×

BBCN Bancorp Reports 2014 Fourth Quarter and Full-Year Financial Results

Q4 2014 Summary:

  • Net income totals $22.7 million, or $0.29 per diluted common share
  • New loan originations for the quarter total $304 million
  • Loans receivable increase to $5.57 billion, reflecting a 2% increase over September 30, 2014 and a 10% increase over December 31, 2013
  • Total deposits increase to $5.69 billion, reflecting a 3% increase during the quarter and an 11% increase for the full year
  • Total assets increase to $7.14 billion, reflecting a 3% increase over the preceding quarter and a 10% increase for 2014

LOS ANGELES, Jan. 26, 2015 (GLOBE NEWSWIRE) -- BBCN Bancorp, Inc. (the "Company") (Nasdaq:BBCN), the holding company of BBCN Bank (the "Bank"), today reported net income of $22.7 million, or $0.29 per diluted common share, for the three months ended December 31, 2014. This reflects a 6% increase over net income of $21.4 million, or $0.27 per diluted common share, for the preceding 2014 third quarter and a 26% increase over $18.1 million, or $0.23 per diluted common share, for the year-ago fourth quarter.

For the full year, net income totaled $88.6 million, or $1.11 per diluted common shares, reflecting an 8% increase over net income of $81.8 million, or $1.03 per diluted common share, for 2013.

"BBCN delivered a solid 2014 fourth quarter, notwithstanding the headwinds of the low interest rate environment and diminishing purchase accounting benefit," said Kevin S. Kim, Chairman and Chief Executive Officer of BBCN Bancorp, Inc. "New loan production amounted to $304 million for the final quarter of the year, contributing to a 10% increase in loans receivable over year-end 2013. In total, we originated $1.33 billion in new loans during 2014, an increase of 17% over $1.14 billion in 2013. Deposits also grew at a strong pace, up 3% during the quarter and 11% for the full year. The higher cash and cash equivalent balance at year end as a result of the strong deposit growth contributed to the continuing pressures on our net interest margin. Overall, we are pleased with the earnings growth for the quarter and full year, particularly in light of the considerable investments that we are making to transform the franchise to a more diversified financial institution.

"2014 was a year of building stability and fortifying the foundation of BBCN. We strengthened the executive management and Board of Directors with a number of key additions, which significantly enhanced our experience and leadership capabilities. In addition to the increased financial support of our customers and communities, as well as the progress in expanding our product offering, we marked a new chapter in the history of BBCN by becoming the first Korean-American bank to establish a presence in Korea. This is a very exciting time for us as we believe BBCN is about to embark on a journey to new frontiers in the years ahead. On behalf of the entire Board and management team, we reaffirm our commitment to enhancing the value for our customers, employees and shareholders, and look forward to keeping everyone apprised of BBCN's ongoing progress," said Kim.

Financial Highlights

(dollars in thousands, except per share data) At or for the Three Months Ended
12/31/2014 9/30/2014 12/31/2013
Net income $ 22,687 $ 21,420 $ 18,071
Diluted earnings per share $ 0.29 $ 0.27 $ 0.23
Net interest income before provision for loan losses $ 66,234 $ 67,907 $ 66,876
Net interest margin 3.90% 4.15% 4.45%
Noninterest income $ 12,050 $ 11,369 $ 11,356
Noninterest expense $ 39,010 $ 39,420 $ 38,164
Net loans receivable $ 5,499,449 $ 5,364,612 $ 5,006,856
Deposits $ 5,693,452 $ 5,509,754 $ 5,148,057
Nonaccrual loans (1) $ 46,352 $ 39,564 $ 39,154
ALLL to loans receivable 1.22% 1.26% 1.33%
ALLL to nonaccrual loans (1) 146.18% 172.46% 171.94%
ALLL to nonperforming assets (1) (2) 53.87% 57.44% 69.15%
Provision for loan losses $ 2,360 $ 4,256 $ 10,950
Net charge offs $ 2,834 $ 2,894 $ 9,345
ROA 1.28% 1.25% 1.13%
ROE 10.42% 9.97% 8.92%
Efficiency ratio 49.83% 49.73% 48.78%

(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $28.9 million, $28.1 million and $27.5 million at December 31, 2014, September 30, 2014 and December 31, 2013, respectively.

(2) Nonperforming assets exclude acquired credit impaired loans totaling $30.4 million, $32.7 million and $43.8 million at December 31, 2014, September 30, 2014 and December 31, 2013, respectively.

