Security California Bancorp Reports 38% Increase in Net Income for Third Quarter of 2014

RIVERSIDE, Calif.--()--Security California Bancorp (OTCBB: SCAF), the parent company of Security Bank of California, reported net income of $1.0 million, or 18 cents per share, for the third quarter of 2014, an increase of 38% from net income of $759,000, or 13 cents per share, for the third quarter of 2013.

Third Quarter 2014 Highlights

  • Total loans were $411 million at September 30, 2014, an increase of 23% year-over-year
  • Total deposits were $514 million at September 30, 2014, an increase of 16% year-over-year
  • Total assets were $607 million at September 30, 2014, an increase of 12% year-over-year
  • Total revenue of $6.0 million, an increase of 12% over third quarter of 2013
  • Total non-performing assets declined 14% from end of prior quarter

“We had an outstanding quarter in all areas of our operations and delivered the highest level of earnings in the history of the Company,” said James A. Robinson, Chairman and CEO of Security California Bancorp. “Our strong performance was driven by robust loan and deposit growth, excellent credit quality, and improving operational efficiencies. We continue to grow our commercial loan portfolio, which increased at an annualized rate of 54% in the third quarter, while attracting new core deposit relationships that further improve our deposit base. Importantly, we continue to grow our balance sheet while maintaining strong underwriting standards and keeping credit losses at an extremely low level. We expect to generate additional solid balance sheet growth in the fourth quarter, which should result in a continuation of our positive trends going forward.”

Third Quarter 2014 Summary Results

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2014 was $5.3 million, an increase of 16% from $4.6 million in the third quarter of 2013. The increase in net interest income was primarily driven by growth in interest-earning assets.

Net interest margin was 3.67% in the third quarter of 2014, down nine basis points from the prior quarter. The decline in net interest margin was primarily due to an increase in the cost of funds and a reduction in the yield on the investment securities portfolio, as the Company reduces the duration in the portfolio as part of its interest rate risk management strategies.

Non-interest Income

Non-interest income for the third quarter of 2014 was $744,648, a decrease of 10.1% from $828,707 in the year-earlier period. The decrease in non-interest income was primarily due to lower gains on sales of SBA loans.

Non-interest Expense

Non-interest expense was $4.0 million for the third quarter of 2014, an increase of 10.4% from $3.7 million in the year-ago period. The increase in non-interest expense was primarily due to an increase in personnel to support the Bank’s growth.

Balance Sheet

Total Assets

Total assets were $607 million at September 30, 2014, an increase of 12% from $544 million at September 30, 2013.

Total Loans

Total loans were $411 million at September 30, 2014, an increase of 23% from $333 million at September 30, 2013. The increase in total loans was primarily driven by growth in the commercial and industrial and commercial real estate portfolios.

Total Deposits

Total deposits were $514 million at September 30, 2014, an increase of 16% from $442 million at September 30, 2013. The increase in total deposits was primarily driven by growth in non-interest bearing and savings and money market accounts.

Asset Quality

Total non-performing assets were $5.3 million, or 0.87% of total assets, at September 30, 2014, compared with $6.1 million, or 1.04% of total assets, at June 30, 2014. The decrease in non-performing assets was attributable to selling the one single-family residential property taken into Other Real Estate Owned (“OREO”) during the previous quarter. The Company sold the OREO property during this quarter at a gain, as anticipated.

At September 30, 2014, total non-accrual loans were $5.3 million, or 1.28% of total loans, compared with $5.4 million, or 1.38% of total loans, at June 30, 2014.

During the third quarter of 2014, the Company had no charge-offs, compared with $390,491 in charge-offs during the second quarter of 2014.

The Company recorded a provision for loan losses of $185,000 for the third quarter of 2014, primarily related to the growth in the loan portfolio. As a result of the provision, the allowance for loan losses as a percentage of gross loans remained consistent at 1.57% at September 30, 2014.

Capital

Security California Bancorp remained well capitalized as of September 30, 2014. All of the company’s capital ratios exceeded minimum regulatory standards for “well capitalized” institutions. As of September 30, 2014, the Company’s Tier 1 leverage ratio was 11.95%, the Tier 1 risk-based ratio was 14.89% and the Total risk-based ratio was 16.15%, compared with the regulatory minimum standards of 5%, 6% and 10%, respectively.

