PLAZA BANCORP, THE HOLDING COMPANY OF PLAZA BANK, ANNOUNCES FINANCIAL RESULTS FOR THE QUARTER ENDED MARCH 31, 2017 (unaudited)
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Highlights for the quarter:
- Earnings per diluted share increased 20% over last quarter and 50% over prior year quarter
- ROAA 1.25%, ROAE 12.17%
- Efficiency ratio improves to 59.3%
- Net interest margin expands to 4.78%
IRVINE, CA – April 19, 2017: Plaza Bancorp (PLZZ.OB) (the “Company”), the holding company of Plaza Bank (the “Bank”), reported unaudited net income for the quarter ended March 31, 2017 of $3.7 million or $0.12 per share on a diluted basis. This compares with net income of $3.0 million, or $0.10 per diluted share, for the fourth quarter of 2016 and net income of $2.3 million, or $0.08 per diluted share, for the first quarter of 2016.
For the three months ended March 31, 2017, the Company’s return on average assets was 1.25% and return on average equity was 12.17%. For the three months ended December 31, 2016, the Company’s return on average assets was 1.02% and the return on average equity was 10.33%. For the three months ended March 31, 2016, the Company’s the return on average assets was 0.89% and the return on average equity was 8.53%.
Gene Galloway, Chief Executive Officer of the Company and the Bank, commenting on the Bank’s results stated “I am pleased to announce that Plaza Bank has continued its streak of reporting profits. We are now at 27 straight quarters of profitability. The continuing financial improvement of the Bank would not have been possible without the loyalty of our clients, the dedication of our employees, and the support of our directors and the communities we serve.”
Rick Sowers, President of the Company and Bank, added “Our core earnings continue to be strong, but we are experiencing a softer market in commercial real estate loan originations where production was off by $16 million, or 24%, compared to the prior quarter. This was partially offset by increased production in commercial lines of credit; however, monthly repayments speeds increased in the quarter by 57 basis points to 3.12% compared to the three months ending in 2016, leaving our loan growth flat for the quarter. We are addressing our loan growth by expanding our asset based lending and increasing the number and quality of our relationship manager teams.”
Net interest income for the quarter ended March 31, 2017 totaled $13.4 million, an increase of $124,000, or 0.9%, from the fourth quarter of 2016. The increase in net interest income reflects higher average loan receivables of $11.5 million and a growth in the average loan yield of 10 basis points partially offset by the two fewer days in the first quarter of 2017 compared to the prior quarter and a slight increase in the cost funding of two basis points. For the quarter, loan interest income totaled $15.0 million, the average of total outstanding loans was $1.0 billion and the annualized yield was 5.92%. Interest expense for the quarter related to the $999.0 million in average deposits was $1.3 million, or 54 basis points annualized. The interest expense related to the subordinated debentures for the quarter was $453,000, or 7.245% annualized.
Net interest margin for the first quarter of 2017 was 4.78% compared with 4.57% from the fourth quarter of 2016. The first quarter of 2017 and the fourth quarter of 2016 net interest margin includes the benefit of loan prepayments, which added 12 and 8 basis points to each quarter, respectively. The 21 basis point margin increase was driven by the aforementioned increases in average loans outstanding and loan rate, plus a reduction in the lower yielding assets, cash and investment securities, partially offset by an increase in funding cost.
The Company recorded a $302,000 reversal to the provision for loan losses during the first quarter of 2017 compared to a provision of $243,000 for the fourth quarter of 2016. The $545,000 decrease in the provision is primarily due to slower loan growth in the first quarter compared to $24.2 million in the prior quarter along with lower loss factors that took effect in the first quarter. Noninterest income decreased $386,000, or 17.7%, for the three months ended March 31, 2017 as compared to the three months ended December 31, 2016. In the fourth quarter of 2016 the Bank reversed $400,000 from the reserve for sold mortgage loans with no further changes in this reserve during the first quarter of 2017.
Non-interest expense totaled $9.2 million for the first quarter of 2017, a decrease of $869,000, or 8.7%, compared with the fourth quarter of 2016. The decrease was primarily driven by non-routine expenses recorded in 2016’s fourth quarter in premises and occupancy of $242,000 and professional expenses of $150,000 plus a reduction in incentive compensation of approximately $450,000 primarily due to the decrease in loan volume during the first quarter of 2017. The Company had 169 full-time equivalent employees as of March 31, 2017.
For the first quarter of 2017, the Company’s effective tax rate was 41.6%, compared to 41.0% for the fourth quarter of 2016. The fourth quarter of 2016 effective tax rate benefited from the finalization and filing of the 2015 tax returns.
Loans held for investment totaled $1.0 billion at March 31, 2017, an increase of $184,000, or less than 0.02%, from December 31, 2016, and an increase of $102.9 million, or 11.2%, from March 31, 2016.
Loan activity during the first quarter of 2017 included loan originations of $85.7 million, a decrease of $8.3 million or 8.8% compared to prior quarter. Originations of loan commitments included commercial real estate loan originations of $49.4 million, commercial and industrial loan originations of $29.0 million and indirect auto originations of $7.3 million. At March 31, 2017 the Company’s loans held for investment to deposit ratio was 103.1%, compared with 101.7% and 103.5% at December 31, 2016 and March 31, 2016, respectively.
