|By Marketwired .||
|February 5, 2014 09:12 PM EST||
SAN JOSE, CA -- (Marketwired) -- 02/05/14 -- Focus Business Bank (OTCQB: FCSB) announced unaudited financial results for the quarter and year ended December 31, 2013. Net income for the quarter was $315,000, or $0.11 per diluted share. For the year ended December 31, 2013, net income was $870,000, or $0.30 per diluted share, compared to $3,458,000, or $1.19 per diluted share, for the year ended December 31, 2012. The changes in net income for the quarter and year ended December 31, 2013 compared to the same periods in 2012 are primarily attributable to the reversal of the Bank's deferred tax asset in late 2012. Pre-tax income of $575,000 and $1,368,000 for the quarter and year ended December 31, 2013 increased 53% and 7%, respectively, compared to pre-tax income of $375,000 and $1,284,000 in the prior year quarter and annual periods. The primary contributors to the growth in pre-tax income were increases in net interest income and non-interest income which were partially offset by increased personnel and infrastructure growth.
President and Chief Executive Officer Richard L. Conniff commented on the December 31, 2013 results, "The Bank experienced outstanding growth in earning assets and deposits in 2013. Over the past five years, the Bank has committed heavily to growing its specialty businesses, cash management services for condominium homeowner associations and public benefit companies, both of which are significant sources of deposits. In addition to the strong growth in deposits from these specialty businesses, we also experienced growth in our core business banking lines resulting in loan growth and additional deposits. While the growth required an investment in personnel and other infrastructure, the Bank is now well positioned to benefit from the recurring long-term revenue generated by this larger base of earning assets."
Highlights of the year ended December 31, 2013
- Non-interest bearing deposits of $94.7 million at December 31, 2013 represent a 50% increase over December 31, 2012 and a record high level. Non-interest bearing deposits reflect the growth in business banking relationships.
- Interest bearing deposits of $190.4 million represent a 54% increase over December 31, 2012 and a record high level. The increase is primarily related to growth in the Bank's specialty businesses.
- Total loans of $140.3 million at December 31, 2013 were 18% above December 31, 2012 and a record high level.
- Net interest income of $6.8 million for the year ended December 31, 2013 represented 12% growth over the year ended December 31, 2012.
- Net income after taxes was $870,000 for the year ended December 31, 2013. Pre-tax net income of $1.4 million for the year was a record high.
Assets and Liabilities
Investment securities of $63.3 million have grown 116% since December 31, 2012 and interest bearing balances with other banks have grown 504% over that same period. The growth in investments and interest bearing balances with other banks has been funded primarily by increased core deposits.
The growth in deposits in 2013 was extraordinary and related, in part, to changing market conditions including opportunities following a competitor's sale of a competing business line to another bank. The timing of these market events has resulted in a very liquid balance sheet at December 31, 2013.
While the Bank was successful growing loans by 18%, the pace of growth in deposits was much higher. The loan to deposit ratio at December 31, 2013 is 49% compared to 64% at December 31, 2012. The Bank added to its lending and business development staff in 2013 and expects those investments to increase loan originations and the loan to deposit ratio in the future. At December 31, 2013, the Bank's loan portfolio is a mix of commercial and industrial loans and commercial real estate loans, primarily to businesses in Santa Clara County.
Net Interest Income
Net interest income for the quarter and year ended December 31, 2013 grew significantly over the same periods ending December 31, 2012. The increase in net interest income was directly related to the higher volume of earning assets. The increase in net interest income was partially offset by a lower net interest margin related to the mix of earning assets with a significantly higher proportion of earning assets being in lower yielding investments and interest bearing deposits with other banks. Short term market interest rates also remain at historically low levels.
Non-interest income was $1,578,000 for the year ended December 31, 2013 compared to $1,159,000 for the year ended December 31, 2012. Non-interest income for both annual periods consisted primarily of gains on the sale of SBA loans, a core business of the Bank, which totaled $1,158,000 and $717,000, for 2013 and 2012, respectively. Other non-interest income includes service charges and income from the servicing of loans sold in the secondary market.
Non-interest expense for 2013 was $7,013,000 compared to $5,964,000 for 2012. The increase in operating expenses is primarily the result of investments in personnel, marketing and infrastructure to support the Bank's substantial growth in earning assets and low cost deposits. The number of full-time equivalent employees at December 31, 2013 was 32 compared to 28 at December 31, 2012.
