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News Release
Contacts: | Douglas G. Goddard | Angie Yang |
Interim CFO | SVP, Investor Relations | |
213-401-2311 | 213-251-2219 | |
douglasg@centerbank.com | angiey@centerbank.com |
CENTER FINANCIAL REPORTS $6.0 MILLION NET INCOME, $0.13 EPS
FOR 2010 THIRD QUARTER
-- Significant Reductions in NPAs and Improving Asset Quality Trends Highlight
Company’s Third Consecutive Quarter of Core Profitable Operations --
LOS ANGELES – October 27, 2010 – Center Financial Corporation (NASDAQ: CLFC), today reported financial results for its 2010 third quarter, posting net income of $6.0 million, equal to $0.13 per diluted common share. This compares with a net loss of $2.5 million, or $0.19 per common share, in the year-ago third quarter.
“We are pleased with the continued positive trends in our operations that collectively contributed to a strong 2010 third quarter, said Jae Whan (J.W.) Yoo, president and chief executive officer. “Asset quality metrics continued to improve, with reductions across the board in our watch list loans, nonperforming loans and early stage delinquencies. This resulted in a lower level of provisioning for loan losses this quarter compared to prior quarters. Importantly, our business development efforts have led to a strong ramp up in our loan pipeline, particularly in SBA lending. Notwithstanding the ongoing challenges in the economic environment, we are more optimistic in our ability to sustain profitability in the coming quarters and believe Center Bank is strongly positioned for the op portunities ahead.”
2010 THIRD QUARTER SUMMARY:
■ | Net income totaled $6.0 million, equal to $0.13 per diluted common share; |
■ | Income tax benefit of $846,000, reflecting a reduction of the valuation allowance against the company’s deferred tax asset; |
■ | Capital ratios further strengthened with total risk-based capital ratio of 19.32% and Tier 1 leverage capital ratio of 12.55% at September 30; |
■ | Non-covered nonperforming loans, excluding the SBA guarantee, declined by $24.1 million to $40.2 million at September 30; |
■ | Delinquent non-covered loans 30 to 89 days past due down slightly to $11.5 million; |
■ | Net charge-offs of $8.0 million, included a total of $1.5 million in recoveries during the quarter; |
■ | Non-covered loans of $1.47 billion were relatively stable at September 30; |
■ | Provision for loan losses equaled $4.0 million, and positive asset quality trends led to a modest reduction in the allowance for loan losses to 3.71% of gross non-covered loans at September 30; the ratio of the allowance to non-covered nonperforming loans increased to 126.1%; |
■ | Total deposits relatively stable at $1.80 billion, with noninterest bearing deposits representing 21.4% of total deposits; |
■ | Annualized average cost of deposits decreased 6 basis points to 1.13%; |
■ | Total assets declined by only $7.7 million to $2.27 billion; and |
■ | Net interest margin narrowed 22 basis points on a sequential basis to 3.31% for Q3 2010. |
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Center Financial Corporation | NASDAQ: CLFC |
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ASSET QUALITY
Non-covered nonperforming loans at September 30, 2010 declined to $43.2 million, reflecting a $24.3 million reduction from $67.5 million at June 30, 2010. Excluding the guaranteed portion of SBA loans, non-covered nonperforming loans equaled $40.2 million and $64.2 million, respectively, at September 30 and June 30, 2010. The company attributed the reduction in non-covered nonperforming loans to three main factors. First, a $1.5 million note sale was completed during the quarter. Second, one loan relationship with an outstanding balance of $6.6 million was upgraded to accrual status during the quarter. Third, two non-covered nonperforming lending relationships were transferred to loans held for sale at the lower of cost or fair market value as of September 30, 2010. 0;Subsequent to the close of the current third quarter, note sales were completed for these two relationships, which will result in a $12.8 million reduction in loans held for sale in the 2010 fourth quarter financial statements.
Total non-covered nonperforming assets at the end of the 2010 third quarter, including $4.5 million in other real estate owned (OREO), equaled $47.7 million. This compares with total non-covered nonperforming assets at June 30, 2010 of $70.3 million, including $2.8 million in OREO. Total non-covered nonperforming assets declined to 3.24% of gross non-covered loans and OREO at September 30, 2010, compared with 4.76% at June 30, 2010.
Delinquent non-covered loans 30 to 89 days past due declined marginally to $11.5 million at the close of the 2010 third quarter from $11.6 million at June 30, 2010. Performing troubled debt restructurings (TDRs) that are not accounted for in non-covered nonaccrual or delinquent loans equaled $23.9 million at September 30, 2010, compared with $17.7 million at June 30, 2010.
Loans acquired in the previously announced FDIC-assisted transaction are subject to a loss sharing agreement and are referred to as “covered loans.” Covered loans are reported separately in the consolidated statements of financial condition.
Net charge-offs during the 2010 third quarter equaled $8.0 million, compared with $7.6 million in the preceding second quarter. Total recoveries of $1.5 million and $2.9 million in the 2010 third and second quarters, respectively, exemplifies the company’s proactive actions to address the credit situation. As a percentage of average loans on an annualized basis, net charge-offs year-to-date equaled 1.79% of average loans.
Center Financial recorded a provision for loan losses of $4.0 million for the 2010 third quarter. The improved asset quality metrics resulted in a reduction in the allowance for loan losses to $54.5 million at September 30, 2010, representing 3.71% of gross non-covered loans. At June 30, 2010, the allowance for loan losses totaled $58.4 million, equal to 3.97% of gross non-covered loans.
LOANS & DEPOSITS
Non-covered loans were relatively stable at $1.47 billion at September 30, 2010 and June 30, 2010. Declining balances in the commercial real estate and commercial loans were largely offset by increased balances in trade finance, SBA and consumer loans. Covered loans at September 30, 2010 declined to $112.7 million from $122.4 million at June 30, 2010. Total loans at September 30, 2010 amounted to $1.58 billion.
