LOS ANGELES, CA -- (Marketwire) -- 10/29/12 -- Commonwealth Business Bank (OTCBB: CWBB)
Highlights:
- Record nine months net income of $5.22 million or $1.68 per diluted share and third quarter net income of $1.80 million or $0.57 per diluted share.
- Net interest income before provision for loan losses in third quarter 2012 rose 19.4% compared with third quarter 2011, and 18% in the nine months of 2012 compared with the nine months of 2011.
- The bank added revenue generating employees in SBA and commercial lending while maintaining a 46.1% efficiency ratio for the nine months of 2012.
- Total assets at September 30, 2012 were $450.05 million, up 12% compared with $402.14 million at September 30, 2011, and up 10% since December 31, 2011.
- Net loans, mainly reflecting steady growth in commercial property and retained SBA loans, was $366.38 million at September 30, 2012, up 16% compared with $316.08 million at September 30, 2011, and up 13.61% compared with December 31, 2011 totals.
- The bank reported a reduction in Texas Ratio to 3.71% and non-accrual loans to 0.72% of gross loans at September 30, 2012.
- Tangible common book value per share increased by $2.42 to $14.90 compared with $12.48 at September 30, 2011.
Commonwealth Business Bank (OTCBB: CWBB) today reported financial results for the quarter and nine months ended September 30, 2012 that reflected earnings growth from significant year-over-year asset quality and non-interest income improvement, loan growth and reduction in cost of funds.
For the three months ended September 30, 2012, net income was $1.80 million or $0.57 per diluted share compared with net income of $1.16 million or $0.37 per diluted share for the three months ended September 30, 2011, a 55% increase. For the nine months ended September 30, 2012, the company reported net income of $5.22 million or $1.68 per diluted share compared with a net loss of $(333,000) or $(0.11) per diluted share for the nine months ended September 30, 2011. Results for the nine months of 2011 reflected significant one-time provisions for loan losses taken in second quarter 2011.
"We are pleased our third quarter and nine month 2012 financial results reflect initiatives to generate steady and reliable income growth, achieve improved asset quality and develop a diversified and balanced loan portfolio," said Joanne Kim, President and CEO. "It remains a highly competitive environment to win quality loans. We believe our focus on building relationships with our business customers one at a time and identifying new opportunities in SBA lending have been important factors in our continuing success."
In third quarter 2012, net interest income after provision for loan losses was $4.43 million compared with $3.14 million in third quarter 2011, a 41% improvement. Total interest income at September 30, 2012 grew 11% compared with September 30, 2011, while the company lowered total interest expense 13% during the same periods. Kim explained that interest income grew as the loan balance increased and nonaccrual loans were returned to accrual status. The bank has benefited from positive impact on cost of funds from re-pricing of interest-bearing accounts to lower rates, growth of non-interest bearing deposits, and run off of high cost wholesale deposits. Despite growth in its loan balance, the bank did not have any loan loss provision expense during third quarter as historical loss factors improved. Net interest income after provision for loan losses for the nine months of 2012 was $11.96 million compared with $2.45 million for the nine months of 2011.
"Managing net interest income in this environment is a challenge for all banks, so our ability to grow third quarter 2012 net interest margin to 3.98% compared with 3.70% in third quarter 2011 was encouraging," Kim explained. She noted the bank has maintained a cost of funds to below 1%.
The company reported total non-interest income of $1.29 million for the quarter ended September 30, 2012 compared with $911,000 for the quarter ended September 30, 2011, a 41% increase. For the nine months ended September 30, 2012, total non-interest income was $3.88 million, up 14% compared with $3.41 million for the nine months ended September 30, 2011. The company recorded year-over year quarterly and nine month growth in its gain on the sale of SBA loans.
Total non-interest expense was $7.62 million for the nine months ended September 30, 2012, compared with $6.34 million for the nine months ended September 30, 2011, primarily reflecting higher salaries and employee benefits resulting from 19% growth in staffing and annual pay increase. The bank added revenue generating employees in SBA and commercial lending in line with strong loan production and also added compliance and administration staff for support. Although non-interest expense increased, the bank continues to be highly productive and its efficiency ratio was 46.8% during third quarter 2012, which remained comparable to previous quarters and compares positively with most community bank peers, both locally and nationally.
