Pacific Commerce Bancorp (PCBC) (the “Company”), parent company of Pacific Commerce Bank (the “Bank”) reported record earnings for the fourth quarter and for the full year ended December 31, 2016.
Highlights for the Year
- Completed the acquisition and integration of ProAmérica Bank, which operates as a division of Pacific Commerce Bank.
- Established a full service branch in Pasadena, California.
- Expanded the combined sales force to 15 from 10 at the prior year end.
Financial Highlights
- GAAP earnings for the fourth quarter equaled $1,526,000, or $0.17 per diluted share.
- GAAP earnings for the full year totaled $3,692,000, or $0.45 per diluted share.
- Core earnings, net of tax-effected merger-related expenses, totaled $4,445,000, or $0.54 per diluted share, for 2016.
- The return on average assets (ROAA) for the fourth quarter and full year were 1.11% and 0.78% respectively.
- The return on average equity (ROAE) in the fourth quarter and full year were 10.47%, and 7.29% respectively.
- The efficiency ratio for the fourth quarter and full year equaled 61.94% and 71.18% respectively.
- Total non-maturing deposits represented 70.1% of total deposits, and total demand deposits represented 48% of total deposits at December 31, 2016.
Total GAAP earnings for the 2016 fourth quarter equaled $1,526,000, or $0.17 per diluted share, compared to $631,000, or $0.09 per diluted share, in the fourth quarter of 2015. Earnings for the fourth quarter of 2015 were impacted by nonrecurring, merger related charges of $83,000, or $0.01 per diluted share, in connection with the 2015 Vibra Bank and 2016 ProAmérica Bank acquisitions. GAAP earnings for the third quarter of 2016 were $1,286,000, or $0.14 per diluted share.
For all of 2016, GAAP earnings equaled $3,692,000, or $0.45 per diluted share, compared to 2015 GAAP earnings of $1,495,000, or $0.25 per diluted share. Adjusting for tax-effected, merger related expenses of $1,081,000 incurred in 2016 associated with the ProAmérica Bank acquisition, core earnings for 2016 were $4,445,000, or $0.54 per diluted share. This compares with core earnings of $2,423,000, or $0.40 per diluted share, in 2015 after adjusting for tax-effected, merger related expenses of $1,328,000 associated with the Vibra Bank and ProAmérica acquisitions.
Chief Executive Officer Frank J. Mercardante said, “We are pleased to have exceeded all our goals for 2016, finishing the year well ahead of projections. Looking ahead, we remain excited about the momentum we have going into 2017, coupled with the improving prospects for a more normalized interest rate environment and the potential for some regulatory relief coming out of Washington in the near future.”
INCOME STATEMENT
Net interest income for the fourth quarter increased to $5,649,000, exclusive of the impact of purchase accounting accretion totaling $187,000, compared with $5,545,000 in the third quarter of 2016 and $3,349,000 million in the fourth quarter of 2015, also exclusive of purchase accounting accretion of $399,000 and $190,000, respectively. Average interest earning assets in the fourth quarter equaled $519.7 million compared to $503.8 million in the third quarter and $328.8 million in the fourth quarter of 2015. Average interest bearing liabilities in the fourth quarter equaled $280.5 million, compared to $288.1 million in the prior quarter and $199.0 million in the fourth quarter of 2015.
Total cost of deposits for the quarter, exclusive of any purchase accounting accretion benefit, equaled 40 basis points, compared to 42 basis points in the third quarter and 39 basis points in the fourth quarter of 2015. Including purchase accounting accretion benefit, the total cost of deposits for the fourth quarter equaled 44 basis points, compared to 46 basis points in the third quarter and 41 basis points in the fourth quarter of 2015.
The net interest margin for the fourth quarter, exclusive of the impact of purchase accounting accretion equaled 4.33% compared to 4.37% in the third quarter of 2016. For the full year the net interest margin equaled 4.56% compared to 4.27% in 2015, exclusive of the impact of purchase accounting accretion.
The Bank did not record a loan loss provision in the fourth quarter of 2016. A total provision of $250,000 was recorded for the full 2016 year. This compares with a negative provision in 2015 of $500,000.
Non-interest income in the fourth quarter of 2016 equaled $784,000, compared to $996,000 in the third quarter of 2016 and $990,000 in the fourth quarter of 2015. The decrease from the third quarter 2016 compared to the fourth quarter of 2016 was due to recognition of recoveries of previously charged-off ProAmérica loans. For the full year ended December 31, 2016 the total non-interest income was $3,088,000 compared to $2,334,000 for all of 2015. For the full year, the largest increases were in other operating income, SBA loan sales and service charges and fees.
Non-interest expenses, exclusive of merger related charges, in the fourth quarter of 2016 totaled $4,100,000, compared to $4,505,000 in the third quarter and $3,210,000 in the fourth quarter of 2015. The reduction in non-interest expense from the third quarter to the fourth quarter was due to a reduction in salaries and benefits of $240,000 while the increase from fourth quarter of 2015 to fourth quarter of 2016 was due to $475,000 of increases to salaries and benefits related to additional staffing related to the ProAmérica acquisition and establishment of the Pasadena Office.
