Net income increases 29% over prior year;
earnings per share increase 27% over prior year
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 2016.
Full Year and Fourth Quarter 2016
Highlights
- Net income in 2016 was $27.5
million, up 29% from the prior year
- Net income for fourth quarter
2016 was $7.2 million, up 30% from the year-ago quarter
- Return on average tangible common
equity of 11.07%, up from 9.86% in the prior year
- Efficiency ratio improved to
58%, from 61% in the prior year
- Net interest income increased
$2.2 million or 10% compared to the fourth quarter of 2015
- Tangible book value per share
increased $1.43 per share or 11% to $14.10 from the prior
year
- Total assets increased $360
million to $3 billion, up 14% from the prior year
- Total deposits increased $321
million to $2.6 billion, up 14% from the prior year
- Non-interest bearing demand
deposits were 54% of total deposits at year-end 2016
- Year-end average deposits per
branch increased to $290 million
- Total loans increased $217
million to $2.1 billion, up 12% from the prior year
- Net organic loan growth of $111
million in the fourth quarter
- Nonperforming assets to total
assets at 0.04% at December 31, 2016
- Continued status as
well-capitalized, the highest regulatory category
Full Year and Fourth Quarter Summary
Results
“2016 was another year of strong financial performance for the
Company,” said David Rainer, Chairman and Chief Executive Officer
of CU Bancorp and California United Bank. “Our return on average
tangible common equity increased to more than 11%, return on
average assets increased to 0.92% and our efficiency ratio was 58%.
Momentum was maintained throughout the year, with fourth quarter
2016 performance resulting in net income and diluted earnings per
share each up 30% over the year-ago quarter. This led to record net
income in 2016 of $27.5 million and diluted earnings per share of
$1.50, an increase of 29% and 27%, respectively, from 2015.
Activities to enhance BSA Compliance and address the BSA Consent
Order resulted in $1.7 million in non-recurring charges, versus our
earlier estimate of $2 million.
“As we have done from our inception, we continue to focus on
low-cost core deposits, which provide an important part of the
value of our franchise. In 2016 CUB’s total deposits increased $321
million to $2.6 billion, and I’m pleased to report that even as the
prime rate increased in December of 2015 and 2016, our cost of
deposits in the fourth quarter remained within 0.01% of the
year-ago quarter. Total assets have grown by $730 million in the
two years since the merger of CUB and 1st Enterprise, buttressing
our commitment to organic growth.
“In the fourth quarter of 2016 CUB achieved net organic loan
growth of $111 million; however, similar to last year, nearly all
of the loan production booked late in December, and the fourth
quarter’s interest income didn’t fully benefit from our strong
performance. This loan growth, combined with the recent increase in
the prime rate—positively affecting 29% of the Company’s loan
portfolio—as well as our ongoing outstanding credit quality, place
the Company well poised for 2017. We also note that, at this time,
for 2017 we are not expecting material non-recurring expenses
related to BSA.”
“Year over year, we grew total loans $217 million or 12% to $2.1
billion—surpassing the $2 billion mark for the first time in the
Company’s history,” said Brian Horton, President of CU Bancorp and
California United Bank. “Commercial and industrial loans increased
modestly by $3 million while commercial and industrial line of
credit commitments increased $34 million from the third quarter of
2016 through new relationships to the Bank. Utilization of
commercial and industrial lines of credit decreased from 45% to
40%, of which 2% was due to the increase in commitments and 3% was
due to pay downs, reflecting the strong balance sheets of our
borrowers. While commercial and industrial lending remains our
business banking focus, fourth quarter loan growth came primarily
through growth in our portfolio of loans secured by real estate,
encompassing most types of this borrowing category. These are
generally loans that have strong guarantors and moderate levels of
loan to value. Furthermore, we have historically experienced a low
level of charge-offs from real estate secured loans. 2016 again
demonstrated our ability to combine growth with discipline in
credit underwriting; witnessed by the ratio of non-performing
assets to total assets of 0.04%.”
The following table shows the Company’s various non-recurring,
non-interest expense of $1.7 million related to the BSA Consent
Order, and $203 thousand in occupancy expense related to the
closure of the Simi Valley administrative office in 2016:
Non-Recurring Costs Associated with BSA and Office Closure
Q4 2016 Q3 2016 YTD
2016
Non-Interest Expense
Salaries and employee
benefits $ 30,249 $ 106,090 $ 136,339
Occupancy 29,394 246,673
276,067 Legal and professional 603,014
601,822 1,209,836 FDIC deposit
assessment (15,000 ) 15,000
- Other operating expenses 15,620
190,717 304,105
Total Non-Interest Expense
$ 663,277 $ 1,160,302 $ 1,926,347
The Company originally estimated $2 million for one-time BSA
costs; actual incurred in 2016 was $1.7 million. Some small amount
of one-time costs is expected in the first quarter of 2017, but at
this time the total is not expected to exceed the original
estimate.
