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BBCN Bancorp Reports 2014 Second Quarter Financial Results

BBCN Bancorp, Inc. Company Logo

Q2 2014 Summary:

  • Net income totals $22.3 million, or $0.28 per diluted common share
  • New loan production for the quarter amounts to $344 million
  • Loans receivable increase to $5.35 billion, reflecting a 5% increase year-to-date
  • Total deposits increase to $5.47 billion, reflecting a 6% increase for the first six months of 2014
  • Total assets increase to $6.87 billion, reflecting a 6% increase from December 31, 2013

LOS ANGELES, July 21, 2014 (GLOBE NEWSWIRE) -- BBCN Bancorp, Inc. (the "Company") (Nasdaq:BBCN), the holding company of BBCN Bank (the "Bank"), today reported net income of $22.3 million, or $0.28 per diluted common share, for the three months ended June 30, 2014. This compares with net income of $22.2 million, or $0.28 per diluted common share, for the preceding 2014 first quarter and $22.7 million, or $0.29 per diluted common share, for the year-ago second quarter.

"BBCN's 2014 second quarter represents another quarter of all-around solid performance, marked by organic loan and deposit growth, improving asset quality trends and strong profitability levels," said Kevin S. Kim, Chairman and Chief Executive Officer of BBCN Bancorp, Inc. "Loan growth was solid at 12% on an annualized basis, with loan originations accelerating to $344 million for the quarter and representing a 15% increase over new loan volumes in the preceding first quarter and a 65% increase over production in the year-ago second quarter. Total deposits grew 10% on a quarterly annualized basis, and core deposits accounted for 92% of the growth during the quarter. Asset quality trends were favorable, with lower end-of-period balances in nonaccrual and criticized loans, when compared with the preceding first quarter, and we continued to maintain higher-than-industry levels of profitability, with annualized pre-tax, pre-provision earnings representing 2.36% of our average assets.

"The overall consistency of our financial performance quarter after quarter exemplifies the strong execution of our management team and the dedication of our business development teams. With the progress we are making on our strategic goals and the investments we are making in our organization, we believe BBCN is well positioned to enhance its value offering to its customers, employees and shareholders as the preeminent Korean-American bank in the United States," said Kim.

Financial Highlights
(Dollars in thousands, except per share data) At or for the Three Months Ended
6/30/2014 3/31/2014 6/30/2013
Net income $ 22,312 $ 22,196 $ 22,671
Diluted earnings per share $ 0.28 $ 0.28 $ 0.29
Net interest income before provision for loan losses $ 67,490 $ 64,966 $ 62,103
Net interest margin 4.20% 4.29% 4.49%
Noninterest income $ 10,492 $ 11,095 $ 10,618
Noninterest expense $ 37,739 $ 36,275 $ 34,429
Net loans receivable $ 5,280,187 $ 5,125,095 $ 4,446,447
Deposits $ 5,470,388 $ 5,334,560 $ 4,576,799
Nonaccrual loans (1) $ 42,651 $ 47,314 $ 44,987
ALLL to loans receivable 1.25% 1.27% 1.59%
ALLL to nonaccrual loans (1) 156.78% 138.86% 159.32%
ALLL to nonperforming assets (1) (2) 62.40% 62.66% 78.71%
Provision for loan losses $ 2,996 $ 3,026 $ 800
Net charge offs $ 1,825 $ 4,647 $ 2,393
ROA 1.31% 1.36% 1.54%
ROE 10.59% 10.84% 11.58%
Efficiency ratio 48.39% 47.69% 47.34%
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $30.0 million, $31.2 million and $21.0 million at June 30, 2014, March 31, 2014 and June 30, 2013, respectively.
(2) Nonperforming assets exclude acquired credit impaired loans totaling $43.7 million, $46.0 million and $18.5 million at June 30, 2014, March 31, 2014 and June 30, 2013, respectively.

Operating Results for the Second Quarter of 2014

The comparability of BBCN's operating results with past performance is impacted by acquisition accounting adjustments related to past acquisitions. The Company provides the following supplemental information to facilitate a better understanding of past financial performance. Operating results for the three months ended June 30, 2014, March 31, 2014, and June 30, 2013 include the following pre-tax acquisition accounting adjustments related to mergers:

Three Months Ended
June 30, March 31, June 30,
2014 2014 2013
Accretion of discount on acquired performing loans $ 4,575 $ 3,202 $ 6,637
Accretion of discount on acquired credit impaired loans 2,096 2,645 1,032
Amortization of premium on acquired FHLB borrowings 94 92 92
Accretion of discount on acquired subordinated debt (40) (91) (48)
Amortization of premium on acquired time deposits 231 314 247
Increase to pre-tax income $ 6,956 $ 6,162 $ 7,960

Net Interest Income and Net Interest Margin. Net interest income before provision for loan losses totaled $67.5 million for the 2014 second quarter, reflecting a 4% increase over $65.0 million in the preceding first quarter of 2014 and a 9% increase over $62.1 million in the prior-year second quarter. The Company attributed the increases largely to the growth in its loans receivable over prior periods, reflecting robust levels of organic loan originations, as well as strategic acquisitions made during 2013 and the reduction in the level of nonaccrual loans. Overall, average interest earning assets for the 2014 second quarter rose 5% over than the preceding first quarter and increased 16% over the year-ago second quarter.

The net interest margin (net interest income divided by average interest earning assets) and the impact of acquisition accounting adjustments are summarized in the following table:

Three Months Ended
6/30/2014 3/31/2014 change 6/30/2013 change
Net interest margin, excluding the effect of acquisition accounting adjustments 3.72% 3.82% (0.10)% 3.86% (0.14)%
Acquisition accounting adjustments 0.48 0.47 0.01 0.63 (0.15)
Net interest margin 4.20% 4.29% (0.09)% 4.49% (0.29)%

The net interest margin for the 2014 second quarter decreased 9 basis points from the preceding first quarter to 4.20%, and 10 basis points on a core basis, excluding the effect of acquisition accounting adjustments, reflecting a less favorable mix of earning assets versus comparable periods.