Total deposits equaled $1.79 billion at September 30, 2010, down by only $7.7 million from $1.80 billion at June 30, 2010. Noninterest-bearing demand deposits accounted for 21.4% of total deposits at September 30, 2010 and 22.1% at June 30, 2010. The company’s loan-to-deposit ratio equaled 85.1% at September 30, 2010 and 85.4% at June 30, 2010.
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Center Financial Corporation | NASDAQ: CLFC |
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The average cost of interest-bearing deposits continued to decline, decreasing to 1.44% for the three months ended September 30, 2010 from 1.52% for the three months ended June 30, 2010. Total cost of deposits declined to 1.13% for the 2010 third quarter, compared with 1.19% for the 2010 second quarter.
BALANCE SHEET SUMMARY & CAPITAL
Total assets decreased to $2.27 billion at September 30, 2010 from $2.28 billion at June 30, 2010. Average interest-earning assets for the 2010 third quarter equaled $2.05 billion, compared with $1.98 billion for the 2010 second quarter.
Total shareholders’ equity at September 30, 2010 increased to $270.7 million from $265.2 million at June 30, 2010. Tangible common equity as a percentage of tangible assets, which is a non-GAAP financial measure, increased to 9.52% at September 30, 2010 from 9.25% at June 30, 2010. With its third consecutive profitable quarter, Center Financial’s capital position continued to strengthen. Total risk-based capital ratio increased to 19.32%, Tier 1 risk-based capital ratio advanced to 18.04% and Tier 1 leverage ratio expanded to 12.55%.
2010 THIRD QUARTER OPERATIONAL HIGHLIGHTS
Net interest income before provision for loan losses totaled $17.1 million for the 2010 third quarter, compared with $17.5 million for the 2010 second quarter and $14.8 million in the prior-year third quarter. The average yield on loans for the 2010 third quarter rose to 5.86% from 5.72% for the preceding second quarter, but was down when compared with 5.91% for the 2009 third quarter.
The company’s net interest margin (NIM) for the 2010 third quarter contracted 22 basis points to 3.31% from 3.53% in the immediately preceding second quarter, but was higher when compared with the 2009 third quarter NIM of 2.85%. The company noted that a final adjustment to interest income related to investment securities acquired in the Innovative Bank transaction was identified subsequent to filing its June 30, 2010 financial statements. This adjustment was recorded in the third quarter of 2010 and reduced investment income for the quarter ended September 30, 2010 by approximately $446,000, which adversely impacted the company’s yield on investment securities.
Noninterest income for the 2010 third quarter totaled $4.4 million, including a $257,000 gain on sale of loans. In the preceding second quarter, noninterest income totaled $11.1 million, including a $5.9 million bargain purchase gain and a gain on the sale of loans of $1.2 million. Noninterest income for the prior-year third quarter amounted to $3.3 million, for which there were no comparable gains.
Total noninterest expense for the 2010 third quarter rose less than 1% to $12.4 million from $12.3 million in the preceding second quarter primarily reflecting non-recurring expenses associated with the full systems integration and branch closure and improvements related to the FDIC-assisted transaction. Total noninterest expense for the prior-year third quarter was $11.7 million. The company’s efficiency ratio for the 2010 third quarter was 57.61%. This compares with 2010 second quarter efficiency ratio of 43.01%, which benefited from a $5.9 million bargain purchase gain, and an efficiency ratio of 64.53% for the 2009 third quarter.
For the 2010 third quarter, Center Financial posted net income of $6.0 million, or $0.13 per diluted common share, after a loan loss provision of $4.0 million and an income tax benefit of $846,000. The company said its income tax benefit for the quarter was due to a reduction in the deferred tax asset valuation allowance by approximately $2.0 million from the June 30, 2010 balance. Net income for the preceding quarter amounted to $7.5 million, or $0.17 per diluted common share, which included a loan loss provision of $5.0 million, an income tax provision of $3.8 million and a bargain purchase gain of $5.9 million. In the 2009 third quarter, the company incurred a net loss of $2.5 million, or $0.19 per common share, after a loan loss provision of $10.6 million and an income tax benefit of $1.6 million.
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Center Financial Corporation | NASDAQ: CLFC |
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For the 2010 third quarter, Center Financial posted a return on average assets (ROAA) of 1.04% and a return on average equity (ROAE) of 8.83%. This compares with an ROAA of 1.38% and an ROAE of 11.43% for the 2010 second quarter. For the year-ago third quarter, the company reported a loss on average assets equal to 0.45% and a loss on average equity of 5.01%.
Yoo concluded: “During the quarter, we completed the systems integration of the former Innovative Bank (IB) operations. The IB Fashion District branch was closed, and our customers were transferred to one of two Center Bank branches located within a mile’s distance. We are optimistic about our growth prospects in Northern California as we recently launched a new marketing campaign, following the completion of branch improvements. In October, we reopened our Denver loan production office to further expand our SBA business development activities. These efforts will be important components of our overall strategic objectives as we dedicate more of our attention to growing our earnings capacity and capitalizing on the opportunities in the current environment.”
Use of Non-GAAP Financial Measures
This news release includes “non-GAAP financial measures” within the meaning of the Securities and Exchange Commission rules. Tangible common equity per common share and tangible common equity to tangible assets are non-GAAP financial measures. Tangible common equity was calculated as total shareholders’ equity less preferred stock and related dividend and accretion of preferred stock discount and net intangible assets. Tangible common equity to tangible assets represents tangible common equity divided by total assets less net intangible assets. The calculation of tangible common equity may differ among companies in light of diversity in presentation in the marketplace. Management believes that these measures are useful when comparing banks with preferred stock due to TARP funding to banks without preferred stock on their balance sheet and for evaluating a company’s capital levels. This information is being provided in response to market participant interest in these financial metrics. 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 measure included in this news release are attached herein.