Full Year and Fourth Quarter 2016
Operating Results
Net Income and Profitability Ratios
Net income for 2016 was $27.5 million, compared with net income
of $21.2 million for 2015. Net income available to common
shareholders for 2016 was $26.2 million or $1.50 per fully diluted
share, compared with net income available to common shareholders of
$20.1 million or $1.18 per fully diluted share for 2015. The
increases were primarily related to strong loan growth resulting in
increased net interest income. Additionally, the Company’s adoption
of ASU 2016-09 during the third quarter of 2016 had a positive
impact of $1.4 million or $0.09 per share in the Company’s diluted
earnings per share for the full year of 2016. The Company recorded
$1.9 million of non-recurring charges in 2016, as discussed further
in the non-interest expense section, compared to none in the
previous year. There were no merger-related expenses in 2016,
compared to $921 thousand in 2015.
Net income available to common shareholders for the fourth
quarter of 2016 was $6.9 million or $0.39 per fully diluted share,
compared with net income available to common shareholders of $5.2
million or $0.30 per fully diluted share for the fourth quarter of
2015. The growth in net income from the prior period was primarily
driven by an increase of $2.2 million in net interest income.
Net income available to common shareholders for the fourth
quarter of 2016 was $6.9 million or $0.39 per fully diluted share,
compared with net income available to common shareholders of $6.3
million or $0.36 per fully diluted share in the third quarter of
2016. The Company’s adoption of ASU 2016-09 in the third quarter of
2016 had a positive impact in the fourth quarter of $523 thousand
or $0.03 per diluted earnings per share. Due to strong loan growth
the Company recorded a provision for loan losses of $882 thousand
in the fourth quarter of 2016, compared to $697 thousand in the
previous quarter. In the fourth quarter of 2016 the Company
recorded non-recurring expenses of $663 thousand, compared to $1.2
million in the third quarter of 2016.
The following table shows certain of the Company’s performance
ratios based on net income available to common shareholders for the
fourth and third quarters of 2016, the fourth quarter of 2015, and
the full years of 2016 and 2015.
2016 2015
Q4 2016 Q3 2016
Q4 2015 Return on average tangible common equity
11.07% 9.86% 10.99%
10.30% 9.61%
Return on average
assets 0.92% 0.80%
0.91% 0.87% 0.77%
Operating
efficiency ratio 58% 61%
58% 60% 58%
Net Interest Income and Net Interest Margin
Net interest income totaled $98.1 million for the full year of
2016, an increase of $10.7 million or 12% from the previous year.
The increase was due to strong net loan growth.
Net interest margin for the full year of 2016 was 3.71%,
compared to 3.83% in the previous year. The decrease was due to
average loans being a lower percentage of average earning assets in
2016 than in 2015, as well as compression in average loan yields
compared to the prior year. However, net interest income grew by
over 12% year over year.
The net interest margin in the fourth quarter of 2016 was 3.60%,
compared to 3.72% in the fourth quarter of 2015. The decrease was
primarily due to average loans being a lower percentage of average
earnings assets in the fourth quarter of 2016 compared to the
fourth quarter of 2015. However, net interest income for the fourth
quarter of 2016 grew by $2.2 million or 10% over the year-ago
quarter.
Net interest income for the fourth quarter of 2016 increased
$283 thousand from the third quarter of 2016, despite the fact that
average loans for the fourth quarter were lower than period-end
loans for the third quarter, which was largely the result of all of
the fourth quarter’s loan growth occurring at the end of the
quarter. The increase in net interest income was primarily related
to an increase in the average balance of investment securities, as
the Bank took advantage of higher market rates to deploy some of
its strong deposit growth into investment securities.
The Company’s net interest income was positively impacted in
both the fourth quarter of 2016 and the third quarter of 2016 by
the recognition of fair value discount earned on early payoffs of
acquired loans. In the fourth quarter of 2016 the Company recorded
$493 thousand in discount earned on early loan payoffs of acquired
loans and other associated payoff benefits aggregating to $336
thousand, with a positive impact on the net interest margin of 11
basis points. In the third quarter of 2016 the Company recorded
$629 thousand in discount earned on early loan payoffs of acquired
loans and other associated payoff benefits of $177 thousand, with a
positive impact on the net interest margin of 12 basis points.
The core loan yield for the fourth quarter of 2016 was 4.66%, a
decrease from 4.69% in the prior quarter, as the increase in the
prime rate did not occur until December 15, 2016.
