Net income and earnings per share both increase
31% over the year-ago quarter
CU Bancorp (NASDAQ: CUNB), the parent company of wholly owned
California United Bank, today reported financial results for the
second quarter of 2017.
Second Quarter 2017
Highlights
- Net income available to common
shareholders increased to $9.0 million, up $1.5 million or 20%
from the prior quarter
- Diluted earnings per share of
$0.51, up 21% from the prior quarter
- Total revenue increased 10% from
the prior quarter
- Return on average tangible common
equity of 13.68%, up from 11.87% in prior quarter
- Return on average assets of
1.18%, up from 0.97% in prior quarter
- Efficiency ratio of 53%,
compared to 58% in prior quarter
- Tangible book value per share
increased $0.65 to $15.17 per share from prior quarter
- Non-performing assets to total
assets ratio remains low at 0.02%, the same as the prior
quarter
- Total loans increased to $2.2
billion, up $105 million from the prior quarter and 10% from the
year-ago quarter
- Total deposits of $2.6 billion,
down $117 million from the prior quarter, but up 10% from the
year-ago quarter
- Non-interest bearing demand
deposits were 55% of total deposits up from 54% in the prior
quarter
- Continued status as
well-capitalized, the highest regulatory category
Announced Merger
As previously announced, on April 5, 2017, CU Bancorp
entered into an agreement and plan of merger (“the agreement”) with
PacWest Bancorp (“PacWest”). Upon completion of the merger, CU
Bancorp will merge with and into PacWest, with PacWest surviving
the merger, and CU Bancorp’s wholly-owned bank subsidiary,
California United Bank, will merge with and into PacWest’s
wholly-owned bank subsidiary, Pacific Western Bank. The combined
company will operate under the PacWest Bank name and brand. The
agreement was approved and adopted by the Boards of Directors of
both CU Bancorp and PacWest. Closing of the transaction, which is
expected to occur in the fourth quarter of 2017, is contingent upon
shareholder approval and receipt of all necessary regulatory
approvals, along with the satisfaction of other customary closing
conditions.
Under terms of the agreement, CU Bancorp shareholders will
receive 0.5308 shares of PacWest common stock and $12.00 in cash
for each share of CU Bancorp, which when announced on April 6,
2017, represented a price 2.8 times the Company’s tangible book
value at December 31, 2016, and 22 times the Company’s analysts’
consensus estimate of its earnings per share for the full-year of
2017.
Second Quarter 2017 Summary
Results
“Second quarter net income of $9.3 million represents an
all-time record for CUB, with earnings increasing 31% from last
year’s second quarter and 20% from the first quarter of 2017,” said
David Rainer, Chairman and Chief Executive Officer of CU Bancorp
and California United Bank. “Second quarter loan growth of $105
million is also an all-time record, with total loans increasing 10%
from last year’s second quarter and 5% from the first quarter of
this year, which on a linked-quarter basis, represents an
annualized growth rate of 21%.
“Deposits grew $243 million or 10% from the year-ago quarter.
After three consecutive quarters in which deposit growth was more
than $100 million per quarter, in the second quarter of 2017 we
experienced a drawdown in deposits of $117 million. As we noted
previously, this was not totally unexpected, as we anticipated
withdrawals related to taxes in the second quarter. Non-interest
bearing demand deposits ended the quarter modestly higher at 55% of
total deposits, evidence our core deposit relationships remain
intact, as our relationship managers continue to provide
outstanding customer service.
“We are very pleased with CUB’s second quarter performance and
we continue to move toward our merger with PacWest in the fourth
quarter, which will provide CUB customers with expanded banking
services and branch locations.”
Net Income and Profitability Ratios
Net income available to common shareholders for the second
quarter of 2017 was $9.0 million or $0.51 per fully diluted share,
compared with net income available to common shareholders of $6.8
million or $0.39 per fully diluted share for the second quarter of
2016. The growth in net income available to common shareholders
from the year-ago quarter is attributable to a $2.5 million
increase in total interest income, which is primarily the result of
the Company’s strong loan growth since the prior period, as well as
a $2.7 million increase in non-interest income, primarily related
to death benefit claims from bank owned life insurance.
Non-interest expense in the second quarter of 2017 increased $2.0
million from the year-ago quarter; the increase was largely due to
$1.5 million in merger expenses.
Net income available to common shareholders for the second
quarter of 2017 was $9.0 million or $0.51 per fully diluted share,
compared with net income available to common shareholders of $7.5
million or $0.42 per fully diluted share in the first quarter of
2017. The growth in net income available to common shareholders
from the prior quarter was due to increases of $249 thousand and
$350 thousand in net interest income and gain on sale of SBA loans,
respectively, and a $2.8 million increase in non-interest income,
largely related to death benefit claims from bank owned life
insurance. Non-interest expense in the second quarter of 2017
included $1.5 million in merger expenses; the previous quarter
reported no merger expense.
