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BBCN Bancorp Reports 2014 Third Quarter Financial Results

Q3 2014 Summary:

  • Net income totals $21.4 million, or $0.27 per diluted common share
  • New loan production for the quarter amounts to $382 million
  • Loans receivable increase to $5.43 billion, reflecting a 7% increase year-to-date
  • Total deposits increase to $5.51 billion, reflecting a 7% increase for the first nine months of 2014
  • Total assets increase to $6.93 billion, reflecting a 7% increase from December 31, 2013

LOS ANGELES, Oct. 20, 2014 (GLOBE NEWSWIRE) -- BBCN Bancorp, Inc. (the "Company") (Nasdaq:BBCN), the holding company of BBCN Bank (the "Bank"), today reported net income of $21.4 million, or $0.27 per diluted common share, for the three months ended September 30, 2014. This compares with net income of $22.3 million, or $0.28 per diluted common share, for the preceding 2014 second quarter and $23.6 million, or $0.30 per diluted common share, for the year-ago third quarter.

"We had another quarter of consistent execution highlighted by steady loan growth with total new loan originations of $382 million for the quarter," said Kevin S. Kim, Chairman and Chief Executive Officer of BBCN Bancorp, Inc. "We continue to see good loan demand in our core California and New York/New Jersey markets, while gaining more traction in our newer markets in the Pacific Northwest and Chicago. Despite the ramp up in quarterly loan production, our overall net loan growth for the third quarter was mitigated by a higher-than-usual level of payoffs as result of a few large transactions.

"We continue to build on the foundation for the healthy long-term growth of our franchise. In addition to the progress we are making with new products and services to better diversify our business mix, we are forging ahead with our efforts to establish a presence in South Korea. We signed cooperative agreements with the City of Los Angeles and Seoul Metropolitan Government during the quarter, and we plan to open our first representative office in Seoul before year-end. We believe our presence in South Korea will significantly enhance our ability to capture more business with Korean national companies with operations in the United States. Given the consistency of our financial performance and the tangible achievements being made with our strategic initiatives, we believe the prospects for BBCN are stronger than ever," said Kim.

Financial Highlights

(Dollars in thousands, except per share data) At or for the Three Months Ended
9/30/2014 6/30/2014 9/30/2013
Net income $ 21,420 $ 22,312 $ 23,552
Diluted earnings per share $ 0.27 $ 0.28 $ 0.30
Net interest income before provision for loan losses $ 67,907 $ 67,490 $ 64,360
Net interest margin 4.15% 4.20% 4.42%
Noninterest income $ 11,369 $ 10,492 $ 10,799
Noninterest expense $ 39,420 $ 37,739 $ 35,746
Net loans receivable $ 5,364,612 $ 5,280,187 $ 5,006,856
Deposits $ 5,509,754 $ 5,470,388 $ 5,148,057
Nonaccrual loans (1) $ 39,564 $ 42,651 $ 36,129
ALLL to loans receivable 1.26% 1.25% 1.34%
ALLL to nonaccrual loans (1) 172.46% 156.78% 181.89%
ALLL to nonperforming assets (1) (2) 57.44% 62.40% 65.27%
Provision for loan losses $ 4,256 $ 2,996 $ 744
Net charge offs $ 2,894 $ 1,825 $ 6,704
ROA 1.25% 1.31% 1.53%
ROE 9.97% 10.59% 11.85%
Efficiency ratio 49.73% 48.39% 47.56%
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $28.1 million, $30.0 million and $25.2 million at September 30, 2014, June 30, 2014 and September 30, 2013, respectively.
(2) Nonperforming assets exclude acquired credit impaired loans totaling $32.7 million, $43.7 million and $38.6 million at September 30, 2014, June 30, 2014 and September 30, 2013, respectively.

Operating Results for the 2014 Third Quarter

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 September 30, 2014, June 30, 2014, and September 30, 2013 include the following pre-tax acquisition accounting adjustments related to past acquisitions:

Three Months Ended
September 30,
2014
June 30,
2014
September 30,
2013
Accretion of discount on acquired performing loans $ 4,157 $ 4,575 $ 4,074
Accretion of discount on acquired credit impaired loans 1,863 2,096 2,806
Amortization of premium on acquired FHLB borrowings 95 94 94
Accretion of discount on acquired subordinated debt (41) (40) (81)
Amortization of premium on acquired time deposits 125 231 308
Increase to pre-tax income $ 6,199 $ 6,956 $ 7,201

Net Interest Income and Net Interest Margin. Net interest income before provision for loan losses increased 1% to $67.9 million for the 2014 third quarter from $67.5 million in the preceding second quarter of 2014 and rose 6% over $64.4 million in the prior-year third quarter. The Company attributed the increases to strong levels of loan originations which supported the expansion of its loans receivable over prior periods. Overall, average loans receivable for the 2014 third quarter rose 3% over the preceding second quarter and increased 14% over the prior-year period, when the Company acquired the former Foster Bankshares, Inc. in the middle of the 2013 third 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
9/30/2014 6/30/2014 change 9/30/2013 change
Net interest margin, excluding the effect of acquisition accounting adjustments 3.73% 3.72% 0. 01% 3.86% (0.13)%
Acquisition accounting adjustments 0.42 0.48 (0.06) 0.56 (0.14)
Net interest margin 4.15% 4.20% (0.05)% 4.42% (0.27)%

The net interest margin for the 2014 third quarter declined 5 basis points from the preceding second quarter to 4.15%, but increased 1 basis point on a core basis, excluding the effect of acquisition accounting adjustments.

