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BBCN Bancorp Reports Solid Financial Results for 2015 Second Quarter

Q2 2015 Summary:

  • Net income totals $22.9 million, or $0.29 per diluted common share
  • New loan originations amount to $360 million
  • Loans receivable increase 2% to $5.82 billion, or 5% year-to-date
  • Total deposits decrease 1% to $5.76 billion, but increase 1% year-to-date
  • Noninterest bearing deposits up 4% over Q1 2015, and increase to 29% of total deposits
  • Total assets increase 1% to $7.33 billion, or 3% year-to-date

LOS ANGELES, July 20, 2015 (GLOBE NEWSWIRE) -- BBCN Bancorp, Inc. (the "Company") (NASDAQ:BBCN), the holding company of BBCN Bank (the "Bank"), today reported strong financial results for the three months ended June 30, 2015. Net income for the 2015 second quarter increased 7% to $22.9 million, or $0.29 per diluted common share, compared with $21.4 million, or $0.27 per diluted common share, for the preceding 2015 first quarter and $22.3 million, or $0.28 per diluted common share, for the year-ago second quarter.

"Financial results for the three months ended June 30, 2015 reflect solid execution across all areas of our business operations," said Kevin S. Kim, Chairman and Chief Executive Officer of BBCN Bancorp, Inc. "Earnings for the second quarter benefited from a 4 basis point expansion in our net interest margin, including a special one-time dividend by the Federal Home Loan Bank of San Francisco, and a concerted focus on expense management. In addition, we made good progress again this quarter with credit recoveries, which contributed to lower-than-projected provision requirements, notwithstanding our loan growth. New loan originations continue to be robust amounting to $360 million for the 2015 second quarter, and our pipeline continues to build. While total deposit balances are down, we are pleased with the more favorable mix, with noninterest bearing deposits increasing 4% during the quarter and accounting for 29% of overall deposits at quarter end.

"We are particularly pleased with the strength and consistency of our financial performance as we continue to transform BBCN into a more diversified financial institution. While we recognize that it will take commitment and time to grow our new business lines to become meaningful contributors to our overall business, we believe these initiatives will significantly enhance BBCN's ability to sustain earnings growth for the long term. Ultimately, it is our goal to deliver greater value to our customers, employees and shareholders as the premier Korean-American Bank in the nation, and we look forward to keeping everyone apprised of our ongoing progress," said Kim.

Financial Highlights
(dollars in thousands, except per share data) At or for the Three Months Ended
6/30/2015 3/31/2015 6/30/2014
Net income $22,941 $21,358 $22,312
Diluted earnings per share $0.29 $0.27 $0.28
Net interest income before provision for loan losses $67,390 $65,123 $67,490
Net interest margin 3.91% 3.87% 4.20%
Noninterest income $10,568 $11,205 $10,492
Noninterest expense $38,698 $39,234 $37,739
Net loans receivable $5,745,706 $5,641,045 $5,280,187
Deposits $5,758,290 $5,803,253 $5,470,388
Nonaccrual loans (1) $39,681 $38,755 $42,651
ALLL to loans receivable 1.21% 1.22% 1.25%
ALLL to nonaccrual loans (1) 176.70% 179.57% 156.78%
ALLL to nonperforming assets (1) (2) 59.63% 59.86% 62.40%
Provision for loan losses $1,000 $1,500 $2,996
Net charge offs (recoveries) $476 $(336) $1,825
ROA 1.26% 1.19% 1.31%
ROE 10.13% 9.60% 10.59%
Efficiency ratio 49.64% 51.40% 48.39%
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $22.6 million, $26.0 million and $30.0 million at June 30, 2015, March 31, 2015 and June 30, 2014, respectively.
(2) Nonperforming assets exclude acquired credit impaired loans totaling $23.0 million, $24.1 million and $43.7 million at June 30, 2015, March 31, 2015 and June 30, 2014, respectively.

Operating Results for the 2015 Second 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 June 30, 2015, March 31, 2015, and June 30, 2014 include the following pre-tax acquisition accounting adjustments related to past acquisitions:

(dollars in thousands) Three Months Ended
6/30/2015 3/31/2015 6/30/2014
Accretion of discount on acquired performing loans $2,515 $2,183 $4,575
Accretion of discount on acquired credit impaired loans 1,818 1,555 2,096
Amortization of premium on acquired FHLB borrowings 95 94 94
Accretion of discount on acquired subordinated debt (42) (41) (40)
Amortization of premium on acquired time deposits 49 75 231
Increase to pre-tax income $4,435 $3,866 $6,956

Net Interest Income and Net Interest Margin. Net interest income before provision for loan losses for the 2015 second quarter increased 3% to $67.4 million from $65.1 million in the preceding 2015 first quarter, reflecting higher interest and fees on loans as a result of a 2% increase in average loans receivable, along with a $923,400 special dividend from the Federal Home Loan Bank of San Francisco ("FHLB"). Compared with the prior-year period, net interest income before provision for loan losses was relatively flat versus $67.5 million, as diminishing acquisition accounting adjustments and lower yields on interest earning assets offset the benefit of a 9% increase in average loans receivable.