Investor Conference Call
The company will host an investor conference call on Thursday, October 28, 2010 at 9 a.m. PDT (12 noon EDT) to review financial results for its 2010 third quarter. The institutional investment community is invited to participate in the call by dialing 866-783-2145 (domestic) or 857-350-1604 (international) and entering passcode 60011737. Other interested parties are invited to listen to the live call through a listen-only audio Web broadcast via the Internet in the Investor Relations section of 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 telephonic replay of the call will be available through Thursday, August 5, 2010 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering replay passcode 24855323.
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 leading financial institutions focusing on the Korean-American community, with total assets of $2.27 billion at September 30, 2010. Headquartered in Los Angeles, Center Bank operates a total of 22 full-service branches and two loan production office. The company has 16 full-service branches located throughout Southern California and three branches in Northern California. Center Bank also operates two branches and one loan production office in the Seattle area, one branch i n Chicago and a loan production office in Denver. Center Bank is a California state-
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Center Financial Corporation | NASDAQ: CLFC |
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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. 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, as amended, for the fiscal year ended December 31, 2009 (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: the health of the national and California economies; competition in the financial services market for both deposits and loans; the ability of Center Financial and its subsidiaries to increase its customer base; customers’ service expectations; changes in interest rates; loan portfolio performance; the company’s ability to secure buyers for foreclosed properties; the successful integration and operations of the FDIC-assisted acquisition; the company’s ability to sustain profitable operations; the company’s ability to capitalize on strategic growth opportunities; and the company’s ability to enhance its earnings capacity. 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 e xpectations of results or any change in events.
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CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands)
9/30/10 | 12/31/09 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 33,491 | $ | 34,294 | ||||
Federal funds sold | 198,285 | 145,810 | ||||||
Interest-bearing deposits in other banks | 89,236 | 52,698 | ||||||
Cash and cash equivalents | 321,012 | 232,802 | ||||||
Securities available for sale, at fair value | 290,803 | 370,427 | ||||||
Non-covered loans held for sale, at the lower of cost or fair value | 50,723 | 23,318 | ||||||
Federal Home Loan Bank and Pacific Coast Bankers Bank stock, at cost | 15,642 | 15,673 | ||||||
Non-covered loans, net of allowance for loan losses of $54,460 as of September 30, 2010 and $58,543 as of December 31, 2009 | 1,361,051 | 1,455,824 | ||||||
Covered loans | 112,674 | - | ||||||
Premises and equipment, net | 13,698 | 13,368 | ||||||
FDIC loss share receivable | 23,652 | - | ||||||
Core deposit intangibles, net | 474 | - | ||||||
Customers’ liability on acceptances | 1,412 | 2,341 | ||||||
Non-covered other real estate owned | 4,548 | 4,278 | ||||||
Covered other real estate owned | 1,459 | - | ||||||
Accrued interest receivable | 5,487 | 6,879 | ||||||
Deferred income taxes, net | 10,095 | 11,551 | ||||||
Investments in affordable housing partnerships | 10,314 | 11,522 | ||||||
Cash surrender value of life insurance | 12,691 | 12,392 | ||||||
Income tax receivable | 16,354 | 16,140 | ||||||
Prepaid regulatory assessment fees | 8,808 | 11,483 | ||||||
Other assets | 6,542 | 4,802 | ||||||
Total | $ | 2,267,439 | $ | 2,192,800 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities | ||||||||
Deposits: | ||||||||
Noninterest-bearing | $ | 383,508 | $ | 352,395 | ||||
Interest-bearing | 1,408,773 | 1,395,276 | ||||||
Total deposits | 1,792,281 | 1,747,671 | ||||||
Acceptances outstanding | 1,412 | 2,341 | ||||||
Accrued interest payable | 5,558 | 5,803 | ||||||
Other borrowed funds | 168,538 | 148,443 | ||||||
Long-term subordinated debentures | 18,557 | 18,557 | ||||||
Accrued expenses and other liabilities | 10,403 | 13,927 | ||||||