Compared with the prior-year period, net interest margin for the 2014 third quarter declined 27 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 third quarter declined 13 basis points from the year-ago third quarter.

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

Three Months Ended
9/30/2014 6/30/2014 change 9/30/2013 change
Weighted average yield on loans, excluding the effect of acquisition accounting adjustments 4.78% 4.86% (0.08)% 4.96% (0.18)%
Acquisition accounting adjustments 0.51 0.58 (0.07) 0.67 (0.16)
Weighted average yield on loans 5.29% 5.44% (0.15)% 5.63% (0.34)%

The weighted average yield on loans for the 2014 third quarter declined 15 basis points to 5.29% from the preceding second quarter. On a core basis excluding the effect of acquisition accounting adjustments, the weighted average yield on loans declined 8 basis points. The weighted average yield on new loans originated during the 2014 third quarter was 4.31%, compared with 4.52% in the preceding second quarter, reflecting a considerably higher contribution of variable rate loans, which are typically booked at lower rates than fixed rate loans. Variable rate loans accounted for 55% of new loan originations for the 2014 third quarter, versus 39% in the preceding second quarter. Compared with the prior-year period, the weighted average yield on loans for the 2014 third quarter decreased 34 basis points and 18 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:

9/30/2014 6/30/2014 change 9/30/2013 change
Fixed rate loans
As a percentage of total loans 51% 50% 1% 45% 1%
Weighted average contractual rate 4.79% 4.85% (0.06)% 5.16% (0.37)%
Variable rate loans
As a percentage of total loans 49% 50% (1)% 55% (6)%
Weighted average contractual rate 4.25% 4.29% (0.04)% 4.43% (0.18)%

The declines in the weighted average contractual rate for fixed rate loans for the 2014 third 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
9/30/2014 6/30/2014 change 9/30/2013 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) (0.01) (0.02) 0.01
Weighted average cost of deposits 0.54% 0.54% −% 0.49% 0.05%

The weighted average cost of deposits for the 2014 third quarter was flat with the preceding second quarter both on a reported basis and on a core basis, excluding the effect of amortization of premium on time deposits assumed in acquisitions. Compared with the prior-year period, the weighted average cost of deposits for the 2014 third quarter increased 5 basis points and rose 4 basis points on a core basis, excluding the effect of premium amortization on time deposits assumed in acquisitions.

Noninterest Income. Total noninterest income for the 2014 third quarter rose 8% to $11.4 million from $10.5 million in the preceding 2014 second quarter and was up 5% over $10.8 million in the prior-year third quarter. The Company attributed the increases largely to higher gain on sale of SBA loans, which amounted to $3.6 million for the 2014 third quarter, versus $2.8 million for the 2014 second quarter and for the 2013 third quarter.

Noninterest Expense. Total noninterest expense for the third quarter of 2014 amounted to $39.4 million, reflecting a 4% increase from $37.7 million in the preceding 2014 second quarter and an 10% increase over $35.7 million in the 2013 third quarter. The increases are largely attributed to higher compensation and credit related expenses.

Salaries and employee benefits expense for the 2014 third quarter rose 7% from the preceding second quarter and was up 17% over the prior-year third quarter, largely reflecting the increase in FTEs to support BBCN's growing franchise and progress with strategic initiatives. In addition, the Company noted that the salaries and employee benefits expense for the 2013 third quarter reflects the mid-quarter Foster acquisition. The total number of FTEs as of September 30, 2014 was 911, a 4% increase over 875 as of June 30, 2014, and a 22% increase over 831 as of September 30, 2013.

Credit related expenses, which previously were included in other expenses, amounted to $3.5 million for the 2014 third quarter, compared with $3.0 million in the preceding second quarter and $2.6 million in the year-ago third quarter.

Income Tax Provision. The effective tax rate for the 2014 third quarter was 39.8%, compared with 40.1% for the preceding 2014 second quarter and 39.1% for the 2013 third quarter.

Balance Sheet Summary

Loans receivable totaled $5.43 billion at September 30, 2014, reflecting a 2% increase over $5.35 billion at June 30, 2014, and a 7% increase year-to-date over $5.07 billion at December 31, 2013.

Total new loan originations during the third quarter of 2014 amounted to $382.3 million, including SBA loan originations of $69.7 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 $40.0 million for the third quarter of 2014, compared with $62.2 million for the preceding 2014 second quarter. During the 2014 third quarter, the Company sold $40.2 million of its SBA loans held for sale.

The robust loan production in the 2014 third quarter was largely offset by higher-than-usual aggregate pay offs and pay downs which amounted to $312.0 million for the quarter. This compares with $231.2 million for the preceding second quarter and $266.1 million for the year-ago third quarter.