Compared with the prior-year second quarter, net interest margin for the 2014 second quarter declined 29 basis points, largely due to a decrease in the weighted average yield on loans. Excluding the effect of acquisition accounting adjustments, the core net interest margin for the current second quarter declined 14 basis points from the year-ago period.

The weighted average yield on loans and the impact of acquisition accounting adjustments are summarized in the following table:

Three Months Ended
6/30/2014 3/31/2014 change 6/30/2013 change
Weighted average yield on loans, excluding the effect of acquisition accounting adjustments 4.86% 4.83% 0.03% 5.02% (0.16)%
Acquisition accounting adjustments 0.58 0.54 0.04 0.76 (0.18)
Weighted average yield on loans 5.44% 5.37% 0.07% 5.78% (0.34)%

The weighted average yield on loans for the 2014 second quarter rose 7 basis points to 5.44% from the preceding first quarter. On a core basis when excluding the effect of acquisition accounting adjustments, the weighted average yield on loans increased 3 basis points. The weighted average yield on new loans originated during the 2014 second quarter was 4.52%, relatively flat with 4.53% in the preceding first quarter. Compared with the prior-year period, the weighted average yield on loans for the 2014 second quarter decreased 34 basis points and 16 basis points on a core basis, excluding the effect of acquisition accounting adjustments.

The composition of fixed and variable rate loans and the associated weighted average contractual rates are summarized in the following table:

6/30/2014 3/31/2014 change 6/30/2013 change
Fixed rate loans
As a percentage of total loans 50% 49% 1% 40% 10%
Weighted average contractual rate 4.85% 4.90% (0.05)% 5.31% %
Variable rate loans
As a percentage of total loans 50% 51% (1)% 60% (10)%
Weighted average contractual rate 4.29% 4.33% (0.04)% 4.50% (0.21)%

The declines in the weighted average contractual rate for fixed rate loans for the 2014 first quarter versus prior periods reflect what continues to be a highly competitive rate environment for fixed rate commercial real estate loans in the current interest rate environment.

The weighted average cost of deposits and the impact of acquisition accounting adjustments are summarized in the following table:

Three Months Ended
6/30/2014 3/31/2014 change 6/30/2013 change
Weighted average cost of deposits, excluding the effect of acquisition accounting adjustments 0.55% 0.55% −% 0.51% 0.04%
Acquisition accounting adjustments (0.01) (0.03) 0.02 (0.02) 0.01
Weighted average cost of deposits 0.54% 0.52% 0.02% 0.49% 0.05%

The weighted average cost of deposits for the 2014 second quarter was relatively stable with the preceding first quarter, up only 2 basis points on a reported basis and flat on a core basis, excluding the effect of amortization of premium on time deposits assumed in mergers. Compared with the prior-year period, the weighted average cost of deposits for the 2014 second quarter increased 5 basis points and increased 4 basis points on a core basis, excluding the effect of premium amortization on time deposits assumed in mergers.

Noninterest Income. Total noninterest income was relatively stable at $10.5 million for the 2014 second quarter, compared with $11.1 million in the preceding 2014 first quarter and $10.6 million in the prior-year second quarter. The Company noted that the 2014 first quarter included a gain on sales of other real estate owned of $406,000, compared with a gain of $31,000 in the current second quarter and a loss of $11,000 in the 2013 second quarter.

Noninterest Expense. Total noninterest expense for the second quarter of 2014 amounted to $37.7 million, reflecting a 4% increase from $36.3 million in the preceding 2014 first quarter, which is largely attributed to an increase in credit related expenses, partially offset by a decrease in salaries and employee benefits. Compared with the prior-year second quarter, total noninterest expense increased 10% from $34.4 million, reflecting the combination of Foster Bankshares in the third quarter of 2013, as well as higher credit related expenses.

Salaries and employee benefits expense for the 2014 second quarter declined 4% from the preceding first quarter, which included separation payments related to the retirement of the Bank's former chief executive officer. Compared with the prior-year second quarter, the increase in salaries and benefits expense reflects the growth in FTEs related to the Foster acquisition, which was completed on August 13, 2013. The total number of FTEs was 875 as of June 30, 2014, 860 as of March 31, 2014, and 749 as of June 30, 2013.

Credit related expenses, which previously were included in other expenses, amounted to $3.0 million for the 2014 second quarter, compared with $1.4 million in the preceding first quarter and $2.2 million in the year-ago second quarter. The Company attributed the increase in credit related expenses versus prior periods to property tax and insurance related payments made to protect BBCN's interest in the underlying collateral of loans.

Income Tax Provision. The effective tax rate for the 2014 second quarter was 40.1%, compared with 39.6% for the preceding 2014 first quarter and 39.5% for the 2013 second quarter.

Balance Sheet Summary

Loans receivable totaled $5.35 billion at June 30, 2014, reflecting a 3% increase over $5.19 billion at March 31, 2014, and a 5% increase year-to-date over $5.07 billion at December 31, 2013.

Total new loan originations during the second quarter of 2014 amounted to $343.7 million, including SBA loan originations of $85.0 million. Sales of SBA loans to the secondary market and gains derived from those sales are based substantially on the production of SBA 7(a) loans. Production of SBA 7(a) loans amounted to $62.2 million for the second quarter of 2014, compared with $38.1 million for the preceding 2014 first quarter. During the 2014 second quarter, the Company sold $31.3 million of its SBA loans held for sale.

Aggregate pay offs and pay downs during the 2014 second quarter amounted to $231.2 million, compared with $197.9 million for the preceding first quarter and $222.8 million for the year-ago second quarter.

