Year-to-date earnings up 30% over the same
period in 2015
CU Bancorp (NASDAQ: CUNB), the parent company of wholly owned
California United Bank, today reported financial results for the
third quarter of 2016.
Third Quarter 2016
Highlights
- Net income available to common
shareholders increased to $6.3 million, compared to $6.0
million in the third quarter of 2015
- Total revenue increased 11% from
the third quarter of 2015
- Non-performing assets to total
assets ratio remains very low at 0.04%; no past due
loans over 30 days; net recoveries year to date
- Return on tangible common equity
of 10.30%
- Efficiency ratio of 60%
- Diluted earnings per share of
$0.36(1)
- Tangible book value per share
increased $0.38 to $13.84 per share
- Total assets increased to $2.9
billion, up $289 million from the third quarter of 2015 and $117
million from the prior quarter
- Total loans increased to $2.0
billion, up $204 million from the third quarter of 2015 and $24
million from the prior quarter
- Total deposits increased to $2.5
billion, up $246 million from the third quarter of 2015 and $110
million from the prior quarter
- Non-interest bearing demand
deposits were 56% of total deposits
- Continued status as well
capitalized, the highest regulatory category
- Named to Fortune’s annual List
of 100 Fastest-Growing Companies
- Received “Outstanding” Community
Reinvestment Act performance rating from the Federal Deposit
Insurance Corporation
Third Quarter 2016 Summary
Results
“CUB’s fundamentals remain excellent, with strong third quarter
revenue growth of 11% over the year-ago quarter and 13% annualized
over the prior quarter, and a pristine balance sheet with
nonperforming assets of just four basis points at September 30,
2016,” said David Rainer, Chairman and Chief Executive Officer of
CU Bancorp and California United Bank. “Third quarter net income
was impacted by one-time costs of $1.2 million, including $957
thousand in compliance expenses related to the BSA Consent Order
disclosed in our recent Form 8-K, and $203 thousand in one-time
expenses associated with the closing of our Simi Valley
administrative office.
“In connection with the BSA Consent Order the Company expects to
incur total non-recurring expenses of $2 million, with the
substantial portion of these expenses incurred in the third and
fourth quarters of 2016. We are committed to meeting the
requirements of the BSA Consent Order and believe we are making
appropriate progress. Despite the impact of these one-time costs,
year-to-date net income available to common shareholders and
diluted earnings per share are up 30% and 26%, respectively, over
the same period in 2015, which is primarily attributable to our
consistent loan growth,” said Rainer.
“In the third quarter of 2016, total loans grew 11% compared to
the third quarter of 2015 and total loan growth for the
linked-quarter period was 5% annualized,” said Brian Horton,
President of CU Bancorp and California United Bank. “Commercial and
industrial line of credit loan commitments grew modestly, with
utilization steady at 45%. We continue to see fluctuations in
commercial and industrial loans outstanding. As we have noted
before, this is part of the dynamic of commercial lending, which
also speaks to the strong liquidity of our borrowers reflected in
CUB’s substantial deposit growth of 11% year over year and 18%
annualized from the previous quarter.
“As a Southern California market leader in commercial and
industrial lending, we are attracting some of the area’s most
experienced and productive relationship managers and we are pleased
to report that we have recently added four within our footprint,”
added Horton.
“Loan growth resulting from relationship-based banking and
combined with consistent, disciplined and prudent underwriting
practices is the best defense against credit quality issues,” said
Anne Williams, Executive Vice President, Chief Credit Officer and
Chief Operating Officer of CU Bancorp and California United Bank.
“This approach has been effective for CUB and we have not wavered
from it, as reflected in our historically low nonperforming asset
ratio of 0.04%. The Company’s senior management team has experience
with numerous historical credit cycles and is committed to continue
this strong credit discipline in the current competitive lending
environment.”
The following table shows the Company’s various non-recurring,
non-interest expense of $957 thousand related to the BSA Consent
Order, and $203 thousand in occupancy expense related to the
closure of the Simi Valley administrative office:
Non-Recurring Costs Associated with BSA and Office
Closure Q3 2016 YTD 2016
Non-Interest Expense Salaries
and employee benefits $ 106,090 $ 106,090 Occupancy
246,673 246,673 Legal and professional
601,822 606,822 FDIC deposit assessment
15,000 15,000 Other operating expenses
190,717 288,485
Total Non-Interest
Expense $ 1,160,302 $ 1,263,070 (1)
In March 2016, the FASB issued Accounting
Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation
(Topic 718): Improvements to Employee Share-Based Payment
Accounting, to reduce the complexity of certain aspects of the
accounting for employee share-based payment transactions. In the
third quarter of 2016, the Company elected the early adoption of
this standard which requires the Company to reflect the adjustments
resulting from the adoption effective January 1, 2016, the
beginning of the annual period that includes the interim period of
adoption. See the “Early Adoption of Accounting Standards Update
(“ASU”) 2016-09” table at the end of this press release for further
details.
Net Income and Profitability Ratios
Net income available to common shareholders for the third
quarter of 2016 was $6.3 million or $0.36 per fully diluted share,
compared with net income available to common shareholders of $6.0
million or $0.35 per fully diluted share for the third quarter of
2015. The growth in net income available to common shareholders
from the year-ago quarter is attributable to a $2.3 million
increase in loan interest income, which is the result of the
Company’s strong organic loan growth since the prior period. In the
third quarter of 2016 the Company recorded no merger-related
expenses, compared to $211 thousand in the year-ago quarter, but
did incur non-recurring expenses of $1.2 million.
