First Choice Bank Announces Another $1 Million Quarter

CERRITOS, Calif.--()--First Choice Bank, the “Bank” (OTCBB: FCBK), continued its strong earnings and credit quality performance into the third quarter of 2014. The Bank was able to grow its loan portfolio and significantly increase core deposits in the quarter. The Bank also raised $3.88 million in fresh equity Capital prior to the end of the quarter through a private placement.

Capital ratios remained strong at the quarter-end, with Tier 1 risk-based capital and total risk-based ratios at 9.91% and 11.16%, comparing favorably to the well capitalized requirements of 6% and 10%, respectively.

The growth in the loan portfolio and the increase in core deposits were significant enough that management and the Board believed that raising extra Capital would be prudent. In a private placement that commenced in late September, 280,983 shares of common stock were sold at a price of $13.80 per share, with $3.85 million of net new Capital recorded by September 30, 2014. Since the end of the quarter, 344,017 shares, representing the balance of the authorized shares, were sold, with the final closing taking place on October 24, 2014. In total, the Bank sold 625,000 shares of common stock at $13.80 and raised total gross Capital of approximately $8.625 million. The actual net Capital will likely be about $8.6 million after deducting expenses associated with the private placement.

Loan growth in the quarter was realized in all areas from construction to commercial real estate, private banking and commercial & industrial loans. In order to accommodate the increase in the loan portfolio, the Bank provided $0.64 million to the Allowance for Loan and Lease Losses (the “ALLL”) in the third quarter.

Despite continued pressure on the net interest margin, earnings remained strong at $1.00 million for the quarter. This was the third quarter in a row where the Bank earned over $1 million, for year to date income of $3.06 million. Earnings for the third quarter of 2014 were $1.00 million compared to $0.50 million in the third quarter of 2013. Year-to-date earnings for 2014 were $3.06 million, compared to $1.50 million in the first nine months of 2013. This represents a 103.8% increase in net income for that period, compared to last year.

Nonperforming assets as a percent of total assets stood at $0 at the end of the quarter. During the quarter, the Bank sold its only real estate owned through foreclosure, and the Bank’s only non-accrual loan was repaid for a slight gain in September. There were no loans in the Bank’s portfolio more than 30 days past due.

The Bank has now had 20 consecutive quarters of profitability. In May 2014, the Bank paid a cash dividend of $0.20 per share.

At the quarter end, total assets were $617.32 million, a 40.28% increase over December 31, 2013, and a 61.40% increase over $382.47 million at September 30, 2013; while total deposits were $557.60 million, a 46.86% increase over December 31, 2013, and a 68.93% increase over $330.07 million at September 30, 2013. In addition, as of September 30, 2014, total loans were $455.57 million, a 30.45% increase over December 31, 2013, and a 48.62% increase over $306.54 million at September 30, 2013, while total Capital was $49.85 million, a 53.46% increase over December 31, 2013, and a 57.24% increase over $31.71 million at September 30, 2013.

At the quarter end, the ALLL stood at $7.55 million, or 1.66% of total loans. When combined with the amount of the discount on certain loans purchased in 2012, the ALLL and that discount amounted to 1.73% of the Bank’s total loans.

The Bank’s investment securities portfolio decreased by $12.78 million from December 31, 2013, to $43.28 million. Cash and due from Banks stood at $114.17 million, so that total Liquidity remained significant. Loan demand in the third quarter was robust. Based on some of the recent volatility in the markets around the world, as well as the typical seasonal slowdown in loan production, management is cautious about significant loan growth in the fourth quarter.

Income for the quarter was generated from Net Interest Income of $4.75 million, combined with Non-Interest Income of $1.19 million. Gain on the sale of loans, primarily the guaranteed portions of SBA loans, accounted for $0.54 million of the Non-Interest Income. Non-interest expense in the quarter was $3.54 million. The Net Interest Margin for the year-to-date period stood at 3.52%. The efficiency ratio for the quarter was 59.7% and for the year to date was 57.1%.

Peter H. Hui, Chairman of the Board, stated, “I am very pleased that so many new and existing shareholders purchased stock in our recent private placement. We value all of our shareholders as friends, and try to have them all join our family of clients as well. We are pleased to welcome them in a year of significant financial achievements.”

Robert M. Franko, President and Chief Executive Officer, stated, “We have had another exciting quarter. Our SBA group, headed by Gary Youmans, has had an outstanding year. In addition, our Commercial & Industrial Group, headed by Maggie Hender, was able to make real progress in a very competitive market. We are so proud of all of our colleagues for their contributions to this year’s financial success.”

Selected Financial Highlights for the nine months ending September 30, 2014:

Net after Tax Income of $3.06 million.
Pre-Tax, Pre-Provision Income of $7.04 million.
Return on average equity (annualized) at 9.59%.
Allowance for Loan and Lease Losses at 1.66% of total loans.
Tier 1 Risk-Based Capital and total Risk-Based Ratios at 9.91% and 11.16%, above 6% and 10%, respectively; Tier 1 Leverage Ratio at 8.54%, compares very favorably to 5.00%, which is the minimum required for a bank to be deemed “Well Capitalized” by the FDIC.