Total deposits amounted to $5.47 billion at June 30, 2014, compared with $5.33 billion at March 31, 2014 and $5.15 billion at year-end 2013. The increase in total deposits from March 31, 2014 is predominantly due to higher balances in noninterest bearing demand deposits and money market accounts, which grew 5% and 4%, respectively. Noninterest bearing deposits at June 30, 2014 totaled $1.51 billion and accounted for 28% of total deposits.

Credit Quality

The provision for loan losses for the 2014 second quarter was $3.0 million, compared with $3.0 million for the preceding 2014 first quarter and $800,000 for the prior-year second quarter.

For a more detailed understanding of the changes in the Allowance for Loan and Lease Losses ("ALLL"), the composition of the ALLL has been segmented for disclosure purposes between loans accounted for under the amortized cost method (referred to as "Legacy Loans") and loans acquired through the Center Financial, Pacific International and Foster transactions (referred to as "Acquired Loans"). The Acquired Loans are further segregated between performing and credit impaired loans.

The composition of the ALLL as of June 30, 2014, March 31, 2014, and June 30, 2013 is as follows:

(dollars in thousands) 6/30/2014 3/31/2014 6/30/2013
Legacy Loans (1) $ 58,877 $ 58,203 $ 61,316
Acquired Performing Loans (2) 2,113 1,936 5,825
Acquired Credit Impaired Loans (2) 5,880 5,560 4,534
Total ALLL $ 66,870 $ 65,699 $ 71,675
Loans receivable $ 5,347,057 $ 5,190,794 $ 4,518,122
ALLL coverage ratio 1.25% 1.27% 1.59%
(1) Legacy Loans include loans originated by the Bank's predecessor bank, loans originated by BBCN and loans that were acquired and that have been refinanced as new loans.
(2) Acquired Loans were marked to fair value at acquisition date, and the allowance for loan losses reflect provisions for credit deterioration since the acquisition date.

Following are the components of criticized loan balances as of June 30, 2014, March 31, 2014, and June 30, 2013:

(dollars in thousands) 6/30/2014 3/31/2014 6/30/2013
Special Mention (1) $ 92,470 $ 93,554 $ 108,788
Classified (1) $ 242,258 $ 253,342 $ 220,677
Criticized $ 334,728 $ 346,896 $ 329,465
(1) Balances include Acquired Loans which were marked to fair value on the date of acquisition.

The Company defines nonperforming loans to include delinquent loans past due 90 days or more on nonaccrual status, plus delinquent loans past due 90 days or more on accrual status (excluding acquired credit impaired loans) and accruing restructured loans.

Nonperforming loans at June 30, 2014 totaled $86.6 million, or 1.62% of loans receivable, compared with $84.8 million, or 1.63% of loans receivable, at March 31, 2014 and $81.5 million, or 1.80% of loans receivable, at June 30, 2013. Nonaccrual loans at June 30, 2014 declined to $42.7 million, or 0.80% of loans receivable, compared with $47.3 million, or 0.91% of loans receivable, at March 31, 2014 and $45.0 million, or 1.00% at June 30, 2013. The Company noted that a restructured nonaccrual loan with an outstanding balance of $5.1 million moved to accrual status during the quarter as an accruing restructured loan. This migration contributed to a decrease in nonaccrual loan balances at the end of the 2014 second quarter from the preceding first quarter, and conversely resulted in an increase in accruing restructured loans as of June 30, 2014.

Nonperforming assets, including other real estate owned, amounted to $107.2 million at June 30, 2014, or 1.56% of total assets, compared with $104.8 million, or 1.57% of total assets, at March 31, 2014, and $91.1 million, or 1.55% of total assets, at June 30, 2013.

Net loan charge-offs for the 2014 second quarter totaled $1.8 million and equaled 0.14% of average loans receivable on an annualized basis. This compares with net loan charge offs of $4.6 million, or 0.36% of average loans receivable on an annualized basis, for the preceding 2014 first quarter and $2.4 million, or 0.21% of average loans receivable on an annualized basis, for the year-ago second quarter.

The allowance for loan losses at June 30, 2014 was $66.9 million, or 1.25% of loans receivable (excluding loans held for sale), compared with $65.7 million, or 1.27%, at March 31, 2014 and $71.7 million, or 1.59%, at June 30, 2013. The coverage ratio of the allowance for loan losses to nonperforming loans (excluding acquired credit impaired loans) was 77.26% at June 30, 2014, compared with 77.44% at March 31, 2014 and 87.98% at June 30, 2013.

Impaired loans (defined as loans for which it is probable that not all principal and interest payments due will be collected in accordance with the contractual terms and restructured loans) totaled $124.2 million at June 20, 2014, compared with $121.8 million at March 31, 2014 and $98.2 million at June 30, 2013.

Capital

At June 30, 2014, the Company continued to exceed all regulatory capital requirements to be classified as a "well-capitalized" institution, as summarized in the following table.

6/30/2014 3/31/2014 6/30/2013
Leverage Ratio 11.66% 11.88% 12.60%
Tier 1 Risk-based Ratio 13.71% 13.70% 14.87%
Total Risk-based Ratio 14.90% 14.89% 16.12%

Tangible common equity per share and as a percentage of tangible assets are summarized in the following table:

6/30/2014 3/31/2014 6/30/2013
Tangible common equity per share (1) $9.34 $9.08 $8.65
Tangible common equity to tangible assets (1) 10.99% 11.00% 11.88%
(1) Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and net other intangible assets divided by total assets less goodwill and net other intangible assets. Management reviews tangible common equity to tangible assets in evaluating the Company's capital levels and has included this ratio in response to market participant interest in tangible common equity as a measure of capital. The accompanying financial information includes a reconciliation of the ratio of tangible common equity to tangible assets with stockholders' equity and total assets.

