Pacific Mercantile Bancorp (Nasdaq: PMBC), the holding company of
Pacific Mercantile Bank (the “Bank”), a wholly owned banking
subsidiary, today reported its financial results for the three and
six months ended June 30, 2019.
For the second quarter of 2019, the Company
reported net income of $2.7 million, or $0.12 per fully diluted
share. This compares to net income of $882 thousand, or $0.04 per
fully diluted share, in the first quarter of 2019, and net income
of $15.4 million, or $0.65 per fully diluted share, in the second
quarter of 2018. The increase in net income, as compared to the
three months ended March 31, 2019, is primarily attributable
to a decrease in our provision for loan and lease losses as a
result of one large charge off related to a single loan
relationship during the previous quarter and increased net interest
income, partially offset by higher operating expenses. The decrease
in net income, as compared to the three months ended June 30,
2018, is primarily attributable to an increase in our provision for
income taxes as a result of the release of the valuation allowance
on our deferred tax asset during the three months ended
June 30, 2018 compared to a provision for income taxes during
the three months ended June 30, 2019, combined with higher
operating expenses attributable to increased legal fees that are
included in our professional fees.
Commenting on the results, Tom Vertin, President
& CEO of Pacific Mercantile Bancorp, said, “We continue to
execute well on our strategies to improve our deposit mix and
funding profile. During the second quarter, we had further
growth in total deposits driven primarily by checking
accounts. Our success in gathering lower-cost deposits has
enabled us to reduce our reliance on non-core time deposits and
more effectively manage our cost of funds. We also had a
strong quarter of loan production and new client acquisition
activity. We added 39 new operating company relationships
through the first half of the year, which puts us ahead of last
year’s pace. Our strong new loan production is being offset
by a significant increase in payoffs resulting from aggressive
pricing and credit terms being offered by competitors. We
have a growing loan pipeline that should result in continued strong
loan production, although the headwind of elevated payoffs presents
a challenge for generating a higher level of loan growth. We
expect that our near-term earnings growth will be largely tied to
our ability to offset payoffs in the loan portfolio and generate
higher levels of net interest income.”
Results of Operations
The following table shows our operating results
for the three and six months ended June 30, 2019, as compared
to the three months ended March 31, 2019 and the three and six
months ended June 30, 2018. The discussion below highlights
the key factors contributing to the changes shown in the following
table.
|
Three Months Ended |
|
Six Months Ended June 30, |
|
June 30, 2019 |
|
March 31, 2019 |
|
June 30, 2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
|
Total interest income |
$ |
16,466 |
|
|
$ |
16,167 |
|
|
$ |
15,914 |
|
|
$ |
32,632 |
|
|
$ |
30,929 |
|
Total interest expense |
4,247 |
|
|
4,116 |
|
|
3,467 |
|
|
8,362 |
|
|
6,297 |
|
Net interest income |
12,219 |
|
|
12,051 |
|
|
12,447 |
|
|
24,270 |
|
|
24,632 |
|
Provision for loan and lease
losses |
— |
|
|
3,300 |
|
|
— |
|
|
3,300 |
|
|
— |
|
Total noninterest income |
1,386 |
|
|
1,490 |
|
|
1,136 |
|
|
2,876 |
|
|
2,191 |
|
Total noninterest expense |
9,707 |
|
|
8,983 |
|
|
9,299 |
|
|
18,691 |
|
|
18,832 |
|
Income tax (benefit)
provision |
1,170 |
|
|
376 |
|
|
(11,085 |
) |
|
1,545 |
|
|
(11,085 |
) |
Net income |
$ |
2,728 |
|
|
$ |
882 |
|
|
$ |
15,369 |
|
|
$ |
3,610 |
|
|
$ |
19,076 |
|
Net Interest Income
Q2 2019 vs Q1 2019. Net
interest income increased $168 thousand, or 1.4%, for the three
months ended June 30, 2019 as compared to the three months
ended March 31, 2019 primarily as a result of:
- An increase in interest income of $299 thousand, or 1.8%,
primarily attributable to an increase in interest earned on
short-term investments as a result of a higher average balances
during the three months ended June 30, 2019 as compared to
the three months ended March 31, 2019; partially offset
by
- An increase in interest expense of $131 thousand, or 3.2%,
primarily attributable to an increase in interest paid on our
deposits as a result of higher average balances during the three
months ended June 30, 2019 as compared to the three months
ended March 31, 2019, which was primarily the result of an
increase in the number of new operating company relationships.Our
net interest margin decreased to 3.58% for the three months ended
June 30, 2019 as compared to 3.63% for the three months ended
March 31, 2019. The decrease is primarily attributable to
fluctuation in the mix of earning assets resulting from the
increase in short-term investments, which caused the yield on
earning assets to decrease even though the yield on loans
increased. Also contributing to the decrease in net interest
margin was an increase in the cost of interest bearing liabilities
resulting from an increase in prevailing interest rates on
certificates of deposit, partially offset by decreases in interest
rates on other interest bearing liabilities.
Q2 2019 vs Q2 2018. Net
interest income decreased $228 thousand, or 1.8%, for the three
months ended June 30, 2019 as compared to the three months
ended June 30, 2018 primarily as a result of:
- An increase in interest expense of $780 thousand, or 22.5%,
primarily attributable to an increase in the volume of and rates of
interest paid on our non-maturing interest bearing deposits for the
three months ended June 30, 2019 as compared to the three
months ended June 30, 2018, which was primarily the result of
higher deposits due to new client acquisition, and our decision to
increase the rate of interest paid on our non-maturing interest
bearing deposits resulting from the rising interest rate
environment, which was somewhat offset by a change in our mix of
deposits from higher cost certificates of deposit to non-maturing
interest and non-interest bearing deposits; partially offset
by
- An increase in interest income of $552 thousand, or 3.5%,
primarily attributable to an increase in interest earned on
short-term investments as a result of higher average balances and
an increase in the average yield on earning assets as a
result of the rising interest rate environment during
the three months June 30, 2019 as compared to the three months
ended June 30, 2018, which was partially offset by a decrease
of $812 thousand in interest recoveries on loans that had been on
nonaccrual status but were paid in full during the three months
ended June 30, 2018.