Net income available to common shareholders for the third
quarter of 2016 was $6.3 million or $0.36 per fully diluted share,
compared with net income available to common shareholders of $6.8
million or $0.39(1) per fully diluted share in the second quarter
of 2016, the previous quarter has been recast, due to the adoption
of ASU 2016-09 during the third quarter of 2016, which had a
positive impact of $475 thousand or $0.03 on the Company’s diluted
earnings per share for the second quarter of 2016. The decrease in
net income available to common shareholders from the prior quarter
is attributable to $1.2 million in non-recurring expenses recorded
in the third quarter of 2016, as discussed further in the
non-interest expense section. The effects of these two items mask
the strong fundamental performance growth in the quarter.
Net income available to common shareholders for the year-to-date
period ending September 30, 2016, increased $4.5 million or 30%
over the same year-to-date period of 2015. Diluted earnings per
share for the year-to-date period ending September 30, 2016,
increased $0.23 or 26% compared to the same period of the prior
year. The increase was driven by an increase in net interest income
of $8.5 million or 13% for the year-to-date period ending September
30, 2016, compared to the same period of the prior year.
Non-interest expense for the year-to-date period ending September
30, 2016, increased $2.1 million or 5% compared to the same period
of the prior year, which includes the $1.2 million of non-recurring
expense.
The following table shows certain of the Company’s performance
ratios for the year-to-date periods through September 30, 2016 and
2015, the third quarter of 2016, the second quarter of 2016(1) and
the third quarter of 2015:
YTD 2016
YTD 2015 Q3 2016 Q2
2016(1)
Q3 2015
Return on average tangible common equity 11.10%
9.95% 10.30% 11.75% 11.48%
Return on
average assets 0.93% 0.82% 0.87%
0.99% 0.93%
Operating efficiency ratio 58%
61% 60% 55% 59%
Net Interest Income and Net Interest Margin
Net interest income totaled $25.0 million for the third quarter
of 2016, an increase of $2.7 million or 12% from the third quarter
of 2015. The increase was primarily driven by strong loan growth
over the last year.
The Company’s net interest income was positively impacted in the
third quarters of both 2016 and 2015 by the recognition of fair
value discounts earned on early payoffs of acquired loans. In the
third quarter of 2016 the Company recorded $629 thousand in
discounts earned on early loan payoffs of acquired loans and other
associated payoff benefits of $177 thousand, which had a positive
impact on the net interest margin of 12 basis points. In the third
quarter of 2015 the Company recorded $560 thousand in discounts
earned on early loan payoffs of acquired loans and other associated
payoff benefits aggregating to $321 thousand, with a positive
impact on the net interest margin of 15 basis points.
The net interest margin in the third quarter of 2016 was 3.72%,
compared to 3.79% in the third quarter of 2015. The decrease was
primarily driven by average loans being a lower percentage of
earning assets in the third quarter of 2016 than in the year-ago
period, due to strong growth in average deposits.
Net interest income for the third quarter of 2016 increased $799
thousand or 3% from the second quarter of 2016. The growth was
primarily driven by an increase in average loans of $57
million.
The Company’s net interest income was positively impacted in
both the third quarter of 2016 and the second quarter of 2016 by
the recognition of fair value discounts earned on early payoffs of
acquired loans. In the third quarter of 2016 the Company recorded
$629 thousand in discounts earned on early loan payoffs and other
associated payoff benefits of $177 thousand, which had a positive
impact on the net interest margin of 12 basis points. In the second
quarter of 2016 the Company recorded $546 thousand in discounts
earned on early loan payoffs and other associated payoff benefits
of $359 thousand, which had a positive impact on the net interest
margin of 14 basis points.
The net interest margin in the third quarter of 2016 was 3.72%,
compared to 3.81% in the second quarter of 2016. The decrease was
primarily driven by average loans being a lower percentage of
earning assets in the third quarter of 2016 than the previous
quarter, as well as higher discounts on acquired loans and other
associated payoff benefits earned during the second quarter of
2016.
The core loan yield for the third quarter of 2016 was 4.69%, the
same as the previous quarter.
As of September 30, 2016, the Company had $10.9 million of
discounts remaining on acquired accruing loans.
The Company’s cost of funds was 0.13% in the third quarter of
2016, compared to 0.12% in both the third quarter of 2015 and the
second quarter of 2016.
Non-interest Income
Non-interest income was $3.1 million in the third quarter of
2016, an increase of $70 thousand or 2% from $3.0 million in the
same quarter of the prior year. The Company’s gain on sale of SBA
loans in the third quarter of 2016 was $189 thousand, compared to
$640 thousand in the year-ago period, which was the highest in
Company history. Other non-interest income in the third quarter of
2016 included $278 thousand in transaction referral fee income
generated by the Company’s SBA lending group; the Company had no
transaction referral fee income in the year-ago quarter. Deposit
account service charge income increased $51 thousand in the third
quarter of 2016 compared to the year-ago period. The Company
realized a $141 thousand gain on sale of securities in the third
quarter of 2016; the year-ago period had no gain on sale of
securities.