Investor Conference Call

The Company will host an investor conference call on Tuesday, July 22, 2014 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for the first quarter of 2014. Investors and analysts may access the conference call by dialing 888-317-6016 (domestic) or 412-317-6016 (international), and asking for the "BBCN Bancorp Conference Call." Other interested parties are invited to listen to a live webcast of the call available in the Investor Relations section under About Us at BBCN Bancorp's website BBCNbank.com. After the live webcast, a replay will remain available in the Investor Relations section of BBCN Bancorp's website for one year. A replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) through July 30, 2014, passcode 10048989.

About BBCN Bancorp, Inc.

BBCN Bancorp, Inc. is the holding company of BBCN Bank, the largest Korean-American bank in the nation with $6.9 billion in assets as of June 30, 2014. Headquartered in Los Angeles and serving a diverse mix of customers mirroring its communities, BBCN operates 49 branches in California, New York, New Jersey, Illinois, Washington and Virginia, along with six loan production offices in Seattle, Denver, Dallas, Atlanta, Northern California and Annandale, Virginia. BBCN specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and business lending, SBA lending and international trade financing. BBCN Bank is a California-chartered bank and its deposits are insured by the FDIC to the extent provided by law. BBCN is an Equal Opportunity Lender.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about future operations and projected full-year financial results that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include but are not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services, and pricing. Readers should carefully review the risk factors and the information that could materially affect the Company's financial results and business, described in documents the Company files from time to time with the Securities and Exchange Commission, including its quarterly reports on Form 10-Q and Annual Reports on Form 10-K, and particularly the discussions of business considerations and certain factors that may affect results of operations and stock price set forth therein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

