EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Center Financial Corporation

 

EXHIBIT 99.1

 

CENTER FINANCIAL POSTS 69% INCREASE IN NET INCOME FOR 2005 FIRST QUARTER

 

— Results Reflect Balanced Gains in Loans and Deposits and Improvements in Operating Ratios —

 

LOS ANGELES, CA – April 28, 2005 – Center Financial Corporation (NASDAQ NM: CLFC), the financial holding company of Center Bank, today reported another quarter of record earnings for the three months ended March 31, 2005.

 

2005 first quarter highlights, compared with a year ago, include:

 

  •   Net income increased 69% to $5.7 million, or $0.34 per diluted share

 

  •   Net loans rose 30% to $1.03 billion

 

  •   Total deposits grew 26% to $1.19 billion

 

  •   Total assets were up 30% to $1.39 billion

 

  •   Return on average assets and return on average equity increased to 1.70% and 24.39%, respectively

 

  •   Efficiency ratio improved to 47.76%

 

  •   Net interest income before provision for loan losses increased 49% to $14.0 million

 

  •   Noninterest income advanced 22% to $5.0 million

 

  •   Received regulatory approvals to establish two new full-service branch offices – one in Seattle, Washington and one in Irvine, California

 

  •   Quarterly cash dividend of $0.04 per share

 

“These financial results marked another outstanding quarter with the highest ever quarterly earnings posted by the company,” said (Paul) Seon-Hong Kim, president and chief executive officer. “We are particularly pleased that the balanced growth achieved in all the major areas of our business translated to significant improvements in our efficiency ratio, return on average assets and return on average equity. With the celebration of our 19th anniversary during the quarter and our continued dedication to meeting the financial needs of our core markets, we believe we are well positioned for growth in 2005.”

 

For the three months ended March 31, 2005, net interest income before provision for loan losses rose 49% to $14.0 million from $9.4 million in the same period a year earlier, reflecting strong growth in net loans and the benefit of the recent series of Federal fund rate hikes. The net interest margin improved to 4.62% from 4.02% in the 2004 first quarter, and from 4.45% in the immediately preceding fourth quarter. The company added $650,000 to its provision for loan losses during the current first quarter, compared with $850,000 in the corresponding prior-year period.

 

Noninterest income grew 22% to $5.0 million from $4.1 million in the 2004 first quarter, benefiting from higher customer service fees, increases in the gain on sale of SBA loans and fee income from trade finance transactions, offset, in part, by a reduction in loan service fees. In addition, Center Financial posted $673,000 from the sale of SBA loans in the current three-month period and amortization on interest rate swaps of $61,000. A year earlier, the company recorded $377,000 from the sale of SBA loans and no amortization on interest rate swaps.

 

Noninterest expenses totaled $9.1 million, an increase of 26% from $7.2 million in the first quarter a year ago. The increase principally reflects higher staff, occupancy and operational costs associated with Center Bank’s expanded franchise, as well as increased professional fees due primarily to Sarbanes-Oxley 404 compliance. Compared with the 2004 first quarter, the current period includes the costs associated with four additional loan production offices and the operations of two additional full-service branches in Chicago and in San Fernando Valley. Center Financial continued to enhance its efficiency ratio, which improved to 47.76% for the 2005 first quarter from 53.48% in same period a year ago.

Center Financial Corporation

 

Net income for the first quarter of 2005 increased 69% to $5.7 million, or $0.34 per diluted share, from $3.3 million, or $0.20 per diluted share, in the corresponding period a year ago.

 

Return on average assets for the current first quarter increased to 1.70% from 1.29% in the year-ago period and from 1.38% in the immediately preceding fourth quarter. Return on average equity improved to 24.39% from 16.80% in the first quarter of 2004 and from 19.33% in the 2004 fourth quarter. The company’s yield on interest earning assets rose to 6.39% in the 2005 first quarter from 5.39% in the same period a year ago.

 

Gross and net loans at March 31, 2005 increased 30% each to $1.05 billion and $1.03 billion, respectively, from $808.5 million and $796.1 million at March 31, 2004. Commercial real estate loans recorded growth of 49% from prior-year levels, accounting for 61% of the company’s gross loans at the end of the 2005 first quarter. Commercial business loans grew by 24% and represented 20% of Center Financial’s loan portfolio. Trade finance loans remained relatively flat compared with a year ago, but decreased to 7% of gross loans, as compared with 9% in the first quarter of 2004. SBA loans, consumer and construction loans totaled 5%, 6%, and 1%, respectively, of the company’s loan portfolio at March 31, 2005.