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
6/30/2015 3/31/2015 change 6/30/2014 change
Net interest margin, excluding the effect of acquisition accounting adjustments 3.63% 3.61% 0.02% 3.72% (0.09)%
Acquisition accounting adjustments 0.28 0.26 0.02 0.48 (0.20)
Net interest margin 3.91% 3.87% 0.04% 4.20% (0.29)%

The net interest margin for the 2015 second quarter increased 4 basis points from the preceding first quarter to 3.91%, and increased 2 basis points on a core basis when excluding the effect of acquisition accounting adjustments, largely reflecting the benefit of the special FHLB dividend.

Compared with the prior-year period, net interest margin for the 2015 second quarter declined 29 basis points, but decreased only 9 basis points when excluding the effect of acquisition accounting adjustments. The Company attributed the year-over-year decrease in net interest margin largely to declines in the weighted average yield on loans.

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

Three Months Ended
6/30/2015 3/31/2015 change 6/30/2014 change
Weighted average yield on loans, excluding the effect of acquisition accounting adjustments 4.64% 4.71% (0.07)% 4.86% (0.22)%
Acquisition accounting adjustments 0.34 0.32 0.02 0.58 (0.24)
Weighted average yield on loans 4.98% 5.03% (0.05)% 5.44% (0.46)%

The weighted average yield on loans for the 2015 second quarter declined 5 basis points to 4.98% from the preceding 2015 first quarter and 7 basis points on a core basis excluding the effect of acquisition accounting adjustments. The weighted average yield on new loans originated during the 2015 second quarter rebounded to 4.29% from 4.07% in the preceding first quarter, which included higher origination levels of commercial loans and variable rate loans. Variable rate loans, which typically have lower initial rates than fixed rate loans, accounted for 51% of new loan originations for the 2015 second quarter, versus 68% in the preceding first quarter.

Compared with the prior-year period, the weighted average yield on loans decreased 46 basis points and 22 basis points on a core basis, excluding the effect of acquisition accounting adjustments.

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

Three Months Ended
6/30/2015 3/31/2015 change 6/30/2014 change
Weighted average cost of deposits, excluding the effect of acquisition accounting adjustments 0.56% 0.56% —% 0.55% 0.01%
Acquisition accounting adjustments (0.01) (0.01) (0.01)
Weighted average cost of deposits 0.55% 0.55% —% 0.54% 0.01%

The weighted average cost of deposits for the 2015 second quarter was flat with the preceding first 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 2015 second quarter increased one basis point both on a reported basis and on a core basis, excluding the effect of premium amortization on time deposits assumed in acquisitions.

Noninterest Income. Noninterest income for the 2015 second quarter totaled $10.6 million, compared with $11.2 million in the preceding 2015 first quarter. Aside from regular fluctuations in other income and fees, the Company posted no gains on sales of securities available for sale in the 2015 second quarter, versus a gain of $424,000 in the preceding first quarter.

Noninterest income for the 2015 second quarter increased modestly when compared with $10.5 million in the prior-year period. The variance reflects industry-wide reductions in service fees on deposits due to regulatory changes, offset by a higher gain on sale of SBA loans in the 2015 second quarter, which amounted to $3.1 million, versus $2.8 million for the year-ago second quarter.

Noninterest Expense. Total noninterest expense for the 2015 second quarter declined 1% to $38.7 million from $39.2 million in the preceding first quarter, but increased 3% over $37.7 million in the second quarter a year ago.

Salaries and employee benefits expense for the 2015 second quarter declined 1% from the preceding first quarter, but increased 15% over the 2014 second quarter. The total number of FTEs as of June 30, 2015 was 927, versus 933 at March 31, 2015 and 875 as of June 30, 2014.

Income Tax Provision. The effective tax rate for the 2015 second quarter was 40.0%, compared with 40.0% for the preceding 2015 first quarter and 40.1% for the 2014 second quarter.

Balance Sheet Summary

Loans receivable totaled $5.82 billion at June 30, 2015, reflecting a 2% increase over $5.71 billion at March 31, 2015, and a 9% increase over $5.35 billion at June 30, 2014.

Total new loan originations during the second quarter of 2015 amounted to $360.2 million, including SBA loan originations of $70.3 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 $58.3 million for the second quarter of 2015, compared with $42.9 million for the preceding 2015 first quarter. During the 2015 second quarter, the Company sold $34.2 million of its SBA loans held for sale.

Aggregate pay offs and pay downs for the 2015 second quarter amounted to $216.5 million, compared with $166.3 million for the preceding 2015 first quarter and $231.2 million for the year-ago second quarter.

