FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains information and statements that are considered “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” or words or phrases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.
The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:
·
|
The strength of the United States economy in general and the strength of the local economies in which we conduct operations;
|
·
|
The effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”);
|
·
|
Inflation/deflation, interest rate, market and monetary fluctuations;
|
·
|
The timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;
|
·
|
The willingness of users to substitute competitors’ products and services for our products and services;
|
·
|
The impact of changes in financial services policies, laws and regulations, including those concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies;
|
·
|
The effect of the SDTB, FAB and Infinity acquisitions and other acquisitions we have made or may make, if any, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions;
|
·
|
Changes in the level of our nonperforming assets and charge-offs;
|
·
|
The effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the FASB or other accounting standards setters;
|
·
|
Possible OTTI of securities held by us;
|
·
|
The impact of current governmental efforts to restructure the United States financial regulatory system, including enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”);
|
·
|
Changes in consumer spending, borrowing and savings habits;
|
·
|
The effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations;
|
·
|
Ability to attract deposits and other sources of liquidity;
|
·
|
Changes in the financial performance and/or condition of our borrowers;
|
·
|
Changes in the competitive environment among financial and bank holding companies and other financial service providers;
|
·
|
Geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad;
|
·
|
Unanticipated regulatory or judicial proceedings; and
|
·
|
Our ability to manage the risks involved in the foregoing.
|
If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Quarterly Report on Form 10-Q and other reports and registration statements filed by us with the SEC. Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We will not update the forward-looking information and statements to reflect actual results or changes in the factors affecting the forward-looking information and statements. For information on the factors that could cause actual results to differ from the expectations stated in the forward-looking statements, see “Risk Factors” under Part I, Item 1A of our 2013 Annual Report.
Forward-looking information and statements should not be viewed as predictions, and should not be the primary basis upon which investors evaluate us. Any investor in our common stock should consider all risks and uncertainties disclosed in our filings with the SEC, all of which are accessible on the SEC’s website at http://www.sec.gov.
GENERAL
This discussion should be read in conjunction with our Management Discussion and Analysis of Financial Condition and Results of Operations included in our 2013 Annual Report, plus the unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. The results for the three months ended March 31, 2014 are not necessarily indicative of the results expected for the year ending December 31, 2014.
The Corporation is a California-based bank holding company incorporated in the state of Delaware and registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”). Our wholly owned subsidiary, Pacific Premier Bank, is a California state-chartered commercial bank. As a bank holding company, the Corporation is subject to regulation and supervision by the Federal Reserve. We are required to file with the Federal Reserve quarterly and annual reports and such additional information as the Federal Reserve may require pursuant to the BHCA. The Federal Reserve may conduct examinations of bank holding companies, such as the Corporation, and its subsidiaries. The Corporation is also a bank holding company within the meaning of the California Financial Code. As such, the Corporation and its subsidiaries are subject to examination by, and may be required to file reports with, the California Department of Business Oversight-Division of Financial Institutions (“DBO”).
A bank holding company, such as the Corporation, is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such a policy. The Federal Reserve, under the BHCA, has the authority to require a bank holding company to terminate any activity or to relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.
As a California state-chartered commercial bank which is a member of the Federal Reserve, the Bank is subject to supervision, periodic examination and regulation by the DBO and the Federal Reserve. The Bank’s deposits are insured by the FDIC through the Deposit Insurance Fund. In general terms, insurance coverage is unlimited for non-interest bearing transaction accounts and up to $250,000 per depositor for all other accounts in accordance with the Dodd-Frank Act. As a result of this deposit insurance function, the FDIC also has certain supervisory authority and powers over the Bank. If, as a result of an examination of the Bank, the regulators should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of the Bank’s operations are unsatisfactory or that the Bank or our management is violating or has violated any law or regulation, various remedies are available to the regulators. Such remedies include the power to enjoin unsafe or unsound practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict growth, to assess civil monetary penalties, to remove officers and directors and ultimately to request the FDIC to terminate the Bank’s deposit insurance. As a California-chartered commercial bank, the Bank is also subject to certain provisions of California law.
We provide banking services within our targeted markets in California to businesses, including the owners and employees of those businesses, professionals, real estate investors and non-profit organizations, as well as consumers in the communities we serve. Additionally, through our HOA Banking and Lending and Franchise Capital units we can provide customized cash management, electronic banking services and credit facilities to HOAs, HOA management companies and Franchise owners nationwide. At March 31, 2014, the Bank operated 13 full-service depository branches in California located in the cities of Encinitas, Huntington Beach, Irvine, Los Alamitos, Newport Beach, Palm Springs, Palm Desert, Point Loma, San Bernardino, San Diego and Seal Beach. Our corporate headquarters are located in Irvine, California. Through our branches and our web site at
www.ppbi.com
, we offer a broad array of deposit products and services for both business and consumer customers, including checking, money market and savings accounts, cash management services, electronic banking, and on-line bill payment. We also offer a variety of loan products, including commercial business loans, lines of credit, commercial real estate loans, SBA loans, residential home loans, and home equity loans. The Bank funds its lending and investment activities with retail deposits obtained through its branches, advances from the FHLB, lines of credit, and wholesale and brokered certificates of deposits.
Our principal source of income is the net spread between interest earned on loans and investments and the interest costs associated with deposits and borrowings used to finance the loan and investment portfolios. Additionally, the Bank generates fee income from loan and investment sales and various products and services offered to both depository and loan customers.
CRITICAL ACCOUNTING POLICIES
Management has established various accounting policies that govern the application of U.S. GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to the Consolidated Financial Statements in our 2013 Annual Report. There have been no significant changes to our Critical Accounting Policies as described in our 2013 Annual Report.
Certain accounting policies require management to make estimates and assumptions which have a material impact on the carrying value of certain assets and liabilities; management considers these to be critical accounting policies. The estimates and assumptions management uses are based on historical experience and other factors, which management believes to be reasonable under the circumstances. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at balance sheet dates and our results of operations for future reporting periods.
We consider the ALLL to be a critical accounting policy that requires judicious estimates and assumptions in the preparation of our financial statements that is particularly susceptible to significant change. For further information, see “Allowances for Loan Losses” discussed in Note 6 to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q and in our 2013 Annual Report.
IFH ACQUISITION
On January 30, 2014, the Company completed its acquisition of IFH, a national lender to franchisees in the QSR industry, and other direct and indirect subsidiaries utilized in its business
Effective January 30, 2014, the Bank acquired Infinity, a national lender to franchisees in the QSR industry, pursuant to the terms of a definitive agreement entered into by the Corporation, the Bank and Infinity on November 15, 2013. As a result of the Infinity Acquisition, the Bank acquired and recorded at the acquisition date assets with a fair value of approximately $80.2 million, including $78.8 million in loans. Also as a result of the Infinity Acquisition, the Bank recorded equity of $9.0 million in connection with the Corporation’s stock issued to Infinity shareholders as part of the acquisition consideration and assumed at acquisition date liabilities with a fair value of approximately $68.3 million, including a $67.6 million credit facility that was paid off in conjunction with the closing of the acquisition.
The fair values of the assets acquired and liabilities assumed were determined based on the requirements of FASB ASC Topic 820:
Fair Value Measurements and Disclosures
.
The acquisition of Infinity is expected to further diversify our loan portfolio with commercial and industrial and owner-occupied commercial real estate loans, to deploy excess liquidity into higher yielding assets, to positively impact our net interest margin and to further leverage our strong capital base. The QSR franchisee lending business is a niche market that provides attractive growth opportunities for the Company in the future. Infinity had no delinquent loans or adversely classified assets as of the acquisition date; and the acquisition is expected to be accretive to our 2014 earnings per share.
SDTB ACQUISITION
Effective June 25, 2013, the Bank acquired SDTB, a San Diego, California, based state-chartered bank, pursuant to the terms of a definitive agreement entered into by the Corporation, the Bank and SDTB on March 6, 2013. As a result of the SDTB Acquisition, the Bank acquired and recorded at the acquisition date assets with a fair value of approximately $211.2 million, including:
·
|
$124.8 million in investment securities;
|
·
|
$42.7 million of gross loans;
|
·
|
$30.3 million of cash and cash equivalents;
|
·
|
$5.6 million in goodwill;
|
·
|
$5.8 million in bank owned life insurance;
|
·
|
$4.1 million of other types of assets; and
|
·
|
$2.8 million of a core deposit intangible.
|
Also as a result of the SDTB Acquisition, the Bank recorded equity of $14.4 million in connection with the Corporation’s stock issued to SDTB shareholders as part of the acquisition consideration and assumed at acquisition date liabilities with a fair value of approximately $186.2 million, including:
·
|
$178.8 million in deposit transaction accounts;
|
·
|
$5.1 million in retail certificates of deposit;
|
·
|
$1.1 million other liabilities; and
|
·
|
$1.2 million in deferred tax liability.
|
The fair values of the assets acquired and liabilities assumed were determined based on the requirements of FASB ASC Topic 820:
Fair Value Measurements and Disclosures
.
The acquisition was an opportunity for the Company to acquire a banking network that complemented our existing banking franchise and expanded into a new market area. Additionally, the SDTB acquisition improved the Company’s deposit base by lowering our cost of deposits and providing an opportunity to accelerate future core deposit growth in the San Diego, California, market area.
FAB ACQUISITION
Effective March 15, 2013, the Bank acquired FAB, a Dallas, Texas, based Texas-chartered bank, pursuant to the terms of a definitive agreement entered into by the Bank and the FAB on October 15, 2012. As a result of the FAB Acquisition, the Bank acquired and recorded at the acquisition date assets with a fair value of approximately $424.2 million, including:
·
|
$222.4 million in investment securities;
|
·
|
$167.7 million of cash and cash equivalents;
|
·
|
$26.4 million of gross loans;
|
·
|
$11.9 million in goodwill;
|
·
|
$5.8 million of other types of assets; and
|
·
|
$1.9 million of a core deposit intangible.
|
Also as a result of the FAB Acquisition, the Bank recorded equity of $14.9 million in connection with the Corporation’s stock issued to FAB shareholders as part of the acquisition consideration and assumed at acquisition date liabilities with a fair value of approximately $378.2 million, including:
·
|
$329.5 million in deposit transaction accounts;
|
·
|
$17.4 million in retail certificates of deposit;
|
·
|
$9.9 million in wholesale deposits;
|
·
|
$16.9 million in other borrowings;
|
·
|
$3.9 million in deferred tax liability; and
|
·
|
$536,000 of other liabilities.
|
The fair values of the assets acquired and liabilities assumed were determined based on the requirements of FASB ASC Topic 820:
Fair Value Measurements and Disclosures
.