The net interest margin in the fourth quarter of 2016 was 3.60%,
compared to 3.72% in the third quarter of 2016. The decrease was
largely due to average loans representing a smaller percentage of
average earning assets in the fourth quarter than the third
quarter, as discussed above. The fourth quarter margin did benefit
from the continued low cost of funds of 0.12%, the same as the
fourth quarter of 2015 and a decrease from 0.13% in the third
quarter of 2016, as well as a decrease in the cost of deposits to
0.10% from 0.11% in the previous quarter.
As of December 31, 2016, the Company had $9.8 million of
discount remaining on acquired accruing loans.
Non-interest Income
Non-interest income in 2016 was $12.0 million, an increase of
$282 thousand or 2% from $11.7 million in the prior year. Gain on
sale of SBA loans decreased $438 thousand from the prior year to
$1.4 million; however, that decrease was offset by an increase in
other non-interest income of $404 thousand, which was primarily due
to an increase of $373 thousand in letter of credit fees. “The
number of SBA loans CUB originates has remained consistent over the
last two years, although in recent quarters premiums have been down
and we’ve done less SBA real estate lending, which has higher
individual balances than SBA commercial and industrial lending, the
result of which has been a lower gain on sale the last two
quarters,” said Rainer. “As the Bank continues to grow its core
commercial lending business, gain on sale of SBA loans contributes
a smaller portion of our net revenues and income.” Deposit account
service charge income and gain on sale of securities increased $170
thousand and $146 thousand, respectively, in 2016, compared with
2015.
Non-interest income was $3.2 million in the fourth quarter of
2016, an increase of $120 thousand or 4% from $3.0 million in the
same quarter of the prior year. Other non-interest income in the
fourth quarter of 2016 included special dividends of $359 thousand,
compared to none in the year-ago quarter. The special dividend
offset the decrease of $388 thousand in SBA gain on sale income in
the fourth quarter of 2016, compared to the year-ago quarter. In
the year-ago quarter a loss of $92 thousand on fixed assets had
been recorded, which was not repeated in the fourth quarter of
2016.
Non-interest income in the fourth quarter of 2016 increased $101
thousand or 3% over the third quarter of 2016. Other non-interest
income in the fourth quarter of 2016 increased $200 thousand from
the third quarter of 2016 and included special dividends of $359
thousand, compared to none in the previous quarter. The special
dividend offset declines in transaction referral fee income and
gain on sale of SBA loans of $169 thousand and $58 thousand,
respectively.
Non-interest Expense
Non-interest expense incurred in 2016 was $63.4 million, an
increase of $3.5 million, or 6% from $60.0 million in the prior
year. The increase in year-over-year non-interest expense is
related to an increase of $2.9 million in salaries and employee
benefits and stock based compensation expense, as the Company’s
active full-time equivalent employees increased to 288 at December
31, 2016, compared to 266 at December 31, 2015. While the largest
portion of this increase relates to BSA activities, other increases
in full-time equivalent employees were made to support the high
level of customer service CUB provides commensurate with its growth
over the last two years. Additionally, the Company recorded $1.9
million in non-recurring expenses in 2016 related to the BSA
Consent Order and the closing of an office. There were no
merger-related expenses in 2016, compared to $921 thousand in 2015.
Additionally, other real estate owned valuation write-downs and
expense decreased by $160 thousand.
Non-interest expense for the fourth quarter of 2016 was $16.4
million, an increase of $1.3 million over the year-ago quarter. The
Company’s non-interest expense for salaries and benefits increased
$596 thousand from the year-ago quarter, and the Company recorded
non-recurring expenses of $663 thousand, compared to none in the
year-ago quarter.
Non-interest expense for the fourth quarter of 2016 was $16.4
million, a decrease of $366 thousand compared to the third quarter
of 2016. The decrease was largely related to a decrease in
non-recurring expenses of $497 thousand compared to the third
quarter of 2016, which quarter included a write-down on the closing
of an office, reflected in the Company’s occupancy expense.
At December 31, 2016, the Company had 288 active full-time
equivalent employees, compared to 285 in the previous quarter; the
increase was primarily related to a net addition of two
relationship managers—for a total relationship management team of
63 employees—as well as an increase in the BSA department employee
level. The increase in expenses associated with ongoing BSA
compliance reached its original expected recurring annual expense
level of $1.1 million in the fourth quarter. However, as the
Company continued to address its BSA progress, it is anticipated
there will be an additional $400 thousand in annual ongoing
expenses related to an increase in BSA staffing.
Income Tax
In the fourth quarter of 2016 the effective tax rate was 36%,
which benefitted from the exercising of 93,310 employee stock
options during the quarter, with a discrete excess tax benefit of
$523 thousand. For the full year of 2016, the effective tax rate
was 37%, which benefitted from the exercising of 505,274 options
during 2016, with a discrete tax benefit of $1.4 million; without
the excess tax benefit, the effective tax rate would have been 40%.