Total deposits declined 1% to $5.76 billion at June 30, 2015 from $5.80 billion at March 31, 2015, reflecting increases in noninterest bearing demand deposits, money market accounts and savings deposits, offset by outflows in jumbo time deposits. Noninterest bearing deposits rose 4% during the 2015 second quarter and increased as a percentage of total deposits to 29% at June 30, 2015 from 28% at March 31, 2015. Compared with June 30, 2014, total deposits increased 5% over $5.47 billion.

Credit Quality

The provision for loan losses for the 2015 second quarter was $1.0 million, compared with $1.5 million for the preceding 2015 first quarter and $3.0 million 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, 2015, March 31, 2015, and June 30, 2014 is as follows:

(dollars in thousands) 6/30/2015 3/31/2015 6/30/2014
Legacy Loans (1) $55,563 $55,397 $58,877
Acquired Loans - Performing (2) 1,908 1,550 2,113
Acquired Loans - Credit Impaired (2) 12,647 12,647 5,880
Total ALLL $70,118 $69,594 $66,870
Loans Receivable $5,815,824 $5,710,639 $5,347,057
ALLL coverage ratio 1.21% 1.22% 1.25%
(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, 2015, March 31, 2015, and June 30, 2014:

(dollars in thousands) 6/30/2015 3/31/2015 6/30/2014
Special Mention (1) $129,795 $112,298 $92,470
Classified (1) 195,389 209,992 242,258
Criticized $325,184 $322,290 $334,728
(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, delinquent loans past due 90 days or more on accrual status (excluding acquired credit impaired loans) and accruing restructured loans. Nonaccrual loans at June 30, 2015 totaled $39.7 million, or 0.68% of loans receivable. This compares with nonaccrual loans of $38.8 million, or 0.68% of loans receivable, at March 31, 2015 and $42.7 million, or 0.80% of loans receivable, at June 30, 2014. Accruing restructured loans amounted to $57.4 million at June 30, 2015, compared with $57.9 million at March 31, 2015 and $43.9 million at June 30, 2014. Total nonperforming loans at June 30, 2015 amounted to $97.4 million, or 1.67% of loans receivable, compared with $96.7 million, or 1.69% of loans receivable, at March 31, 2015 and $86.6 million, or 1.62% of loans receivable, at June 30, 2014.

Nonperforming assets, including nonperforming loans and other real estate owned, amounted to $117.6 million at June 30, 2015, or 1.60% of total assets, compared with $116.3 million, or 1.60% of total assets, at March 31, 2015, and $107.2 million, or 1.56% of total assets, at June 30, 2014.

Net charge offs for the 2015 second quarter amounted to $476,000, or 0.03% of average loans receivable on an annualized basis, compared with net recoveries of $336,000 for the 2015 first quarter, or 0.02% of average loans receivable on an annualized basis and net charge offs of $1.8 million, or 0.14% of average loans receivable on an annualized basis, for the year-ago second quarter.

The allowance for loan losses at June 30, 2015 was $70.1 million, or 1.21% of loans receivable (excluding loans held for sale), compared with $69.6 million, or 1.22%, at March 31, 2015 and $66.9 million, or 1.25%, at June 30, 2014. The coverage ratio of the allowance for loan losses to nonperforming loans (excluding acquired credit impaired loans) was 71.98% at June 30, 2015, versus 72.00% at March 31, 2015 and 77.26% at June 30, 2014.

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) declined to $118.7 million at June 30, 2015, compared with $122.7 million at March 31, 2015 and $124.2 million at June 30, 2014.

Capital

At June 30, 2015, the Company continued to exceed all regulatory capital requirements to be classified as a "well-capitalized" institution, as summarized in the following table.

6/30/2015 3/31/2015 6/30/2014
Common Equity Tier 1 Capital 12.58% 12.73%
Leverage Ratio 11.80% 11.76% 11.66%
Tier 1 Risk-based Ratio 13.22% 13.39% 13.71%
Total Risk-based Ratio 14.34% 14.53% 14.90%

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

6/30/2015 3/31/2015 6/30/2014
Tangible common equity per share (1) $10.05 $9.93 $9.34
Tangible common equity to tangible assets (1) 11.07% 11.03% 10.99%
(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 21, 2015 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for the 2015 second quarter. 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 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 telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) through July 28, 2015, passcode 10068287.

About BBCN Bancorp, Inc.