For the twelve months ended December 31, 2016 non-interest expenses exclusive of merger related expenses increased by 40.8% to $15.5 million, from $11.2 million in the prior year. The largest increases were in salaries and benefits, information technology and occupancy expenses primarily related to the growth in the organization.
The return on average assets (ROAA) for the fourth quarter of 2016 and full year were 1.11% and 0.78% respectively. This compares to an ROAA of 0.70% in the prior year fourth quarter and 0.48% for all of 2015.
Adjusting for tax effected nonrecurring merger related charges in both years in connection with the ProAmérica Bank acquisition in 2016 and the Vibra Bank acquisition in 2015, the ROAA in each of those years were 0.94% and 0.82%, respectively.
The return on average equity (ROAE) in the 2016 fourth quarter equaled 10.47%, and 7.29% for the full year. This compares to an ROAE of 4.79% in the fourth quarter of 2015 and 4.40% for the full year. Adjusting for tax effected nonrecurring merger related charges in 2016 and 2015 in connection with the two acquisitions the ROAE in each of those years were 8.77% and 7.14%, respectively.
The efficiency ratio, exclusive of merger related charges, which measures total revenue to total operating expense, improved to 61.94% compared to 64.9% in the third quarter and from 74.67% in the fourth quarter of 2015 using core earnings as defined above. For the full 2016 year the efficiency ratio improved to 66.59% from 77.84% for all of 2015 based on core earnings.
BALANCE SHEET
Assets at December 31, 2016 increased to $539.6 million, compared to $353.5 million at the prior year-end. Total loans increased by 38.0% to $423.4 million compared to $306.7 million a year ago.
Total deposits increased by 61.6% to $458.1 million from $283.5 million a year ago, largely as a result of the ProAmérica Bank acquisition, the establishment of the Pasadena Office and a more concentrated effort on obtaining deposit relationships from borrowers. Total non-maturity deposits increased to $348.8 million from $205.0 million and now represent 70.1% of total deposits.
CREDIT QUALITY
Excluding $176.7 million in loans acquired from Vibra Bank and ProAmérica Bank that are covered under purchase accounting rules and are carried at a discount of 1.33% as of December 31, 2016, the allowance for loan and lease losses (ALLL) to total loans held for investment equaled 1.44% of loans outstanding. Total loans held for sale equaled $8.9 million at the end of the fourth quarter including $1.7 million in mortgage loans which were held at a discount of 2.00% to the face value of the note.
REGULATORY CAPITAL
Shareholders’ equity at the Company as of December 31, 2016 equaled $58.6 million, compared to $39.1 million a year ago. Both the Company and Bank remained “Well-Capitalized” by regulatory definition at December 31, 2016 with capital ratios as follows:
Minimum | Company | Bank | |||||||
| Tier 1 Leverage Ratio: | 4.00% | 8.92% | 9.90% | ||||||
| Common Equity Tier 1 Capital Ratio: | 4.50% | 10.88% | 12.08% | ||||||
| Tier 1 Capital Ratio: | 6.00% | 10.88% | 12.08% | ||||||
| Total Capital Ratio: | 8.00% | 11.71% | 12.91% | ||||||
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 SHEET | |||||||||||||||||||
| December 31, | December 31, | September 30, | |||||||||||||||||
2016 | 2015 | % Change | 2016 | ||||||||||||||||
| Assets | |||||||||||||||||||
| Cash and due from banks | $ | 25,644 | $ | 4,488 | 471.4 | % | $ | 25,803 | |||||||||||
| Interest Bearing Deposits with Other Banks | 64,381 | 28,398 | 126.7 | % | 58,305 | ||||||||||||||
| Federal Funds Sold | 3,000 | 3,000 | 0.0 | % | 3,000 | ||||||||||||||
| Investment securities | 74 | 252 | -70.6 | % | 127 | ||||||||||||||
| Mortgage Warehouse Loans Held for Sale | 1,696 | 9,288 | -81.7 | % | 1,092 | ||||||||||||||
| Other Loans Held for Sale | 9,596 | 8,389 | 14.4 | % | 10,021 | ||||||||||||||
| Loans, net of unearned income | 412,102 | 289,068 | 42.6 | % | 430,947 | ||||||||||||||
| Less: Allowance for loan losses | (3,583 | ) | (3,066 | ) | 16.9 | % | (3,493 | ) | |||||||||||