The FAB acquisition was an opportunity for the Company to acquire a highly efficient, consistently profitable and niche-focused business that complimented our banking franchise. Additionally, this acquisition improved the Company’s deposit base by lowering our cost of deposits and providing a platform to accelerate future core deposit growth from HOAs.
RESULTS OF OPERATIONS
In the first quarter of 2014, we reported net income of $2.6 million, or $0.15 per share on a diluted basis, compared with net income for the first quarter of 2013 of $2.0 million, or $0.13 per share on a diluted basis. For the three months ended March 31, 2014, the Company’s return on average assets was 0.64% and return on average equity was 5.77%, compared with a return on average assets of 0.67% and a return on average equity of 5.65% for the three months ended March 31, 2013.
Net Interest Income
Our earnings are derived predominately from net interest income, which is the difference between the interest income earned on interest-earning assets, primarily loans and securities, and the interest expense incurred on interest-bearing liabilities, primarily deposits and borrowings. The spread between the yield on interest-earning assets and the cost of interest-bearing liabilities and the relative dollar amounts of these assets and liabilities principally affect net interest income.
Net interest income totaled $16.6 million in the first quarter of 2014 up $3.7 million or 29.0%, compared to the first quarter of 2013. The increase in net interest income was primarily related to an increase in interest-earning assets of $436.1 million, primarily related to the acquisition of FAB and SDTB in the first and second quarters of 2013, respectively, and organic loan growth. The increase was partially offset by a lower net interest margin, which decreased 32 basis points from the first quarter of 2013 to the first quarter of 2014. The decrease in the net interest margin was related to the rate on interest-earning assets decreasing more rapidly than the cost of interest-bearing liabilities. The decrease in interest-earning assets of 44 basis points is mainly attributable to a higher mix of lower yielding investment securities, which were acquired from FAB and SDTB, and a decrease in our weighted average loan portfolio rate. The weighted average loan portfolio rate at the end of the first quarter of 2014 was 5.0%, 30 basis points lower than the weighted average loan portfolio rate at the end of the first quarter of 2013 and primarily reflected lower rates on loan originations during the period. Partially offsetting the lower yield on average interest-earning assets was a decrease in deposit costs of 13 basis points primarily resulting from an improved mix of lower cost deposits acquired from FAB and SDTB and lower pricing on certificates of deposit.
The following tables present for the periods indicated the average dollar amounts from selected balance sheet categories calculated from daily average balances and the total dollar amount, including adjustments to yields and costs, of:
·
|
Interest income earned from average interest-earning assets and the resultant yields; and
|
·
|
Interest expense incurred from average interest-bearing liabilities and resultant costs, expressed as rates.
|
The tables below set forth our net interest income, net interest rate spread and net interest rate margin for the periods indicated. The net interest rate margin reflects the relative level of interest-earning assets to interest-bearing liabilities and equals our net interest rate spread divided by average interest-earning assets for the periods indicated.
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
|
|
STATISTICAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balance Sheet
|
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
March 31, 2013
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/Cost
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/Cost
|
|
|
Balance
|
|
|
Interest
|
|
|
Yield/Cost
|
|
Assets
|
|
(dollars in thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
70,341
|
|
|
$
|
27
|
|
|
|
0.16
|
%
|
|
$
|
62,647
|
|
|
$
|
24
|
|
|
|
0.15
|
%
|
|
$
|
69,143
|
|
|
$
|
37
|
|
|
|
0.22
|
%
|
Federal funds sold
|
|
|
192
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27
|
|
|
|
-
|
|
|
|
-
|
|
Investment securities
|
|
|
243,847
|
|
|
|
1,410
|
|
|
|
2.31
|
|
|
|
283,334
|
|
|
|
1,646
|
|
|
|
2.32
|
|
|
|
134,895
|
|
|
|
802
|
|
|
|
2.38
|
|
Loans receivable, net (1)
|
|
|
1,254,407
|
|
|
|
16,585
|
|
|
|
5.36
|
|
|
|
1,183,209
|
|
|
|
16,303
|
|
|
|
5.47
|
|
|
|
928,577
|
|
|
|
13,396
|
|
|
|
5.85
|
|
Total interest-earning assets
|
|
|
1,568,787
|
|
|
|
18,022
|
|
|
|
4.65
|
%
|
|
|
1,529,216
|
|
|
|
17,973
|
|
|
|
4.67
|
%
|
|
|
1,132,642
|
|
|
|
14,235
|
|
|
|
5.09
|
%
|
Noninterest-earning assets
|
|
|
87,095
|
|
|
|
|
|
|
|
|
|
|
|
78,684
|
|
|
|
|
|
|
|
|
|
|
|
38,911
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,655,882
|
|
|
|
|
|
|
|
|
|
|
$
|
1,607,900
|
|
|
|
|
|
|
|
|
|
|
$
|
1,171,553
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking
|
|
$
|
137,658
|
|
|
$
|
38
|
|
|
|
0.11
|
%
|
|
$
|
119,092
|
|
|
$
|
41
|
|
|
|
0.14
|
%
|
|
$
|
34,761
|
|
|
$
|
8
|
|
|
|
0.09
|
%
|
Money market
|
|
|
435,188
|
|
|
|
314
|
|
|
|
0.29
|
|
|
|
428,363
|
|
|
|
307
|
|
|
|
0.28
|
|
|
|
263,923
|
|
|
|
175
|
|
|
|
0.27
|
|
Savings
|
|
|
75,904
|
|
|
|
28
|
|
|
|
0.15
|
|
|
|
76,980
|
|
|
|
28
|
|
|
|
0.14
|
|
|
|
80,954
|
|
|
|
35
|
|
|
|
0.18
|
|
Time
|
|
|
329,026
|
|
|
|
689
|
|
|
|
0.85
|
|
|
|
294,292
|
|
|
|
592
|
|
|
|
0.80
|
|
|
|
350,304
|
|
|
|
801
|
|
|
|
0.93
|
|
Total interest-bearing deposits
|
|
|
977,776
|
|
|
|
1,069
|
|
|
|
0.44
|
|
|
|
918,727
|
|
|
|
968
|
|
|
|
0.42
|
|
|
|
729,942
|
|
|
|
1,019
|
|
|
|
0.57
|
|
FHLB advances and other borrowings
|
|
|
85,019
|
|
|
|
243
|
|
|
|
1.16
|
|
|
|
122,786
|
|
|
|
262
|
|
|
|
0.85
|
|
|
|
44,769
|
|
|
|
240
|
|
|
|
2.17
|
|
Subordinated debentures
|
|
|
10,310
|
|
|
|
75
|
|
|
|
2.95
|
|
|
|
10,310
|
|
|
|
77
|
|
|
|
2.96
|
|
|
|
10,310
|
|
|
|
77
|
|
|
|
3.03
|
|
Total borrowings
|
|
|
95,329
|
|
|
|
318
|
|
|
|
1.35
|
|
|
|
133,096
|
|
|
|
339
|
|
|
|
1.01
|
|
|
|
55,079
|
|
|
|
317
|
|
|
|
2.33
|
|
Total interest-bearing liabilities
|
|
|
1,073,105
|
|
|
|
1,387
|
|
|
|
0.52
|
%
|
|
|
1,051,823
|
|
|
|
1,307
|
|
|
|
0.49
|
%
|
|
|
785,021
|
|
|
|
1,336
|
|
|
|
0.69
|
%
|
Noninterest-bearing deposits
|
|
|
389,513
|
|
|
|
|
|
|
|
|
|
|
|
364,735
|
|
|
|
|
|
|
|
|
|
|
|
237,081
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
10,951
|
|
|
|
|
|
|
|
|
|
|
|
17,887
|
|
|
|
|
|
|
|
|
|
|
|
9,766
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,473,569
|
|
|
|
|
|
|
|
|
|
|
|
1,434,445
|
|
|
|
|
|
|
|
|
|
|
|
1,031,868
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
182,313
|
|
|
|
|
|
|
|
|
|
|
|
173,455
|
|
|
|
|
|
|
|
|
|
|
|
139,685
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
1,655,882
|
|
|
|
|
|
|
|
|
|
|
$
|
1,607,900
|
|
|
|
|
|
|
|
|
|
|
$
|
1,171,553
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
16,635
|
|
|
|
|
|
|
|
|
|
|
$
|
16,666
|
|
|
|
|
|
|
|
|
|
|
$
|
12,899
|
|
|
|
|
|
Net interest rate spread (2)
|
|
|
|
|
|
|
|
4.13
|
%
|
|
|
|
|
|
|
|
|
|
|
4.18
|
%
|
|
|
|
|
|
|
|
|
|
|
4.40
|
%
|
Net interest margin (3)
|
|
|
|
|
|
|
|
|
|
|
4.30
|
%
|
|
|
|
|
|
|
|
|
|
|
4.32
|
%
|
|
|
|
|
|
|
|
|
|
|
4.62
|
%
|
Ratio of interest-earning assets to interest-bearing liabilities
|
|
|
|
146.19
|
%
|
|
|
|
|
|
|
|
|
|
|
145.39
|
%
|
|
|
|
|
|
|
|
|
|
|
144.28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees, unamortized discounts and premiums, and allowance for loan losses.
|
|
(2) Represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
|
|
(3) Represents net interest income divided by average interest-earning assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in our net interest income are a function of changes in both volumes and rates of interest-earning assets and interest-bearing liabilities. The following table presents the impact the volume and rate changes have had on our net interest income for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, we have provided information on changes to our net interest income with respect to:
·
|
Changes in interest rates (changes in interest rates multiplied by prior volume);
|
·
|
Changes in volume (changes in volume multiplied by prior rate); and
|
·
|
The net change or the combined impact of volume and rate changes allocated proportionately to changes in volume and changes in interest rates.
|
|
|
Three Months Ended March 31, 2014
|
|
|
|
Compared to
|
|
|
|
Three Months Ended March 31, 2013
|
|
|
|
Increase (decrease) due to
|
|
|
|
Rate
|
|
|
Volume
|
|
|
Net
|
|
|
|
(in thousands)
|
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
(11
|
)
|
|
$
|
1
|
|
|
$
|
(10
|
)
|
Investment securities
|
|
|
(25
|
)
|
|
|
633
|
|
|
|
608
|
|
Loans receivable, net
|
|
|
(1,190
|
)
|
|
|
4,379
|
|
|
|
3,189
|
|
Total interest-earning assets
|
|
$
|
(1,226
|
)
|
|
$
|
5,013
|
|
|
$
|
3,787
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking
|
|
$
|
2
|
|
|
$
|
28
|
|
|
$
|
30
|
|
Money market
|
|
|
14
|
|
|
|
125
|
|
|
|
139
|
|
Savings
|
|
|
(5
|
)
|
|
|
(2
|
)
|
|
|
(7
|
)
|
Time
|
|
|
(66
|
)
|
|
|
(46
|
)
|
|
|
(112
|
)
|
FHLB advances and other borrowings
|
|
|
(146
|
)
|
|
|
149
|
|
|
|
3
|
|
Subordinated debentures
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
Total interest-bearing liabilities
|
|
$
|
(203
|
)
|
|
$
|
254
|
|
|
$
|
51
|
|
Change in net interest income
|
|
$
|
(1,023
|
)
|
|
$
|
4,759
|
|
|
$
|
3,736
|
|
Provision for Loan Losses
We recorded a $949,000 provision for loan losses during the first quarter of 2014, up from $296,000 for the first quarter of 2013. The increase in the provision for loan losses in the first quarter of 2014 was attributable to both the changing profile of our loan portfolio and the net charge-off of $464,000 of loans primarily acquired from our FDIC-assisted acquisitions. Net loan charge-offs in the first quarter of 2014 were up $168,000 from the first quarter of 2013. Substantially all of the charge-offs in the first quarter of 2014 were attributable to loans that we acquired from our FDIC-assisted transactions.