The actual tax rate may be volatile, dependent upon the volume of
stock events and differential in stock price between grant and
event. There are 27,942 options that remain outstanding expiring in
2017.
Balance Sheet
Assets
Total assets at December 31, 2016, were $3.0 billion, a
year-over-year increase of $360 million from December 31, 2015. The
increase in total assets was primarily due to strong deposit growth
throughout 2016.
During the fourth quarter of 2016, the Company had a net
increase in its investment securities of $95 million from the prior
quarter and $154 million from December 31, 2015, reducing its
balances at the Federal Reserve to $90 million at December 31,
2016. The purchases were made in conjunction with the increase in
yields seen in the later part of the fourth quarter. As of December
31, 2016, the investment portfolio’s duration is only 2.3.
The increase in interest rates from September 30, 2016, to
December 31, 2016, also impacted the Company’s tangible book value;
however, as a result of the short duration of the Bank’s investment
securities portfolio, the change in unrealized gain (loss) was only
72 basis points of the available for sale securities.
Tangible book value per share at December 31, 2016, was $14.10,
an increase of $0.26 or 2% from September 30, 2016, and $1.43 or
11% from December 31, 2015.
Loans
Total loans were $2.1 billion at December 31, 2016, an increase
of $75 million or 15% annualized from the end of the prior quarter
and the first time the Company’s total loans have exceeded $2.0
billion. This also represents an increase of $217 million or 12%
from December 31, 2015. The increases in total loans from the prior
year and the prior quarter were due to strong organic loan
growth.
During the fourth quarter of 2016, the Company had $111 million
of net organic loan growth. Pay downs and payoffs in the acquired
loan portfolios were approximately $36 million in the same
quarter.
Total commercial and industrial line of credit commitments
increased $34 million from the prior quarter, and commercial and
industrial loans outstanding increased $3.2 million from the prior
quarter.
Loans secured by real estate grew $77 million in the fourth
quarter of 2016, compared to the prior quarter, and the growth was
well distributed throughout the Company’s loans secured by real
estate portfolios. Owner-occupied real estate, and construction,
land development and other land, each accounted for 28% of the
growth in loans secured by real estate, and nonresidential
properties accounted for 26% of the growth in loans secured by real
estate, with multifamily residential properties representing 13% of
the growth in loans secured by real estate.
At December 31, 2016, commercial and industrial loans, and owner
occupied real estate loans combined were $954 million or 47% of
total loans, compared to $930 million or 47% at September 30, 2016.
At December 31, 2015, commercial and industrial loans, and owner
occupied real estate loans combined were $945 million or 52% of
total loans.
Deposits
Total deposits at December 31, 2016 were $2.6 billion, an
increase of $102 million from the end of the prior quarter and $321
million from the prior year. Non-interest bearing deposits at
December 31, 2016 were $1.4 billion or 54% of total deposits,
compared to $1.4 billion or 56% of total deposits at September 30,
2016 and $1.3 billion or 56% at December 31, 2015. Average deposits
per branch were $290 million as of December 31, 2016.
Cost of deposits was 0.10% and 0.11%, for the fourth quarter and
full-year 2016, respectively. Cost of deposits for the fourth
quarter and full year of 2015 was 0.10%.
Asset Quality
Total non-performing assets were $1.1 million, or 0.04% of total
assets at December 31, 2016, compared with $1.2 million, or 0.04%
of total assets, at September 30, 2016.
The Company had $428 thousand in net recoveries in 2016,
compared to $2.0 million in net charge-offs in 2015. Excluding
2016, CUB’s net loan charge-offs for the prior five years averaged
0.06%.
The Company recorded a loan loss provision of $882 thousand for
the fourth quarter of 2016. The loan loss provision reflects strong
net organic loan growth of $111 million during the fourth
quarter.
Total nonaccrual loans were $1.1 million, or 0.05% of total
loans, at December 31, 2016, compared with $1.2 million, or 0.06%
of total loans, at September 30, 2016. Of the remaining nonaccrual
loans, none individually exceeds $300 thousand.
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 1.18% at December 31, 2016, compared
with 1.20% at September 30, 2016, and 1.25% at December 31,
2015.
Capital
CU Bancorp remained well capitalized at December 31, 2016, with
total risk weighted assets of $2.68 billion. All of the Company’s
capital ratios are above minimum regulatory standards for “well
capitalized” institutions.
