EX-99.1 2 d863923dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

CU BANCORP REPORTS 2014 FOURTH QUARTER AND ANNUAL RESULTS

INCLUDING RECORD LOAN GROWTH OF $98 MILLION

Los Angeles, CA, February 2, 2015 - CU Bancorp (NASDAQ: CUNB), the parent company of wholly owned California United Bank, today reported financial results for the fourth quarter and full year of 2014.

The comparability of financial information for the fourth quarter and full year of 2014 to 2013, is affected by the Company’s acquisition of 1st Enterprise Bank (“1st Enterprise”), which was accomplished by a merger of California United Bank with 1st Enterprise (“the merger”), effective November 30, 2014. Operating results for fourth quarter and full year 2014 include the combined operations of both entities from December 1, 2014.

Full Year and Fourth Quarter 2014 Highlights

 

•   Core earnings of $11.4 million for 2014, an increase of $1.6 million or 16.3% from 2013

 

•   Net income in 2014 before the provision for income taxes and excluding merger-related charges was $18.8 million, up 27% from the prior year

 

•   Net interest income increased to $53.3 million for 2014, an increase of $4.5 million, or 9.2% from 2013

 

•   Net interest margin increased for the fourth quarter of 2014 to 3.78% from 3.70% for the prior quarter

 

•   Net organic loan growth of $98.5 million in the fourth quarter

 

•   Total assets increased $833 million to $2.3 billion, as a result of the merger

 

•   Total loans increased to $1.6 billion, as a result of the merger and organic loan growth

 

•   Total deposits increased to $1.9 billion, as a result of the merger

 

•   Non-interest bearing demand deposits were 53% of total deposits

 

•   Nonperforming assets to total assets decreased to 0.21%, at December 31, 2014, from 0.68% at December 31, 2013

 

•   Continued status as well-capitalized, the highest regulatory category

Full Year and Fourth Quarter 2014 Operating Results

Net Income and Profitability Ratios

Net income for 2014 was $8.9 million or $0.75 per fully diluted share, compared with net income of $9.8 million or $0.90 per fully diluted share for the full year of 2013. Net income in 2014 was impacted by $3.5 million in charges related to the merger. Excluding merger-related charges, net income before the provision for income taxes for the full year of 2014 was $18.8 million, an increase of 27% compared to net income before the provision for income taxes of $14.8 million for the full year of 2013.

Core net income (defined below) for the full year 2014 was $11.4 million or $0.98 per fully diluted share, an increase of 16.3% from core net income of $9.8 million or $0.91 per fully diluted share, for the full year 2013.

Net income for the fourth quarter of 2014 was $1.3 million or $0.09 per fully diluted share, compared with net income of $2.8 million or $0.26 per fully diluted share for the fourth quarter of 2013. Merger-related expenses in the fourth quarter of 2014 were $2.4 million, compared to none in the year-ago quarter. Excluding merger-related charges, net income before the provision for income taxes for the fourth quarter of 2014 was $4.4 million, an increase of 19% compared to $3.7 million in the fourth quarter of 2013.

Core net income for the fourth quarter of 2014 was $2.7 million or $0.20 per fully diluted share, compared to core net income of $2.8 million or $0.26 per fully diluted share, for the fourth quarter of 2013. Primarily due to record loan growth of $98.5 million in the fourth quarter of 2014, the Company recognized a loan loss provision of $1.7 million, compared to a loan loss provision of $934 thousand in the year-ago quarter.

Net income for the fourth quarter of 2014 was $1.3 million or $0.09 per fully diluted share, compared with net income of $2.5 million or $0.23 per fully diluted share in the third quarter of 2014. Fourth quarter 2014 merger-related expenses increased $1.8 million to $2.4 million, compared to $631 thousand in the third quarter of 2014. Core net income for the fourth quarter of 2014 was $2.7 million or $0.20 per fully diluted share, compared to $3.2 million in the prior quarter or $0.28 per fully diluted share. As noted above, in the fourth quarter of 2014 the Company recorded a loan loss provision of $1.7 million, compared to $35 thousand in the prior quarter.

The Company calculates core net income by adding back the tax-effected merger-related charges to GAAP earnings for the periods presented, because the Company believes the use of core net income, a non-GAAP measure, facilitates the assessment of its banking operations and peer comparability. A reconciliation to GAAP is included in tabular form at the end of this release.

“CUB had a tremendous fourth quarter with record loan growth of $98 million,” said David Rainer, Chairman and Chief Executive Officer of CU Bancorp and California United Bank. “Due to this outstanding growth in loan originations, the Company made a corresponding loan loss provision of $1.7 million to augment the allowance for loan losses, which had a dampening effect on quarterly earnings. That said, the Company had revenue growth of $3.1 million over the previous quarter, a 21% increase.

“While we are very excited about the increase in loan originations during the quarter, we continue to focus on prudent underwriting—reflected in CUB’s exceptional asset quality—and pricing discipline.”

“The integration of California United Bank and 1st Enterprise continues on track and our target date for system convergence remains February 9,” said Brian Horton, President of CU Bancorp and California United Bank. “I am very pleased that despite the responsibilities of integration, we have continued to provide our customers with outstanding customer service and added new banking clients, as reflected in the fourth quarter’s strong loan growth.”

The following table shows certain of the Company’s performance ratios for the full year of 2014 and the full year of 2013, as well as a column calculating performance ratios based on core net income for both years.