YTD 2019 vs YTD 2018. Net
interest income decreased $362 thousand, or 1.5%, for the six
months ended June 30, 2019 as compared to the six months ended
June 30, 2018, primarily as a result of:
- An increase in interest expense of $2.1 million, or 32.8%,
primarily attributable to an increase in the volume of and rates of
interest paid on our deposits and other borrowings for the six
months ended June 30, 2019 as compared to the six months ended
June 30, 2018, which was primarily the result of higher
deposits due to new client acquisition, our decision to increase
the rate of interest paid on our non-maturity interest bearing
deposits and our certificates of deposit resulting from the rising
interest rate environment, and an increase in our FHLB borrowings;
partially offset by
- An increase in interest income of $1.7 million, or 5.5%,
primarily attributable to an increase in interest earned on loans
and short-term investments as a result of higher average balances
and an increase in the average yields during the six months ended
June 30, 2019 as compared to the six months ended
June 30, 2018, which was primarily the result of the rising
interest rate environment, which was partially offset by a decrease
of $1.6 million in interest recoveries on loans that had been on
nonaccrual status but were paid in full during the six months ended
June 30, 2018.
Provision for Loan and Lease
Losses
Q2 2019 vs Q1 2019. We recorded
no provision for loan and lease losses during the three months
ended June 30, 2019 as a result of a nominal increase in our
loan portfolio during the quarter with a favorable change in the
composition of loans. We recorded a $3.3 million provision
for loan and lease losses during the three months ended
March 31, 2019 as a result of total charge offs of $5.7
million, which primarily related to one large credit, partially
offset by a decline in the level of classified assets. During the
three months ended June 30, 2019, we had net charge-offs of
$40 thousand, compared to net charge-offs of $5.3 million for the
three months ended March 31, 2019.
Q2 2019 vs Q2 2018. We
recorded no provision for loan and lease losses during the three
months ended June 30, 2019 as a result of a nominal increase
in our loan portfolio during the quarter with a favorable change in
the composition of loans. We recorded no provision for loan and
lease losses during the three months ended June 30, 2018 due
primarily to a slight decrease in our loan portfolio during the
quarter.
YTD 2019 vs YTD 2018. We
recorded a $3.3 million provision for loan and lease losses during
the six months ended June 30, 2019 as a result of total net
charge-offs of $5.3 million, which primarily related to one large
credit, partially offset by a decline in the level of classified
assets. We recorded no provision for loan and lease losses during
the six months ended June 30, 2018 primarily as a result of
reserves for new loan growth being offset by a decline in the level
of classified assets.
Noninterest Income
Q2 2019 vs Q1 2019. Noninterest
income decreased $104 thousand, or 7.0%, for the three months ended
June 30, 2019 as compared to the three months ended
March 31, 2019, primarily resulting from a decrease in loan
servicing fees.
Q2 2019 vs Q2 2018. Noninterest
income increased by $250 thousand, or 22.0%, for the three months
ended June 30, 2019 as compared to the three months ended
June 30, 2018, primarily as a result of an increase of $300
thousand in gain on sale of SBA loans during the second quarter of
2019 as compared to the same period in 2018.
YTD 2019 vs YTD 2018.
Noninterest income increased $685 thousand, or 31.3%, for the six
months ended June 30, 2019 as compared to the six months ended
June 30, 2018, primarily as a result of:
- An increase of $600 thousand in gain on sale of SBA loans
during the six months ended June 30, 2019 as compared to the same
period in 2018; and
- An increase in deposit related fees, credit card fees and loan
service fees during the six months ended June 30, 2019 as
compared to the same period in 2018; partially offset by
- A gain of $48 thousand on the sale of securities available for
sale during the six months ended June 30, 2018 that did not occur
in the same period in 2019.
Noninterest Expense
Q2 2019 vs Q1 2019. Noninterest
expense increased $724 thousand, or 8.1%, for the three months
ended June 30, 2019 as compared to the three months ended
March 31, 2019, primarily as a result of:
- An increase of $296 thousand in salaries and employee benefits
primarily related to an increase in the incentive compensation
accrual during the second quarter of 2019 and an annual increase in
employee salaries; and
- An increase of $394 thousand in our professional fees
primarily related to higher legal fees during the second quarter of
2019; partially offset by
- A decrease of $67 thousand in our other real estate owned
expense during the three months ended June 30, 2019 as compared to
the three months ended March 31, 2019.
Q2 2019 vs Q2 2018. Noninterest
expense increased $408 thousand, or 4.4%, for the three months
ended June 30, 2019 as compared to the three months ended
June 30, 2018, primarily as a result of:
- An increase of $554 thousand in our professional fees primarily
related to higher legal fees during the second quarter of 2019 and
the recovery of legal fees attributable to the payoff of a loan
relationship during the second quarter of 2018 that was previously
on nonaccrual status; and
- An increase of $146 thousand in our data processing fees
primarily related to a higher credit card and deposit volume in the
second quarter of 2019; partially offset by
- A decrease of $179 thousand in salaries and employee benefits
primarily related to employee benefits;
- A decrease of $73 thousand in our FDIC insurance expenses
primarily related to a decrease in our premium; and
- A decrease in various expense accounts related to the normal
course of operating, including expenses related to loan production
and business development during the three months ended
June 30, 2019 as compared to the three months ended
June 30, 2018;
YTD 2019 vs YTD 2018.