At March 31, 2017, the allowance for loan losses was $12.6 million, a decrease of $404,000 from December 31, 2016. A provision of $302,000 was reversed from the allowance during the first quarter of 2017 primarily due to reductions in the loss factors and two loans totaling $106,000 were charged off during the quarter that were previously reserved for in the prior quarter.
At March 31, 2017, the Bank’s allowance for loan losses as a percent of nonaccrual loans was 215%, a decrease from 503% at December 31, 2016 and 838% at March 31, 2016, and the ratio of allowance for loan losses to loans held for investment was 1.23%, a decrease from 1.27% at December 31, 2016 and 1.32% at March 30, 2016. Including the loan fair market value discounts recorded in connection with the June 2009 change in control at Plaza Bank and four acquisitions, the allowance for loan losses to loans held for investment ratio was 1.39% at March 31, 2017, compared with 1.43% at December 31, 2016 and 1.59% at March 31, 2016.
Nonperforming assets totaled $6.0 million or 0.50% of total assets at March 31, 2017, compared to $2.8 million or 0.23% of total assets at December 31, 2016. During the first quarter of 2017, nonperforming loans increased $3.3 million to $5.8 million, and other real estate owned remained at $206,000. The increase in non-accrual loans is primary due to one real estate secured loan for $3.2 million that is 75% guaranteed by the SBA that is in foreclosure. Management does not expect a loss on this loan secured by a commercial building located in Newport Beach.
Loan delinquencies, defined as 30 days to and including 89 days past due, as of March 31, 2017 decreased to $537,000, or 0.05% of loans held for investment compared to $3.0 million, or 0.29% of loans held for investment at December 31, 2016. Loans that are 90 days or more past due total $4.8 million, or 0.5% of loans held for investment as of March 31, 2017 up from December 31, 2016 total of $1.7 million, or 0.2% of loans held for investment and are all classified as nonperforming assets.
At March 31, 2017, deposits totaled $990.3 million, a decrease of $14.2 million, or 1.4%, from December 31, 2016 and an increase of $102.5 million, or 11.5%, from March 31, 2016. At March 31, 2017, non-maturity deposits totaled $737.9 million, a decrease of $26.1 million, or 3.4%, from December 31, 2016 and an increase of $65.0 million, or 9.7%, from March 31, 2016. During the first quarter of 2017, deposit decreases included $29.2 million in noninterest bearing deposits and $1.9 million in retail certificates of deposit partially offset by increases in money market/savings deposits of $3.1 million and $13.8 million in wholesale/brokered certificates of deposit.
Total borrowings at March 31, 2017 amounted to $82.7 million, a decrease of $2.0 million or 2.4% from December 31, 2016 and an increase of $21.0 million from March 31, 2016. At March 31, 2017, total borrowings represented 6.9% of total assets, compared to 7.0% and 5.8%, as of December 31, 2016 and March 31, 2016, respectively.
At March 31, 2017, the Company’s ratio of tangible common equity to total assets was 10.54%, with a tangible book value of $3.78 per share and $3.72 per diluted share.
At March 31, 2017, the Company had total risk based capital on a consolidated basis of approximately $147.6 million, and the Bank had total risk based capital of approximately $140.3 million. The federal banking regulators’ capital ratios requirements for “well capitalized” banks are 5.00% for tier 1 leverage capital, 6.5% for common equity tier 1 capital, 8.00% for tier 1 capital and 10.00% for total capital. At March 31, 2017, the Bank exceeded all regulatory capital ratio requirements for well capitalized banks.
The following table sets forth the capital ratios of the Company and the Bank at March 31, 2017:
About Plaza Bancorp
Plaza Bancorp is the holding company of Plaza Bank. Plaza Bank is a full service community bank serving the business and professional communities in Southern California and Southern Nevada. The Bank is committed to meeting the financial needs of small to middle market businesses and professional firms with loans for working capital, equipment and owner-occupied commercial real estate financing and a full array of cash management services. Plaza Bank meets its customers’ needs through its seven regional offices located in the cities of El Segundo, Irvine, Las Vegas, Manhattan Beach, Montebello, Pasadena and San Diego. For more information, visit www.plazabank.com or call President Rick Sowers at (310) 606-8040 or CEO Gene Galloway at (949) 502-4309 or (702) 277-2221.
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbors created by that Act. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements are based on currently available information, expectations, assumptions, projections, and management’s judgment about the Company, the Bank, the banking industry and general economic conditions. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely.
Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that might cause such differences include, but are not limited to: the Bank’s ability to successfully execute its business plans and achieve its objectives; changes in general economic, real estate and financial market conditions, either nationally or locally in areas in which the Bank conducts its operations; changes in interest rates; new litigation or claims or changes in existing litigation or claims; future credit loss experience; increased competitive challenges and expanding product and pricing pressures among financial institutions; legislation or regulatory changes which adversely affect the Bank’s operations or business; loss of key personnel; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies; and the ability to satisfy requirements related to the Sarbanes-Oxley Act and other regulation on internal control.