Total deposits amounted to $5.51 billion at September 30, 2014, reflecting a 1% increase over $5.47 billion at June 30, 2014, and a 7% increase over $5.15 billion at year-end 2013. The increase in total deposits from June 30, 2014 reflects a 6% increase in money market account balances, which was partially offset by strategic reductions in wholesale deposits. Noninterest bearing deposits at September 30, 2014 totaled $1.50 billion and accounted for 27% of total deposits.

Credit Quality

The provision for loan losses for the 2014 third quarter was $4.3 million, compared with $3.0 million for the preceding 2014 second quarter and $744,000 for the prior-year third 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 September 30, 2014, June 30, 2014, and September 30, 2013 is as follows:

(dollars in thousands) 9/30/2014 6/30/2014 9/30/2013
Legacy Loans (1) $ 60,073 $ 58,877 $ 59,773
Acquired Performing Loans (2) 1,973 2,113 1,964
Acquired Credit Impaired Loans (2) 6,186 5,880 3,978
Total ALLL $ 68,232 $ 66,870 $ 65,715
Loans receivable $ 5,432,844 $ 5,347,057 $ 4,898,939
ALLL coverage ratio 1.26% 1.25% 1.34%
(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 September 30, 2014, June 30, 2014, and September 30, 2013:

(dollars in thousands) 9/30/2014 6/30/2014 9/30/2013
Special Mention (1) $ 113,395 $ 92,470 $ 111,631
Classified (1) $ 231,768 $ 242,258 $ 246,743
Criticized $ 345,163 $ 334,728 $ 358,374
(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.

Nonaccrual loans at September 30, 2014 declined to $39.6 million, or 0.73% of loans receivable, compared with $42.7 million, or 0.80% of loans receivable, at June 30, 2014 and $36.1 million, or 0.74% at September 30, 2013. Accruing restructured loans totaled $56.1 million at September 30, 2014, compared with $43.9 million at June 30, 2014 and $36.0 million at September 30, 2013. Total nonperforming loans at September 30, 2014 totaled $95.6 million, or 1.76% of loans receivable, compared with $86.6 million, or 1.62% of loans receivable, at June 30, 2014 and $73.1 million, or 1.49% of loans receivable, at September 30, 2013.

Nonperforming assets, including other real estate owned, amounted to $118.8 million at September 30, 2014, or 1.71% of total assets, compared with $107.2 million, or 1.56% of total assets, at June 30, 2014, and $100.7 million, or 1.59% of total assets, at September 30, 2013.

Net loan charge-offs for the 2014 third quarter totaled $2.9 million and equaled 0.21% of average loans receivable on an annualized basis. This compares with net loan charge offs of $1.8 million, or 0.14% of average loans receivable on an annualized basis, for the preceding 2014 second quarter and $6.7 million, or 0.56% of average loans receivable on an annualized basis, for the year-ago third quarter.

The allowance for loan losses at September 30, 2014 was $68.2 million, or 1.26% of loans receivable (excluding loans held for sale), compared with $66.9 million, or 1.25%, at June 30, 2014 and $65.7 million, or 1.34%, at September 30, 2013. The coverage ratio of the allowance for loan losses to nonperforming loans (excluding acquired credit impaired loans) was 71.35% at September 30, 2014, compared with 77.26% at June 30, 2014 and 89.90% at September 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 $130.7 million at September 30, 2014, compared with $124.2 million at June 30, 2014 and $99.2 million at September 30, 2013.

Capital

At September 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.

9/30/2014 6/30/2014 9/30/2013
Leverage Ratio 11.80% 11.66% 12.06%
Tier 1 Risk-based Ratio 13.73% 13.71% 13.64%
Total Risk-based Ratio 14.93% 14.90% 14.89%

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

9/30/2014 6/30/2014 9/30/2013
Tangible common equity per share (1) $9.49 $9.34 $8.52
Tangible common equity to tangible assets (1) 11.07% 10.99% 10.87%
(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, October 21, 2014 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for the 2014 third quarter. Investors and analysts may access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (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 October 29, 2014, passcode 10053641.

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 September 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.

(tables follow)