Non-interest income in the third quarter of 2016 increased $83
thousand or 3% over the second quarter of 2016. The Company’s gain
on sale of SBA loans in the third quarter of 2016 was $189
thousand, compared to $485 thousand in the prior quarter. Other
non-interest income in the third quarter of 2016 included $278
thousand in transaction referral fee income generated by the
Company’s SBA lending group, compared to $29 thousand in
transaction referral fee income in the prior quarter. The Company
realized a $141 thousand gain on sale of securities in the third
quarter of 2016; the prior quarter had no gain on sale of
securities.
Non-interest Expense
Non-interest expense for the third quarter of 2016 was $16.8
million, an increase of $1.7 million, or 11% compared to
non-interest expense of $15.1 million for the same period of the
prior year. This increase followed a six-quarter period during
which non-interest expense was essentially flat, despite
double-digit growth in loans and deposits. In the third quarter of
2016 the Company’s salaries and employee benefits and stock based
compensation expense increased by $462 thousand and $129 thousand,
respectively, over the third quarter of 2015, as full-time
equivalent employees grew to 285 at September 30, 2016, an increase
of 19 from the end of the year-ago quarter. The Company recorded
one-time expenses of $1.2 million in the third quarter of 2016, of
which $957 thousand were related to BSA Consent Order expenses and
$203 thousand were related to costs associated with the closing of
the Simi Valley administrative office; the related branch was
closed last December.
Non-interest expense for the third quarter of 2016 was $16.8
million, an increase of $1.7 million or 11% over the second quarter
of 2016. The Company’s non-interest expense for salaries and
benefits increased by $366 thousand in the third quarter of 2016
compared to the second quarter of 2016, reflecting the increase of
seven full-time equivalent employees near the end of the second
quarter and the hiring of an additional five in the third quarter.
The hires were made in order to support the high level of customer
service CUB provides, as well as address expanding regulatory and
compliance requirements. The increase in expenses associated with
BSA compliance will continue through the fourth quarter to reach
the expected $1.1 million recurring annual expense. As noted above,
the Company recorded non-recurring expenses of $1.2 million in the
third quarter of 2016, of which $957 thousand were related to BSA
Consent Order expenses and $203 thousand were related to costs
associated with the closing of the Simi Valley administrative
office; this compares to $103 thousand in second quarter of 2016
related to non-recurring BSA expenses.
Income Tax
In the third quarter of 2016, the effective tax rate was 38%,
compared to a recast effective tax rate of 36%(1) for the previous
quarter. In the third quarter of 2016 15,000 options were
exercised, compared to 207,475 in the second quarter. The first
quarter of 2016 benefitted from the exercising of 189,489 options,
with a recast effective tax rate of 37%.(1) The tax rate will have
more volatility, due to the new accounting treatment of stock based
compensation, in future quarters.
Balance Sheet
Assets
Total assets at September 30, 2016, were $2.9 billion, a
year-over-year increase of $289 million from September 30, 2015.
The increase was primarily due to strong growth in total
deposits.
Tangible book value per share at September 30, 2016, was $13.84,
an increase of $0.38 or 3% from June 30, 2016, and $1.42 or 11%
from September 30, 2015.
Loans
Total loans were $1.97 billion at September 30, 2016, an
increase of $24 million or 5% annualized from $1.95 billion at the
end of the prior quarter. This also represents an increase of $204
million or 11% from September 30, 2015. The increase in loans for
both periods was due to strong organic loan growth.
During the third quarter of 2016, the Company had $66 million of
net organic loan production. Pay downs in the acquired loan
portfolios were approximately $42 million in the same quarter.
Total commercial and industrial line of credit commitments
outstanding increased $13 million from the prior quarter, and
utilization of commercial and industrial line of credit commitments
continued at 45%, the same as the previous quarter.
Loans secured by real estate grew $53 million in the third
quarter of 2016, compared to the prior quarter. The bulk of the
growth in loans secured by real estate, 77%, came primarily from
other nonresidential properties and multifamily residential
properties, representing loans to customers with long-term
relationships with the Company and backed by guarantors. The
construction lending portfolio accounted for 12% of this growth and
owner-occupied real estate made up 9% of the growth.
At September 30, 2016, commercial and industrial loans, and
owner-occupied real estate loans combined were $930 million or 47%
of total loans, compared to $948 million or 49% at June 30, 2016.
At September 30, 2015, commercial and industrial loans, and
owner-occupied real estate were $933 million or 53% of total
loans.
Deposits
Total deposits at September 30, 2016 were $2.5 billion, an
increase of $110 million from the end of the prior quarter and $246
million from the prior year. The strong growth in total deposits
year over year was largely in non-interest bearing deposits, which
were 56% of total deposits at September 30, 2016, compared to 55%
at September 30, 2015, and 56% at June 30, 2016. Average deposits
per branch were $278 million as of September 30, 2016.
Cost of deposits for the quarter was 0.11%, compared to 0.10% in
both the prior quarter and the year-ago quarter.
Asset Quality
Total non-performing assets were $1.2 million, or 0.04% of total
assets at September 30, 2016, compared with $5.6 million or 0.21%
of total assets at September 30, 2015. The Company had no past due
loans over 30 days at September 30, 2016.
Total nonaccrual loans were $1.2 million or 0.06% of total
loans, at September 30, 2016, compared with $4.3 million or 0.24%
of total loans at September 30, 2015. There are no individual
nonaccrual loans over $300 thousand.