BBCN Bancorp, Inc.
Consolidated Financial Statements and Selected Financial Data
Unaudited (Dollars in Thousands, Except per Share Data)
Assets 6/30/2014 3/31/2014 % change 12/31/2013 % change 6/30/2013 % change
Cash and due from banks $ 414,919 $ 403,111 3% $ 316,705 31% $ 296,330 40%
Securities available for sale, at fair value 746,683 725,229 3% 705,751 6% 725,239 3%
Federal Home Loan Bank and Federal Reserve Bank stock 28,399 27,902 2% 27,941 2% 26,261 8%
Loans held for sale, at the lower of cost or fair value 53,324 38,157 40% 44,115 21% 43,111 24%
Loans receivable 5,347,057 5,190,794 3% 5,074,176 5% 4,518,122 18%
Allowance for loan losses (66,870) (65,699) -2% (67,320) 1% (71,675) 7%
Net loans receivable 5,280,187 5,125,095 3% 5,006,856 5% 4,446,447 19%
Accrued interest receivable 13,133 13,410 -2% 13,403 -2% 13,054 1%
Premises and equipment, net 30,699 31,290 -2% 30,894 -1% 23,226 32%
Bank owned life insurance 45,354 45,062 1% 44,770 1% 44,400 2%
Goodwill 105,401 105,401 0% 105,401 0% 92,288 14%
Other intangible assets, net 4,535 4,859 -7% 5,184 -13% 3,125 45%
Other assets 143,657 148,035 -3% 174,179 -18% 149,533 -4%
Total assets $ 6,866,291 $ 6,667,551 3% $ 6,475,199 6% $ 5,863,014 17%
Liabilities
Deposits $ 5,470,388 $ 5,334,560 3% $ 5,148,057 6% $ 4,576,799 20%
Borrowings from Federal Home Loan Bank 461,166 421,260 9% 421,352 9% 421,539 9%
Subordinated debentures 42,076 42,037 0% 57,410 -27% 41,920 0%
Accrued interest payable 6,087 5,740 6% 4,821 26% 4,499 35%
Other liabilities 33,965 31,795 7% 34,185 -1% 37,232 -9%
Total liabilities 6,013,682 5,835,392 3% 5,665,825 6% 5,081,989 18%
Stockholders' Equity
Common stock, $0.001 par value; authorized, 150,000,000 shares at June 30, 2014, March 31, 2014, December 31, 2013 and June 30, 2013; issued and outstanding, 79,493,732, 79,488,899, 79,441,525 and 79,205,840 shares and at June 30, 2014, March 31, 2014, December 31, 2013 and June 30, 2013, respectively 79 79 0% 79 0% 79 0%
Capital surplus 541,173 540,979 0% 540,876 0% 537,085 1%
Retained earnings 311,195 294,842 6% 278,604 12% 248,866 25%
Accumulated other comprehensive income, net 162 (3,741) 104% (10,185) 102% (5,005) 103%
Total stockholders' equity 852,609 832,159 2% 809,374 5% 781,025 9%
Total liabilities and stockholders' equity $ 6,866,291 $ 6,667,551 3% $ 6,475,199 6% $ 5,863,014 17%
Three Months Ended Six Months Ended
6/30/2014 3/31/2014 % change 6/30/2013 % change 6/30/2014 6/30/2013 % change
Interest income:
Interest and fees on loans $ 71,687 $ 68,694 4% $ 65,473 9% $ 140,381 $ 128,502 9%
Interest on securities 4,078 4,095 0% 3,526 16% 8,172 6,953 18%
Interest on federal funds sold and other investments 688 565 22% 380 81% 1,253 667 88%
Total interest income 76,453 73,354 4% 69,379 10% 149,806 136,122 10%
Interest expense:
Interest on deposits 7,272 6,690 9% 5,647 29% 13,962 11,055 26%
Interest on other borrowings 1,691 1,698 0% 1,629 4% 3,389 3,248 4%
Total interest expense 8,963 8,388 7% 7,276 23% 17,351 14,303 21%
Net interest income before provision for loan losses 67,490 64,966 4% 62,103 9% 132,455 121,819 9%
Provision for loan losses 2,996 3,026 -1% 800 275% 6,022 8,306 -27%
Net interest income after provision for loan losses 64,494 61,940 4% 61,303 5% 126,433 113,513 11%
Noninterest income:
Service fees on deposit accounts 3,360 3,472 -3% 2,922 15% 6,832 5,797 18%
Net gains on sales of SBA loans 2,811 2,722 3% 3,295 -15% 5,533 5,989 -8%
Net gains on sales of other loans -- -- 0% 19 -100% -- 62 -100%
Net gains on sales of securities available-for-sale -- -- 0% -- 0% -- 54 -100%
Net gains (loss) on sales of OREO 31 406 -92% (11) 382% 437 (9) 4956%
Other income and fees 4,290 4,495 -5% 4,393 -2% 8,785 8,665 1%
Total noninterest income 10,492 11,095 -5% 10,618 -1% 21,587 20,558 5%
Noninterest expense:
Salaries and employee benefits 18,143 18,938 -4% 16,219 12% 37,082 32,551 14%
Occupancy 4,715 4,623 2% 4,835 -2% 9,339 8,846 6%
Furniture and equipment 2,012 2,014 0% 1,613 25% 4,026 3,186 26%
Advertising and marketing 1,508 1,088 39% 1,190 27% 2,596 2,463 5%
Data processing and communications 2,299 2,122 8% 1,861 24% 4,420 3,505 26%
Professional fees 1,315 1,313 0% 1,443 -9% 2,628 2,744 -4%
FDIC assessment 1,080 1,023 6% 858 26% 2,103 1,552 36%
Merger and integration expenses 50 173 -71% 385 -87% 224 1,690 -87%
Credit related expenses 3,016 1,421 112% 2,203 37% 4,437 3,918 13%
Other 3,601 3,560 1% 3,822 -6% 7,158 7,249 -1%
Total noninterest expense 37,739 36,275 4% 34,429 10% 74,013 67,704 9%
Income before income taxes 37,247 36,760 1% 37,492 -1% 74,007 66,367 12%
Income tax provision 14,935 14,564 3% 14,821 1% 29,499 26,235 12%
Net income $ 22,312 $ 22,196 1% $ 22,671 -2% $ 44,508 $ 40,132 11%
Earnings Per Common Share:
Basic $ 0.28 $ 0.28 $ 0.29 $ 0.56 $ 0.51
Diluted $ 0.28 $ 0.28 $ 0.29 $ 0.56 $ 0.51
Average Shares Outstanding:
Basic 79,490,767 79,489,579 79,062,233 79,481,359 78,746,444
Diluted 79,614,046 79,639,839 79,236,732 79,618,446 79,000,811
Three months ended Six Months Ended
6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013 6/30/2014 6/30/2013
Net Income $ 22,312 $ 22,196 $ 18,071 $ 23,552 $ 22,671 $ 44,508 $ 40,132
Add back: Income tax 14,935 14,564 11,047 15,117 14,821 29,499 26,235
Add back: Provision for loan losses 2,996 3,026 10,950 744 800 6,022 8,306
