IRVINE, CA--(Marketwire - October 28, 2010) - Plaza Bank (
OTCBB:
PLZB) today announced third
quarter 2010 net earnings of $4,743,000, or $0.23 per diluted common share,
compared with a net loss of $794,000, or ($0.08) per common share, for the
same period the prior year. As discussed below, net earnings for the
quarter included non-recurring income resulting from a bargain purchase
gain associated with the Bank's acquisition of the failed SouthwestUSA
Bank, Las Vegas, Nevada ("SWUSA") from the FDIC in July 2010. The third
quarter 2010 operating loss before taxes, which excludes the bargain
purchase gain on acquisition, related acquisition costs and deferred tax
adjustments, was $246,000.
Total assets as of September 30, 2010, were $360,034,000 compared with
$158,816,000 as of September 30, 2009. The 127% increase was primarily due
to the acquisition of selected assets and all the deposits of the former
SWUSA from the FDIC. "Organic" asset growth in the Irvine-based California
division totaled $67,925,000 for the nine months ended September 30, 2010.
Third Quarter 2010 Highlights
- Net interest income of $2,314,000 equates to a 177.5% increase over the
third quarter of 2009;
- The net interest margin for the quarter was 3.18% compared with 2.25%
for the third quarter of 2009;
- The provision for loan losses was $233,000 during the quarter and net
charge-offs were zero;
- Total deposits increased $151,402,000 to $275,099,000 as of September
30, 2010, representing an 122.4% increase from the prior year;
- The cost of deposits for the third quarter was 1.45%, a decrease of 65
basis points from the third quarter of 2009;
- Tangible common equity was 12.23% of total assets at the end of the
third quarter and the total risk-based capital ratio was 23.12%.
Chief Executive Officer Terry L. Robinson stated, "The third quarter 2010
marks two major milestones for Plaza Bank -- our first quarterly profit and
our first acquisition." Plaza President Gene Galloway added, "It is
remarkable to note what Plaza's new management team has accomplished in
slightly over one year -- lifting of a cease & desist order, attainment of
consistent profitability, significantly growing core deposits and
completing an acquisition."
FDIC-Assisted Acquisition
On July 23, 2010, the Nevada Financial Institutions Division closed SWUSA
and appointed the FDIC as receiver. Immediately following those actions,
Plaza Bank (the "Bank") assumed the banking operations of the former SWUSA
from the FDIC under a purchase and assumption agreement with loss sharing.
After applying purchase accounting fair value adjustments, Plaza Bank
acquired assets totaling $185,573,000, including $105,652,000 of loans, and
assumed deposit liabilities totaling $168,465,000. The assets purchased
excluded "non-performing" loans and other real estate on the books of the
former SWUSA as of April 7, 2010.
Plaza's management believes the loss sharing agreement for this acquisition
substantially covers the future losses contained in the acquired loan
portfolio. These loans, their proceeds and some other minor assets
subject to the loss sharing agreement, are referred to as "covered" loans
or assets, and are presented as a separate line item in the Bank's balance
sheet. The loss sharing agreement and fair value adjustments significantly
mitigate the risk associated with the covered assets acquired.
Management expects the SWUSA acquisition to be accretive to earnings
commencing with the first quarter of 2011. Integration of the Nevada and
California divisions is proceeding in accordance with plan and a system
conversion, which will result in both divisions operating on a common
system platform, will be completed prior to year-end 2010.
Statement of Profit & Loss
The following discussion of components of the Bank's profit and loss
performance excludes comparison of year-to-date 2010 results compared to
2009 numbers. The exclusion is due to a change-in-control event recorded
by Plaza Bank effective June 5, 2009 wherein assets were adjusted to their
fair values and the books were closed, resulting in a "stub period"
statement of profit & loss ended June 5, 2009 and a new stub period
commencing the following day. As a result, the year-to-date 2009 numbers
reflect approximately 4 months of operating results, from June 6, 2009
through September 30, 2009. Consequently, comparisons between year-to-date
results for 2010 covering 9 months and the 4 month stub period for 2009 are
not meaningful.