For purchased credit impaired loans, charge-offs are recorded when there is a decrease in the estimated cash flows of the credit from original cash flow estimates. Purchased credit impaired loans were recorded at their estimated fair value, which incorporated our estimated expected cash flows until the ultimate resolution of these credits. To the extent actual or projected cash flows are less than originally estimated, additional provisions for loan losses or charge-offs will be recognized into earnings or against the allowance, if applicable. To the extent actual or projected cash flows are more than originally estimated, the increase in cash flows is prospectively recognized in loan interest income. Due to the accounting rules associated with our purchased credit impaired loans, each quarter we are required to re-estimate cash flows which could cause volatility in our reported net interest margin and provision for loans losses. During the first quarter of 2014, there were no charge-offs associated with purchased credit impaired loans, compared to $57,000 for the same period in 2013.
Our Loss Mitigation Department continues collection efforts on loans previously written down and/or charged-off to maximize potential recoveries. See “Allowance for Loan Losses” discussed below in this Quarterly Report on Form 10-Q.
Noninterest Income
Noninterest income for the first quarter of 2014 was $2.1 million, $328,000 or 19.0% from the first quarter of 2013. The increase was primarily related to higher loan servicing fees of $530,000, primarily associated with the $500,000 fee related to the assumption of an existing loan in the first quarter of 2014, partially offset by lower net gains on sales of loans of $175,000 and other income of $146,000, primarily related to the $180,000 market value loss on loans held for sale that were moved to loans held for investment during the first quarter of 2014.
Noninterest Expense
Noninterest expense totaled $13.5 million for the first quarter of 2014, up $2.4 million or 21.1%, compared to the first quarter of 2013. The increase in expense primarily related to increased costs associated with the acquisitions of FAB during the first quarter of 2013, SDTB in the second quarter of 2013 and IFH in the first quarter of 2014, together with our organic growth. On a year-over-year basis, the increase primarily related to the following:
·
|
A $1.8 million increase in compensation and benefits expense, primarily due to the addition of employees from the acquisitions, as well as employees added in lending and credit areas to increase our loan production of commercial and industrial (“C&I”) loans, commercial real estate (“CRE”) loans, SBA loans, HOA loans, warehouse facilities and construction loans;
|
·
|
A $601,000 increase in deposit expenses, primarily related to increases in deposit transaction accounts related to acquisitions and organic growth;
|
·
|
A $496,000 increase in data processing and communications expense, primarily related to a $357,000 fee paid to terminate services from our payment processing system provider for a new, more cost effective provider; and
|
·
|
A $295,000 increase in premises and occupancy, primarily related to acquisitions.
|
Partially offsetting these increases was a decrease in merger-related expense of $1.1 million.
Income Taxes
For the first quarter of 2014, our effective tax rate was 37.3%, compared with 37.4% for the first quarter of 2013. At March 31, 2014, we had no valuation allowance against our deferred tax asset of $9.2 million based on management’s analysis that the asset was more-likely-than-not to be realized.
FINANCIAL CONDITION
At March 31, 2014, assets totaled $1.7 billion, up $31.1 million or 1.8% from December 31, 2013, and up $338.6 million or 24.1% from March 31, 2013. The increase in assets during the first quarter of 2014 was primarily related to the acquisition of IFH, which added assets at the acquisition date of $80.2 million and $5.5 million in goodwill, partially offset by a decrease in investment securities available for sale of $53.9 million.
The increase in assets from March 31, 2013 was primarily related to the acquisition of SDTB, which added assets at the acquisition date of $211.2 million, and IFH, as well as organic loan growth. In addition, during the period, loans increased $379.9 million inclusive of loans acquired, cash and cash equivalents increased $25.0 million, and goodwill from acquisitions increased $11.1 million. These increases were partially offset by a decrease in investment securities available for sale of $99.0 million.
Loans
Net loans held for investment totaled $1.3 billion at March 31, 2014, an increase of $84.8 million or 6.9% from December 31, 2013, and an increase of $382.9 million or 41.0% from March 31, 2013. The increase in loan balances for the first quarter of 2014 was primarily related to increases in C&I loans of $84.8 million, primarily from the acquisition of IFH, which included $78.8 million in loans at acquisition date, construction loans of $16.8 million and commercial owner occupied loans of $2.8 million, partially offset by decreases in multi-family loans of $10.5 million, warehouse facilities loans of $6.5 million and one-to-four family loans of $3.8 million.
The increase in loans from March 31, 2013 was impacted by $78.8 million of loans acquired from IFH and $42.7 million of loans acquired from SDTB at their respective acquisition dates. The remainder of the increase was primarily associated with organic growth and purchases of loans. The increase in loans from March 31, 2013 included increases in real estate loans of $244.1 million, C&I loans of $131.3 million and commercial owner occupied loans of $57.3 million, partially offset by a decrease in warehouse facility loans of $57.9 million.
The following table sets forth the composition of our loan portfolio in dollar amounts, as a percentage of the portfolio and gives the weighted average interest rate by loan category at the dates indicated:
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Percent
|
|
|
Average
|
|
|
|
|
|
Percent
|
|
|
Average
|
|
|
|
|
|
Percent
|
|
|
Average
|
|
|
|
Amount
|
|
|
of Total
|
|
|
Interest Rate
|
|
|
Amount
|
|
|
of Total
|
|
|
Interest Rate
|
|
|
Amount
|
|
|
of Total
|
|
|
Interest Rate
|
|
|
|
(dollars in thousands)
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
271,877
|
|
|
|
20.5
|
%
|
|
|
5.33
|
%
|
|
$
|
187,035
|
|
|
|
15.0
|
%
|
|
|
5.01
|
%
|
|
$
|
140,592
|
|
|
|
14.9
|
%
|
|
|
5.16
|
%
|
Commercial owner occupied (1)
|
|
|
223,848
|
|
|
|
16.9
|
%
|
|
|
5.39
|
%
|
|
|
221,089
|
|
|
|
17.8
|
%
|
|
|
5.33
|
%
|
|
|
166,571
|
|
|
|
17.6
|
%
|
|
|
5.90
|
%
|
SBA
|
|
|
11,045
|
|
|
|
0.8
|
%
|
|
|
5.85
|
%
|
|
|
10,659
|
|
|
|
0.9
|
%
|
|
|
5.92
|
%
|
|
|
5,116
|
|
|
|
0.5
|
%
|
|
|
6.04
|
%
|
Warehouse facilities
|
|
|
81,033
|
|
|
|
6.1
|
%
|
|
|
3.91
|
%
|
|
|
87,517
|
|
|
|
7.0
|
%
|
|
|
4.07
|
%
|
|
|
138,935
|
|
|
|
14.7
|
%
|
|
|
4.79
|
%
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-owner occupied
|
|
|
333,490
|
|
|
|
25.2
|
%
|
|
|
5.33
|
%
|
|
|
333,544
|
|
|
|
26.9
|
%
|
|
|
5.33
|
%
|
|
|
256,015
|
|
|
|
27.1
|
%
|
|
|
5.59
|
%
|
Multi-family
|
|
|
223,200
|
|
|
|
16.8
|
%
|
|
|
4.73
|
%
|
|
|
233,689
|
|
|
|
18.8
|
%
|
|
|
4.82
|
%
|
|
|
139,100
|
|
|
|
14.7
|
%
|
|
|
5.69
|
%
|
One-to-four family (2)
|
|
|
141,469
|
|
|
|
10.7
|
%
|
|
|
4.41
|
%
|
|
|
145,235
|
|
|
|
11.7
|
%
|
|
|
4.43
|
%
|
|
|
87,109
|
|
|
|
9.2
|
%
|
|
|
4.67
|
%
|
Construction
|
|
|
29,857
|
|
|
|
2.2
|
%
|
|
|
5.19
|
%
|
|
|
13,040
|
|
|
|
1.0
|
%
|
|
|
5.18
|
%
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
0.00
|
%
|
Land
|
|
|
6,170
|
|
|
|
0.5
|
%
|
|
|
4.59
|
%
|
|
|
7,605
|
|
|
|
0.6
|
%
|
|
|
4.73
|
%
|
|
|
7,863
|
|
|
|
0.8
|
%
|
|
|
4.83
|
%
|
Other loans
|
|
|
3,480
|
|
|
|
0.3
|
%
|
|
|
5.78
|
%
|
|
|
3,839
|
|
|
|
0.3
|
%
|
|
|
5.82
|
%
|
|
|
4,690
|
|
|
|
0.5
|
%
|
|
|
6.09
|
%
|
Total gross loans (3)
|
|
|
1,325,469
|
|
|
|
100.0
|
%
|
|
|
5.00
|
%
|
|
|
1,243,252
|
|
|
|
100.0
|
%
|
|
|
4.95
|
%
|
|
|
945,991
|
|
|
|
100.0
|
%
|
|
|
5.30
|
%
|
Less loans held for sale
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
3,147
|
|
|
|
|
|
|
|
|
|
|
|
3,643
|
|
|
|
|
|
|
|
|
|
Total gross loans held for investment
|
|
|
1,325,469
|
|
|
|
|
|
|
|
|
|
|
|
1,240,105
|
|
|
|
|
|
|
|
|
|
|
|
942,348
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loan origination costs/(fees) and premiums/(discounts)
|
|
|
(97
|
)
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
(520
|
)
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(8,685
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,200
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,994
|
)
|
|
|
|
|
|
|
|
|
Loans held for investment, net
|
|
$
|
1,316,687
|
|
|
|
|
|
|
|
|
|
|
$
|
1,231,923
|
|
|
|
|
|
|
|
|
|
|
$
|
933,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Majority secured by real estate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Includes second trust deeds.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Total gross loans for March 31, 2014 are net of (i) the unaccreted mark-to-market discounts on Canyon National loans of $1.8 million, on Palm Desert National loans of $2.2 million, and on SDTB loans of $115,000 and (ii) the mark-to-market premium on FAB loans of $53,000.