During the third quarter of 2016, the Company recorded net
charge-offs of $802 thousand, compared with net recoveries of $868
thousand in the second quarter of 2016 and $136 thousand in net
recoveries in the third quarter of 2015. The largest charge-off in
the third quarter of 2016 was related to an acquired loan.
The Company recorded a loan loss provision for the third quarter
of 2016 of $697 thousand, associated with net organic loan growth
of $66 million. This compares to a loan loss provision in the prior
quarter of $1.1 million, associated with net organic loan growth of
$121 million, and $705 thousand in the year-ago quarter, associated
with net organic loan growth of $89 million.
The allowance for loan losses as a percentage of loans
(excluding acquired loans that have been marked to fair value and
their related allowance) was 1.20% at September 30, 2016, compared
with 1.22% at June 30, 2016, and 1.30% at September 30, 2015.
Capital
CU Bancorp remained well capitalized at September 30, 2016, with
total risk weighted assets of $2.54 billion. All of the Company’s
capital ratios are above minimum regulatory standards for “well
capitalized” institutions.
September 30, 2016
Minimum Capital Ratios to Be Considered
“Well Capitalized”
Basel III Minimum Capital Ratios
with Buffer
CU Bancorp
Total Risk-Based Capital Ratio 10% 8.625%
11.65%
Tier 1 Risk-Based Capital Ratio 8% 6.625% 10.90% Common Equity Tier
1 Ratio 6.5% 5.125% 9.77% Tier 1 Leverage Capital Ratio 5% NA 9.83%
At September 30, 2016, tangible common equity was $245 million
with common shares issued of 17,673,438 as of the same date,
resulting in tangible book value per common share of $13.84. This
compares to tangible common equity of $238 million with a tangible
book value per common share of $13.46 at June 30, 2016.
About CU Bancorp and California United Bank
CU Bancorp is the parent of California United Bank. Founded in
2005, California United Bank provides a full range of financial
services, including credit and deposit products, cash management,
and internet banking to businesses, non-profits, entrepreneurs,
professionals and investors throughout Southern California from its
headquarters office in Downtown Los Angeles and additional
full-service offices in the San Fernando Valley, the Santa Clarita
Valley, the Conejo Valley, Los Angeles, South Bay, Orange County
and the Inland Empire. California United Bank is an SBA Preferred
Lender. To view CU Bancorp’s most recent financial information,
please visit the Investor Relations section of the Company’s Web
site. Information on products and services may be obtained by
calling 818-257-7700 or visiting the Company’s Web site at
www.cunb.com.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking information
about CU Bancorp (the “Company”) that is intended to be covered by
the safe harbor for “forward-looking statements” provided by the
Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical fact are forward-looking
statements. Such statements involve inherent risks and
uncertainties, many of which are difficult to predict and are
generally beyond the control of the Company. Forward-looking
statements speak only as of the date they are made and we assume no
duty to update such statements. We caution readers that a number of
important factors could cause actual results to differ materially
from those expressed in, implied or projected by, such
forward-looking statements. Risks and uncertainties include, but
are not limited to: lower than expected revenues; credit quality
deterioration or a reduction in real estate values which could
cause an increase in the allowance for credit losses and a
reduction in net earnings; increased competitive pressure among
depository institutions; increased cost of additional capital; a
change in the interest rate environment reduces net interest
margins; asset/liability repricing risks and liquidity risks; legal
matters could be filed against the Company and could take longer or
cost more than expected to resolve or may be resolved adversely to
the Company; general economic conditions, either nationally or in
the market areas in which the Company does or anticipates doing
business, are less favorable than expected; environmental
conditions, including natural disasters and drought, may disrupt
our business, impede our operations, negatively impact the values
of collateral securing the Company’s loans and leases or impair the
ability of our borrowers to support their debt obligations; the
economic and regulatory effects of the continuing war on terrorism
and other events of war; legislative or regulatory requirements,
including, but not limited to requirements and expenses relating to
the Bank Secrecy Act, the Company’s ability to demonstrate
compliance with the BSA Consent Order to the satisfaction of the
Federal Deposit Insurance Corporation (“FDIC”) and the California
Department of Business Oversight (“CDBO”), the possibility that any
expansionary activities will be impeded while the BSA Consent Order
remains outstanding, the Company’s ability to employ and retain
additional qualified BSA staff or third parties, or changes
adversely affecting the Company’s business; changes in the
securities markets; regulatory approvals for any capital activities
cannot be obtained on the terms expected or on the anticipated
schedule; and, other risks that are described in CU Bancorp’s
public filings with the U.S. Securities and Exchange Commission
(the “SEC”). If any of these risks or uncertainties materializes or
if any of the assumptions underlying such forward-looking
statements proves to be incorrect, CU Bancorp’s results could
differ materially from those expressed in, implied or projected by
such forward-looking statements. For a more complete discussion of
risks and uncertainties, investors and security holders are urged
to read CU Bancorp’s Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q and other reports filed by CU Bancorp with the SEC.
The documents filed by CU Bancorp with the SEC may be obtained at
CU Bancorp’s website at www.cubancorp.com or at the SEC’s website
at www.sec.gov. These documents may also be obtained free of charge
from CU Bancorp by directing a request to: CU Bancorp c/o
California United Bank, 15821 Ventura Boulevard, Suite 100, Encino,
CA 91436. Attention: Investor Relations. Telephone
818-257-7700.