Net income available to common shareholders for the year-to-date
period ending June 30, 2017, increased $3.4 million or 26% over the
same year-to-date period of 2016. Diluted earnings per share for
the year-to-date period ending June 30, 2017, increased $0.18 or
24% compared to the same period of the prior year. The increase was
driven by increases in net interest income of $4.9 million or 10%,
and $2.7 million in non-interest income for the year-to-date period
ending June 30, 2017, compared to the same period of the prior
year. Non-interest expense for the year-to-date period ending June
30, 2017, increased $3.5 million or 12%, which included $1.5
million in merger expenses; the same period of the prior year had
no merger expenses.
The following table shows certain of the Company’s performance
ratios for the second quarter of 2017, the first quarter of 2017,
the second quarter of 2016, as well as year-to-date 2017 and
2016:
Q2 2017
Q1 2017
Q2 2016
YTD 2017 YTD 2016 Return on average
tangible common equity 13.68 % 11.87 %
11.75 % 12.80 % 11.52 %
Return on average
assets 1.18 % 0.97 % 0.99 % 1.08 %
0.96 %
Operating efficiency ratio 53 %
58 % 55 % 55 % 57 %
Net Interest Income and Net Interest Margin
Net interest income totaled $26.4 million for the second quarter
of 2017, an increase of $2.2 million or 9% from the second quarter
of 2016. The increase was primarily driven by strong loan growth
over the last year.
The Company’s net interest income was positively impacted in the
second quarter of 2016 and on a limited basis in the second quarter
of 2017 by the recognition of fair value discounts earned on early
payoffs of acquired loans. In the second quarter of 2017 the
Company recorded $98 thousand in discounts earned on early loan
payoffs of acquired loans, which had a positive impact on the net
interest margin of only 2 basis points. In the second quarter of
2016 the Company recorded both $546 thousand in discounts earned on
early loan payoffs of acquired loans 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 second quarter of 2017 was 3.75%,
compared to 3.81% in the second quarter of 2016. The decrease was
primarily driven by a decrease of $807 thousand in discounts earned
on early loan payoffs and other associated payoff benefits in the
second quarter of 2017, compared to the year ago period.
Net interest income for the second quarter of 2017 increased
$249 thousand from the first quarter of 2017. While second quarter
loan growth was robust, the majority of the loans funded late in
the quarter; as a result, net interest income didn’t fully benefit
from the quarter’s loan growth. Additionally, discounts earned on
early loan payoffs of acquired loans and other associated payoff
benefits declined $896 thousand from the prior quarter.
The Company’s net interest income was positively impacted in the
first quarter of 2017 and on a limited basis in the second quarter
of 2017 by the recognition of fair value discounts earned on early
payoffs of acquired loans. In the second quarter of 2017 the
Company recorded $98 thousand in discounts earned on early loan
payoffs, which had a positive impact on the net interest margin of
only 2 basis points. In the first quarter of 2017 the Company
recorded both $688 thousand in discounts earned on early loan
payoffs of acquired loans and other associated payoff benefits of
$306 thousand, which had a positive impact on the net interest
margin of 14 basis points.
The net interest margin in the second quarter of 2017 was 3.75%,
compared to 3.67% in the first quarter of 2017. The increase was
primarily driven by average loans being a higher percentage of
earning assets in the second quarter of 2017 than the previous
quarter, which was due to a decrease in the Company’s average
deposits.
The core loan yield for the second quarter of 2017 was 4.72%,
compared to 4.65% in the previous quarter, reflecting the prime
rate increases in March and June of 2017.
As of June 30, 2017, the Company had $8 million of discounts
remaining on acquired accruing loans.
The Company’s cost of funds was 0.15% in the second quarter of
2017, compared to 0.12% in the second quarter of 2016 and 0.15% in
the first quarter of 2017. The small year-over-year increase
reflects the strength of the Bank’s core deposit base, despite
three prime rate increases since March 31, 2016.
Non-interest Income
Non-interest income was $5.6 million in the second quarter of
2017, an increase of $2.7 million from $3.0 million in the same
quarter of the prior year. The increase was primarily due to $2.5
million in benefits from bank owned life insurance, included in
other non-interest income, that was largely related to the recent
deaths of three Bank employees, two of whom were no longer with the
Company. Gain on sale of SBA loans increased $67 thousand in the
second quarter of 2017, compared to the year-ago quarter.
Non-interest income in the second quarter of 2017 increased $2.8
million or 98% over the first quarter of 2017. The increase was
primarily due to a $2.5 million increase in other non-interest
income, largely related to the bank owned life insurance benefits
discussed above, as well as an increase of $73 thousand in
transaction referral income. Gain on sale of SBA loans increased
$350 thousand compared with the prior quarter.
