SOURCE: 1st Enterprise Bank

1st Enterprise Bank

July 16, 2014 17:42 ET

1st Enterprise Bank Announces Earnings for the 2nd Quarter of 2014

LOS ANGELES, CA--(Marketwired - Jul 16, 2014) - 1st Enterprise Bank ("the Bank") (OTCQB: FENB), an independent full-service commercial bank serving the Southern California business community, today reported net income of $990,000 or $.22 per diluted share for the second quarter of 2014, compared with net income of $1.4 million or $.34 per diluted share for the prior year period. The period ending June 30, 2014 included one-time transaction related expenses of approximately $530,000 related to the Bank's pending merger with CU Bancorp that was announced on June 3, 2014. The Bank continued its strong organic growth in loans and deposits, as loans grew by $37 million or 7% and deposits grew by $42 million or 6% from the first quarter of 2014. 

Financial Highlights

  • Total Assets grew by $74 million or 10%, from $716 million at June 30, 2013 to $790 million at June 30, 2014
  • Total Loans outstanding grew by $105 million or 24%, from $445 million at June 30, 2013 to $550 million at June 30, 2014
  • Total Deposits grew by $93 million or 15%, from $600 million at June 30, 2013 to $693 million at June 30, 2014
  • Adjusted Pre-tax Operating Income grew by more than $518,000 or 24% from the prior year See Supplemental Information -- Non-GAAP Financial Measures. 

Proposed Merger with CU Bancorp

  • On June 3, 2014, 1st Enterprise Bank and CU Bancorp (the parent of California United Bank) jointly announced the signing of a definitive agreement and plan of merger whereby 1st Enterprise will merge into California United Bank. This merger combines two commercial banking franchises in Southern California with more than $2.2 billion in combined assets which operate offices in Los Angeles, Orange, Ventura and San Bernardino counties.
  • Under the terms of the merger agreement, 1st Enterprise shareholders will receive 1.3450 shares of CU Bancorp common stock for each share of 1st Enterprise common stock.
  • The transaction, currently expected to close in the fourth quarter of 2014, is subject to customary conditions, including the approval of bank regulatory agencies and the shareholders of both companies.

John Black, CEO, stated, "The Bank continues to grow its customer base, which is reflected in its 24% growth in loans and 15% growth in deposits over last year. Income for the quarter was impacted by some extraordinary items including $530,000 in merger related costs and a $500,000 addition to the off-balance sheet reserve for an impaired credit related to standby letters of credit. The Bank's adjusted pre-tax operating income excludes these unusual items and resulted in a 24% increase year over year and a 12% increase over the first quarter of 2014." Brian Horton, President, added, "We are pleased with the Bank's continued growth and our merger with CU Bancorp remains on track to close during the fourth quarter of this year."

For the three months ended June 30, 2014, net interest income before provision was $6.1 million, an increase of 12% compared to the second quarter of 2013 and was equal to the first quarter of 2014. The year-over-year growth in net interest income was the result of both growth in earning assets and expansion in net interest margin. Earning assets were $707 million in the second quarter of 2014, an 8% or $51 million increase over the prior year. The net interest margin was 3.46% during the second quarter of 2014, compared to 3.32% for the prior year. The increase in net interest margin was the result of a .14% increase in the earning asset yield over the prior year. This increase in earning asset yield resulted from loan balances growing from 66% of earning assets in the prior year to 74% in the current quarter. Net interest income over the prior quarter was essentially flat as earning assets grew by $3 million, while the net interest margin declined from 3.50% to 3.46%. 

For the current quarter, there was a modest release of loan loss reserves resulting in a credit of $140,000 to the loan loss provision, due to positive migration trends within the Bank's loan risk rating categories. There was no provision for loan loss during the prior quarter and a $66,000 loan loss provision for the second quarter of 2013. There were no loan charge-offs during the second quarter of 2014, the prior year, or the prior quarter. There were net recoveries of $21,000 in both the second quarter of 2014 and the prior year. As of June 30, 2014 there was one non-accrual loan that totaled $1.7 million.

Non-interest income, excluding gain on sale, was $960,000 for the quarter, which was a 9% increase year over year and a 7% sequential increase. Growth in non-interest income was generally due to increased deposit and loan related fees over prior periods. 

Non-interest expense increased by $1.3 million or 31% over the prior year and increased by $710,000 or 15% over the prior quarter. Both comparative increases were significantly impacted by one-time transactions expense in the second quarter of 2014 totaling $530,000 and a $500,000 provision expense recorded in the quarter for growth in the off-balance sheet credit reserve. After adjusting for these items, the Bank's operating expense grew by $239,000 or 6% over the prior year and decreased by $208,000 or 5% over the prior quarter. The year over year increase was mostly due to increased staff levels, while the decline from the first quarter was partly due to timing of employment taxes that typically peak in the first quarter of each year.

Non-GAAP Financial Disclosures
This press release contains non-GAAP financial disclosures. The Bank has included non-GAAP financial measurements to provide meaningful supplemental information regarding the Bank's operating performance.

