PLAZA BANCORP, THE HOLDING COMPANY OF PLAZA BANK, ANNOUNCES FINANCIAL RESULTS FOR JUNE 30, 2017 (unaudited)
Highlights for the quarter ended June 30, 2017:
- New loan commitments increase 25.4% to $108 million
- Total deposits up $84 million, or 8.5%
- ROAA 1.19%, ROAE 11.32%
- Efficiency ratio improves to 57.2%
- Net interest margin increases to 4.83%
IRVINE, CA – July 20, 2017: Plaza Bancorp (PLZZ.OB) (the “Company”), the holding company of Plaza Bank (the “Bank”), reported unaudited net income for the first six months of 2017, the Company recorded net income of $7.2 million, or $0.24 per diluted share. This is an increase of $1.9 million, or 36.8%, compared to the first six months of 2016 which had net income of $5.3 million, or $0.17 per diluted share.
For the six months ended June 30, 2017, the Company’s annualized return on average assets was 1.22% and annualized return on average equity was 11.74%, up from an annualized return on average assets of 0.99% and an annualized return on average equity of 9.57% for the first half of 2016.
For the quarter ended June 30, 2017, the Company reported net income of $3.5 million, or $0.12 per share on a diluted basis, compared with $3.7 million, or $0.12 per diluted share, for the first quarter of 2017 and net income of $3.0 million, or $0.10 per diluted share, in the second quarter of 2016. This represents an increase in the per diluted share amount of 20% over the comparable quarter in 2016.
For the quarter ended June 30, 2017, the Company’s annualized return on average assets was 1.19% and annualized return on average equity was 11.32%. For the quarter ended March 31, 2017, the Company’s return on average assets was 1.25% and the return on average common equity was 12.17%. For the quarter ended June 30, 2016, the Company’s return on average assets was 1.09% and the return on average common equity was 10.58%.
Gene Galloway, Chief Executive Officer of the Company and the Bank, commenting on the quarter’s results over the same period a year ago, stated “The Bank’s earnings are benefiting from the Federal Reserve rate hikes as the yields on our loans are up 23 basis points year over year on a quarterly basis while our cost of deposits has increased only 12 basis points during this same period. The yield increase, along with the growth in loans outstanding, has driven our quarterly loan interest income up 14.7% to $15.5 million from $13.5 million in the last year. Overall the combination of growing our net interest income and lowering our noninterest expenses, compared to the second quarter in 2016, has boosted our earnings per diluted share from a year ago by 41%.”
Rick Sowers, President of the Company and Bank, added “The investments we have made in our relationship management and business development teams, coupled with internal process efficiencies are starting to show positive results with the increases in our loan volume and deposit growth. New additions to our ABL, C&I and SBA teams are making meaningful contributions and this is reflected in our strong loan and deposit pipelines.”
Net interest income for the quarter ended June 30, 2017 totaled $13.8 million, an increase of $388,000, or 2.9%, from the first quarter of 2017. The net interest margin for the increase in net interest income reflects higher average loan oustandings of $11.1 million and a growth in the average loan yield of 7 basis points partially offset by an increase in the cost funding of 5 basis points. For the second quarter, loan interest income totaled $15.5 million, the average of total outstanding loans was $1.0 billion and the annualized yield was 5.99%. Interest expense for the second quarter related to the $1.0 billion in average deposits was $1.5 million, or 59 basis points annualized. The interest expense related to the subordinated debentures for the second quarter was $453,000, or 7.25% annualized.
Net interest margin for the second quarter of 2017 was 4.83% compared with 4.78% for the first quarter of 2017. The net interest margin for the second quarter of 2017 and for the first quarter of 2017 include the benefit of loan prepayments, which added 9 and 12 basis points to each quarter, respectively. The 5 basis point margin increase was driven by the aforementioned increases in average loans outstanding and loan rate, plus a reduction in lower yielding investment securities, partially offset by an increase in funding cost.
The Company recorded a $383,000 provision for loan losses during the second quarter of 2017 compared to a reversal to the provision of $302,000 for the first quarter of 2017. The $685,000 increase in the provision is primarily due to loan growth of $33.0 million.
Noninterest income decreased $164,000, or 9.1%, for the quarter ended June 30, 2017 as compared to the quarter ended March 31, 2017. The reduction in noninterest income quarter-over-quarter is primarily related to a $232,000 decrease in net gain from loan sales and $93,000 reduction loan servicing income partially offset by a $216,000 recovery on an asset formerly covered under a FDIC loss share agreement.
Non-interest expense totaled $8.9 million for the second quarter of 2017, a decrease of $222,000, or 2.4%, compared with the first quarter of 2017. The decrease was primarily driven by lower payroll taxes of $245,000 in the second quarter compared to the prior quarter. The Company had 175 full-time equivalent employees as of June 30, 2017, up six employees from the prior quarter.
For the second quarter of 2017, the Company’s effective tax rate was 41.8%, compared to 41.6% for the first quarter of 2017.
Loans held for investment totaled $1.1 billion at June 30, 2017, an increase of $32.9 million, or 3.2%, from March 31, 2017, and an increase of $98.1 million, or 10.3%, from June 30, 2016.
