SOURCE: Focus Business Bank

Focus Business Bank

February 11, 2015 18:42 ET

Focus Business Bank Announces Unaudited Financial Results for the Quarter and Year Ending December 31, 2014

SAN JOSE, CA--(Marketwired - Feb 11, 2015) - Focus Business Bank (OTCQB: FCSB) announces unaudited financial results for the quarter and year ended December 31, 2014. Net income for the quarter and year ended December 31, 2014 was $319,000 ($0.11/per diluted share) and $1,157,000 ($0.39/per diluted share), respectively, compared to $315,000 ($0.11/per diluted share) and $869,000 ($0.30/per diluted share) for the same periods in 2013. The increases in net income for the quarter and year ending December 31, 2014 compared to the same periods in 2013 were primarily attributable to growth in net interest income resulting from a significant increase in earning assets and an increase in non-interest income, partially offset by increases in operating expenses, the provision for loan losses and income taxes.

Chairman and Chief Executive Officer Richard L. Conniff commented on the December 31, 2014 results, "Over the past two years, the Bank has experienced significant growth across all of its business lines, particularly its services to condominium homeowner associations. While this growth required an investment in infrastructure and impacted current period earnings, the long-term returns will be significant. Net income for the company increased 33% from 2013 to 2014, evidencing the positive impact of growth in earning assets."

Balance Sheet Highlights as of December 31, 2014

  • Total assets of $391 million at December 31, 2014 represented an increase of 25% over December 31, 2013.
  • Total loans of $182 million at December 31, 2014 were an all time record and 30% above December 31, 2013.
  • Total deposits of $361 million at December 31, 2014 increased 27% from December 31, 2013. 

Assets and Liabilities

As a result of deposit growth, the Bank continues to maintain high levels of liquidity. The Bank's liquid assets, consisting of cash and due from banks, federal funds sold and investment securities, totaled $200 million, or 51% of total assets, at December 31, 2014 compared to $167 million, or 53% of total assets, at December 31, 2013. The loan to deposit ratio at December 31, 2014 was 50% compared to 49% at December 31, 2013.

In addition to significant on-balance sheet growth in deposits, the Bank supports its specialty deposit clients with cash management services including the placement of funds in FDIC insured accounts with other financial institutions. These off-balance sheet deposits increased from $42.3 million at December 31, 2013 to $78.4 million at December 31, 2014. The Bank has continued to invest in developing these cash management capabilities to meet the needs of its clients.

Mr. Conniff noted, "During 2013 and 2014, the Bank made the strategic decision to capitalize on its capabilities in banking public benefit companies and condominium homeowner associations. That decision, which the Bank supported with personnel resources and infrastructure, resulted in significant deposit growth. While loan growth was also significant during this period, even higher rates of deposit growth created high levels of liquidity. During 2015, the Bank expects to deploy these liquid assets carefully into higher earning assets, primarily loans, which should result in a significant improvement in earnings going forward. During 2014, the Bank added two lending officers and a loan oriented business development officer to its lending team."

Net Interest Income

Net interest income for the quarter and year ended December 31, 2014 was $2.4 million and $8.7 million, respectively, compared to $1.9 million and $6.8 million for the same periods ended December 31, 2013. The increase in net interest income was directly related to the higher volume of earning assets funded by growth in deposits. The increase in net interest income attributable to higher volumes of earning assets was partially offset by decreases in the net interest margin related to market interest rates which remain at historically low levels. The net interest margin for the year ended December 31, 2014 was 2.61% compared to 2.80% for the year ended December 31, 2013.

Non-interest Income

Non-interest income includes service charges and fees, securities gains, SBA loan sales gains and loan servicing fees. Total non-interest income was $372,000 and $1.9 million respectively, for the quarter and year ended December 31, 2014 compared to $535,000 and $1.6 million for the same periods ending December 31, 2013. The increase in non-interest income for the year ended December 31, 2014 compared to the previous year relates primarily to an increase in servicing income for SBA loans sold in the secondary market, gains on the sale of securities and service charges and fees on deposit accounts. 

Focus Business Bank is an SBA Preferred Lender and the origination and sale of SBA loans has been a material and recurring source of non-interest revenue for the Bank since operations commenced in 2007. Gains on the sale of SBA loans totaled $125,000 and $1.1 million, respectively, for the quarter and year ended December 31, 2014, compared to $387,000 and $1.2 million for the same periods ending December 31, 2013. Looking forward, the Bank is expecting to maintain this level of SBA loan origination and sales activity.

Non-Interest Expense

Non-interest expense for the quarter and year ended December 31, 2014 was $2.3 million and $8.5 million, respectively, compared to $1.9 million and $7.0 million for the same periods ended December 31, 2013. The increase in non-interest expense is primarily attributable to the Bank's growth. FTEs increased from 32 at December 31, 2013 to 41 at December 31, 2014. The increase in headcount also resulted in higher occupancy expense as the Bank expanded its leased premises in mid-2013. 

Asset Quality

At December 31, 2014, the Bank had no non-performing loans compared to $1.1 million at December 31, 2013. The provision for loan losses for the quarter and year ended December 31, 2014 was $100,000 and $300,000, respectively, compared to no provision for loan losses in 2013. At December 31, 2014, the allowance for loan losses was 1.47% of total loans, compared to 1.82% at December 31, 2013.