|
|
Gross loans increased $82.2 million during the first quarter of 2014, compared to a decrease of $40.2 million during the first quarter of 2013. The increase in gross loans during the first quarter of 2014 was primarily from loan originations of $106.2 million, of which $69.5 million were funded at origination, loans acquired from IFH of $78.8 million and loan purchases of $1.8 million, partially offset by loan repayments of $77.6 million, an increase in undisbursed loan funds of $17.7 million and loan sales of $9.5 million. During the first quarter of 2014, our loan originations were diversified across loan type and included $46.8 million in C&I loans which contained $8.1 million in HOA loans and $6.8 million in franchise business loans, $22.8 million in commercial non-owner occupied loans, $20.4 million in construction loans, $7.6 million in multifamily loans and $5.2 million in SBA loans.
The decrease in gross loans in the first quarter of 2013 was primarily from a change in undisbursed loan funds, net of $107.0 million and principal repayments of $45.2 million, partially offset by loan originations of $89.8 million and loans acquired from First Associations of $26.4 million.
The following table sets forth loan originations, purchases, sales and principal repayments relating to our gross loans for the periods indicated:
|
|
Three Months Ended
|
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
|
(in thousands)
|
|
Beginning balance gross loans
|
|
$
|
1,243,252
|
|
|
$
|
986,194
|
|
Loans originated:
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
46,786
|
|
|
|
12,133
|
|
Commercial owner occupied (1)
|
|
|
1,800
|
|
|
|
3,582
|
|
SBA
|
|
|
5,199
|
|
|
|
4,373
|
|
Warehouse facilities
|
|
|
1,150
|
|
|
|
42,710
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
Commercial non-owner occupied
|
|
|
22,806
|
|
|
|
25,970
|
|
Multi-family
|
|
|
7,574
|
|
|
|
783
|
|
One-to-four family (2)
|
|
|
450
|
|
|
|
180
|
|
Construction loans
|
|
|
20,428
|
|
|
|
-
|
|
Other loans
|
|
|
12
|
|
|
|
106
|
|
Total loans originated
|
|
|
106,205
|
|
|
|
89,837
|
|
Loans purchased:
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
69,543
|
|
|
|
26,421
|
|
Commercial owner occupied
|
|
|
11,105
|
|
|
|
-
|
|
Total loans purchased
|
|
|
80,648
|
|
|
|
26,421
|
|
Total loan production
|
|
|
186,853
|
|
|
|
116,258
|
|
Principal repayments
|
|
|
(77,555
|
)
|
|
|
(45,244
|
)
|
Sales of loans
|
|
|
(9,508
|
)
|
|
|
(5,048
|
)
|
Change in undisbursed loan funds, net
|
|
|
(17,651
|
)
|
|
|
(107,003
|
)
|
Charge-offs
|
|
|
(501
|
)
|
|
|
(480
|
)
|
Change in mark-to-market discounts from acquisitions
|
|
|
579
|
|
|
|
1,314
|
|
Net increase (decrease) in gross loans
|
|
|
82,217
|
|
|
|
(40,203
|
)
|
Ending balance gross loans
|
|
$
|
1,325,469
|
|
|
$
|
945,991
|
|
|
|
|
|
|
|
|
|
|
(1) Majority secured by real estate.
|
|
|
|
|
|
|
|
|
(2) Includes second trust deeds.
|
|
|
|
|
|
|
|
|
The following table sets forth the weighted average interest rates, weighted average number of months to reprice and the periods to repricing for our gross loan portfolio at the date indicated:
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
Number
|
|
|
|
|
|
Average
|
|
|
Average Months
|
|
Periods to Repricing
|
|
of Loans
|
|
|
Amount
|
|
|
Interest Rate
|
|
|
to Reprice
|
|
|
|
(dollars in thousands)
|
|
1 Year and less
|
|
|
893
|
|
|
$
|
423,071
|
|
|
|
5.15
|
%
|
|
|
1.23
|
|
Over 1 Year to 3 Years
|
|
|
73
|
|
|
|
77,373
|
|
|
|
4.50
|
%
|
|
|
28.59
|
|
Over 3 Years to 5 Years
|
|
|
310
|
|
|
|
383,699
|
|
|
|
4.70
|
%
|
|
|
48.64
|
|
Over 5 Years to 7 Years
|
|
|
56
|
|
|
|
121,809
|
|
|
|
4.54
|
%
|
|
|
75.38
|
|
Over 7 Years to 10 Years
|
|
|
15
|
|
|
|
15,799
|
|
|
|
4.92
|
%
|
|
|
103.44
|
|
Total adjustable
|
|
|
1,347
|
|
|
|
1,021,751
|
|
|
|
4.86
|
%
|
|
|
31.59
|
|
Fixed
|
|
|
919
|
|
|
|
303,718
|
|
|
|
5.49
|
%
|
|
|
|
|
Total
|
|
|
2,266
|
|
|
$
|
1,325,469
|
|
|
|
5.00
|
%
|
|
|
|
|
Delinquent Loans.
When a borrower fails to make required payments on a loan and does not cure the delinquency within 30 days, we normally record a notice of default and, after providing the required notices to the borrower, commence foreclosure proceedings. If the loan is not reinstated within the time permitted by law, we may sell the property at a foreclosure sale. At these foreclosure sales, we generally acquire title to the property. At March 31, 2014, loans delinquent 30 or more days as a percentage of total gross loans was 0.12%, down from 0.17% at December 31, 2013, and from 0.32% at March 31, 2013.
The following table sets forth delinquencies in the Company's loan portfolio at the dates indicated:
|
|
30 - 59 Days
|
|
|
60 - 89 Days
|
|
|
90 Days or More (1)
|
|
|
Total
|
|
|
|
# of
Loans
|
|
|
Principal
Balance
of Loans
|
|
|
# of
Loans
|
|
|
Principal
Balance
of Loans
|
|
|
# of
Loans
|
|
|
Principal
Balance
of Loans
|
|
|
# of
Loans
|
|
|
Principal
Balance
of Loans
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1
|
|
|
$
|
32
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1
|
|
|
$
|
32
|
|
Commercial owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
446
|
|
|
|
2
|
|
|
|
446
|
|
SBA
|
|
|
1
|
|
|
|
46
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
14
|
|
|
|
2
|
|
|
|
60
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
918
|
|
|
|
2
|
|
|
|
918
|
|
One-to-four family
|
|
|
3
|
|
|
|
72
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
49
|
|
|
|
6
|
|
|
|
121
|
|
Total
|
|
|
4
|
|
|
$
|
118
|
|
|
|
1
|
|
|
$
|
32
|
|
|
|
8
|
|
|
$
|
1,427
|
|
|
|
13
|
|
|
$
|
1,577
|
|
Delinquent loans to total gross loans
|
|
|
|
|
|
|
0.01
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
0.11
|
%
|
|
|
|
|
|
|
0.12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial owner occupied
|
|
|
2
|
|
|
$
|
768
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1
|
|
|
$
|
446
|
|
|
|
3
|
|
|
$
|
1,214
|
|
SBA
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
14
|
|
|
|
1
|
|
|
|
14
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
560
|
|
|
|
2
|
|
|
|
560
|
|
One-to-four family
|
|
|
3
|
|
|
|
71
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
|
|
123
|
|
|
|
7
|
|
|
|
194
|
|
Other
|
|
|
3
|
|
|
|
130
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
130
|
|
Total
|
|
|
8
|
|
|
$
|
969
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8
|
|
|
$
|
1,143
|
|
|
|
16
|
|
|
$
|
2,112
|
|
Delinquent loans to total gross loans
|
|
|
|
|
|
|
0.08
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
0.09
|
%
|
|
|
|
|
|
|
0.17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
1
|
|
|
$
|
9
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1
|
|
|
$
|
218
|
|
|
|
2
|
|
|
$
|
227
|
|
Commercial owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
245
|
|
|
|
1
|
|
|
|
245
|
|
SBA
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
72
|
|
|
|
1
|
|
|
|
72
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
1,337
|
|
|
|
1
|
|
|
|
1,337
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
1,047
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
1,047
|
|
One-to-four family
|
|
|
2
|
|
|
|
49
|
|
|
|
1
|
|
|
|
30
|
|
|
|
1
|
|
|
|
9
|
|
|
|
4
|
|
|
|
88
|
|
Total
|
|
|
3
|
|
|
$
|
58
|
|
|
|
2
|
|
|
$
|
1,077
|
|
|
|
5
|
|
|
$
|
1,881
|
|
|
|
10
|
|
|
$
|
3,016
|
|
Delinquent loans to total gross loans
|
|
|
|
|
|
|
0.01
|
%
|
|
|
|
|
|
|
0.11
|
%
|
|
|
|
|
|
|
0.20
|
%
|
|
|
|
|
|
|
0.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) All loans that are delinquent 90 days or more are on nonaccrual status and reported as part of nonperforming loans.
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses.
The ALLL represents an estimate of probable losses inherent in our loan portfolio and is determined by applying a systematically derived loss factor to individual segments of the loan portfolio. The adequacy and appropriateness of the ALLL and the individual loss factors are reviewed each quarter by management.
The loss factor for each segment of our loan portfolio is generally based on our actual historical loss rate experience with emphasis on recent past periods to account for current economic conditions and supplemented by management judgment for certain segments where we lack loss history experience. We also consider historical charge-off rates for the last 10 and 15 years for commercial banks and savings institutions headquartered in California as collected and reported by the FDIC. The loss factor is adjusted by qualitative adjustment factors to arrive at a final loss factor for each loan portfolio segment. For additional information regarding the qualitative adjustments, please see “Allowances for Loan Losses” discussed in our 2013 Annual Report. The qualitative factors allow management to assess current trends within our loan portfolio and the economic environment to incorporate their effect when calculating the ALLL. The final loss factors are applied to pass graded loans within our loan portfolio. Higher factors are applied to loans graded below pass, including classified and criticized assets.