Operating Results for the 2014 Fourth 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 December 31, 2014, September 30, 2014, and December 31, 2013 include the following pre-tax acquisition accounting adjustments related to past acquisitions:

(Dollars in thousands) Three Months Ended
12/31/2014 9/30/2014 12/31/2013
Accretion of discount on acquired performing loans $ 3,190.00 $ 4,157.00 $ 4,873.00
Accretion of discount on acquired credit impaired loans 1,670 1,863 2,480
Amortization of premium on acquired FHLB borrowings 96 95 94
Accretion of discount on acquired subordinated debt (41) (41) (107)
Amortization of premium on acquired time deposits 105 125 369
Increase to pre-tax income $ 5,020 $ 6,199 $ 7,709

Net Interest Income and Net Interest Margin. Net interest income before provision for loan losses for the 2014 fourth quarter amounted to $66.2 million, compared with $67.9 million in the preceding third quarter of 2014 and $66.9 million in the prior-year fourth quarter. The Company attributed the decreases in net interest income, notwithstanding the solid expansion of its loans receivable over prior periods, to diminishing acquisition accounting adjustments, reversals of interest income related to nonaccrual loans and lower yields on interest earning assets. Overall, average loans receivable for the 2014 fourth quarter rose 1% over the preceding third quarter and increased 10% over the fourth quarter of 2013.

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
12/31/2014 9/30/2014 change 12/31/2013 change
Net interest margin, excluding the effect of acquisition accounting adjustments 3.57% 3.73% (0.16)% 3.87% (0.30)%
Acquisition accounting adjustments 0.33 0.42 (0.09) 0.58 (0.25)
Net interest margin 3.90% 4.15% (0.25)% 4.45% (0.55)%

The net interest margin for the 2014 fourth quarter declined 25 basis points from the preceding third quarter to 3.90% and declined 16 basis points on a core basis, when excluding the effect of acquisition accounting adjustments. Compared with the year-ago fourth quarter, net interest margin for the 2014 fourth quarter declined 55 basis points and decreased 30 basis points on a core basis excluding the effect of acquisition accounting adjustments. The Company attributed the pressures on net interest margin to decreases in the weighted average yield on loans and a higher mix of cash and cash equivalents on its balance sheet.

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

Three Months Ended
12/31/2014 9/30/2014 change 12/31/2013 change
Weighted average yield on loans, excluding the effect of acquisition accounting adjustments 4.71% 4.78% (0.07)% 4.90% (0.19)%
Acquisition accounting adjustments 0.40 0.51 (0.11) 0.69 (0.29)
Weighted average yield on loans 5.11% 5.29% (0.18)% 5.59% (0.48)%

The weighted average yield on loans for the 2014 fourth quarter declined 18 basis points to 5.11% from the preceding third quarter. On a core basis excluding the effect of acquisition accounting adjustments, the weighted average yield on loans declined only 7 basis points. The weighted average yield on new loans originated during the 2014 fourth quarter increased to 4.39% from 4.31% in the preceding third quarter. Variable rate loans accounted for 52% of new loan originations for the 2014 fourth quarter, with fixed rate loans representing 48%. The Company noted that the 2014 fourth quarter was the second consecutive period in which variable rate loan volumes exceeded fixed rate loans. Compared with the prior-year period, the weighted average yield on loans for the 2014 fourth quarter decreased 48 basis points and 19 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:

12/31/2014 9/30/2014 change 12/31/2013 change
Fixed rate loans
As a percentage of total loans 52% 51% 1% 48% 4%
Weighted average contractual rate 4.75% 4.79% (0.04)% 4.99% (0.24)%
Variable rate loans
As a percentage of total loans 48% 49% (1)% 52% (4)%
Weighted average contractual rate 4.17% 4.25% (0.08)% 4.37% (0.20)%

The declines in the weighted average contractual rate for the 2014 fourth quarter versus prior periods reflect what continues to be a highly competitive rate environment for fixed rate and variable 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
12/31/2014 9/30/2014 change 12/31/2013 change
Weighted average cost of deposits, excluding the effect of acquisition accounting adjustments 0.56% 0.55% 0.01% 0.52% 0.04%
Acquisition accounting adjustments (0.01) (0.01) (0.02) 0.01
Weighted average cost of deposits 0.55% 0.54% 0.01% 0.50% 0.05%

The weighted average cost of deposits for the 2014 fourth quarter rose by 1 basis point over the preceding third 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 fourth 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 fourth quarter rose 6% to $12.1 million from $11.4 million in both the preceding 2014 third and prior-year fourth quarters. The increase in noninterest income is largely attributable to the higher gain on sale of SBA loans in the 2014 fourth quarter, which amounted to $4.1 million, versus $3.6 million for the 2014 third quarter and $2.7 million for the year-ago fourth quarter.

Noninterest Expense. Total noninterest expense for the fourth quarter of 2014 declined 1% to $39.0 million from $39.4 million in the preceding 2014 third quarter, but increased 2% when compared with $38.2 million in the fourth quarter a year ago.

Salaries and employee benefits expense for the 2014 fourth quarter was relatively flat with the preceding third quarter, but increased 9% over the 2013 fourth quarter, reflecting an increase in FTEs to support BBCN's growing franchise and investments in new products and services to become a more diversified financial institution. The total number of FTEs as of December 31, 2014 was 915, compared with 911 as of September 30, 2014 and 835 as of December 31, 2013.

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

Income Tax Provision. The effective tax rate for the 2014 third quarter was 38.5%, compared with 39.8% for the preceding 2014 third quarter and 37.9% for the 2013 fourth quarter.

Balance Sheet Summary

Loans receivable totaled $5.57 billion at December 31, 2014, reflecting a 2% increase over $5.43 billion at September 30, 2014, and a 10% increase for the full year over $5.07 billion at December 31, 2013.