Non-interest Expense
Non-interest expense for the second quarter of 2017 was $17.1
million, an increase of $2.0 million, or 14% compared to
non-interest expense of $15.1 million for the same period of the
prior year. In the second quarter of 2017 the Company recorded $1.5
million in merger-related expenses; in the year-ago period the
Company recorded no merger-related expenses. In the second quarter
of 2017 salaries and employee benefits increased by $775 thousand
over the second quarter of 2016, as average full-time equivalent
employees grew to 290 for the period ending June 30, 2017, compared
to an average of 277 full-time equivalent employees in the year-ago
period. Additionally, the Bank’s annual merit increases were
effective in the second quarter of 2017.
Non-interest expense for the second quarter of 2017 was $17.1
million, an increase of $427 thousand or 3% over the first quarter
of 2017. The increase was due to merger expenses of $1.5 million
incurred in the second quarter of 2017; the prior quarter had no
reported merger expenses. Merger expenses were partially offset by
a decrease of $483 thousand in salaries and employee benefits in
the second quarter of 2017, compared to the prior quarter, which
was largely related to the decline in seasonal compensation
expenses incurred annually in the first quarter, such as FICA and
401(k) employee contribution matches. Additionally, legal and
professional fees decreased by $549 thousand in the second quarter;
$230 thousand of the decrease was due to legal fees related to the
merger that were incurred prior to the signing of the definitive
agreement in the first quarter that were reclassified as merger
expenses after the signing of the agreement in the second
quarter.
Income Tax
In the second quarter of 2017 the Company benefited from a
discrete tax benefit of $1 million provided by the tax-exempt death
benefit claims from the Company’s bank owned life insurance. The
Company also benefited from the vesting of 4,500 restricted shares
during the quarter, which provided a discrete excess tax benefit of
$29 thousand. The Company recorded non-deductible merger expenses
that resulted in an additional tax expense for the Company of $264
thousand. The effective tax rate for the end of second quarter was
36%; without the above mentioned discrete tax benefit items and the
additional tax expense as a result of the non-deductible merger
expenses, the effective tax rate would have been 39%. This compares
to an effective tax rate of 36% for the previous quarter, which
benefited from the exercise of 27,942 stock options and vesting of
30,582 restricted stock shares with a discrete excess tax benefit
of $424 thousand.
Balance Sheet
Assets
Total assets at June 30, 2017, were $3.0 billion, a
year-over-year increase of $262 million from June 30, 2016. The
increase was primarily due to strong growth in total deposits.
Tangible book value per share at June 30, 2017, was $15.17, an
increase of $0.65 or 4% from March 31, 2017, and $1.71 or 13% from
June 30, 2016.
Loans
Total loans were $2.2 billion at June 30, 2017, an increase of
$105 million or 21% annualized from $2.0 billion at the end of the
prior quarter. This also represents an increase of $200 million or
10% from June 30, 2016. The increase in loans for both periods was
due to strong loan growth, as well as reduced payoffs and pay downs
in the second quarter of 2017.
During the second quarter of 2017, the Company had $124 million
of net organic loan production. Pay downs in the acquired loan
portfolios were approximately $19 million in the same quarter.
Total commercial and industrial loans outstanding increased $11
million from the prior quarter, as utilization of commercial and
industrial line of credit commitments increased to 43%, compared to
40% in the previous quarter and 45% in the year-ago quarter.
Loans secured by real estate grew $80 million in the second
quarter of 2017 compared to the prior quarter. Growth was spread
throughout the portfolio and not concentrated in any single
category.
At June 30, 2017, commercial and industrial loans, and
owner-occupied real estate loans combined were $943 million or 44%
of total loans, compared to $921 million or 45% at March 31, 2017.
At June 30, 2016, commercial and industrial loans, and
owner-occupied real estate were $948 million or 49% of total
loans.
Deposits
Total deposits at June 30, 2017 were $2.6 billion, an increase
of $243 million or 10% from the second quarter of 2016 and a
decrease of $117 million from the end of the prior quarter.
Non-interest bearing deposits were $1.5 billion or 55% of total
deposits at June 30, 2017, compared to 56% at June 30, 2016, and
54% at March 31, 2017. Average deposits per branch were $293
million per branch as of June 30, 2017.
As the Company noted in its first quarter earnings release, the
buildup of deposits during the first quarter was likely related to
customers accumulating cash in anticipation of federal and state
income taxes, as well as property taxes in California.
Additionally, a number of clients made distributions to their
investment partners in the second quarter.
Cost of deposits for the quarter was 0.13%, compared to 0.13% in
the prior quarter and 0.10% in the year-ago quarter.
Asset Quality
Total non-performing assets were $726 thousand, or 0.02% of
total assets at June 30, 2017, compared with $2.6 million or 0.09%
of total assets at June 30, 2016.
Total nonaccrual loans were $726 thousand or 0.03% of total
loans, at June 30, 2017, compared with $2.6 million or 0.13% of
total loans at June 30, 2016.