BBCN Bancorp, Inc. is the holding company of BBCN Bank, the largest Korean-American bank in the nation with $7.3 billion in assets as of June 30, 2015. 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; eight loan production offices in Seattle, Denver, Dallas, Atlanta, Northern California, Annandale, Virginia, Portland, Oregon and Fremont, California; 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.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)
Assets 6/30/2015 3/31/2015 % change 12/31/2014 % change 6/30/2014 % change
Cash and due from banks $299,883 $429,871 (30)% $462,160 (35)% $414,919 (28)%
Securities available for sale, at fair value 875,405 812,372 8% 796,523 10% 746,683 17%
Federal Home Loan Bank, Federal Reserve Bank stock and other investments 40,558 28,673 41% 28,708 41% 28,399 43%
Loans held for sale, at the lower of cost or fair value 33,785 26,432 28% 28,311 19% 53,324 (37)%
Loans receivable 5,815,824 5,710,639 2% 5,565,192 5% 5,347,057 9%
Allowance for loan losses (70,118) (69,594) (1)% (67,758) (3)% (66,870) (5)%
Net loans receivable 5,745,706 5,641,045 2% 5,497,434 5% 5,280,187 9%
Accrued interest receivable 13,781 13,904 (1)% 13,634 1% 13,133 5%
Premises and equipment, net 35,321 30,074 17% 30,722 15% 30,699 15%
Bank owned life insurance 46,466 46,196 1% 45,927 1% 45,354 2%
Goodwill 105,401 105,401 —% 105,401 —% 105,401 —%
Servicing assets 10,935 10,529 4% 10,341 6% 9,024 21%
Other intangible assets, net 3,354 3,620 (7)% 3,887 (14)% 4,535 (26)%
Other assets 122,724 119,788 2% 117,282 5% 134,633 (9)%
Total assets $7,333,319 $7,267,905 1% $7,140,330 3% $6,866,291 7%
Liabilities
Deposits $5,758,290 $5,803,253 (1)% $5,693,452 1% $5,470,388 5%
Borrowings from Federal Home Loan Bank 580,785 480,881 21% 480,975 21% 461,166 26%
Subordinated debentures 42,241 42,199 —% 42,158 —% 42,076 —%
Accrued interest payable 5,954 6,477 (8)% 5,855 2% 6,087 (2)%
Other liabilities 37,461 35,897 4% 35,117 7% 33,965 10%
Total liabilities 6,424,731 6,368,707 1% 6,257,557 3% 6,013,682 7%
Stockholders' Equity
Common stock, $0.001 par value; authorized, 150,000,000 shares at June 30, 2015, March 31, 2015, December 31, 2014, and June 30, 2014; issued and outstanding, 79,550,403, 79,542,321, 79,503,552 and 79,493,732 shares at June 30, 2015, March 31, 2015, December 31, 2014, and June 30, 2014, respectively 80 79 1% 79 1% 79 1%
Capital surplus 541,091 541,824 —% 541,589 —% 541,173 —%
Retained earnings 367,792 352,807 4% 339,400 8% 311,195 18%
Accumulated other comprehensive income, net (375) 4,488 (108)% 1,705 (122)% 162 (331)%
Total stockholders' equity 908,588 899,198 1% 882,773 3% 852,609 7%
Total liabilities and stockholders' equity $7,333,319 $7,267,905 1% $7,140,330 3% $6,866,291 7%
Three Months Ended Six Months Ended
6/30/2015 3/31/2015 % change 6/30/2014 % change 6/30/2015 6/30/2014 % change
Interest income:
Interest and fees on loans $71,249 $69,639 2% $71,687 (1)% $140,888 $140,381 —%
Interest on securities 4,215 4,219 —% 4,078 3% 8,434 8,172 3%
Interest on federal funds sold and other investments 1,611 696 131% 688 134% 2,307 1,253 84%
Total interest income 77,075 74,554 3% 76,453 1% 151,629 149,806 1%
Interest expense:
Interest on deposits 7,970 7,754 3% 7,272 10% 15,724 13,962 13%
Interest on other borrowings 1,714 1,677 2% 1,691 1% 3,391 3,389 —%
Total interest expense 9,684 9,431 3% 8,963 8% 19,115 17,351 10%
Net interest income before provision for loan losses 67,391 65,123 3% 67,490 —% 132,514 132,455 —%
Provision for loan losses 1,000 1,500 (33)% 2,996 (67)% 2,500 6,022 (58)%
Net interest income after provision for loan losses 66,391 63,623 4% 64,494 3% 130,014 126,433 3%
Noninterest income:
Service fees on deposit accounts 3,030 3,062 (1)% 3,360 (10)% 6,092 6,832 (11)%
Net gains on sales of SBA loans 3,119 3,044 2% 2,811 11% 6,163 5,533 11%
Net gains on sales of other loans 45 182 (75)% 100% 227 100%
