Pacific Commerce Bancorp Reports Record Second Quarter Results

LOS ANGELES--()--Pacific Commerce Bancorp (PCBC) (the “Company”), parent company of Pacific Commerce Bank (the “Bank”), today reported record earnings for the second quarter and on a year-to-date basis. Second quarter results include the impact of the ProAmérica Bank acquisition which closed on May 20, 2016.

“The ProAmérica Bank acquisition represents our second transaction in thirteen months. The growth in asset base from these transactions, coupled with organic growth from existing and new branch locations was the key driver in our improved core earnings and asset growth.”

Financial Highlights for the Second Quarter 2016

  • Year to date core earnings, adjusted for merger related expenses, increased 79% to $1,674,000 compared to core earnings of $937,000 for the first half of 2015.
  • Core earnings, adjusted for merger related expenses, increased 56% to $998,000 in the current quarter compared to $639,000 for the second quarter of 2015.
  • The net interest margin for the current quarter and year to date was 4.17% and 4.28% respectively.
  • Total assets rose to $554.2 million.
  • Capital ratios exceed levels required to be considered “well capitalized.”

Excluding tax effected merger-related expenses associated with the ProAmérica Bank acquisition, core net income for the first half of 2016 increased by 79% to $1,674,000 compared to core net income of $937,000 after tax effected merger-related expenses associated with the Vibra Bank acquisition and loan provision reversals during the first half of 2015.

Year to date GAAP earnings totaled $879,000, or $0.12 per diluted share, after merger related expenses of $1,073,000 associated with the ProAmérica Bank acquisition. This compares with GAAP earnings of $518,000, or $0.09 per diluted share, for the first half of 2015 after one time charges of $1,139,000 related to the Vibra Bank acquisition and loan provision reversals of $500,000.

Excluding tax effected merger-related expenses, core net income for the second quarter of 2016 was $998,000 compared to core net income of $639,000 in the second quarter of 2015 after tax effected merger-related expenses. The Company’s GAAP earnings for the quarter ended June 30, 2016 equaled $324,000, or $0.04 per diluted share, compared with a GAAP loss of $16,000, or $0.00 per diluted share, in the second quarter of 2015.

Frank J. Mercardante, Chief Executive Officer of the Company and Bank said, “The ProAmérica Bank acquisition represents our second transaction in thirteen months. The growth in asset base from these transactions, coupled with organic growth from existing and new branch locations was the key driver in our improved core earnings and asset growth.”

He added, “The realization of cost synergies and operational integration of the ProAmérica transaction are ahead of schedule. We expect to complete the back-office consolidation during the third quarter and anticipate little, if any, additional merger related expenses in the second half of the year. We acquired an excellent team of banking professionals in this transaction. We look forward to building on our broad clientele base throughout the Los Angeles County marketplace.”

INCOME STATEMENT

Net interest income for the second quarter increased 29% to $4.4 million compared to $3.4 million in the second quarter of 2015 and $3.7 million in the first quart of 2016. Average interest earning assets and interest bearing liabilities increased in the quarter to $422.3 million and $240.2 million respectively from $4.7 million and $4.4 million respectively in the prior year’s quarter largely as a result of the ProAmérica Bank acquisition and the Bank’s new Pasadena office opened in the first quarter of 2016.

The net interest margin decreased during the quarter by 10 basis points to 4.17% from 4.27% in the second quarter of 2015 as a result of long-term borrowings at the Company in the fourth quarter of 2015. The funds were primarily used to augment the Bank’s capital levels.

Non-interest income increased 110% in the second quarter of 2016 to $1.0 million, from $485,000 in the second quarter of 2015. Compared to the first quarter of 2016, non-interest income increased by 49% from $684,000. During the current quarter the largest increase in non-interest income was in SBA loan sales and servicing income, other non-interest income and deposit service charges and fees.

For the six months ended June 30, 2016 non-interest income increased by 145% to $1.7 million from $0.7 million in the first half of 2015. The largest increases were in SBA loan sales and servicing income, other non-interest income and deposit service charges and fees.

Non-interest expenses exclusive of merger related expenses increased in the second quarter by 31% to $3.7 million from $2.8 million in the second quarter of 2015 with increases in salaries and benefits, occupancy expenses, legal and consulting and IT related expenses representing the largest components of the increase.

For the six months ended June 30, 2016 non-interest expenses exclusive of merger related expenses increased by 51%, from $4.6 million to $6.9 million. The largest increases were in salaries and benefits, information technology and occupancy expenses.

BALANCE SHEET

Total assets at June 30, 2016 increased 54% to $554.2 million from $359.5 million, at March 31, 2016 and $353.4 million at December 31, 2015 largely as a result of the ProAmérica Bank acquisition.

Total loans increased 48% to $456.7 million from $307.6 million at March 31, 2016 and $306.7 million at December 31, 2015, largely as a result of the ProAmérica Bank acquisition.