During the second quarter of 2017, the Company recorded net
recoveries of $20 thousand, compared with net recoveries of $231
thousand in the first quarter of 2017 and $868 thousand in the
second quarter of 2016.
The Company recorded a loan loss provision for the second
quarter of 2017 of $701 thousand, associated with strong net
organic loan growth of $124 million. In the first quarter of 2017
the Company recorded no loan loss provision, due to net recoveries
and limited organic loan growth. In the second quarter of 2016 the
Company recorded a loan loss provision of $1.1 million, associated
with strong net organic loan growth of $121 million and a specific
reserve of $594 thousand for an impaired loan.
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 1.13% at June 30, 2017, compared with
1.17% at March 31, 2017, and 1.22% at June 30, 2016.
Capital
CU Bancorp remained well capitalized at June 30, 2017, with
total risk weighted assets of $2.77 billion. All of the Company’s
capital ratios are above minimum regulatory standards for “well
capitalized” institutions.
June 30, 2017
Minimum Capital Ratios
Basel III Minimum
to Be Considered
Capital Ratios with
“Well Capitalized”
Buffer
CU Bancorp
Total Risk-Based Capital Ratio 10 % 9.25 % 11.73 % Tier 1
Risk-Based Capital Ratio 8 % 7.25 % 10.96 % Common Equity Tier 1
Ratio 6.5 % 5.75 % 9.92 % Tier 1 Leverage Capital Ratio 5 % NA
10.16 %
At June 30, 2017, tangible common equity was $271 million with
common shares issued of 17,831,131 as of the same date, resulting
in tangible book value per common share of $15.17. This compares to
tangible common equity of $259 million with a tangible book value
per common share of $14.52 at March 31, 2017.
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”), including information regarding
the pending merger between the Company and PacWest Bancorp
(“PacWest”), 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; the ability to complete the proposed merger
between CU Bancorp and PacWest, including by obtaining regulatory
approvals and approval by the shareholders of CU Bancorp, or any
future transaction, successfully integrate such acquired entities,
or achieve expected beneficial synergies and/or operating
efficiencies, in each case within expected time-frames or at all;
the initiation and resolution of regulatory or other governmental
inquiries or investigations, changes in PacWest’s stock price
before completion of the merger, including as a result of the
financial performance of PacWest before closing; and other risks
that are described in CU Bancorp’s and PacWest’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.
ADDITIONAL INFORMATION ABOUT THE PROPOSED MERGER TRANSACTION
WITH PACWEST AND WHERE TO FIND IT
Investors and security holders are urged to carefully review and
consider each of PacWest’s and CU Bancorp’s public filings with the
SEC, including but not limited to their Annual Reports on Form
10-K, their proxy statements, their Current Reports on Form 8-K and
their Quarterly Reports on Form 10-Q. The documents filed by
PacWest with the SEC may be obtained free of charge at PacWest’s
website at www.pacwestbancorp.com or at the SEC’s website at
www.sec.gov. These documents may also be obtained free of charge
from PacWest by requesting them in writing to PacWest Bancorp, 9701
Wilshire Boulevard, Suite 700, Beverly Hills, CA 90212; Attention:
Investor Relations, by submitting an email request to
investor-relations@pacwestbancorp.com or by telephone at (310)
887-8521. The documents filed by CU Bancorp with the SEC may be
obtained free of charge 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
requesting them in writing to CU Bancorp, 818 W. 7th Street, Suite
220, Los Angeles, CA 90017; Attention: Investor Relations, or by
telephone at 818-257-7700.
PacWest has filed a registration statement with the SEC (File
333-218249) which includes a preliminary proxy statement of CU
Bancorp and a preliminary prospectus of PacWest, and each party
will file other documents regarding the proposed transaction with
the SEC. Before making any voting or investment decision, investors
and security holders of CU Bancorp are urged to carefully read the
entire registration statement and proxy statement/prospectus, when
they become available, as well as any amendments or supplements to
these documents, because they will contain important information
about the proposed transaction. A definitive proxy
statement/prospectus will be sent to the shareholders of CU Bancorp
seeking any required shareholder approvals. Investors and security
holders will be able to obtain the registration statement and the
proxy statement/prospectus free of charge from the SEC’s website or
from PacWest or CU Bancorp by writing to the addresses provided for
each company set forth in the paragraphs above.
PacWest, CU Bancorp, their directors, executive officers and
certain other persons may be deemed to be participants in the
solicitation of proxies from CU Bancorp shareholders in favor of
the approval of the transaction. Information about the directors
and executive officers of PacWest and their ownership of PacWest
common stock is set forth in the proxy statement for PacWest’s 2017
annual meeting of stockholders, as previously filed with the SEC.
