Pacific Commerce Bancorp Reports 2017 Another Record Year

LOS ANGELES--()--Pacific Commerce Bancorp (OTC Pink: PCBC) (the “Company”), parent company of Pacific Commerce Bank (the “Bank”), today reported results for the year ending December 31, 2017. The Company also reported a one-time, non-cash deferred tax asset (DTA) charge of $930,000, or $0.10 per share, as a result of the new federal tax law passed in December 2017.

“2017 was the strongest year for earnings in the Company’s history. Loan originations exceeded $136 million and core deposit growth remains robust. Given the strength of the economy and the Bank’s current position in the marketplace, we remain excited about the future.”

HIGHLIGHTS

  • Core net income increased 29% for the year to $5.6 million, or $0.60 per diluted share, from $4.3 million, or $0.54 per diluted share in 2016.
  • Core return on average assets (ROAA) for the year equaled 1.05%, compared to 0.92% for 2016.
  • Core return on average equity (ROAE) equaled 9.01%, compared to 8.53% for 2016.
  • The efficiency ratio for 2017 equaled 62.2%, compared to 66.6% in 2016.
  • Total noninterest bearing demand deposits equaled 49.8% of total deposits and total non-maturity deposits equaled 81.5% of total deposits.

Following the passage of the new federal tax law in December the Company determined that a DTA impairment charge was required based on the reduction in the federal corporate tax rate from 34% to 21%. The Company expects to see its total tax burden reduced by approximately 28% in future periods, recouping the DTA charge in the next three quarters.

Chief Executive Officer Frank Mercardante said, “2017 was the strongest year for earnings in the Company’s history. Loan originations exceeded $136 million and core deposit growth remains robust. Given the strength of the economy and the Bank’s current position in the marketplace, we remain excited about the future.”

Net income, including the DTA adjustment, totaled $4,664,000, or $0.50 per diluted share, for the year just ended. This represents a 26.3% increase over 2016 net income of $3,692,000, or $0.45 per diluted share. Excluding the DTA impairment charge, the 2017 after tax operating income increased 29.4% to $5,594,000, or $0.60 per diluted share, compared to $4,324,000, or $0.54 per diluted share in 2016, excluding non-core merger expenses.

Net interest income, before loan loss provisions, increased 12% in 2017 to $22,673,000 from $20,255,000 in 2016. The net interest margin for 2017, exclusive of the impact of purchase accounting accretion and amortization, equaled 4.40%, compared to 4.56% for 2016. Net interest income was positively impacted during 2017 by purchase accounting accretion in the amount of $382,000, or 8 basis points, compared to $709,000, or 17 basis points for all of 2016.

The yield on average interest bearing assets, exclusive of the impact of purchase accounting accretion, equaled 4.71% for 2017, compared to 4.87% in 2016. The 16 basis point decline was primarily due to a higher volume of prepayment penalties earned on loans in 2016. The cost of interest bearing liabilities, exclusive of purchase accounting accretion, equaled 0.65% for all of 2017, compared with 0.59% in 2016.

Average interest earning assets in the current year equaled $505.8 million, while average interest bearing liabilities equaled $242.8 million. This compares to $428.6 million and $237.6 million in 2016, respectively. Total loans averaged $420.3 million in 2017, compared with $368.8 million in 2016. Total Deposits averaged $462.4 million in 2017, compared to $381.8 million in 2016. Total non-maturity deposits averaged $366.7 million in 2017, compare to $286.4 million in 2016.

Noninterest income increased 6.3% in the year to $3,283,000 from $3,088,000 in 2016. Service charges and fee income were up 47.1% and SBA loan sales and fee income was up 8.1%, while other noninterest income was down 6.8%. The Company also recorded a loss on the sale of a Shared National Credit in the amount of $184,000 during the second quarter, which is reflected in other noninterest income.

Noninterest expenses, including merger related charges, declined year-over-year by $477,000, or 3%, to $16,139,000 from $16,616,000 in 2016. Other noninterest expenses declined by 2% in all of 2017 compared to 2016. Occupancy and salaries and benefits increased by 12% and 6%, respectively.

The ROAA for the twelve months of 2017, exclusive of the DTA adjustment, was 1.05%, compared with 0.96% for 2016. The ROAE for the full 2017 year, exclusive of the DTA adjustment, totaled 9.01%, compared with 9.18% for 2016, excluding non-core merger costs.

Credit quality remained strong throughout the year. The Company recorded a provision for loan losses of $300,000 in 2017, compared to $250,000 in 2016, largely due to growth in the portfolio. Excluding $144.1 million in loans carried under purchase accounting rules, which are held at a discount of 1.38% as of December 31, 2017, the allowance for loan and lease losses to total loans held for investment equaled 1.25% of loans outstanding. Total loans held for sale equaled $7.9 million at the end of the year.