Total new loan originations during the fourth quarter of 2014 amounted to $304.1 million, including SBA loan originations of $57.3 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 $48.3 million for the fourth quarter of 2014, compared with $40.0 million for the preceding 2014 third quarter. During the 2014 fourth quarter, the Company sold $48.4 million of its SBA loans held for sale.

Aggregate pay offs and pay downs for the 2014 fourth quarter amounted to $262.2 million for the quarter, compared with $312.0 million for the preceding third quarter and $209.7 million for the year-ago fourth quarter.

Total deposits amounted to $5.69 billion at December 31, 2014, reflecting a 3% increase over $5.51 billion at September 30, 2014, and an 11% increase over $5.15 billion at year-end 2013. The increase in total deposits from September 30, 2014 reflects a 3% increase in noninterest bearing demand deposits and an 8% increase in money market account balances, offset in part by strategic reductions in wholesale time deposits. Noninterest bearing deposits at December 31, 2014 totaled $1.54 billion and accounted for 27% of total deposits.

Credit Quality

The provision for loan losses for the 2014 fourth quarter was $2.4 million, compared with $4.3 million for the preceding 2014 third quarter and $11.0 million for the prior-year fourth 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 December 31, 2014, September 30, 2014, and December 31, 2013 is as follows:

(Dollars in thousands) 12/31/2014 9/30/2014 12/31/2013
Legacy Loans (1) $ 58,644 $ 60,073 $ 59,978
Acquired Loans - Performing (2) 1,767 1,973 2,564
Acquired Loans - Credit Impaired (2) 7,347 6,186 4,778
Total ALLL $ 67,758 $ 68,232 $ 67,320
Loans Receivable $ 5,567,207 $ 5,432,844 $ 5,074,176
ALLL coverage ratio 1.22% 1.26% 1.33%

(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 December 31, 2014, September 30, 2014, and December 31, 2013:

(Dollars in thousands) 12/31/2014 9/30/2014 12/31/2013
Special Mention (1) $ 122,335 $ 113,395 $ 89,488
Classified (1) 224,062 231,768 266,360
Criticized $ 346,397 $ 345,163 $ 355,848

(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 December 31, 2014 totaled $46.4 million, or 0.83% of loans receivable, compared with $39.6 million, or 0.73% of loans receivable, at September 30, 2014 and $39.2 million, or 0.77% of loans receivable, at December 31, 2013. Accruing restructured loans totaled $57.1 million at December 31, 2014, compared with $56.1 million at September 30, 2014 and $33.9 million at December 31, 2013. Total nonperforming loans at December 31, 2014 amounted to $103.8 million, or 1.87% of loans receivable, compared with $95.6 million, or 1.76% of loans receivable, at September 30, 2014 and $73.1 million, or 1.44% of loans receivable, at December 31, 2013.

Nonperforming assets, including other real estate owned, totaled $125.8 million at December 31, 2014, or 1.76% of total assets, compared with $118.8 million, or 1.71% of total assets, at September 30, 2014, and $97.4 million, or 1.50% of total assets, at December 31, 2013.

Net loan charge-offs for the 2014 fourth quarter totaled $2.8 million and equaled 0.21% of average loans receivable on an annualized basis. This compares with net loan charge offs of $2.9 million and equaled 0.21% of average loans receivable on an annualized basis, for the preceding 2014 third quarter and $9.3 million, or 0.75% of average loans receivable on an annualized basis, for the year-ago fourth quarter.

The allowance for loan losses at December 31, 2014 was $67.8 million, or 1.22% of loans receivable (excluding loans held for sale), compared with $68.2 million, or 1.26%, at September 30, 2014 and $67.3 million, or 1.33%, at December 31, 2013. The coverage ratio of the allowance for loan losses to nonperforming loans (excluding acquired credit impaired loans) was 65.25% at December 31, 2014, versus 71.35% at September 30, 2014 and 92.14% at December 31, 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 $127.1 million at December 31, 2014, compared with $130.7 million at September 30, 2014 and $116.3 million at December 31, 2013.

Capital

At December 31, 2014, the Company continued to exceed all regulatory capital requirements to be classified as a "well-capitalized" institution, as summarized in the following table.

12/31/2014 9/30/2014 12/31/2013
Leverage Ratio 11.62% 11.80% 11.97%
Tier 1 Risk-based Ratio 13.64% 13.72% 13.66%
Total Risk-based Ratio 14.80% 14.93% 14.90%

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

12/31/2014 9/30/2014 12/31/2013
Tangible common equity per share (1) $9.72 $9.49 $8.79
Tangible common equity to tangible assets (1) 10.98% 11.07% 10.97%

(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, January 27, 2015 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for the 2014 fourth quarter and full year. Investors and analysts are invited to 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 at the Investor Relations section of BBCN Bancorp's website at www.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 February 4, 2015, passcode 10058570.

About BBCN Bancorp, Inc.

