LOS ANGELES, CA -- (Marketwired) -- 07/16/14 -- 1st Enterprise Bank ("the Bank") (OTCQB: FENB), an independent full-service commercial bank serving the Southern California business community, today reported net income of $990,000 or $.22 per diluted share for the second quarter of 2014, compared with net income of $1.4 million or $.34 per diluted share for the prior year period. The period ending June 30, 2014 included one-time transaction related expenses of approximately $530,000 related to the Bank's pending merger with CU Bancorp that was announced on June 3, 2014. The Bank continued its strong organic growth in loans and deposits, as loans grew by $37 million or 7% and deposits grew by $42 million or 6% from the first quarter of 2014.
Financial Highlights
- Total Assets grew by $74 million or 10%, from $716 million at June 30, 2013 to $790 million at June 30, 2014
- Total Loans outstanding grew by $105 million or 24%, from $445 million at June 30, 2013 to $550 million at June 30, 2014
- Total Deposits grew by $93 million or 15%, from $600 million at June 30, 2013 to $693 million at June 30, 2014
- Adjusted Pre-tax Operating Income grew by more than $518,000 or 24% from the prior year See Supplemental Information -- Non-GAAP Financial Measures.
Proposed Merger with CU Bancorp
- On June 3, 2014, 1st Enterprise Bank and CU Bancorp (the parent of California United Bank) jointly announced the signing of a definitive agreement and plan of merger whereby 1st Enterprise will merge into California United Bank. This merger combines two commercial banking franchises in Southern California with more than $2.2 billion in combined assets which operate offices in Los Angeles, Orange, Ventura and San Bernardino counties.
- Under the terms of the merger agreement, 1st Enterprise shareholders will receive 1.3450 shares of CU Bancorp common stock for each share of 1st Enterprise common stock.
- The transaction, currently expected to close in the fourth quarter of 2014, is subject to customary conditions, including the approval of bank regulatory agencies and the shareholders of both companies.
John Black, CEO, stated, "The Bank continues to grow its customer base, which is reflected in its 24% growth in loans and 15% growth in deposits over last year. Income for the quarter was impacted by some extraordinary items including $530,000 in merger related costs and a $500,000 addition to the off-balance sheet reserve for an impaired credit related to standby letters of credit. The Bank's adjusted pre-tax operating income excludes these unusual items and resulted in a 24% increase year over year and a 12% increase over the first quarter of 2014." Brian Horton, President, added, "We are pleased with the Bank's continued growth and our merger with CU Bancorp remains on track to close during the fourth quarter of this year."
For the three months ended June 30, 2014, net interest income before provision was $6.1 million, an increase of 12% compared to the second quarter of 2013 and was equal to the first quarter of 2014. The year-over-year growth in net interest income was the result of both growth in earning assets and expansion in net interest margin. Earning assets were $707 million in the second quarter of 2014, an 8% or $51 million increase over the prior year. The net interest margin was 3.46% during the second quarter of 2014, compared to 3.32% for the prior year. The increase in net interest margin was the result of a .14% increase in the earning asset yield over the prior year. This increase in earning asset yield resulted from loan balances growing from 66% of earning assets in the prior year to 74% in the current quarter. Net interest income over the prior quarter was essentially flat as earning assets grew by $3 million, while the net interest margin declined from 3.50% to 3.46%.
For the current quarter, there was a modest release of loan loss reserves resulting in a credit of $140,000 to the loan loss provision, due to positive migration trends within the Bank's loan risk rating categories. There was no provision for loan loss during the prior quarter and a $66,000 loan loss provision for the second quarter of 2013. There were no loan charge-offs during the second quarter of 2014, the prior year, or the prior quarter. There were net recoveries of $21,000 in both the second quarter of 2014 and the prior year. As of June 30, 2014 there was one non-accrual loan that totaled $1.7 million.
Non-interest income, excluding gain on sale, was $960,000 for the quarter, which was a 9% increase year over year and a 7% sequential increase. Growth in non-interest income was generally due to increased deposit and loan related fees over prior periods.
Non-interest expense increased by $1.3 million or 31% over the prior year and increased by $710,000 or 15% over the prior quarter. Both comparative increases were significantly impacted by one-time transactions expense in the second quarter of 2014 totaling $530,000 and a $500,000 provision expense recorded in the quarter for growth in the off-balance sheet credit reserve. After adjusting for these items, the Bank's operating expense grew by $239,000 or 6% over the prior year and decreased by $208,000 or 5% over the prior quarter. The year over year increase was mostly due to increased staff levels, while the decline from the first quarter was partly due to timing of employment taxes that typically peak in the first quarter of each year.
Non-GAAP Financial Disclosures
This press release contains non-GAAP financial disclosures. The Bank has included non-GAAP financial measurements to provide meaningful supplemental information regarding the Bank's operating performance.