Total liabilities | 1,996,749 | 1,936,742 | ||||||
Commitments and Contingencies | - | - | ||||||
Shareholders’ Equity | ||||||||
Preferred stock, no par value; 10,000,000 shares authorized; issued and outstanding, 55,000 shares and 128,500 shares as of September 30, 2010 and December 31, 2009, respectively | ||||||||
Series A, cumulative, issued and outstanding, 55,000 shares as of September 30, 2010 and December 31, 2009 | 53,347 | 53,171 | ||||||
Series B, non-cumulative, convertible, issued and outstanding, none and 73,500 shares as of September 30, 2010 and December 31, 2009, respectively | - | 70,000 | ||||||
Common stock, no par value; 100,000,000 and 40,000,000 shares authorized; issued and outstanding, 39,902,811 and 20,160,726 shares (including 65,784 shares and 10,050 of unvested restricted stock) as of September 30, 2010 and December 31, 2009, respectively | 187,621 | 88,060 | ||||||
Retained earnings | 26,300 | 41,314 | ||||||
Accumulated other comprehensive income, net of tax | 3,422 | 3,513 | ||||||
Total shareholders’ equity | 270,690 | 256,058 | ||||||
Total | $ | 2,267,439 | $ | 2,192,800 |
CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
9/30/10 | 6/30/10 | 9/30/09 | 9/30/10 | 9/30/09 | ||||||||||||||||
Interest and Dividend Income: | ||||||||||||||||||||
Interest and fees on loans | $ | 22,513 | $ | 21,388 | $ | 23,128 | $ | 64,529 | $ | 72,181 | ||||||||||
Interest on federal funds sold | 127 | 102 | 162 | 289 | 310 | |||||||||||||||
Interest on investment securities | 1,499 | 2,859 | 2,426 | 7,302 | 7,060 | |||||||||||||||
Total interest and dividend income | 24,139 | 24,349 | 25,716 | 72,120 | 79,551 | |||||||||||||||
Interest Expense: | ||||||||||||||||||||
Interest on deposits | 5,137 | 5,060 | 9,031 | 15,658 | 27,668 | |||||||||||||||
Interest on borrowed funds | 1,747 | 1,671 | 1,736 | 5,021 | 5,336 | |||||||||||||||
Interest expense on trust preferred securities | 155 | 143 | 156 | 438 | 529 | |||||||||||||||
Total interest expense | 7,039 | 6,874 | 10,923 | 21,117 | 33,533 | |||||||||||||||
Net interest income before provision for loan losses | 17,100 | 17,475 | 14,793 | 51,003 | 46,018 | |||||||||||||||
Provision for loan losses | 4,000 | 5,000 | 10,561 | 16,000 | 54,847 | |||||||||||||||
Net interest income (loss) after provision for loan losses | 13,100 | 12,475 | 4,232 | 35,003 | (8,829 | ) | ||||||||||||||
Noninterest Income: | ||||||||||||||||||||
Customer service fees | 2,043 | 2,086 | 2,008 | 6,161 | 6,004 | |||||||||||||||
Fee income from trade finance transactions | 684 | 720 | 543 | 2,062 | 1,679 | |||||||||||||||
Wire transfer fees | 321 | 331 | 275 | 933 | 820 | |||||||||||||||
Gain on business acquisition | - | 5,900 | - | 5,900 | - | |||||||||||||||
Gain on sale of loans | 257 | 1,203 | - | 1,460 | - | |||||||||||||||
Net gain (loss) on sale of securities available for sale | - | - | (7 | ) | 2,209 | (55 | ) | |||||||||||||
Loan service fees | 565 | 427 | 167 | 1,153 | 626 | |||||||||||||||
Other income | 539 | 391 | 356 | 1,279 | 1,480 | |||||||||||||||
Total noninterest income | 4,409 | 11,058 | 3,342 | 21,157 | 10,554 | |||||||||||||||
Noninterest Expense: | ||||||||||||||||||||
Salaries and employee benefits | 4,653 | 4,647 | 4,671 | 13,640 | 13,645 | |||||||||||||||
Occupancy | 1,388 | 1,437 | 1,214 | 4,020 | 3,644 | |||||||||||||||
Furniture, fixtures, and equipment | 756 | 640 | 713 | 1,903 | 1,757 | |||||||||||||||
Data processing | 832 | 654 | 591 | 1,950 | 1,708 | |||||||||||||||
Legal fees | 567 | 279 | 174 | 1,152 | 824 | |||||||||||||||
Accounting and other professional fees | 309 | 546 | 425 | 1,170 | 1,187 | |||||||||||||||
Business promotion and advertising | 376 | 415 | 289 | 1,048 | 971 | |||||||||||||||
Supplies and communications | 440 | 396 | 368 | 1,100 | 1,096 | |||||||||||||||
Security service | 320 | 285 | 269 | 840 | 775 | |||||||||||||||
Regulatory assessment | 1,073 | 1,037 | 642 | 3,096 | 2,876 | |||||||||||||||
Merger related expenses | - | 129 | - | 129 | - | |||||||||||||||
OREO related expenses | 170 | 400 | 1,152 | 1,529 | 1,305 | |||||||||||||||
Other operating expenses | 1,508 | 1,408 | 1,195 | 3,950 | 3,807 | |||||||||||||||
Total noninterest expense | 12,392 | 12,273 | 11,703 | 35,527 | 33,595 | |||||||||||||||
Income (loss) before income tax provision (benefit) | 5,117 | 11,260 | (4,129 | ) | 20,633 | (31,870 | ) | |||||||||||||
Income tax provision (benefit) | (846 | ) | 3,758 | (1,605 | ) | 4,400 | (13,834 | ) | ||||||||||||
Net income (loss) | 5,963 | 7,502 | (2,524 | ) | 16,233 | (18,036 | ) | |||||||||||||