BBCN Bancorp, Inc. is the holding company of BBCN Bank, the largest Korean-American bank in the nation with $7.1 billion in assets as of December 31, 2014. Headquartered in Los Angeles and serving a diverse mix of customers mirroring its communities, BBCN operates 50 branches in California, New York, New Jersey, Illinois, Washington and Virginia; six loan production offices in Seattle, Denver, Dallas, Atlanta, Northern California and Annandale, Virginia; and a representative office in Seoul, Korea. 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 may contain forward-looking statements, including statements about future operations and projected 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 12/31/2014 9/30/2014 % change 12/31/2013 % change
Cash and due from banks 462,160 $ 443,320 4% $ 316,705 46%
Securities available for sale, at fair value 796,523 710,625 12% 705,751 13%
Federal Home Loan Bank, Federal Reserve Bank stock and other investments 28,708 28,744 0% 28,324 1%
Loans held for sale, at the lower of cost or fair value 26,296 45,695 -42% 44,115 -40%
Loans receivable 5,567,207 5,432,844 2% 5,074,176 10%
Allowance for loan losses (67,758) (68,232) 1% (67,320) -1%
Net loans receivable 5,499,449 5,364,612 3% 5,006,856 10%
Accrued interest receivable 13,634 13,142 4% 13,403 2%
Premises and equipment, net 30,722 30,999 -1% 30,894 -1%
Bank owned life insurance 45,927 45,644 1% 44,770 3%
Goodwill 105,401 105,401 0% 105,401 0%
Other intangible assets, net 14,228 13,735 4% 14,099 1%
Other assets 117,282 125,889 -7% 164,881 -29%
Total assets 7,140,330 $ 6,927,806 3% $ 6,475,199 10%
Liabilities
Deposits 5,693,452 $ 5,509,754 3% $ 5,148,057 11%
Borrowings from Federal Home Loan Bank 480,975 467,071 3% 421,352 14%
Subordinated debentures 42,158 42,117 0% 57,410 -27%
Accrued interest payable 5,855 6,173 -5% 4,821 21%
Other liabilities 35,117 38,043 -8% 34,185 3%
Total liabilities 6,257,557 6,063,158 3% 5,665,825 10%
Stockholders' Equity
Common stock, $0.001 par value; authorized, 150,000,000 shares at December 31, 2014, September 30, 2014, and December 31, 2013; issued and outstanding, 79,503,552, 79,497,331, and 79,441,525 shares and at December 31, 2014, September 30, 2014, and December 31, 2013, respectively 79 79 0% 79 0%
Capital surplus 541,589 541,406 0% 540,876 0%
Retained earnings 339,400 324,664 5% 278,604 22%
Accumulated other comprehensive income, net 1,705 (1,501) 214% (10,185) 117%
Total stockholders' equity 882,773 864,648 2% 809,374 9%
Total liabilities and stockholders' equity $ 7,140,330 $ 6,927,806 3% $ 6,475,199 10%
Three Months Ended Twelve Months Ended
12/31/2014 9/30/2014 % change 12/31/2013 % change 12/31/2014 12/31/2013 % change
Interest income:
Interest and fees on loans $ 70,999 $ 72,437 -2% $ 70,435 1% $ 283,817 $ 266,684 6%
Interest on securities 3,973 3,999 -1% 3,971 0% 16,144 14,726 10%
Interest on federal funds sold and other investments 795 648 23% 510 56% 2,696 1,663 62%
Total interest income 75,767 77,084 -2% 74,916 1% 302,657 283,073 7%
Interest expense:
Interest on deposits 7,797 7,419 5% 6,307 24% 29,178 23,321 25%
Interest on other borrowings 1,736 1,758 -1% 1,733 0% 6,882 6,697 3%
Total interest expense 9,533 9,177 4% 8,040 19% 36,060 30,018 20%
Net interest income before provision for loan losses 66,234 67,907 -2% 66,876 -1% 266,597 253,055 5%
Provision for loan losses 2,360 4,256 -45% 10,950 -78% 12,638 20,000 -37%
Net interest income after provision for loan losses 63,874 63,651 0% 55,926 14% 253,959 233,055 9%
Noninterest income:
Service fees on deposit accounts 3,398 3,456 -2% 3,720 -9% 13,686 12,838 7%
Net gains on sales of SBA loans 4,062 3,578 14% 2,699 51% 13,174 11,515 14%
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 47 29 62% (45) 204% 513 (102) 603%
Other income and fees 4,543 4,306 6% 4,982 -9% 17,634 18,346 -4%
Total noninterest income 12,050 11,369 6% 11,356 6% 45,007 42,713 5%