About 1st Enterprise Bank
Founded in 2006, 1st Enterprise Bank is a full service independent commercial banking institution, whose highly experienced bankers personally serve Southern California entrepreneurial businesses, professional firms and nonprofit organizations, along with their owners and key managers. Headquartered in the Los Angeles financial district, with full service regional banking offices in Irvine and Ontario and an LPO in Woodland Hills, 1st Enterprise Bank offers a full range of credit and depository services, with special emphasis on superior customer service, sophisticated cash management services and direct access to bank decision makers. Customers work directly with a dedicated Relationship Manager, a seasoned professional who understands their unique challenges serving as a sounding board and an active participant in their client's success. For more information on 1st Enterprise Bank, please visit www.1stenterprisebank.com.
Forward-Looking Statement:
This news release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about 1st Enterprise Bank's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including those described above and the following: 1st Enterprise Bank's timely implementation of new products and services, technological changes, changes in consumer spending and savings habits and other risks discussed from time to time in 1st Enterprise Bank's reports and filings with banking regulatory agencies. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made, and 1st Enterprise Bank does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.
1st Enterprise Bank
Condensed Statements of Financial Condition
$000
Unaudited Unaudited Unaudited
--------- --------- ---------
Assets 6/30/2014 3/31/2014 6/30/2013
--------- --------- ---------
Cash and due from banks $ 31,103 $ 33,270 $ 16,786
Interest earning deposits in other banks 11,377 29,461 14,526
--------- --------- ---------
Total cash and cash equivalents 42,479 62,731 31,312
Investment securities - available-for-sale 109,816 113,071 152,189
Investment securities - held-to-maturity 61,015 61,769 61,931
Loans, net of deferred loan fees 550,371 513,360 444,861
Allowance for loan losses (6,400) (6,519) (5,790)
--------- --------- ---------
Loans, net of allowance for loan losses 543,971 506,841 439,071
Bank owned life insurance 16,661 16,538 16,148
Premises and equipment, net 2,362 2,372 2,647
Accrued interest receivable and other
assets 13,669 12,590 12,813
--------- --------- ---------
Total Assets $ 789,974 $ 775,912 $ 716,111
========= ========= =========
Liabilities
Noninterest-bearing demand deposits $ 335,032 $ 321,500 $ 274,167
Interest bearing transaction accounts 43,523 43,770 38,076
Money market and savings accounts 301,673 270,219 271,377
Time deposits 12,924 16,083 16,879
--------- --------- ---------
Total Deposits 693,152 651,572 600,499
Federal Home Loan Bank borrowings 20,000 50,000 45,000
Other liabilities 4,507 3,253 3,384
--------- --------- ---------
Total Liabilities 717,659 704,825 648,883
Shareholders' Equity
Serial Preferred Stock 16,380 16,380 16,380
Common Stock 43,392 43,378 43,068
Retained Earnings 12,194 11,245 7,287
Accumulated other comprehensive income 349 84 494
--------- --------- ---------
Total Shareholders' Equity 72,315 71,087 67,228
--------- --------- ---------
Total Liabilities and Shareholders' Equity $ 789,974 $ 775,912 $ 716,111
========= ========= =========
1st Enterprise Bank
Condensed Statements of Operations
$000 Three Months Ended
----------------------------------
Unaudited
----------------------------------
6/30/2014 3/31/2014 6/30/2013
---------- ---------- ----------
Interest Income
Interest and fees on loans $ 5,346 $ 5,293 $ 4,724
Interest on investment securities 947 972 879
Other interest income 5 3 7
---------- ---------- ----------
Total interest income 6,298 6,268 5,610
Interest Expense 197 191 183
---------- ---------- ----------
Net Interest Income 6,101 6,077 5,427
Provision for loan losses (140) - 66
---------- ---------- ----------
Net Interest Income After Provision for
Loan Losses 6,241 6,077 5,361
Non-interest Income
Service charges, fees and other income 960 900 877
Gain on sale of investment sercurities 17 41 4
---------- ---------- ----------
Total non-interest Income 977 941 881
Non-interest Expenses
Compensation and benefit expenses 2,659 2,876 2,450
Occupancy and equipment expenses 395 379 405
Data processing 304 268 268
Merger related expenses 529 - -
Professional and legal 285 401 334
Provision for credit losses on off-
balance sheet exposures 501 112 (5)
Other operating expenses 721 648 668
---------- ---------- ----------
Total non-interest expense 5,394 4,684 4,120
Income Before Income Taxes 1,824 2,334 2,122
