SOURCE: 1st Enterprise Bank

1st Enterprise Bank

October 16, 2014 14:40 ET

1st Enterprise Bank Announces Record Earnings for the 3rd Quarter of 2014

LOS ANGELES, CA--(Marketwired - Oct 16, 2014) - 1st Enterprise Bank ("the Bank") (OTCQB: FENB), an independent full-service commercial bank serving the Southern California business community, today reported record quarterly net income of $2.4 million or $.56 per diluted share for the third quarter of 2014. The Bank continued its strong organic growth in loans and deposits, as loans grew by 23% and deposits grew by 10% from the third quarter of 2013. 

Financial Highlights

  • Net income for the quarter ended September 30, 2014 was $2.4 million or $.56 per diluted share, compared to $1.4 million or $.33 per diluted share in the third quarter of 2013.
  • Total Assets grew by $69 million or 9%, from $731 million at September 30, 2013 to $801 million at September 30, 2014.
  • Total Loans outstanding grew by $106 million or 23%, from $464 million at September 30, 2013 to $570 million at September 30, 2014.
  • Total Deposits grew by $61 million or 10%, from $629 million at September 30, 2013 to $691 million at September 30, 2014.
  • Adjusted Pre-tax Operating Income grew by more than $1 million or 50% 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 has been approved by all bank regulatory agencies and is expected to close in the fourth quarter of 2014, subject to customary conditions, including the approval of the shareholders of both companies. The Bank's annual shareholder meeting is scheduled for November 14, 2014.

John Black, CEO, stated, "I am pleased to announce that the Bank achieved record quarterly earnings in the third quarter and continued its history of double-digit loan and deposit growth."

Brian Horton, President, added, "Reaching $800 Million in assets in just over eight years is a wonderful accomplishment and is the result of the dedication and efforts of our very talented staff. We congratulate them, and thank our customers for their support."

For the three months ended September 30, 2014, net interest income before provision was $6.5 million, an increase of 19% compared to the third quarter of 2013 and an increase of 7% compared to the second 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 $737 million in the third quarter of 2014, a 10% or $65 million increase over the prior year. The net interest margin was 3.51% during the third quarter of 2014, compared to 3.23% for the prior year. The increase in net interest margin was the result of a .28% increase in the earning asset yield over the prior year. This increase in earning asset yield resulted from loan balances growing from 67% of earning assets in the prior year to 76% in the current quarter. Net interest income grew over the prior quarter as earning assets grew by $30 million and the net interest margin increased by .05%. The increase in net interest margin over the prior quarter was the result of a .05% increase in the yield on earning assets which also resulted from an increase in loan balances as a percentage of earning assets.

For the current quarter, the loan loss provision included $370,000 in loan recoveries and a release of loan loss reserves, resulting in a total credit of $553,000 to the loan loss provision. During the quarter, a non-accrual loan for $1.7 million was charged-off. A specific loan loss reserve had been established for 100% of this non-accrual loan in past quarters.

Non-interest income, excluding gain on sale, was $945,000 for the quarter, which was a 5% increase year over year and a 2% sequential decline. Growth in non-interest income over the prior year was generally due to increased deposit related fee income. 

Non-interest expense was essentially flat over the prior year and decreased by $1.1 million or 21% from the prior quarter. Both the third and second quarters of 2014 were impacted by merger related transaction expenses totaling $147,000 and $529,000, respectively. The third and second quarters were also impacted by changes in the Bank's off-balance sheet reserves. In the third quarter of 2014 the off-balance sheet credit reserve declined by $221,000, while in the second quarter of 2014 it grew by $501,000. After adjusting for these items, the Bank's operating expenses grew by $57,000 or 1% over the prior year and decreased by $40,000 or 1% from the prior quarter.