About 1st Enterprise Bank
Founded in 2006, 1st Enterprise Bank is a full service independent commercial banking institution, whose highly experienced bankers personally serve Southern California entrepreneurial businesses, professional firms and nonprofit organizations, along with their owners and key managers. Headquartered in the Los Angeles financial district, with full service regional banking offices in Irvine and Ontario and an LPO in Woodland Hills, 1st Enterprise Bank offers a full range of credit and depository services, with special emphasis on superior customer service, sophisticated cash management services and direct access to bank decision makers. Customers work directly with a dedicated Relationship Manager, a seasoned professional who understands their unique challenges serving as a sounding board and an active participant in their client's success. For more information on 1st Enterprise Bank, please visit www.1stenterprisebank.com.

Forward-Looking Statement:
This news release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about 1st Enterprise Bank's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including those described above and the following: 1st Enterprise Bank's timely implementation of new products and services, technological changes, changes in consumer spending and savings habits and other risks discussed from time to time in 1st Enterprise Bank's reports and filings with banking regulatory agencies. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made, and 1st Enterprise Bank does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.

   
   
1st Enterprise Bank  
Condensed Statements of Financial Condition  
$000                  
    Unaudited     Unaudited     Unaudited  
Assets   6/30/2014     3/31/2014     6/30/2013  
  Cash and due from banks   $ 31,103     $ 33,270     $ 16,786  
  Interest earning deposits in other banks     11,377       29,461       14,526  
    Total cash and cash equivalents     42,479       62,731       31,312  
                           
  Investment securities - available-for-sale     109,816       113,071       152,189  
  Investment securities - held-to-maturity     61,015       61,769       61,931  
  Loans, net of deferred loan fees     550,371       513,360       444,861  
  Allowance for loan losses     (6,400 )     (6,519 )     (5,790 )
  Loans, net of allowance for loan losses     543,971       506,841       439,071  
  Bank owned life insurance     16,661       16,538       16,148  
  Premises and equipment, net     2,362       2,372       2,647  
  Accrued interest receivable and other assets     13,669       12,590       12,813  
    Total Assets   $ 789,974     $ 775,912     $ 716,111  
                         
Liabilities                        
  Noninterest-bearing demand deposits   $ 335,032     $ 321,500     $ 274,167  
  Interest bearing transaction accounts     43,523       43,770       38,076  
  Money market and savings accounts     301,673       270,219       271,377  
  Time deposits     12,924       16,083       16,879  
    Total Deposits     693,152       651,572       600,499  
  Federal Home Loan Bank borrowings     20,000       50,000       45,000  
  Other liabilities     4,507       3,253       3,384  
    Total Liabilities     717,659       704,825       648,883  
                         
Shareholders' Equity                        
  Serial Preferred Stock     16,380       16,380       16,380  
  Common Stock     43,392       43,378       43,068  
  Retained Earnings     12,194       11,245       7,287  
  Accumulated other comprehensive income     349       84       494  
    Total Shareholders' Equity     72,315       71,087       67,228  
                         
Total Liabilities and Shareholders' Equity   $ 789,974     $ 775,912     $ 716,111  
                         
                   
                   
1st Enterprise Bank
Condensed Statements of Operations
$000   Three Months Ended  
    Unaudited  
    6/30/2014     3/31/2014     6/30/2013  
Interest Income                        
  Interest and fees on loans   $ 5,346     $ 5,293     $ 4,724  
  Interest on investment securities     947       972       879  
  Other interest income     5       3       7  
    Total interest income     6,298       6,268       5,610  
Interest Expense     197       191       183  
Net Interest Income     6,101       6,077       5,427  
                         
Provision for loan losses     (140 )     -       66  
                         
Net Interest Income After Provision for Loan Losses     6,241       6,077       5,361  
                         
Non-interest Income                        
Service charges, fees and other income     960       900       877  
Gain on sale of investment sercurities     17       41       4  
    Total non-interest Income     977       941       881  
                         
Non-interest Expenses                        
  Compensation and benefit expenses     2,659       2,876       2,450  
  Occupancy and equipment expenses     395       379       405  
  Data processing     304       268       268  
  Merger related expenses     529       -       -  
  Professional and legal     285       401       334  
  Provision for credit losses on off-balance sheet exposures     501       112       (5 )
  Other operating expenses     721       648       668  
    Total non-interest expense     5,394       4,684       4,120  
                         
Income Before Income Taxes     1,824       2,334       2,122  
                         
Provision for income taxes     834       829       712  
                         
Net Income   $ 990     $ 1,505     $ 1,410  
                         
Preferred dividends     41       41       41  
                         
Net Income Applicable to Common Shareholders   $ 949     $ 1,464     $ 1,369  
                         
Earnings Per Share                        
Basic earnings per share   $ 0.25     $ 0.38     $ 0.36  
                         
Diluted earnings per share   $ 0.22     $ 0.35     $ 0.34  
                         
Average shares outstanding     3,816,280       3,803,389       3,793,339  
                         
Average fully diluted shares     4,218,767       4,182,521       4,082,229  
                         
Total Shares outstanding at end of period     3,837,239       3,840,938       3,815,589  
                         