 

     FY 2014     CORE
FY 2014		     FY 2013     CORE FY
2013		  

Return on average assets

      0.59 %      0.76 %      0.74 %      0.74 % 

Return on average equity

      5.8 %      7.5 %      7.5 %      7.5 % 

Operating efficiency ratio

      71 %      65 %      68 %      68 % 

Net Interest Income and Net Interest Margin

Net interest income before the provision for loan losses totaled $53.3 million for the full year of 2014, an increase of $4.5 million or 9.2% from the previous year. The increase was due to higher average loan balances, the result of net organic loan growth.

Net interest margin for the full year of 2014 was 3.79%, compared to 3.96% in the previous year. In 2014 the discount earned on early payoffs was $445 thousand less than 2013; this was coupled with a decline in the core loan yield, as newer loans were originated at lower rates than paid off loans, the combination of which had a negative impact on the net interest margin in 2014.

Net interest income before the provision for loan losses totaled $15.7 million for the fourth quarter of 2014, an increase of $3.4 million or 27.5% from the fourth quarter of 2013. The increase was primarily driven by net organic loan growth and one month of combined operations after the merger.

The Company’s net interest income was positively impacted in both the fourth quarter of 2014 and the fourth quarter of 2013 by the recognition of fair value discount earned on early payoffs of acquired loans. The Company recorded $384 thousand and $571 thousand in discount earned on early loan payoffs of acquired loans in the fourth quarter of 2014 and 2013, respectively, with a positive impact on the net interest margin of 9 basis points and 17 basis points, respectively. In addition, in the fourth quarter of 2014, the Company’s net interest income benefitted from the recovery of $227 thousand in interest on a non-accrual loan that was paid off, with a positive impact on the net interest margin of 5 basis points.

The net interest margin in the fourth quarter of 2014 was 3.78%, compared to 3.69% in the fourth quarter of 2013. The increase was primarily driven by average loans being a higher percentage of earning assets in the fourth quarter of 2014.

Net interest income before the provision for loan losses for the fourth quarter of 2014 increased $3.0 million or 23.2% from the third quarter of 2014. This was primarily the result of an increase of $284 million in the Company’s average earning assets, due to one month of combined operations after the merger with 1st Enterprise. The Company recorded $384 thousand and $403 thousand in discount earned on early loan payoffs of acquired loans in the fourth and third quarter of 2014, respectively.

The net interest margin in the fourth quarter of 2014 was 3.78%, compared to 3.70% in the third quarter of 2014. The increase was primarily driven by the recovery of $227 thousand in interest on a non-accrual loan that was paid off, as well as an increase of 4 basis points in the core loan yield to 4.95%, primarily due to the fair value discount amortization on the 1st Enterprise loan portfolio.

As of December 31, 2014, the Company had $21.7 million of discount remaining on acquired accruing loans, including $16.3 million related to the 1st Enterprise merger.

The Company’s cost of funds was 0.13% in the fourth quarter of 2014, a decrease from 0.16% in the fourth quarter of 2013 and 0.14% for the third quarter of 2014.

Non-interest Income

Non-interest income was $7.7 million in 2014, an increase of $1.2 million or 18.3% from $6.5 million in the prior year. The increase included an improvement in deposit account service charge income of $367 thousand, $134 thousand in higher gain on sale of SBA loans, and an increase of $784 thousand in other non-interest income. Included in other non-interest income in 2014 were increases of $339 thousand in transaction referral fees, $132 thousand in letters of credit fees, and a $225 thousand settlement in the second quarter related to an other real estate owned property sold in 2013.

Non-interest income was $2.1 million in the fourth quarter of 2014, an increase of $201 thousand or 10.4% from $1.9 million in the same quarter of the prior year. The overall increase was primarily due to an increase of $225 thousand in deposit account service charge income as a result of the merger and a $208 thousand increase in transaction referral income. These increases were partially offset by a lower gain on sale of SBA loans and a net loss on sale of securities.

Non-interest income in the fourth quarter of 2014 increased $128 thousand or 6.4% over the third quarter of 2014. The overall increase was primarily due to an increase of $222 thousand in deposit account service charge income as a result of the merger, partially offset by a decrease of $46 thousand in gain on sale of SBA loans and a $47 thousand loss on sale of securities.

Non-interest Expense

Non-interest expense incurred in 2014 was $43.4 million, an increase of $5.7 million, or 15.3% from $37.6 million in the prior year. The increase was primarily attributable to $3.5 million in charges associated with the merger on November 30, 2014, and one month of salaries and benefits, and other operating expenses included in 2014. In addition, an increase of $611 thousand in stock-based compensation in 2014 was due to the annual granting of stock-based compensation late in the third quarter of 2013, which resulted in reduced non-interest expense in that year.

Non-interest expense for the fourth quarter of 2014 was $14.1 million, an increase of $4.5 million, or 46.6% compared to non-interest expense of $9.6 million for the same period of the prior year. In addition to $2.4 million in merger-related charges, the increase included one month of additional expenses associated with 1st Enterprise operations, and an increase of $223 thousand in bonus expense concomitant with record loan production. In addition, in the fourth quarter the Company recorded $125 thousand for one month of core deposit intangible amortization related to the merger.