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   9/30/2014     6/30/2014     9/30/2013  
  Cash and due from banks   $ 15,381     $ 31,103     $ 25,030  
  Interest earning deposits in other banks     22,178       11,377       11,708  
    Total cash and cash equivalents     37,559       42,479       36,738  
                         
  Certificates of deposit in other banks     -       -       2,241  
  Investment securities - available-for-sale     105,512       109,816       141,962  
  Investment securities - held-to-maturity     60,433       61,015       61,274  
  Loans, net of deferred loan fees     569,925       550,371       463,998  
  Allowance for loan losses     (4,500 )     (6,400 )     (5,805 )
  Loans, net of allowance for loan losses     565,425       543,971       458,193  
  Bank owned life insurance     16,788       16,661       16,281  
  Premises and equipment, net     2,220       2,362       2,536  
  Accrued interest receivable and other assets     12,802       13,669       12,112  
    Total Assets   $ 800,739     $ 789,973     $ 731,337  
                         
Liabilities                        
  Noninterest-bearing demand deposits   $ 338,396     $ 335,032     $ 298,662  
  Interest bearing transaction accounts     40,261       43,523       36,841  
  Money market and savings accounts     302,495       301,673       282,465  
  Time deposits     9,502       12,924       11,524  
    Total Deposits     690,654       693,152       629,492  
  Federal Home Loan Bank borrowings     31,000       20,000       30,000  
  Other liabilities     4,386       4,507       3,501  
    Total Liabilities     726,040       717,659       662,993  
                         
Shareholders' Equity                        
  Serial Preferred Stock     16,380       16,380       16,380  
  Common Stock     43,534       43,392       43,109  
  Retained Earnings     14,578       12,194       8,634  
  Accumulated other comprehensive income     207       349       221  
    Total Shareholders' Equity     74,699       72,315       68,344  
                         
Total Liabilities and Shareholders' Equity   $ 800,739     $ 789,973     $ 731,337  
                         
                         
                         
1st Enterprise Bank                        
Condensed Statements of Operations   Three Months Ended  
$000   Unaudited  
    9/30/2014     6/30/2014     9/30/2013  
Interest Income                        
  Interest and fees on loans   $ 5,815     $ 5,346     $ 4,780  
  Interest on investment securities     906       947       855  
  Other interest income     7       5       11  
    Total interest income     6,728       6,298       5,646  
Interest Expense     205       197       180  
Net Interest Income     6,523       6,101       5,466  
                         
Provision for loan losses     (553 )     (140 )     4  
                         
Net Interest Income After Provision for Loan Losses     7,076       6,241       5,462  
                         
Non-interest Income                        
Service charges, fees and other income     945       960       904  
Gain on sale of investment sercurities     -       17       (12 )
    Total non-interest Income     945       977       892  
                         
Non-interest Expenses                        
  Compensation and benefit expenses     2,711       2,659       2,584  
  Occupancy and equipment expenses     398       395       399  
  Data processing     281       304       268  
  Merger related expenses     147       529       -  
  Professional and legal     273       285       347  
  Provision for credit losses on off-balance sheet exposures     (221 )     501       (15 )
  Other operating expenses     661       721       669  
    Total non-interest expense     4,250       5,394       4,252  
                         
Income Before Income Taxes     3,771       1,824       2,103  
                         
Provision for income taxes     1,346       834       715  
                         
Net Income   $ 2,425     $ 990     $ 1,388  
                         
Preferred dividends     41       41       41  
                         
Net Income Applicable to Common Shareholders   $ 2,384     $ 949     $ 1,347  
                         
Earnings Per Share                        
Basic earnings per share   $ 0.62     $ 0.25     $ 0.36  
                         
Diluted earnings per share   $ 0.56     $ 0.22     $ 0.33  
                         
Average shares outstanding     3,824,772       3,816,280       3,795,218  
                         
Average fully diluted shares     4,238,353       4,218,767       4,123,964  
                         
Total Shares outstanding at end of period     3,846,839       3,837,239       3,822,389  
                         
Capital Ratios                        
Tier 1 leverage ratio     9.5 %     9.6 %     9.6 %
                         
Tier 1 risk-based capital ratio     10.7 %     10.5 %     11.5 %
                         
Total risk-based capital ratio     11.4 %     11.6 %     12.5 %
                         
Book value per share   $ 15.16     $ 14.58     $ 13.59  
                         
Performance Ratios                        
Return on average assets     1.23 %     0.53 %     0.77 %
                         