BBCN Bancorp, Inc.
Consolidated Financial Statements and Selected Financial Data
Unaudited (Dollars in Thousands, Except per Share Data)
Assets 9/30/2014 6/30/2014 % change 12/31/2013 % change 9/30/2013 % change
Cash and due from banks 443,320 $ 414,919 7% $ 316,705 40% $ 345,352 28%
Securities available for sale, at fair value 710,625 746,683 -5% 705,751 1% 708,566 0%
Federal Home Loan Bank, Federal Reserve Bank stock and other investments 28,744 28,782 0% 28,324 1% 28,340 1%
Loans held for sale, at the lower of cost or fair value 45,695 53,324 -14% 44,115 4% 49,480 -8%
Loans receivable 5,432,844 5,347,057 2% 5,074,176 7% 4,898,939 11%
Allowance for loan losses (68,232) (66,870) -2% (67,320) -1% (65,715) -4%
Net loans receivable 5,364,612 5,280,187 2% 5,006,856 7% 4,833,224 11%
Accrued interest receivable 13,126 13,133 0% 13,403 -2% 13,108 0%
Premises and equipment, net 30,999 30,699 1% 30,894 0% 29,747 4%
Bank owned life insurance 45,644 45,354 1% 44,770 2% 44,593 2%
Goodwill 105,401 105,401 0% 105,401 0% 119,881 -12%
Other intangible assets, net 13,735 13,559 1% 14,099 -3% 14,225 -3%
Other assets 125,601 134,250 -6% 164,881 -24% 154,471 -19%
Total assets 6,927,502 $ 6,866,291 1% $ 6,475,199 7% $ 6,340,987 9%
Liabilities
Deposits 5,509,754 $ 5,470,388 1% $ 5,148,057 7% $ 5,021,102 10%
Borrowings from Federal Home Loan Bank 467,071 461,166 1% 421,352 11% 421,446 11%
Subordinated debentures 42,117 42,076 0% 57,410 -27% 57,303 -27%
Accrued interest payable 6,157 6,087 1% 4,821 28% 4,827 28%
Other liabilities 37,755 33,965 11% 34,185 10% 35,079 8%
Total liabilities 6,062,854 6,013,682 1% 5,665,825 7% 5,539,757 9%
Stockholders' Equity
Common stock, $0.001 par value; authorized, 150,000,000 shares at September 30, 2014, June 30, 2014, December 31, 2013 and September 30, 2013; issued and outstanding, 79,497,331, 79,493,732, 79,441,525, and 79,247,719 shares and at September 30, 2014, June 30, 2014, December 31, 2013 and September 30, 2013, respectively 79 79 0% 79 0% 79 0%
Capital surplus 541,406 541,173 0% 540,876 0% 538,062 1%
Retained earnings 324,664 311,195 4% 278,604 17% 266,478 22%
Accumulated other comprehensive income, net (1,501) 162 -1027% (10,185) 85% (3,389) 56%
Total stockholders' equity 864,648 852,609 1% 809,374 7% 801,230 8%
Total liabilities and stockholders' equity $ 6,927,502 $ 6,866,291 1% $ 6,475,199 7% $ 6,340,987 9%
Three Months Ended Nine Months Ended
9/30/2014 6/30/2014 %
change
9/30/2013 %
change
9/30/2014 9/30/2013 %
change
Interest income:
Interest and fees on loans $ 72,437 $ 71,687 1% $ 67,747 7% $ 212,818 $ 196,249 8%
Interest on securities 3,999 4,078 -2% 3,802 5% 12,171 10,755 13%
Interest on federal funds sold and other investments 648 688 -6% 486 33% 1,901 1,153 65%
Total interest income 77,084 76,453 1% 72,035 7% 226,890 208,157 9%
Interest expense:
Interest on deposits 7,419 7,272 2% 5,959 25% 21,381 17,014 26%
Interest on other borrowings 1,758 1,691 4% 1,716 2% 5,146 4,964 4%
Total interest expense 9,177 8,963 2% 7,675 20% 26,527 21,978 21%
Net interest income before provision for loan losses 67,907 67,490 1% 64,360 6% 200,363 186,179 8%
Provision for loan losses 4,256 2,996 42% 744 472% 10,278 9,050 14%
Net interest income after provision for loan losses 63,651 64,494 -1% 63,616 0% 190,085 177,129 7%
Noninterest income:
Service fees on deposit accounts 3,456 3,360 3% 3,321 4% 10,288 9,118 13%
Net gains on sales of SBA loans 3,578 2,811 27% 2,827 27% 9,112 8,816 3%
Net gains on sales of other loans -- -- 0% -- 0% -- 62 -100%
Net gains on sales of securities available-for-sale -- -- 0% -- 0% -- 54 -100%
Net gains (loss) on sales of OREO 29 31 -6% (48) 160% 466 (57) 918%
Other income and fees 4,306 4,290 0% 4,699 -8% 13,091 13,364 -2%
Total noninterest income 11,369 10,492 8% 10,799 5% 32,957 31,357 5%
Noninterest expense:
Salaries and employee benefits 19,346 18,143 7% 16,535 17% 56,428 49,086 15%
Occupancy 4,722 4,715 0% 4,360 8% 14,060 13,206 6%
Furniture and equipment 1,916 2,012 -5% 1,728 11% 5,942 4,914 21%
Advertising and marketing 1,535 1,508 2% 1,393 10% 4,131 3,856 7%