Non-interest expense for the fourth quarter of 2014 increased $4.1 million or 40.6% over the third quarter of 2014. The increase was due to merger-related charges of $2.4 million, a $1.8 million increase from $631 thousand of merger-related charges in the third quarter and as noted above, one month of additional expenses associated with 1st Enterprise operations, as well as an increase of $598 thousand in bonus expense on record loan production. In addition, in the fourth quarter the Company recorded $125 thousand for one month of core deposit intangible amortization related to the merger.

“Merger-related charges are running at the expected rate and the Company doesn’t anticipate any increase in the estimated expenses of $7.9 million, including those previously recognized by 1st Enterprise prior to the merger,” said David Rainer.

At March 31, 2014, the quarter prior to announcement of the merger, 1st Enterprise had 82 active full-time equivalent employees and CUB had 181 active full-time equivalent employees, for a total of 263. As of December 31, 2014, the combined entity had reduced its active full-time equivalent employees by 13 to 250.

Income Tax

The Company had both tax deductible and non-tax deductible merger expenses in 2014. Additionally, various merger expenses are not all subject to the same percentage of tax deductibility. The Company’s merger-related expenses in the second and third quarter of 2014 were not tax deductible; merger expenses in the fourth quarter of 2014 provided the Company with

some merger-related tax deductions. Due to the preceding, tax rates for third and fourth quarter of 2014 were 46% and 36%, respectively. For the full year of 2014 the Company’s effective tax rate was 42%.

Balance Sheet

Assets

Total assets at December 31, 2014, were $2.3 billion, a year-over-year increase of $857 million from December 31, 2013. The increase was primarily due to the addition of $782 million in assets from the 1st Enterprise merger, as well as $52 million in goodwill recorded for the transaction.

Loans

Total loans were $1.6 billion at December 31, 2014, an increase of $646 million from $979 million at the end of the prior quarter. This also represents an increase of $692 million from December 31, 2013. The increase in loans in both periods was largely the result of the merger with 1st Enterprise on November 30, 2014, coupled with organic loan growth.

During the fourth quarter of 2014, the Company had approximately $98.5 million of net organic loan production. Pay downs in the acquired loan portfolios (excluding 1st Enterprise) were approximately $9 million in the same quarter.

Due to the similarity of the 1st Enterprise and CUB loan portfolios prior to the merger, there was little change in the makeup of the Company’s loan portfolio. At December 31, 2014, commercial and industrial loans, and owner occupied real estate loans combined were $868 million or 53.4% of total loans, compared to $496 million or 50.7% at September 30, 2014.

Deposits

Total deposits at December 31, 2014 were $1.9 billion, an increase of $685 million from $1.3 billion at the end of the prior quarter. This also represents an increase of $715 million from December 31, 2013. The increase in total deposits in both periods was primarily the result of the merger with 1st Enterprise.

Non-interest bearing deposits at December 31, 2014 were $1.0 billion or 53% of total deposits, compared to $698 million or 55% of total deposits at September 30, 2014.

Cost of deposits for the quarter was 0.11%, the same as the prior quarter.

Asset Quality

Total non-performing assets were $4.8 million, or 0.21% of total assets at December 31, 2014, compared with $4.4 million, or 0.30% of total assets, at September 30, 2014. The decline in non-performing assets to total assets ratio was due to the low level of non-performing assets in the 1st Enterprise loan portfolio added from the merger.

Total nonaccrual loans were $3.9 million, or 0.24% of total loans, at December 31, 2014, compared with $4.4 million, or 0.44% of total loans, at September 30, 2014. The decline reflects a nonaccrual loan of $850 thousand, which was acquired in the Premier Commercial Bank portfolio in 2012, that is now other real estate owned; the property is a single-family residence in the state of Washington.

Net charge-offs for 2014 were $231 thousand or 0.02% of average loans.

The Company recorded a loan loss provision of $1.7 million for the fourth quarter of 2014. The loan loss provision reflects strong loan origination and modest net charge-offs recorded in 2014, and an overall improving credit quality environment.

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 1.39% at December 31, 2014, compared with 1.43% at September 30, 2014, and 1.50% at December 31, 2013.

Capital

CU Bancorp remained well capitalized at December 31, 2014 with total risk weighted assets of $1,992,043,000. All of the Company’s capital ratios are above minimum regulatory standards for “well capitalized” institutions.

 

December 31, 2014    Minimum Capital to Be
Considered
“Well-Capitalized”		     CU Bancorp  

Total Risk-Based Capital Ratio

      10 %      11.59 % 

Tier 1 Risk-Based Capital Ratio

      6 %      10.93 % 

Tier 1 Leverage Capital Ratio

      5 %      12.89 % 

At December 31, 2014, tangible common equity was $189.7 million with common shares issued and outstanding of 16,683,856 as of the same date, resulting in tangible book value per common share of $11.37. This compares to tangible common equity of $134.2 million with a tangible book value per common share of $11.95 at September 30, 2014. The increase in tangible common equity and decrease in tangible book value per common share from the prior quarter primarily reflects the merger with 1st Enterprise on November 30, 2014. The Company estimates it will earn back the tangible book value per share in three-and-a-half years.

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, Simi 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 could cause an increase in the allowance for credit losses and a reduction in net earnings; increased competitive pressure among depository institutions; the Company’s ability to complete future acquisitions, successfully integrate acquired entities, or achieve expected beneficial synergies and/or operating efficiencies within expected time-frames or at all; the possibility that personnel changes will not proceed as planned; the cost of additional capital is more than expected; 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 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. CU Bancorp assumes no obligation to update 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.