Balance Sheet, Asset Quality and Capital Strength
Total assets were $450.05 million at September 30, 2012 compared with $402.14 million September 30, 2011. Net loans after allowance for loan losses at September 30, 2012 were $366.38 million compared with $316.08 million at September 30, 2011. The increase partially reflects retention of guaranteed portion of SBA loans to build a stable pipeline of SBA inventories. A key strategic direction is to expand SBA lending, which management anticipates will maximize capital leverage while adding less credit risk than conventional commercial and real estate loans.
Commonwealth added $717,000 in provision for loan losses during the nine months of 2012 compared with $8.30 million in the nine months of 2011, and no provision for third quarter 2012. Net charge offs to average loans for the nine months of 2012 improved to 0.04% compared with 2.10% for the same period in 2011. The asset quality continues to improve and the Texas Ratio was 3.71% compared with 10.63% at June 30, 2012 and 24.65% at September 30, 2011.
Non-accrual loans were reduced by 61.4% to $2.73 million at September 30, 2012, compared with $7.1 million at June 30, 2012, and down 82% compared with $15.2 million at September 30, 2011, 30 to 89 days loan delinquencies increased by $4.7 million at September 30, 2012. This is attributable to one commercial loan which management feels is well secured. The bank reported no Other Real Estate Owned at September 30, 2012.
Total deposits at September 30, 2012 were $393.05 million compared with $406.64 million at June 30, 2012 and $353.47 million at September 30, 2011. Deposit balance declined from second quarter 2012 as high rate wholesale deposits were intentionally run off to minimize cost, and periodic balance fluctuation in large checking accounts was normalized. The company's net loans to deposits ratio, including loans held for sale, was 93.2% at September 30, 2012. Kim noted that the bank's goal is to expand its core deposit base to fund its growing lending activities.
The bank reported a tier 1 leverage capital ratio of 12.11%, a tier 1 risk-based capital ratio of 14.36%, and a total risk-based capital ratio of 15.63% in third quarter 2012, which exceed minimum regulatory standards for a well-capitalized financial institution.
Kim concluded: "We continue to focus on risk management while expanding and diversifying our loan portfolio and avoiding exposure to large individual credits. Many attractively located commercial properties in the Los Angeles area have continued to be in demand, which has facilitated our growing activity in owner-occupied business loans and commercial property loans. Strengthening the bank's balance sheet and credit quality has positioned us to grow and pursue opportunities.
"We are looking forward to moving to our new headquarters on Wilshire Boulevard at the beginning of 2013, which is closer to the center of the Korean-American business activities. It will provide increased foot traffic and excellent visibility for the bank."
Commonwealth Business Bank is a traditional full-service commercial bank opened on March 9, 2005 and is headquartered in the "Miracle Mile" of the Los Angeles, California.
This press release contains certain forward-looking information about Commonwealth Business Bank (CWBB) that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements, and include statements related to the bank's outlook. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of CWBB. CWBB cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to, revenues that are lower than expected and credit quality deterioration which could cause an increase in the provision for credit losses.
These forward-looking statements involve known and unknown risks, uncertainties and factors such as: changes in consumer spending, borrowing and savings habits, technological changes, the cost of additional capital is more than expected, a change in the interest rate environment reduces interest margins, asset/liability repricing risks and liquidity risks, general economic conditions, particularly those affecting real estate values, either nationally or in the market areas in which CWBB does or anticipates doing business, including the possibility of a U.S. recession, a slowdown in construction activity, recent volatility in the credit or equity markets and its effect on the general economy, loan delinquency rates, the ability of CWBB to retain customers, demographic changes, demand for the products or services of CWBB as well as its ability to attract and retain qualified people, competition with other banks and financial institutions, and other factors. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, CWBB's results could differ materially from those expressed in, or implied or projected by such forward-looking statements. CWBB assumes no obligation to update such forward-looking statements.