Pre-tax, pre-provision income (PTPP) 1 $ 40,243 $ 39,786 $ 40,068 $ 39,413 $ 38,292 $ 80,029 $ 74,673
PTPP to average assets (annualized) 2.36% 2.44% 2.51% 2.56% 2.60% 2.40% 2.57%
1 While pre-tax, pre-provision income is a non-GAAP performance measure, we believe it is a useful measure in analyzing underlying performance trends, particularly in times of economic stress. It is the level of earnings adjusted to exclude the impact of income tax and provision expense.
At or for the Three Months Ended (Annualized) At or for the Six Months Ended (Annualized)
Profitability measures: 6/30/2014 3/31/2014 6/30/2013 6/30/2014 6/30/2013
ROA 1.31% 1.36% 1.54% 1.33% 1.38%
ROE 10.59% 10.84% 11.58% 10.71% 10.37%
Return on average tangible equity 2 12.18% 12.52% 13.21% 12.35% 11.83%
Net interest margin 4.20% 4.29% 4.49% 4.24% 4.49%
Efficiency ratio 48.39% 47.69% 47.34% 48.05% 47.55%
2 Average tangible equity is calculated by subtracting average goodwill and average other intangibles from average stockholders' equity. This is non-GAAP measure that we believe provides investors wth information that is useful in understanding our financial performance and position.
Three Months Ended Three Months Ended Three Months Ended
6/30/2014 3/31/2014 6/30/2013
Interest Annualized Interest Annualized Interest Annualized
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Yield/Cost Balance Expense Yield/Cost Balance Expense Yield/Cost
INTEREST EARNING ASSETS:
Loans receivable, including loans held for sale $ 5,289,059 $ 71,687 5.44% $ 5,183,801 $ 68,694 5.37% $ 4,546,461 $ 65,473 5.78%
Securities available for sale 721,270 4,078 2.26% 698,931 4,095 2.34% 705,479 3,526 2.00%
FRB and FHLB stock and other investments 426,924 668 0.63% 259,107 565 0.87% 296,788 380 0.51%
Term Federal funds sold 13,407 20 0.61% -- -- NA -- -- 0.00%
Total interest earning assets $ 6,450,661 $ 76,453 4.75% $ 6,141,839 $ 73,354 4.84% $ 5,548,728 $ 69,379 5.01%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest-bearing $ 1,483,473 $ 2,499 0.68% $ 1,392,300 $ 2,277 0.66% $ 1,285,768 $ 1,937 0.60%
Savings 207,312 539 1.04% 217,426 600 1.12% 185,584 721 1.56%
Time deposits:
$100,000 or more 1,626,200 2,984 0.74% 1,561,170 2,679 0.70% 1,252,934 1,975 0.63%
Other 695,740 1,250 0.72% 663,978 1,134 0.69% 652,766 1,013 0.62%
Total time deposits 2,321,940 4,234 0.73% 2,225,148 3,813 0.69% 1,905,700 2,988 0.63%
Total interest bearing deposits 4,012,725 7,272 0.73% 3,834,874 6,690 0.71% 3,377,052 5,646 0.67%
FHLB advances 445,835 1,311 1.18% 421,318 1,211 1.17% 421,595 1,218 1.16%
Other borrowings 40,490 380 3.71% 52,400 487 3.72% 43,559 411 3.73%
Total interest bearing liabilities 4,499,050 $ 8,963 0.80% 4,308,592 $ 8,388 0.79% 3,842,206 $ 7,275 0.75%
Noninterest bearing demand deposits 1,437,860 1,353,719 1,214,984
Total funding liabilities/cost of funds $ 5,936,910 0.61% $ 5,662,311 0.60% $ 5,057,190 0.58%
Net interest income/net interest spread $ 67,490 3.95% $ 64,966 4.05% $ 62,104 4.25%
Net interest margin 4.20% 4.29% 4.49%
Net interest margin, excluding effect of
nonaccrual loan income (expense) 4.18% 4.30% 4.49%
Net interest margin, excluding effect of
nonaccrual loan income (expense) and prepayment fee income 4.16% 4.26% 4.47%
Nonaccrual loan income (reversed) recognized $ 211 $ (197) $ (77)
Prepayment fee income received 302 309 306
Net $ 513 $ 112 $ 229
Cost of deposits:
Noninterest bearing demand deposits $ 1,437,860 $ -- $ 1,353,897 $ -- $ 1,214,984 $ --
Interest bearing deposits 4,012,725 7,272 0.73% 3,834,874 6,690 0.71% 3,377,052 5,646 0.67%
Total deposits $ 5,450,585 $ 7,272 0.54% $ 5,188,771 $ 6,690 0.52% $ 4,592,036 $ 5,646 0.49%
.
Six Months Ended Six Months Ended
6/30/2014 6/30/2013
Interest Annualized Interest Annualized
Average Income/ Average Average Income/ Average
Balance Expense Yield/Cost Balance Expense Yield/Cost
INTEREST EARNING ASSETS:
Loans receivable, including loans held for sale $ 5,236,721 $ 140,381 5.41% $ 4,495,673 $ 128,502 5.76%
Securities available for sale 710,163 8,172 2.30% 698,769 6,953 1.99%
FRB and FHLB stock and other investments 343,479 1,233 0.72% 277,266 667 0.48%
Federal funds sold 6,740 20 0.61% -- -- N/A
Total interest earning assets $ 6,297,103 $ 149,806 4.80% $ 5,471,708 $ 136,122 5.01%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest-bearing $ 1,438,138 $ 4,776 0.67% $ 1,275,922 $ 3,809 0.60%
Savings 212,341 1,139 1.08% 185,885 1,475 1.60%
Time deposits:
$100,000 or more 1,593,865 5,663 0.72% 1,207,381 3,705 0.62%
Other 679,947 2,384 0.71% 674,165 2,065 0.62%
Total time deposits 2,273,812 8,047 0.71% 1,881,546 5,770 0.62%
Total interest bearing deposits 3,924,291 13,962 0.72% 3,343,353 11,054 0.67%
FHLB advances 433,644 2,522 1.17% 422,266 2,442 1.17%
Other borrowings 46,412 867 3.71% 42,915 806 3.74%
Total interest bearing liabilities 4,404,347 $ 17,350 0.79% 3,808,534 $ 14,302 0.76%
Non-interest bearing demand deposits 1,396,111 1,177,048
Total funding liabilities / cost of funds $ 5,800,458 0.60% $ 4,985,582 0.58%
Net interest income / net interest spread $ 132,456 4.00% $ 121,820 4.25%
Net interest margin 4.24% 4.49%
Net interest margin, excluding effect of
nonaccrual loan income(expense) 4.24% 4.48%
Net interest margin, excluding effect of
nonaccrual loan income(expense) and prepayment fee income 4.21% 4.47%
Nonaccrual loan income (reversed) recognized $ 75 $ 160