Contacts

CU Bancorp

David Rainer, 818-257-7776

Chairman and CEO

or

Karen Schoenbaum, 818-257-7700

Chief Financial Officer

CU BANCORP

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     December 31,
2014		     September 30,
2014		     December 31,
2013		  
     Unaudited     Unaudited     Audited  

ASSETS

       

Cash and due from banks

    $ 33,996      $ 27,882      $ 23,156   

Interest earning deposits in other financial institutions

      98,590       167,859       218,131   
  

 

 

    

 

 

    

 

 

  

Total cash and cash equivalents

      132,586        195,741        241,287   

Certificates of deposit in other financial institutions

      76,433       74,473       60,307   

Investment securities available-for-sale, at fair value

      226,962        139,552        106,488   

Investment securities held-to-maturity, at amortized cost

      47,147       —         —     
  

 

 

    

 

 

    

 

 

  

Total investment securities

      274,109        139,552        106,488   

Loans

      1,624,723       978,800       933,194   

Allowance for loan loss

      (12,610 )      (11,348 )      (10,603 ) 
  

 

 

    

 

 

    

 

 

  

Net loans

      1,612,113       967,452       922,591   

Premises and equipment, net

      5,377        3,648        3,531   

Deferred tax assets, net

      16,504       10,369       11,835   

Other real estate owned, net

      850        —          —     

Goodwill

      63,950       12,292       12,292   

Core deposit and leasehold right intangibles

      9,547        2,246        2,525   

Bank owned life insurance

      38,732       21,663       21,200   

Accrued interest receivable and other assets

      34,916        23,921        25,760   
  

 

 

    

 

 

    

 

 

  

Total Assets

    $ 2,265,117     $ 1,451,357     $ 1,407,816   
  

 

 

    

 

 

    

 

 

  

LIABILITIES AND SHAREHOLDERS’ EQUITY

       

LIABILITIES

       

Non-interest bearing demand deposits

    $ 1,032,634     $ 698,251     $ 632,192   

Interest bearing transaction accounts

      206,544        145,899        155,735   

Money market and savings deposits

      643,675       365,945       380,915   

Certificates of deposit

      64,840        52,852        63,581   
  

 

 

    

 

 

    

 

 

  

Total deposits

      1,947,693       1,262,947       1,232,423   

Securities sold under agreements to repurchase

      9,411        13,618        11,141   

Subordinated debentures, net

      9,538       9,498       9,379   

Accrued interest payable and other liabilities

      19,283        16,521        16,949   
  

 

 

    

 

 

    

 

 

  

Total Liabilities

      1,985,925       1,302,584       1,269,892   
  

 

 

    

 

 

    

 

 

  

SHAREHOLDERS’ EQUITY

       

Preferred stock

      16,004       —         —     

Common stock

      226,389        122,952        121,675   

Additional paid-in capital

      19,748       9,940       8,377   

Retained earnings

      16,861        15,678        8,077   

Accumulated other comprehensive income (loss)

      190       203       (205 ) 
  

 

 

    

 

 

    

 

 

  

Total Shareholders’ Equity

      279,192        148,773        137,924   
  

 

 

    

 

 

    

 

 

  

Total Liabilities and Shareholders’ Equity

    $ 2,265,117     $ 1,451,357     $ 1,407,816   
  

 

 

    

 

 

    

 

 

  

CU BANCORP

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

 

     For the three months ended  
     December 31,
2014		     September 30,
2014		      December 31,
2013		  
     Unaudited     Unaudited      Unaudited  

Interest Income

        

Interest and fees on loans

    $ 15,191      $ 12,401       $ 12,111   

Interest on investment securities

      812       589         493   

Interest on interest bearing deposits in other financial institutions

      261        248         237   
  

 

 

    

 

 

     

 

 

  

Total Interest Income

      16,264       13,238         12,841   
  

 

 

    

 

 

     

 

 

  

Interest Expense

        

Interest on interest bearing transaction accounts

      84       70         65   

Interest on money market and savings deposits

      282        225         255   

Interest on certificates of deposit

      47       58         58   

Interest on securities sold under agreements to repurchase

      7        8         11   

Interest on subordinated debentures

      108       109         109   
  

 

 

    

 

 

     

 

 

  

Total Interest Expense

      528        470         498   
  

 

 

    

 

 

     

 

 

  

Net Interest Income

      15,736       12,768         12,343   

Provision for loan losses

      1,721        35         934   
  

 

 

    

 

 

     

 

 

  

Net Interest Income After Provision For Loan Losses

      14,015       12,733         11,409   
  

 

 

    

 

 

     

 

 

  

Non-Interest Income

        

Gain (Loss) on sale of securities, net

      (47 )     —           42   

Gain on sale of SBA loans, net

      285        331         414   

Deposit account service charge income

      853       631         628   

Other non-interest income

      1,041        1,042         847   
  

 

 

    

 

 

     

 

 

  

Total Non-Interest Income

      2,132       2,004         1,931   
  

 

 

    

 

 

     

 

 

  

Non-Interest Expense

        