Loan activity during the second quarter of 2017 included loan originations of $108.1 million, an increase of $21.9 million or 25.4% compared to the prior quarter. Originations of loan commitments included commercial real estate loan originations of $60.4 million, commercial and industrial loan originations of $39.5 million and indirect auto originations of $8.2 million. At June 30, 2017 the Company’s loans held for investment to deposit ratio was 98.2%, compared with 103.1% and 105.9% at March 31, 2017 and June 30, 2016, respectively.
At June 30, 2017, the allowance for loan losses was $12.9 million, an increase of $375,000, or 3.0%, from March 31, 2017. The provision for loan loss for the quarter was $383,000 while net charge-offs were $8,000.
At June 30, 2017, the Bank’s allowance for loan losses as a percentage of nonaccrual loans was 274%, an increase from 215% at March 31, 2017 and a decrease from 1,432% at June 30, 2016. The ratio of allowance for loan losses to loans held for investment was 1.23%, the same as the March 31, 2017 ratio and below the 1.30% at June 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 1.37% at June 30, 2017, compared with 1.39% at March 31, 2017 and 1.55% at June 30, 2016.
Nonperforming assets totaled $4.9 million or 0.39% of total assets at June 30, 2017, compared to $6.0 million or 0.50% of total assets at March 31, 2017. During the second quarter of 2017, nonperforming loans decreased $1.1 million to $4.7 million, and other real estate owned remained at $206,000. The decrease in non-accrual loans is primarily due to one commercial real estate loan for $913,000 that was foreclosed on and the property sold during the quarter for a loss of $54,000.
Loan delinquencies, defined as 30 days to and including 89 days past due, as of June 30, 2017, decreased to $454,000, or 0.04% of loans held for investment compared to $537,000, or 0.05% of loans held for investment at March 31, 2017. Loans that were 90 days or more past due totaled $645,000, or 0.06% of loans held for investment as of June 30, 2017, down from a March 31, 2017 total of $4.8 million, or 0.5% of loans held for investment. These loans were all classified as nonperforming assets. The decrease in loans delinquent 90 days or greater past due is attributable to one loan for $3.1 million that was brought current by the holder of the second deed of trust.
At June 30, 2017, deposits totaled $1.1 billion, an increase of $83.7 million, or 8.5%, from March 31, 2017 and an increase of $171.1 million, or 19.0%, from June 30, 2016. At June 30, 2017, non-maturity deposits totaled $826.2 million, an increase of $88.3 million, or 12.0%, from March 31, 2017 and an increase of $159.9 million, or 24.0%, from June 30, 2016.
Total borrowings at June 30, 2017 amounted to $55.7 million, a decrease of $27.0 million, or 32.6%, from March 31, 2017 and $34.0 million, or 37.9%, from June 30, 2016. At June 30, 2017, total borrowings represented 4.4 % of total assets, compared to 6.9% and 8.1%, as of March 31, 2017 and June 30, 2016, respectively.
At June 30, 2017, the Company’s ratio of tangible common equity to total assets was 9.3%, with a tangible book value of $3.91 per share and $3.85 per diluted share.
At June 30, 2017, the Company had total risk based capital on a consolidated basis of approximately $151.9 million, and the Bank had total risk based capital of approximately $141.9 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 June 30, 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 June 30, 2017:
|Tier 1 leverage ratio||9.69%||9.43%||9.12%|
|Tier 1 risk-based capital ratio||10.17%||10.22%||9.76%|
|Common equity tier 1 capital ratio||10.17%||10.22%||9.76%|
|Tier 1 leverage ratio||10.96%||10.93%||11.50%|
|Tier 1 risk-based capital ratio||11.50%||11.85%||12.33%|
|Common equity tier 1 capital ratio||11.50%||11.85%||12.33%|
About Plaza Bancorp
Plaza Bancorp is the holding company of Plaza Bank. Plaza Bank is a top-rated community bank committed to serving and supporting the business communities of Southern California and Southern Nevada. We are committed to meeting the unique financial needs of businesses and professionals with superb options for small business lending, commercial and industrial lending, and asset based lending. You can expect a full service bank offering deposit accounts, online banking, and treasury management solutions. Our expert bankers tailor creative solutions to provide your business with a truly personal banking experience. With seven regional offices located in El Segundo, Irvine, Las Vegas, Manhattan Beach, Montebello, Pasadena and San Diego, Plaza Bank makes a positive impact in the communities we serve. Plaza Bank rose to the top 5.3% of community banks and ranked #29 of the “100 Top-Performing Community Banks” in 2016 by S&P Global Market Intelligence, out of 546 banks with assets between $1 billion to $10 billion. Other Plaza Bank top performance rankings include a Bauer Financial award of “5 Stars” and a Findley Report “Super Premium” ranking.
Our Mission: Plaza Bank is dedicated to creating an exceptional and personal experience, one relationship at a time.
For more information, visit plazabank.com or call CEO Gene Galloway at (702) 277-2221 or (949) 502-4309 or President Rick Sowers at (310) 606-8040.
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.