Noninterest expense decreased $141 thousand, or 0.7%, for the six
months ended June 30, 2019 as compared to the six months ended
June 30, 2018, primarily as a result of:
- A decrease of $899 thousand in salaries and employee benefits
primarily related to a decrease in employee benefits and incentive
compensation;
- A decrease of $191 thousand in our FDIC insurance expenses
primarily related to a decrease in our premium; and
- A decrease in various expense accounts related to the
normal course of operating, including expenses related to loan
production and business development; partially offset by
- An increase of $600 thousand in our professional fees primarily
related to higher legal fees in 2019 and the recovery of legal fees
attributable to the payoff of a loan relationship in the second
quarter of 2018 that was previously on nonaccrual status;
- An increase of $104 thousand in occupancy and equipment expense
related to building and equipment maintenance; and
- An increase $272 thousand in data processing fees primarily
related to a higher credit card and deposit volume.
Income tax provision
(benefit)
For the three and six months ended June 30,
2019, we had an income tax expense of $1.2 million and $1.5
million, respectively. The income tax expense during the three and
six months ended June 30, 2019 is a result of our operating
income. Accounting rules specify that management must evaluate the
deferred tax asset on a recurring basis to determine whether enough
positive evidence exists to determine whether it is
more-likely-than-not that the deferred tax asset will be available
to offset or reduce future taxes. The tax code allows net
operating losses incurred prior to December 31, 2017 to be carried
forward for 20 years from the date of the loss, and based on its
evaluation, management believes that the Company will be able to
realize the deferred tax asset within the period that our net
operating losses may be carried forward. Due to the hierarchy
of evidence that the accounting rules specify, management
determined that there continued to be enough positive evidence to
support no valuation allowance on our deferred tax asset at
June 30, 2019. The value of our deferred tax asset at June 30,
2019 was computed based on an estimate of taxable income for the
full year of 2019.
For the three months ended March 31, 2019, we
had an income tax expense of $376 thousand. The income tax expense
during the three months ended March 31, 2019 is a result of our
operating income.
For the three and six months ended June 30,
2018, we had an income tax benefit of $11.1 million, as a result of
the release of our full valuation allowance of $11.1 million on our
net deferred tax asset. During the three and six months ended
June 30, 2018, management determined that the valuation
allowance that was previously established on the balance of our
deferred tax asset was no longer required at June 30, 2018 and
released the entire $11.1 million during the three months ended
June 30, 2018.
Balance Sheet Information
Loans
As indicated in the table below, at
June 30, 2019, gross loans totaled approximately $1.1 billion,
which represented an increase of $14.5 million, or 1.4%, compared
to gross loans outstanding at March 31, 2019. The following
table sets forth the composition, by loan category, of our loan
portfolio at June 30, 2019, March 31, 2019, and
December 31, 2018.
|
June 30, 2019 |
|
March 31, 2019 |
|
December 31, 2018 |
|
Amount |
|
Percent of Total Loans |
|
Amount |
|
Percent of Total Loans |
|
Amount |
|
Percent
ofTotalLoans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
|
Commercial loans |
$ |
441,850 |
|
|
40.7 |
% |
|
$ |
448,021 |
|
|
41.9 |
% |
|
$ |
444,441 |
|
|
40.7 |
% |
Commercial real estate loans -
owner occupied |
214,233 |
|
|
19.7 |
% |
|
213,334 |
|
|
19.9 |
% |
|
211,645 |
|
|
19.3 |
% |
Commercial real estate loans -
all other |
221,437 |
|
|
20.4 |
% |
|
220,106 |
|
|
20.5 |
% |
|
226,441 |
|
|
20.7 |
% |
Residential mortgage loans -
multi-family |
83,966 |
|
|
7.7 |
% |
|
91,856 |
|
|
8.6 |
% |
|
97,173 |
|
|
8.9 |
% |
Residential mortgage loans -
single family |
21,294 |
|
|
2.0 |
% |
|
19,776 |
|
|
1.8 |
% |
|
21,176 |
|
|
1.9 |
% |
Construction and land
development loans |
12,230 |
|
|
1.1 |
% |
|
29,261 |
|
|
2.7 |
% |
|
38,496 |
|
|
3.5 |
% |
Consumer loans |
91,442 |
|
|
8.4 |
% |
|
49,549 |
|
|
4.6 |
% |
|
54,514 |
|
|
5.0 |
% |
Gross loans |
$ |
1,086,452 |
|
|
100.0 |
% |
|
$ |
1,071,903 |
|
|
100.0 |
% |
|
$ |
1,093,886 |
|
|
100.0 |
% |
The increase of $14.5 million in gross loans
during the second quarter of 2019 was primarily a result of total
new organic loan fundings of $52.7 million, along with loan
portfolio purchases and participations including a $39.9 million
specialty automobile loan portfolio purchase, $2.2 million in
commercial real estate loan participations, and $4.3 million in
commercial loan participations, partially offset by loan payments
and payoffs of $84.5 million, and charge offs of $127
thousand. The specialty automobile loan portfolio
acquisition, which approximately doubled the size of the Bank’s
existing specialty auto portfolio, was made in light of the
favorable performance of this asset class, including high asset
quality and attractive yield, but does not reflect a change in the
bank’s overall C&I market strategy.
During the second quarter of 2019, we secured
new client relationships with commercial loan commitments of $37.9
million, of which $19.7 million were funded at June 30, 2019.
Our total commercial loan commitments increased to $729.9 million
at June 30, 2019 from $701.3 million at March 31, 2019,
while the utilization rate of commercial loan commitments decreased
to 60.1% at June 30, 2019 from 63.3% at March 31,
2019.