| Net Loans | 419,811 | 303,679 | 38.2 | % | 438,567 | ||||||||||||||
| Other assets | 26,650 | 16,652 | 60.0 | % | 26,347 | ||||||||||||||
| Total Assets | $ | 539,560 | $ | 356,469 | 51.4 | % | $ | 552,149 | |||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||
| Demand deposits | $ | 204,984 | $ | 111,963 | 83.1 | % | $ | 196,058 | |||||||||||
| Non-maturity interest bearing deposits | 143,815 | 93,114 | 54.5 | % | 154,148 | ||||||||||||||
| Time Deposits | 109,302 | 78,459 | 39.3 | % | 128,483 | ||||||||||||||
| Total Deposits | 458,101 | 283,536 | 61.6 | % | 478,689 | ||||||||||||||
| Borrowings | 20,905 | 29,430 | -29.0 | % | 13,943 | ||||||||||||||
| Accrued interest and other liabilities | 1,926 | 1,385 | 39.1 | % | 2,577 | ||||||||||||||
| Total Liabilities | 480,932 | 314,351 | 53.0 | % | 495,209 | ||||||||||||||
| Shareholders' Equity | |||||||||||||||||||
| Common stock | 56,984 | 41,161 | 38.4 | % | 56,822 | ||||||||||||||
| Retained Earnings (Deficit) | 1,644 | (2,047 | ) | 180.3 | % | 117 | |||||||||||||
| Other Comprehensive Income | - | 4 | -100.0 | % | 1 | ||||||||||||||
| Total Shareholders' Equity | 58,628 | 39,118 | 49.9 | % | 56,940 | ||||||||||||||
| Total Liabilities & Shareholders' Equity | $ | 539,560 | $ | 353,469 | 52.6 | % | $ | 552,149 | |||||||||||
| Book value per share at end of period | $ | 6.58 | $ | 5.98 | 10.0 | % | $ | 6.39 | |||||||||||
| Tangible Book Value per share at end of period | $ | 5.46 | $ | 5.41 | 0.9 | % | $ | 5.21 | |||||||||||
| Ending Shares outstanding | 8,912,269 | 6,543,701 | 36.2 | % | 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) | |||||||||||||
| STATEMENT OF INCOME | |||||||||||||
| For the Twelve Months Ended December 31, | |||||||||||||
2016 | 2015 | % change | |||||||||||
| Total interest income | $ | 21,609 | $ | 13,212 | 63.6 | % | |||||||
| Total interest expense | 1,354 | 721 | 87.8 | % | |||||||||
| Net interest income | 20,255 | 12,491 | 62.2 | % | |||||||||
| Provision for loan losses | 250 | (500 | ) | 150.0 | % | ||||||||
| Total non-interest income | 3,088 | 2,334 | 32.3 | % | |||||||||
Non-Interest Expense (Non-merger Related) | 15,535 | 11,198 | 38.7 | % | |||||||||
Core earnings before Merger Related Expenses and Income Taxes | 7,558 | 4,127 | 83.1 | % | |||||||||
Non-Recurring Merger Related Expenses | 1,081 | 1,328 | -18.6 | % | |||||||||
| Income tax expense | 2,785 | 1,304 | 113.6 | % | |||||||||
| Net Income | $ | 3,692 | $ | 1,495 | 147.0 | % | |||||||
| Basic earnings per share | $ | 0.46 | $ | 0.25 | |||||||||
| Diluted earnings per share | $ | 0.45 | $ | 0.25 | |||||||||
| Diluted core earnings per average share | $ | 0.54 | $ | 0.40 | |||||||||
| Average shares outstanding | 8,004,766 | 5,985,648 | |||||||||||
| Diluted average shares outstanding | 8,160,970 | 6,044,347 | |||||||||||
| Three Months Ended | % Change | Three Months | ||||||||||||||
| Dec. 31, 2016 | Dec. 31, 2015 | 12/16 to 12/15 | Sept. 30, 2016 | |||||||||||||
| Total interest income | $ | 6,223 | $ | 3,624 | 71.7 | % | $ | 6,328 | ||||||||
| Total interest expense | 387 | 203 | 90.6 | % | 384 | |||||||||||
| Net interest income | 5,836 | 3,421 | 70.6 | % | 5,944 | |||||||||||
| Provision for loan losses | 0 | 0 | 250 | |||||||||||||
| Total non-interest income | 784 | 990 | -20.8 | % | 996 | |||||||||||
Non-Interest Expense (Non-merger Related) | 4,100 | 3,210 | 27.7 | % | 4,505 | |||||||||||
Core earnings before Merger Related Expenses and Income Taxes | 2,520 | 1,201 | 109.8 | % | 2,185 | |||||||||||
Non-Recurring Merger Related Expenses | 0 | 83 | -100.0 | % | 0 | |||||||||||
| Income tax expense | 994 | 487 | 104.1 | % | 899 | |||||||||||
| Net Income | $ | 1,526 | $ | 631 | 141.8 | % | $ | 1,286 | ||||||||
| Basic earnings per share | $ | 0.17 | $ | 0.10 | 77.6 | % | $ | 0.14 | ||||||||
| Diluted earnings per share | $ | 0.17 | $ | 0.09 | 84.5 | % | $ | 0.14 | ||||||||
Core earnings per average share, net of tax | $ | 0.17 | $ | 0.11 | 58.7 | % | $ | 0.14 | ||||||||
| Average shares outstanding | 8,912,269 | 6,543,701 | 36.2 | % | 8,911,682 | |||||||||||
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