December 31, 2016
Minimum Capital Ratios to Be
Considered
“Well
Capitalized”
Basel III Minimum Capital Ratios
with Buffer
CU
Bancorp
Total Risk-Based Capital Ratio 10% 8.625% 11.44% Tier 1 Risk-Based
Capital Ratio 8% 6.625% 10.68% Common Equity Tier 1 Ratio 6.5%
5.125% 9.61% Tier 1 Leverage Capital Ratio 5% NA 9.72%
At December 31, 2016, tangible common equity was $250 million
with common shares issued of 17,759,006 as of the same date,
resulting in tangible book value per common share of $14.10. This
compares to tangible common equity of $245 million with a tangible
book value per common share of $13.84 at September 30, 2016.
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”) 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; 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. 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.
CU BANCORP CONSOLIDATED BALANCE SHEETS (Dollars in
thousands) December 31, September 30, December
31, 2016 2016 2015
Unaudited Unaudited Audited
ASSETS Cash and due from banks $
41,281 $ 47,701 $ 50,960 Interest earning deposits in other
financial institutions 167,789 244,205
171,103 Total cash and cash equivalents 209,070
291,906 222,063 Certificates of deposit in other financial
institutions 51,245 51,490 56,860 Investment securities
available-for-sale, at fair value 469,950 375,094 315,785
Investment securities held-to-maturity, at amortized cost
42,027 40,073 42,036 Total
investment securities 511,977 415,167 357,821 Loans 2,050,226
1,974,941 1,833,163 Allowance for loan loss (19,374 )
(18,371 ) (15,682 ) Net loans 2,030,852 1,956,570 1,817,481
Premises and equipment, net 4,184 4,354 5,139 Deferred tax assets,
net 17,181 15,614 17,033 Other real estate owned, net - - 325
Goodwill 64,603 64,603 64,603 Core deposit and leasehold right
intangibles, net 6,300 6,665 7,671 Bank owned life insurance 51,216
50,889 49,912 Accrued interest receivable and other assets
48,132 35,914 35,734
Total
Assets $ 2,994,760 $ 2,893,172 $ 2,634,642
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES Non-interest bearing demand deposits $ 1,400,097
$ 1,399,320 $ 1,288,085 Interest bearing transaction accounts
332,702 284,154 261,123 Money market and savings deposits 845,110
786,882 679,081 Certificates of deposit 29,480
35,033 58,502
Total deposits 2,607,389
2,505,389 2,286,791 Securities sold under agreements to repurchase
18,816 24,251 14,360 Subordinated debentures, net 9,856 9,817 9,697
Accrued interest payable and other liabilities 20,514
20,785 16,987
Total Liabilities
2,656,575 2,560,242 2,327,835
SHAREHOLDERS' EQUITY Serial preferred stock 16,955
17,021 16,995 Common stock 235,873 234,383 230,688 Additional
paid-in capital 25,213 24,847 23,017 Retained earnings 63,163
56,296 36,923 Accumulated other comprehensive income (loss)
(3,019 ) 383 (816 )
Total Shareholders'
Equity 338,185 332,930
306,807
Total Liabilities and Shareholders' Equity $
2,994,760 $ 2,893,172 $ 2,634,642
CU
BANCORP CONSOLIDATED STATEMENTS OF INCOME (Dollars in
thousands, except share data) For the
three months ended December 31,2016 September 30,2016
December 31,2015 Unaudited Unaudited Unaudited
Interest
Income Interest and fees on loans $ 23,888 $ 23,958 $ 22,298
Interest on investment securities 1,727 1,419 1,163 Interest on
interest bearing deposits in other financial institutions
536 478 346 Total Interest Income 26,151
25,855 23,807
Interest Expense Interest on
interest bearing transaction accounts 116 102 110 Interest on money
market and savings deposits 532 524 434 Interest on certificates of
deposit 29 46 40 Interest on securities sold under agreements to
repurchase 15 13 9 Interest on subordinated debentures 128
122 112 Total Interest Expense 820 807
705
Net Interest Income 25,331 25,048 23,102
Provision for loan losses 882 697 2,249
Net
Interest Income After Provision For Loan Losses 24,449
24,351 20,853
Non-Interest Income Gain on sale
of securities, net 117 141 112 Gain on sale of SBA loans, net 131
189 519 Deposit account service charge income 1,193 1,210 1,191
Other non-interest income 1,718 1,518 1,217