Net Interest Income and Margin
Net interest income of $2,314,000 for the quarter ended September 30, 2010
represented an increase of $714,000 or 44.6% from the quarter ended June
30, 2010 and an increase of $1,480,000 or 177% from the third quarter of
2009. The net interest margin, which is net interest income divided by
average earning assets, was 3.18% for the third quarter of 2010 and 3.63%
and 2.25% for the quarters ended June 30, 2010 and September 30, 2009,
respectively. The increase in net interest income was primarily
attributable to increases in loan volumes and a lower cost of funds. The
decrease in the net interest margin in the third quarter of 2010 compared
to the second quarter resulted from the Bank holding large cash balances (a
result of settlement of the assisted transaction) which were invested in
low-yielding fed funds and other cash-equivalent instruments. The net
interest margin is expected to increase over time as these excess liquid
funds are deployed into loans and various higher-yielding investments.
Taking the temporary effects of the acquisition of the former SWUSA into
consideration, management believes the underlying long-term trend in the
net interest margin is positive.
Non-Interest Income
The Bank's non-interest income for the quarter and nine months ended
September 30, 2010, excluding the bargain purchase gain on acquisition, was
$633,000 and $1,265,000, respectively. By comparison, non-interest income
for the third quarter of 2009 was $544,000. The largest component of
non-interest income was gain on sales of the guaranteed portion of Small
Business Administration (SBA) loans. Gains on loan sales for the quarter
and nine months ended September 30, 2010 were $426,000 and $710,000,
respectively, compared to $444,000 for the third quarter of 2009. Due to a
change in accounting rules effective January 1, 2010, recognition of gain
on sales income is deferred 90 days from the date of executing a loan sale.
Consequently, no gains on loan sales were recorded during the first quarter
of 2010.
Non-Interest Expense
Non-interest expense was $2,960,000 and $7,094,000 for the quarter and nine
months ended September 30, 2010, respectively, compared to $1,891,000 for
the third quarter of 2009.
Salary and benefits expense for the quarter and nine months ended September
30, 2010 was $1,947,000 and $4,731,000, respectively, compared with
$1,205,000 for the third quarter of 2009. During the year preceding the
former SWUSA acquisition, the number of full-time equivalent (FTE)
employees remained steady at approximately 45, despite significant growth
in loans and deposits. As of September 30, 2010, the Bank's FTE employees
totaled 69, with the increase primarily the result of the former SWUSA
acquisition.
Non-recurring Income
During the third quarter of 2010, the Bank reported non-recurring income
from two sources: the reversal of a deferred tax liability resulted in
income of $1,172,000, net of tax, and the former SWUSA acquisition resulted
in recognition of $5,992,000 in income, net of tax, as a result of the
bargain purchase acquisition gain. These income sources are excluded from
the operating income calculation, but they are included in the Bank's
bottom-line net income and retained earnings.
Balance Sheet
The Bank reported total gross loans outstanding of $227,855,000 as of
September 30, 2010, representing an increase of $126,435,000, or 125%, from
$101,420,000 at September 30, 2009. The significant increase resulted from
a combination of organic growth in commercial & industrial loans and
owner-occupied real estate loans of $56,835,000 and the effect of the
former SWUSA acquisition which increased loans by $69,600,000.
The Bank's total deposits were $275,099,000 as of September 30, 2010,
representing an increase of $151,402,000, or 122%, compared with
$123,697,000 at September 30, 2009. The increase in deposits consisted
primarily of $40,962,000 in non-interest bearing checking accounts, a 349%
increase, and $50,475,000 in money market accounts, a 461% increase. The
"mix" of deposits also improved during the year, with non-interest bearing
balances equating to 19.2% of total deposits as of September 30, 2010
compared with 9.5% at September 30, 2009.
Credit Quality -- Non-Covered Loan Portfolio
Non-performing assets not covered under the loss share agreement with the
FDIC were $1,339,000, or .46% of total non-covered assets outstanding as of
September 30, 2010, compared with $729,000, or .46% of total assets as of
September 30, 2009. Of the non-performing total as of September 30, 2010,
$1,182,000 represented non-accrual loans and $106,000 represented other
real estate owned ("OREO").
The Bank has written down impaired loans to their estimated net disposition
values and they are expected to be resolved without recognition of
additional losses. The provision for loan losses during the third quarter
of 2010 totaled $233,000 and net charge-offs were zero for the quarter.
The allowance for loan and lease losses (ALLL) as of September 30, 2010 was
$1,383,000, representing 1.59% of applicable loans. Loans booked prior to
June 5, 2009, were adjusted to fair value in conjunction with the
change-of-control event on that date. Consequently, with rare exceptions,
the ALLL applies only to loans booked subsequent to June 5, 2009.