 

Total deposits grew to $1.19 billion at the end of the first quarter of 2005, compared with $1.17 billion at December 31, 2004 and $946.5 million at March 31, 2004. Core deposits represented 62% of total deposits at the end of the current quarter, with non-interest bearing, interest bearing checking and savings deposits posting increases of 31%, 19% and 23%, respectively, over year-ago levels. Non-interest bearing deposits accounted for 31% of total deposits at March 31, 2005, as compared with 30% at the end of the 2004 first quarter. Time deposits rose 25% over a year ago and accounted for 46% of total deposits.

 

The average cost of interest-bearing deposits for the 2005 first quarter increased to 2.37% from 1.83% a year earlier. The average cost of total deposits equaled 1.66% for the current first quarter, up from 1.27% in the 2004 first quarter. The average cost of funds for the period ended March 31, 2005 was 2.46%, compared with 1.89% in the prior-year first quarter.

 

Total assets at March 31, 2005 rose to $1.39 billion from $1.34 billion at year-end 2004 and $1.07 billion at the end of the 2004 first quarter. Interest-earning assets grew to $1.27 billion from $1.22 billion at December 31, 2004 and $969.9 million at March 31, 2004. The growth of total assets was financed by the increase in deposits collected by the company’s expanded network of branch offices.

 

Total non-performing assets were $3.5 million, or 0.25% of total assets, at March 31, 2005, compared with $3.4 million, or 0.26% of total assets, at December 31, 2004, and $3.0 million, or 029% of total assets, at the end of the first quarter of 2004. Net charge-offs for the current quarter totaled $94,000, compared with $376,000 for the first quarter of 2004. The allowance for loan losses was increased to $11.8 million in response to the strong growth in the company’s loan portfolio, and represented 1.13% of loans, net of unearned income at March 31, 2005, compared with 1.10% at year-end 2004 and 1.15% at the end of the year-ago first quarter.

 

Shareholders’ equity at March 31, 2005 increased to $95.2 million from $90.7 million at December 31, 2004 and $81.6 million at March 31, 2004. At the end of the 2005 first quarter, Center Financial remained “well-capitalized” under all regulatory categories, with a Tier 1 risk-based capital ratio of 9.88%, a total risk-based capital ratio of 10.94%, and a Tier 1 leverage ratio of 8.36%.

 

Kim added: “Late in the quarter, we announced the appointment of Patrick Hartman, a Certified Public Accountant with more than 28 years of experience in the financial services industry, as our new chief financial officer. We are

Center Financial Corporation

 

pleased to have strengthened our management team with the vast experience that Patrick brings to Center Financial, most of which as the chief financial officer of a community bank. We look forward to his valued contributions, particularly related to corporate governance and compliance with Sarbanes-Oxley, as we work diligently to grow the Center Bank franchise and deliver greater value to our shareholders.”

 

About Center Financial Corporation

 

Center Financial Corporation is the financial holding company of Center Bank, a community bank offering a full range of financial services for diverse ethnic and small business customers. Founded in 1986 and specializing in commercial and SBA loans and trade finance products, Center Bank has grown to be one of the nation’s largest financial institutions focusing on the Korean-American community, with total assets of $1.39 billion at March 31, 2005. Headquartered in Los Angeles, Center Bank operates 24 branch and loan production offices across the nation, of which 14 full-service branches are located throughout Southern California and one branch in Chicago, plus nine loan production offices in Phoenix, Seattle, Denver, Washington D.C., Las Vegas, Atlanta, Honolulu, Houston and Dallas. Center Bank is a California state-chartered institution and a member of the FDIC. For additional information on Center Bank, visit the company’s Web site at www.centerbank.com.

 

This release may contain forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and accordingly, the cautionary statements contained in Center Financial Corp’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2004 (See Business, and Management’s Discussion and Analysis), and other filings with the Securities and Exchange Commission are incorporated herein by reference. These factors include, but are not limited to: competition in the financial services market for both deposits and loans; the ability of Center Financial and its subsidiaries to increase its customer base; and regional and general economic conditions. Actual results and performance in future periods may be materially different from any future results or performance suggested by the forward-looking statements in this release. Such forward-looking statements speak only as of the date of this release. Center Financial expressly disclaims any obligation to update or revise any forward-looking statements found herein to reflect any changes in the company’s expectations of results or any change in events.