No assurance can be given that we will not, in any particular period, sustain loan losses that exceed the amount reserved, or that subsequent evaluation of our loan portfolio, in light of the prevailing factors, including economic conditions which may adversely affect our market area or other circumstances, will not require significant increases in the loan loss allowance. In addition, regulatory agencies, as an integral part of their examination process, periodically review our ALLL and may require us to recognize additional provisions to increase the allowance or take charge-offs in anticipation of future losses.
Our ALLL at March 31, 2014 was $8.7 million, up from $8.2 million at December 31, 2013 and $8.0 million at March 31, 2013. At March 31, 2014, given the composition of our loan portfolio, the ALLL was considered adequate to cover estimated losses inherent in the loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the ALLL change, the Company’s estimate of probable loan losses could also change, which could affect the level of future provisions for loan losses.
The following table sets forth the Company’s ALLL and its corresponding percentage of the loan category balance and the percent of loan balance to total gross loans in each of the loan categories listed for the periods indicated:
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
March 31, 2013
|
|
|
|
|
|
|
Allowance
|
|
|
% of Loans
|
|
|
|
|
|
Allowance
|
|
|
% of Loans
|
|
|
|
|
|
Allowance
|
|
|
% of Loans
|
|
Balance at End of
|
|
|
|
|
as a % of
|
|
|
in Category to
|
|
|
|
|
|
as a % of
|
|
|
in Category to
|
|
|
|
|
|
as a % of
|
|
|
in Category to
|
|
Period Applicable to
|
|
Amount
|
|
|
Category Total
|
|
|
Total Loans
|
|
|
Amount
|
|
|
Category Total
|
|
|
Total Loans
|
|
|
Amount
|
|
|
Category Total
|
|
|
Total Loans
|
|
|
|
(dollars in thousands)
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
2,365
|
|
|
|
0.87
|
%
|
|
|
20.5
|
%
|
|
$
|
1,968
|
|
|
|
1.05
|
%
|
|
|
15.0
|
%
|
|
$
|
2,296
|
|
|
|
1.63
|
%
|
|
|
14.9
|
%
|
Commercial owner occupied
|
|
|
1,754
|
|
|
|
0.78
|
%
|
|
|
16.9
|
%
|
|
|
1,818
|
|
|
|
0.82
|
%
|
|
|
17.8
|
%
|
|
|
1,665
|
|
|
|
1.00
|
%
|
|
|
17.6
|
%
|
SBA
|
|
|
179
|
|
|
|
1.62
|
%
|
|
|
0.8
|
%
|
|
|
151
|
|
|
|
1.42
|
%
|
|
|
0.9
|
%
|
|
|
50
|
|
|
|
0.98
|
%
|
|
|
0.5
|
%
|
Warehouse facilities
|
|
|
376
|
|
|
|
0.46
|
%
|
|
|
6.1
|
%
|
|
|
392
|
|
|
|
0.45
|
%
|
|
|
7.0
|
%
|
|
|
730
|
|
|
|
0.53
|
%
|
|
|
14.7
|
%
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-owner occupied
|
|
|
1,857
|
|
|
|
0.56
|
%
|
|
|
25.2
|
%
|
|
|
1,658
|
|
|
|
0.50
|
%
|
|
|
26.9
|
%
|
|
|
1,403
|
|
|
|
0.55
|
%
|
|
|
27.1
|
%
|
Multi-family
|
|
|
805
|
|
|
|
0.36
|
%
|
|
|
16.8
|
%
|
|
|
817
|
|
|
|
0.35
|
%
|
|
|
18.8
|
%
|
|
|
506
|
|
|
|
0.36
|
%
|
|
|
14.7
|
%
|
One-to-four family
|
|
|
919
|
|
|
|
0.65
|
%
|
|
|
10.7
|
%
|
|
|
1,099
|
|
|
|
0.76
|
%
|
|
|
11.7
|
%
|
|
|
1,174
|
|
|
|
1.35
|
%
|
|
|
9.2
|
%
|
Construction
|
|
|
323
|
|
|
|
1.08
|
%
|
|
|
2.2
|
%
|
|
|
136
|
|
|
|
1.04
|
%
|
|
|
1.0
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
0.0
|
%
|
Land
|
|
|
81
|
|
|
|
1.31
|
%
|
|
|
0.5
|
%
|
|
|
127
|
|
|
|
1.67
|
%
|
|
|
0.6
|
%
|
|
|
121
|
|
|
|
1.54
|
%
|
|
|
0.8
|
%
|
Other Loans
|
|
|
26
|
|
|
|
0.75
|
%
|
|
|
0.3
|
%
|
|
|
34
|
|
|
|
0.89
|
%
|
|
|
0.3
|
%
|
|
|
49
|
|
|
|
1.04
|
%
|
|
|
0.5
|
%
|
Total
|
|
$
|
8,685
|
|
|
|
0.66
|
%
|
|
|
100.0
|
%
|
|
$
|
8,200
|
|
|
|
0.66
|
%
|
|
|
100.0
|
%
|
|
$
|
7,994
|
|
|
|
0.85
|
%
|
|
|
100.0
|
%
|
The ALLL as a percent of nonaccrual loans was 324.8% at March 31, 2014, down from 364.3% at December 31, 2013, but up from 257.7% at March 31, 2013. At March 31, 2014, the ratio of ALLL to total gross loans was 0.66%, equal to that at December 31, 2013, but down from 0.85% at March 31, 2013. Our ratio of ALLL plus the remaining unamortized credit discount on the loans acquired to total gross loans was 0.88% at March 31, 2014, down from 0.93% at December 31, 2013 and 1.47% at March 31, 2013.
The following table sets forth the activity within the Company’s ALLL in each of the loan categories listed for the periods indicated:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(dollars in thousands)
|
|
Balance, beginning of period
|
|
$
|
8,200
|
|
|
$
|
7,994
|
|
Provision for loan losses
|
|
|
949
|
|
|
|
296
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
(124
|
)
|
|
|
(58
|
)
|
SBA
|
|
|
-
|
|
|
|
(5
|
)
|
Real estate:
|
|
|
|
|
|
|
|
|
Commercial non-owner occupied
|
|
|
(365
|
)
|
|
|
(401
|
)
|
One-to-four family
|
|
|
(12
|
)
|
|
|
(10
|
)
|
Other loans
|
|
|
-
|
|
|
|
(6
|
)
|
Total charge-offs
|
|
|
(501
|
)
|
|
|
(480
|
)
|
Recoveries :
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
5
|
|
|
|
7
|
|
SBA
|
|
|
2
|
|
|
|
19
|
|
Real estate:
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
|
30
|
|
|
|
43
|
|
Other loans
|
|
|
-
|
|
|
|
115
|
|
Total recoveries
|
|
|
37
|
|
|
|
184
|
|
Net loan charge-offs
|
|
|
(464
|
)
|
|
|
(296
|
)
|
Balance at end of period
|
|
$
|
8,685
|
|
|
$
|
7,994
|
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
Net charge-offs to average total loans, net
|
|
|
0.15
|
%
|
|
|
0.13
|
%
|
Allowance for loan losses to gross loans at end of period
|
|
|
0.66
|
%
|
|
|
0.85
|
%
|
Investment Securities
Investment securities available for sale totaled $202.1 million at March 31, 2014, down $53.9 million or 21.1% from December 31, 2013 and down $99.0 million or 32.9% from March 31, 2013. The decrease in securities available for sale during the first quarter of 2014 was primarily due to sales totaling $56.0 million and principal pay downs of $6.2 million, partially offset by purchases of $5.5 million and increase in market value of $3.4 million. The decrease in securities from March 31, 2013 was primarily related to sales of $288.5 million and principal pay downs of $34.1 million, partially offset by $124.8 million added from the acquisition of SDTB and $106.8 million of investment security purchases. The purchase of investment securities primarily related to investing excess liquidity from our bank acquisitions, while the sales were made to help fund loan production and to improve our interest-earning asset mix by redeploying investment funds into loans. At March 31, 2014, the end of period yield on investment securities was 2.32%, up from 2.21% at December 31, 2013, and 1.73% at March 31, 2013.