Total non-interest bearing demand deposits increased by 35.4% to $177.6 million as of the June 30, 2016 quarter compared to $131.2 million at March 31, 2016 and $112.0 million at December 31, 2015. Total deposits at June 30, 2016 increased by $162.0 million, to $448.3 million from $286.3 million at March 31, 2016.

CREDIT QUALITY

Excluding $207.2 million in loans covered under purchase accounting rules which are carried at a discount of 1.41% as of June 30, 2016, the allowance for loan and lease losses to total loans held for investment equaled 1.32% of loans outstanding. Total loans held for sale equaled $23.1 million at the end of the quarter including mortgage loans held for sale of $13.4 million which were held at a discount of 2.00% to the face value of the note.

Overall credit quality remains strong at the end of the quarter, resulting in the determination by management that no additional provision for the allowance was required at this time. As of June 30, 2016 total nonaccrual loans represented less than one percent of the outstanding portfolio.

REGULATORY CAPITAL

Both the Company and Bank remained “Well-Capitalized” by regulatory definition with capital ratios, as of June 30, 2016, as follows:

    Minimum Required     Company     Bank
Tier 1 Leverage Ratio: 4.00% 10.20% 11.00%
Common Equity Tier 1 Capital Ratio: 4.50% 9.65% 10.38%
Tier 1 Capital Ratio: 6.00% 9.65% 10.38%
Total Capital Ratio: 8.00% 10.36% 11.09%
 

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 Mexican 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 publicly 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 bank's actual results may differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that the bank 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 bank 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 bank cautions readers not to place undue reliance on any forward-looking statements. The bank 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,
2016
June 30,
2015
% Change March 31,
2016
Assets
Cash and due from banks $ 38,898 $ 7,371 427.7% $ 29,829
Federal funds sold 34,440 29,548 16.6% 8,584
Investment securities 186 362 -48.6% 212
Mortgage Warehouse Loans Held for Sale 13,373 12,987 100.0% 3,205
Other Loans Held for Sale 9,734 5,909 64.7% 9,399

Loans Held for Investment, net of unearned income

433,551 278,372 55.7% 295,042
Less: Allowance for loan losses   (3,187)       (2,952)     8.0%       (3,156)
Net Loans 453,471 294,316 54.1% 304,490
Other assets   27,159       16,788     61.8%       16,354
Total Assets $ 554,154     $ 348,385     59.1%     $ 359,469
 
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 177,633 $ 85,601 107.5% $ 131,230
Interest-bearing deposits   270,694       188,555     43.6%       155,066
Total Deposits 448,327 274,156 63.5% 286,296
Borrowings 48,939 35,000 39.8% 31,934
Accrued interest and other liabilities   1,336       1,451     -7.9%       1,306
Total Liabilities 498,602 310,607 60.5% 319,536
 
Shareholders' Equity
Common stock 56,718 40,805 39.0% 41,422
Retained Earnings (1,168) (3,035) -61.5% (1,492)
Other Comprehensive Income   2       8     -75.0%       3
Total Shareholders' Equity   55,552       37,778     47.0%       39,933
Total Liabilities & Shareholders' Equity $ 554,154     $ 348,385     107.6%     $ 359,469
 

Book Value per share at end of period

$

6.24

$

5.80

$

4.48

Tangible Book Value per share at end of period

$

5.04

$

5.23

$

5.53

 
 
Pacific Commerce Bancorp
Consolidated Selected Financial Data – Unaudited

(Amounts are in thousands, except for earnings per share and shares outstanding data)

 

STATEMENT OF OPERATIONS

       
Six Months Ended June 30, Three Months Ended June 30,
2016     2015     % change 2016     2015     % change
Total interest income $ 8,664 $ 5,824 49% $ 4,709 $ 3,630 30%
Total interest expense   583       331     76%   327       205     60%
Net interest income 8,081 5,493 47% 4,382 3,425 28%
Provision for loan losses 0 (500) 0% 0 0 0%
Total non-interest income 1,703 696 145% 1,019 485 110%
Non-Interest Expense (Non-merger Related)   6,940       4,597     51%   3,705       2,824     31%
Income Before Merger Related Expenses and Income Taxes 2,844 2,092 36% 1,696 1,086 56%
Non-Recurring Merger Related Expenses 1,073 1,139 -6% 940 951 -1%
Income tax expense/(benefit)   892       435     105%   432       151     186%
Net Income/(Loss) $ 879     $ 518     70% $ 324     $ (16)     -2125%
 
 
Basic earnings per share $0.12 $0.10 $0.04 ($0.00)
Diluted earnings per share $0.12 $0.09 $0.04 ($0.00)
Tax Effected Core Earnings Per Share $0.24 $0.17 $0.13 $0.10
Average shares outstanding 7,087,589 5,420,859 7,617,455 6,369,917

Contacts

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

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