Pacific Commerce Bancorp Reports Second Quarter 2017 Results

LOS ANGELES--()--Pacific Commerce Bancorp (PCBC) (the “Company”), parent company of Pacific Commerce Bank (the “Bank”), reported net income of $2,808,000, or $0.30 per diluted share for, the six months ended June 30, 2017. Earnings for the second quarter equaled $1,410,000, or $0.15 per diluted share.

“We are pleased to report another solid quarter of financial performance in every category of measurement. Earnings, core deposits, asset quality and loan production are all on target with our budget and we presently are confident that the rest of the year will continue to be as successful.”

FINANCIAL HIGHLIGHTS

  • The return on average assets (ROAA) for the six months and the quarter equaled 1.07% and 1.05%, respectively.
  • The return on average equity (ROAE) for the six months and the quarter equaled 9.37% and 9.23%, respectively.
  • The efficiency ratio for the six months and the quarter were 62.4% and 62.4%, respectively.
  • Tangible book value per share increased to $5.82.

For the first six months of 2017, the Company’s earnings increased 219%, to $2,808,000, or $0.30 per diluted share, compared to $879,000, or $0.12 per diluted share, for the first half of 2016. Adjusted for nonrecurring merger related expenses, core earnings for the first half of 2016 totaled $1,511,000, or $0.24 per diluted share.

For the quarter ended June 30, 2017, the Company earned $1,410,000, or $0.15 per diluted share, compared to $1,398,000, or $0.15 per diluted share, in the first quarter of 2017. The Company earned $324,000, or $0.04 per diluted share for the three months ended June 30, 2016 after nonrecurring charges of $940,000 related to the ProAmérica Bank acquisition.

Chief Executive Officer Frank Mercardante said, “We are pleased to report another solid quarter of financial performance in every category of measurement. Earnings, core deposits, asset quality and loan production are all on target with our budget and we presently are confident that the rest of the year will continue to be as successful.”

INCOME STATEMENT

For the six months ended June 30, 2016 net interest income totaled $11,215,000 compared to $8,081,000 for the first six months of 2016. Average total earning assets in the current period equaled $503.7 million at a yield of 4.78%, compared to average earning assets totaling $379.9 million at a yield of 4.59% for the first half of 2016.

Net interest income totaled $5,562,000 in the second quarter of 2017, compared to $5,653,000 in the first quarter of 2017. Net interest income in the second quarter of 2016 equaled $4,382,000. Net interest income was positively impacted by purchase accounting accretion in each of the periods totaling $91,000 in the second quarter of 2017, $137,000 in the first quarter of 2017 and $114,000 in the 2016 second quarter.

The net interest margin, exclusive of the impact of purchase accounting accretion equaled 4.30%, in the second quarter of 2017 compared to 4.50% in the first quarter of 2017 and 4.17% in the second quarter of 2016. The yield on average interest bearing assets, exclusive of the impact of purchase accounting accretion equaled 4.60%, in the second quarter of 2017 compared to 4.48% in the second quarter of 2016 and 4.78% in the first quarter of 2017. Total loans at the end of the quarter were $407.8 million compared to $424.7 million as of March 31, 2017.

Mr. Mercardante further commented, “New loan fundings exceeded $60 million during the first half of the year, exactly on plan. However, we made the conscious decision to exit several client and Shared National Credit relationships during the quarter reducing loans by more than $14 million in the aggregate. Our pipeline remains strong and currently we expect to replenish those loans in the coming quarters.”

The cost of interest bearing deposits for the current quarter, exclusive of purchase accounting accretion, equaled 51 basis points, compared with 47 basis points in the second quarter of 2016 and 48 basis points in the first quarter of 2017. The purchase accounting accretion benefit for the current quarter equaled 6 basis points, compared to 1 basis point in the second quarter of 2016 and 6 basis points in the first quarter of 2017.

The Company had average borrowings of $6 million in the second quarter of 2017 with an average cost of 5.75%. This compares to average borrowings of $4 million in the second quarter of 2016 with an average cost of 5.11% and average borrowings of $6 million in the first quarter of 2017 with an average cost of 5.56%. These borrowings were used to augment capital at the Company’s banking subsidiary, Pacific Commerce Bank.