As of September 30, 2010, non-accrual loans and delinquent loans (past due
30 - 89 days and accruing) were .75% and .03% of non-covered loans
outstanding, respectfully, compared with .33% and .35% as of September 30,
2009. The increase in the percentage of non-accrual loans during the third
quarter was due to a single loan with minor loss exposure; management does
not believe it is evidence of a negative trend.
Credit Quality -- Covered Loan Portfolio
The loans acquired in the former SWUSA acquisition, their proceeds and some
other minor assets subject to the loss sharing agreement with the FDIC, are
referred to as "covered" loans or assets. Covered non-performing loans
totaled $6,945,000, or 10.02% of covered loans, as of September 30, 2010.
Non-performing assets consist entirely of non-accrual loans. These covered
non-performing loans were written down to their estimated fair value on
their acquisition date, incorporating our projections of future expected
cash flows until the ultimate resolution of these credits. The estimated
credit losses embedded in the acquired loan portfolio are based on
management's and third-party consultants' credit review of the portfolio
and analysis of historical losses in the market. To the extent that actual
and projected cash flows are less than originally estimated, additional
provisions for loan losses on the covered loan portfolio will be
recognized; however, these provisions would be offset 80% by a
corresponding increase in the FDIC loss sharing asset.
Capital
The Bank continued to strengthen its capital position during the third
quarter of 2010, receiving a capital injection of $15 million from the
Carpenter Community BancFund organization in preparation for the former
SWUSA acquisition. This injection, coupled with the capital resulting from
booking the bargain purchase gain on acquisition, resulted in the capital
position of Plaza Bank increasing significantly during the quarter, despite
an increase of approximately $133,293,000 in assets due primarily to the
acquisition. As of September 30, 2010, the Bank's tier 1 leverage capital
ratio and total risk-based capital ratio were at 11.99% and 23.12%,
respectively, compared with corresponding ratios of 10.39% and 13.25% at
June 30, 2010 and 12.38% and 17.48% at September 30, 2009.
"We are very pleased with our exceptionally strong capital position,"
stated John Shindler, Executive Vice President and Chief Financial Officer
of Plaza Bank. "This strong capital level, coupled with our attaining
profitability, positions Plaza to be an opportunistic acquirer of other
community banks, given today's environment."
About Plaza Bank
Plaza Bank is a full service community bank serving the business and
professional communities in Southern California and Las Vegas, Nevada. The
Bank is committed to meeting the financial needs of small to middle market
businesses and professional firms with loans for working capital, equipment
and owner-occupied commercial real estate financing and a full array of
cash management services. Our bankers are experienced, professional and
knowledgeable. For more information, visit
www.plazabank.net or call CEO
Terry Robinson or President Gene Galloway at (949) 502-4300.
Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995, and are subject to the safe harbors created by that Act.
.Forward-looking statements can be identified by the fact that they do not
relate strictly to historical or current facts. They often include the
words "believe," "expect," "anticipate," "intend," "plan," "estimate," or
words of similar meaning, or future or conditional verbs such as "will,"
"would," "should," "could," or "may." Forward-looking statements are based
on currently available information, expectations, assumptions, projections,
and management's judgment about the Bank, the banking industry and general
economic conditions. These forward-looking statements are not guarantees
of future performance, nor should they be relied upon as representing
management's views as of any subsequent date. Future events are difficult
to predict, and the expectations described above are necessarily subject to
risk and uncertainty that may cause actual results to differ materially and
adversely.
Forward-looking statements involve significant risks and uncertainties and
actual results may differ materially from those presented, either expressed
or implied, in this press release. Factors that might cause such
differences include, but are not limited to: the Bank's ability to
successfully execute its business plans and achieve its objectives; changes
in general economic, real estate and financial market conditions, either
nationally or locally in areas in which the Bank conducts its operations;
changes in interest rates; new litigation or changes in existing
litigation; future credit loss experience; increased competitive challenges
and expanding product and pricing pressures among financial institutions;
legislation or regulatory changes which adversely affect the Bank's
operations or business; loss of key personnel; changes in accounting
policies or procedures as may be required by the Financial Accounting
Standards Board or other regulatory agencies; and the ability to satisfy
requirements related to the Sarbanes-Oxley Act and other regulation on
internal control.
Contact Information: Media Contacts:
Gene Galloway
President -- Plaza Bank
702-277-2221 or 949-502-4309
Stacey Divine
Infuze Marketing
916-662-8282