Prepayment fee income received 914 369
Net $ 989 $ 529
Cost of deposits:
Non-interest bearing demand deposits $ 1,396,111 $ -- $ 1,177,048 $ --
Interest bearing deposits 3,924,291 13,962 0.72% 3,343,353 11,054 0.67%
Total deposits $ 5,320,402 $ 13,962 0.53% $ 4,520,401 $ 11,054 0.49%
Three Months Ended Six Months Ended
6/30/2014 3/31/2014 % change 6/30/2013 % change 6/30/2014 6/30/2013 % change
AVERAGE BALANCES
Loans receivable, including loans held for sale $ 5,289,059 $ 5,183,801 2% $ 4,546,461 16% $5,236,721 $ 4,495,673 16%
Investments 1,161,601 958,038 21% 1,002,267 16% 1,060,382 976,035 9%
Interest earning assets 6,450,661 6,141,839 5% 5,548,728 16% 6,297,103 5,471,708 15%
Total assets 6,821,827 6,525,548 5% 5,880,737 16% 6,674,506 5,804,577 15%
Interest bearing deposits 4,012,725 3,834,874 5% 3,377,052 19% 3,924,291 3,343,353 17%
Interest bearing liabilities 4,499,050 4,308,592 4% 3,842,206 17% 4,404,347 3,808,534 16%
Noninterest bearing demand deposits 1,437,860 1,353,719 6% 1,214,984 18% 1,396,111 1,177,048 19%
Stockholders' equity 842,837 819,344 3% 783,181 8% 831,155 774,257 7%
Net interest earning assets 1,951,611 1,833,247 6% 1,706,522 14% 1,892,756 1,663,174 14%
6/30/2014 3/31/2014 % change 12/31/2013 % change 6/30/2013 % change
LOAN PORTFOLIO COMPOSITION:
Commercial loans $ 1,070,196 $ 1,058,665 1% $ 1,073,778 0% $ 1,060,196 1%
Real estate loans 4,184,297 4,034,998 4% 3,904,059 7% 3,412,620 23%
Consumer and other loans 93,823 98,895 -5% 98,507 -5% 47,088 99%
Loans outstanding 5,348,316 5,192,558 3% 5,076,344 5% 4,519,904 18%
Unamortized deferred loan fees - net of costs (1,259) (1,763) 29% (2,168) 42% (1,782) 29%
Loans, net of deferred loan fees and costs 5,347,057 5,190,795 3% 5,074,176 5% 4,518,122 18%
Allowance for loan losses (66,870) (65,699) -2% (67,320) 1% (71,675) 7%
Loan receivable, net $ 5,280,187 $ 5,125,096 3% $ 5,006,856 5% $ 4,446,447 19%
REAL ESTATE LOANS BY PROPERTY TYPE: 6/30/2014 3/31/2014 % change 12/31/2013 % change 6/30/2013 % change
Retail buildings $ 1,229,485 $ 1,166,573 5% $ 1,140,103 8% $ 939,442 31%
Hotels/motels 810,442 734,141 10% 720,175 13% 662,011 22%
Gas stations/car washes 546,659 534,078 2% 522,198 5% 486,282 12%
Mixed-use facilities 320,117 331,571 -3% 312,156 3% 284,328 13%
Warehouses 421,266 415,635 1% 383,979 10% 352,693 19%
Multifamily 194,592 193,503 1% 181,503 7% 150,360 29%
Other 661,736 659,497 0% 643,945 3% 537,504 23%
Total $ 4,184,297 $ 4,034,998 4% $ 3,904,059 7% $ 3,412,620 23%
DEPOSIT COMPOSITION 6/30/2014 3/31/2014 % change 12/31/2013 % change 6/30/2013 % change
Noninterest bearing demand deposits $ 1,512,423 $ 1,442,348 5% $ 1,399,454 8% $ 1,210,563 25%
Money market and other 1,449,771 1,391,541 4% 1,376,068 5% 1,261,905 15%
Saving deposits 203,790 210,973 -3% 222,446 -8% 181,672 12%
Time deposits of $100,000 or more 1,624,340 1,589,751 2% 1,499,248 8% 1,276,147 27%
Other time deposits 680,064 699,947 -3% 650,841 4% 646,512 5%
Total deposit balances $ 5,470,388 $ 5,334,560 3% $ 5,148,057 6% $ 4,576,799 20%
DEPOSIT COMPOSITION (%) 6/30/2014 3/31/2014 12/31/2013 6/30/2013
Noninterest bearing demand deposits 27.7% 27.0% 27.2% 26.4%
Money market and other 26.5% 26.1% 26.7% 27.6%
Saving deposits 3.7% 4.0% 4.3% 4.0%
Time deposits of $100,000 or more 29.7% 29.8% 29.1% 27.9%
Other time deposits 12.4% 13.1% 12.7% 14.1%
Total deposit balances 100.0% 100.0% 100.0% 100.0%
CAPITAL RATIOS 6/30/2014 3/31/2014 12/31/2013 6/30/2013
Total stockholders' equity $ 852,609 $ 832,159 $ 809,374 $ 781,025
Tier 1 risk-based capital ratio 13.71% 13.70% 13.66% 14.87%
Total risk-based capital ratio 14.90% 14.89% 14.90% 16.12%
Tier 1 leverage ratio 11.66% 11.88% 11.97% 12.60%
Total risk weighted assets $ 5,713,242 $ 5,579,047 5,498,694 4,900,260
Book value per common share $ 10.72 $ 10.46 $ 10.18 $ 9.86
Tangible common equity to tangible assets3 10.99% 11.00% 10.97% 11.88%
Tangible common equity per share3 $ 9.34 $ 9.08 $ 8.79 $ 8.65
3 Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and other intangible assets, net divided by total assets less goodwill and other intangible assets, net. Management reviews tangible common equity to tangible assets in evaluating the Company's capital levels and has included this ratio in response to market participant interest in tangible common equity as a measure of capital.
Reonciliation of GAAP financial measures to non-GAAP financial measures:
6/30/2014 3/31/2014 12/31/2013 6/30/2013
Total stockholders' equity $ 852,609 $ 832,159 $ 809,374 $ 781,025
Less: Common stock warrant (378) (378) (378) (378)
Goodwill and other intangible assets, net (109,936) (110,260) (110,585) (95,413)
Tangible common equity $ 742,295 $ 721,521 $ 698,411 $ 685,234
Total assets $ 6,866,291 $ 6,667,551 $ 6,475,199 $ 5,863,014
Less: Goodwill and other intangible assets, net (109,936) (110,260) (110,585) (95,413)
Tangible assets $ 6,756,355 $ 6,557,291 $ 6,364,614 $ 5,767,601
Common shares outstanding 79,493,732 79,488,899 79,441,525 79,205,840
Tangible common equity to tangible assets 10.99% 11.00% 10.97% 11.88%
Tangible common equity per share $ 9.34 $ 9.08 $ 8.79 $ 8.65
Three Months Ended Six Months Ended
ALLOWANCE FOR LOAN LOSSES: 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013 6/30/2014 6/30/2013
Balance at beginning of period $ 65,699 $ 67,320 $ 65,715 $ 71,675 $ 73,268 $ 67,320 $ 66,941