Salaries and employee benefits

      8,266       5,621         5,495   

Stock compensation expense

      367        445         372   

Occupancy

      1,142       999         1,037   

Data processing

      545        472         455   

Legal and professional

      616       456         557   

FDIC deposit assessment

      248        195         226   

Merger expenses

      1,174       631         —     

OREO expenses

      1        8         7   

Office services expenses

      305       219         248   

Other operating expenses

      1,443        985         1,223   
  

 

 

    

 

 

     

 

 

  

Total Non-Interest Expense

      14,107       10,031         9,620   
  

 

 

    

 

 

     

 

 

  

Net Income Before Provision for Income Tax

      2,040        4,706         3,720   

Provision for income tax

      733       2,157         888   
  

 

 

    

 

 

     

 

 

  

Net Income

    $ 1,307      $ 2,549       $ 2,832   
  

 

 

    

 

 

     

 

 

  

Preferred stock dividends and discount accretion

      124       —           —     
  

 

 

    

 

 

     

 

 

  

Net Income Available to Common Shareholders

    $ 1,183      $ 2,549       $ 2,832   
  

 

 

    

 

 

     

 

 

  

Earnings Per Share

        

Basic earnings per share

    $ 0.09     $ 0.23       $ 0.26   

Diluted earnings per share

    $ 0.09      $ 0.23       $ 0.26   

Average shares outstanding

      12,761,000       10,986,000         10,736,000   

Diluted average shares outstanding

      13,228,000        11,190,000         10,999,000   

CU BANCORP

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

 

     For the year ended December 31,  
     2014     2013  
     Unaudited     Audited  

Interest Income

     

Interest and fees on loans

    $ 51,882      $ 48,201   

Interest on investment securities

      2,369       1,913   

Interest on interest bearing deposits in other financial institutions

      926        732   
  

 

 

    

 

 

  

Total Interest Income

      55,177       50,846   
  

 

 

    

 

 

  

Interest Expense

     

Interest on interest bearing transaction accounts

      278       238   

Interest on money market and savings deposits

      963        1,027   

Interest on certificates of deposit

      216       255   

Interest on securities sold under agreements to repurchase

      34        74   

Interest on subordinated debentures

      431       485   
  

 

 

    

 

 

  

Total Interest Expense

      1,922        2,079   
  

 

 

    

 

 

  

Net Interest Income

      53,255       48,767   

Provision for loan losses

      2,239        2,852   
  

 

 

    

 

 

  

Net Interest Income After Provision For Loan Losses

      51,016       45,915   
  

 

 

    

 

 

  

Non-Interest Income

     

Gain (Loss) on sale of securities, net

      (47 )     47   

Gain on sale of SBA loans, net

      1,221        1,087   

Deposit account service charge income

      2,744       2,377   

Other non-interest income

      3,791        3,007   
  

 

 

    

 

 

  

Total Non-Interest Income

      7,709       6,518   
  

 

 

    

 

 

  

Non-Interest Expense

     

Salaries and employee benefits

      24,820       21,782   

Stock compensation expense

      1,699        1,088   

Occupancy

      4,112       4,194   

Data processing

      1,968        1,868   

Legal and professional

      2,006       2,166   

FDIC deposit assessment

      844        880   

Merger expenses

      2,302       43   

OREO expenses

      15        95   

Office services expenses

      1,026       1,034   

Other operating expenses

      4,593        4,490   
  

 

 

    

 

 

  

Total Non-Interest Expense

      43,385       37,640   
  

 

 

    

 

 

  

Net Income Before Provision for Income Tax

      15,340        14,793   

Provision for income tax

      6,432       5,008   
  

 

 

    

 

 

  

Net Income

    $ 8,908      $ 9,785   
  

 

 

    

 

 

  

Preferred stock dividends and discount accretion

      124       —     
  

 

 

    

 

 

  

Net Income Available to Common Shareholders

    $ 8,784      $ 9,785   
  

 

 

    

 

 

  

Earnings Per Share

     

Basic earnings per share

    $ 0.77     $ 0.93   

Diluted earnings per share

    $ 0.75      $ 0.90   

Average shares outstanding

      11,393,000       10,567,000   

Diluted average shares outstanding

      11,668,000        10,837,000   

CU BANCORP

CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS

(Unaudited)

(Dollars in thousands)

 

     For the three months ended  
     December 31, 2014     September 30, 2014  
     Average
Balance		      Interest      Average
Yield/Rate		     Average
Balance		      Interest      Average
Yield/Rate		  

Interest-Earning Assets:

                 

Deposits in other financial institutions

    $ 275,340       $ 261         0.37 %    $ 278,623       $ 248         0.35 % 

Investment securities

      191,203        812        1.70 %      121,124        589        1.95 % 

Loans

      1,186,899         15,191         5.08 %      969,668         12,401         5.07 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total interest-earning assets

      1,653,442        16,264        3.90 %      1,369,415        13,238        3.84 % 

Non-interest-earning assets

      109,277              91,123         
  

 

 

          

 

 

        

Total Assets

    $ 1,762,719           $ 1,460,538        
  

 

 

          

 

 

        

Interest-Bearing Liabilities:

                 

Interest bearing transaction accounts

    $ 185,232       $ 84         0.18 %    $ 150,160       $ 70         0.18 % 

Money market and savings deposits

      469,065        282        0.24 %      363,693        225        0.25 % 

Certificates of deposit

      61,154         47         0.30 %      59,362         58         0.39 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total Interest Bearing Deposits