CU BANCORP CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) September
30, June 30, December 31, September 30, 2016
2016 (1)
2015 2015 Unaudited Unaudited Audited
Unaudited
ASSETS Cash and due from banks $ 47,701 $ 42,659 $
50,960 $ 41,929 Interest earning deposits in other financial
institutions 244,205 194,681
171,103 269,298 Total cash and cash
equivalents 291,906 237,340 222,063 311,227 Certificates of deposit
in other financial institutions 51,490 54,410 56,860 58,674
Investment securities available-for-sale, at fair value 375,094
334,113 315,785 256,085 Investment securities held-to-maturity, at
amortized cost 40,073 40,595
42,036 43,269 Total investment securities
415,167 374,708 357,821 299,354 Loans 1,974,941 1,951,111 1,833,163
1,771,347 Allowance for loan loss (18,371 ) (18,476 )
(15,682 ) (14,965 ) Net loans 1,956,570 1,932,635
1,817,481 1,756,382 Premises and equipment, net 4,354 4,647 5,139
4,981 Deferred tax assets, net 15,614 14,455 17,033 17,241 Other
real estate owned, net - - 325 1,292 Goodwill 64,603 64,603 64,603
63,950 Core deposit and leasehold right intangibles, net 6,665
6,932 7,671 8,138 Bank owned life insurance 50,889 50,561 49,912
49,548 Accrued interest receivable and other assets 35,914
36,142 35,734 33,220
Total Assets $ 2,893,172 $ 2,776,433 $
2,634,642 $ 2,604,007
LIABILITIES AND
SHAREHOLDERS' EQUITY LIABILITIES Non-interest bearing
demand deposits $ 1,399,320 $ 1,337,550 $ 1,288,085 $ 1,248,348
Interest bearing transaction accounts 284,154 259,103 261,123
257,853 Money market and savings deposits 786,882 747,490 679,081
691,292 Certificates of deposit 35,033 51,598
58,502 62,320
Total
deposits 2,505,389 2,395,741 2,286,791 2,259,813 Securities
sold under agreements to repurchase 24,251 25,782 14,360 16,698
Subordinated debentures, net 9,817 9,777 9,697 9,657 Accrued
interest payable and other liabilities 20,785
18,674 16,987 19,491
Total
Liabilities 2,560,242 2,449,974
2,327,835 2,305,659
SHAREHOLDERS'
EQUITY Serial preferred stock 17,021 17,086 16,995 16,739
Common stock 234,383 234,141 230,688 227,823 Additional paid-in
capital 24,847 24,437 23,017 21,810 Retained earnings 56,296 50,017
36,923 31,713 Accumulated other comprehensive income (loss)
383 778 (816 ) 263
Total Shareholders' Equity 332,930
326,459 306,807 298,348
Total
Liabilities and Shareholders' Equity $ 2,893,172 $
2,776,433 $ 2,634,642 $ 2,604,007
CU BANCORP CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
For the three months ended September 30,2016
June 30,2016 (1) September 30,2015 Unaudited Unaudited
Unaudited
Interest Income Interest and fees on loans $
23,958 $ 23,165 $ 21,689 Interest on investment securities 1,419
1,415 1,124 Interest on interest bearing deposits in other
financial institutions 478 417 293 Total
Interest Income 25,855 24,997 23,106
Interest Expense Interest on interest bearing transaction
accounts 102 99 105 Interest on money market and savings deposits
524 484 427 Interest on certificates of deposit 46 31 53 Interest
on securities sold under agreements to repurchase 13 14 9 Interest
on subordinated debentures 122 120 110 Total
Interest Expense 807 748 704
Net Interest
Income 25,048 24,249 22,402 Provision for loan losses
697 1,063 705
Net Interest Income After Provision
For Loan Losses 24,351 23,186 21,697
Non-Interest Income Gain on sale of securities, net
141 - - Gain on sale of SBA loans, net 189 485 640 Deposit account
service charge income 1,210 1,222 1,159 Other non-interest income
1,518 1,268 1,189 Total Non-Interest Income
3,058 2,975 2,988
Non-Interest Expense
Salaries and employee benefits 9,396 9,030 8,934 Stock compensation
expense 939 891 810 Occupancy 1,673 1,439 1,465 Data processing 657
635 596 Legal and professional 1,434 651 412 FDIC deposit
assessment 389 359 370 Merger expenses - - 146 OREO loss and
expenses 2 4 153 Office services expenses 413 320 383 Other
operating expenses 1,864 1,760 1,798 Total
Non-Interest Expense 16,767 15,089 15,067
Net Income Before Provision for Income Tax Expense 10,642
11,072 9,618 Provision for income tax expense 4,059
3,952 3,355
Net Income $ 6,583 $ 7,120 $ 6,263
Preferred stock dividends and discount accretion 304
307 293
Net Income Available to Common Shareholders $
6,279 $ 6,813 $ 5,970 Earnings Per Share Basic earnings per
share $ 0.36 $ 0.40 $ 0.36 Diluted earnings per share $ 0.36 $ 0.39
$ 0.35 Average shares outstanding 17,339,000 17,210,000 16,541,000
Diluted average shares outstanding 17,605,000 17,506,000 16,998,000
CU BANCORP CONSOLIDATED STATEMENTS OF
INCOME (Dollars in thousands, except share data)
For the nine months ended September 30, 2016
2015 Unaudited Unaudited