 

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(TABLES FOLLOW)

Center Financial Corporation

 

CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(In thousands, except share and per share data)

 

     03/31/05
     03/31/04
     12/31/04
  
Assets                         

Cash and due from banks

    $ 69,566     $ 53,199     $ 63,564  

Federal funds sold

      52,470       29,165       35,915  

Money market funds and interest-bearing deposits in other banks

      3,564       30,000       3,663  

Securities available-for-sale

      167,829       100,602       157,027  

Securities held-to-maturity

      10,880       13,992       11,396  

Loans (net of unearned income)

      1,043,676       805,409       1,021,700  

Allowance for loan losses

      (11,783 )     (9,278 )     (11,227 )
    
 
 

Net loans

      1,031,893       796,131       1,010,473  

Fixed assets

      12,047       11,048       11,695  

Bank-owned life insurance - cash surrender value

      10,522       10,136       10,430  

Goodwill

      1,253       —         1,253  

Other assets

      27,494       23,291       32,698  
    
 
 

Total assets

    $ 1,387,518     $ 1,067,564     $ 1,338,114  
    
 
 
Liabilities and Shareholders’ Equity                         

Deposits

                         

Non-interest bearing deposits

    $ 374,917     $ 285,417     $ 347,195  

Interest bearing deposits

      815,734       661,108       818,341  
    
 
 

Total deposits

      1,190,651       946,525       1,165,536  

Borrowed funds

      69,268       10,709       44,854  

Long-term subordinated debenture

      18,557       18,557       18,557  

Other liabilities

      13,825       10,074       18,447  
    
 
 

Total Liabilities

      1,292,301       985,865       1,247,394  

Shareholders’ Equity

      95,217       81,699       90,720  
    
 
 

Total Liabilities & Shareholders’ Equity

    $ 1,387,518     $ 1,067,564     $ 1,338,114  
    
 
 

Book value per share

    $ 5.83     $ 5.08     $ 5.57  

Number of common shares outstanding at period end

      16,341,063       16,088,264       16,283,496  
    
 
 

Center Financial Corporation

 

CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(In thousands, except share and per share data)

 

    

Quarter Ended

March 31,

     2005
     2004

Interest income

    $ 19,324     $ 12,562

Interest expense

      5,341       3,173
    
 

Net interest income before provision for loan losses

      13,983       9,389

Provision for loan losses

      650       850
    
 

Net interest income after provision for loan losses

      13,333       8,539

Noninterest income

               

Customer service fees

      2,235       1,916

Fee income from trade finance transactions

      902       703

Wire transfer fees

      204       185

Gain on sale of loans

      673       377

Net gain on sale of securities available for sale

      50       —  

Loan service fees

      336       551

Amortization on interest rate swaps

      61       —  

Other income

      533       353
    
 

Total noninterest income

      4,994       4,085
    
 

Noninterest expenses

               

Salaries and employee benefits

      4,445       3,682

Occupancy

      715       537

Furniture, fixtures, and equipment

      408       321

Data processing

      465       468

Professional service fees

      955       144

Business promotion and advertising

      650       321

Stationery and supplies

      177       106

Telecommunications

      129       126

Postage and courier service

      163       129

Impairment loss of securities available for sale

      —         540

Security service

      175       155

Other operating expenses

      781       677
    
 

Total noninterest expenses

      9,063       7,206
    
 

INCOME BEFORE INCOME TAX PROVISION

      9,264       5,418

INCOME TAX PROVISION

      3,613       2,071
    
 

Net income

    $ 5,651     $ 3,347
    
 

Other comprehensive (loss) income1

      (794 )     574

Total comprehensive income

    $ 4,857     $ 3,921
    
 

Earning per share, basic

    $ 0.35     $ 0.21

Earning per share, diluted

    $ 0.34     $ 0.20

Basic average common shares outstanding

      16,314,981       16,062,048

Diluted average common shares outstanding

      16,669,216       16,464,230
1 Comprehensive income represents the change in unrealized gain (loss) on securities available for sale and, interest rate swaps, net of tax, from the previous period end.