Non-interest income in the second quarter of 2017 equaled $833,000, compared with $1,019,000 in the second quarter of 2016 and $687,000 in the first quarter of 2017. Non-interest expenses totaled $3,988,000 in the second quarter of 2017, compared to $3,705,000 in the second quarter of 2016 and $3,957,000 in the first quarter of 2017. The efficiency ratio for the current period was 62.4%, compared to 62.4% in the first quarter of 2017 and 68.5% in the second quarter of 2016, exclusive of merger related charges.

The ROAA for the second quarter of 2017 was 1.05%, compared with 0.45% and 1.08% in the second quarter of 2016 and first quarter of 2017. The ROAE for the second quarter of 2017 equaled 9.23%, compared with 4.00% in the second quarter of 2016 and 9.50% in the first quarter of 2017, respectively.

CREDIT QUALITY

Credit quality remained unchanged in the most recent quarter and the current reserve for future losses was deemed adequate. Excluding $159.4 million in loans carried under purchase accounting rules which are held at a discount of 1.34% as of June 30, 2017, the allowance for loan and lease losses to total loans held for investment equaled 1.41% of loans outstanding. Total loans held for sale equaled $8.6 million at the end of the second quarter.

BALANCE SHEET

Total average assets and average interest-earning assets were $537.1 million and $510.5 million respectively at June 30, 2017. This compares with $445.4 million and $422.1 million respectively, at June 30, 2016, and $524.5 million and $497.0 million, respectively at March 31, 2017.

Average interest bearing liabilities as of June 30, 2017 totaled $245.4 million, compared with $240.1 million at June 30, 2016 and $252.6 million at March 31, 2017. Total non-maturity deposits increased to $365.5 million as of June 30, 2017, compared to $323.3 million at June 30, 2016 and $367.6 million at March 31, 2017. Total deposits were $457.3 million as of June 30, 2017, compared to $448.3 million at June 30, 2016 and $467.6 million at March 31, 2017.

REGULATORY CAPITAL

Shareholders’ equity at the Company as of June 30, 2017 equaled $61.9 million, compared to $55.6 million at June 30, 2016 and $60.3 million at March 31, 2017. Both the Company and Bank remained “Well-Capitalized” by regulatory definition at June 30, 2017 with capital ratios as follows:

  Minimum    

Required

Company

Bank

Tier 1 Leverage Ratio: 4.00% 9.71% 10.68%
Common Equity Tier 1 Capital Ratio: 4.50% 11.84% 13.02%
Tier 1 Capital Ratio: 6.00% 11.84% 13.02%
Total Capital Ratio: 8.00% 12.65% 13.84%

About Pacific Commerce Bancorp

Pacific Commerce Bancorp is the parent company for Pacific Commerce Bank. Pacific Commerce Bank operates six full-service branches in Los Angeles and San Diego Counties, including its wholly owned division, ProAmérica Bank in Downtown Los Angeles. The Bank provides a complete array of deposit, treasury, cash management and loan banking solutions to small businesses, professionals and high net worth individuals from Los Angeles to the Mexico border. As a Preferred SBA Lender the Bank provides a full complement of lending solutions to small businesses throughout Southern California. Pacific Commerce Bancorp’s common stock is publically traded on the Over the Counter Market under the ticker symbol “PCBC”. For more information please visit our website at www.pacificcommercebank.com.

Forward-Looking Information

The financial information in this press release is based on unaudited financial results. Certain statements in this press release are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Such forward-looking statements are subject to risks and uncertainties and therefore the Company's actual results may differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that the Company is subject to include, but are not limited to, risks related to the local and national economy, including fluctuations in interest rates and costs and changes in economic policy; the ability of the Company to perform in accordance with its plans; competition; regulatory matters; demand for loan products; deposit flows; its ability to develop and implement new technologies; and other factors. The Company cautions readers not to place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims any obligation, to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Pacific Commerce Bancorp
Consolidated Selected Financial Data – Unaudited
(Amounts are in thousands, except for book value per share and shares outstanding data)
 