STATEMENTS OF OPERATIONS (Unaudited)
As of September 30, 2012
(Dollar in thousansds)
Three Months Ended Nine Months Ended
-------------------------------------- -------------------------
September June September September September
30, 30, % 30, % 30, 30, %
2012 2012 Change 2011 Change 2012 2011 Change
-------- ------ ------ -------- ------ -------- --------- ------
Total
interest
income $ 5,283 $4,942 6.9% $ 4,640 13.9% $ 15,262 $ 13,721 11.2%
Total
interest
expense 856 870 -1.6% 933 -8.3% 2,584 2,975 -13.1%
-------- ------ ------ -------- ------ -------- --------- -----
Net
interest
income
before LL
prov 4,427 4,072 8.7% 3,707 19.4% 12,678 10,746 18.0%
Provision
for loan
losses - 300 NM 564 NM 717 8,296 -91.4%
-------- ------ ------ -------- ------ -------- --------- -----
Net
interest
income
after LL
prov 4,427 3,772 17.4% 3,143 40.9% 11,961 2,450 388.2%
Gain on
sale of
loans 869 913 -4.8% 557 56.0% 2,615 2,333 12.1%
Service
charges
and
other
income 416 521 -20.2% 354 17.5% 1,261 1,078 17.0%
-------- ------ ------ -------- ------ -------- --------- -----
Total non-
interest
Income 1,285 1,434 -10.4% 911 41.1% 3,876 3,411 13.6%
Salaries
and
employee
benefits 1,717 1,508 13.9% 1,197 43.4% 4,697 3,452 36.1%
Occupancy
and
equipment 297 288 3.1% 265 12.1% 860 765 12.4%
Other
expenses 660 709 -6.9% 673 -1.9% 2,067 2,119 -2.5%
-------- ------ ------ -------- ------ -------- --------- -----
Total non-
interest
Expense 2,674 2,505 6.7% 2,135 25.2% 7,624 6,336 20.3%
-------- ------ ------ -------- ------ -------- --------- -----
Income
(loss)
before
income
taxes 3,038 2,701 12.5% 1,919 58.3% 8,213 (475) NM
Total
Income tax
provision 1,240 972 27.6% 756 64.0% 2,995 (142) NM
======== ====== ====== ======== ====== ======== ========= =====
Net income
(loss) $ 1,798 $1,729 4.0% $ 1,163 54.6% $ 5,218 $ (333) NM
-------- ------ ------ -------- ------ -------- --------- -----
-------- ------ ------ -------- ------ -------- --------- -----
BASIC EPS $ 0.58 $ 0.56 $ 0.38 $ 1.68 $ (0.11)
DILUTED
EPS $ 0.57 $ 0.54 $ 0.37 $ 1.68 $ (0.11)
-------- ------ ------ -------- ------ -------- --------- -----
STATEMENTS OF FINANCIAL CONDITION (Unaudited)
As of September 30, 2012
(Dollar in thousansds)
--------- --------- ------ --------- ------ --------- ------
September December September
30, June 30, % 31, % 30, %
2012 2012 Change 2011 Change 2011 Change
--------- --------- ------ --------- ------ --------- ------
ASSETS
Cash and Cash
Equivalent $ 56,634 $ 72,739 -22.1% 51,784 9.4% $ 55,409 2.2%
Total
Investment
Securities 14,023 18,642 -24.8% 21,951 -36.1% 18,727 -25.1%
Loans and
lease
financing,
net of
deferred fee
and costs 377,424 368,801 2.3% 333,505 13.2% 327,495 15.2%
Less:
Allowance
for loan
losses (11,041) (11,149) -1.0% (10,929) 1.0% (11,415) -3.3%
-------- -------- ----- -------- ----- -------- -----
Net Loans 366,383 357,652 2.4% 322,576 13.6% 316,080 15.9%
FHLB & FRB
stocks 3,264 3,264 - 3,052 6.9% 3,161 3.3%
Other assets 9,743 9,508 2.5% 8,721 11.7% 8,760 11.2%