Deposits
|
June 30, 2019 |
|
March 31, 2019 |
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Type of
Deposit |
($ in thousands) |
|
|
Noninterest-bearing checking accounts |
$ |
378,063 |
|
|
$ |
364,083 |
|
|
$ |
340,406 |
|
Interest-bearing checking accounts |
112,626 |
|
|
100,294 |
|
|
64,144 |
|
Money market and savings deposits |
450,057 |
|
|
450,003 |
|
|
460,355 |
|
Certificates of deposit |
258,884 |
|
|
266,970 |
|
|
271,097 |
|
Totals |
$ |
1,199,630 |
|
|
$ |
1,181,350 |
|
|
$ |
1,136,002 |
|
The increase in our total deposits from
March 31, 2019 to June 30, 2019 is primarily attributable
to an increase of $26.3 million in our checking accounts, partially
offset by a decrease of $8.1 million in our certificates of
deposit. The increase in our core deposits is the result of new
client acquisition, which has resulted in relationships with
growing operating companies that are attracting capital investment
to fund that growth. The decrease in our certificates of deposit is
primarily the result of our decision to improve our deposit mix by
replacing higher cost certificates of deposit with lower priced
core deposits. Lower priced core deposits increased to 78.4% of
total deposits, while higher priced certificates of deposit
decreased to 21.6% of total deposits at June 30, 2019, as
compared to 77.4% and 22.6% of total deposits, respectively, at
March 31, 2019.
Asset Quality
Nonperforming Assets
|
2019 |
|
2018 |
June 30 |
|
March 31 |
|
June 30 |
|
|
($ in
thousands) |
|
|
Total non-performing loans |
$ |
1,344 |
|
|
$ 1,321 |
|
|
$ 5,325 |
|
|
|
|
|
|
|
|
|
|
Other real estate owned |
— |
|
|
— |
|
|
2,073 |
|
Other non-performing assets |
82 |
|
|
96 |
|
|
— |
|
Total
non-performing assets |
$ |
1,426 |
|
|
$ |
1,417 |
|
|
$ |
7,398 |
|
90-day past due loans(1) |
$ |
— |
|
|
$ |
— |
|
|
$ |
2,669 |
|
Total classified assets |
$ |
5,174 |
|
|
$ |
4,079 |
|
|
$ |
14,757 |
|
Allowance for loan and lease losses |
$ |
11,474 |
|
|
$ |
11,514 |
|
|
$ |
13,369 |
|
Allowance for loan and lease losses /gross loans |
1.06 |
% |
|
1.07 |
% |
|
1.26 |
% |
Allowance for loan and lease losses /total assets |
0.81 |
% |
|
0.82 |
% |
|
0.98 |
% |
Ratio of allowance for loan and lease losses to nonperforming
loans |
853.72 |
% |
|
871.61 |
% |
|
251.06 |
% |
Ratio of nonperforming assets to total assets |
0.10 |
% |
|
0.10 |
% |
|
0.54 |
% |
Net quarterly charge-offs (recoveries) to gross loans |
— |
% |
|
0.49 |
% |
|
— |
% |
(1) No loans were 90 days or more past due at June 30, 2019.
Nonperforming assets at June 30, 2019
increased $9 thousand from March 31, 2019 as a result of an
increase in non-performing loans, partially offset by a decrease in
our other non-performing assets owned. The increase in our
non-performing loans resulted from the addition of $309 thousand of
commercial and consumer loans during the three months ended
June 30, 2019, partially offset by principal payments of $159
thousand, charge-offs of $104 thousand and the transfer to other
assets of $23 thousand, during the same period.
Our classified assets increased by $1.1 million
from $4.1 million at March 31, 2019 to $5.2 million at
June 30, 2019, and has decreased by $9.6 million from $14.8
million at June 30, 2018. The increase this quarter is
primarily related to additions of $1.4 million during the three
months ended June 30, 2019, partially offset by principal
payments of $165 thousand, charge-offs of $112 thousand, and the
transfer to other assets of $24 thousand, during the same
period.
Allowance for loan and lease losses
|
2019 |
|
2018 |
June 30 |
|
March 31 |
|
December 31 |
|
September 30 |
|
June 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in
thousands) |
|
|
Balance at
beginning of quarter |
$ |
11,514 |
|
|
$ |
13,506 |
|
|
$ |
13,463 |
|
|
$ |
13,369 |
|
|
$ |
13,405 |
|
Charge offs |
(127 |
) |
|
(5,698 |
) |
|
(922 |
) |
|
(419 |
) |
|
(355 |
) |
Recoveries |
87 |
|
|
406 |
|
|
965 |
|
|
513 |
|
|
319 |
|
Provision |
— |
|
|
3,300 |
|
|
— |
|
|
— |
|
|
— |
|
Balance at end of quarter |
$ |
11,474 |
|
|
$ |
11,514 |
|
|
$ |
13,506 |
|
|
$ |
13,463 |
|
|
$ |
13,369 |
|
At June 30, 2019, the allowance for loan
and lease losses (“ALLL”) totaled $11.5 million, which was
approximately $40 thousand less than at March 31, 2019 and
$1.9 million less than at June 30, 2018. The ALLL
activity during the three months ended June 30, 2019 included
net charge-offs of $40 thousand. There was no provision for loan
and lease losses during the period, primarily attributable to
nominal growth in the total loan portfolio and favorable change in
the composition of loan categories during the three months ended
June 30, 2019. The ratio of the ALLL-to-total loans outstanding as
of June 30, 2019 was 1.06% as compared to 1.07% and 1.26% as
of March 31, 2019 and June 30, 2018, respectively.
Capital Resources
At June 30, 2019, the Bank had total
regulatory capital of $166.2 million. The ratio of the Bank’s
total capital-to-risk weighted assets, which is a principal federal
bank regulatory measure of the financial strength of banking
institutions, was 13.5% which exceeds the minimum for a bank to be
classified under federal bank regulatory guidelines as a
“well-capitalized” banking institution, which is the highest of the
capital standards established by federal banking regulatory
authorities.