The following tables set forth the amortized cost, unrealized gains and losses, and estimated fair value of our investment securities portfolio at the dates indicated:
|
|
March 31, 2014
|
|
|
|
Amortized
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Estimated
Fair Value
|
|
|
|
(in thousands)
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
77,062
|
|
|
$
|
848
|
|
|
$
|
(586
|
)
|
|
$
|
77,324
|
|
Mortgage-backed securities
|
|
|
126,921
|
|
|
|
65
|
|
|
|
(2,168
|
)
|
|
|
124,818
|
|
Total securities available for sale
|
|
$
|
203,983
|
|
|
$
|
913
|
|
|
$
|
(2,754
|
)
|
|
$
|
202,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
Amortized
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Estimated
Fair Value
|
|
|
|
(in thousands)
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
73
|
|
|
$
|
8
|
|
|
$
|
-
|
|
|
$
|
81
|
|
Municipal bonds
|
|
|
95,388
|
|
|
|
589
|
|
|
|
(1,850
|
)
|
|
|
94,127
|
|
Mortgage-backed securities
|
|
|
165,857
|
|
|
|
12
|
|
|
|
(3,988
|
)
|
|
|
161,881
|
|
Total securities available for sale
|
|
$
|
261,318
|
|
|
$
|
609
|
|
|
$
|
(5,838
|
)
|
|
$
|
256,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
|
|
Amortized
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Estimated
Fair Value
|
|
|
|
(in thousands)
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
74
|
|
|
$
|
11
|
|
|
$
|
-
|
|
|
$
|
85
|
|
Municipal bonds
|
|
|
154,543
|
|
|
|
1,783
|
|
|
|
(387
|
)
|
|
|
155,939
|
|
Mortgage-backed securities
|
|
|
143,882
|
|
|
|
1,821
|
|
|
|
(567
|
)
|
|
|
145,136
|
|
Total securities available for sale
|
|
$
|
298,499
|
|
|
$
|
3,615
|
|
|
$
|
(954
|
)
|
|
$
|
301,160
|
|
The following table sets forth the fair values and weighted average yields on our investment securities available for sale portfolio by contractual maturity at the date indicated:
|
|
March 31, 2014
|
|
|
|
One Year
|
|
|
More than One
|
|
|
More than Five Years
|
|
|
More than
|
|
|
|
|
|
|
or Less
|
|
|
to Five Years
|
|
|
to Ten Years
|
|
|
Ten Years
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Weighted
Average
Yield
|
|
|
Fair
Value
|
|
|
|
|
|
Fair
Value
|
|
|
|
|
|
Fair
Value
|
|
|
|
|
|
Fair
Value
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
-
|
|
|
|
0.00
|
%
|
|
$
|
11,729
|
|
|
|
1.07
|
%
|
|
$
|
37,570
|
|
|
|
1.87
|
%
|
|
$
|
28,025
|
|
|
|
2.94
|
%
|
|
$
|
77,324
|
|
|
|
2.15
|
%
|
Mortgage-backed securities
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
12,576
|
|
|
|
1.42
|
%
|
|
|
112,242
|
|
|
|
2.06
|
%
|
|
|
124,818
|
|
|
|
2.02
|
%
|
Total investment securities available for sale
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
11,729
|
|
|
|
1.07
|
%
|
|
|
50,146
|
|
|
|
1.75
|
%
|
|
|
140,267
|
|
|
|
2.24
|
%
|
|
|
202,142
|
|
|
|
2.07
|
%
|
Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB
|
|
|
6,131
|
|
|
|
6.66
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
6,131
|
|
|
|
6.66
|
%
|
Federal Reserve Bank/TIB
|
|
|
7,973
|
|
|
|
5.53
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
7,973
|
|
|
|
5.53
|
%
|
Total stock
|
|
|
14,104
|
|
|
|
6.02
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
14,104
|
|
|
|
6.02
|
%
|
Total securities
|
|
$
|
14,104
|
|
|
|
6.02
|
%
|
|
$
|
11,729
|
|
|
|
1.07
|
%
|
|
$
|
50,146
|
|
|
|
1.75
|
%
|
|
$
|
140,267
|
|
|
|
2.24
|
%
|
|
$
|
216,246
|
|
|
|
2.32
|
%
|
Each quarter, we review individual securities classified as available for sale to determine whether a decline in fair value below the amortized cost basis is other-than-temporary. If it is probable that we will be unable to collect all amounts due according to the contractual terms of the debt security, an OTTI write down is recorded against the security and a loss recognized.
In determining if a security has an OTTI loss, we review downgrades in credit ratings and the length of time and extent that the fair value has been less than the cost of the security. We estimate OTTI losses on a security primarily through:
·
|
An evaluation of the present value of estimated cash flows from the security using the current yield to accrete beneficial interest and including assumptions in the prepayment rate, default rate, delinquencies, loss severity and percentage of nonperforming assets;
|
·
|
An evaluation of the estimated payback period to recover principal;
|
·
|
An analysis of the credit support available in the underlying security to absorb losses; and
|
·
|
A review of the financial condition and near term prospects of the issuer.
|
During the quarter ended March 31, 2014, there were no OTTI charges and $13,000 in recoveries, compared to $30,000 of net OTTI charges during the same period last year.
Securities with OTTI credit losses recognized in noninterest income and associated OTTI non-credit losses recognized in accumulated other comprehensive loss during the periods indicated were as follows:
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating
|
|
|
Number
|
|
|
Fair Value
|
|
|
OTTI Credit Loss (Recovery)
|
|
|
Non Credit Gain in Accumulated Other Comprehensive Income (AOCI)
|
|
Number
|
|
|
Fair Value
|
|
|
OTTI Credit Loss
|
|
|
Non Credit Gain in Accumulated Other Comprehensive Income (AOCI)
|
|
(dollars in thousands)
|
|
D
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
4
|
|
|
$
|
446
|
|
|
$
|
30
|
|
|
$
|
95
|
|
Various
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
(13
|
)
|
|
$
|
-
|
|
|
|
4
|
|
|
$
|
446
|
|
|
$
|
30
|
|
|
$
|
95
|
|
There was no OTTI credit loss for any single debt security for the three months ended March 31, 2014, compared to $32,000 for the three months ended March 31, 2013.
Nonperforming Assets
Nonperforming assets consist of loans on which we have ceased accruing interest (nonaccrual loans), restructured loans and OREO. It is our general policy to account for a loan as nonaccrual when the loan becomes 90 days delinquent or when collection of interest appears doubtful.
At March 31, 2014, nonperforming assets totaled $3.4 million or 0.20% of total assets, essentially equal to $3.4 million or 0.20% at December 31, 2013, but down from $4.7 million or 0.33% at March 31, 2013. Compared to March 31, 2014, nonperforming loans increased $423,000 and OREO decreased $434,000 from December 31, 2013 and nonperforming loans decreased $428,000 and OREO decreased $809,000 from March 31, 2013.
The following table sets forth our composition of nonperforming assets at the dates indicated:
|
|
March 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
|
(dollars in thousands)
|
|
Nonperforming assets
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
31
|
|
|
$
|
-
|
|
|
$
|
333
|
|
Commercial owner occupied
|
|
|
864
|
|
|
|
747
|
|
|
|
245
|
|
SBA (1)
|
|
|
14
|
|
|
|
14
|
|
|
|
121
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-owner occupied
|
|
|
1,327
|
|
|
|
983
|
|
|
|
1,974
|
|
One-to-four family
|
|
|
438
|
|
|
|
507
|
|
|
|
429
|
|
Total nonaccrual loans
|
|
|
2,674
|
|
|
|
2,251
|
|
|
|
3,102
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
752
|
|
|
|
1,186
|
|
|
|
1,561
|
|
Total other real estate owned
|
|
|
752
|
|
|
|
1,186
|
|
|
|
1,561
|
|
Total nonperforming assets, net
|
|
$
|
3,426
|
|
|
$
|
3,437
|
|
|
$
|
4,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
8,685
|
|
|
$
|
8,200
|
|
|
$
|
7,994
|
|
Allowance for loan losses as a percent of
total nonperforming loans
|
|
|
324.79
|
%
|
|
|
364.28
|
%
|
|
|
257.70
|
%
|
Nonperforming loans as a percent of gross loans
|
|
|
0.20
|
%
|
|
|
0.18
|
%
|
|
|
0.33
|
%
|
Nonperforming assets as a percent of total assets
|
|
|
0.20
|
%
|
|
|
0.20
|
%
|
|
|
0.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
The SBA totals include the guaranteed amount of $72,000 as of March 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
Total liabilities were $1.6 billion at March 31, 2014, compared to $1.5 billion at December 31, 2013 and $1.2 billion at March 31, 2013. The increase of $17.5 million from the year ended December 31, 2013 was predominately related to increases in deposits of $128.9 million, partially offset by a decrease in FHLB advances and other borrowings of $108.6 million. The increase of $307.4 million from March 31, 2013 was primarily due to an increase in deposits of $249.5 million, FHLB advances and other borrowings of $51.3 million and accrued expenses and other liabilities of $6.6 million.
Deposits.
Deposits totaled $1.4 billion at March 31, 2014, up $128.9 million or 9.9% from December 31, 2013 and $249.5 million or 21.0% from March 31, 2013. During the first quarter of 2014, we had deposit increases in noninterest bearing checking of $46.1 million, certificates of deposit of $41.0 million, money market of $25.7 million and checking of $16.4 million. Within the first quarter of 2014, transaction account increases of approximately $27 million to $30 million were related to seasonal increases in existing HOA management accounts attributed to annual billings and the receipt of homeowners’ dues.
The increase in deposits since March 31, 2013 was primarily related to the SDTB acquisition, which added deposits of $183.9 million at a cost of 23 basis points at the acquisition date, partially offset by declines in deposit levels in the second through fourth quarters in 2013 of $63.3 million, mainly related to purposeful runoff of certificates of deposit, and the deposit activity in first quarter of 2014. At March 31, 2014, we had no brokered deposits.
The total weighted average cost of deposits at March 31, 2014 was 0.34%, up from 0.33% at December 31, 2013, but down from 0.37% at March 31, 2013.
At March 31, 2014, our gross loan to deposit ratio was 92.4%, down from 95.2% at December 31, 2013, but up from 79.8% at March 31, 2013.
The following table sets forth the distribution of the Company’s deposit accounts at the dates indicated and the weighted average interest rates on each category of deposits presented:
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
March 31, 2013
|
|
|
|
|
Balance
|
|
|
% of Total Deposits
|
|
|
Weighted Average Rate
|
|
|
Balance
|
|
|
% of Total Deposits
|
|
|
Weighted Average Rate
|
|
|
Balance
|
|
|
% of Total Deposits
|
|
|
Weighted Average Rate
|
|
|
|
|
(dollars in thousands)
|
|
Noninterest bearing checking
|
|
|
$
|
412,871
|
|
|
|
28.8
|
%
|
|
|
0.00
|
%
|
|
$
|
366,755
|
|
|
|
28.1
|
%
|
|
|
0.00
|
%
|
|
$
|
316,536
|
|
|
|
26.7
|
%
|
|
|
0.00
|
%
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking
|
|
|
|
137,285
|
|
|
|
9.5
|
%
|
|
|
0.11
|
%
|
|
|
120,886
|
|
|
|
9.3
|
%
|
|
|
0.11
|
%
|
|
|
115,541
|
|
|
|
9.7
|
%
|
|
|
0.10
|
%
|
Money market
|
|
|
|
453,261
|
|
|
|
31.6
|
%
|
|
|
0.30
|
%
|
|
|
427,577
|
|
|
|
32.7
|
%
|
|
|
0.29
|
%
|
|
|
323,709
|
|
|
|
27.3
|
%
|
|
|
0.28
|
%
|
Savings
|
|
|
|
76,087
|
|
|
|
5.3
|
%
|
|
|
0.14
|
%
|
|
|
76,412
|
|
|
|
5.8
|
%
|
|
|
0.14
|
%
|
|
|
80,578
|
|
|
|
6.8
|
%
|
|
|
0.15
|
%
|
Time deposit accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 1.00%
|
|
|
|
131,274
|
|
|
|
9.1
|
%
|
|
|
0.51
|
%
|
|
|
120,583
|
|
|
|
9.2
|
%
|
|
|
0.39
|
%
|
|
|
164,843
|
|
|
|
13.9
|
%
|
|
|
0.55
|
%
|
1.00-1.99
|
|
|
|
211,725
|
|
|
|
14.8
|
%
|
|
|
1.06
|
%
|
|
|
181,046
|
|
|
|
13.9
|
%
|
|
|
1.06
|
%
|
|
|
169,616
|
|
|
|
14.3
|
%
|
|
|
1.15
|
%
|
2.00-2.99
|
|
|
|
11,266
|
|
|
|
0.8
|
%
|
|
|
2.85
|
%
|
|
|
11,503
|
|
|
|
0.8
|
%
|
|
|
2.83
|
%
|
|
|
12,560
|
|
|
|
1.1
|
%
|
|
|
2.80
|
%
|
3.00-3.99
|
|
|
|
694
|
|
|
|
0.0
|
%
|
|
|
3.20
|
%
|
|
|
795
|
|
|
|
0.1
|
%
|
|
|
3.28
|
%
|
|
|
1,144
|
|
|
|
0.1
|
%
|
|
|
3.44
|
%
|
4.00-4.99
|
|
|
|
3
|
|
|
|
0.0
|
%
|
|
|
4.93
|
%
|
|
|
2
|
|
|
|
0.0
|
%
|
|
|
4.93
|
%
|
|
|
288
|
|
|
|
0.0
|
%
|
|
|
4.24
|
%
|
5.00 and greater
|
|
|
|
737
|
|
|
|
0.1
|
%
|
|
|
5.25
|
%
|
|
|
727
|
|
|
|
0.1
|
%
|
|
|
5.25
|
%
|
|
|
904
|
|
|
|
0.1
|
%
|
|
|
5.26
|
%
|
Total time deposit accounts
|
|
|
|
355,699
|
|
|
|
24.8
|
%
|
|
|
0.92
|
%
|
|
|
314,656
|
|
|
|
24.1
|
%
|
|
|
0.88
|
%
|
|
|
349,355
|
|
|
|
29.5
|
%
|
|
|
0.94
|
%
|
Total interest-bearing deposits
|
|
|
|
1,022,332
|
|
|
|
71.2
|
%
|
|
|
0.48
|
%
|
|
|
939,531
|
|
|
|
71.9
|
%
|
|
|
0.45
|
%
|
|
|
869,183
|
|
|
|
73.3
|
%
|
|
|
0.51
|
%
|
Total deposits
|
|
|
$
|
1,435,203
|
|
|
|
100.0
|
%
|
|
|
0.34
|
%
|
|
$
|
1,306,286
|
|
|
|
100.0
|
%
|
|
|
0.33
|
%
|
|
$
|
1,185,719
|
|
|
|
100.0
|
%
|
|
|
0.37
|
%
|
Borrowings.