About Security California Bancorp and Security Bank of California

Security California Bancorp is the parent of Security Bank of California and is traded on the Over the Counter Bulletin Board (“OTCBB”) under the symbol SCAF.OB. Through its full service offices in Riverside, San Bernardino, Redlands and Orange, Security Bank of California is a full service community bank, focusing on providing banking services for businesses, their owners and families, and successful individuals. The bank also has Loan Production Offices (“LPO”) in Irwindale and Palm Desert. To learn more about the bank’s products and services, call 951-368-2265 or visit the company’s Web site at www.securitybankca.com

Forward Looking Statements

This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, and competition within the business areas in which the Bank is conducting its operations, including the real estate market in California and other factors beyond the Bank’s control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. Readers should not place undue reliance on the forward-looking statements, which reflect management’s view only as of the date hereof. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

 
Security California Bancorp and Subsidiaries
Interim Consolidated Income Statements (Unaudited)
(Dollars in Thousands)
           
Three months ended Nine months ended
  09/30/14       06/30/14       09/30/13     09/30/14       09/30/13  
INTEREST INCOME
Loans, with fees $ 4,900 $ 4,720 $ 3,995 $ 14,041 $ 11,859
Deposit with banks 23 23 23 67 66
Investment securities   766     820     884     2,474     2,083  
Total interest income   5,688     5,564     4,901     16,583     14,008  
 
INTEREST EXPENSE
Deposits 392 350 335 1,084 991
Other   9     15     8     38     26  
Total interest expense   401     365     344     1,122     1,017  
 
Net interest income 5,287 5,198 4,558 15,461 12,992
Provision for loan losses   164     429     423     841     723  
Net income after provision for
loan losses   5,123     4,769     4,135     14,620     12,269  
 
NON INTEREST INCOME
Service charges on deposits 228 254 249 715 754
Gain on sale of securities 3 51 - 54 158
SBA gains on sales and fees 331 371 417 1,162 1,146
Other   182     183     164     536     497  
Total non interest income   745     858     829     2,467     2,555  
 
NON INTEREST EXPENSE
Salaries & benefits 2,541 2,612 2,311 7,686 6,601
Premises & equipment 427 481 500 1,356 1,420
Other   1,068     1,064     843     3,032     2,858  
Total non interest expense   4,036     4,157     3,654     12,073     10,879  
 
Net income before taxes 1,832 1,471 1,310 5,013 3,945
Provision for income tax   782     614     551     2,107     1,644  
 
NET INCOME $ 1,049   $ 858   $ 759   $ 2,906   $ 2,301  
 
EARNINGS PER SHARE
Diluted earning per share $ 0.18 $ 0.15 $ 0.13 $ 0.50 $ 0.40
Average outstanding common shares 5,670,174 5,669,797 5,669,416 5,670,174 5,668,269
 
PERFORMANCE INDICATORS
Return on average assets 0.71 % 0.60 % 0.57 % 0.68 % 0.61 %
Return on average equity 6.12 % 5.20 % 4.80 % 5.88 % 4.76 %
Efficiency ratio 66.94 % 69.21 % 67.84 % 67.55 % 70.70 %
 
Security California Bancorp & Subsidiaries
Interim Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
             
As of
  09/30/14     06/30/14     03/31/14     12/31/13     09/30/13  
ASSETS
Cash & due from banks $ 12,097 $ 16,158 $ 14,327 $ 11,690 $ 17,198
Interest bearing deposits with banks 35,523 26,783 18,465 20,701 20,283
Investment Securities 138,272 144,468 142,946 143,653 157,673
Loans:
Commercial & Industrial 157,448 138,713 140,273 129,204 125,998
Real Estate - Commercial 213,281 213,264 210,513 197,770 168,743
Real Estate - Construction 12,350 8,040 6,088 4,272 4,206
Real Estate - Consumer 22,534 25,931 28,610 27,459 30,115
Other   5,131     5,301     4,212     5,682     4,398  
Total 410,745 391,249 389,696 364,387 333,461
Allowance for loan losses   (6,454 )   (6,160 )   (6,064 )   (5,742 )   (5,567 )
Loans, net 404,291 385,089 383,632 358,644 327,894
Premises & equipment 3,821 3,831 3,937 4,028 3,907
Accrued interest 1,721 1,713 1,725 1,775 1,656
Other assets   11,175     13,230     15,213     16,257     15,081  
 
TOTAL ASSETS $ 606,900   $ 591,273   $ 580,245   $ 556,748   $ 543,692  
 
LIABILITIES
Deposits:
Demand non interest bearing $ 217,237 $ 194,079 $ 198,862 $ 190,868 $ 191,866
Demand interest bearing 21,427 21,092 15,244 22,680 17,870
Money market & savings 180,813 158,667 155,000 148,370 141,263
Time certificate   94,925     91,381     90,916     82,992     90,857  
Total deposits 514,402 465,219 460,022 444,909 441,855
Other borrowings 22,000 57,750 53,826 48,050 38,100
Accrued interest & other liabilities   2,199     1,425     1,521     1,454     1,445  
 