======== ======== ===== ======== ===== ======== =====
TOTAL ASSETS $450,047 $461,805 -2.5% $408,084 10.3% $402,137 11.9%
LIABILITIES AND
STOCKHOLDERS'
EQUITY
DDA $ 58,076 $ 61,674 -5.8% $ 42,885 35.4% $ 40,476 43.5%
Money market
& NOW 126,633 128,860 -1.7% 111,158 13.9% 107,668 17.6%
Savings 3,928 4,801 -18.2% 4,389 -10.5% 3,684 6.6%
Time deposits< $100K 91,382 99,017 -7.7% 104,948 -12.9% 116,255 -21.4%
Time deposits
=
$100K 113,030 112,283 0.7% 93,617 20.7% 85,386 32.4%
-------- -------- ----- -------- ----- -------- -----
TOTAL DEPOSITS 393,049 406,635 -3.3% 356,997 10.1% 353,469 11.2%
TOTAL
LIABILITIES 395,934 409,480 -3.3% 359,332 10.2% 355,610 11.3%
SHAREHOLDERS'
EQUITY 54,113 52,325 3.4% 48,752 11.0% 46,527 16.3%
======== ======== ===== ======== ===== ======== =====
TOTAL
LIABILITIES &
SHAREHOLDERS'
EQUITY $450,047 $461,805 -2.5% $408,084 10.3% $402,137 11.9%
-------- -------- ------ -------- ------ -------- ------
SELECTED FINANCIAL RATIOS
As of September 30, 2012
(Dollar in thousands)
Three Months Ended
-----------------------------------------------------------------
September June December September
30, 30, % 31, % 30, %
2012 2012 Change 2011 Change 2011 Change
---------- -------- ------- ---------- ------- ---------- -------
Performance
Ratios:
Return
on
Average
Assets 1.61% 1.67% -0.06% 2.12% -0.51% 1.15% 0.46%
Return
on
Average
Equity 13.37% 13.47% -0.10% 18.10% -4.73% 9.99% 3.38%
Net
Interest
Margin 3.98% 3.96% 0.02% 3.71% 0.27% 3.70% 0.28%
Cost of
Funds 0.88% 0.97% -0.09% 1.01% -0.13% 1.05% -0.17%
Efficiency
Ratio 46.81% 45.50% 1.31% 50.82% -4.01% 46.22% 0.59%
Capital
Ratios:
Core
Capital
(Leverage)
Ratio 12.11% 12.50% -0.39% 11.99% 0.12% 11.51% 0.60%
Tier 1
Risk-
Based
Capital
Ratio 14.36% 14.16% 0.20% 14.13% 0.23% 13.65% 0.71%
Total
Risk-
Based
Capital
Ratio 15.63% 15.44% 0.19% 15.41% 0.22% 14.93% 0.70%
Delinquent
Loans,
30-89
Days
Past-Due: $ 4,843 $ 95 NM $ 2,286 NM $ 904 NM
Non-
Performing
Assets:
Total
Non-
Accrual
Loans $ 2,730 $ 7,070 -61.38% $ 13,104 -79.16% $ 15,169 -82.00%
90 Days
or More
Past-
Due and
Still
Accruing - - 729 -
Accrual
TDR
Loans 11,108 7,292 52.33% 6,867 61.76% 5,871 89.20%
Total
Non-
Perform-
ing
Loans 13,838 14,362 -3.65% 20,700 -33.15% 21,040 -34.23%
Other
Real
Estate
Owned - - - - - - -
Total
Non-
Perform-
ing
Assets $ 13,838 $14,362 -3.65% $ 20,700 -33.15% $ 21,040 -34.23%
Asset
Quality
Ratios:
Total
Non-
Accrual
Loans
to
Gross
Loans 0.72% 1.92% -1.19% 3.93% -3.21% 4.63% -3.91%
Non-
Perform-
ing
Loans
to
Gross
Loans 3.67% 3.89% -0.23% 6.21% -2.54% 6.42% -2.76%
Total
NPA to
Assets 3.07% 3.11% -0.04% 5.07% -2.00% 5.23% -2.16%
Net
Charge-
offs to
Average
Gross
Loans 0.12% -0.09% 0.21% 0.59% -0.47% 0.08% 0.04%
ALLL to
Loans,
Net of
Deferred
Fees/
Costs 2.93% 3.02% -0.08% 3.28% -0.35% 3.49% -0.56%
ALLL to
Non-
Accrual
Loans 404.38% 157.69% NM 83.40% NM 75.25% NM
ALLL to
Non-
Perform-
ing
Loans 79.79% 77.63% 2.16% 52.80% 26.99% 54.25% 25.54%
Texas
Ratio 3.71% 10.63% -6.91% 20.29% -16.58% 24.65% -20.94%