Return on average common equity     16.51 %     6.80 %     10.37 %
                         
Net interest margin     3.51 %     3.46 %     3.23 %
                         
Cost of Funds     0.12 %     0.12 %     0.11 %
                         
Efficiency ratio     66.45 %     71.50 %     66.30 %
                         
                         
1st Enterprise Bank  
Supplemental Information - NON-GAAP Financial Measures  
Adjusted Operating Income  
$000                        
                         
Net Interest Income   $ 6,523     $ 6,101     $ 5,466  
                         
Non interest income     945       977       892  
Less: gain on sale of securities     0       (17 )     12  
Adjusted Operating Revenue     7,468       7,061       6,370  
                         
Non-interest expense     4,250       5,394       4,252  
Less: merger related expenses     147       529       -  
Less: provision for credit losses on off-balance sheet exposures     (221 )     501       (15 )
Adjusted non-interest expense     4,324       4,364       4,267  
                         
Adjusted Pre-tax Operating Income   $ 3,144     $ 2,697     $ 2,103  
                         
Efficiency ratio     57.9 %     61.8 %     67.0 %
                             
                             
                             
1st Enterprise Bank  
Net Interest Margin Analysis  
$000   For the Three Months Ended  
    September 30, 2014     June 30, 2014  
    Average Balance   Interest   Average Rate     Average Balance   Interest   Average Rate  
  Loans (1)   556,929   5,815   4.14 %   525,520   5,346   4.08 %
  Investment Securities (2)   167,923   906   2.16 %   172,339   947   2.20 %
  Interest-bearing deposits in other banks   11,781   7   0.23 %   8,875   5   0.22 %
Total interest-earning assets   736,633   6,728   3.62 %   706,734   6,298   3.57 %
                             
Non-interest earning assets   48,189             47,710          
  Total assets   784,822             754,444          
                             
  Money market, NOW, and Savings accounts   343,717   191   0.22 %   329,842   177   0.22 %
  Time Deposits   12,286   13   0.41 %   15,171   15   0.40 %
  Borrowings   6,598   2   0.12 %   12,744   4   0.12 %
Total interest-bearing liabilities   362,601   205   0.22 %   357,757   197   0.22 %
                             
  Non-interest bearing deposits   344,259             320,955          
  Other liabilities   4,309             3,377          
Total non-interest bearing liabilities   348,568             324,332          
                             
Shareholder's Equity   73,653             72,355          
Total liabilities and shareholders equity   784,822             754,444          
                             
Net interest income       6,523             6,101      
Net interest spread (3)           3.40 %           3.35 %
Net interest margin (4)           3.51 %           3.46 %
                             
    For the Three Months Ended  
    September 30, 2014     September 30, 2013  
    Average Balance   Interest   Average Rate     Average Balance   Interest   Average Rate  
  Loans (1)   556,929   5,815   4.14 %   448,250   4,780   4.23 %
  Investment Securities (2)   167,923   906   2.16 %   210,182   855   1.63 %
  Interest-bearing deposits in other banks   11,781   7   0.23 %   13,366   11   0.33 %
Total interest-earning assets   736,633   6,728   3.62 %   671,798   5,647   3.34 %
                             
Non-interest earning assets   48,189             41,535          
  Total assets   784,822             713,333          
                             
  Money market, NOW, and Savings accounts   343,717   191   0.22 %   315,048   159   0.20 %
  Time Deposits   12,286   13   0.41 %   16,200   12   0.31 %
  Borrowings   6,598   2   0.12 %   18,321   9   0.20 %
Total interest-bearing liabilities   362,601   205   0.22 %   349,569   181   0.20 %
                             
  Non-interest bearing deposits   344,259             292,630          
  Other liabilities   4,309             3,214          
Total non-interest bearing liabilities   348,568             295,844          
                             
Shareholder's Equity   73,653             67,920          
Total liabilities and shareholders equity   784,822             713,333          
                             
Net interest income       6,523             5,467      
Net interest spread (3)           3.40 %           3.13 %
Net interest margin (4)           3.51 %           3.23 %
   
(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:
    E. Allen Nicholson
    EVP/CFO
    213-430-7040