      715,451        413        0.23 %      573,215        353        0.24 % 

Securities sold under agreements to repurchase

      12,716         7         0.22 %      14,210         8         0.22 % 

Subordinated debentures and other debt

      9,642        108        4.38 %      9,740        109        4.38 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total Interest Bearing Liabilities

      737,809         528         0.28 %      597,165         470         0.31 % 

Non-interest bearing demand deposits

      830,711             699,592        
  

 

 

          

 

 

        

Total funding sources

      1,568,520              1,296,757         

Non-interest bearing liabilities

      17,157             16,041        

Shareholders’ Equity

      177,042              147,740         
  

 

 

          

 

 

        

Total Liabilities and Shareholders’ Equity

    $ 1,762,719           $ 1,460,538        
  

 

 

          

 

 

        

Net interest income

       $ 15,736            $ 12,768      
     

 

 

          

 

 

     

Net interest margin

            3.78 %            3.70 % 

CU BANCORP

CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS

(Unaudited)

(Dollars in thousands)

 

     For the three months ended  
     December 31, 2014     December 31, 2013  
     Average
Balance		      Interest      Average
Yield/Rate		     Average
Balance		      Interest      Average
Yield/Rate		  

Interest-Earning Assets:

                 

Deposits in other financial institutions

    $ 275,340       $ 261         0.37 %    $ 315,183       $ 237         0.29 % 

Investment securities

      191,203        812        1.70 %     101,497        493        1.94 % 

Loans

      1,186,899         15,191         5.08 %      911,649         12,111         5.27 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total interest-earning assets

      1,653,442        16,264        3.90 %     1,328,329        12,841        3.84 % 

Non-interest-earning assets

      109,277              92,025         
  

 

 

          

 

 

        

Total Assets

    $ 1,762,719           $ 1,420,354        
  

 

 

          

 

 

        

Interest-Bearing Liabilities:

                 

Interest bearing transaction accounts

    $ 185,232       $ 84         0.18 %    $ 144,009       $ 65         0.18 % 

Money market and savings deposits

      469,065        282        0.24 %     389,594        255        0.26 % 

Certificates of deposit

      61,154         47         0.30 %      64,302         58         0.36 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total Interest Bearing Deposits

      715,451        413        0.23 %     597,905        378        0.25 % 

Securities sold under agreements to repurchase

      12,716         7         0.22 %      15,604         11         0.28 % 

Subordinated debentures and other debt

      9,642        108        4.38 %     9,363        109        4.56 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total Interest Bearing Liabilities

      737,809         528         0.28 %      622,872         498         0.32 % 

Non-interest bearing demand deposits

      830,711             648,577        
  

 

 

          

 

 

        

Total funding sources

      1,568,520              1,271,449         

Non-interest bearing liabilities

      17,157             12,969        

Shareholders’ Equity

      177,042              135,936         
  

 

 

          

 

 

        

Total Liabilities and Shareholders’ Equity

    $ 1,762,719           $ 1,420,354        
  

 

 

          

 

 

        

Net interest income

       $ 15,736            $ 12,343      
     

 

 

          

 

 

     

Net interest margin

            3.78 %           3.69 % 

CU BANCORP

CONSOLIDATED YEAR-TO-DATE AVERAGE BALANCE SHEETS AND YIELD ANALYSIS

(Unaudited)

(Dollars in thousands)

 

     For the twelve months ended  
     December 31, 2014     December 31, 2013  
     Average
Balance		      Interest      Average
Yield/Rate		     Average
Balance		      Interest      Average
Yield/Rate		  

Interest-Earning Assets:

                 

Deposits in other financial institutions

    $ 265,076       $ 926         0.34 %    $ 245,102       $ 732         0.29 % 

Investment securities

      129,841        2,369        1.82 %      106,806        1,913        1.79 % 

Loans

      1,010,030         51,882         5.14 %      878,705         48,201         5.49 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total interest-earning assets

      1,404,947        55,177        3.93 %      1,230,613        50,846        4.13 % 

Non-interest-earning assets

      95,818              91,975         
  

 

 

          

 

 

        

Total Assets

    $ 1,500,765           $ 1,322,588        
  

 

 

          

 

 

        

Interest-Bearing Liabilities:

                 

Interest bearing transaction accounts

    $ 153,327       $ 278         0.18 %    $ 130,247       $ 238         0.18 % 

Money market and savings deposits

      390,185        963        0.25 %      361,486        1,027        0.28 % 

Certificates of deposit

      61,048         216         0.35 %      65,943         255         0.39 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total Interest Bearing Deposits

      604,560        1,457        0.24 %      557,676        1,520        0.27 % 

Securities sold under agreements to repurchase

      13,579         34         0.25 %      24,376         74         0.30 % 

Subordinated debentures and other debt

      9,556        431        4.45 %      9,368        485        5.11 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total Interest Bearing Liabilities

      627,695         1,922         0.31 %      591,420         2,079         0.35 % 

Non-interest bearing demand deposits

      704,437             587,637        
  

 

 

          

 

 

        

Total funding sources

      1,332,132              1,179,057         

Non-interest bearing liabilities

      16,133             12,287        

Shareholders’ Equity

      152,500              131,244         
  

 

 

          

 

 

        

Total Liabilities and Shareholders’ Equity

    $ 1,500,765           $ 1,322,588        
  

 

 

          

 

 

        