Preferred stock dividends and accretion of preferred stock discount | (748 | ) | (746 | ) | (742 | ) | (31,246 | ) | (2,211 | ) | ||||||||||
Net income (loss) available to common shareholders | 5,215 | 6,756 | (3,266 | ) | (15,013 | ) | (20,247 | ) | ||||||||||||
Other comprehensive income (loss) | 144 | 1,013 | 1,365 | (91 | ) | 2,991 | ||||||||||||||
Comprehensive income (loss) | $ | 6,107 | $ | 8,515 | $ | (1,159 | ) | $ | 16,142 | $ | (15,045 | ) | ||||||||
Earnings (loss) per common share: | ||||||||||||||||||||
Basic | $ | 0.13 | $ | 0.17 | $ | (0.19 | ) | $ | (0.44 | ) | $ | (1.21 | ) | |||||||
Diluted | $ | 0.13 | $ | 0.17 | $ | (0.19 | ) | $ | (0.44 | ) | $ | (1.21 | ) | |||||||
Average common shares outstanding: | ||||||||||||||||||||
Basic | 39,902,114 | 39,895,181 | 16,788,950 | 33,762,755 | 16,787,986 | |||||||||||||||
Diluted | 39,912,160 | 39,908,346 | 16,788,950 | 33,762,755 | 16,787,986 |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
Three Months Ended | ||||||||||||||||||||||||
9/30/10 | 6/30/10 | 9/30/09 | ||||||||||||||||||||||
Average Balance | Annualized Average Rate/Yield | Average Balance | Annualized Average Rate/Yield | Average Balance | Annualized Average Rate/Yield | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans | $ | 1,523,012 | 5.86 | % | $ | 1,498,956 | 5.72 | % | $ | 1,553,814 | 5.91 | % | ||||||||||||
Federal funds sold | 228,116 | 0.22 | 185,860 | 0.22 | 254,853 | 0.25 | ||||||||||||||||||
Investments | 300,231 | 1.98 | 298,392 | 3.84 | 251,891 | 3.82 | ||||||||||||||||||
Total interest-earning assets | 2,051,359 | 4.67 | 1,983,208 | 4.92 | 2,060,558 | 4.95 | ||||||||||||||||||
Noninterest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 109,237 | 89,749 | 84,367 | |||||||||||||||||||||
Bank premises and equipment, net | 13,091 | 12,845 | 13,975 | |||||||||||||||||||||
Customers’ acceptances outstanding | 2,100 | 2,353 | 2,587 | |||||||||||||||||||||
Accrued interest receivables | 5,012 | 6,165 | 7,427 | |||||||||||||||||||||
Other assets | 102,399 | 84,064 | �� | 62,418 | ||||||||||||||||||||
Total noninterest-earning assets | 231,839 | 195,176 | 170,774 | |||||||||||||||||||||
Total assets | $ | 2,283,198 | $ | 2,178,384 | $ | 2,231,332 | ||||||||||||||||||
Liabilities and Shareholders’ Equity: | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Money market and NOW accounts | $ | 519,943 | 1.14 | % | $ | 475,608 | 1.15 | % | $ | 496,907 | 1.75 | % | ||||||||||||
Savings | 92,288 | 2.53 | 92,390 | 2.69 | 80,529 | 3.24 | ||||||||||||||||||
Time certificates of deposit over $100,000 | 505,758 | 1.38 | 499,851 | 1.46 | 597,068 | 2.64 | ||||||||||||||||||
Other time certificates of deposit | 301,881 | 1.70 | 265,746 | 1.91 | 341,459 | 2.56 | ||||||||||||||||||
1,419,870 | 1.44 | 1,333,595 | 1.52 | 1,515,963 | 2.36 | |||||||||||||||||||
Other borrowed funds | 169,844 | 4.08 | 167,541 | 4.00 | 159,775 | 4.31 | ||||||||||||||||||
Long-term subordinated debentures | 18,557 | 3.31 | 18,557 | 3.09 | 18,557 | 3.34 | ||||||||||||||||||
Total interest-bearing liabilities | 1,608,271 | 1.74 | 1,519,693 | 1.81 | 1,694,295 | 2.56 | ||||||||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Demand deposits | 379,286 | 379,059 | 322,370 | |||||||||||||||||||||
Total funding liabilities | 1,987,557 | 1.41 | % | 1,898,752 | 1.45 | % | 2,016,665 | 2.15 | % | |||||||||||||||
Other liabilities | 27,722 | 18,488 | 14,611 | |||||||||||||||||||||
Total noninterest-bearing liabilities | 407,008 | 397,547 | 336,981 | |||||||||||||||||||||
Shareholders’ equity | 267,919 | 261,144 | 200,056 | |||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,283,198 | $ | 2,178,384 | $ | 2,231,332 | ||||||||||||||||||
Net interest income | ||||||||||||||||||||||||
Cost of deposits | 1.13 | % | 1.19 | % | 1.95 | % | ||||||||||||||||||
Net interest spread | 2.93 | % | 3.11 | % | 2.39 | % | ||||||||||||||||||
Net interest margin | 3.31 | % | 3.53 | % | 2.85 | % |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
Nine Months Ended | ||||||||||||||||
9/30/10 | 9/30/09 | |||||||||||||||
Annualized | Annualized | |||||||||||||||
Average | Average | Average | Average | |||||||||||||
Balance | Rate/Yield | Balance | Rate/Yield | |||||||||||||
Assets: | ||||||||||||||||
Interest-earning assets: | ||||||||||||||||
Loans | $ | 1,539,882 | 5.60 | % | $ | 1,614,596 | 5.98 | % | ||||||||
Federal funds sold | 173,785 | 0.22 | 180,436 | 0.23 | ||||||||||||
Investments | 326,820 | 2.99 | 228,200 | 4.14 | ||||||||||||
Total interest-earning assets | 2,040,487 | 4.73 | 2,023,232 | 5.26 | ||||||||||||
Noninterest - earning assets: | ||||||||||||||||