Interest Income Interest and fees
on loans $ 69,701 $ 62,239 Interest on investment securities 4,066
3,355 Interest on interest bearing deposits in other financial
institutions 1,334 741 Total Interest Income
75,101 66,335
Interest Expense Interest on interest
bearing transaction accounts 300 303 Interest on money market and
savings deposits 1,519 1,218 Interest on certificates of deposit
110 150 Interest on securities sold under agreements to repurchase
38 21 Interest on subordinated debentures 359 326
Total Interest Expense 2,326 2,018
Net Interest
Income 72,775 64,317 Provision for loan losses 2,382
2,831
Net Interest Income After Provision For Loan
Losses 70,393 61,486
Non-Interest
Expense Gain on sale of securities, net 141 - Gain on sale of
SBA loans, net 1,228 1,278 Deposit account service charge income
3,621 3,453 Other non-interest income 3,863 3,960
Total Non-Interest Income 8,853 8,691
Non-Interest
Expense Salaries and employee benefits 27,745 26,045 Stock
compensation expense 2,664 2,130 Occupancy 4,548 4,300 Data
processing 1,910 1,872 Legal and professional 2,560 1,914 FDIC
deposit assessment 1,098 1,054 Merger related expenses - 498 OREO
loss and expenses 85 179 Office services expenses 1,136 1,204 Other
operating expenses 5,297 5,696 Total Non-Interest
Expense 47,043 44,892
Net Income Before Provision
for Income Tax Expense 32,203 25,285 Provision for income tax
expense 11,916 9,556
Net Income $ 20,287 $
15,729 Preferred stock dividends and discount accretion 914
877
Net Income Available to Common Shareholders $
19,373 $ 14,852 Earnings Per Share Basic earnings per share
$ 1.13 $ 0.90 Diluted earnings per share $ 1.11 $ 0.88 Average
shares outstanding 17,197,000 16,477,000 Diluted average shares
outstanding 17,510,000 16,924,000
CU BANCORP
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS AND YIELD
ANALYSIS (Unaudited) (Dollars in thousands)
For the three months
ended September 30, 2016 June 30, 2016 Average Balance Interest
Average Yield/Rate Average Balance Interest Average Yield/Rate
Interest-Earning Assets: Deposits in other financial
institutions $ 317,678 $ 478 0.59 % $ 274,531 $ 417 0.60 %
Investment securities 392,454 1,419 1.45 % 374,888 1,415 1.51 %
Loans 1,965,509 23,958 4.85 % 1,908,945
23,165 4.88 % Total interest earning assets 2,675,641 25,855 3.84 %
2,558,364 24,997 3.93 % Non-interest earning assets 209,981
209,342
Total Assets $ 2,885,622 $ 2,767,706
Interest Bearing Liabilities: Interest bearing transaction
accounts $ 278,983 $ 102 0.14 % $ 288,384 $ 99 0.14 % Money market
and savings deposits 789,208 524 0.26 % 740,117 484 0.26 %
Certificates of deposit 46,197 46 0.39 %
53,460 31 0.23 %
Total Interest Bearing Deposits
1,114,388 672 0.24 % 1,081,961 614 0.23 % Securities sold under
agreements to repurchase 21,893 13 0.24 % 25,223 14 0.22 %
Subordinated debentures and other debt 9,831 122 4.86
% 9,758 120 4.86 %
Total Interest Bearing
Liabilities 1,146,112 807 0.28 % 1,116,942 748 0.27 %
Non-interest bearing demand deposits 1,389,196
1,312,833 Total funding sources 2,535,308 2,429,775 Non-interest
bearing liabilities 19,290 15,901 Shareholders' Equity
331,024 322,030
Total Liabilities and Shareholders'
Equity $ 2,885,622 $ 2,767,706 Net interest income $ 25,048 $
24,249 Net interest margin 3.72 % 3.81 %
CU
BANCORP CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS AND
YIELD ANALYSIS (Unaudited) (Dollars in thousands)
For the three months
ended September 30, 2016 September 30, 2015 Average Balance
Interest Average Yield/Rate Average Balance Interest Average
Yield/Rate
Interest-Earning Assets: Deposits in other
financial institutions $ 317,678 $ 478 0.59 % $ 329,640 $ 293 0.35
% Investment securities 392,454 1,419 1.45 % 281,476 1,124 1.60 %
Loans 1,965,509 23,958 4.85 % 1,735,977
21,689 4.96 % Total interest earning assets 2,675,641 25,855 3.84 %
2,347,093 23,106 3.91 % Non-interest earning assets 209,981
212,301
Total Assets $ 2,885,622 $ 2,559,394
Interest Bearing Liabilities: Interest bearing transaction
accounts $ 278,983 $ 102 0.14 % $ 268,877 $ 105 0.15 % Money market
and savings deposits 789,208 524 0.26 % 701,189 427 0.24 %
Certificates of deposit 46,197 46 0.39 %
61,243 53 0.34 %
Total Interest Bearing Deposits
1,114,388 672 0.24 % 1,031,309 585 0.23 % Securities sold under
agreements to repurchase 21,893 13 0.24 % 15,306 9 0.23 %
Subordinated debentures and other debt 9,831 122 4.86
% 9,703 110 4.44 %
Total Interest Bearing
Liabilities 1,146,112 807 0.28 % 1,056,318 704 0.26 %
Non-interest bearing demand deposits 1,389,196
1,190,170 Total funding sources 2,535,308 2,246,488 Non-interest
bearing liabilities 19,290 17,717 Shareholders' Equity