Data processing and communications 2,206 2,299 -4% 1,983 11% 6,626 5,488 21%
Professional fees 1,567 1,315 19% 1,440 9% 4,195 4,184 0%
FDIC assessment 1,135 1,080 5% 818 39% 3,238 2,370 37%
Merger and integration expenses 66 50 32% 931 -93% 290 2,621 -89%
Credit related expenses 3,531 3,016 17% 2,646 33% 7,969 6,564 21%
Other 3,396 3,601 -6% 3,912 -13% 10,555 11,161 -5%
Total noninterest expense 39,420 37,739 4% 35,746 10% 113,434 103,450 10%
Income before income taxes 35,600 37,247 -4% 38,669 -8% 109,608 105,036 4%
Income tax provision 14,180 14,935 -5% 15,117 -6% 43,680 41,352 6%
Net income $ 21,420 $ 22,312 -4% $ 23,552 -9% $ 65,928 $ 63,684 4%
Earnings Per Common Share:
Basic $ 0.27 $ 0.28 $ 0.30 $ 0.83 $ 0.81
Diluted $ 0.27 $ 0.28 $ 0.30 $ 0.83 $ 0.80
Average Shares Outstanding:
Basic 79,493,917 79,490,767 79,223,636 79,486,958 78,914,360
Diluted 79,601,075 79,614,046 79,334,865 79,617,317 79,122,060
Three Months Ended Nine Months Ended
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 9/30/2014 9/30/2013
Net Income $ 21,420 $ 22,312 $ 22,196 $ 18,071 $ 23,552 $ 65,928 $ 63,684
Add back: Income tax 14,180 14,935 14,564 11,047 15,117 43,680 41,352
Add back: Provision for loan losses 4,256 2,996 3,026 10,950 744 10,278 9,050
Pre-tax, pre-provision income (PTPP) 1 $ 39,856 $ 40,243 $ 39,786 $ 40,068 $ 39,413 $ 119,886 $ 114,086
PTPP to average assets (annualized) 2.32% 2.36% 2.44% 2.51% 2.56% 2.37% 2.96%
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. 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 Nine Months Ended (Annualized)
Profitability measures: 9/30/2014 6/30/2014 9/30/2013 9/30/2014 9/30/2013
ROA 1.25% 1.31% 1.53% 1.30% 1.43%
ROE 9.97% 10.59% 11.85% 10.46% 10.87%
Return on average tangible equity 2 11.43% 12.18% 13.90% 12.03% 12.52%
Net interest margin 4.15% 4.20% 4.42% 4.21% 4.46%
Efficiency ratio 49.73% 48.39% 47.56% 48.62% 47.56%
2 Average tangible equity is calculated by subtracting average goodwill and average core deposit intangibles assets 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
9/30/2014 6/30/2014 9/30/2013
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 $ 5,434,815 $ 72,437 5.29% $ 5,289,059 $ 71,687 5.44% $ 4,771,022 $ 67,747 5.63%
Securities available for sale 734,282 3,999 2.18% 721,270 4,078 2.26% 714,660 3,802 2.13%
FRB and FHLB stock and other investments 332,643 648 0.76% 426,924 668 0.62% 291,672 486 0.65%
Term Federal funds sold -- -- 0.00% 13,407 20 0.60% -- -- N/A
Total interest earning assets $ 6,501,740 $ 77,084 4.71% $ 6,450,660 $ 76,453 4.75% $ 5,777,354 $ 72,035 4.95%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest-bearing $ 1,492,175 $ 2,558 0.68% $ 1,483,473 $ 2,499 0.68% $ 1,276,732 $ 1,927 0.60%
Savings 202,785 496 0.97% 207,312 539 1.04% 204,049 668 1.30%
Time deposits:
$100,000 or more 1,601,436 3,094 0.77% 1,626,200 2,984 0.74% 1,380,962 2,361 0.68%
Other 677,474 1,270 0.74% 695,740 1,250 0.72% 677,352 1,003 0.59%
Total time deposits 2,278,910 4,365 0.76% 2,321,940 4,234 0.73% 2,058,314 3,364 0.65%
Total interest bearing deposits 3,973,870 7,419 0.74% 4,012,725 7,272 0.73% 3,539,095 5,959 0.67%
FHLB advances 462,434 1,373 1.18% 445,835 1,311 1.18% 422,084 1,251 1.18%
Other borrowings 40,533 385 3.72% 40,490 380 3.71% 48,273 465 3.77%
Total interest bearing liabilities 4,476,837 $ 9,177 0.81% 4,499,050 $ 8,963 0.80% 4,009,452 $ 7,675 0.76%
Noninterest bearing demand deposits 1,483,966 1,437,860 1,306,308
Total funding liabilities/cost of funds $ 5,960,803 0.61% $ 5,936,910 0.61% $ 5,315,760 0.57%
Net interest income/net interest spread $ 67,907 3.89% $ 67,490 3.95% $ 64,360 4.19%
Net interest margin 4.15% 4.20% 4.42%
Net interest margin, excluding effect of nonaccrual loan income (expense) 4.14% 4.18% 4.42%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income 4.10% 4.16% 4.37%
Nonaccrual loan income (reversed) recognized $ 63 $ 211 $ (153)
Prepayment fee income received 608 302 580
Net $ 671 $ 513 $ 427
Cost of deposits:
Noninterest bearing demand deposits $ 1,483,966 $ -- $ 1,437,860 $ -- $ 1,306,308 $ --