---------- ---------- ----------
Provision for income taxes 834 829 712
---------- ---------- ----------
Net Income $ 990 $ 1,505 $ 1,410
========== ========== ==========
Preferred dividends 41 41 41
---------- ---------- ----------
Net Income Applicable to Common
Shareholders $ 949 $ 1,464 $ 1,369
========== ========== ==========
Earnings Per Share
Basic earnings per share $ 0.25 $ 0.38 $ 0.36
Diluted earnings per share $ 0.22 $ 0.35 $ 0.34
Average shares outstanding 3,816,280 3,803,389 3,793,339
Average fully diluted shares 4,218,767 4,182,521 4,082,229
Total Shares outstanding at end of
period 3,837,239 3,840,938 3,815,589
Capital Ratios
Tier 1 leverage ratio 9.6% 9.5% 9.6%
Tier 1 risk-based capital ratio 10.5% 11.1% 11.8%
Total risk-based capital ratio 11.6% 12.2% 12.9%
Book value per share $ 14.58 $ 14.24 $ 13.33
Performance Ratios
Return on average assets 0.53% 0.81% 0.81%
Return on average common equity 6.80% 10.98% 10.51%
Net interest margin 3.46% 3.50% 3.32%
Cost of Funds 0.12% 0.11% 0.12%
Efficiency ratio 71.50% 66.80% 65.96%
1st Enterprise Bank
Supplemental Information - NON-GAAP Financial Measures
Adjusted Operating Income
$000
Net Interest Income $ 6,101 $ 6,077 $ 5,427
Non interest income 977 941 881
Less: gain on sale of securities (17) (41) (4)
------- ------- -------
Adjusted Operating Revenue 7,061 6,977 6,304
Non-interest expense 5,394 4,684 4,120
Less: merger related expenses 529 - -
Less: provision for credit losses on off-balance
sheet exposures 501 112 (5)
------- ------- -------
Adjusted non-interest expense 4,364 4,572 4,125
Adjusted Pre-tax Operating Income $ 2,697 $ 2,405 $ 2,179
======= ======= =======
Efficiency ratio 61.8% 65.5% 65.4%
1st Enterprise Bank
Net Interest Margin Analysis
$000 For the Three Months Ended
----------------------------------------------------
June 30, 2014 March 31, 2014
------------------------- -------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------- -------- ------- -------- -------- -------
Loans (1) 525,520 5,346 4.08% 510,789 5,293 4.20%
Investment Securities
(2) 172,339 947 2.20% 187,378 972 2.07%
Interest-bearing
deposits in other
banks 8,875 5 0.22% 5,946 3 0.22%
-------- -------- ------- -------- -------- -------
Total interest-earning
assets 706,734 6,298 3.57% 704,113 6,268 3.61%
Non-interest earning
assets 47,710 46,918
-------- --------
Total assets 754,444 751,031
Money market, NOW,
and Savings accounts 329,842 177 0.22% 314,159 168 0.22%
Time Deposits 15,171 15 0.40% 11,655 10 0.34%
Borrowings 12,744 4 0.12% 42,381 13 0.12%
-------- -------- ------- -------- -------- -------
Total interest-bearing
liabilities 357,757 197 0.22% 368,195 191 0.21%
Non-interest bearing
deposits 320,955 308,411
Other liabilities 3,377 3,970
-------- --------
Total non-interest
bearing liabilities 324,332 312,381
Shareholder's Equity 72,355 70,455
-------- --------
Total liabilities and
shareholders equity 754,444 751,031
Net interest income 6,101 6,077
Net interest spread
(3) 3.35% 3.40%
Net interest margin
(4) 3.46% 3.50%
For the Three Months Ended
----------------------------------------------------
June 30, 2014 June 30, 2013
------------------------- -------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------- -------- ------- -------- -------- -------
Loans (1) 525,520 5,346 4.08% 435,620 4,724 4.35%
Investment Securities
(2) 172,339 947 2.20% 212,008 879 1.66%
Interest-bearing
deposits in other
banks 8,875 5 0.22% 8,256 7 0.36%
-------- -------- ------- -------- -------- -------
Total interest-earning
assets 706,734 6,298 3.57% 655,884 5,610 3.43%
Non-interest earning
assets 47,710 43,503
-------- --------
Total assets 754,444 699,387
Money market, NOW,
and Savings accounts 329,842 177 0.22% 306,162 160 0.21%
Time Deposits 15,171 15 0.40% 14,297 11 0.31%
Borrowings 12,744 4 0.12% 27,789 13 0.18%
-------- -------- ------- -------- -------- -------
Total interest-bearing
liabilities 357,757 196 0.22% 348,248 183 0.21%
Non-interest bearing
deposits 320,955 279,575
Other liabilities 3,377 4,328
-------- --------
Total non-interest
bearing liabilities 324,332 283,903
Shareholder's Equity 72,355 67,236
-------- --------
Total liabilities and
shareholders equity 754,444 699,387
Net interest income 6,101 5,427
Net interest spread
(3) 3.35% 3.22%
Net interest margin
(4) 3.46% 3.32%
(1) Loan fees have been included in the calculation of interest
income
(2) Yields on tax exempt securities have not been calculated on a
tax equivalent basis
(3) Represents the difference between the weighted average yield
on interest-bearing assets and the weighted average yield on
interest bearing liabilities
(4) Represents net interest income as a percentage of average
interest-earning assets
Contact:
John C. Black
CEO
213-430-7000