Capital Ratios                        
Tier 1 leverage ratio     9.6 %     9.5 %     9.6 %
                         
Tier 1 risk-based capital ratio     10.5 %     11.1 %     11.8 %
                         
Total risk-based capital ratio     11.6 %     12.2 %     12.9 %
                         
Book value per share   $ 14.58     $ 14.24     $ 13.33  
                         
Performance Ratios                        
Return on average assets     0.53 %     0.81 %     0.81 %
                         
Return on average common equity     6.80 %     10.98 %     10.51 %
                         
Net interest margin     3.46 %     3.50 %     3.32 %
                         
Cost of Funds     0.12 %     0.11 %     0.12 %
                         
Efficiency ratio     71.50 %     66.80 %     65.96 %
                         
                         
                   
1st Enterprise Bank  
Supplemental Information - NON-GAAP Financial Measures  
Adjusted Operating Income  
$000                  
                   
Net Interest Income   $ 6,101     $ 6,077     $ 5,427  
                         
Non interest income     977       941       881  
Less: gain on sale of securities     (17 )     (41 )     (4 )
Adjusted Operating Revenue     7,061       6,977       6,304  
                         
Non-interest expense     5,394       4,684       4,120  
Less: merger related expenses     529       -       -  
Less: provision for credit losses on off-balance sheet exposures     501       112       (5 )
Adjusted non-interest expense     4,364       4,572       4,125  
                         
Adjusted Pre-tax Operating Income   $ 2,697     $ 2,405     $ 2,179  
                         
Efficiency ratio     61.8 %     65.5 %     65.4 %
                         
                         
                             
1st Enterprise Bank        
Net Interest Margin Analysis        
$000   For the Three Months Ended  
    June 30, 2014     March 31, 2014  
    Average Balance   Interest   Average Rate     Average Balance   Interest   Average Rate  
  Loans (1)   525,520   5,346   4.08 %   510,789   5,293   4.20 %
  Investment Securities (2)   172,339   947   2.20 %   187,378   972   2.07 %
  Interest-bearing deposits in other banks   8,875   5   0.22 %   5,946   3   0.22 %
Total interest-earning assets   706,734   6,298   3.57 %   704,113   6,268   3.61 %
                             
Non-interest earning assets   47,710             46,918          
  Total assets   754,444             751,031          
                             
  Money market, NOW, and Savings accounts   329,842   177   0.22 %   314,159   168   0.22 %
  Time Deposits   15,171   15   0.40 %   11,655   10   0.34 %
  Borrowings   12,744   4   0.12 %   42,381   13   0.12 %
Total interest-bearing liabilities   357,757   197   0.22 %   368,195   191   0.21 %
                             
  Non-interest bearing deposits   320,955             308,411          
  Other liabilities   3,377             3,970          
Total non-interest bearing liabilities   324,332             312,381          
                             
Shareholder's Equity   72,355             70,455          
Total liabilities and shareholders equity   754,444             751,031          
                             
Net interest income       6,101             6,077      
Net interest spread (3)           3.35 %           3.40 %
Net interest margin (4)           3.46 %           3.50 %
                             
    For the Three Months Ended  
    June 30, 2014     June 30, 2013  
    Average Balance   Interest   Average Rate     Average Balance   Interest   Average Rate  
  Loans (1)   525,520   5,346   4.08 %   435,620   4,724   4.35 %
  Investment Securities (2)   172,339   947   2.20 %   212,008   879   1.66 %
  Interest-bearing deposits in other banks   8,875   5   0.22 %   8,256   7   0.36 %
Total interest-earning assets   706,734   6,298   3.57 %   655,884   5,610   3.43 %
                             
Non-interest earning assets   47,710             43,503          
  Total assets   754,444             699,387          
                             
  Money market, NOW, and Savings accounts   329,842   177   0.22 %   306,162   160   0.21 %
  Time Deposits   15,171   15   0.40 %   14,297   11   0.31 %
  Borrowings   12,744   4   0.12 %   27,789   13   0.18 %
Total interest-bearing liabilities   357,757   196   0.22 %   348,248   183   0.21 %
                             
  Non-interest bearing deposits   320,955             279,575          
  Other liabilities   3,377             4,328          
Total non-interest bearing liabilities   324,332             283,903          
                             
Shareholder's Equity   72,355             67,236          
Total liabilities and shareholders equity   754,444             699,387          
                             
Net interest income       6,101             5,427      
Net interest spread (3)           3.35 %           3.22 %
Net interest margin (4)           3.46 %           3.32 %
     
  (1) Loan fees have been included in the calculation of interest income   
  (2) Yields on tax exempt securities have not been calculated on a tax equivalent basis  
  (3) Represents the difference between the weighted average yield on interest-bearing assets and the weighted average yield on interest bearing liabilities
  (4) Represents net interest income as a percentage of average interest-earning assets  

Contact Information

  • Contact:
    John C. Black
    CEO
    213-430-7000