Interest bearing deposits 3,973,870 7,419 0.74% 4,012,725 7,272 0.73% 3,539,095 5,959 0.67%
Total deposits $ 5,457,836 $ 7,419 0.54% $ 5,450,585 $ 7,272 0.54% $ 4,845,403 $ 5,959 0.49%
.
Nine Months Ended Nine Months Ended
9/30/2014 9/30/2013
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 $ 5,303,478 $ 212,818 5.37% $ 4,588,464 $ 196,249 5.72%
Securities available for sale 718,291 12,171 2.26% 704,124 10,755 2.04%
FRB and FHLB stock and other investments 339,828 1,881 0.73% 282,120 1,153 0.54%
Federal funds sold 4,469 20 0.60% -- -- N/A
Total interest earning assets $ 6,366,066 $ 226,890 4.76% $ 5,574,708 $ 208,157 4.99%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest-bearing $ 1,456,348 $ 7,335 0.67% $ 1,276,195 $ 5,736 0.60%
Savings 209,121 1,635 1.05% 192,006 2,144 1.49%
Time deposits:
$100,000 or more 1,596,416 8,757 0.73% 1,265,877 6,066 0.64%
Other 679,114 3,654 0.72% 675,239 3,068 0.61%
Total time deposits 2,275,530 12,411 0.73% 1,941,116 9,134 0.63%
Total interest bearing deposits 3,940,999 21,381 0.73% 3,409,317 17,014 0.67%
FHLB advances 443,346 3,894 1.17% 422,205 3,693 1.17%
Other borrowings 44,431 1,252 3.71% 44,721 1,271 3.75%
Total interest bearing liabilities 4,428,776 $ 26,527 0.80% 3,876,243 $ 21,978 0.76%
Non-interest bearing demand deposits 1,425,718 1,220,608
Total funding liabilities / cost of funds $ 5,854,494 0.61% $ 5,096,851 0.58%
Net interest income / net interest spread $ 200,363 3.96% $ 186,179 4.23%
Net interest margin 4.21% 4.46%
Net interest margin, excluding effect of nonaccrual loan income (expense) 4.20% 4.46%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income 4.17% 4.44%
Nonaccrual loan income (reversed) recognized $ 138 $ 6
Prepayment fee income received 1,523 948
Net $ 1,661 $ 954
Cost of deposits:
Non-interest bearing demand deposits $ 1,425,718 $ -- $ 1,220,608 $ --
Interest bearing deposits 3,940,999 21,381 0.73% 3,409,317 17,014 0.67%
Total deposits $ 5,366,717 $ 21,381 0.53% $ 4,629,925 $ 17,014 0.49%
Three Months Ended Nine Months Ended
9/30/2014 6/30/2014 %
change
9/30/2013 %
change
9/30/2014 9/30/2013 %
change
AVERAGE BALANCES
Loans receivable, including loans held for sale $ 5,434,815 $ 5,289,059 3% $ 4,771,022 14% $5,303,478 $ 4,588,464 16%
Investments 1,066,925 1,161,601 -8% 1,006,332 6% 1,062,588 986,244 8%
Interest earning assets 6,501,740 6,450,660 1% 5,777,354 13% 6,366,066 5,574,708 14%
Total assets 6,867,465 6,821,827 1% 6,160,132 11% 6,739,533 5,924,397 14%
Interest bearing deposits 3,973,870 4,012,725 -1% 3,539,095 12% 3,940,999 3,409,317 16%
Interest bearing liabilities 4,476,837 4,499,050 0% 4,009,452 12% 4,428,776 3,876,243 14%
Noninterest bearing demand deposits 1,483,966 1,437,860 3% 1,306,308 14% 1,425,718 1,220,608 17%
Stockholders' equity 859,606 842,837 2% 794,737 8% 840,743 781,159 8%
Net interest earning assets 2,024,903 1,951,610 4% 1,767,902 15% 1,937,290 1,698,465 14%
9/30/2014 6/30/2014 % change 12/31/2013 % change 9/30/2013 % change
LOAN PORTFOLIO COMPOSITION:
Commercial loans $ 1,023,924 $ 1,070,196 -4% $ 1,073,778 -5% $ 1,068,844 -4%
Real estate loans 4,317,960 4,184,298 3% 3,904,059 11% 3,736,225 16%
Consumer and other loans 92,362 93,822 -2% 98,507 -6% 95,693 -3%
Loans outstanding 5,434,246 5,348,316 2% 5,076,344 7% 4,900,762 11%
Unamortized deferred loan fees - net of costs (1,402) (1,259) -11% (2,168) 35% (1,823) 23%
Loans, net of deferred loan fees and costs 5,432,844 5,347,057 2% 5,074,176 7% 4,898,939 11%
Allowance for loan losses (68,232) (66,870) -2% (67,320) -1% (65,715) -4%
Loan receivable, net $ 5,364,612 $ 5,280,187 2% $ 5,006,856 7% $ 4,833,224 11%
REAL ESTATE LOANS BY PROPERTY TYPE: 9/30/2014 6/30/2014 % change 12/31/2013 % change 9/30/2013 % change
Retail buildings $ 1,233,161 $ 1,229,485 0% $ 1,140,103 8% $ 1,089,898 13%
Hotels/motels 846,921 810,442 5% 720,175 18% 667,206 27%
Gas stations/car washes 582,725 546,659 7% 522,198 12% 523,368 11%
Mixed-use facilities 353,395 320,117 10% 312,156 13% 297,506 19%
Warehouses 443,418 421,266 5% 383,979 15% 362,700 22%