Net gains on sales of securities available for sale 424 (100)% —% 424 100%
Net gains on sales of OREO 73 110 (34)% 31 135% 183 437 (58)%
Other income and fees 4,301 4,383 (2)% 4,290 —% 8,684 8,785 (1)%
Total noninterest income 10,568 11,205 (6)% 10,492 1% 21,773 21,587 1%
Noninterest expense:
Salaries and employee benefits 20,932 21,181 (1)% 18,143 15% 42,113 37,082 14%
Occupancy 4,810 4,692 3% 4,715 2% 9,502 9,339 2%
Furniture and equipment 2,323 2,263 3% 2,012 15% 4,586 4,026 14%
Advertising and marketing 1,484 1,391 7% 1,508 (2)% 2,875 2,596 11%
Data processing and communications 2,463 2,349 5% 2,299 7% 4,812 4,420 9%
Professional fees 1,253 1,424 (12)% 1,315 (5)% 2,677 2,628 2%
FDIC assessment 909 1,112 (18)% 1,080 (16)% 2,021 2,103 (4)%
Credit related expenses 1,976 2,189 (10)% 3,016 (34)% 4,165 4,437 (6)%
Other 2,548 2,633 (3)% 3,651 (30)% 5,181 7,382 (30)%
Total noninterest expense 38,698 39,234 (1)% 37,739 3% 77,932 74,013 5%
Income before income taxes 38,261 35,594 7% 37,247 3% 73,855 74,007 —%
Income tax provision 15,320 14,236 8% 14,935 3% 29,556 29,499 —%
Net income $22,941 $21,358 7% $22,312 3% $44,299 $44,508 —%
Earnings Per Common Share:
Basic $0.29 $0.27 $0.28 $0.56 $0.56
Diluted $0.29 $0.27 $0.28 $0.56 $0.56
Average Shares Outstanding:
Basic 79,549,097 79,526,218 79,490,767 79,539,789 79,481,359
Diluted 79,569,875 79,602,122 79,614,046 79,563,944 79,618,446
At or for the Three Months Ended At or for the Six Months Ended
(Annualized)
Profitability measures: 6/30/2015 3/31/2015 6/30/2014 6/30/2015 6/30/2014
ROA 1.26% 1.19% 1.31% 1.23% 1.33%
ROE 10.13% 9.60% 10.59% 9.86% 10.71%
Return on average tangible equity 1 11.51% 10.94% 12.18% 11.23% 12.35%
Net interest margin 3.91% 3.87% 4.20% 3.89% 4.24%
Efficiency ratio 49.64% 51.40% 48.39% 50.51% 48.05%
1 Average tangible equity is calculated by subtracting average goodwill and average core deposit intangibles assets from average stockholders' equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position.
Three Months Ended Three Months Ended Three Months Ended
6/30/2015 3/31/2015 6/30/2014
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 $5,742,153 $71,249 4.98% $5,617,929 $69,639 5.03% $5,289,059 $71,687 5.44%
Securities available for sale 819,820 4,215 2.06% 782,305 4,219 2.16% 721,270 4,078 2.26%
FRB and FHLB stock and other investments 348,690 1,611 1.83% 410,973 696 0.68% 426,924 668 0.62%
Term federal funds sold NA NA 13,407 20 0.60%
Total interest earning assets $6,910,663 $77,075 4.47% $6,811,207 $74,554 4.44% $6,450,660 $76,453 4.75%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing $1,608,495 $2,873 0.72% $1,625,641 $2,765 0.68% $1,483,473 $2,499 0.68%
Savings 194,053 416 0.86% 195,063 425 0.88% 207,312 539 1.04%
Time deposits:
$100,000 or more 1,750,089 3,514 0.81% 1,713,331 3,377 0.80% 1,626,200 2,984 0.74%
Other 609,654 1,167 0.77% 626,197 1,187 0.77% 695,740 1,250 0.72%
Total time deposits 2,359,743 4,681 0.80% 2,339,528 4,564 0.79% 2,321,940 4,234 0.73%
Total interest bearing deposits 4,162,291 7,970 0.77% 4,160,232 7,754 0.76% 4,012,725 7,272 0.73%
FHLB advances 481,946 1,327 1.10% 480,942 1,297 1.09% 445,835 1,311 1.18%
Other borrowings 40,670 387 3.76% 40,624 380 3.74% 40,490 380 3.71%
Total interest bearing liabilities 4,684,907 $9,684 0.83% 4,681,798 $9,431 0.82% 4,499,050 $8,963 0.80%
Noninterest bearing demand deposits 1,623,922 1,543,144 1,437,860
Total funding liabilities/cost of funds $6,308,829 0.62% $6,224,942 0.61% $5,936,910 0.61%
Net interest income/net interest spread $67,391 3.64% $65,123 3.62% $67,490 3.95%
Net interest margin 3.91% 3.87% 4.20%
Net interest margin, excluding effect of nonaccrual loan income (expense) 3.91% 3.88% 4.18%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income 3.88% 3.85% 4.16%
Nonaccrual loan income (reversed) recognized $(21) $(24) $211
Prepayment fee income received 457 510 302
Net $436 $486 $513
Cost of deposits:
