LOS ANGELES--(BUSINESS WIRE)--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.
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:
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Minimum Required |
Company |
Bank |
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| 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.
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Pacific Commerce Bancorp Consolidated Selected Financial Data – Unaudited (Amounts are in thousands, except for book value per share and shares outstanding data) |
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| 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 | |||||||||||||||||||
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Pacific Commerce Bancorp Consolidated Selected Financial Data – Unaudited (Amounts are in thousands, except for book value per share and shares outstanding data) |
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| 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 | |||||||||||||||||||||||||||||||
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Diluted EPS (excl. tax reform adj) |
$ | 0.60 | $ | - | $ | 0.15 |
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| 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 |
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- | - | ||||||||||||||||||||||||||||||||||||
| 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 | % | |||||||||||||||||||||||||||||||