Multifamily 197,902 194,592 2% 181,503 9% 171,489 15%
Other 660,438 661,737 0% 643,945 3% 624,058 6%
Total $ 4,317,960 $ 4,184,298 3% $ 3,904,059 11% $ 3,736,225 16%
DEPOSIT COMPOSITION 9/30/2014 6/30/2014 % change 12/31/2013 % change 9/30/2013 % change
Noninterest bearing demand deposits $ 1,503,275 $ 1,512,423 -1% $ 1,399,454 7% $ 1,362,675 10%
Money market and other 1,537,467 1,449,771 6% 1,376,068 12% 1,267,113 21%
Saving deposits 199,953 203,790 -2% 222,446 -10% 228,073 -12%
Time deposits of $100,000 or more 1,595,213 1,624,340 -2% 1,499,248 6% 1,475,321 8%
Other time deposits 673,846 680,064 -1% 650,841 4% 687,920 -2%
Total deposit balances $ 5,509,754 $ 5,470,388 1% $ 5,148,057 7% $ 5,021,102 10%
DEPOSIT COMPOSITION (%) 9/30/2014 6/30/2014 12/31/2013 9/30/2013
Noninterest bearing demand deposits 27.3% 27.7% 27.2% 27.2%
Money market and other 27.9% 26.5% 26.7% 25.2%
Saving deposits 3.6% 3.7% 4.3% 4.5%
Time deposits of $100,000 or more 29.0% 29.7% 29.1% 29.4%
Other time deposits 12.2% 12.4% 12.7% 13.7%
Total deposit balances 100.0% 100.0% 100.0% 100.0%
CAPITAL RATIOS 9/30/2014 6/30/2014 12/31/2013 9/30/2013
Total stockholders' equity $ 864,648 $ 852,609 $ 809,374 $ 801,230
Tier 1 risk-based capital ratio 13.73% 13.71% 13.66% 13.64%
Total risk-based capital ratio 14.93% 14.90% 14.90% 14.89%
Tier 1 leverage ratio 11.80% 11.66% 11.97% 12.06%
Total risk weighted assets $ 5,807,138 $ 5,713,242 5,498,694 5,330,009
Book value per common share $ 10.87 $ 10.72 $ 10.18 $ 10.11
Tangible common equity to tangible assets3 11.07% 10.99% 10.97% 10.87%
Tangible common equity per share3 $ 9.49 $ 9.34 $ 8.79 $ 8.52
3 Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and core deposit intangible assets, net divided by total assets less goodwill and core deposit 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.
Reconciliation of GAAP financial measures to non-GAAP financial measures:
9/30/2014 6/30/2014 12/31/2013 9/30/2013
Total stockholders' equity $ 864,648 $ 852,609 $ 809,374 $ 801,230
Less: Common stock warrant (378) (378) (378) (378)
Goodwill and core deposit intangible assets, net (109,612) (109,936) (110,585) (125,444)
Tangible common equity $ 754,658 $ 742,295 $ 698,411 $ 675,408
Total assets $ 6,927,502 $ 6,866,291 $ 6,475,199 $ 6,340,987
Less: Goodwill and core deposit intangible assets, net (109,612) (109,936) (110,585) (125,444)
Tangible assets $ 6,817,890 $ 6,756,355 $ 6,364,614 $ 6,215,543
Common shares outstanding 79,497,331 79,493,732 79,441,525 79,247,719
Tangible common equity to tangible assets 11.07% 10.99% 10.97% 10.87%
Tangible common equity per share $ 9.49 $ 9.34 $ 8.79 $ 8.52
Three Months Ended Nine Months Ended
ALLOWANCE FOR LOAN LOSSES: 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 9/30/2014 9/30/2013
Balance at beginning of period $ 66,870 $ 65,699 $ 67,320 $ 65,715 $ 71,675 $ 67,320 $ 66,941
Provision for loan losses 4,256 2,996 3,026 10,950 744 10,278 9,050
Recoveries 772 946 616 605 1,086 2,334 1,843
Charge offs (3,666) (2,771) (5,263) (9,950) (7,790) (11,700) (12,119)
Balance at end of period $ 68,232 $ 66,870 $ 65,699 $ 67,320 $ 65,715 $ 68,232 $ 65,715
Net charge offs/average gross loans (annualized) 0.21% 0.14% 0.36% 0.75% 0.56% 0.24% 0.30%
Three Months Ended Nine Months Ended
NET CHARGED OFF LOANS BY TYPE 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 9/30/2014 9/30/2013
Real estate loans $ 1,100 $ 765 $ 154 $ 288 $ 6,129 $ 2,019 $ 7,887
Commercial loans 1,803 1,255 4,414 9,139 119 $ 7,472 1,953
Consumer loans (9) (195) 79 (82) (44) $ (125) (64)
Charge offs excluding Acquired Credit Impaired Loans 2,894 1,825 4,647 9,345 6,204 9,366 9,776
Charge offs on Acquired Credit Impaired Loans -- -- -- -- 500 -- 500
Total net charge offs $ 2,894 $ 1,825 $ 4,647 $ 9,345 $ 6,704 $ 9,366 $ 10,276
NONPERFORMING ASSETS 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Delinquent loans on nonaccrual status4 $ 39,564 $ 42,651 $ 47,314 $ 39,154 $ 36,129
Delinquent loans 90 days or more on accrual status5 -- -- -- 5 948
Accruing restructured loans 56,061 43,906 37,527 33,903 36,018
