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CFNB Revises 2014 Fourth Quarter and Year End Earnings Down

IRVINE, Calif.--(BUSINESS WIRE)--California First National Bancorp (NASDAQ: CFNB) ("CalFirst Bancorp") today announced a downward adjustment of 13% to previously reported net earnings for the fourth quarter ended June 30, 2014 and 4% reduction to previously reported net earnings for the fiscal year ended June 30, 2014. The revision to results reported by CalFirst Bancorp on July 30, 2014 relates entirely to the incorrect recognition of operating lease income from one new lease booked in June 2014. As a result of the error, operating lease income was overstated in the fourth quarter and fiscal year by $466,000, with net income in both periods overstated by $287,000. This revision has no effect on any previously reported periods or any of the Company’s financial statements previously filed with the SEC.

Revised earnings of $1.85 million for the fourth quarter of fiscal 2014 compare to earnings of $1.9 million for the fourth quarter of fiscal 2013. For the fiscal year ended June 30, 2014, revised net earnings of $7.0 million are down 4% from $7.35 million reported for fiscal 2013. Diluted earnings per share for the fourth quarter of 2014 were revised to $.18 per share, unchanged from 2013 and down from $0.20 per share previously reported. Diluted earnings per share for fiscal 2014 are revised to $.67 per share, 4% below the $0.70 per share previously reported for fiscal 2014 and actual EPS for fiscal 2013. This revision is not material to the Company’s consolidated assets or stockholders’ equity.

Revised Consolidated Statements of Earnings

                   

 

 

Percent Change

Three Months Ended Years Ended

 

As Reported 7/30/14

 

to 7/30/14 Release

June 30, June 30, Q4   Year Q4   Year
Dollars in thousands, except per share amounts

2014

 

2013

2014

 

2013

2014

2014

2014

2014

Revised Revised
Direct finance and loan income $4,748 $4,835 $18,370 $18,995 $4,748 $18,370
Investment and interest income 255   483 1,371   2,408 255   1,371
Total direct finance, loan and interest income 5,002 5,318 19,741 21,403 5,002 19,741
Interest expense on deposits and borrowings 753   783 3,037   2,664 753   3,037
Net direct finance, loan and interest income 4,249 4,535 16,704 18,739 4,249 16,704
Provision for credit losses 200   - 200   275 200   200

Net direct finance, loan and interest income after provision for credit losses

4,049 4,535 16,504 18,464 4,049 16,504

Non-interest income

Operating and sales-type lease income 884 360 2,152 1,711 1,350 2,618 -34 % -18 %
Gain on sale of leases, loans and leased property 391 304 2,980 2,278 391 2,980
Gains recorded on investment securities - - - 316 - -
Other fee income – net 61   187 432   526 61   432
Total non-interest income 1,337 851 5,564 4,831 1,802 6,031 -26 % -8 %

Non-interest expenses

Compensation and employee benefits 1,905 1,915 7,796 8,505 1,905 7,796
Occupancy 158 227 682 922 158 682
Professional services 144 102 590 585 144 590
Other general and administrative 401   365 1,927   1,598 401   1,927
Total non-interest expenses 2,608   2,609 10,995   11,610 2,608   10,995
 
Earnings before income taxes 2,778 2,777 11,073 11,685 3,244 11,539 -14 % -4 %
Income taxes 932   871 4,022   4,331 1,111   4,201 -16 % -4 %
Net earnings $1,846   $1,906 $7,051   $7,354 $2,133   $7,338 -13 % -4 %
Basic earnings per share $ 0.18 $ 0.18 $ 0.67 $ 0.70 $ 0.20 $ 0.70 -14 % -4 %
Diluted earnings per share $ 0.18 $ 0.18 $ 0.67 $ 0.70 $ 0.20 $ 0.70 -14 % -4 %
 
Weighted average common shares outstanding 10,460 10,447 10,453 10,446 10,448 10,450
Diluted number of common shares outstanding 10,463 10,454 10,456 10,453 10,452 10,453
 
 

Management reviewed the matter with the Audit Committee of the Board of Directors, and reached the determination that it needed to revise the previously released earnings report. The issue related to the operating lease was identified during the process of completing the annual audit and preparing the Company’s Form 10-K to be filed for the year ended June 30, 2014. Since no financial statements for the 2014 fourth quarter and fiscal year end have been filed as of yet, the Company will not need to amend or restate any previously filed financial statements. While our process failed to recognize the issue related to income recognition on this unique operating lease prior to the issuance of the Company’s year-end press release, our internal controls ultimately identified the error. Our internal review of the matter is ongoing, but based on the unique nature of this transaction, we do not believe there is a weakness in our internal controls over financial reporting. If we obtain additional information material to our periodic financial reports, we will make appropriate disclosure.

California First National Bancorp is a bank holding company with leasing and bank operations based in Orange County, California. California First National Bank is an FDIC-insured national bank that gathers deposits using telephone, the Internet, and direct mail from a centralized location, and provides lease financing and commercial loans to businesses and organizations nationwide through a centralized marketing program designed to offer cost-effective alternatives.

This press release contains forward-looking statements, which involve management assumptions, risks and uncertainties. The statements in this press release that are not strictly historical in nature constitute "forward-looking statements." Such statements include expectations regarding the Company's expected revision to our earnings and financial statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual results to be different from the results expressed or implied by such forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this press release to reflect events or circumstances arising after the date hereof. For further discussion regarding management assumptions, risks and uncertainties, readers should refer to the Company’s 2013 Annual Report on Form 10-K and the 2014 quarterly reports on Form 10-Q.

Contacts

California First National Bancorp
S. Leslie Jewett, 949-255-0500
ljewett@calfirstbancorp.com