The following table sets forth the regulatory
capital and capital ratios of the Bank at June 30, 2019, as
compared to the regulatory requirements that must be met for a
banking institution to be rated as a well-capitalized
institution.
|
ActualAt June 30, 2019 |
|
Federal Regulatory Requirementto be Rated
Well-Capitalized |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
Total Capital to Risk Weighted Assets |
$ |
166,176 |
|
|
13.5 |
% |
|
$ |
123,269 |
|
|
At least 10.0 |
|
|
|
|
|
|
|
|
Common Equity Tier 1 Capital to
Risk Weighted Assets |
$ |
154,352 |
|
|
12.5 |
% |
|
$ |
80,125 |
|
|
At least 6.5 |
|
|
|
|
|
|
|
|
Tier 1 Capital to Risk Weighted
Assets |
$ |
154,352 |
|
|
12.5 |
% |
|
$ |
98,615 |
|
|
At least 8.0 |
|
|
|
|
|
|
|
|
Tier 1 Capital to Average
Assets |
$ |
154,352 |
|
|
11.0 |
% |
|
$ |
70,416 |
|
|
At least 5.0 |
About Pacific Mercantile
Bancorp
Pacific Mercantile Bancorp (Nasdaq: PMBC) is the
parent holding company of Pacific Mercantile Bank, which opened for
business March 1, 1999. The Bank, which is an FDIC insured,
California state-chartered bank and a member of the Federal Reserve
System, provides a wide range of commercial banking services to
businesses, business professionals and individual clients. The Bank
is headquartered in Orange County and operates a total of seven
offices in Southern California, located in Orange, Los Angeles, San
Diego, and San Bernardino counties. The Bank offers tailored
flexible solutions for its clients including an array of loan and
deposit products, sophisticated cash management services, and
comprehensive online banking services accessible at
www.pmbank.com.
Forward-Looking Information
This news release contains statements regarding
our expectations, beliefs and views about our future financial
performance and our business, trends and expectations regarding the
markets in which we operate, and our future plans. Those
statements, which include the quotation from management, constitute
“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, can be identified by
the fact that they do not relate strictly to historical or current
facts. Often, they include words such as “believe,” “expect,”
“anticipate,” “intend,” “plan,” “estimate,” “project,” or words of
similar meaning, or future or conditional verbs such as “will,”
“would,” “should,” “could,” or “may.” Forward-looking statements
are based on current information available to us and our
assumptions about future events over which we do not have
control. Moreover, our business and our markets are subject
to a number of risks and uncertainties which could cause our actual
financial performance in the future, and the future performance of
our markets (which can affect both our financial performance and
the market prices of our shares), to differ, possibly materially,
from our expectations as set forth in the forward-looking
statements contained in this news release.
In addition to the risk of incurring loan losses
and provision for loan losses, which is an inherent risk of the
banking business, these risks and uncertainties include, but are
not limited to, the following: the risk that the credit quality of
our borrowers declines; potential declines in the value of the
collateral for secured loans; the risk that steps we have taken to
strengthen our overall credit administration are not effective; the
risk of a downturn in the United States economy, and domestic or
international economic conditions, which could cause us to incur
additional loan losses and adversely affect our results of
operations in the future; the risk that our interest margins and,
therefore, our net interest income will be adversely affected by
changes in prevailing interest rates; the risk of increases in our
nonperforming assets, in which event we would face the prospect of
further loan charge-offs and write-downs of assets; the risk that
we will not be able to manage our interest rate risks effectively,
in which event our operating results could be harmed; the prospect
of changes in government regulation of banking and other financial
services organizations, which could impact our costs of doing
business and restrict our ability to take advantage of business and
growth opportunities; the risk that our efforts to develop a robust
commercial banking platform may not succeed; and the risk that we
may be unable to realize our expected level of increasing deposit
inflows. Readers of this news release are encouraged to
review the additional information regarding these and other risks
and uncertainties to which our business is subject that is
contained in our Annual Report on Form 10-K for the year ended
December 31, 2018, which is on file with the Securities and
Exchange Commission (“SEC”). Additional information will be set
forth in our Quarterly Report on Form 10-Q for the three months
ended June 30, 2019, which we expect to file with the SEC during
the third quarter of 2019, and readers of this release are urged to
review the additional information that will be contained in that
report.
Due to these and other risks and uncertainties
to which our business is subject, you are cautioned not to place
undue reliance on the forward-looking statements contained in this
news release, which speak only as of its date, or to make
predictions about our future financial performance based solely on
our historical financial performance. We disclaim any obligation to
update or revise any of the forward-looking statements as a result
of new information, future events or otherwise, except as may be
required by law.