At March 31, 2014, total borrowings amounted to $105.8 million, down $108.6 million or 50.6% from December 31, 2013, but up $51.3 million or 94.2% from March 31, 2013. The change in borrowings primarily related to overnight FHLB advances used to supplement the funding of loans as deposit levels fluctuate. Additionally, during the first quarter of 2014, repurchase agreement debt related to our HOA business decreased $1.6 million to $17.0 million. This repurchase agreement debt was offered as a service to certain HOA depositors that adds protection for deposit amounts above FDIC insurance levels. Total borrowings at March 31, 2014 represented 6.1% of total assets and had an end of period weighted average cost of 1.22%, compared with 12.5% of total assets at a weighted average cost of 0.63% at December 31, 2013 and 3.9% of total assets at a weighted average cost of 2.29% at March 31, 2013. At March 31, 2014, total borrowings were comprised of the following:
·
|
Three reverse repurchase agreements totaling $28.5 million at a weighted average rate of 3.26% and secured by approximately $36.3 million of government sponsored entity MBS;
|
·
|
HOA reverse repurchase agreements totaling $17.0 million at a weighted average rate of 0.02% and secured by approximately $29.2 million of government sponsored entity MBS; and
|
·
|
Subordinated Debentures used to fund the issuance of Trust Preferred Securities in 2004 of $10.3 million with a rate of 2.99%. For additional information about the Subordinated Debentures and Trust Preferred Securities, see Note 8 to the Consolidated Financial Statements in this report.
|
The following table sets forth certain information regarding the Company's borrowed funds at the dates indicated:
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
March 31, 2013
|
|
|
|
Balance
|
|
|
Weighted Average Rate
|
|
|
Balance
|
|
|
Weighted Average Rate
|
|
|
Balance
|
|
|
Weighted Average Rate
|
|
|
|
(dollars in thousands)
|
|
FHLB advances
|
|
$
|
50,000
|
|
|
|
0.11
|
%
|
|
$
|
156,000
|
|
|
|
0.06
|
%
|
|
$
|
-
|
|
|
|
0.00
|
%
|
Reverse repurchase agreements
|
|
|
45,506
|
|
|
|
2.05
|
%
|
|
|
48,091
|
|
|
|
1.98
|
%
|
|
|
44,191
|
|
|
|
2.11
|
%
|
Subordinated debentures
|
|
|
10,310
|
|
|
|
2.99
|
%
|
|
|
10,310
|
|
|
|
2.99
|
%
|
|
|
10,310
|
|
|
|
3.05
|
%
|
Total borrowings
|
|
$
|
105,816
|
|
|
|
1.22
|
%
|
|
$
|
214,401
|
|
|
|
0.63
|
%
|
|
$
|
54,501
|
|
|
|
2.29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average cost of
borrowings during the quarter
|
|
|
1.35
|
%
|
|
|
|
|
|
|
1.01
|
%
|
|
|
|
|
|
|
2.33
|
%
|
|
|
|
|
Borrowings as a percent of total assets
|
|
|
6.1
|
%
|
|
|
|
|
|
|
12.5
|
%
|
|
|
|
|
|
|
3.9
|
%
|
|
|
|
|
Stockholders’ Equity.
Total stockholders’ equity was $188.9 million as of March 31, 2014, up from $175.2 million at December 31, 2013 and $157.6 million at March 31, 2013. The current year increase of $13.6 million in stockholders’ equity was primarily related to equity consideration for the acquisition of IFH of $9.0 million, net income for the first three months of 2014 of $2.6 million and favorable change in accumulated other comprehensive income of $2.0 million. The increase of $31.3 million from March 31, 2013 was primarily related to the Corporation’s stock issued to SDTB and Infinity shareholders as part of the acquisition consideration of $14.4 million for SDTB and $9.0 million for Infinity and net income over the period of $9.7 million, partially offset by the unfavorable change in accumulated other comprehensive income of $2.7 million.
Our book value per share increased to $10.96 at March 31, 2014, up from $10.52 at December 31, 2013 and $10.21 at March 31, 2013. At March 31, 2014, the Company’s tangible common equity to tangible assets ratio was 9.30%, up from 8.94% at December 31, 2013, but down from 10.16% at March 31, 2013.
Tangible common equity to tangible assets (the "tangible common equity ratio") is a non-GAAP financial measure derived from GAAP-based amounts. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common shareholders' equity and dividing by tangible assets. We believe that this information is important to shareholders as tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes, which excludes intangible assets from the calculation of risk-based ratios.
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
|
|
GAAP Reconciliation
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
188,860
|
|
|
|
175,226
|
|
|
|
157,589
|
|
Less: Intangible assets
|
|
|
(29,324
|
)
|
|
|
(24,056
|
)
|
|
|
(16,317
|
)
|
Tangible common equity
|
|
$
|
159,536
|
|
|
$
|
151,170
|
|
|
$
|
141,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
1,745,282
|
|
|
|
1,714,187
|
|
|
|
1,406,655
|
|
Less: Intangible assets
|
|
|
(29,324
|
)
|
|
|
(24,056
|
)
|
|
|
(16,317
|
)
|
Tangible assets
|
|
$
|
1,715,958
|
|
|
$
|
1,690,131
|
|
|
$
|
1,390,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity ratio
|
|
|
9.30
|
%
|
|
|
8.94
|
%
|
|
|
10.16
|
%
|
CAPITAL RESOURCES AND LIQUIDITY
Our primary sources of funds are deposits, advances from the FHLB and other borrowings, principal and interest payments on loans, and income from investments. While maturities and scheduled amortization of loans are a predictable source of funds, deposit inflows and outflows as well as loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.
Our primary sources of funds generated during the first three months of 2014 were from:
·
|
Net increase of $128.9 million in deposit accounts;
|
·
|
Proceeds of $87.6 million from the sale and principal payments on loans held for investment;
|
·
|
Proceeds of $56.1 million from the sale of securities available for sale;
|
·
|
Net change of $17.7 million of undisbursed loan funds; and
|
·
|
Principal payments of $6.2 million from securities available for sale.
|
We used these funds to:
·
|
Repay FHLB advances and other borrowings of $176.2 million;
|
·
|
Purchase and originate loans held for investment of $108.0 million;
|
·
|
Acquire Infinity of $7.8 million; and
|
·
|
Purchase securities available for sale of $5.0 million.
|
Our most liquid assets are unrestricted cash and short-term investments. The levels of these assets are dependent on our operating, lending and investing activities during any given period. Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. At March 31, 2014, cash and cash equivalents totaled $124.4 million and the market value of our investment securities available for sale totaled $202.1 million. If additional funds are needed, we have additional sources of liquidity that can be accessed, including FHLB advances, Federal Funds lines, the Federal Reserve’s lending programs and loan sales. As of March 31, 2014, the maximum amount we could borrow through the FHLB was $769.6 million, of which $488.1 million was available for borrowing based on collateral pledged of $607.6 million in real estate loans. At March 31, 2014, we had $50.0 million in FHLB borrowings against that available balance. At March 31, 2014, we also had unsecured lines of credit aggregating $62.3 million, which consisted of $59.0 million with other financial institutions from which to draw funds and $3.3 million with the Federal Reserve Bank. At March 31, 2014, no funds were drawn against these unsecured lines of credit. For the quarter ended March 31, 2014, our average liquidity ratio was 12.52%. The Company regularly models liquidity stress scenarios to ensure that adequate liquidity is available and has contingency funding plans in place which are reviewed and tested on a regular basis.
To the extent that 2014 deposit growth is not sufficient to satisfy our ongoing commitments to fund maturing and withdrawable deposits, repay maturing borrowings, fund existing and future loans, or make investments, we may access funds through our FHLB borrowing arrangement, unsecured lines of credit or other sources.
The Bank has a policy in place that permits the purchase of brokered funds, in an amount not to exceed 5% of total deposits, as a secondary source for funding. At March 31, 2014, we had no brokered time deposits.
The Corporation is a corporate entity separate and apart from the Bank that must provide for its own liquidity. The Corporation’s primary sources of liquidity are dividends from the Bank. There are statutory and regulatory provisions that limit the ability of the Bank to pay dividends to the Corporation. Management believes that such restrictions will not have a material impact on the ability of the Corporation to meet its ongoing cash obligations.
