First California Financial Group 8-K 2009
Documents found in this filing:
For further Information:
For Immediate Release
FIRST CALIFORNIA RETURNS TO PROFITABILITY IN THE 2009 SECOND QUARTER
WESTLAKE VILLAGE Calif., July 27, 2009 First California Financial Group, Inc. (Nasdaq:FCAL), the holding company of First California Bank, today reported net income of $217,000 for the three months ended June 30, 2009, following a net loss in the immediately preceding first quarter primarily due to a significant build up of its allowance for loan losses.
In addition to returning to profitable operations in the 2009 second quarter, we had a number of other important achievements that strengthen our prospects as a leading bank of choice in Southern California, said C. G. Kum, President and Chief Executive Officer. The integration of 1st Centennial Bank into First Californias operational platform was successfully and seamlessly completed during the quarter. We remain pleased with the stability of the core deposits and the quality of the acquired assets, and the benefits from this transaction are now beginning to show in our results.
2009 Second Quarter Financial Highlights:
Nonaccrual loans at June 30, 2009 totaled $27.0 million, compared with $8.4 million as of March 31, 2009. The change is predominantly attributed to two items previously reported. One loan with a balance of $22.5 million migrated to nonaccrual status during the current second quarter. This is the largest loan in the companys real estate construction portfolio, is a completed project and no charge-off was necessary. Secondly, the company
foreclosed on a property that served as collateral for a $5.7 million nonaccrual loan and moved it to other real estate owned status. As a result, total foreclosed property at the close of the 2009 second quarter increased to $6.8 million from $1.1 million at March 31, 2009.
Nonaccrual loans and loans past due 90 days and accruing were $27.3 million as of June 30, 2009, compared with $8.4 million as of March 31, 2009. These non-performing loans, as a percentage of total loans, were 2.9% at the close of the second quarter and 0.9% at the close of the first quarter.
Conservative underwriting and proactive resolution of potential problem credits contributed to another quarter of nominal losses, with net loan charge-offs totaling $430,000 for the 2009 second quarter. The companys 2009 second quarter provision for loan losses of $1.1 million exceeded net charge-offs by $680,000. This increased the allowance for loan losses as a percentage of total loans to 1.27% at June 30, 2009 from 1.26% at March 31, 2009.
Results of Operations
Net interest income before provision for loan losses increased 15.1% to $11.9 million for the 2009 second quarter from $10.3 million in the prior-year period. The company said the increase primarily reflects the benefits from its 1st Centennial transaction effected in January 2009. The addition of $100.0 million of 1st Centennials loans to the companys portfolio during February 2009 contributed to increased levels of interest income on loans in the 2009 second quarter. Given the stability of the $270 million in core deposits assumed in the transaction, First California was able to reduce its borrowings, which resulted in lower levels of interest expense in the 2009 second quarter versus the prior-year period.
Net interest margin for the 2009 second quarter expanded 15 basis points to 3.75% from the immediately preceding quarter, but was lower when compared with 4.17% in the prior-year period primarily due to the significant reductions in the Federal Funds Rate versus a year ago. Year-over-year asset yields were also negatively impacted by the increase in nonaccrual loans and a higher percentage of earning assets in lower-yielding federal funds sold. However, these were partially offset by the decrease in rates paid on interest-bearing liabilities as time deposits and borrowings repriced to current, lower rates. The cost of interest-bearing liabilities was 2.09% for the 2009 second quarter, compared with 2.29% for the preceding quarter and 2.74% a year ago.
In addition to higher interest income and lower interest expense, the expansion of the deposit customer base from the 1st Centennial transaction contributed to an increase in service charges on deposit accounts in the first half of 2009 compared with the first half of 2008. However, the lag between the costs of the transaction and the full deployment of the newly acquired liquid assets affected profitability levels for the 2009 three- and six-month periods. The company attributed approximately $250,000 and $723,000 of the increase in operating expenses for the second quarter and first half of the year, respectively, to integration-related matters.
The companys 2009 second quarter efficiency ratio was also adversely impacted by a number of other factors. The regular FDIC insurance assessment increased to $550,000 for the second quarter from $196,000 for the first quarter due to increased rates and higher deposit levels and there was a special insurance assessment of $675,000 for the second quarter. The company incurred $249,000 of expenses during the 2009 second quarter in connection with the foreclosure and sale of other real estate owned. During the 2009 second quarter, the company posted a market loss of $709,000 on loans held-for-sale and an impairment loss of $565,000 on one security. All of these expenses more than offset securities gains of $2.0 million during the quarter. The
efficiency ratio for the current second quarter was 98.60%, compared with 87.30% for the preceding first quarter and 76.52% in the year-ago second quarter.
Net income for the 2009 second quarter was $217,000, compared with $1.3 million for the year-ago second quarter. After a dividend payment of $313,000 to the U.S. Treasury Department, the company incurred a loss per common share of $0.01. In the 2008 second quarter, earnings per diluted share equaled $0.11.
Loans at June 30, 2009 totaled $940.2 million, up 19.3% from $787.9 million at year-end 2008, largely reflecting the addition of selected 1st Centennial loans, as well as the reclassification of loans held-for-sale to the loan portfolio. Deposits as of June 30, 2009 totaled $1.09 billion, compared with $817.6 million as of December 31, 2008. The sharp increase is predominantly attributed to the addition and retention of approximately $270 million in non-brokered deposits from the 1st Centennial Bank transaction. Total assets at June 30, 2009 equaled $1.45 billion, compared with $1.18 billion at December 31, 2008.