Shareholders’ equity at the Company as of December 31, 2017, equaled $64.1 million, compared to $58.6 million at December 31, 2016. Both the Company and Bank remained “Well-Capitalized” by regulatory definition at December 31, 2017, with capital ratios as follows:

               

Minimum

Required

         

Company

         

Bank

Tier 1 Leverage Ratio: 4.00% 10.11% 11.10%
Common Equity Tier 1 Capital Ratio: 4.50% 11.85% 13.01%
Tier 1 Capital Ratio: 6.00% 11.85% 13.01%
Total Capital Ratio: 8.00% 12.70% 13.86%
 

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 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 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 SHEETS December 31, September 30, December 31,
2017 2017 2016
Assets
Cash and due from banks $ 8,615 $ 9,565 25,664
Interest Bearing Deposits with Other Banks 16,536 11,588 64,380
Federal Funds Sold 56,139 70,102 3,000
Investment securities - - 74
Mortgage Warehouse Loans Held for Sale - - 1,696
Other Loans Held for Sale 7,940 11,174 9,596
Loans, net of unearned income 425,027 413,443 412,102
Less: Allowance for loan losses   (3,763 )             (3,561 )             (3,436 )
Net Loans 429,204 421,056 419,958
Other assets   25,617               26,099               26,484  
Total Assets $ 536,111             $ 538,410             $ 539,560  
 
Liabilities and Shareholders' Equity
Demand deposits $ 231,119 $ 234,796 $ 204,984
Non-maturity interest bearing deposits 147,283 145,459 143,815
Time Deposits   86,001               86,733               109,302  
Total Deposits 464,403 466,988 458,101
Borrowings 5,947 5,937 20,906
Accrued interest and other liabilities   1,682               1,985               1,925  
Total Liabilities 472,032 474,910 480,932
 
Shareholders' Equity
Common stock 57,771 57,628 56,984
Retained Earnings 6,308 5,872 1,644
Other Comprehensive Income   -               -               -  
Total Shareholders' Equity   64,079               63,500               58,628  
Total Liabilities & Shareholders' Equity $ 536,111             $ 538,410             $ 539,560  
 
Book value per share at end of period $ 7.16 $ 7.09 $ 6.58
Tangible Book Value per share at end of period $ 6.07 $ 6.00 $ 5.46
Ending Shares outstanding 8,951,285 8,951,285 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)

 
STATEMENTS OF INCOME For the Twelve Months Ended December 31, For the Three Months Ended
2017       2016       % change      

$ change

Dec 31, 2017       Sep 30, 2017       Dec 31, 2016
 
Total interest income $ 24,234 $ 21,609 12.1 % $ 2,625 $ 6,151 $ 6,150 $ 6,223
Total interest expense   1,561           1,354         15.3 %         207     436           407           387  
Net interest income 22,673 20,255 11.9 % 2,418 5,715 5,743 5,836
Provision for loan losses   300           250         20.0 %         50     200           100           0  
Net Income After Prov. for Loan Losses 22,373 20,005 11.8 % 2,368 5,515 5,643 5,836
Non-Interest Income:
Service charges and fees 900 612 47.1 % 288 236 251 174
(Loss) on sale of loans (184 ) - - (184 ) - - -
Gain on SBA loan sales and related fees 1,887 1,746 8.1 % 141 609 367 458
Other noninterest income   680           730         -6.8 %         (50 )   151           148           152  
Total non-interest income 3,283 3,088 6.3 % 195 996 766 784
Non-Interest Expense (Non-merger Related):
Total Salaries and employee benefits 9,353 8,858 5.6 % 495 2,486 2,173 2,294
Total Occupancy 1,950 1,747 11.6 % 203 482 501 491
Total Other noninterest expense   4,836           4,930         -1.9 %         (94 )   1,245           1,305           1,315  
Non-Interest Expense (Non-merger Related)   16,139           15,535         3.9 %         604     4,213           3,979           4,100  
Core earnings before Merger Related Expenses and Income Taxes   9,517           7,558         25.9 %         1,959     2,298           2,430           2,520  
Non-Recurring Merger Related Expenses - 1,081 -100.0 % (1,081 ) - - -
Tax Reform DTA Adjustment 930 - - 930 930 - -
Income tax expense   3,923           2,785         40.9 %         1,138     931           1,010           994  
Net Income (GAAP) $ 4,664         $ 3,692         26.3 %       $ 972   $ 437         $ 1,420         $ 1,526  
 
 
Basic earnings per share $ 0.52 $ 0.46 $ 0.05 $ 0.16 $ 0.17
Diluted EPS $ 0.50 $ 0.45 $ 0.05 $ 0.15 $ 0.17

Diluted EPS (excl. tax reform adj)

$ 0.60 $ - $ 0.15

-

-

Diluted core earnings per average share $ 0.60 $ 0.54 $ 0.15 $ 0.15 $ 0.17
Average shares outstanding 8,942,630 8,004,766 8,951,285 8,950,133 8,912,269
Diluted average shares outstanding 9,249,023 8,160,970 9,311,655 9,264,445 9,068,473
 
Efficiency Ratio - GAAP 62.2 % 71.2 % 62.8 % 61.1 % 61.9 %
Efficiency - merger expense adjusted 62.2 % 66.6 % 62.8 % 61.1 % 61.9 %
Tax Reform DTA Adjustment 930 - 930 - -
Net merger expenses after tax - 632

-

- -
 
ROAA GAAP 0.88 % 0.78 % 0.32 % 1.07 % 1.11 %
ROAE GAAP 7.51 % 7.29 % 2.68 % 8.95 % 10.47 %
ROAA (excl. merger exp) - 0.92 % - - -
ROAE (excl. merger exp) - 8.53 % - - -
ROAA (excl. tax reform adjustment) 1.05 % - 1.00 % - -
ROAE (excl. tax reform adjustment) 9.01 % - 8.39 % - -
Net Interest Margin - GAAP 4.48 % 4.73 % 4.41 % 4.55 % 4.47 %
 

Contacts

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

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