Noninterest bearing demand deposits $1,623,922 $— $1,543,144 $— $1,437,860 $—
Interest bearing deposits 4,162,291 7,970 0.77% 4,160,232 7,754 0.76% 4,012,725 7,272 0.73%
Total deposits $5,786,213 $7,970 0.55% $5,703,376 $7,754 0.55% $5,450,585 $7,272 0.54%
Six Months Ended Six Months Ended
6/30/2015 6/30/2014
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 $5,680,364 $140,888 5.00% $5,236,721 $140,381 5.41%
Securities available for sale 801,166 8,434 2.11% 710,163 8,172 2.30%
FRB and FHLB stock and other investments 379,659 2,307 1.21% 343,479 1,233 0.71%
Term federal funds sold NA 6,740 20 0.60%
Total interest earning assets $6,861,189 $151,629 4.45% $6,297,103 $149,806 4.79%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing $1,617,021 $5,638 0.70% $1,438,138 $4,776 0.67%
Savings 194,555 841 0.87% 212,341 1,139 1.08%
Time deposits:
$100,000 or more 1,731,812 6,891 0.80% 1,593,865 5,663 0.72%
Other 617,879 2,354 0.77% 679,947 2,384 0.71%
Total time deposits 2,349,691 9,245 0.79% 2,273,812 8,047 0.71%
Total interest bearing deposits 4,161,267 15,724 0.76% 3,924,291 13,962 0.72%
FHLB advances 481,447 2,624 1.10% 433,644 2,522 1.17%
Other borrowings 40,647 767 3.75% 46,412 867 3.71%
Total interest bearing liabilities 4,683,361 $19,115 0.82% 4,404,347 $17,351 0.79%
Noninterest bearing demand deposits 1,583,756 1,396,111
Total funding liabilities/cost of funds $6,267,117 0.61% $5,800,458 0.60%
Net interest income/net interest spread $132,514 3.63% $132,455 4.00%
Net interest margin 3.89% 4.24%
Net interest margin, excluding effect of nonaccrual loan income (expense) 3.89% 4.24%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income 3.86% 4.21%
Nonaccrual loan income (reversed) recognized $(45) $75
Prepayment fee income received 967 914
Net $922 $989
Cost of deposits:
Noninterest bearing demand deposits $1,583,756 $— $1,396,111 $—
Interest bearing deposits 4,161,267 15,724 0.76% 3,924,291 13,962 0.72%
Total deposits $5,745,023 $15,724 0.55% $5,320,402 $13,962 0.53%
Three Months Ended Six Months Ended
AVERAGE BALANCES 6/30/2015 3/31/2015 % change 6/30/2014 % change 6/30/2015 6/30/2014 % change
Loans receivable, including loans held for sale $5,742,153 $5,617,929 2% $5,289,059 9% $5,680,364 $5,236,721 8%
Investments 1,168,510 1,193,278 (2)% 1,161,601 1% 1,168,510 1,060,382 10%
Interest earning assets 6,910,663 6,811,206 1% 6,450,661 7% 6,848,874 6,297,103 9%
Total assets 7,264,687 7,161,811 1% 6,821,827 6% 7,213,533 6,674,506 8%
Interest bearing deposits 4,162,291 4,160,232 —% 4,012,725 4% 4,161,267 3,924,291 6%
Interest bearing liabilities 4,684,907 4,681,798 —% 4,499,050 4% 4,683,361 4,404,347 6%
Noninterest bearing demand deposits 1,623,922 1,543,144 5% 1,437,860 13% 1,583,756 1,396,111 13%
Stockholders' equity 906,310 890,206 2% 842,837 8% 898,302 831,155 8%
Net interest earning assets 2,225,756 2,129,408 5% 1,951,611 14% 2,165,513 1,892,756 14%
LOAN PORTFOLIO COMPOSITION: 6/30/2015 3/31/2015 % change 12/31/2014 % change 6/30/2014 % change
Commercial loans $1,085,714 $1,072,261 1% $1,038,383 5% $1,070,196 1%
Real estate loans 4,645,401 4,554,127 2% 4,441,864 5% 4,184,297 11%
Consumer and other loans 87,706 87,812 —% 89,850 (2)% 93,823 (7)%
Loans outstanding 5,818,821 5,714,200 2% 5,570,097 4% 5,348,316 9%
Unamortized deferred loan fees - net of costs (2,998) (3,308) 9% (2,890) (4)% (1,259) (138)%
Loans, net of deferred loan fees and costs 5,815,823 5,710,892 2% 5,567,207 4% 5,347,057 9%
Allowance for loan losses (70,118) (69,594) (1)% (67,758) (3)% (66,870) (5)%
Loan receivable, net $5,745,705 $5,641,298 2% $5,499,449 4% $5,280,187 9%
REAL ESTATE LOANS BY PROPERTY TYPE: 6/30/2015 3/31/2015 % change 12/31/2014 % change 6/30/2014 % change
Retail buildings $1,183,866 $1,215,119 (3)% $1,244,133 (5)% $1,229,485 (4)%
Hotels/motels 969,980 907,106 7% 889,411 9% 810,442 20%
Gas stations/car washes 630,445 624,644 1% 603,961 4% 546,659 15%
Mixed-use facilities 349,600 346,865 1% 334,068 5% 320,117 9%