331,024 295,189
Total Liabilities and Shareholders'
Equity $ 2,885,622 $ 2,559,394 Net interest income $ 25,048 $
22,402 Net interest margin 3.72 % 3.79 %
CU
BANCORP CONSOLIDATED YEAR-TO-DATE AVERAGE BALANCE SHEETS AND
YIELD ANALYSIS (Unaudited) (Dollars in thousands)
For the Nine Months Ended
September 30, 2016 September 30, 2015 Average Balance Interest
Average Yield/Rate Average Balance
Interest
Average Yield/Rate
Interest-Earning Assets: Deposits in
other financial institutions $ 297,943 $ 1,334 0.59 % $ 264,560 $
741 0.37 % Investment securities 373,493 4,066 1.45 % 272,820 3,355
1.64 % Loans 1,908,097 69,701 4.88 % 1,686,967
62,239 4.93 % Total interest earning assets 2,579,533 75,101
3.89 % 2,224,347 66,335 3.99 % Non-interest earning assets
211,295 209,094
Total Assets $ 2,790,828 $ 2,433,441
Interest Bearing Liabilities: Interest bearing
transaction accounts $ 279,386 $ 300 0.14 % $ 254,092 $ 303 0.16 %
Money market and savings deposits 752,138 1,519 0.27 % 681,852
1,218 0.24 % Certificates of deposit 51,839 110 0.28
% 61,875 150 0.32 %
Total Interest Bearing
Deposits 1,083,363 1,929 0.24 % 997,819 1,671 0.22 % Securities
sold under agreements to repurchase 22,550 38 0.23 % 12,896 21 0.22
% Subordinated debentures and other debt 9,770 359
4.83 % 9,624 326 4.47 %
Total Interest Bearing
Liabilities 1,115,683 2,326 0.28 % 1,020,339 2,018 0.26 %
Non-interest bearing demand deposits 1,335,878
1,106,491 Total funding sources 2,451,561 2,126,830 Non-interest
bearing liabilities 17,211 17,892 Shareholders' Equity
322,056 288,719
Total Liabilities and Shareholders'
Equity $ 2,790,828 $ 2,433,441 Net interest income $ 72,775 $
64,317 Net interest margin 3.77 % 3.87 %
CU BANCORP
LOAN COMPOSITION (Dollars in thousands)
September 30,2016 June 30,2016 December 31,2015
September 30,2015 Unaudited Unaudited Audited Unaudited
Commercial and Industrial Loans: $ 499,439 $ 522,074
$ 537,368 $ 556,462
Loans Secured by Real Estate:
Owner-Occupied Nonresidential Properties 430,218 425,515 407,979
376,579 Other Nonresidential Properties 610,267 582,204 533,168
515,402 Construction, Land Development and Other Land 172,441
165,963 125,832 94,353 1-4 Family Residential Properties 122,955
121,971 114,525 125,635 Multifamily Residential Properties
100,003 86,942 71,179 65,275 Total Loans
Secured by Real Estate 1,435,884 1,382,595
1,252,683 1,177,244
Other Loans: 39,618
46,442 43,112 37,641
Total Loans $ 1,974,941 $
1,951,111 $ 1,833,163 $ 1,771,347
COMMERCIAL AND
INDUSTRIAL LINE OF CREDIT UTILIZATION (Dollars in
thousands)
September 30,2016 June 30,2016 December 31,2015 September
30,2015 Unaudited Unaudited Unaudited Unaudited Disbursed $
396,607 45 % $ 396,544 45 % $ 408,619 46 % $ 413,732 47 %
Undisbursed 490,796 55 % 477,444 55 % 477,901
54 % 457,520 53 % Total Commitments $ 887,403 100 % $
873,988 100 % $ 886,520 100 % $ 871,252 100 %
CU
BANCORP SUPPLEMENTAL DATA (Dollars in thousands)
September 30,2016
June 30,2016 December 31,2015 September
30,2015 Unaudited Unaudited Unaudited Unaudited
Capital Ratios
Table: Total risk-based capital ratio
11.65
% 11.62 % 11.54 % 11.45 % Common equity tier 1 capital ratio 9.77 %
9.69 % 9.61 % 9.51 % Tier 1 risk-based capital ratio 10.90 % 10.85
% 10.85 % 10.76 % Tier 1 leverage capital ratio 9.83 % 10.00 % 9.67
% 9.78 % Tangible Common Equity/Tangible Assets 8.66 % 8.78 % 8.49
% 8.28 %
Asset Quality Table: Loans originated by the
Bank on non-accrual $ - $ 114 $ 89 $ 1,516 Loans acquired thru
acquisition that are on non-accrual 1,223
2,463 1,962 2,788 Total
non-accrual loans 1,223 2,577 2,051 4,304 Other Real Estate Owned
- - 325 1,292
Total non-performing assets $ 1,223 $ 2,577 $
2,376 $ 5,596 Net charge-offs (recoveries)
year to date $
(307)
$
(1,109)
$ 2,009 $ 476 Net charge-offs (recoveries) quarterly $ 802 $
(868)
$ 1,532 $
(136)
Non-accrual loans to total loans 0.06 % 0.13 % 0.11 % 0.24 %
Total non-performing assets to total assets 0.04 % 0.09 %
0.09 % 0.21 % Allowance for loan losses to total loans 0.93
% 0.95 % 0.86 % 0.84 % Allowance for loan losses to total
loans accounted at historical cost, which excludes loans acquired
by acquisition 1.20 % 1.22 % 1.25 % 1.30 % Net year to date
charge-offs (recoveries) to average year to date loans
(0.02)
%
(0.06)
%
0.12 % 0.03 % Allowance for loan losses to non-accrual loans
accounted at historical cost, which excludes non-accrual loans
acquired by acquisition and related allowance N/A 15684 % 17583 %
987 % Allowance for loan losses to total non-accrual loans
1503 % 717 % 764 % 348 %
As of September 30, 2016, there were no
restructured loans or loans over 90 days past due and still
accruing.