Liquidity and Capital Resources
First Californias primary source of funds continues to be core deposits. The bank also has access to alternate funding sources that are available typically at a lower cost than current market prices on time deposits. Accordingly, First California continued to utilize strategic levels of brokered deposits, FHLB borrowings and State of California time deposits during the second quarter. Given this strong liquidity position and the growth in relationship banking deposits, brokered deposits decreased to $60.3 million at June 30, 2009, compared with $98.2 million at December 31, 2008. Deposits, excluding brokered deposits and the initial impact of the 1st Centennial transaction, increased $47.1 million year-to-date. The shift in the mix of funding liabilities and the repricing of liabilities to current market rates during the quarter contributed to a reduction in the cost of interest-bearing deposits to 1.61% for the second quarter of 2009 from 1.78% for the preceding 2009 first quarter.
At June 30, 2009, First California had available total unsecured Federal Funds facilities with other financial institutions of $31.0 million. In addition, the bank has a $13.7 million secured borrowing facility with the Federal Reserve Bank of San Francisco. Also, the unused and available borrowing capacity on the banks secured FHLB borrowing facility was in excess of $163 million at June 30, 2009.
At June 30, 2009, First California had $96.4 million of Federal Funds sold and $245.9 million of securities. The securities portfolio is comprised mainly of U.S. government agency mortgage-backed securities, U.S. government agency and private-label collateralized mortgage obligations and municipal securities. During the current second quarter, the company posted an other-than-temporary impairment charge of $565,000 related to one private-label collateralized mortgage obligation.
Total shareholders equity rose to $159.1 million at June 30, 2009 from $158.9 million at December 31, 2008. The companys net book value per common share was $11.62 at June 30, 2009, compared with $11.65 at year-end 2008. Tangible book value per common share was $5.33 at June 30, 2009, compared with $6.54 at December 31, 2008. The decline is attributed to a higher number of outstanding common shares versus the year-end count and an increase in intangible assets as a result of the 1st Centennial transaction.
First Californias total risk-based and leverage capital ratios at June 30, 2009 were 12.48% and 8.96%, respectively. First Californias tangible common equity as a percentage of total assets declined to 4.28% as of June 30, 2009 from 6.34% as of year-end 2008, primarily due to the increase in intangible assets as a result of the 1st Centennial transaction.
Kum concluded: We believe the actions taken year-to-date have significantly enhanced the value of the First California Bank franchise for our customers and shareholders. We have an expanded regional base from which to gain market share and extend our leadership in Southern California banking. We boosted our reserves significantly while maintaining one of the lowest loan loss levels amongst our peers. Combined with our conservative underwriting, proactive management philosophy and commitment to maintaining a strong balance sheet, we are confident that First California Bank will endure this economic cycle and stay well positioned to capitalize on the opportunities ahead.
About First California
First California Financial Group, Inc. (Nasdaq:FCAL) is the holding company of First California Bank. Celebrating 30 years of business in 2009, First California is a regional force of strength and stability in Southern California banking. With assets of $1.45 billion and led by an experienced team of bankers, the company is one of the strongest capitalized financial institutions in the region. The bank specializes in serving the comprehensive financial needs of the commercial market, particularly small- and middle-sized businesses, professional firms and commercial real estate development and construction companies. Committed to providing the best client service available in its markets, First California offers a full line of quality commercial banking products through 18 full-service branch offices in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties. The holding companys Web site can be accessed at www.fcalgroup.com. For additional information on First California Banks products and services, visit www.fcbank.com.
This press release contains certain forward-looking information about First California 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 maintenance of First California Banks asset quality and capital position, the successful integration of the 1st Centennial Bank acquisition, the companys ability to enhance efficiencies and manage costs and the expected continued progress in consolidating operations and the benefits of those activities, the monitoring of and management of risks in First California Banks loan portfolio, the adequacy of sources of liquidity to support First Californias and First California Banks operations and strategic plans, the monitoring of and response to changing market conditions, and the status of the economy in the Southern California communities served by First California and First California Bank. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of First California. First California 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 are lower than expected, credit quality deterioration which could cause an increase in the provision for credit losses, First Californias ability to complete future acquisitions, successfully integrate such acquired entities, or achieve expected beneficial synergies and/or operating efficiencies within expected time-frames or at all, 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 First California does or anticipates doing business are less favorable than expected, 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 First California and First California Bank to retain customers, demographic changes, demand for the products or services of First California and First California Bank, as well as their 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, First Californias results could differ materially from those expressed in, or implied or projected by such forward-looking statements. First California assumes no obligation to update such forward-looking statements. For a more complete discussion of risks and uncertainties, investors and security holders are urged to
read the section titled Risk Factors in First Californias Annual Report on Form 10-K and any other reports filed by it with the Securities and Exchange Commission (SEC). The documents filed by First California with the SEC may be obtained at the SECs website at www.sec.gov. These documents may also be obtained free of charge from First California by directing a request to: First California Financial Group, Inc., 3027 Townsgate Road, Suite 300, Westlake Village, CA 91361. Attention: Investor Relations. Telephone (805) 322-9655.
# # #
(Financial Tables Follow)
First California Financial Group
Unaudited Quarterly Financial Results
First California Financial Group
Unaudited Quarterly Financial Results
First California Financial Group
Unaudited Quarterly Financial Results