Pacific Commerce Bancorp Reports First Quarter Results

LOS ANGELES--()--Pacific Commerce Bancorp (OTC Pink: PCBC) (the “Company”), parent company of Pacific Commerce Bank (the “Bank”), today reported results for the first quarter ending March 31, 2018. On February 26, 2018, the Company announced that it entered into a merger agreement with First Choice Bank (OTCQX: FCBP). The transaction is subject to regulatory and shareholder approval and is expected to close in the third quarter of 2018.

FINANCIAL HIGHLIGHTS

  • Core net income (adjusting for a total of $242,000 tax effected merger related expenses incurred in Q1-2018 and the DTA impairment charge of $930,000 in Q4-2017), increased 23.65% in the quarter to $1.69 million, or $0.18 per diluted share, from $1.37 million, or $0.15 per diluted share in the fourth quarter of 2017.
  • Core return on average assets (ROAA) for the quarter equaled 1.24%, compared to 1.00% in the fourth quarter of 2017.
  • Core return on average equity (ROAE) for the quarter equaled 10.53%, for the quarter compared to 8.39% in the fourth quarter of 2017.
  • The core efficiency ratio for the quarter equaled 57.46%, compared to 62.79% in the fourth quarter of 2017.
  • Total noninterest bearing demand deposits for the quarter equaled 52.2% of total deposits and total non-maturity deposits equaled 83.9% of total deposits, compared to 49.8% and 81.5% for the fourth quarter of 2017.

Net income totaled $1,449,000, or $0.15 per diluted share, for the first quarter, compared to $437,000, or $0.05 per diluted share in the fourth quarter of 2017. Adjusting for a total of $242,000 tax effected merger related expenses incurred in Q1-2018 and the DTA impairment charge of $930,000, caused by the Tax Cuts and Jobs Act, in Q4-2017, core earnings in Q1-2018 equaled $1,691,000, or $0.18 per diluted share, compared to core earnings of $1,367,000, or $0.15 per diluted share in Q4-2017.

Average interest earning assets equaled $525.8 million in Q1-2018, while average interest bearing liabilities equaled $233.8 million. This compares to $514.3 million and $231.6 million, in Q4-2017, respectively. Total loans averaged $430.7 million in the most recent quarter, compared to $426.8 million in Q4-2017. Total deposits averaged $478.7 million in Q1-2018, compared to $468.3 million in Q4-2017. Total non-maturity deposits averaged $396.1 million in Q1-2018, compare to $381.5 million in Q4-2017.

The ROAA for the first three months of 2018 was 1.07%, compared with 0.32% in Q4-2017. Adjusting for tax effected merger related expenses incurred in Q1-2018 and the DTA impairment charge in Q4-2017, core ROAA was 1.24% and 1.00% respectively. The ROAE for the first three months of 2018 equaled 9.02%, compared with 2.68% in Q4-2017. Adjusting for tax effected merger related expenses incurred in Q1-2018 and the DTA impairment charge in Q4-2017, core ROAE equaled 10.53% and 8.39% respectively.

The Company recorded a provision for loan and lease losses of $725,000 in Q1-2018, compared to $200,000 in Q4-2017. The increased provision reflects the payoff of a heavily discounted purchased loan. The discount is reflected in total interest income and was offset with an increase in the loan and lease provision. Excluding $130.7 million in loans carried under purchase accounting rules, which are held at a discount of 0.93% as of March 31, 2018, the allowance for loan and lease losses to total loans held for investment equaled 1.39% of loans outstanding.

Shareholders’ equity at the Company as of March 31, 2018, equaled $65.6 million. Both the Company and Bank remained “Well-Capitalized” by regulatory definition at March 31, 2018, with capital ratios as follows:

                Minimum

Required

          Company           Bank
Tier 1 Leverage Ratio: 4.00% 10.23% 11.22%
Common Equity Tier 1 Capital ratio: 4.50% 12.00% 13.17%
Tier 1 Capital Ratio: 6.00% 12.00% 13.17%
Total Capital Ratio: 8.00% 13.00% 14.16%
 

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.

Additional Information about the Merger and Where to Find It

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.

In connection with the proposed transaction, First Choice Bancorp has filed with the Securities and Exchange Commission a registration statement on Form S-4 containing, among other things, a joint proxy statement/prospectus and other documents with respect to the proposed merger of Pacific Commerce Bancorp and First Choice Bancorp. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS PROVIDED BY FIRST CHOICE BANCORP AND PACIFIC COMMERCE BANCORP IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and shareholders may obtain free copies of the S-4 and the joint proxy statement/prospectus and other relevant documents prepared by First Choice Bancorp and Pacific Commerce Bancorp (if and when they become available) free of charge by contacting First Choice Bancorp or Pacific Commerce Bancorp. Investors and shareholders also may obtain free copies of these documents through the website maintained by the SEC at www.sec.gov.