Total Liabilities   538,601     524,394     515,369     494,413     481,400  
 
SHAREHOLDERS' EQUITY
Preferred stock 7,133 7,133 7,133 7,133 7,133
Common stock 56,596 56,569 56,528 56,501 56,475
Retained earnings 7,082 6,033 5,175 4,176 3,311
Accumulated other comprehensive income   (2,513 )   (2,857 )   (3,960 )   (5,475 )   (4,627 )
 
Total Shareholders' Equity   68,299     66,878     64,876     62,335     62,292  
 
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 606,900   $ 591,273   $ 580,245   $ 556,748   $ 543,692  
 
CAPITAL ADEQUACY
Tier 1 leverage ratio 11.95 % 12.09 % 12.25 % 12.38 % 12.70 %
Tier 1 risk-based capital ratio 14.89 % 15.24 % 15.02 % 15.77 % 16.38 %
Total risk-based capital ratio 16.15 % 16.49 % 16.28 % 17.02 % 17.63 %
Total equity / total assets 11.21 % 11.27 % 11.14 % 11.15 % 11.41 %
Book value per common shares $ 12.04 $ 11.79 $ 11.44 $ 10.99 $ 10.99
                     
Security California Bancorp & Subsidiaries
Interim Consolidated Average Balance Sheets and Yield Data (Unaudited)
(Dollars in thousands)
     
Three months ended - 2014
September 30 June 30
Yields Interest Yields Interest
Average or Income/ Average or Income/
Balance Rates Expense Balance Rates Expense
ASSETS
Interest earning assets
Loans, with fees $ 402,385 4.83 % $ 4,900 $ 390,528 4.85 % $ 4,720
Interest bearing with banks 25,227 0.36 % 23 22,054 0.43 % 23
Investment securities   144,694 2.12 %   766   142,105 2.31 %   820
Total interest earning assets   572,307 3.95 % $ 5,688   554,687 4.02 % $ 5,564
 
Non interest earning assets
Cash & due from banks 10,783 10,361
All other assets   6,824   9,008
Total non interest earning assets   17,607   19,368
 
TOTAL ASSETS $ 589,914 $ 574,055
 
LIABILITIES & SHAREHOLDERS' EQUITY
Interest bearing liabilities
Deposits
Demand interest bearing $ 21,835 0.14 % $ 8 $ 17,304 0.14 % $ 6
Money market & savings 166,958 0.54 % 228 157,657 0.51 % 202
Time certificate 93,727 0.66 % 156 90,636 0.63 % 142
Other borrowings   27,180 0.13 %   9   43,881 0.14 %   15
Total interest bearing liabilities   309,700 0.51 % $ 401   309,477 0.47 % $ 365
 
Non interest bearing liabilities
Demand deposits 210,248 197,297
Accrued interest & other liabilities   1,984   1,122
Total non interest bearing liabilities 212,232 198,419
Shareholders' equity   67,982   66,158
 
TOTAL LIABILITIES & SHAREHOLDERS'S EQUITY $ 589,914 $ 574,055
 
NET INTEREST INCOME AND MARGIN 3.67 % $ 5,287 3.76 % $ 5,198
                     
Security California Bancorp & Subsidiaries
Interim Consolidated Average Balance Sheets and Yield Data (Unaudited)
(Dollars in thousands)
     
Three months ended September 30,
2014 2013
Yields Interest Yields Interest
Average or Income/ Average or Income/
Balance Rates Expense Balance Rates Expense
ASSETS
Interest earning assets
Loans, with fees $ 402,385 4.83 % $ 4,900 $ 327,380 4.84 % $ 3,995
Interest bearing with banks 25,227 0.36 % 23 20,083 0.45 % 23
Investment securities   144,694 2.12 %   766   158,284 2.23 %   884
Total interest earning assets   572,307 3.95 %   5,688   505,746 3.85 % $ 4,901
 
Non interest earning assets
Cash & due from banks 10,783 10,488
All other assets   6,824   7,990
Total non interest earning assets   17,607   18,478
 
TOTAL ASSETS $ 589,914 $ 524,224
 
LIABILITIES & SHAREHOLDERS' EQUITY
Interest bearing liabilities
Deposits
Demand interest bearing $ 21,835 0.14 % $ 8 $ 17,585 0.14 % $ 6
Money market & savings 166,958 0.54 % 228 137,009 0.55 % 190
Time certificate 93,727 0.66 % 156 88,105 0.63 % 139
Other borrowings   27,180 0.13 %   9   27,770 0.12 %   8
Total interest bearing liabilities   309,700 0.51 %   401   270,468 0.50 % $ 344
 
Non interest bearing liabilities
Demand deposits 210,248 189,390
Accrued interest & other liabilities   1,984   1,653
Total non interest bearing liabilities 212,232 191,043
Shareholders' equity   67,982   62,713
 