Information about the directors and executive officers of CU
Bancorp and their ownership of CU Bancorp common shares is set
forth in the amendment to the Company’s Annual Report on Form 10-K,
dated April 28, 2017 , as previously filed with the SEC.
Shareholders may obtain additional information regarding the
interests of such participants by reading the registration
statement and the proxy statement/prospectus when they become
available.
CU BANCORP CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) June 30,
March 31, December 31, June 30, 2017 2017 2016 2016 Unaudited
Unaudited Audited Unaudited
ASSETS Cash and due from banks $
56,382 $ 51,168 $ 41,281 $ 42,659 Interest earning deposits in
other financial institutions 111,852 313,609
167,789 194,681 Total cash and
cash equivalents 168,234 364,777 209,070 237,340 Certificates of
deposit in other financial institutions 47,325 48,795 51,245 54,410
Investment securities available-for-sale, at fair value 453,952
469,399 469,950 334,113 Investment securities held-to-maturity, at
amortized cost 39,992 40,945
42,027 40,595 Total investment securities
493,944 510,344 511,977 374,708 Loans 2,151,593 2,046,138 2,050,226
1,951,111 Allowance for loan loss (20,326 ) (19,605 )
(19,374 ) (18,476 ) Net loans 2,131,267 2,026,533
2,030,852 1,932,635 Premises and equipment, net 3,806 3,946 4,184
4,647 Deferred tax assets, net 16,291 15,329 17,181 14,455 Goodwill
64,603 64,603 64,603 64,603 Core deposit and leasehold right
intangibles, net 5,641 5,970 6,300 6,932 Bank owned life insurance
61,536 63,595 51,216 50,561 Accrued interest receivable and other
assets 45,478 39,376 48,132
36,142
Total Assets $ 3,038,125
$ 3,143,268 $ 2,994,760 $ 2,776,433
LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES
Non-interest bearing demand deposits $ 1,459,553 $ 1,485,730 $
1,400,097 $ 1,337,550 Interest bearing transaction accounts 328,156
346,279 332,702 259,103 Money market and savings deposits 820,832
892,143 845,110 747,490 Certificates of deposit 29,725
30,623 29,480 51,598
Total deposits 2,638,266 2,754,775 2,607,389
2,395,741 Securities sold under agreements to repurchase 12,180
11,939 18,816 25,782 Subordinated debentures, net 9,936 9,896 9,856
9,777 Accrued interest payable and other liabilities 20,167
20,210 20,514 18,674
Total Liabilities 2,680,549
2,796,820 2,656,575 2,449,974
SHAREHOLDERS' EQUITY Serial preferred stock 16,818 16,887
16,955 17,086 Common stock 236,308 236,308 235,873 234,141
Additional paid-in capital 26,254 25,462 25,213 24,437 Retained
earnings 79,654 70,645 63,163 50,017 Accumulated other
comprehensive income (loss) (1,458 ) (2,854 )
(3,019 ) 778
Total Shareholders' Equity
357,576 346,448 338,185
326,459
Total Liabilities and Shareholders' Equity $
3,038,125 $ 3,143,268 $ 2,994,760 $ 2,776,433
CU BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands,
except share data) For the three months
ended June 30, March 31, June 30, 2017 2017 2016 Unaudited
Unaudited Unaudited
Interest Income Interest and fees on
loans $ 24,695 $ 24,432 $ 23,165 Interest on investment securities
2,153 2,041 1,415 Interest on interest bearing deposits in other
financial institutions 615 710 417 Total
Interest Income 27,463 27,183 24,997
Interest Expense Interest on interest bearing transaction
accounts 146 157 99 Interest on money market and savings deposits
699 670 484 Interest on certificates of deposit 35 26 31 Interest
on securities sold under agreements to repurchase 7 9 14 Interest
on subordinated debentures 136 130 120 Total
Interest Expense 1,023 992 748
Net Interest
Income 26,440 26,191 24,249 Provision for loan losses
701 - 1,063
Net Interest Income after Provision
for Loan Losses 25,739 26,191 23,186
Non-Interest Income Gain on sale of securities, net - 141 -
Gain on sale of SBA loans, net 552 202 485 Deposit account service
charge income 1,210 1,160 1,222 Other non-interest income
3,865 1,332 1,268 Total Non-Interest Income
5,627 2,835 2,975
Non-Interest Expense
Salaries and employee benefits 9,805 10,288 9,030 Stock
compensation expense 837 773 891 Occupancy 1,450 1,489 1,439 Data
processing 670 656 635 Legal and professional 460 1,009 651 FDIC