ABOUT FIRST CHOICE BANK

First Choice Bank, headquartered in Cerritos, California, is a community focused financial institution, serving diverse consumers and commercial clients and specializing in loans to small businesses, Commercial and Industrial (C&I) loans, residential mortgage loans and commercial real estate loans with a niche in providing finance for the hospitality industry. The Bank is a Preferred Small Business Administration (SBA) Lender. The Bank recently started a private banking operation. Founded in 2005, First Choice Bank has quickly become a leading provider of financial services that enable our customers to grow, maintain strength, and reach unprecedented levels of success. We strive to surpass our clients’ expectations through our efficiency and professionalism and are committed to being “First in Speed, Service, and Solutions.” First Choice Bank stock is traded on the Over the Counter Bulletin Board (OTCBB); our Ticker Symbol is FCBK.

The Bank’s web site is www.FirstChoiceBankCA.com.

Forward-Looking Statements

Except for the historical information in this news release, the matters described herein contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs, results of examinations by our banking regulators, our ability to maintain adequate levels of capital and liquidity, our ability to manage loan delinquency rates, our ability to price deposits to retain existing customers and achieve low-cost deposit growth, manage expenses and lower the efficiency ratio, expand or maintain the net interest margin, mitigate interest rate risk for changes in the interest rate environment, competitive pressures in the banking industry, access to available sources of credit to manage liquidity, the local and national economic environment, and other risks and uncertainties. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this release. First Choice Bank undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Investors are encouraged to read the First Choice Bank annual reports which are available on our website.

 
FIRST CHOICE BANK
THIRD QUARTER REPORT / SEPTEMBER 30, 2014
         
BALANCE SHEET
(all amounts in thousand dollars except share and per share information)
 
    September 30,     December 31,     September 30,
2014 2013 2013
      (unaudited)     (audited)     (unaudited)
ASSETS                  
 
Cash and due from banks $ 114,172 $ 30,557 $ 13,538
Investment securities - available for sale 43,280 56,056 58,503
Stock Investments, restricted 2,970 2,154 2,154
 
Loans (gross) 455,572 349,240 306,536
Less : unaccreted disc. acquired loans (341 ) (544 ) (647 )
Less allowance for loan losses   (7,551 )   (5,749 )   (5,210 )
Loans, net 447,680 342,947 300,679
 
Premises and equipment, net 1,258 880 962
Foreclosed assets 0 347 347
Other assets   7,955     7,112     6,283  
$ 617,315   $ 440,053   $ 382,466  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Noninterest bearing deposits $ 62,970 $ 43,173 $ 47,919
Interest checking accounts 202,773 0 0
NOW accounts 6,107 2,526 4,284
Money market accounts 50,673 70,300 67,085
Savings accounts 119,479 73,181 9,603
Certificates of deposits   115,597     190,512     201,179  
Total Deposits 557,599 379,692 330,070
Borrowings 8,000 27,000 20,000
Other liabilities   1,863     876     690  
Total liabilities 567,462 407,568 350,760
 
Total shareholders' equity   49,853     32,485     31,706  
$ 617,315   $ 440,053   $ 382,466  
                               
STATEMENT OF INCOME
For the three months ended For the nine months ended
September 30, June 30, September 30, September 30, September 30,
2014 2014 2013 2014 2013
 
Interest income $ 6,020 $ 5,391 $ 4,313 16,357 11,081
Interest expense   1,271     991     697     3,134     2,125  
Net interest income 4,749 4,400 3,616 13,223 8,956
Provision for loan losses   640     450     1,114     1,795     1,891  
Net interest income after provision for loan losses 4,109 3,950 2,502 11,428 7,065
Noninterest income 1,186 933 515 3,200 1,868
Noninterest expense   3,542     3,135     2,243     9,384     6,518  
Income before income taxes 1,753 1,748 774 5,244 2,415
Provision for income taxes   750     690     276     2,181     912  
Net income $ 1,003   $ 1,058   $ 498     3,063     1,503  
 
Net income per share-basic (annualized) $ 1.04 $ 0.65
Return on assets (annualized) 0.80 % 0.55 %
Return on equity (annualized) 9.59 % 5.94 %
Net income margin 3.52 % 3.42 %
Efficiency ratio 57.14 % 60.75 %
                               
SELECTED RATIOS
September 30, December 31, September 30,
2014 2013 2013
Allowance for loan losses as a percent of total gross loans 1.66 % 1.65 % 1.70 %
Nonperforming assets as a percent of total assets 0.00 % 0.14 % 0.23 %
Loan to deposit ratio 80.29 % 90.32 % 91.10 %
Tier one leverage capital 8.54 % 8.22 % 8.73 %
Total risk based capital 11.16 % 10.38 % 11.47 %
 

Contacts

First Choice Bank
Robert M. Franko, 310-488-2310
President & Chief Executive Officer
or
Yvonne L. Chen, 562-345-9244
Chief Financial officer

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