Noninterest expense:
Salaries and employee benefits 19,273 19,346 0% 17,719 9% 75,701 66,805 13%
Occupancy 5,070 4,722 7% 4,470 13% 19,130 17,676 8%
Furniture and equipment 2,190 1,916 14% 1,895 16% 8,132 6,809 19%
Advertising and marketing 1,295 1,535 -16% 1,328 -2% 5,426 5,184 5%
Data processing and communications 2,270 2,206 3% 2,107 8% 8,896 7,595 17%
Professional fees 1,687 1,567 8% 1,010 67% 5,882 5,194 13%
FDIC assessment 1,115 1,135 -2% 939 19% 4,353 3,309 32%
Merger and integration expenses 32 66 -52% 2,540 -99% 322 5,161 -94%
Credit related expenses 2,997 3,531 -15% 2,331 29% 10,966 8,895 23%
Other 3,081 3,396 -9% 3,825 -19% 13,636 14,986 -9%
Total noninterest expense 39,010 39,420 -1% 38,164 2% 152,444 141,614 8%
Income before income taxes 36,914 35,600 4% 29,118 27% 146,522 134,154 9%
Income tax provision 14,227 14,180 0% 11,047 29% 57,907 52,399 11%
Net income $ 22,687 $ 21,420 6% $ 18,071 26% $ 88,615 $ 81,755 8%
Earnings Per Common Share:
Basic $ 0.29 $ 0.27 $ 0.23 $ 1.11 $ 1.03
Diluted $ 0.29 $ 0.27 $ 0.23 $ 1.11 $ 1.03
Average Shares Outstanding:
Basic 79,500,638 79,493,917 79,350,797 79,493,742 79,036,729
Diluted 79,596,391 79,601,075 79,520,193 79,611,037 79,260,703
Three Months Ended Twelve Months Ended
12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 12/31/2014 12/31/2013
Net Income $ 22,687 $ 21,420 $ 22,312 $ 22,196 $ 18,071 $ 88,615 $ 81,755
Add back: Income tax 14,227 14,180 14,935 14,564 11,047 57,907 52,399
Add back: Provision for loan losses 2,360 4,256 2,996 3,026 10,950 12,638 20,000
Pre-tax, pre-provision income (PTPP) 1 $ 39,274 $ 39,856 $ 40,243 $ 39,786 $ 40,068 $ 159,160 $ 154,154
PTPP to average assets (annualized) 2.21% 2.32% 2.36% 2.44% 2.51% 2.33% 2.55%
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 Twelve Months Ended
(Annualized)
Profitability measures: 12/31/2014 9/30/2014 12/31/2013 12/31/2014 12/31/2013
ROA 1.28% 1.25% 1.13% 1.30% 1.35%
ROE 10.42% 9.97% 8.92% 10.44% 10.37%
Return on average tangible equity 2 11.91% 11.43% 10.51% 12.00% 12.01%
Net interest margin 3.90% 4.15% 4.45% 4.13% 4.46%
Efficiency ratio 49.83% 49.73% 48.78% 48.92% 47.88%
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
12/31/2014 9/30/2014 12/31/2013
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 $ 5,508,850 $ 70,999 5.11% $ 5,434,815 $ 72,437 5.29% $ 4,999,586 $ 70,435 5.59%
Securities available for sale 716,245 3,973 2.22% 734,282 3,999 2.18% 702,886 3,971 2.26%
FRB and FHLB stock and other investments 520,225 795 0.60% 332,643 648 0.76% 258,270 510 0.77%
Total interest earning assets $ 6,745,320 $ 75,767 4.46% $ 6,501,740 $ 77,084 4.71% $ 5,960,742 $ 74,916 4.99%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest-bearing $ 1,686,608 $ 2,936 0.69% $ 1,492,175 $ 2,558 0.68% $ 1,327,322 $ 2,082 0.62%
Savings 199,387 459 0.91% 202,785 496 0.97% 226,638 657 1.15%
Time deposits:
$100,000 or more 1,606,508 3,185 0.79% 1,601,436 3,094 0.77% 1,468,459 2,413 0.65%
Other 649,961 1,217 0.74% 677,474 1,270 0.74% 662,029 1,155 0.69%
Total time deposits 2,256,469 4,402 0.77% 2,278,910 4,365 0.76% 2,130,488 3,568 0.66%
Total interest bearing deposits 4,142,464 7,797 0.75% 3,973,870 7,419 0.74% 3,684,448 6,307 0.68%
FHLB advances 481,340 1,351 1.11% 462,434 1,373 1.18% 420,319 1,204 1.14%
Other borrowings 40,578 385 3.72% 40,533 385 3.72% 56,453 529 3.67%
Total interest bearing liabilities 4,664,382 $ 9,533 0.81% 4,476,837 $ 9,177 0.81% 4,161,220 $ 8,040 0.77%
Noninterest bearing demand deposits 1,514,678 1,483,966 1,379,230
Total funding liabilities/cost of funds $ 6,179,060 0.61% $ 5,960,803 0.61% $ 5,540,450 0.58%
Net interest income/net interest spread $ 66,234 3.65% $ 67,907 3.89% $ 66,876 4.22%
Net interest margin 3.90% 4.15% 4.45%
Net interest margin, excluding effect of nonaccrual loan income (expense) 3.91% 4.14% 4.47%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income 3.89% 4.10% 4.44%