|
Three Months Ended |
|
Six Months Ended |
|
June 30, 2019 |
|
March 31, 2019 |
|
June 30, 2018 |
|
Jun '19 vs Mar '19% Change |
|
Jun '19 vs Jun '18 % Change |
|
June 30, 2019 |
|
June 30, 2018 |
|
% Change |
Total interest income |
$ |
16,466 |
|
|
$ |
16,167 |
|
|
$ |
15,914 |
|
|
1.8 |
% |
|
3.5 |
% |
|
$ |
32,632 |
|
|
$ |
30,929 |
|
|
5.5 |
% |
Total interest expense |
4,247 |
|
|
4,116 |
|
|
3,467 |
|
|
3.2 |
% |
|
22.5 |
% |
|
8,362 |
|
|
6,297 |
|
|
32.8 |
% |
Net interest income |
12,219 |
|
|
12,051 |
|
|
12,447 |
|
|
1.4 |
% |
|
(1.8 |
)% |
|
24,270 |
|
|
24,632 |
|
|
(1.5 |
)% |
Provision for loan and lease
losses |
— |
|
|
3,300 |
|
|
— |
|
|
(100.0 |
)% |
|
100.0 |
% |
|
3,300 |
|
|
— |
|
|
— |
% |
Net interest income after provision for loan and lease losses |
12,219 |
|
|
8,751 |
|
|
12,447 |
|
|
39.6 |
% |
|
(1.8 |
)% |
|
20,970 |
|
|
24,632 |
|
|
(14.9 |
)% |
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service fees on deposits and other banking services |
443 |
|
|
398 |
|
|
407 |
|
|
11.3 |
% |
|
8.8 |
% |
|
840 |
|
|
794 |
|
|
5.8 |
% |
Net gain (loss) on sale of securities available for sale |
— |
|
|
— |
|
|
— |
|
|
— |
% |
|
— |
% |
|
— |
|
|
48 |
|
|
(100.0 |
)% |
Net gain on sale of small business administration loans |
300 |
|
|
300 |
|
|
— |
|
|
— |
% |
|
100.0 |
% |
|
600 |
|
|
— |
|
|
— |
% |
Net loss on sale of other assets |
(11 |
) |
|
(25 |
) |
|
— |
|
|
(56.0 |
)% |
|
— |
% |
|
(36 |
) |
|
(4 |
) |
|
800.0 |
% |
Other non-interest income |
654 |
|
|
817 |
|
|
729 |
|
|
(20.0 |
)% |
|
(10.3 |
)% |
|
1,472 |
|
|
1,353 |
|
|
8.8 |
% |
Total non-interest income |
1,386 |
|
|
1,490 |
|
|
1,136 |
|
|
(7.0 |
)% |
|
22.0 |
% |
|
2,876 |
|
|
2,191 |
|
|
31.3 |
% |
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
5,737 |
|
|
5,441 |
|
|
5,916 |
|
|
5.4 |
% |
|
(3.0 |
)% |
|
11,177 |
|
|
12,076 |
|
|
(7.4 |
)% |
Occupancy and equipment |
1,127 |
|
|
1,088 |
|
|
1,047 |
|
|
3.6 |
% |
|
7.6 |
% |
|
2,215 |
|
|
2,111 |
|
|
4.9 |
% |
Professional Fees |
1,190 |
|
|
796 |
|
|
636 |
|
|
49.5 |
% |
|
87.1 |
% |
|
1,986 |
|
|
1,386 |
|
|
43.3 |
% |
OREO expenses, net |
1 |
|
|
68 |
|
|
8 |
|
|
(98.5 |
)% |
|
(87.5 |
)% |
|
69 |
|
|
8 |
|
|
100.0 |
% |
FDIC Expense |
193 |
|
|
164 |
|
|
266 |
|
|
17.7 |
% |
|
(27.4 |
)% |
|
357 |
|
|
548 |
|
|
(34.9 |
)% |
Other non-interest expense |
1,459 |
|
|
1,426 |
|
|
1,426 |
|
|
2.3 |
% |
|
2.3 |
% |
|
2,887 |
|
|
2,703 |
|
|
6.8 |
% |
Total non-interest
expense |
9,707 |
|
|
8,983 |
|
|
9,299 |
|
|
8.1 |
% |
|
4.4 |
% |
|
18,691 |
|
|
18,832 |
|
|
(0.7 |
)% |
Income before income taxes |
3,898 |
|
|
1,258 |
|
|
4,284 |
|
|
209.9 |
% |
|
(9.0 |
)% |
|
5,155 |
|
|
7,991 |
|
|
(35.5 |
)% |
Income tax expense |
1,170 |
|
|
376 |
|
|
(11,085 |
) |
|
211.2 |
% |
|
(110.6 |
)% |
|
1,545 |
|
|
(11,085 |
) |
|
(113.9 |
)% |
Net income (loss) from continuing operations |
2,728 |
|
|
882 |
|
|
15,369 |
|
|
209.3 |
% |
|
(82.2 |
)% |
|
3,610 |
|
|
19,076 |
|
|
(81.1 |
)% |
Net income |
$ |
2,728 |
|
|
$ |
882 |
|
|
$ |
15,369 |
|
|
209.3 |
% |
|
(82.2 |
)% |
|
$ |
3,610 |
|
|
$ |
19,076 |
|
|
(81.1 |
)% |
Net income (loss) allocable to common shareholders |
$ |
2,728 |
|
|
$ |
882 |
|
|
$ |
15,369 |
|
|
209.3 |
% |
|
(82.2 |
)% |
|
$ |
3,610 |
|
|
$ |
19,076 |
|
|
(81.1 |
)% |
Basic income per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders |
$ |
0.12 |
|
|
$ |
0.04 |
|
|
$ |
0.66 |
|
|
200.0 |
% |
|
(81.8 |
)% |
|
$ |
0.15 |
|
|
$ |
0.82 |
|
|
(81.7 |
)% |
Diluted income per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders |
$ |
0.12 |
|
|
$ |
0.04 |
|
|
$ |
0.65 |
|
|
200.0 |
% |
|
(81.5 |
)% |
|
$ |
0.15 |
|
|
$ |
0.81 |
|
|
(81.5 |
)% |
Weighted average number of
common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
22,620 |
|
|
21,824 |
|
|
23,332 |
|
|
3.6 |
% |
|
(3.1 |
)% |
|
22,224 |
|
|
23,299 |
|
|
(4.6 |
)% |
Diluted |
23,616 |
|
|
23,547 |
|
|
23,558 |
|
|
0.3 |
% |
|
0.2 |
% |
|
23,581 |
|
|
23,502 |
|
|
0.3 |
% |
Ratios from continuing
operations(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
0.78 |
% |
|
0.26 |
% |
|
4.57 |
% |
|
|
|
|
|
0.52 |
% |
|
2.89 |
% |
|
|
Return on average equity |
7.57 |
% |
|
2.50 |
% |
|
51.01 |
% |
|
|
|
|
|
5.06 |
% |
|
32.45 |
% |
|
|
Efficiency ratio |
71.35 |
% |
|
66.34 |
% |
|
68.46 |
% |
|
|
|
|
|
68.85 |
% |
|
70.21 |
% |
|
|
(1) Ratios for the three months
ended June 30, 2019, March 31, 2019 and June 30,
2018 have been annualized.