Total Non-Interest Income 3,159 3,058 3,039
Non-Interest Expense Salaries and employee benefits 9,540
9,396 8,944 Stock compensation expense 903 939 836 Occupancy 1,491
1,673 1,492 Data processing 684 657 623 Legal and professional
1,222 1,434 497 FDIC deposit assessment 327 389 412 OREO loss and
expenses - 2 66 Office services expenses 352 413 322 Other
operating expenses 1,882 1,864 1,881 Total
Non-Interest Expense 16,401 16,767 15,073
Net Income Before Provision for Income Tax Expense 11,207
10,642 8,819 Provision for income tax expense 4,037
4,059 3,312
Net Income $ 7,170 $ 6,583 $ 5,507
Preferred stock dividends and discount accretion 303
304 297
Net Income Available to Common Shareholders $
6,867 $ 6,279 $ 5,210 Earnings Per Share Basic earnings per
share $ 0.39 $ 0.36 $ 0.31 Diluted earnings per share $ 0.39 $ 0.36
$ 0.30 Average shares outstanding 17,417,000 17,339,000 16,744,000
Diluted average shares outstanding 17,675,000 17,605,000 17,163,000
CU BANCORP CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data) For the
Year Ended December 31, 2016 2015 Unaudited Audited
Interest Income Interest and fees on loans $ 93,589 $ 84,537
Interest on investment securities 5,793 4,518 Interest on interest
bearing deposits in other financial institutions 1,870
1,087 Total Interest Income 101,252 90,142
Interest Expense Interest on interest bearing transaction
accounts 416 413 Interest on money market and savings deposits
2,051 1,652 Interest on certificates of deposit 139 190 Interest on
securities sold under agreements to repurchase 53 30 Interest on
subordinated debentures 487 438 Total Interest
Expense 3,146 2,723
Net Interest Income 98,106
87,419 Provision for loan losses 3,264 5,080
Net
Interest Income After Provision For Loan Losses 94,842
82,339
Non-Interest Income Gain on sale of
securities, net 258 112 Gain on sale of SBA loans, net 1,359 1,797
Deposit account service charge income 4,814 4,644 Other
non-interest income 5,581 5,177 Total Non-Interest
Income 12,012 11,730
Non-Interest Expense
Salaries and employee benefits 37,285 34,989 Stock compensation
expense 3,567 2,966 Occupancy 6,039 5,792 Data processing 2,594
2,495 Legal and professional 3,782 2,411 FDIC deposit assessment
1,425 1,466 Merger expenses - 498 OREO loss and expenses 85 245
Office services expenses 1,488 1,526 Other operating expenses
7,179 7,577 Total Non-Interest Expense 63,444
59,965
Net Income Before Provision for Income Tax
Expense 43,410 34,104 Provision for income tax expense
15,953 12,868
Net Income $ 27,457 $ 21,236 Preferred
stock dividends and discount accretion 1,217 1,174
Net Income Available to Common Shareholders $ 26,240 $
20,062 Earnings Per Share Basic earnings per share $ 1.52 $
1.21 Diluted earnings per share $ 1.50 $ 1.18 Average shares
outstanding 17,252,000 16,544,000 Diluted average shares
outstanding 17,551,000 16,983,000
CU BANCORP
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS AND YIELD
ANALYSIS (Unaudited) (Dollars in thousands)
For the Three Months Ended
December 31, 2016 September 30, 2016
AverageBalance
Interest
AverageYield/Rate
AverageBalance
Interest
AverageYield/Rate
Interest-Earning Assets: Deposits in other financial
institutions $ 344,750 $ 536 0.61 % $ 317,678 $ 478 0.59 %
Investment securities 481,858 1,727 1.43 % 392,454 1,419 1.45 %
Loans 1,973,773 23,888 4.81 % 1,965,509
23,958 4.85 % Total interest-earning assets 2,800,381 26,151 3.72 %
2,675,641 25,855 3.84 % Non-interest-earning assets 207,554
209,981
Total Assets $ 3,007,935 $ 2,885,622
Interest-Bearing Liabilities: Interest bearing transaction
accounts $ 322,023 $ 116 0.14 % $ 278,983 $ 102 0.14 % Money market
and savings deposits 814,548 532 0.26 % 789,208 524 0.26 %
Certificates of deposit 32,369 29 0.36 %
46,197 46 0.39 %
Total Interest Bearing Deposits
1,168,940 677 0.23 % 1,114,388 672 0.24 % Securities sold under
agreements to repurchase 23,303 15 0.24 % 21,893 13 0.24 %
Subordinated debentures and other debt 9,871 128 5.07
% 9,831 122 4.86 %
Total Interest Bearing
Liabilities 1,202,114 820 0.27 % 1,146,112 807 0.28 %