At December 31, 2014, the Bank had other real estate owned of $575,000 representing two commercial real estate properties acquired through foreclosure. The properties are both under contract for sale and are currently scheduled to close escrow before March 31, 2015. Management believes the net proceeds from the sale of the properties will be equal to or exceed the recorded value of the other real estate owned and any related carrying costs.

Capital

Focus Business Bank has capital ratios in excess of the minimum regulatory requirements for a bank to be considered well capitalized. Regulatory capital ratios compared to the minimum ratios to be considered well capitalized are as follows:

         
    At December 31, 2014   Minimum to be considered well capitalized
Tier-1 leverage   7.09%   5.00%
Tier-1 risk based capital   13.46%   6.00%
Total risk-based capital   14.71%   10.00%
         

The Bank has not participated in any government sponsored capital programs, including the Troubled Asset Relief Program ("TARP") or the Small Business Lending Fund ("SBLF").

About Focus Business Bank

Focus Business Bank is dedicated to meeting the banking needs of closely-held businesses and professionals in Santa Clara County. The Bank also serves not-for-profit organizations and condominium homeowner associations with expertise, market knowledge, products and services tailored to these specific industries. The Bank specializes in business cash management services and commercial loans of all types. The Bank's office is located at 10 Almaden Boulevard in downtown San Jose, California.

Forward-Looking Statements

This release may contain forward-looking statements, such as, among others, statements about plans, expectations and goals concerning future growth and performance. Forward-looking statements are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, including the real estate market in California and other factors beyond the Bank's control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

 
 
Focus Business Bank
Unaudited Summary Financial Information
             
    As of        
BALANCE SHEET   31-Dec-14     30-Sep-14     31-Dec-13     12 Month % Change  
($ in ',000s except per share data)                              
ASSETS                              
Cash and due from banks                              
  Interest bearing   $ 102,066     $ 113,758     $ 89,507     14 %
  Non-interest bearing     26,809       23,512       13,484     99 %
Federal funds sold     500       501       501     0 %
Investment securities     71,086       91,947       63,293     12 %
Loans     182,410       170,684       140,342     30 %
  Allowance for loan losses     (2,679 )     (2,578 )     (2,548 )   5 %
    Net Loans     179,731       168,106       137,794     30 %
Other assets     11,091       9,227       8,080     37 %
TOTAL ASSETS   $ 391,283     $ 407,051     $ 312,659     25 %
LIABILITIES                              
Deposits                              
  Non-interest bearing   $ 94,901     $ 104,754     $ 94,661     0 %
  Interest bearing     266,409       272,552       190,354     40 %
    Total deposits     361,310       377,306       285,015     27 %
Other liabilities     1,480       1,631       949     56 %
TOTAL LIABILITIES     362,790       378,937       285,964     27 %
Stockholders' equity     28,493       28,114       26,695     7 %
LIABILITIES AND STOCKHOLDERS' EQUITY   $ 391,283     $ 407,051     $ 312,659     25 %
Shares outstanding     3,001,722       2,989,722       2,934,930        
Book value/share   $ 9.49     $ 9.40     $ 9.10     4 %
Balance Sheet Ratios                              
  Loan/Deposit     50 %     45 %     49 %      
  Non-interest bearing/Total deposits     26 %     28 %     33 %      
Regulatory Capital Ratios                              
  Tier-1 leverage     7.09 %     7.22 %     8.50 %      
  Tier-1 risk based capital     13.46 %     13.99 %     13.58 %      
  Total risk-based capital     14.71 %     15.24 %     14.84 %      
Asset Quality Metrics                              
  Non-performing loans   $ -     $ -     $ 1,098        
  Non-performing loans/total loans     0.00 %     0.00 %     0.78 %      
  ALLL/Total loans     1.47 %     1.51 %     1.82 %      
                                 
                                 
 
Focus Business Bank
Unaudited Summary Financial Information (cont.)
 
    Quarters Ended     Year Ended  
INCOME STATEMENT   31-Dec-14     31-Dec-13     31-Dec-14     31-Dec-13  
($ in ',000s except per share data)                                
Interest income   $ 2,608     $ 2,067     $ 9,432     $ 7,445  
Interest expense     163       175       686       642  
  Net interest income     2,445       1,892       8,746       6,803  
Provision for loan losses     100       -       300       -  
Non-interest income     372       535       1,923       1,578  
Non-interest expense     2,251       1,852       8,546       7,013  
    Pre-tax income     466       575       1,823       1,368  
    Income taxes     147       260       666       498  
Net income   $ 319     $ 315     $ 1,157     $ 870  
Net income per diluted share   $ 0.11     $ 0.11     $ 0.39     $ 0.30  
Performance Metrics                                
  Net interest margin     2.65 %     2.68 %     2.61 %     2.80 %
  Return on average assets     0.32 %     0.42 %     0.32 %     0.33 %
  Return on average equity     4.44 %     4.65 %     4.16 %     3.28 %

Contact Information

  • Contact:
    Richard L. Conniff
    Chairman and Chief Executive Officer
    408.200.8701
    Email Contact