Warehouses 499,313 486,656 3% 450,356 11% 421,266 19%
Multifamily 213,256 205,383 4% 205,280 4% 194,592 10%
Other 798,941 768,354 4% 714,655 12% 661,736 21%
Total $4,645,401 $4,554,127 2% $4,441,864 5% $4,184,297 11%
DEPOSIT COMPOSITION 6/30/2015 3/31/2015 % change 12/31/2014 % change 6/30/2014 % change
Noninterest bearing demand deposits $1,689,137 $1,616,935 4% $1,543,018 9% $1,512,423 12%
Money market and other 1,615,974 1,592,151 1% 1,663,855 (3)% 1,449,771 11%
Saving deposits 196,998 193,839 2% 198,205 (1)% 203,790 (3)%
Time deposits of $100,000 or more 1,637,673 1,774,109 (8)% 1,667,367 (2)% 1,624,340 1%
Other time deposits 618,508 626,220 (1)% 621,007 —% 680,064 (9)%
Total deposit balances $5,758,290 $5,803,254 (1)% $5,693,452 1% $5,470,388 5%
DEPOSIT COMPOSITION (%) 6/30/2015 3/31/2015 12/31/2014 6/30/2014
Noninterest bearing demand deposits 29.3% 27.9% 27.1% 27.7%
Money market and other 28.1% 27.4% 29.2% 26.5%
Saving deposits 3.4% 3.3% 3.5% 3.7%
Time deposits of $100,000 or more 28.4% 30.6% 29.3% 29.7%
Other time deposits 10.8% 10.8% 10.9% 12.4%
Total deposit balances 100.0% 100.0% 100.0% 100.0%
CAPITAL RATIOS 6/30/2015 3/31/2015 12/31/2014 6/30/2014
Total stockholders' equity $908,588 $899,198 $882,773 $852,609
Common Equity Tier 1 ratio 12.58% 12.73% —% —%
Tier 1 risk-based capital ratio 13.22% 13.39% 13.64% 13.71%
Total risk-based capital ratio 14.34% 14.53% 14.80% 14.90%
Tier 1 leverage ratio 11.80% 11.76% 11.62% 11.66%
Total risk weighted assets $6,380,538 $6,194,595 $5,956,129 $5,713,242
Book value per common share $11.42 $11.30 $11.10 $10.72
Tangible common equity to tangible assets 2 11.07% 11.03% 11.00% 10.99%
Tangible common equity per share 2 $10.05 $9.93 $9.72 $9.34
2 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:
6/30/2015 3/31/2015 12/31/2014 6/30/2014
Total stockholders' equity $908,588 $899,198 $882,773 $852,609
Less: Common stock warrant (378) (378) (378)
Goodwill and core deposit intangible assets, net (108,754) (109,021) (109,288) (109,936)
Tangible common equity $799,834 $789,799 $773,107 $742,295
Total assets $7,333,319 $7,267,905 $7,140,330 $6,866,291
Less: Goodwill and core deposit intangible assets, net (108,754) (109,021) (109,288) (109,936)
Tangible assets $7,224,565 $7,158,884 $7,031,042 $6,756,355
Common shares outstanding 79,550,403 79,542,321 79,503,552 79,493,732
Tangible common equity to tangible assets 11.07% 11.03% 11.00% 10.99%
Tangible common equity per share $10.05 $9.93 $9.72 $9.34
Three Months Ended Six Months Ended
ALLOWANCE FOR LOAN LOSSES: 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 6/30/2015 6/30/2014
Balance at beginning of period $69,594 $67,758 $68,232 $66,870 $65,699 $67,758 $67,320
Provision for loan losses 1,000 1,500 2,360 4,256 2,996 2,500 6,022
Recoveries 975 1,461 3,225 772 946 2,436 1,562
Charge offs (1,451) (1,125) (6,059) (3,666) (2,771) (2,576) (8,034)
Balance at end of period $70,118 $69,594 $67,758 $68,232 $66,870 $70,118 $66,870
Net charge offs/average gross loans (annualized) 0.03% (0.02)% 0.21% 0.21% 0.14% 0.00% 0.25%
Three Months Ended Six Months Ended
NET CHARGED OFF LOANS BY TYPE 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 6/30/2015 6/30/2014
Real estate loans $13 $(460) $(265) $1,100 $765 $(447) $919
Commercial loans 560 111 3,104 1,803 1,255 671 5,669
Consumer loans (97) 13 (5) (9) (195) (84) (116)
Charge offs excluding Acquired Credit Impaired Loans 476 (336) 2,834 2,894 1,825 140 6,472
Charge offs on Acquired Credit Impaired Loans
Total net charge offs $476 $(336) $2,834 $2,894 $1,825 $140 $6,472
NONPERFORMING ASSETS 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014
Delinquent loans on nonaccrual status 3 $ 39,681 $ 38,755 $ 46,352 $ 39,564 $ 42,651
Delinquent loans 90 days or more on accrual status 4 333 361
Accruing restructured loans 57,393 57,905 57,128 56,061 43,906
Total nonperforming loans 97,407 96,660 103,841 95,625 86,557