deposit assessment 391 446 359 Merger expenses 1,471 - - OREO loss
and expenses - - 4 Office services expenses 363 380 320 Other
operating expenses 1,673 1,652 1,760 Total
Non-Interest Expense 17,120 16,693 15,089
Net Income before Provision for Income Tax Expense 14,246
12,333 11,072 Provision for income tax expense 4,937
4,550 3,952
Net Income $ 9,309 $ 7,783 $ 7,120
Preferred stock dividends and discount accretion 300
301 307
Net Income Available to Common Shareholders $
9,009 $ 7,482 $ 6,813 Earnings Per Share Basic earnings per
share $ 0.51 $ 0.43 $ 0.40 Diluted earnings per share $ 0.51 $ 0.42
$ 0.39 Average shares outstanding 17,584,000 17,532,000 17,210,000
Diluted average shares outstanding 17,771,000 17,756,000 17,506,000
CU BANCORP CONSOLIDATED STATEMENTS OF
INCOME (Dollars in thousands, except per share data)
For the six months ended June 30, 2017 2016 Unaudited
Unaudited
Interest Income Interest and fees on loans $
49,127 $ 45,743 Interest on investment securities 4,194 2,647
Interest on interest bearing deposits in other financial
institutions 1,325 856 Total Interest Income
54,646 49,246
Interest Expense Interest on interest
bearing transaction accounts 303 198 Interest on money market and
savings deposits 1,369 995 Interest on certificates of deposit 61
64 Interest on securities sold under agreements to repurchase 16 25
Interest on subordinated debentures 266 237 Total
Interest Expense 2,015 1,519
Net Interest
Income 52,631 47,727 Provision for loan losses 701
1,685
Net Interest Income after Provision for Loan
Losses 51,930 46,042
Non-Interest Income
Gain on sale of securities, net 141 - Gain on sale of SBA loans,
net 754 1,039 Deposit account service charge income 2,370 2,411
Other non-interest income 5,197 2,345 Total
Non-Interest Income 8,462 5,795
Non-Interest
Expense Salaries and employee benefits 20,093 18,349 Stock
compensation expense 1,610 1,725 Occupancy 2,939 2,875 Data
processing 1,326 1,253 Legal and professional 1,469 1,126 FDIC
deposit assessment 837 709 Merger related expenses 1,471 - OREO
loss and expenses - 83 Office services expenses 743 723 Other
operating expenses 3,325 3,433 Total Non-Interest
Expense 33,813 30,276
Net Income before Provision
for Income Tax Expense 26,579 21,561 Provision for income tax
expense 9,487 7,857
Net Income $ 17,092 $
13,704 Preferred stock dividends and discount accretion 601
610
Net Income Available to Common Shareholders $
16,491 $ 13,094 Earnings Per Share Basic earnings per share
$ 0.94 $ 0.77 Diluted earnings per share $ 0.93 $ 0.75 Average
shares outstanding 17,558,000 17,126,000 Diluted average shares
outstanding 17,764,000 17,462,000
CU BANCORP
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS AND YIELD
ANALYSIS (Unaudited) (Dollars in thousands)
For the Three Months
Ended June 30, 2017 March 31, 2017 Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
Interest-Earning Assets: Deposits in other financial
institutions $ 229,161 $ 615 1.06 % $ 334,660 $ 710 0.85 %
Investment securities 514,470 2,153 1.67 % 518,303 2,041 1.58 %
Loans 2,087,997 24,695 4.74 % 2,043,693
24,432 4.85 % Total interest earning assets 2,831,628 27,463 3.89 %
2,896,656 27,183 3.81 % Non-interest earning assets 221,270
218,536
Total Assets $ 3,052,898 $ 3,115,192
Interest-Bearing Liabilities: Interest bearing transaction
accounts $ 327,589 $ 146 0.18 % $ 339,230 $ 157 0.19 % Money market
and savings deposits 841,831 699 0.33 % 878,035 670 0.31 %
Certificates of deposit 30,156 35 0.47 %
29,626 26 0.36 %
Total Interest Bearing Deposits
1,199,576 880 0.29 % 1,246,891 853 0.28 % Securities sold under
agreements to repurchase 12,465 7 0.23 % 15,017 9 0.24 %
Subordinated debentures and other debt 9,920 136 5.42
% 9,877 130 5.26 %
Total Interest Bearing
Liabilities 1,221,961 1,023 0.34 % 1,271,785 992 0.32 %
Non-interest bearing demand deposits 1,461,342
1,480,366 Total funding sources 2,683,303 2,752,151 Non-interest
bearing liabilities 18,259 19,824 Shareholders' Equity
351,336 343,217
Total Liabilities and Shareholders'
Equity $ 3,052,898 $ 3,115,192 Net interest income $ 26,440 $