CU BANCORP GAAP RECONCILIATIONS These
non-GAAP measures have inherent limitations, are not required to be
uniformly applied and are not audited. They should not be
considered in isolation or as a substitute for analyses of results
reported under GAAP. These non-GAAP measures may not be comparable
to similarly titled measures reported by other companies.
TCE Calculations and Reconciliation to Total Shareholders'
Equity (Unaudited) The Company utilizes the term
Tangible Common Equity (TCE), a non-GAAP financial measure. CU
Bancorp’s management believes TCE is useful because it is a measure
utilized by both regulators and market analysts in evaluating a
consolidated bank holding company’s financial condition and capital
strength. TCE represents common shareholders’ equity less goodwill
and certain intangible assets. A reconciliation of CU Bancorp’s
total shareholders’ equity to TCE is provided in the table below
for the periods indicated: (Dollars in thousands, except
share data) September 30,2016
June 30,2016 December 31,2015 September
30,2015
Tangible Common Equity Calculation Total
shareholders' equity $ 332,930 $ 326,459 $ 306,807 $ 298,348 Less:
Serial preferred stock 17,021 17,086 16,995 16,739 Less: Goodwill
64,603 64,603 64,603 63,950 Less: Core deposit and leasehold right
intangibles, net 6,665 6,932 7,671
8,138
Tangible Common Equity $ 244,641 $ 237,838 $ 217,538 $
209,521 Common shares issued 17,673,000 17,668,000
17,175,000 16,871,000 Book value per common share $ 17.87 $ 17.51 $
16.87 $ 16.69 Tangible book value per common share $ 13.84 $ 13.46
$ 12.67 $ 12.42
CU BANCORP Early Adoption
of Accounting Standards Update (ASU) 2016-09
(Unaudited)
In March 2016, the FASB issued ASU
2016-09, Compensation – Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting, to reduce
the complexity of certain aspects of the accounting for employee
share-based payment transactions. In the third quarter of 2016, the
Company elected the early adoption of this standard which requires
the Company to reflect the adjustments resulting from the adoption
effective January 1, 2016, the beginning of the annual period that
includes the interim period of adoption. Previously, excess tax
benefits resulting from the exercise or vesting of share-based
awards were recorded directly to additional paid-in capital. Under
this new guidance, such excess tax benefits are recorded as a
reduction in provision for income tax expense in the quarter of
exercise or vesting, rather than increasing additional paid-in
capital. In addition, the new guidance requires that assumed
proceeds under the treasury stock method be modified to exclude the
amount of excess tax benefits that would have been recognized in
additional paid-in capital, as such, increases the diluted average
shares outstanding.
The following table presents the impact of the adoption of
the new accounting guidance to the Company’s previously reported
financial results: (Dollars in thousands, except share data)
Three Months Ended June 30, 2016 Three Months
Ended March 31, 2016
As Previously Reported
As Reported Under ASU
2016-09
As Previously Reported
As Reported Under ASU
2016-09
Consolidated Statement of Income Provision for income tax
expense $ 4,427 $ 3,952 $ 4,202 $ 3,905 Net Income $ 6,645 $ 7,120
$ 6,287 $ 6,584 Net Income Available to Common Shareholders $ 6,338
$ 6,813 $ 5,984 $ 6,281 Basic earnings per share $ 0.37 $ 0.40 $
0.35 $ 0.37 Diluted earnings per share $ 0.36 $ 0.39 $ 0.35 $ 0.36
Diluted average shares outstanding 17,461,000 17,506,000 17,341,000
17,417,000
Consolidated Balance Sheet Additional
paid-in capital $ 25,209 $ 24,437 $ 23,854 $ 23,557 Retained
earnings $ 49,245 $ 50,017 $ 42,907 $ 43,204
Ratios
Return on average assets 0.92 % 0.99 % 0.89 % 0.93 % Return on
average tangible common equity 10.93 % 11.75 % 10.75 % 11.29 %
Six Months Ended June 30, 2016
As Previously Reported
As Reported Under ASU
2016-09
Consolidated Statement of Income Provision for income tax
expense $ 8,629 $ 7,857 Net Income $ 12,932 $ 13,704 Net Income
Available to Common Shareholders $ 12,322 $ 13,094 Basic earnings
per share $ 0.72 $ 0.77 Diluted earnings per share $ 0.71 $ 0.75
Diluted average shares outstanding 17,401,000 17,462,000
Consolidated Balance Sheet Additional paid-in capital $
25,209 $ 24,437 Retained earnings $ 49,245 $ 50,017
Ratios Return on average assets 0.90 % 0.96 % Return on
average tangible common equity 10.85 % 11.52 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161027005439/en/
CU Bancorp(213) 430-7072David RainerChairman and CEOorKaren
SchoenbaumChief Financial Officer
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