Nonaccrual loan income (reversed) recognized $ (164) $ 63 $ (280)
Prepayment fee income received 206 608 537
Net $ 42 $ 671 $ 257
Cost of deposits:
Noninterest bearing demand deposits $ 1,514,678 $ -- $ 1,437,860 $ -- $ 1,379,230 $ --
Interest bearing deposits 4,142,464 7,797 0.75% 4,012,725 7,272 0.73% 3,684,448 6,307 0.68%
Total deposits $ 5,657,142 $ 7,797 0.55% $ 5,450,585 $ 7,272 0.54% $ 5,063,678 $ 6,307 0.50%
Twelve Months Ended Twelve Months Ended
12/31/2014 12/31/2013
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 $ 5,355,243 $ 283,817 5.30% $ 4,692,089 $ 266,684 5.68%
Securities available for sale 717,775 16,144 2.25% 703,812 14,726 2.09%
FRB and FHLB stock and other investments 385,298 2,676 0.68% 276,109 1,663 0.59%
Federal funds sold 3,342 20 0.60% -- -- NA
Total interest earning assets $ 6,461,657 $ 302,657 4.68% $ 5,672,010 $ 283,073 4.99%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest-bearing $ 1,514,386 $ 10,270 0.68% $ 1,289,082 $ 7,818 0.61%
Savings 206,667 2,094 1.01% 200,735 2,800 1.39%
Time deposits:
$100,000 or more 1,598,960 11,942 0.75% 1,317,178 8,254 0.63%
Other 671,766 4,871 0.73% 671,670 4,449 0.66%
Total time deposits 2,270,726 16,813 0.74% 1,988,848 12,703 0.64%
Total interest bearing deposits 3,991,779 29,178 0.73% 3,478,665 23,321 0.67%
FHLB advances 452,923 5,245 1.16% 421,729 4,899 1.16%
Other borrowings 43,459 1,637 3.72% 47,678 1,798 3.72%
Total interest bearing liabilities 4,488,162 $ 36,060 0.80% 3,948,072 $ 30,018 0.76%
Non-interest bearing demand deposits 1,448,141 1,260,596
Total funding liabilities / cost of funds $ 5,936,303 0.61% $ 5,208,668 0.58%
Net interest income / net interest spread $ 266,597 3.88% $ 253,055 4.23%
Net interest margin 4.13% 4.46%
Net interest margin, excluding effect of nonaccrual loan income (expense) 4.13% 4.47%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income 4.10% 4.44%
Nonaccrual loan income (reversed) recognized $ (26) $ (274)
Prepayment fee income received 1,729 1,485
Net $ 1,703 $ 1,211
Cost of deposits:
Non-interest bearing demand deposits $ 1,448,141 $ -- $ 1,260,596 $ --
Interest bearing deposits 3,991,779 29,178 0.73% 3,478,665 23,321 0.67%
Total deposits $ 5,439,920 $ 29,178 0.54% $ 4,739,261 $ 23,321 0.49%
Three Months Ended Twelve Months Ended
12/31/2014 9/30/2014 % change 12/31/2013 % change 12/31/2014 12/31/2013 % change
AVERAGE BALANCES
Loans receivable, including loans held for sale $ 5,508,850 $ 5,434,815 1% $ 4,999,586 10% $ 5,355,243 $ 4,692,089 14%
Investments 1,236,470 1,066,925 16% 961,156 29% 1,106,415 979,921 13%
Interest earning assets 6,745,320 6,501,740 4% 5,960,742 13% 6,461,657 5,672,010 14%
Total assets 7,099,418 6,867,468 3% 6,393,648 11% 6,830,244 6,042,674 13%
Interest bearing deposits 4,142,464 3,973,870 4% 3,684,448 12% 3,991,779 3,478,665 15%
Interest bearing liabilities 4,664,382 4,476,837 4% 4,161,220 12% 4,488,162 3,948,072 14%
Noninterest bearing demand deposits 1,514,678 1,483,966 2% 1,379,230 10% 1,448,141 1,260,596 15%
Stockholders' equity 871,291 859,606 1% 810,563 7% 848,443 788,570 8%
Net interest earning assets 2,080,938 2,024,903 3% 1,799,522 16% 1,973,495 1,723,938 14%
12/31/2014 9/30/2014 % change 12/31/2013 % change
LOAN PORTFOLIO COMPOSITION:
Commercial loans $ 1,038,383 $ 1,023,924 1% $ 1,073,778 -3%
Real estate loans 4,441,864 4,317,960 3% 3,904,059 14%
Consumer and other loans 89,850 92,362 -3% 98,507 -9%
Loans outstanding 5,570,097 5,434,246 2% 5,076,344 10%
Unamortized deferred loan fees - net of costs (2,890) (1,402) -106% (2,168) -33%
Loans, net of deferred loan fees and costs 5,567,207 5,432,844 2% 5,074,176 10%
Allowance for loan losses (67,758) (68,232) 1% (67,320) -1%
Loan receivable, net $ 5,499,449 $ 5,364,612 3% $ 5,006,856 10%
REAL ESTATE LOANS BY PROPERTY TYPE: 12/31/2014 9/30/2014 % change 12/31/2013 % change
Retail buildings $ 1,244,133 $ 1,233,161 1% $ 1,140,103 9%
Hotels/motels 889,411 846,921 5% 720,175 23%