TOTAL LIABILITIES & SHAREHOLDERS'S EQUITY $ 589,914 $ 524,224
 
NET INTEREST INCOME AND MARGIN 3.67 % $ 5,287 3.58 % $ 4,558
                     
Security California Bancorp & Subsidiaries
Interim Consolidated Average Balance Sheets and Yield Data (Unaudited)
(Dollars in thousands)
     
Nine months ended September 30,
2014 2013
Yields Interest Yields Interest
Average or Income/ Average or Income/
Balance Rates Expense Balance Rates Expense
ASSETS
Interest earning assets
Loans, with fees $ 387,641 4.84 % $ 14,041 $ 327,789 4.84 % $ 11,859
Interest bearing with banks 22,323 0.41 % 67 19,500 0.45 % 66
Investment securities   146,085 2.26 %   2,474   134,907 2.06 %   2,083
Total interest earning assets   556,050 3.99 % $ 16,583   482,197 3.88 % $ 14,008
 
Non interest earning assets
Cash & due from banks 10,519 9,747
All other assets   7,794   8,931
Total non interest earning assets   18,313   18,678
 
TOTAL ASSETS $ 574,363 $ 500,874
 
LIABILITIES & SHAREHOLDERS' EQUITY
Interest bearing liabilities
Deposits
Demand interest bearing $ 19,279 0.14 % $ 20 $ 16,427 0.14 % $ 17
Money market & savings 158,448 0.52 % 619 127,948 0.56 % 537
Time certificate 91,386 0.65 % 445 88,514 0.66 % 436
Other borrowings   38,644 0.13 %   38   21,638 0.16 %   26
Total interest bearing liabilities   307,757 0.49 % $ 1,122   254,527 0.53 % $ 1,017
 
Non interest bearing liabilities -
Demand deposits 199,010 181,063
Accrued interest & other liabilities   1,558   644
Total non interest bearing liabilities 200,567 181,707
Shareholders' equity   66,039   64,640
 
TOTAL LIABILITIES & SHAREHOLDERS'S EQUITY $ 574,363 $ 500,874
 
NET INTEREST INCOME AND MARGIN 3.72 % $ 15,461 3.60 % $ 12,992
         
Security California Bancorp & Subsidiaries
Interim Consolidated Asset Quality and Credit Data (Unaudited)
(Dollars in thousands)
     
As of
  09/30/14     06/30/14     03/31/14     12/31/13     09/30/13  
ALLOWANCE FOR LOAN LOSSES
Beginning of period $ 6,160 $ 6,064 $ 5,742 $ 5,567 $ 5,942
Quarterly movement:
Provision for loan losses 185 450 269 432 350
Charge-offs - (390 ) - (295 ) (790 )
Recoveries   109     37     52     38     65  
End of period $ 6,454   $ 6,160   $ 6,064   $ 5,742   $ 5,567  
 
 
NON PERFORMING ASSETS
Loans accounted for on a non-accrual basis $ 5,261 $ 5,390 5,661 5,694 4,253
Loans with principal and/or interest
contractually past due 90 days and still
accruing interest   -     -     -     -     -  
 
Non performing loans 5,261 5,390 5,661 5,694 4,253
Other real estate owned   -     747     -     -     -  
 
Non performing assets 5,261 6,137 5,661 5,694 4,253
 
Loans restructured and in compliance with
modified terms   659     -     916     572     -  
 
Non performing assets and restructured loans $ 5,920   $ 6,137   $ 6,577   $ 6,266   $ 4,253  
 
Non Performing Loans by Asset Type
Commercial & Industrial $ 975 $ 1,078 $ 574 $ 592 $ 610
SBA 3,380 3,388 3,396 3,405 3,644
Consumer   907     923     1,692     1,697     -  
Other - - - - -
Total non performing loans by asset type $ 5,261   $ 5,390   $ 5,661   $ 5,694   $ 4,253  
 
 
ASSET QUALITY
Allowance for loan losses / gross loans 1.57 % 1.57 % 1.56 % 1.58 % 1.67 %
Allowance for loan losses / non performing loans 122.67 % 114.29 % 107.10 % 100.86 % 130.88 %
Non performing assets / total assets 0.87 % 1.04 % 0.98 % 1.02 % 0.78 %
Non performing loans /gross loans 1.28 % 1.38 % 1.45 % 1.56 % 1.28 %
Net quarterly charge-offs / gross loans 0.00 % -0.10 % 0.35 % -0.05 % -0.32 %

Contacts

Financial Profiles, Inc.
Matt Andrejczak, 310-622-8241

Contacts

Financial Profiles, Inc.
Matt Andrejczak, 310-622-8241