26,191 Net interest margin 3.75 % 3.67 %
CU BANCORP
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS AND YIELD
ANALYSIS (Unaudited) (Dollars in thousands)
For the Three Months
Ended June 30, 2017 June 30, 2016 Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
Interest-Earning Assets: Deposits in other financial
institutions $ 229,161 $ 615 1.06 % $ 274,531 $ 417 0.60 %
Investment securities 514,470 2,153 1.67 % 374,888 1,415 1.51 %
Loans 2,087,997 24,695 4.74 % 1,908,945
23,165 4.88 % Total interest earning assets 2,831,628 27,463 3.89 %
2,558,364 24,997 3.93 % Non-interest earning assets 221,270
209,342
Total Assets $ 3,052,898 $ 2,767,706
Interest-Bearing Liabilities: Interest bearing transaction
accounts $ 327,589 $ 146 0.18 % $ 288,384 $ 99 0.14 % Money market
and savings deposits 841,831 699 0.33 % 740,117 484 0.26 %
Certificates of deposit 30,156 35 0.47 %
53,460 31 0.23 %
Total Interest Bearing Deposits
1,199,576 880 0.29 % 1,081,961 614 0.23 % Securities sold under
agreements to repurchase 12,465 7 0.23 % 25,223 14 0.22 %
Subordinated debentures and other debt 9,920 136 5.42
% 9,758 120 4.86 %
Total Interest Bearing
Liabilities 1,221,961 1,023 0.34 % 1,116,942 748 0.27 %
Non-interest bearing demand deposits 1,461,342
1,312,833 Total funding sources 2,683,303 2,429,775 Non-interest
bearing liabilities 18,259 15,901 Shareholders' Equity
351,336 322,030
Total Liabilities and Shareholders'
Equity $ 3,052,898 $ 2,767,706 Net interest income $ 26,440 $
24,249 Net interest margin 3.75 % 3.81 %
CU
BANCORP CONSOLIDATED YEAR-TO-DATE AVERAGE BALANCE SHEETS AND
YIELD ANALYSIS (Unaudited) (Dollars in thousands)
For the Six Months Ended
June 30, 2017 June 30, 2016 Average Average Average Average Balance
Interest Yield/Rate Balance Interest Yield/Rate
Interest-Earning
Assets: Deposits in other financial institutions $ 281,619 $
1,325 0.94 % $ 287,967 $ 856 0.59 % Investment securities 516,376
4,194 1.62 % 363,909 2,647 1.45 % Loans 2,065,967
49,127 4.80 % 1,879,074 45,743 4,89 % Total interest
earning assets 2,863,962 54,646 3.85 % 2,530,950 49,246 3.91 %
Non-interest earning assets 219,911 211,959
Total
Assets $ 3,083,873 $ 2,742,909
Interest-Bearing
Liabilities: Interest bearing transaction accounts $ 333,377 $
303 0.18 % $ 279,590 $ 198 0.14 % Money market and savings deposits
859,833 1,369 0.32 % 733,399 995 0.27 % Certificates of deposit
29,892 61 0.41 % 54,690 64 0.24 %
Total Interest Bearing Deposits 1,223,102 1,733 0.29 %
1,067,679 1,257 0.24 % Securities sold under agreements to
repurchase 13,734 16 0.23 % 22,882 25 0.22 % Subordinated
debentures and other debt 9,898 266 5.35 %
9,739 237 4.81 %
Total Interest Bearing Liabilities
1,246,734 2,015 0.33 % 1,100,300 1,519 0.27 % Non-interest bearing
demand deposits 1,470,802 1,308,925 Total funding
sources 2,717,536 2,409,225 Non-interest bearing liabilities 19,038
16,162 Shareholders' Equity 347,299 317,522
Total
Liabilities and Shareholders' Equity $ 3,083,873 $ 2,742,909
Net interest income $ 52,631 $ 47,727 Net interest margin 3.71 %
3.79 %
CU BANCORP
LOAN COMPOSITION (Dollars in thousands)
June 30, March 31, December 31, June 30, 2017 2017
2016 2016 Unaudited Unaudited Audited Unaudited
Commercial and Industrial Loans: $ 495,632 $ 484,280 $
502,637 $ 522,074
Loans Secured by Real Estate:
Owner-Occupied Nonresidential Properties 447,782 436,269 451,322
425,515 Other Nonresidential Properties 710,454 689,015 630,163
582,204 Construction, Land Development and Other Land 205,845
192,572 194,059 165,963 1-4 Family Residential Properties 122,556
118,268 127,164 121,971 Multifamily Residential Properties
125,393 95,483 109,858 86,942 Total Loans
Secured by Real Estate 1,612,030 1,531,607
1,512,566 1,382,595
Other Loans: 43,931
30,251 35,023 46,442
Total Loans $ 2,151,593 $ 2,046,138 $ 2,050,226 $ 1,951,111
COMMERCIAL AND INDUSTRIAL LINE OF CREDIT
UTILIZATION (Dollars in thousands)
June 30, March 31, December 31,
June 30, 2017 2017 2016 2016 Unaudited Unaudited Unaudited
Unaudited Disbursed $ 384,923 43 % $ 357,149 40 % $ 372,625
40 % $ 396,544 45 % Undisbursed 509,567 57 % 542,503
60 % 548,733 60 % 477,444 55 % Total Commitments $