Net interest income

       $ 53,255            $ 48,767      
     

 

 

          

 

 

     

Net interest margin

            3.79 %            3.96 % 

CU BANCORP

LOAN COMPOSITION

(Dollars in thousands)

 

     December 31,
2014		      September 30,
2014		      December 31,
2013		  
     Unaudited      Unaudited      Audited  

Commercial and Industrial Loans:

    $ 528,517      $ 297,853      $ 299,473   

Loans Secured by Real Estate:

         

Owner-Occupied Nonresidential Properties

      339,309         198,406         197,605   

Other Nonresidential Properties

      481,517        303,606        271,818   

Construction, Land Development and Other Land

      72,223         58,474         47,074   

1-4 Family Residential Properties

      121,985        68,134        65,711   

Multifamily Residential Properties

      52,813         27,937         33,780   
  

 

 

     

 

 

     

 

 

  

Total Loans Secured by Real Estate

      1,067,847        656,557        615,988   
  

 

 

     

 

 

     

 

 

  

Other Loans:

      28,359        24,390        17,733   
  

 

 

     

 

 

     

 

 

  
                          
  

 

 

     

 

 

     

 

 

  

Total Loans

    $ 1,624,723      $ 978,800      $ 933,194   
  

 

 

     

 

 

     

 

 

  

COMMERCIAL AND INDUSTRIAL LINE OF CREDIT UTILIZATION

(Dollars in thousands)

 

     December 31,
2014		     September 30,
2014		     December 31,
2013		  
     Unaudited     Unaudited     Unaudited  

Disbursed

    $ 403,394         47 %    $ 199,052         46 %    $ 196,044         49 % 

Undisbursed

      453,266        53 %      232,554        54 %      201,860        51 % 
  

 

 

       

 

 

       

 

 

     

Total Commitments

    $ 856,660         100 %    $ 431,606         100 %    $ 397,904         100 % 
  

 

 

       

 

 

       

 

 

     

CU BANCORP

SUPPLEMENTAL DATA

(Dollars in thousands)

 

     December 31,
2014		     September 30,
2014		     December 31,
2013		  
     Unaudited     Unaudited     Unaudited  

Capital Ratios Table:

       

Total risk-based capital ratio

      11.59 %      12.83 %      12.80 % 

Tier 1 risk-based capital ratio

      10.93 %     11.88 %     11.84 % 

Tier 1 leverage capital ratio

      12.89 %      10.12 %      9.57 % 

Asset Quality Table:

       

Loans originated by the Bank on non-accrual

    $ 2,131     $ 2,018     $ 1,657   

Loans acquired through acquisition that are on non-accrual

      1,778        2,336        7,899   
  

 

 

    

 

 

    

 

 

  

Total non-accrual loans

      3,909       4,354       9,556   

Other Real Estate Owned

      850        —          —     
  

 

 

    

 

 

    

 

 

  

Total non-performing assets

    $ 4,759     $ 4,354     $ 9,556   
  

 

 

    

 

 

    

 

 

  

Net charge-offs/(recoveries) year to date

    $ 231     $ (227 )   $ 1,052   

Net charge-offs/(recoveries) quarterly

    $ 458     $ (29 )   $ 369   

Non-accrual loans to total loans

      0.24 %     0.44 %     1.02 % 

Total non-performing assets to total assets

      0.21 %     0.30 %     0.68 % 

Allowance for loan losses to total loans

      0.78 %     1.16 %     1.14 % 

Allowance for loan losses to total loans accounted at historical cost, which excludes purchased loans acquired by acquisition

      1.39 %     1.43 %     1.50 % 

Net year to date charge-offs/(recoveries) to average year to date loans

      0.02 %     (0.02 )%     0.12 % 

Allowance for loan losses to non-accrual loans accounted at historical cost, which excludes non-accrual purchased loans acquired by acquisition and related allowance

      591.7 %     562.2 %     639.8 % 

Allowance for loan losses to total non-accrual loans

      322.6 %     260.6 %     111.0 % 

As of December 31, 2014, 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 Calculation 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 per share data)

 

     December 31,
2014		      September 30,
2014		      December 31,
2013		  
     Unaudited      Unaudited      Audited  

Tangible Common Equity Calculation

         

Total shareholders’ equity

    $ 279,192       $ 148,773       $ 137,924   

Less: Preferred stock

      16,004        —          —     

Less: Goodwill

      63,950         12,292         12,292   

Less: Core deposit and leasehold right intangibles

      9,547        2,246        2,525   
  

 

 

     

 

 

     

 

 

  

Tangible Common Equity

    $ 189,691       $ 134,235       $ 123,107   
  

 

 

     

 

 

     

 

 

  

Common shares issued and outstanding

      16,683,856         11,231,801         11,081,364   

Tangible book value per common share

    $ 11.37      $ 11.95      $ 11.11   

Book value per common share

    $ 15.78       $ 13.25       $ 12.45   

CU BANCORP

GAAP RECONCILIATIONS

Core Net Income, ROAA, ROAE, Core Efficiency Ratio

(Unaudited)

The Company utilizes the term Core Net Income, a non-GAAP financial measure. CU Bancorp’s management believes Core Net Income is useful because it is a measure utilized by market analysts to understand the effects of merger-related expenses and provides an alternative view of the Company’s performance over time and in comparison to the Company’s competitors. Core net income should not be viewed as a substitute for net income. A reconciliation of CU Bancorp’s Net Income to Core Net Income, as well as related ratios is presented in the tables below for the periods indicated:

