112 | ||||||
Allowance for Loan Losses: | ||||||||||||
Balance at beginning of period | $ | 20,477 | $ | 20,477 | $ | 17,412 | ||||||
Charge-offs: | ||||||||||||
Construction Real Estate | 402 | 201 | — | |||||||||
Commercial Real Estate | 319 | 319 | — | |||||||||
Commercial | 4,403 | 3,347 | 2,725 | |||||||||
Consumer | 2,039 | 617 | 218 | |||||||||
SBA | 581 | 424 | 609 | |||||||||
Trade Finance | 1,144 | 725 | — | |||||||||
Total charge-offs | 8,888 | 5,633 | 3,552 | |||||||||
Recoveries | ||||||||||||
Commercial | 128 | 109 | 34 | |||||||||
Consumer | 131 | 78 | 72 | |||||||||
SBA | 135 | 114 | 17 | |||||||||
Trade Finance | 12 | 10 | — | |||||||||
Total recoveries | 406 | 311 | 123 | |||||||||
Net loan charge-offs | 8,482 | 5,322 | 3,429 | |||||||||
Provision for loan losses | 14,825 | 6,330 | 6,494 | |||||||||
Balance at end of period | $ | 26,820 | $ | 21,485 | $ | 20,477 | ||||||
Ratios: | ||||||||||||
Net loan charge-offs to average loans | 0.47 | % | 0.29 | % | 0.21 | % | ||||||
Provision for loan losses to average total loans | 0.82 | 0.35 | 0.39 | |||||||||
Allowance for loan losses to gross loans at end of period | 1.56 | 1.22 | 1.13 | |||||||||
Allowance for loan losses to total nonperforming loans | 131 | 256 | 327 | |||||||||
Net loan charge-offs to allowance for loan losses at end of period | 31.63 | 24.77 | 16.75 | |||||||||
Net loan charge-offs to provision for loan losses | 57.21 | 84.08 | 52.80 |
(1) | Net of deferred loan fees and discount on SBA loans sold |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA(Unaudited)
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
12/31/08 | 9/30/08 | 6/30/08 | 3/31/08 | 12/31/07 | 12/31/08 | 12/31/07 | |||||||||||||||
Performance ratios: | |||||||||||||||||||||
Return on average assets | 0.13 | % | (0.61 | )% | 1.00 | % | 0.79 | % | 0.81 | % | 0.34 | % | 1.14 | % | |||||||
Return on average equity | 1.47 | 7.59 | 12.97 | 10.47 | 10.03 | 4.18 | 14.33 | ||||||||||||||
Efficiency ratio | 58.88 | 116.51 | 53.49 | 59.52 | 61.80 | 72.49 | 53.80 | ||||||||||||||
Net loans to total deposits at period end | 105.44 | 107.07 | 108.10 | 110.2 | 113.44 | 105.44 | 113.44 | ||||||||||||||
Net loans to total assets at period end | 81.99 | 85.19 | 84.37 | 85.81 | 86.01 | 81.99 | 86.01 | ||||||||||||||
As of the Dates Indicated | |||||||||||||||||||||
12/31/08 | 9/30/08 | 6/30/08 | 3/31/08 | 12/31/07 | |||||||||||||||||
Capital ratios: | |||||||||||||||||||||
Leverage capital ratio | |||||||||||||||||||||
Consolidated Company | 11.62 | % | 8.71 | % | 8.51 | % | 8.35 | % | 8.49 | % | |||||||||||
Center Bank | 10.98 | 8.73 | 8.46 | 8.23 | 8.28 | ||||||||||||||||
Tier 1 risk-based capital ratio | |||||||||||||||||||||
Consolidated Company | 12.88 | 9.84 | 9.49 | 9.11 | 9.31 | ||||||||||||||||
Center Bank | 12.16 | 9.86 | 9.43 | 8.98 | 9.08 | ||||||||||||||||
Total risk-based capital ratio | |||||||||||||||||||||
Consolidated Company | 14.13 | 11.03 | 10.63 | 10.25 | 10.42 | ||||||||||||||||
Center Bank | 13.41 | 11.04 | 10.57 | 10.11 | 10.19 |
CENTER FINANCIAL CORPORATION
RECONCILIATION OF NON-U.S. GAAP MEASURES TO U.S. GAAP
(Unaudited, in thousands)
The following table sets forth the reconciliation of non-U.S. GAAP financial information included in the company’s 2008 fourth quarter financial results news release, adjusted for the effects of the KEIC settlement expense and OTTI impairment expense:
For the Three Months Ended December 31, 2008 | ||||||||||||
GAAP As Reported | Less OTTI Effect | Non-GAAP As Adjusted | ||||||||||
Noninterest expense | $ | (12,770 | ) | $ | 2,611 | $ | (10,159 | ) | ||||
Net income | $ | 667 | $ | 1,514 | $ | 2,181 | ||||||
Earnings per share | ||||||||||||
Basic | $ | 0.03 | $ | 0.09 | $ | 0.12 | ||||||
Diluted | $ | 0.03 | $ | 0.09 | $ | 0.12 | ||||||
Weighted average shares outstanding – basic and diluted | 16,815,000 | — | 16,815,000 | |||||||||
Efficiency ratio | 58.88 | % | (12.04 | )% | 46.84 | % | ||||||
Return on average assets | 0.13 | % | 0.30 | % | 0.43 | % | ||||||
Return on average equity | 1.47 | % | 3.35 | % | 4.82 | % |
For the Year Ended December 31, 2008 | ||||||||||||||||
GAAP As Reported | Less KEIC Effect | Less OTTI Effect | Non-GAAP As Adjusted | |||||||||||||
Noninterest expense | $ | (65,225 | ) | $ | 7,700 | $ | 9,889 | $ | (47,636 | ) | ||||||
Net income | $ | 7,010 | $ | 4,466 | $ | 5,736 | $ | 17,212 | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.41 | $ | 0.27 | $ | 0.35 | $ | 1.04 | ||||||||
Diluted | $ | 0.41 | $ | 0.27 | $ | 0.35 | $ | 1.04 | ||||||||
Weighted average shares outstanding – basic and diluted | 16,560,000 | 157,000 | — | 16,403,000 | ||||||||||||
Efficiency ratio | 72.49 | % | (8.56 | )% | (10.99 | )% | 52.94 | |||||||||
% | ||||||||||||||||
Return on average assets | 0.34 | % | 0.21 | % | 0.28 | % | 0.83 | |||||||||
% | ||||||||||||||||
Return on average equity | 4.18 | % | 2.66 | % | 3.42 | % | 10.26 | |||||||||
% |