Center Financial Corporation

 

CENTER FINANCIAL CORPORATION

SELECTED FINANCIAL DATA (Unaudited)

(In thousands)

 

     For the Three Months Ended
March 31,
    

For the Year Ended

December 31,

2004

  
     2005
     2004
    

Average gross loans outstanding during period

    $ 1,039,245     $ 784,072     $ 878,819  

Total loans outstanding at end of period1

      1,043,676       805,409       1,021,700  

Non-performing assets

                         

Loans past due 90 days or more and still accruing interest

    $ —       $ —       $ —    

Non-accrual loans

      3,499       3,018       3,431  
    
 
 

Total non-performing loans

      3,499       3,018       3,431  

Other Real Estate Owned

      —         —         —    
    
 
 

Total Non-performing assets

    $ 3,499     $ 3,018     $ 3,431  
    
 
 

Allowance for Loan Losses

                         

Balance as of January 1, 2005

    $ (11,227 )   $ (8,804 )   $ (8,804 )

Provision for loan losses

      (650 )     (850 )     (3,250 )

Net loan charge-offs and (recoveries)

      94       376       827  
    
 
 

Balance as of March 31, 2005

    $ (11,783 )   $ (9,278 )   $ (11,227 )
    
 
 

 

Selected Ratios    Quarter Ended
March 31,
    

Year Ended

2004

  

For the Period

    2005
     2004
    

Return on average assets

    1.70 %   1.29 %   1.29 %

Return on average equity

    24.39     16.80     17.82  

Interest rate spread

    3.93     3.50     3.52  

Net interest margin

    4.62     4.02     4.10  

Yield on earning assets

    6.39     5.39     5.56  

Cost of interest-bearing deposits

    2.37     1.83     1.97  

Cost of deposits

    1.66     1.27     1.37  

Cost of funds

    2.46     1.89     2.04  

Noninterest expense/average assets

    0.67     0.69     3.15  

Efficiency ratio

    47.76     53.48     57.47  

Net charge-offs/(recoveries) to average loans

    0.01     0.05     0.09  

 

     Period Ended March 31,
    

Year Ended

December 31, 2004

  
     2005
     2004
    

Tier 1 risk-based capital ratio

    9.88 %   11.17 %   9.57 %

Total risk-based capital ratio

    10.94     12.24     10.59  

Tier 1 leverage ratio

    8.36     9.26     9.09  

Non-accrual loans to gross loans

    0.34     0.37     0.34  

Non-performing assets to total loans and OREO

    0.34     0.37     0.34  

Non-performing assets to total assets

    0.25     0.28     0.26  

Allowance for loan loss to gross loans

    1.13     1.15     1.10  

Allowance for loan losses to nonperforming assets

    336.75     307.42     327.22  
1 Total loans are net of deferred loan fees and discount on SBA loan sold.

Center Financial Corporation

 

CENTER FINANCIAL CORPORATION

SELECTED FINANCIAL DATA (Unaudited)

(In thousands)

 

     For the Three Months Ended
March 31,
    

% chg

    

Year Ended
December 31,

2004

  
     2005
     2004
      
Loans                               

Real estate–construction

    $ 11,122     $ 17,396     -36.1 %   $ 16,919  

Real estate–commercial

      634,747       426,770     48.7 %     607,296  

Commercial

      211,248       169,844     24.4 %     208,995  

Consumer

      61,385       50,627     21.2 %     58,178  

Trade finance

      76,892       76,215     0.9 %     83,763  

SBA

      51,643       67,549     -23.5 %     49,027  

Other

      159       89     78.7 %     864  
    
 
 
 

Total loans-gross

      1,047,196       808,490     29.5 %     1,025,042  

Unearned Income

      (3,520 )     (3,081 )   14.2 %     (3,342 )

Allowance for loan losses

      (11,783 )     (9,278 )   27.0 %     (11,227 )
    
 
 
 

Total loans–net

    $ 1,031,893     $ 796,131     29.6 %   $ 1,010,473  

Deposits

                               

Non-interest bearing

    $ 374,917     $ 285,417     31.4 %   $ 347,195  

Interest bearing checking

      191,288       160,325     19.3 %     210,842  

Savings

      78,498       63,955     22.7 %     73,733  

Time deposits

      545,948       436,828     25.0 %     533,766  
    
 
 
 

Total deposits

    $ 1,190,651     $ 946,525     25.8 %   $ 1,165,536  

 

Average Balances   

Quarter Ended

March 31,

     2005
    2004

Average assets

    $ 1,344,656    $ 1,044,741

Average equity

      93,985      80,132

Average net loans

      1,027,819      774,888

Average deposits

      1,178,961      896,589

Average interest earning assets

      1,226,812      937,683