(Dollars in thousands except per share data)

 

     Three Months Ended  
     December 31,
2014		     September 30,
2014		     December 31,
2013		  

Net Income Available to Common Shareholders

    $ 1,183     $ 2,549     $ 2,832   

Add back: Merger expenses, net

      825        631        —     

Add back: Severance and retention expenses, net

      688        —          —     
  

 

 

    

 

 

    

 

 

  

Core Net Income Available to Common Shareholders

    $ 2,696     $ 3,180     $ 2,832   
  

 

 

    

 

 

    

 

 

  

Provision for Loan Losses

    $ 1,721      $ 35      $ 934   

Average Assets

    $ 1,762,719       1,460,538       1,420,354   

ROAA

      0.27 %      0.69 %      0.79 % 

Core ROAA*

      0.61 %     0.86 %     0.79 % 

Average Equity

    $ 177,042        147,740        135,936   

ROAE

      2.65 %     6.85 %     8.27 % 

Core ROAE**

      6.04 %      8.54 %      8.27 % 

Diluted Average Shares Outstanding

      13,228,000       11,190,000       10,999,000   

Diluted Earnings Per Share

    $ 0.09      $ 0.23      $ 0.26   

Diluted Core Earnings Per Share***

    $ 0.20     $ 0.28     $ 0.26   

 

* Core ROAA: Annualized core net income/average assets
** Core ROAE: Annualized core net income/average equity
*** Diluted Core Earnings Per Share: Annualized core net income/diluted average shares outstanding

 

     Three Months Ended  
     December 31,
2014		     September 30,
2014		     December 31,
2013		  

Net Interest Income

    $ 15,736     $ 12,768     $ 12,343   

Non-Interest Income

      2,132        2,004        1,931   

Non-Interest Expense

      14,107       10,031       9,620   

Subtract: Merger expenses

      1,174        631        —     

Subtract: Severance and retention

      1,187        —          —     
  

 

 

    

 

 

    

 

 

  

Core Non-Interest Expense

    $ 11,746     $ 9,400     $ 9,620   
  

 

 

    

 

 

    

 

 

  

Efficiency Ratio*

      79 %     68 %     68 % 

Core Efficiency Ratio**

      66 %      64 %      68 % 

 

* Efficiency ratio represents non-interest expense as a percent of net interest income plus non-interest income, excluding gain on sale of securities, net

** Core efficiency ratio represents core non-interest expense as a percent of net interest income plus non-interest income, excluding gain on sale of securities, net

CU BANCORP

GAAP RECONCILIATIONS

Core Net Income, ROAA, ROAE, Core Efficiency Ratio

(Unaudited)

The Company utilizes the term Core Net Income, a non-GAAP financial measure. CU Bancorp’s management believes Core Net Income is useful because it is a measure utilized by market analysts to understand the effects of merger-related expenses and provides an alternative view of the Company’s performance over time and in comparison to the Company’s competitors. Core net income should not be viewed as a substitute for net income. A reconciliation of CU Bancorp’s Net Income to Core Net Income, as well as related ratios is presented in the tables below for the periods indicated:

(Dollars in thousands except per share data)

 

     Twelve Months Ended  
     December 31,
2014		     December 31,
2013		  

Net Income Available to Common Shareholders

    $ 8,784     $ 9,785   

Add back: Merger expenses, net

      1,952        43   

Add back: Severance and retention expenses, net

      693        —     
  

 

 

    

 

 

  

Core Net Income Available to Common Shareholders

    $ 11,429     $ 9,828   
  

 

 

    

 

 

  

Provision for Loan Losses

    $ 2,329      $ 2,852   

Average Assets

    $ 1,500,765     $ 1,322,588   

ROAA

      0.59 %      0.74 % 

Core ROAA*

      0.76 %     0.74 % 

Average Equity

    $ 152,500        131,244   

ROAE

      5.76 %     7.46 % 

Core ROAE**

      7.49 %      7.49 % 

Diluted Average Shares Outstanding

      11,668,000       10,837,000   

Diluted Earnings Per Share

    $ 0.75      $ 0.90   

Diluted Core Earnings Per Share***

    $ 0.98      $ 0.91   

 

* Core ROAA: Year-to-date core net income/average assets
** Core ROAE: Year-to-date core net income/average equity
*** Diluted Core Earnings Per Share: Year-to-date core net income/diluted average shares outstanding

 

     Twelve Months Ended  
     December 31,
2014		     December 31,
2013		  

Net Interest Income

    $ 53,255     $ 48,767   

Non-Interest Income

      7,709        6,518   

Non-Interest Expense

      43,385       37,640   

Subtract: Merger expenses

      2,302        43   

Subtract: Severance and retention expenses

      1,195        —     
  

 

 

    

 

 

  

Core Non-Interest Expense

    $ 39,888     $ 37,597   
  

 

 

    

 

 

  

Efficiency Ratio*

      71 %     68 % 

Core Efficiency Ratio**

      65 %      68 % 

* Efficiency ratio represents non-interest expense as a percent of net interest income plus non-interest income, excluding gain on sale of securities, net
** Core efficiency ratio represents core non-interest expense as a percent of net interest income plus non-interest income, excluding gain on sale of securities, net