Gas stations/car washes 603,961 582,725 4% 522,198 16%
Mixed-use facilities 334,068 353,395 -5% 312,156 7%
Warehouses 450,356 443,418 2% 383,979 17%
Multifamily 205,280 197,902 4% 181,503 13%
Other 714,655 660,438 8% 643,945 11%
Total $ 4,441,864 $ 4,317,960 3% $ 3,904,059 14%
DEPOSIT COMPOSITION 12/31/2014 9/30/2014 % change 12/31/2013 % change
Noninterest bearing demand deposits $ 1,543,018 $ 1,503,275 3% $ 1,399,454 10%
Money market and other 1,663,855 1,537,467 8% 1,376,068 21%
Saving deposits 198,205 199,953 -1% 222,446 -11%
Time deposits of $100,000 or more 1,667,367 1,595,213 5% 1,499,248 11%
Other time deposits 621,007 673,846 -8% 650,841 -5%
Total deposit balances $ 5,693,452 $ 5,509,754 3% $ 5,148,057 11%
DEPOSIT COMPOSITION (%) 12/31/2014 9/30/2014 12/31/2013
Noninterest bearing demand deposits 27.1% 27.3% 27.2%
Money market and other 29.2% 27.9% 26.7%
Saving deposits 3.5% 3.6% 4.3%
Time deposits of $100,000 or more 29.3% 29.0% 29.1%
Other time deposits 10.9% 12.2% 12.7%
Total deposit balances 100.0% 100.0% 100.0%
CAPITAL RATIOS 12/31/2014 9/30/2014 12/31/2013
Total stockholders' equity $ 882,773 $ 864,648 $ 809,374
Tier 1 risk-based capital ratio 13.64% 13.72% 13.66%
Total risk-based capital ratio 14.80% 14.93% 14.90%
Tier 1 leverage ratio 11.62% 11.80% 11.97%
Total risk weighted assets $ 5,957,617 $ 5,807,854 5,498,694
Book value per common share $ 11.10 $ 10.87 $ 10.18
Tangible common equity to tangible assets3 11.00% 11.07% 10.97%
Tangible common equity per share3 $ 9.72 $ 9.49 $ 8.79
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.
Reonciliation of GAAP financial measures to non-GAAP financial measures:
12/31/2014 9/30/2014 12/31/2013
Total stockholders' equity $ 882,773 $ 864,648 $ 809,374
Less: Common stock warrant (378) (378) (378)
Goodwill and core deposit intangible assets, net (109,288) (109,612) (110,585)
Tangible common equity $ 773,107 $ 754,658 $ 698,411
Total assets $ 7,140,330 $ 6,927,806 $ 6,475,199
Less: Goodwill and core deposit intangible assets, net (109,288) (109,612) (110,585)
Tangible assets $ 7,031,042 $ 6,818,194 $ 6,364,614
Common shares outstanding 79,503,552 79,497,331 79,441,525
Tangible common equity to tangible assets 11.00% 11.07% 10.97%
Tangible common equity per share $ 9.72 $ 9.49 $ 8.79
Three Months Ended Twelve Months Ended
ALLOWANCE FOR LOAN LOSSES: 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 12/31/2014 12/31/2013
Balance at beginning of period $ 68,232 $ 66,870 $ 65,699 $ 67,320 $ 65,715 $ 67,320 $ 66,941
Provision for loan losses 2,360 4,256 2,996 3,026 10,950 12,638 20,000
Recoveries 3,225 772 946 616 605 5,559 2,448
Charge offs (6,059) (3,666) (2,771) (5,263) (9,950) (17,759) (22,069)
Balance at end of period $ 67,758 $ 68,232 $ 66,870 $ 65,699 $ 67,320 $ 67,758 $ 67,320
Net charge offs/average gross loans (annualized) 0.21% 0.21% 0.14% 0.36% 0.75% 0.23% 0.42%
Three Months Ended Twelve Months Ended
NET CHARGED OFF LOANS BY TYPE 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 12/31/2014 12/31/2013
Real estate loans $ (265) $ 1,100 $ 765 $ 154 $ 288 $ 1,754 $ 8,175
Commercial loans 3,104 1,803 1,255 4,414 9,139 $ 10,576 11,092
Consumer loans (5) (9) (195) 79 (82) $ (130) (146)
Charge offs excluding Acquired Credit Impaired Loans 2,834 2,894 1,825 4,647 9,345 12,200 19,121
Charge offs on Acquired Credit Impaired Loans -- -- -- -- -- -- 500
Total net charge offs $ 2,834 $ 2,894 $ 1,825 $ 4,647 $ 9,345 $ 12,200 $ 19,621
NONPERFORMING ASSETS 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
Delinquent loans on nonaccrual status4 $ 46,352 $ 39,564 $ 42,651 $ 47,314 $ 39,154
Delinquent loans 90 days or more on accrual status5 361 -- -- -- 5
Accruing restructured loans 57,128 56,061 43,906 37,527 33,903
Total nonperforming loans 103,841 95,625 86,557 84,841 73,062
Other real estate owned 21,938 23,162 20,610 20,001 24,288
Total nonperforming assets $ 125,779 $ 118,787 $ 107,167 $ 104,842 $ 97,350