The Bank had no loan charge-offs in 2012 or 2013 and made no provision for loan losses in those years. The allowance for loan losses was 1.82% of total loans at December 31, 2013 compared to 2.13% at December 31, 2012. At December 31, 2013, the Bank had two loans totaling $1.1 million which were not performing in accordance with their contractual loan terms but were considered by management to be in the process of collection. Both loans were originated under the United States Small Business Administration (SBA) 7a loan program and, therefore, have guarantees from the SBA associated with them.
Focus Business Bank has capital ratios in excess of the minimum regulatory requirements for a bank to be considered well capitalized. At December 31, 2013, the total risk-based capital ratio was 14.84% compared to the regulatory well capitalized minimum of 10%. The Bank has not participated in any government sponsored capital programs, including the Troubled Asset Relief Program ("TARP") or the Small Business Lending Fund ("SBLF").
About Focus Business Bank
Focus Business Bank is dedicated to meeting the banking needs of closely-held businesses and professionals in Santa Clara County. The Bank's office is located at 10 Almaden Boulevard in downtown San Jose, California and offers a variety of commercial banking products including loans, deposits, remote deposit capture and other cash management services oriented toward closely-held businesses and their owners. The Bank specializes in commercial loans and is also an SBA Preferred Lender. The Bank also serves not-for-profit businesses and condominium homeowner associations by offering expertise, market knowledge and specialized products and services to these customers.
This release may contain forward-looking statements, such as, among others, statements about plans, expectations and goals concerning future growth and performance. Forward-looking statements are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, including the real estate market in California and other factors beyond the Bank's control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.
Focus Business Bank Unaudited Summary Financial Information As of ------------------------------- 12 Month BALANCE SHEET 31-Dec-13 30-Sep-13 31-Dec-12 % Change --------- --------- --------- -------- ($ in ',000s except per share data) ASSETS Cash and due from banks Interest bearing $ 61,323 $ 50,312 $ 52,560 17% Non-interest bearing 41,668 42,467 6,895 504% Federal funds sold 501 505 505 -1% Investment securities 63,293 47,602 29,368 116% Loans 140,342 134,315 119,415 18% Allowance for loan losses (2,548) (2,547) (2,545) 0% --------- --------- --------- Net Loans 137,794 131,768 116,870 18% Other assets 8,080 8,257 7,237 12% --------- --------- --------- TOTAL ASSETS $ 312,659 $ 280,911 $ 213,435 46% ========= ========= ========= LIABILITIES Deposits Non-interest bearing $ 94,661 $ 80,980 $ 63,065 50% Interest bearing 190,354 172,509 123,295 54% --------- --------- --------- Total deposits 285,015 253,489 186,360 53% Other liabilities 975 1,035 880 11% --------- --------- --------- TOTAL LIABILITIES 285,990 254,524 187,240 53% Stockholders' equity 26,695 26,387 26,195 2% --------- --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY $ 312,685 $ 280,911 $ 213,435 47% ========= ========= ========= Book value/share $ 9.10 $ 9.00 $ 8.97 1% Balance Sheet Ratios Loan/deposit 49% 53% 64% Non-interest/total deposit 33% 32% 34% Regulatory Capital Ratios Tier-1 leverage 8.50% 9.12% 11.77% Tier-1 risk based capital 13.58% 14.04% 16.81% Total risk-based capital 14.84% 15.30% 18.07% Asset Quality Metrics Non-performing loans $ 1,098 $ - $ - Non-performing loans/total loans 0.78% 0.00% 0.00% ALLL/total loans 1.82% 1.90% 2.13% Focus Business Bank Unaudited Summary Financial Information (cont.) Quarters Ended Year Ended -------------------- -------------------- INCOME STATEMENT 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12 --------- --------- --------- --------- ($ in ',000s except per share data) Interest income $ 2,067 $ 1,769 $ 7,445 $ 6,531 Interest expense 175 123 642 442 --------- --------- --------- --------- Net interest income 1,892 1,646 6,803 6,089 Provision for loan losses - - - - Non-interest income 535 421 1,578 1,159 Non-interest expense 1,852 1,692 7,013 5,964 --------- --------- --------- --------- Pre-tax income (loss) 575 375 1,368 1,284 Income taxes 260 (16) 498 (2,174) --------- --------- --------- --------- Net income $ 315 $ 391 $ 870 $ 3,458 ========= ========= ========= ========= Net income per diluted share $ 0.11 $ 0.13 $ 0.30 $ 1.19 Performance Metrics Net interest margin 2.68% 3.35% 2.80% 3.60% Return on average assets 0.42% 0.75% 0.33% 1.95% Return on average equity 4.65% 5.98% 3.28% 14.47%
Richard L. Conniff
President and Chief Executive Officer
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