Other real estate owned 20,187 19,606 21,938 23,162 20,610
Total nonperforming assets $ 117,594 $ 116,266 $ 125,779 $ 118,787 $ 107,167
Nonperforming assets/total assets 1.60% 1.60% 1.76% 1.71% 1.56%
Nonperforming assets/loans receivable & OREO 2.01% 2.03% 2.25% 2.18% 2.00%
Nonperforming assets/total capital 12.94% 12.93% 14.25% 13.74% 12.57%
Nonperforming loans/loans receivable 1.67% 1.69% 1.87% 1.76% 1.62%
Nonaccrual loans/loans receivable 0.68% 0.68% 0.83% 0.73% 0.80%
Allowance for loan losses/loans receivable 1.21% 1.22% 1.22% 1.26% 1.25%
Allowance for loan losses/nonaccrual loans 176.70% 179.57% 146.18% 172.46% 156.78%
Allowance for loan losses/nonperforming loans 71.98% 72.00% 65.25% 71.35% 77.26%
Allowance for loan losses/nonperforming assets 59.63% 59.86% 53.87% 57.44% 62.40%
3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $22.6 million, $26.0 million, $28.9 million, $28.1 million, and $30.0 million at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014, respectively.
4 Excludes Acquired Credit Impaired Loans totaling $23.0 million, $24.1 million, $30.4 million, $32.7 million, and $43.7 million, at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014, respectively.
BREAKDOWN OF ACCRUING RESTRUCTURED LOANS BY TYPE: 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014
Retail buildings $ 5,705 $ 5,956 $ 6,050 $ 5,979 $ 6,021
Hotels/motels 8,012 8,095 8,172 8,246 8,323
Gas stations/car washes
Mixed-use facilities 844 784 789 792 797
Warehouses 5,759 6,180 5,880 5,939 5,922
Multifamily
Other 5 37,073 36,890 36,237 35,105 22,843
Total $ 57,393 $ 57,905 $ 57,128 $ 56,061 $ 43,906
5 Includes commercial business and other loans
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014
Legacy
30 - 59 days $ 3,457 $ 4,901 $ 2,084 $ 3,936 $ 3,170
60 - 89 days 1,546 1,565 1,812 1,284 210
Total delinquent loans less than 90 days past due - legacy $ 5,003 $ 6,466 $ 3,896 $ 5,220 $ 3,380
Acquired
30 - 59 days $ 1,553 $ 1,294 $ 1,806 $ 6,911 $ 6,403
60 - 89 days 629 66 436 283 640
Total delinquent loans less than 90 days past due - acquired $ 2,182 $ 1,360 $ 2,242 $ 7,194 $ 7,043
Total delinquent loans less than 90 days past due $ 7,185 $ 7,826 $ 6,138 $ 12,414 $ 10,423
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE BY TYPE 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014
Legacy
Real estate loans $ 2,240 $ 2,127 $ 2,475 $ 2,768 $ 1,675
Commercial loans 2,734 4,082 1,385 2,221 1,640
Consumer loans 29 257 36 231 65
Total delinquent loans less than 90 days past due - legacy $ 5,003 $ 6,466 $ 3,896 $ 5,220 $ 3,380
Acquired
Real estate loans $ 1,843 $ 1,145 $ 1,747 $ 6,297 $ 6,051
Commercial loans 333 199 382 884 860
Consumer loans 6 16 113 13 132
Total delinquent loans less than 90 days past due - acquired $ 2,182 $ 1,360 $ 2,242 $ 7,194 $ 7,043
Total delinquent loans less than 90 days past due $ 7,185 $ 7,826 $ 6,138 $ 12,414 $ 10,423
NONACCRUAL LOANS BY TYPE 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014
Real estate loans $ 25,922 $ 25,126 $ 30,988 $ 29,001 $ 27,815
Commercial loans 12,031 12,591 14,302 9,486 13,553
Consumer loans 1,728 1,038 1,062 1,077 1,283
Total non-accrual loans $ 39,681 $ 38,755 $ 46,352 $ 39,564 $ 42,651
CRITICIZED LOANS 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014
Legacy
Special mention $ 102,725 $ 90,041 $ 96,092 $ 88,314 $ 55,659
Substandard 103,074 111,162 114,369 113,865 112,357
Doubtful 220 228 39 470 1,227
Loss
Total criticized loans - legacy $ 206,019 $ 201,431 $ 210,500 $ 202,649 $ 169,243
Acquired
Special mention $ 27,070 $ 22,257 $ 26,243 $ 25,081 $ 36,811
Substandard 90,262 96,655 107,506 114,347 124,618
Doubtful 1,833 1,947 2,148 3,086 3,980
Loss 76
Total criticized loans - acquired $ 119,165 $ 120,859 $ 135,897 $ 142,514 $ 165,485
Total criticized loans $ 325,184 $ 322,290 $ 346,397 $ 345,163 $ 334,728

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

Source:BBCN Bancorp, Inc.