Nonperforming assets/total assets 1.76% 1.71% 1.56% 1.57% 1.50%
Nonperforming assets/loans receivable & OREO 2.25% 2.18% 2.00% 2.01% 1.91%
Nonperforming assets/total capital 14.25% 13.74% 12.57% 12.60% 12.03%
Nonperforming loans/loans receivable 1.87% 1.76% 1.62% 1.63% 1.44%
Nonaccrual loans/loans receivable 0.83% 0.73% 0.80% 0.91% 0.77%
Allowance for loan losses/loans receivable 1.22% 1.26% 1.25% 1.27% 1.33%
Allowance for loan losses/nonaccrual loans 146.18% 172.46% 156.78% 138.86% 171.94%
Allowance for loan losses/nonperforming loans 65.25% 71.35% 77.26% 77.44% 92.14%
Allowance for loan losses/nonperforming assets 53.87% 57.44% 62.40% 62.66% 69.15%
4 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $28.9 million, $28.1 million, $30.0 million, $31.2 million and $27.5 million at December 31, 2014, September 30, 2014, June 30, 2014, March 31, 2014 and December 31, 2013, respectively.
5 Excludes Acquired Credit Impaired Loans totaling $30.4 million, $32.7 million, $43.7 million, $46.0 million and $43.8 million at December 31, 2014, September 30, 2014, June 30, 2014, March 31, 2014 and December 31, 2013, respectively.
BREAKDOWN OF ACCRUING RESTRUCTURED LOANS BY TYPE: 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
Retail buildings $ 6,050 $ 5,979 $ 6,021 $ 5,542 $ 5,576
Hotels/motels 8,172 8,246 8,323 8,401 8,477
Gas stations/car washes -- -- -- -- --
Mixed-use facilities 789 792 797 796 802
Warehouses 5,880 5,939 5,922 812 482
Multifamily -- -- -- -- --
Other6 36,237 35,105 22,843 21,976 18,566
Total $ 57,128 $ 56,061 $ 43,906 $ 37,527 $ 33,903
6 Includes commercial business and other loans
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
Legacy
30 - 59 days $ 2,084 $ 3,936 $ 3,170 $ 1,700 $ 2,209
60 - 89 days 1,812 1,284 210 445 266
Total delinquent loans less than 90 days past due - legacy $ 3,896 $ 5,220 $ 3,380 $ 2,145 $ 2,475
Acquired
30 - 59 days $ 1,806 $ 6,911 $ 6,403 $ 4,916 $ 5,113
60 - 89 days 436 283 640 3 2,506
Total delinquent loans less than 90 days past due - acquired $ 2,242 $ 7,194 $ 7,043 $ 4,919 $ 7,619
Total delinquent loans less than 90 days past due $ 6,138 $ 12,414 $ 10,423 $ 7,064 $ 10,094
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE BY TYPE 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
Legacy
Real estate loans $ 2,475 $ 2,768 $ 1,675 $ 760 $ 1,375
Commercial loans 1,385 2,221 1,640 1,338 1,024
Consumer loans 36 231 65 47 76
Total delinquent loans less than 90 days past due - legacy $ 3,896 $ 5,220 $ 3,380 $ 2,145 $ 2,475
Acquired
Real estate loans $ 1,747 $ 6,297 $ 6,051 $ 4,036 $ 6,034
Commercial loans 382 884 860 598 1,228
Consumer loans 113 13 132 285 357
Total delinquent loans less than 90 days past due - acquired $ 2,242 $ 7,194 $ 7,043 $ 4,919 $ 7,619
Total delinquent loans less than 90 days past due $ 6,138 $ 12,414 $ 10,423 $ 7,064 $ 10,094
NONACCRUAL LOANS BY TYPE 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
Real estate loans $ 30,988 $ 29,001 $ 27,815 $ 34,070 $ 28,083
Commercial loans 14,302 9,486 13,553 12,216 10,141
Consumer loans 1,062 1,077 1,283 1,028 930
Total non-accrual loans $ 46,352 $ 39,564 $ 42,651 $ 47,314 $ 39,154
CRITICIZED LOANS 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
Legacy
Special mention $ 96,092 $ 88,314 $ 55,659 $ 52,159 $ 46,480
Substandard 114,369 113,865 112,357 111,529 120,163
Doubtful 39 470 1,227 3,332 359
Loss -- -- -- -- --
Total criticized loans - legacy $ 210,500 $ 202,649 $ 169,243 $ 167,020 $ 167,002
Acquired
Special mention $ 26,243 $ 25,081 $ 36,811 $ 41,395 $ 43,009
Substandard 107,506 114,347 124,618 134,660 138,337
Doubtful 2,148 3,086 3,980 2,376 6,100
Loss -- -- 76 1,445 1,402
Total criticized loans - acquired $ 135,897 $ 142,514 $ 165,485 $ 179,876 $ 188,848
Total criticized loans $ 346,397 $ 345,163 $ 334,728 $ 346,896 $ 355,850

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

Source:BBCN Bancorp, Inc.