|
|
CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION(Dollars in
thousands, except share and book value
data)(Unaudited) |
|
|
|
ASSETS |
June 30, 2019 |
|
December 31, 2018 |
|
Increase/ (Decrease) |
|
|
|
|
Cash and due from banks |
$ |
17,561 |
|
|
$ |
13,250 |
|
|
32.5 |
% |
|
Interest bearing deposits with financial institutions(1) |
247,680 |
|
|
174,468 |
|
|
42.0 |
% |
|
Interest bearing time deposits |
2,420 |
|
|
2,420 |
|
|
— |
% |
|
Investment securities (including stock) |
36,303 |
|
|
40,053 |
|
|
(9.4 |
)% |
|
Loans (net of allowances of $11,474 and $13,506,
respectively) |
1,077,595 |
|
|
1,083,240 |
|
|
(0.5 |
)% |
|
Other real estate owned |
— |
|
|
1,173 |
|
|
(100.0 |
)% |
|
Net deferred tax assets |
8,795 |
|
|
10,935 |
|
|
(19.6 |
)% |
|
Other assets |
28,763 |
|
|
23,799 |
|
|
20.9 |
% |
|
Total assets |
$ |
1,419,117 |
|
|
$ |
1,349,338 |
|
|
5.2 |
% |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
Non-interest bearing deposits |
$ |
378,063 |
|
|
$ |
340,406 |
|
|
11.1 |
% |
|
Interest bearing deposits |
|
|
|
|
|
|
Interest checking |
112,626 |
|
|
64,144 |
|
|
75.6 |
% |
|
Savings/money market |
450,057 |
|
|
460,355 |
|
|
(2.2 |
)% |
|
Certificates of deposit |
258,884 |
|
|
271,097 |
|
|
(4.5 |
)% |
|
Total interest bearing deposits |
821,567 |
|
|
795,596 |
|
|
3.3 |
% |
|
Total deposits |
1,199,630 |
|
|
1,136,002 |
|
|
5.6 |
% |
|
Other borrowings |
40,000 |
|
|
40,000 |
|
|
— |
% |
|
Other liabilities |
16,044 |
|
|
14,435 |
|
|
11.1 |
% |
|
Junior subordinated debentures |
17,527 |
|
|
17,527 |
|
|
— |
% |
|
Total liabilities |
1,273,201 |
|
|
1,207,964 |
|
|
5.4 |
% |
|
Shareholders’ equity |
145,916 |
|
|
141,374 |
|
|
3.2 |
% |
|
Total Liabilities and Shareholders’ Equity |
$ |
1,419,117 |
|
|
$ |
1,349,338 |
|
|
5.2 |
% |
|
Book value per share |
$ |
6.21 |
|
|
$ |
6.06 |
|
|
2.5 |
% |
|
Shares outstanding, common |
23,514,870 |
|
|
21,916,195 |
|
|
7.3 |
% |
|
- Interest bearing deposits held in the Bank’s account
maintained at the Federal Reserve Bank.
|
Three Months
Ended |
|
June 30, 2019 |
|
March 31, 2019 |
|
June 30, 2018 |
|
AverageBalance |
|
InterestEarned/Paid |
|
AverageYield/Rate |
|
AverageBalance |
|
InterestEarned/Paid |
|
AverageYield/Rate |
|
Average Balance |
|
Interest Earned/ Paid |
|
Average Yield/ Rate |
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments(1) |
$ |
269,980 |
|
|
$ |
1,620 |
|
|
2.41 |
% |
|
$ |
225,561 |
|
|
$ |
1,355 |
|
|
2.44 |
% |
|
$ |
192,175 |
|
|
$ |
864 |
|
|
1.80 |
% |
Securities available for sale and stock(2) |
36,880 |
|
|
260 |
|
|
2.83 |
% |
|
39,203 |
|
|
292 |
|
|
3.02 |
% |
|
38,633 |
|
|
262 |
|
|
2.72 |
% |
Loans(3) |
1,062,228 |
|
|
14,586 |
|
|
5.51 |
% |
|
1,080,771 |
|
|
14,520 |
|
|
5.45 |
% |
|
1,089,135 |
|
|
14,788 |
|
|
5.45 |
% |
Total interest-earning assets |
1,369,088 |
|
|
16,466 |
|
|
4.82 |
% |
|
1,345,535 |
|
|
16,167 |
|
|
4.87 |
% |
|
1,319,943 |
|
|
15,914 |
|
|
4.84 |
% |
Noninterest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
15,573 |
|
|
|
|
|
|
15,084 |
|
|
|
|
|
|
16,617 |
|
|
|
|
|
All other assets |
26,052 |
|
|
|
|
|
|
29,231 |
|
|
|
|
|
|
12,970 |
|
|
|
|
|
Total assets |
$1,410,713 |
|
|
|
|
|
$1,389,850 |
|
|
|
|
|
$1,349,530 |
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts |
$ |
108,530 |
|
|
181 |
|
|
0.67 |
% |
|
$ |
95,475 |
|
|
161 |
|
|
0.68 |
% |
|
$ |
56,906 |
|
|
63 |
|
|
0.44 |
% |
Money market and savings accounts |
460,935 |
|
|
2,106 |
|
|
1.83 |
% |
|
457,975 |
|
|
2,114 |
|
|
1.87 |
% |
|
434,294 |
|
|
1,670 |
|
|
1.54 |
% |
Certificates of deposit |
261,721 |
|
|
1,466 |
|
|
2.25 |
% |
|
272,256 |
|
|
1,349 |
|
|
2.01 |
% |
|
326,660 |
|
|
1,349 |
|
|
1.66 |
% |
Other borrowings |
40,220 |
|
|
262 |
|
|
2.61 |
% |
|
40,000 |
|
|
258 |
|
|
2.62 |
% |
|
36,934 |
|
|
171 |
|
|