Pacific Commerce Bancorp

Consolidated Selected Financial Data – Unaudited

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

       
BALANCE SHEETS
March 31, December 31, March 31,
  2018     2017   % Change     2017  
Assets
Cash and due from banks $ 12,391 $ 8,615 43.8 % $ 25,235
Interest Bearing Deposits with Other Banks 109,532 69,675 57.2 % 60,848
Federal Funds Sold 3,000 3,000 0.0 % 2,740
Investment securities - - 0.0 % 22
Other Loans Held for Sale - 7,940 -100.0 % 11,587
Loans, net of unearned income 420,515 425,027 -1.1 % 413,154
Less: Allowance for loan losses   (4,492 )   (3,763 ) 19.4 %   (3,455 )
Net Loans 416,023 429,204 -3.1 % 421,286
Other assets   25,090     25,617   -2.1 %   25,429  
Total Assets $ 566,036   $ 536,111   5.6 % $ 535,560  
 

Liabilities and Shareholders' Equity

Demand deposits $ 256,935 $ 231,119 11.2 % $ 223,657
Non-maturity interest bearing deposits 156,214 147,283 6.1 % 143,935
Time Deposits   79,493     86,001   -7.6 %   99,988  
Total Deposits 492,642 464,403 6.1 % 467,580
Borrowings 5,958 5,947 0.2 % 5,952
Accrued interest and other liabilities   1,796     1,682   6.8 %   1,742  
Total Liabilities 500,396 472,032 6.0 % 475,274
 
Shareholders' Equity
Common stock 57,883 57,771 0.2 % 57,244
Retained Earnings (Deficit)   7,757     6,308   23.0 %   3,042  
Total Shareholders' Equity   65,640     64,079   2.4 %   60,286  
Total Liabilities & Shareholders' Equity $ 566,036   $ 536,111   5.6 % $ 535,560  
 
Book value per share at end of period $ 7.33 $ 7.16 $ 6.75
Tangible Book Value per share at end of period $ 6.25 $ 6.07 $ 5.64
Ending Shares outstanding 8,951,285 8,951,285 8,935,689
 

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 Three Months Ended
31-Mar-18   31-Dec-17   % change     31-Mar-17
 
Total interest income $ 7,058 $ 6,151 14.7 % $ 5,995
Total interest expense   498     436   14.2 %   342  
Net interest income 6,560 5,715 14.8 % 5,653
Provision for loan losses   725     200   262.5 %   -  
Net Income After Prov. for Loan Losses 5,835 5,515 5.8 % 5,653
Non-Interest Income:
Service charges and fees 248 236 5.1 % 176
Gain on SBA loan sales and related fees 408 609 -33.0 % 338
Other noninterest income   168     151   11.3 %   173  
Total non-interest income 824 996 -17.3 % 687
Non-Interest Expense (Non-merger Related):
Total Salaries and employee benefits 2,457 2,486 -1.2 % 2,343
Total Occupancy 489 482 1.5 % 473
Total Other noninterest expense   1,297     1,245   4.2 %   1,141  
Non-Interest Expense (Non-merger Related)   4,243     4,213   0.7 %   3,957  
Core earnings before Merger Related Expenses and Income Taxes   2,416     2,298   5.1 %   2,383  
Non-Recurring Merger Related Expenses 345 - -
Tax Reform DTA Adjustment - 930 -100.0 % -
Income tax expense   622     931   -33.2 %   985  
Net Income (GAAP) $ 1,449   $ 437   231.6 % $ 1,398  
 
 
Basic earnings per share $ 0.16 $ 0.05 $ 0.16
Diluted EPS $ 0.15 $ 0.05 $ 0.15
Diluted EPS(excl. tax reform adj) $ 0.15
Diluted EPS (excl. merger exp) $ 0.18 $ 0.05 $ 0.15
Average shares outstanding 8,951,285 8,951,285 8,929,964
Diluted average shares outstanding 9,397,916 9,311,655 9,193,679
 
Efficiency Ratio - GAAP 62.14 % 62.79 % 62.41 %
Efficiency - merger expense adjusted 57.46 % 62.79 % 62.41 %
Tax Reform DTA Adjustment $ 930
Net merger expenses after tax $ 242
 
ROAA GAAP 1.07 % 0.32 % 1.08 %
ROAE GAAP 9.02 % 2.68 % 9.50 %
ROAA (excl. merger exp) 1.24 %
ROAE (excl. merger exp) 10.53 %
ROAA (excl. tax reform adjustment) 1.00 %
ROAE (excl. tax reform adjustment) 8.39 %
Net Interest Margin - GAAP 5.06 % 4.41 % 4.61 %
 

Contacts

Pacific Commerce Bancorp
Long T. Huynh, Chief Financial Officer, 213-613-5000

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