Cash and due from banks | 97,395 | 59,980 | ||||||||||||||
Bank premises and equipment, net | 13,099 | 14,366 | ||||||||||||||
Customers’ acceptances outstanding | 2,283 | 3,166 | ||||||||||||||
Accrued interest receivables | 5,890 | 7,108 | ||||||||||||||
Other assets | 82,536 | 54,063 | ||||||||||||||
Total noninterest-earning assets | 201,203 | 138,683 | ||||||||||||||
Total assets | $ | 2,241,690 | $ | 2,161,915 | ||||||||||||
Liabilities and Shareholders’ Equity: | ||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||
Deposits: | ||||||||||||||||
Money market and NOW accounts | $ | 500,282 | 1.11 | % | $ | 480,777 | 1.94 | % | ||||||||
Savings | 93,068 | 2.61 | 65,254 | 3.40 | ||||||||||||
Time certificates of deposit over $100,000 | 511,853 | 1.55 | 663,781 | 2.40 | ||||||||||||
Other time certificates of deposit | 275,656 | 1.82 | 222,982 | 4.27 | ||||||||||||
1,380,859 | 1.52 | 1,432,794 | 2.58 | |||||||||||||
Other borrowed funds | 166,811 | 4.02 | 168,199 | 4.24 | ||||||||||||
Long-term subordinated debentures | 18,557 | 3.16 | 18,557 | 3.81 | ||||||||||||
Total interest-bearing liabilities | 1,566,227 | 1.80 | 1,619,550 | 2.77 | ||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||
Demand deposits | 370,831 | 311,058 | ||||||||||||||
Total funding liabilities | 1,937,058 | 1.46 | % | 1,930,608 | 2.32 | % | ||||||||||
Other liabilities | 42,879 | 18,757 | ||||||||||||||
Total noninterest-bearing liabilities | 413,710 | 329,815 | ||||||||||||||
Shareholders’ equity | 261,753 | 212,550 | ||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,241,690 | $ | 2,161,915 | ||||||||||||
Net interest income | ||||||||||||||||
Cost of deposits | 1.20 | % | 2.12 | % | ||||||||||||
Net interest spread | 2.92 | % | 2.49 | % | ||||||||||||
Net interest margin | 3.34 | % | 3.04 | % |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
As of the Dates Indicated | ||||||||||||||||||||
9/30/10 | 6/30/10 | 3/31/10 | 12/31/09 | 9/30/09 | ||||||||||||||||
Deposits | ||||||||||||||||||||
Demand deposits (noninterest-bearing) | $ | 383,508 | $ | 397,598 | $ | 360,520 | $ | 352,395 | $ | 332,541 | ||||||||||
Money market accounts and NOW | 497,362 | 505,217 | 445,999 | 528,331 | 503,006 | |||||||||||||||
Savings | 89,067 | 94,486 | 90,294 | 86,567 | 77,698 | |||||||||||||||
969,937 | 997,301 | 896,813 | 967,293 | 913,245 | ||||||||||||||||
Time deposits | ||||||||||||||||||||
Less than $100,000 | 302,745 | 303,582 | 227,909 | 256,020 | 322,141 | |||||||||||||||
$100,000 or more | 519,599 | 499,112 | 500,590 | 524,358 | 574,829 | |||||||||||||||
Total deposits | $ | 1,792,281 | $ | 1,799,995 | $ | 1,625,312 | $ | 1,747,671 | $ | 1,810,215 | ||||||||||
As a percentage of total deposits: | ||||||||||||||||||||
Demand deposits (noninterest-bearing) | 21.4 | % | 22.1 | % | 22.2 | % | 20.2 | % | 18.4 | % | ||||||||||
Money market accounts and NOW | 27.8 | % | 28.1 | % | 27.4 | % | 30.2 | % | 27.8 | % | ||||||||||
Savings | 5.0 | % | 5.2 | % | 5.6 | % | 5.0 | % | 4.2 | % | ||||||||||
54.1 | % | 55.4 | % | 55.2 | % | 55.4 | % | 50.4 | % | |||||||||||
Time deposits | ||||||||||||||||||||
Less than $100,000 | 16.9 | % | 16.9 | % | 14.0 | % | 14.6 | % | 17.8 | % | ||||||||||
$100,000 or more | 29.0 | % | 27.7 | % | 30.8 | % | 30.0 | % | 31.8 | % | ||||||||||
Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
As of the Dates Indicated | ||||||||||||||||||||
9/30/10 | 6/30/10 | 3/31/10 | 12/31/09 | 9/30/09 | ||||||||||||||||
Non-covered Loans | ||||||||||||||||||||
Real Estate: | ||||||||||||||||||||
Construction | $ | 14,987 | $ | 15,052 | $ | 16,620 | $ | 21,014 | $ | 21,800 | ||||||||||
Commercial | 918,882 | 937,792 | 985,479 | 1,007,794 | 1,095,858 | |||||||||||||||
Commercial | 279,450 | 296,195 | 299,738 | 295,289 | 290,675 | |||||||||||||||
Trade Finance | 65,666 | 53,342 | 43,370 | 39,290 | 43,602 | |||||||||||||||
SBA | 69,029 | 60,531 | 65,460 | 49,933 | 43,969 | |||||||||||||||
Consumer and other | 119,187 | 111,919 | 111,772 | 125,560 | 97,841 | |||||||||||||||
Non-covered Loans | 1,467,201 | 1,474,831 | 1,522,439 | 1,538,880 | 1,593,745 | |||||||||||||||
Less: | ||||||||||||||||||||
Allowance for loan losses | 54,460 | 58,435 | 61,011 | 58,543 | 63,978 | |||||||||||||||
Deferred loan fees | 31 | 188 | 290 | 331 | 483 | |||||||||||||||
Discount on SBA loans retained | 936 | 997 | 799 | 864 | 931 | |||||||||||||||
Net Non-covered Loans | $ | 1,411,774 | $ | 1,415,211 | $ | 1,460,339 | $ | 1,479,142 | $ | 1,528,353 | ||||||||||
As a percentage of non-covered loans: | ||||||||||||||||||||
Real Estate: | ||||||||||||||||||||