1.86 |
% |
Junior subordinated debentures |
17,527 |
|
|
232 |
|
|
5.31 |
% |
|
17,527 |
|
|
234 |
|
|
5.41 |
% |
|
17,527 |
|
|
214 |
|
|
4.90 |
% |
Total interest bearing liabilities |
888,933 |
|
|
4,247 |
|
|
1.92 |
% |
|
883,233 |
|
|
4,116 |
|
|
1.89 |
% |
|
872,321 |
|
|
3,467 |
|
|
1.59 |
% |
Noninterest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
360,597 |
|
|
|
|
|
|
341,134 |
|
|
|
|
|
|
346,553 |
|
|
|
|
|
Accrued expenses and other liabilities |
16,544 |
|
|
|
|
|
|
22,277 |
|
|
|
|
|
|
9,802 |
|
|
|
|
|
Shareholders' equity |
144,639 |
|
|
|
|
|
|
143,206 |
|
|
|
|
|
|
120,854 |
|
|
|
|
|
Total liabilities and shareholders' equity |
$1,410,713 |
|
|
|
|
|
$1,389,850 |
|
|
|
|
|
$1,349,530 |
|
|
|
|
Net interest income |
|
|
$ |
12,219 |
|
|
|
|
|
|
$ |
12,051 |
|
|
|
|
|
|
$12,447 |
|
|
Net interest income/spread |
|
|
|
|
2.90 |
% |
|
|
|
|
|
2.98 |
% |
|
|
|
|
|
3.25 |
% |
Net interest margin |
|
|
|
|
3.58 |
% |
|
|
|
|
|
3.63 |
% |
|
|
|
|
|
3.78 |
% |
- Short-term investments consist of federal funds sold and
interest bearing deposits that we maintain at other financial
institutions.
- Stock consists of FHLB stock and Federal Reserve Bank of San
Francisco stock.
- Loans include the average balance of nonaccrual loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended |
|
June 30, 2019 |
|
June 30, 2018 |
|
AverageBalance |
|
InterestEarned/Paid |
|
AverageYield/Rate |
|
AverageBalance |
|
InterestEarned/Paid |
|
AverageYield/Rate |
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
|
Short-term investments(1) |
$ |
247,893 |
|
|
$ |
2,975 |
|
|
2.42 |
% |
|
$ |
186,422 |
|
|
$ |
1,560 |
|
|
1.69 |
% |
Securities available for sale and stock(2) |
38,035 |
|
|
551 |
|
|
2.92 |
% |
|
40,789 |
|
|
536 |
|
|
2.65 |
% |
Loans(3) |
1,071,449 |
|
|
29,106 |
|
|
5.48 |
% |
|
1,076,109 |
|
|
28,833 |
|
|
5.40 |
% |
Total interest-earning assets |
1,357,377 |
|
|
32,632 |
|
|
4.85 |
% |
|
1,303,320 |
|
|
30,929 |
|
|
4.79 |
% |
Noninterest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
15,330 |
|
|
|
|
|
|
16,228 |
|
|
|
|
|
All other assets |
27,632 |
|
|
|
|
|
|
10,051 |
|
|
|
|
|
Total assets |
1,400,339 |
|
|
|
|
|
|
1,329,599 |
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts |
$ |
102,038 |
|
|
$ |
342 |
|
|
0.68 |
% |
|
$ |
70,667 |
|
|
$ |
177 |
|
|
0.51 |
% |
Money market and savings accounts |
459,463 |
|
|
4,220 |
|
|
1.85 |
% |
|
392,046 |
|
|
2,654 |
|
|
1.37 |
% |
Certificates of deposit |
266,959 |
|
|
2,815 |
|
|
2.13 |
% |
|
342,394 |
|
|
2,729 |
|
|
1.61 |
% |
Other borrowings |
40,110 |
|
|
520 |
|
|
2.61 |
% |
|
38,489 |
|
|
337 |
|
|
1.77 |
% |
Junior subordinated debentures |
17,527 |
|
|
465 |
|
|
5.35 |
% |
|
17,527 |
|
|
400 |
|
|
4.60 |
% |
Total interest bearing liabilities |
886,097 |
|
|
8,362 |
|
|
1.90 |
% |
|
861,123 |
|
|
6,297 |
|
|
1.47 |
% |
Noninterest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
350,919 |
|
|
|
|
|
|
339,238 |
|
|
|
|
|
Accrued expenses and other liabilities |
19,397 |
|
|
|
|
|
|
10,706 |
|
|
|
|
|
Shareholders' equity |
143,926 |
|
|
|
|
|
|
118,532 |
|
|
|
|
|
Total liabilities and shareholders' equity |
1,400,339 |
|
|
|
|
|
|
1,329,599 |
|
|
|
|
|
Net interest income |
|
|
$ |
24,270 |
|
|
|
|
|
|
$ |
24,632 |
|
|
|
Net interest income/spread |
|
|
|
|
2.95 |
% |
|
|
|
|
|
3.32 |
% |
Net interest margin |
|
|
|
|
3.61 |
% |
|
|
|
|
|
3.81 |
% |
- Short-term investments consist of federal funds sold and
interest bearing deposits that we maintain at other financial
institutions.
- Stock consists of FHLB stock and Federal Reserve Bank of San
Francisco stock.
- Loans include the average balance of nonaccrual loans.
For
more information contact |
Curt
Christianssen, Chief Financial Officer, 714-438-2500 |
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