Provision for loan losses 2,996 3,026 10,950 744 800 6,022 8,306
Recoveries 946 616 605 1,086 507 1,562 757
Charge offs (2,771) (5,263) (9,950) (7,790) (2,900) (8,034) (4,329)
Balance at end of period $ 66,870 $ 65,699 $ 67,320 $ 65,715 $ 71,675 $ 66,870 $ 71,675
Net charge offs/average gross loans (annualized) 0.14% 0.36% 0.75% 0.56% 0.21% 0.25% 0.16%
Three Months Ended Six Months Ended
NET CHARGED OFF LOANS BY TYPE 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013 6/30/2014 6/30/2013
Real estate loans $ 765 $ 154 $ 288 $ 6,129 $ 744 $ 919 $ 1,758
Commercial loans 1,255 4,414 9,139 119 1,684 $ 5,669 1,834
Consumer loans (195) 79 (82) (44) (35) $ (116) (20)
Charge offs excluding Acquired Credit Impaired Loans 1,825 4,647 9,345 6,204 2,393 6,472 3,572
Charge offs on Acquired Credit Impaired Loans -- -- -- 500 -- -- --
Total net charge offs $ 1,825 $ 4,647 $ 9,345 $ 6,704 $ 2,393 $ 6,472 $ 3,572
NONPERFORMING ASSETS 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Delinquent loans on nonaccrual status4 $ 42,651 $ 47,314 $ 39,154 $ 36,129 $ 44,987
Delinquent loans 90 days or more on accrual status5 -- -- 5 948 252
Accruing restructured loans 43,906 37,527 33,903 36,018 36,225
Total nonperforming loans 86,557 84,841 73,062 73,095 81,464
Other real estate owned 20,610 20,001 24,288 27,582 9,596
Total nonperforming assets $ 107,167 $ 104,842 $ 97,350 $ 100,677 $ 91,060
Nonperforming assets/total assets 1.56% 1.57% 1.50% 1.59% 1.55% --
Nonperforming assets/loans receivable & OREO 2.00% 2.01% 1.91% 2.04% 2.01%
Nonperforming assets/total capital 12.57% 12.60% 12.03% 12.57% 11.66%
Nonperforming loans/loans receivable 1.62% 1.63% 1.44% 1.49% 1.80%
Nonaccrual loans/loans receivable 0.80% 0.91% 0.77% 0.74% 1.00%
Allowance for loan losses/loans receivable 1.25% 1.27% 1.33% 1.34% 1.59%
Allowance for loan losses/nonaccrual loans 156.78% 138.86% 171.94% 181.89% 159.32%
Allowance for loan losses/nonperforming loans 77.26% 77.44% 92.14% 89.90% 87.98%
Allowance for loan losses/nonperforming assets 62.40% 62.66% 69.15% 65.27% 78.71%
4 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $30.0 million, $31.2 million, $27.5 million, $25.2 million and $21.0 million at June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013 and June 30, 2013, respectively.
5 Excludes Acquired Credit Impaired Loans totaling $43.7 million, $46.0 million, $43.8 million, $38.6 million and $18.5 million at June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013 and June 30, 2013, respectively.
BREAKDOWN OF ACCRUING RESTRUCTURED LOANS BY TYPE: 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Retail buildings $ 6,021 $ 5,542 $ 5,576 $ 6,777 $ 6,812
Hotels/motels 8,323 8,401 8,477 8,550 8,623
Gas stations/car washes -- -- -- -- --
Mixed-use facilities 797 796 802 807 811
Warehouses 5,922 812 482 485 489
Multifamily -- -- -- -- --
Other6 22,843 21,976 18,566 19,399 19,490
Total $ 43,906 $ 37,527 $ 33,903 $ 36,018 $ 36,225
6 Includes commercial business and other loans
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Legacy
30 - 59 days $ 3,170 $ 1,700 $ 2,209 $ 1,705 $ 2,056
60 - 89 days 210 445 266 732 85
Total delinquent loans less than 90 days past due - legacy $ 3,380 $ 2,145 $ 2,475 $ 2,437 $ 2,141
Acquired
30 - 59 days $ 6,403 $ 4,916 $ 5,113 $ 4,013 $ 1,768
60 - 89 days 640 3 2,506 1,663 2,121
Total delinquent loans less than 90 days past due - acquired $ 7,043 $ 4,919 $ 7,619 $ 5,676 $ 3,889
Total delinquent loans less than 90 days past due $ 10,423 $ 7,064 $ 10,094 $ 8,113 $ 6,030
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE BY TYPE 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Legacy
Real estate loans $ 1,675 $ 760 $ 1,375 $ 1,664 $ 853
Commercial loans 1,640 1,338 1,024 744 1,267
Consumer loans 65 47 76 29 21
Total delinquent loans less than 90 days past due - legacy $ 3,380 $ 2,145 $ 2,475 $ 2,437 $ 2,141
Acquired
Real estate loans $ 6,051 $ 4,036 $ 6,034 $ 4,616 $ 2,695
Commercial loans 860 598 1,228 833 1,167
Consumer loans 132 285 357 227 27
Total delinquent loans less than 90 days past due - acquired $ 7,043 $ 4,919 $ 7,619 $ 5,676 $ 3,889
Total delinquent loans less than 90 days past due $ 10,423 $ 7,064 $ 10,094 $ 8,113 $ 6,030
NONACCRUAL LOANS BY TYPE 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Real estate loans $ 27,815 $ 34,070 $ 28,083 $ 26,616 $ 34,577
Commercial loans 13,553 12,216 10,141 8,743 9,629
Consumer loans 1,283 1,028 930 770 781
Total non-accrual loans $ 42,651 $ 47,314 $ 39,154 $ 36,129 $ 44,987
CRITICIZED LOANS 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Legacy
Special mention $ 55,659 $ 52,159 $ 46,480 $ 61,804 $ 66,774
Substandard 112,357 111,529 120,163 100,551 97,692
Doubtful 1,227 3,332 359 8 152
Loss -- -- -- -- --
Total criticized loans - legacy $ 169,243 $ 167,020 $ 167,002 $ 162,363 $ 164,618
Acquired
Special mention $ 36,811 $ 41,395 $ 43,009 $ 49,827 $ 42,014
Substandard 124,618 134,660 138,337 143,149 121,758
Doubtful 3,980 2,376 6,100 2,045 368
Loss 76 1,445 1,402 990 707
Total criticized loans - acquired $ 165,485 $ 179,876 $ 188,848 $ 196,011 $ 164,847
Total criticized loans $ 334,728 $ 346,896 $ 355,850 $ 358,374 $ 329,465

CONTACT: Angie Yang SVP, Investor Relations 213-251-2219 angie.yang@BBCNbank.com

Source:BBCN Bancorp, Inc.