Construction | 1.0 | % | 1.0 | % | 1.1 | % | 1.4 | % | 1.4 | % | ||||||||||
Commercial | 62.6 | % | 63.6 | % | 64.7 | % | 65.5 | % | 68.8 | % | ||||||||||
Commercial | 19.0 | % | 20.1 | % | 19.7 | % | 19.2 | % | 18.2 | % | ||||||||||
Trade Finance | 4.5 | % | 3.6 | % | 2.8 | % | 2.6 | % | 2.7 | % | ||||||||||
SBA | 4.7 | % | 4.1 | % | 4.3 | % | 3.2 | % | 2.8 | % | ||||||||||
Consumer and other | 8.1 | % | 7.6 | % | 7.4 | % | 8.1 | % | 6.1 | % | ||||||||||
Non-covered Loans | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Covered Loans
9/30/10 | 6/30/10 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Real Estate: | ||||||||||||||||
Construction | $ | - | 0.0 | % | $ | - | 0.0 | % | ||||||||
Commercial | 73,043 | 64.8 | % | 76,280 | 62.3 | % | ||||||||||
Commercial | 9,698 | 8.6 | % | 12,388 | 10.1 | % | ||||||||||
Trade Finance | - | 0.0 | % | - | 0.0 | % | ||||||||||
SBA | 29,022 | 25.8 | % | 32,438 | 26.5 | % | ||||||||||
Consumer and other | 911 | 0.8 | % | 1,256 | 1.0 | % | ||||||||||
Covered Loans | $ | 112,674 | 100.0 | % | $ | 122,362 | 100.0 | % |
Total Loans
9/30/10 | 6/30/10 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Real Estate: | ||||||||||||||||
Construction | $ | 14,987 | 0.9 | % | $ | 15,052 | 0.9 | % | ||||||||
Commercial | 991,925 | 62.8 | % | 1,014,072 | 63.5 | % | ||||||||||
Commercial | 289,148 | 18.3 | % | 308,583 | 19.3 | % | ||||||||||
Trade Finance | 65,666 | 4.2 | % | 53,342 | 3.3 | % | ||||||||||
SBA | 98,051 | 6.2 | % | 92,969 | 5.8 | % | ||||||||||
Consumer and other | 120,098 | 7.6 | % | 113,175 | 7.1 | % | ||||||||||
Total Loans | $ | 1,579,875 | 100.0 | % | $ | 1,597,193 | 100.0 | % |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
9/30/10 | 6/30/10 | 12/31/09 | 9/30/09 | |||||||||||||
Non-covered nonperforming loans: | ||||||||||||||||
Construction Real Estate | $ | 4,029 | $ | 4,540 | $ | 8,441 | $ | 5,309 | ||||||||
Commercial Real Estate | 28,639 | 51,057 | 42,678 | 25,167 | ||||||||||||
Commercial | 7,631 | 7,445 | 8,290 | 8,236 | ||||||||||||
Consumer | 229 | 281 | 339 | 909 | ||||||||||||
Trade Finance | - | 1,196 | 1,498 | 1,196 | ||||||||||||
SBA | 2,653 | 2,972 | 2,207 | 2,185 | ||||||||||||
Total non-covered nonperforming loans | 43,181 | 67,491 | 63,453 | 43,002 | ||||||||||||
Other real estate owned | 4,548 | 2,778 | 4,278 | 4,813 | ||||||||||||
Non-covered nonperforming assets | 47,729 | 70,269 | 67,731 | 47,815 | ||||||||||||
Guaranteed portion of nonperforming loans | 3,022 | 3,250 | 2,816 | 3,134 | ||||||||||||
Total non-covered nonperforming assets, net of guarantees | $ | 44,707 | $ | 67,019 | $ | 64,915 | $ | 44,681 | ||||||||
Performing TDR’s not included above | $ | 23,898 | $ | 17,709 | $ | 4,414 | $ | 4,400 | ||||||||
Ratios: | ||||||||||||||||
Non-covered nonperforming loans to gross non-covered loans | 2.94 | % | 4.58 | % | 4.12 | % | 2.70 | % | ||||||||
Non-covered nonperforming assets to gross non-covered loans and other real estate owned | 3.24 | 4.76 | 4.39 | 2.99 | ||||||||||||
Delinquency: | ||||||||||||||||
Delinquent loans 30-89 days past due | $ | 11,521 | $ | 11,582 | $ | 13,439 | $ | 15,638 | ||||||||
Total nonperforming loans | 43,181 | 67,491 | 63,453 | 43,002 | ||||||||||||
Total delinquent non-covered loans | $ | 54,702 | $ | 79,073 | $ | 76,892 | $ | 58,640 | ||||||||
Covered nonperforming assets: | ||||||||||||||||
Covered nonperforming loans | $ | 10,890 | $ | 13,358 | $ | - | $ | - | ||||||||
Covered other real estate owned | 1,459 | 1,560 | - | - | ||||||||||||
Total covered nonperforming assets | $ | 12,349 | $ | 14,918 | $ | - | $ | - | ||||||||
Ratios: | ||||||||||||||||
Covered nonperforming loans to covered loans | 9.67 | % | 10.92 | % | - | % | - | % | ||||||||
Covered nonperforming assets to total assets | 0.54 | 0.66 | - | - | ||||||||||||
Total nonperforming assets: | ||||||||||||||||
Total nonperforming loans | $ | 54,071 | $ | 80,849 | $ | 63,453 | $ | 43,002 | ||||||||
Other real estate owned | 6,007 | 4,338 | 4,278 | 4,813 | ||||||||||||
Total nonperforming assets | $ | 60,078 | $ | 85,187 | $ | 67,731 | $ | 47,815 | ||||||||
Ratios: | ||||||||||||||||
Nonperforming loans to total gross loans | 3.42 | % | 5.06 | % | 4.12 | % | 2.70 | % | ||||||||
Nonperforming assets to total assets | 2.65 | 3.74 | 3.09 | 2.17 |
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(Dollars in thousands)
Nine Months Ended and as of 9/30/10 | Six Months Ended and as of 6/30/10 | Three Months Ended and as of 3/31/10 | Year Ended and as of 12/31/09 | Nine Months Ended and as of 9/30/09 | ||||||||||||||||
Balances | ||||||||||||||||||||