The Corporation has never declared or paid dividends on its common stock and does not anticipate declaring or paying any cash dividends in the foreseeable future. The Corporation’s board of directors has authorized stock repurchase plans, which allow the Corporation to proactively manage its capital position and return excess capital to it stockholders. Shares purchased under such plans also provide the Corporation with shares of common stock necessary to satisfy obligations related to stock compensation awards. No shares were repurchased under our stock repurchase plans during the three months ended March 31, 2014. See Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds for additional information.
Contractual Obligations and Off-Balance Sheet Commitments
Contractual Obligations
.
The Company enters into contractual obligations in the normal course of business primarily as a source of funds for its asset growth and to meet required capital needs.
The following schedule summarizes maturities and payments due on our obligations and commitments, excluding accrued interest, as of the date indicated:
|
|
March 31, 2014
|
|
|
|
Less than 1 year
|
|
|
1 - 3 years
|
|
|
3 - 5 years
|
|
|
More than 5 years
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Contractual obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances
|
|
$
|
50,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
50,000
|
|
Other borrowings
|
|
|
17,006
|
|
|
|
-
|
|
|
|
28,500
|
|
|
|
-
|
|
|
|
45,506
|
|
Subordinated debentures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,310
|
|
|
|
10,310
|
|
Certificates of deposit
|
|
|
250,244
|
|
|
|
101,726
|
|
|
|
3,051
|
|
|
|
678
|
|
|
|
355,699
|
|
Operating leases
|
|
|
2,161
|
|
|
|
5,137
|
|
|
|
3,708
|
|
|
|
1,595
|
|
|
|
12,601
|
|
Total contractual cash obligations
|
|
$
|
319,411
|
|
|
$
|
106,863
|
|
|
$
|
35,259
|
|
|
$
|
12,583
|
|
|
$
|
474,116
|
|
Off-Balance Sheet Commitments
.
We utilize off-balance sheet commitments in the normal course of business to meet the financing needs of our customers and to reduce our own exposure to fluctuations in interest rates. These financial instruments include commitments to originate real estate, business and other loans held for investment, undisbursed loan funds, lines and letters of credit, and commitments to purchase loans and investment securities for portfolio. The contract or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.
Commitments to originate loans held for investment are agreements to lend to a customer as long as there is no violation of any condition established in the commitment. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Undisbursed loan funds and unused lines of credit on home equity and commercial loans include committed funds not disbursed. Letters of credit are conditional commitments we issue to guarantee the performance of a customer to a third party. As of March 31, 2014, we had commitments to extend credit on existing lines and letters of credit of $246.0 million, compared to $337.2 million at December 31, 2013 and $236.7 million at March 31, 2013.
The following table summarizes our contractual commitments with off-balance sheet risk by expiration period at the date indicated:
|
|
March 31, 2014
|
|
|
|
Less than 1 year
|
|
|
1 - 3 years
|
|
|
3 - 5 years
|
|
|
More than 5 years
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Other unused commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
$
|
100
|
|
|
$
|
2,051
|
|
|
$
|
100
|
|
|
$
|
4,863
|
|
|
$
|
7,114
|
|
Commercial and industrial
|
|
|
40,599
|
|
|
|
21,738
|
|
|
|
5,093
|
|
|
|
34,944
|
|
|
|
102,374
|
|
Warehouse facilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101,817
|
|
|
|
101,817
|
|
Standby letters of credit
|
|
|
4,305
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,305
|
|
All other
|
|
|
3,137
|
|
|
|
26,810
|
|
|
|
5
|
|
|
|
452
|
|
|
|
30,404
|
|
Total commitments
|
|
$
|
48,141
|
|
|
$
|
50,599
|
|
|
$
|
5,198
|
|
|
$
|
142,076
|
|
|
$
|
246,014
|
|
Regulatory Capital Compliance
The Corporation and the Bank are subject to risk-based capital regulations which quantitatively measure capital against risk-weighted assets, including certain off-balance sheet items. These regulations define the elements of the Tier 1 and Tier 2 components of total capital and establish minimum ratios of 4% for Tier 1 capital and 8% for total capital for capital adequacy purposes. Supplementing these regulations is a leverage requirement. This requirement establishes a minimum leverage ratio (at least 3% or 4%, depending upon an institution’s regulatory status) which is calculated by dividing Tier 1 capital by adjusted quarterly average assets (after deducting goodwill). In addition, the Bank is subject to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) which imposes a number of mandatory supervisory measures. Among other matters, FDICIA established five capital categories, ranging from “well capitalized” to “critically under capitalized.” Such classifications are used by regulatory agencies to determine a bank’s deposit insurance premium and approval of applications authorizing institutions to increase their asset size or otherwise expand business activities or acquire other institutions. Under FDICIA, a “well capitalized” bank must maintain minimum leverage, Tier 1 and total capital ratios of 5%, 6% and 10%, respectively. The Federal Reserve applies comparable tests for bank holding companies. At March 31, 2014, the Bank and the Corporation, respectively, exceeded the requirements for “well capitalized” institutions under the tests pursuant to FDICIA and of the Federal Reserve.
The Bank’s and the Company’s capital amounts and ratios are presented in the following table along with the well capitalized requirement at the dates indicated:
|
|
Actual
|
|
|
Minimum Required for Capital Adequacy Purposes
|
|
|
Required to be Well Capitalized Under Prompt Corrective Action Regulations
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
(dollars in thousands)
|
|
At March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to adjusted tangible assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
$
|
167,294
|
|
|
|
10.26
|
%
|
|
$
|
65,229
|
|
|
|
4.00
|
%
|
|
$
|
81,536
|
|
|
|
5.00
|
%
|
Consolidated
|
|
|
170,096
|
|
|
|
10.45
|
%
|
|
|
65,085
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Risk-Based Capital (to risk-weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
167,294
|
|
|
|
12.06
|
%
|
|
|
55,476
|
|
|
|
4.00
|
%
|
|
|
83,214
|
|
|
|
6.00
|
%
|
Consolidated
|
|
|
170,096
|
|
|
|
12.23
|
%
|
|
|
55,624
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to risk-weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
176,301
|
|
|
|
12.71
|
%
|
|
|
110,953
|
|
|
|
8.00
|
%
|
|
|
138,691
|
|
|
|
10.00
|
%
|
Consolidated
|
|
|
179,104
|
|
|
|
12.88
|
%
|
|
|
111,249
|
|
|
|
8.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to adjusted tangible assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
$
|
160,473
|
|
|
|
10.03
|
%
|
|
$
|
64,025
|
|
|
|
4.00
|
%
|
|
$
|
80,031
|
|
|
|
5.00
|
%
|
Consolidated
|
|
|
163,105
|
|
|
|
10.29
|
%
|
|
|
63,431
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Risk-Based Capital (to risk-weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
160,473
|
|
|
|
12.34
|
%
|
|
|
52,021
|
|
|
|
4.00
|
%
|
|
|
78,031
|
|
|
|
6.00
|
%
|
Consolidated
|
|
|
163,105
|
|
|
|
12.54
|
%
|
|
|
52,046
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to risk-weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
168,673
|
|
|
|
12.97
|
%
|
|
|
104,042
|
|
|
|
8.00
|
%
|
|
|
130,052
|
|
|
|
10.00
|
%
|
Consolidated
|
|
|
171,305
|
|
|
|
13.17
|
%
|
|
|
104,092
|
|
|
|
8.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to adjusted tangible assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
$
|
145,642
|
|
|
|
12.55
|
%
|
|
$
|
46,423
|
|
|
|
4.00
|
%
|
|
$
|
58,029
|
|
|
|
5.00
|
%
|
Consolidated
|
|
|
147,953
|
|
|
|
12.84
|
%
|
|
|
46,100
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Risk-Based Capital (to risk-weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
145,642
|
|
|
|
14.43
|
%
|
|
|
40,362
|
|
|
|
4.00
|
%
|
|
|
60,543
|
|
|
|
6.00
|
%
|
Consolidated
|
|
|
147,953
|
|
|
|
14.61
|
%
|
|
|
40,500
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to risk-weighted assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
153,636
|
|
|
|
15.23
|
%
|
|
|
80,724
|
|
|
|
8.00
|
%
|
|
|
100,905
|
|
|
|
10.00
|
%
|
Consolidated
|
|
|
155,947
|
|
|
|
15.40
|
%
|
|
|
81,000
|
|
|
|
8.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
On July 2, 2013, the Federal Reserve issued a final rule implementing a revised regulatory capital framework for U.S. banks in accordance with the Basel III international accord and satisfying related mandates under the Dodd-Frank Act. Under the final rule, minimum capital requirements will increase for both quantity and quality of capital held by banking organizations. The final rule includes a new common equity tier 1 minimum capital requirement of 4.5% of risk-weighted assets and increases the minimum tier 1 capital requirement from 4.0% to 6.0% of risk-weighted assets. The minimum total risk-based capital requirement remains unchanged at 8.0% of total risk-weighted assets. In addition to these minimum capital requirements, the final rule requires banking organizations to hold a buffer of common equity tier 1 capital in an amount above 2.5% of total risk-weighted assets to avoid restrictions on capital distributions and discretionary bonus payments to executive officers.
The final rule also establishes a standardized approach for determining risk-weighted assets. Under the final rule, risk weights for residential mortgage loans that apply under current capital rules will continue to apply and banking organizations with less than $15 billion in total assets may continue to include existing trust preferred securities as capital. The final rule allows banking organizations that are not subject to the advanced approaches rule, like us, to make a one-time election not to include most elements of accumulated other comprehensive income in regulatory capital and instead use the existing treatment under current capital rules.
The minimum regulatory capital requirements and compliance with a standardized approach for determining risk-weighted assets of the final rule are effective for us on January 1, 2015. The capital conservation buffer framework transition period begins January 1, 2016, with full implementation effective January 1, 2019. The Company continues to evaluate the impact of the final Basel III capital rules, and based on management’s initial review, we expect to exceed all capital requirements under the new rules. We will continue to evaluate and monitor our capital ratios under the new rules prior to the initial implementation date of January 1, 2015.
The final rule also enhances the risk-sensitivity of the advanced approaches risk-based capital rule, including among others, revisions to better address counterparty credit risk and interconnectedness among financial institutions and incorporation of the Federal Reserve’s market risk rule into the integrated capital framework. These provisions of the final rule generally apply only to large, internationally active banking organizations or banking organizations with significant trading activity and are not expected to directly impact us.