894,490 100 % $ 899,652 100 % $ 921,358 100 % $ 873,988 100 %
CU BANCORP
SUPPLEMENTAL DATA (Dollars in thousands)
June 30, March 31, December 31, June 30, 2017
2017 2016 2016 Unaudited Unaudited Unaudited Unaudited
Capital
Ratios Table: Total risk-based capital ratio 11.73 % 11.70 %
11.44 % 11.62 % Common equity tier 1 capital ratio 9.92 % 9.86 %
9.61 % 9.69 % Tier 1 risk-based capital ratio 10.96 % 10.94 % 10.68
% 10.85 % Tier 1 leverage capital ratio 10.16 % 9.63 % 9.72 % 10.00
% Tangible Common Equity/Tangible Assets 9.10 % 8.42 % 8.55 % 8.78
%
Asset Quality Table: Loans originated by the Bank
on non-accrual $ - $ - $ - $ 114 Loans acquired thru acquisition
that are on non-accrual 726 760
1,122 2,463 Total non-accrual loans 726
760 1,122 2,577
Total non-performing assets $ 726 $ 760 $ 1,122
$ 2,577 Net charge-offs (recoveries) year to
date $ (251 ) $ (231 ) $ (428 ) $ (1,109 ) Net charge-offs
(recoveries) quarterly $ (20 ) $ (231 ) $ (121 ) $ (868 )
Non-accrual loans to total loans 0.03 % 0.04 % 0.05 % 0.13 %
Total non-performing assets to total assets 0.02 % 0.02 % 0.04 %
0.09 % Allowance for loan losses to total loans 0.94 % 0.96
% 0.94 % 0.95 % Allowance for loan losses to total loans
accounted at historical cost, which excludes loans acquired by
acquisition 1.13 % 1.17 % 1.18 % 1.22 % Net year to date
charge-offs (recoveries) to average year to date loans (0.01
)%
(0.01
)%
(0.02
)%
(0.06
)%
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 N/A N/A 15684 %
Allowance for loan losses to total non-accrual loans 2798 % 2580 %
1726 % 717 %
As of June 30, 2017, there were no restructured loans or loans
over 90 days past due and still accruing.
CU BANCORPGAAP
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.
Tangible Common Equity (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 and per share data)
June 30, March 31, December 31, June
30, 2017 2017 2016 2016
Tangible Common Equity Calculation
Total shareholders' equity $ 357,576 $ 346,448 $ 338,185 $ 326,459
Less: Serial preferred stock 16,818 16,887 16,955 17,086 Less:
Goodwill 64,603 64,603 64,603 64,603 Less: Core deposit and
leasehold right intangibles, net 5,641 5,970
6,300 6,932
Tangible Common Equity $ 270,514 $
258,988 $ 250,327 $ 237,838 Common shares issued and
outstanding 17,831,000 17,834,000 17,759,000 17,668,000 Tangible
book value per common share $ 15.17 $ 14.52 $ 14.10 $ 13.46 Book
value per common share $ 19.11 $ 18.48 $ 18.09 $ 17.51
CU BancorpReturn on Average Tangible
Common Equity(Unaudited)
(Dollars in thousands)
Return on Average Tangible Common Equity represents annualized
quarterly or year-to-date net income available to common
shareholders as a percent of average tangible common equity. A
calculation of CU Bancorp’s Return on Average Tangible Common
Equity is provided in the tables below for the periods
indicated:
Three Months Ended June 30, March 31,
June 30, 2017 2017 2016
Average Tangible Common Equity
Calculation Total Average shareholders' equity $ 351,336 $
343,217 $ 322,030 Less: Average serial preferred stock 16,860
16,930 17,126 Less: Average goodwill 64,603 64,603 64,603 Less:
Average core deposit and leasehold right intangibles, net
5,818 6,132 7,144
Average
Tangible Common Equity $ 264,055 $ 255,552 $
233,157 Net Income Available to Common Shareholders $
9,009 $ 7,482 $ 6,813
Return on Average Tangible Common
Equity 13.68 % 11.87 % 11.75 % Six Months
Ended June 30, June 30, 2017 2016
Average Tangible Common
Equity Calculation Total Average shareholders' equity $ 347,299
$ 317,522 Less: Average serial preferred stock 16,895 17,107 Less:
Average goodwill 64,603 64,603 Less: Average core deposit and
leasehold right intangibles, net 5,974 7,330
Average Tangible Common Equity $ 259,827 $
228,482 Net Income Available to Common Shareholders $
16,491 $ 13,094
Return on Average Tangible Common Equity
12.80 % 11.52 %
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CU Bancorp(213) 430-7072David RainerChairman and CEOorKaren
SchoenbaumChief Financial Officer
CU Bancorp (CA) (MM) (NASDAQ:CUNB)
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