Average total non-covered loans outstanding during the period | $ | 1,498,908 | $ | 1,517,404 | $ | 1,534,369 | $ | 1,637,703 | $ | 1,661,384 | ||||||||||
Total non-covered loans outstanding at end of period | $ | 1,466,234 | $ | 1,473,646 | $ | 1,521,350 | $ | 1,537,685 | $ | 1,592,331 | ||||||||||
Allowance for Loan Losses: | ||||||||||||||||||||
Balance at beginning of period | $ | 58,543 | $ | 58,543 | $ | 58,543 | $ | 38,172 | $ | 38,172 | ||||||||||
Charge-offs: | ||||||||||||||||||||
Construction Real Estate | 419 | - | - | 6,844 | 5,078 | |||||||||||||||
Commercial Real Estate | 16,178 | 10,040 | 3,659 | 23,742 | 7,173 | |||||||||||||||
Commercial | 5,011 | 3,747 | 532 | 23,795 | 15,305 | |||||||||||||||
Consumer | 563 | 238 | 190 | 1,599 | 1,298 | |||||||||||||||
SBA | 1,008 | 872 | 331 | 941 | 786 | |||||||||||||||
Trade Finance | 1,448 | 251 | - | 911 | - | |||||||||||||||
Total charge-offs | 24,627 | 15,148 | 4,712 | 57,832 | 29,640 | |||||||||||||||
Recoveries | ||||||||||||||||||||
Construction Real Estate | 123 | - | - | - | - | |||||||||||||||
Commercial Real Estate | 1,357 | 105 | 43 | - | - | |||||||||||||||
Commercial | 2,817 | 2,789 | 53 | 269 | 253 | |||||||||||||||
Consumer | 96 | 66 | 44 | 394 | 299 | |||||||||||||||
SBA | 151 | 80 | 40 | 67 | 46 | |||||||||||||||
Trade Finance | - | - | - | 1 | 1 | |||||||||||||||
Total recoveries | 4,544 | 3,040 | 180 | 731 | 599 | |||||||||||||||
Net loan charge-offs | 20,083 | 12,108 | 4,532 | 57,101 | 29,041 | |||||||||||||||
Provision for loan losses | 16,000 | 12,000 | 7,000 | 77,472 | 54,847 | |||||||||||||||
Balance at end of period | $ | 54,460 | $ | 58,435 | $ | 61,011 | $ | 58,543 | $ | 63,978 | ||||||||||
Ratios: | ||||||||||||||||||||
Net loan charge-offs to average non-covered loans* | 1.79 | % | 1.61 | % | 1.20 | % | 3.49 | % | 2.33 | % | ||||||||||
Provision for loan losses to average total non-covered loans* | 1.43 | 1.59 | 1.85 | 4.73 | 4.40 | |||||||||||||||
Allowance for loan losses to gross non-covered loans at end of period | 3.71 | 3.97 | 4.01 | 3.81 | 4.01 | |||||||||||||||
Allowance for loan losses to non-covered nonperforming loans | 126.1 | 86.6 | 86.6 | 92.3 | 148.8 | |||||||||||||||
Net loan charge-offs to allowance for loan losses at end of period* | 49.30 | 41.78 | 30.13 | 97.54 | 60.52 | |||||||||||||||
Net loan charge-offs to provision for loan losses | 125.52 | 100.90 | 64.74 | 73.71 | 52.95 | |||||||||||||||
* Ratios are annualized for comparability purposes |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
9/30/10 | 6/30/10 | 3/31/10 | 9/30/09 | 9/30/10 | 9/30/09 | |||||||||||||||||||
Performance ratios: | ||||||||||||||||||||||||
Return (loss) on average assets | 1.04 | % | 1.38 | % | 0.53 | % | (0.45 | ) % | 0.97 | % | (1.12 | ) % | ||||||||||||
Return (loss) on average equity | 8.83 | 11.43 | 4.34 | (5.01 | ) | 8.29 | (11.35 | ) | ||||||||||||||||
Efficiency ratio | 57.61 | 43.01 | 49.12 | 64.53 | 49.23 | 59.38 | ||||||||||||||||||
Net loans to total deposits at period end | 85.06 | 85.38 | 89.85 | 84.43 | 85.06 | 84.43 | ||||||||||||||||||
Net loans to total assets at period end | 67.23 | 67.49 | 70.15 | 69.41 | 67.23 | 69.41 | ||||||||||||||||||
Capital ratios: | ||||||||||||||||||||||||
Leverage capital ratio | ||||||||||||||||||||||||
Consolidated Company | 12.55 | % | 12.38 | % | 12.82 | % | 9.45 | % | ||||||||||||||||
Center Bank | 12.31 | 12.09 | 12.46 | 9.03 | ||||||||||||||||||||
Tier 1 risk-based capital ratio | ||||||||||||||||||||||||
Consolidated Company | 18.04 | 17.19 | 16.94 | 12.14 | ||||||||||||||||||||
Center Bank | 17.68 | 16.77 | 16.45 | 11.58 | ||||||||||||||||||||
Total risk-based capital ratio | ||||||||||||||||||||||||
Consolidated Company | 19.32 | 18.47 | 18.23 | 13.42 | ||||||||||||||||||||
Center Bank | 18.96 | 18.05 | 17.73 | 12.86 |
CENTER FINANCIAL CORPORATION
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(Dollars in thousands, except per share data)
9/30/10 | 12/31/09 | |||||||
Total shareholders’ equity | $ | 270,690 | $ | 256,058 | ||||
Less: | ||||||||
Preferred stock | (53,347 | ) | (123,171 | ) | ||||
Common stock warrant | (1,026 | ) | (1,026 | ) | ||||
Intangible assets, net | (474 | ) | - | |||||
Tangible common equity | $ | 215,843 | $ | 131,861 | ||||
Total assets | $ | 2,267,439 | $ | 2,192,800 | ||||
Less : Intangible assets, net | (474 | ) | - | |||||
Tangible assets | $ | 2,266,965 | $ | 2,192,800 | ||||
Common shares outstanding | 39,902,811 | 20,160,726 | ||||||
Tangible common equity per common share | $ | 5.41 | $ | 6.54 | ||||
Tangible common equity to tangible assets | 9.52 | % | 6.01 | % |