BALANCE SHEET
  June 30,   June 30,   March 31,   December 31,

2017

2016

2017

2016

Assets
Cash and due from banks $8,005 $9,738 $25,235 $25,664
Interest Bearing Deposits with Other Banks 11,524 29,160 60,848 64,380
Federal Funds Sold 77,009 34,440 2,740 3,000
Investment securities - 186 22 74
Mortgage Warehouse Loans Held for Sale - 13,373 - 1,696
Other Loans Held for Sale 8,655 9,734 11,587 9,596
Loans, net of unearned income 399,152 433,546 413,154 412,102
Less: Allowance for loan losses (3,459 )   (3,182 )   (3,455 )   (3,436 )
Net Loans 404,348 453,471 421,286 419,958
Other assets 26,050     27,159     25,429     26,484  
Total Assets $526,936     $554,154     $535,560     $539,560  
 
Liabilities and Shareholders' Equity
Demand deposits $225,781 $177,633 $223,657 $204,984
Non-maturity interest bearing deposits 139,750 145,650 143,935 143,815
Time Deposits 91,764     125,044     99,988     109,302  
Total Deposits 457,295 448,327 467,580 458,101
Borrowings 5,956 48,939 5,952 20,906
Accrued interest and other liabilities 1,811     1,336     1,742     1,925  
Total Liabilities 465,062 498,602 475,274 480,932
 
Shareholders' Equity
Common stock 57,422 56,718 57,244 56,984
Retained Earnings (Deficit) 4,452 (1,168 ) 3,042 1,644
Other Comprehensive Income -     2     -     -  
Total Shareholders' Equity 61,874     55,552     60,286     58,628  
Total Liabilities & Shareholders' Equity $526,936     $554,154     $535,560     $539,560  
 
Book value per share at end of period $6.92 $6.24 $6.75 $6.58
Tangible Book Value per share at end of period

$5.82

$5.04 $5.64 $5.46
Ending Shares outstanding 8,940,689 8,907,772 8,935,689 8,912,269
 
Pacific Commerce Bancorp
Consolidated Selected Financial Data – Unaudited
(Amounts are in thousands, except for book value per share and shares outstanding data)
 
STATEMENT OF INCOME
  For the Three Months Ended,   For the Six Months Ended,

June 30, 2017

 

March 31, 2017

 

June 30, 2016

June 30, 2017

 

June 30, 2016

 
Total interest income $ 5,938 $ 5,995 $ 4,709 $ 11,933 $ 8,664
Total interest expense   376       342       327     718       583  
Net interest income 5,562 5,653 4,382 11,215 8,081
Provision for loan losses 0 0 0 0 0
Total non-interest income 833 687 1,019 1,520 1,703

Non-Interest Expense (Non-merger Related)

  3,988       3,957       3,705     7,945       6,940  

Core earnings before Merger Related Expenses and Income Taxes

2,407 2,383 1,696 4,790 2,844

Non-Recurring Merger Related Expenses

- - 940 - 1,073
Income tax expense   997       985       432     1,982       892  
Net Income $ 1,410     $ 1,398     $ 324   $ 2,808     $ 879  
 
SELECTED FINANCIAL INFORMATION
 
Basic earnings per share $ 0.16 $ 0.15 $ 0.04 $ 0.31 $ 0.12
Diluted earnings per share $ 0.15 $ 0.15 $ 0.04 $ 0.30 $ 0.12
Diluted core earnings per average share $ 0.15 $ 0.15 $ 0.13 $ 0.30 $ 0.24
Average shares outstanding 8,938,821 8,929,964 7,617,455 8,934,417 7,087,589
Diluted average shares outstanding 9,220,760 9,193,679 7,742,037 9,207,231 7,212,171
 
Efficiency Ratio - GAAP 62.4 % 62.4 % 86.0 % 62.4 % 81.9 %
Efficiency - merger expense adjusted 62.4 % 62.4 % 68.5 % 62.4 % 70.9 %
Net merger expenses after tax $ - $ - $ 553 $ - $ 631
ROAA GAAP 1.05 % 1.08 % 0.45 % 1.07 % 1.08 %
ROAE GAAP 9.23 % 9.50 % 4.00 % 9.37 % 9.50 %
ROAA (excl. merger exp) 1.05 % 1.08 % 0.84 % 1.07 % 1.08 %
ROAE (excl. merger exp) 9.23 % 9.50 % 7.61 % 9.37 % 9.50 %
Net Interest Margin 4.37 % 4.61 % 4.18 % 4.49 % 4.28 %

Contacts

Pacific Commerce Bancorp
Long T. Huynh, Chief Financial Officer, 213-617-0082

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