Non-interest bearing demand deposits 1,448,407
1,389,196 Total funding sources 2,650,521 2,535,308 Non-interest
bearing liabilities 20,713 19,290 Shareholders' Equity
336,701 331,024
Total Liabilities and Shareholders'
Equity $ 3,007,935 $ 2,885,622 Net interest income $ 25,331 $
25,048 Net interest margin 3.60 % 3.72 %
CU BANCORP
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS AND YIELD
ANALYSIS (Unaudited) (Dollars in thousands)
For the Three Months Ended
December 31, 2016 December 31, 2015
AverageBalance
Interest
AverageYield/Rate
AverageBalance
Interest
AverageYield/Rate
Interest-Earning Assets: Deposits in other financial
institutions $ 344,750 $ 536 0.61 % $ 362,966 $ 346 0.37 %
Investment securities 481,858 1,727 1.43 % 330,812 1,163 1.41 %
Loans 1,973,773 23,888 4.81 % 1,769,043
22,298 5.00 % Total interest-earning assets 2,800,381 26,151 3.72 %
2,462,821 23,807 3.84 % Non-interest-earning assets 207,554
215,604
Total Assets $ 3,007,935 $ 2,678,425
Interest-Bearing Liabilities: Interest bearing transaction
accounts $ 322,023 $ 116 0.14 % $ 271,359 $ 110 0.16 % Money market
and savings deposits 814,548 532 0.26 % 714,439 434 0.24 %
Certificates of deposit 32,369 29 0.36 %
59,497 40 0.27 %
Total Interest Bearing Deposits
1,168,940 677 0.23 % 1,045,295 584 0.22 % Securities sold under
agreements to repurchase 23,303 15 0.24 % 17,143 9 0.21 %
Subordinated debentures and other debt 9,871 128 5.07
% 9,678 112 4.53 %
Total Interest Bearing
Liabilities 1,202,114 820 0.27 % 1,072,116 705 0.26 %
Non-interest bearing demand deposits 1,448,407
1,283,373 Total funding sources 2,650,521 2,355,489 Non-interest
bearing liabilities 20,713 18,910 Shareholders' Equity
336,701 304,026
Total Liabilities and Shareholders'
Equity $ 3,007,935 $ 2,678,425 Net interest income $ 25,331 $
23,102 Net interest margin 3.60 % 3.72 %
CU BANCORP
CONSOLIDATED YEAR-TO-DATE AVERAGE BALANCE SHEETS AND YIELD
ANALYSIS
(Unaudited)
(Dollars in thousands)
For the Twelve Months Ended December 31, 2016 December 31, 2015
AverageBalance
Interest
AverageYield/Rate
AverageBalance
Interest
AverageYield/Rate
Interest-Earning Assets: Deposits in other financial
institutions $ 309,709 $ 1,870 0.59 % $ 289,364 $ 1,087 0.37 %
Investment securities 400,733 5,793 1.45 % 287,436 4,518 1.57 %
Loans 1,924,603 93,589 4.86 % 1,707,654
84,537 4.95 % Total interest-earning assets 2,635,045 101,252 3.95
% 2,284,454 90,142 3.95 % Non-interest-earning assets
210,356 210,736
Total Assets $ 2,845,401 $ 2,495,190
Interest-Bearing Liabilities: Interest bearing
transaction accounts $ 290,104 $ 416 0.14 % $ 258,444 $ 413 0.16 %
Money market and savings deposits 767,826 2,051 0.27 % 690,065
1,652 0.24 % Certificates of deposit 46,945 139 0.30
% 61,275 190 0.31 %
Total Interest Bearing
Deposits 1,104,875 2,606 0.24 % 1,009,784 2,255 0.22 %
Securities sold under agreements to repurchase 22,739 53 0.23 %
13,966 30 0.21 % Subordinated debentures and other debt
9,795 487 4.89 % 9,637 438 4.48 %
Total
Interest Bearing Liabilities 1,137,409 3,146 0.28 % 1,033,387
2,723 0.26 % Non-interest bearing demand deposits 1,364,164
1,151,075 Total funding sources 2,501,573 2,184,462
Non-interest bearing liabilities 18,091 18,151 Shareholders' Equity
325,737 292,577
Total Liabilities and
Shareholders' Equity $ 2,845,401 $ 2,495,190 Net interest
income $ 98,106 $ 87,419 Net interest margin 3.71 % 3.83 %
CU BANCORP LOAN COMPOSITION (Dollars in
thousands) December 31,2016
September 30,2016 December 31,2015 Unaudited Unaudited
Audited
Commercial and Industrial Loans: $
502,637 $ 499,439 $ 537,368
Loans Secured by Real
Estate: Owner-Occupied Nonresidential Properties 451,322
430,218 407,979 Other Nonresidential Properties 630,163 610,267
533,168 Construction, Land Development and Other Land 194,059
172,441 125,832 1-4 Family Residential Properties 127,164 122,955
114,525 Multifamily Residential Properties 109,858
100,003 71,179 Total Loans Secured by Real Estate
1,512,566 1,435,884 1,252,683
Other
Loans: 35,023 39,618 43,112
Total Loans $ 2,050,226 $ 1,974,941 $
1,833,163
COMMERCIAL AND INDUSTRIAL LINE OF CREDIT