Total nonperforming loans 95,625 86,557 84,841 73,062 73,095
Other real estate owned 23,162 20,610 20,001 24,288 27,582
Total nonperforming assets $ 118,787 $ 107,167 $ 104,842 $ 97,350 $ 100,677
Nonperforming assets/total assets 1.71% 1.56% 1.57% 1.50% 1.59%
Nonperforming assets/loans receivable & OREO 2.18% 2.00% 2.01% 1.91% 2.04%
Nonperforming assets/total capital 13.74% 12.57% 12.60% 12.03% 12.57%
Nonperforming loans/loans receivable 1.76% 1.62% 1.63% 1.44% 1.49%
Nonaccrual loans/loans receivable 0.73% 0.80% 0.91% 0.77% 0.74%
Allowance for loan losses/loans receivable 1.26% 1.25% 1.27% 1.33% 1.34%
Allowance for loan losses/nonaccrual loans 172.46% 156.78% 138.86% 171.94% 181.89%
Allowance for loan losses/nonperforming loans 71.35% 77.26% 77.44% 92.14% 89.90%
Allowance for loan losses/nonperforming assets 57.44% 62.40% 62.66% 69.15% 65.27%
4 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $28.1 million, $30.0 million, $31.2 million, $27.5 million and $25.2 million at September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013, respectively.
5 Excludes Acquired Credit Impaired Loans totaling $32.7 million, $43.7 million, $46.0 million, $43.8 million and $38.6 million at September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013, respectively.
BREAKDOWN OF ACCRUING RESTRUCTURED LOANS BY TYPE: 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Retail buildings $ 5,979 $ 6,021 $ 5,542 $ 5,576 $ 6,777
Hotels/motels 8,246 8,323 8,401 8,477 8,550
Gas stations/car washes -- -- -- -- --
Mixed-use facilities 792 797 796 802 807
Warehouses 5,939 5,922 812 482 485
Multifamily -- -- -- -- --
Other6 35,105 22,843 21,976 18,566 19,399
Total $ 56,061 $ 43,906 $ 37,527 $ 33,903 $ 36,018
6 Includes commercial business and other loans
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Legacy
30 - 59 days $ 3,936 $ 3,170 $ 1,700 $ 2,209 $ 1,705
60 - 89 days 1,284 210 445 266 732
Total delinquent loans less than 90 days past due - legacy $ 5,220 $ 3,380 $ 2,145 $ 2,475 $ 2,437
Acquired
30 - 59 days $ 6,911 $ 6,403 $ 4,916 $ 5,113 $ 4,013
60 - 89 days 283 640 3 2,506 1,663
Total delinquent loans less than 90 days past due - acquired $ 7,194 $ 7,043 $ 4,919 $ 7,619 $ 5,676
Total delinquent loans less than 90 days past due $ 12,414 $ 10,423 $ 7,064 $ 10,094 $ 8,113
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE BY TYPE 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Legacy
Real estate loans $ 2,768 $ 1,675 $ 760 $ 1,375 $ 1,664
Commercial loans 2,221 1,640 1,338 1,024 744
Consumer loans 231 65 47 76 29
Total delinquent loans less than 90 days past due - legacy $ 5,220 $ 3,380 $ 2,145 $ 2,475 $ 2,437
Acquired
Real estate loans $ 6,297 $ 6,051 $ 4,036 $ 6,034 $ 4,616
Commercial loans 884 860 598 1,228 833
Consumer loans 13 132 285 357 227
Total delinquent loans less than 90 days past due - acquired $ 7,194 $ 7,043 $ 4,919 $ 7,619 $ 5,676
Total delinquent loans less than 90 days past due $ 12,414 $ 10,423 $ 7,064 $ 10,094 $ 8,113
NONACCRUAL LOANS BY TYPE 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Real estate loans $ 29,001 $ 27,815 $ 34,070 $ 28,083 $ 26,616
Commercial loans 9,486 13,553 12,216 10,141 8,743
Consumer loans 1,077 1,283 1,028 930 770
Total non-accrual loans $ 39,564 $ 42,651 $ 47,314 $ 39,154 $ 36,129
CRITICIZED LOANS 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Legacy
Special mention $ 88,314 $ 55,659 $ 52,159 $ 46,480 $ 61,804
Substandard 113,865 112,357 111,529 120,163 100,551
Doubtful 470 1,227 3,332 359 8
Loss -- -- -- -- --
Total criticized loans - legacy $ 202,649 $ 169,243 $ 167,020 $ 167,002 $ 162,363
Acquired
Special mention $ 25,081 $ 36,811 $ 41,395 $ 43,009 $ 49,827
Substandard 114,347 124,618 134,660 138,337 143,149
Doubtful 3,086 3,980 2,376 6,100 2,045
Loss -- 76 1,445 1,402 990
Total criticized loans - acquired $ 142,514 $ 165,485 $ 179,876 $ 188,848 $ 196,011
Total criticized loans $ 345,163 $ 334,728 $ 346,896 $ 355,850 $ 358,374

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

Source:BBCN Bancorp, Inc.