UTILIZATION (Dollars in thousands)
December 31,2016
September 30,2016 December 31,2015
Unaudited Unaudited Unaudited Disbursed $ 372,625 40
% $ 396,607 45 % $ 408,619 46 % Undisbursed 548,733 60 %
490,796 55 % 477,901 54 % Total Commitments $ 921,358
100 % $ 887,403 100 % $ 886,520 100 %
CU BANCORP
SUPPLEMENTAL DATA (Dollars in thousands)
December 31,2016 September 30,
2016
December 31,2015 Unaudited Unaudited Unaudited
Capital
Ratios Table: Total risk-based capital ratio 11.44 % 11.65 %
11.54 % Common equity tier 1 capital ratio 9.61 % 9.77 % 9.61 %
Tier 1 risk-based capital ratio 10.68 % 10.90 % 10.85 % Tier 1
leverage capital ratio 9.72 % 9.83 % 9.67 % Tangible Common
Equity/Tangible Assets 8.55 % 8.66 % 8.49 %
Asset Quality
Table: Loans originated by the Bank on non-accrual $ - $ - $ 89
Loans acquired thru acquisition on non-accrual 1,122
1,223 1,962 Total non-accrual loans
1,122 1,223 2,051 Other Real Estate Owned - -
325 Total non-performing assets $ 1,122
$ 1,223 $ 2,376 Net charge-offs/(recoveries)
year to date $ (428 ) $ (307 ) $ 2,009 Net
charge-offs/(recoveries) quarterly $ (121 ) $ 802 $ 1,532
Non-accrual loans to total loans 0.05 % 0.06 % 0.11 % Total
non-performing assets to total assets 0.04 % 0.04 % 0.09 %
Allowance for loan losses to total loans 0.94 % 0.93 % 0.86 %
Allowance for loan losses to total loans accounted at
historical cost, which excludes loans acquired by acquisition 1.18
% 1.20 % 1.25 % 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 loans acquired by
acquisition and related allowance N/A N/A 17583 % Allowance
for loan losses to total non-accrual loans 1726 % 1503 % 764 %
As of December 31, 2016, 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. The
Company utilizes the term 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.
Tangible Common Equity (TCE) Calculation and
Reconciliation to Total Shareholders' Equity (Unaudited)
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
data)
December 31,2016
September 30,2016
December 31,2015
Tangible Common Equity Calculation Total shareholders'
equity $ 338,185 $ 332,930 $ 306,807 Less: Serial preferred stock
16,955 17,021 16,995 Less: Goodwill 64,603 64,603 64,603 Less: Core
deposit and leasehold right intangibles 6,300 6,665
7,671
Tangible Common Equity $ 250,327 $ 244,641 $
217,538 Common shares issued 17,759,000 17,673,000
17,175,000 Tangible book value per common share $ 14.10 $ 13.84 $
12.67 Book value per common share $ 18.09 $ 17.87 $ 16.87
CU BANCORP
GAAP RECONCILIATIONS
Return on Average Tangible Common
Equity
(Unaudited)
Return on Average Tangible Common Equity represents
annualized 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 table below for the periods indicated:
(Dollars in thousands)
Three Months Ended December 31,2016
September 30,2016 December 31,2015
Average
Tangible Common Equity Calculation Total average shareholders'
equity $ 336,701 $ 331,024 $ 304,026 Less: Average serial preferred
stock 16,996 17,063 16,837 Less: Average goodwill 64,603 63,603
64,177 Less: Average core deposit and leasehold right intangibles
6,498 6,792 7,930
Average Tangible Common Equity $ 248,604 $ 243,566
$ 215,082 Net Income Available to Common
Shareholders $ 6,867 $ 6,279 $ 5,210
Return on Average Tangible
Common Equity 10.99 % 10.30 % 9.62 % Twelve
Months Ended December 31,2016 December 31,2015
Average Tangible Common Equity Calculation Total average
shareholders' equity $ 325,737 $ 292,577 Less: Average serial
preferred stock 17,068 16,457 Less: Average goodwill 64,603 64,014
Less: Average core deposit and leasehold right intangibles
6,986 8,644
Average Tangible Common
Equity $ 237,080 $ 203,462 Net Income
Available to Common Shareholders $ 26,240 $ 20,062
Return on
Average Tangible Common Equity 11.07 % 9.86 %
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version on businesswire.com: http://www.businesswire.com/news/home/20170126005260/en/
CU Bancorp(213) 430-7072David RainerChairman and CEOorKaren
SchoenbaumChief Financial Officer
CU Bancorp (CA) (MM) (NASDAQ:CUNB)
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