First California Financial Group, Inc. (NASDAQ: FCAL) today
reported financial results for its three and twelve months ended
December 31, 2008.
"While 2008 will be recorded in history for the unprecedented
events that thrust the country into a recessionary period, we at
First California will remember the year as one in which the company
and its subsidiary, First California Bank, navigated through a most
challenging economic environment and made continuous progress with
its strategic growth plan," said C. G. Kum, president and chief
executive officer. "Guided by our commitment to provide our
neighboring communities with the strength, safety and security of a
healthy financial institution, the company posted another year of
solid growth in loans and deposits, strong capital ratios and
stable asset quality metrics."
2008 Fourth Quarter Highlights:
-- The bank remained strongly capitalized at December 31, 2008 with a
total risk-based capital ratio of 12.27% which exceeds the regulatory
agencies' "well-capitalized" guidelines;
-- Loans grew to $787.9 million from $783.5 million at September 30,
2008;
-- Deposits increased to $817.6 million from $757.8 million at September
30, 2008;
-- Allowance for loan losses as a percentage of loans remained unchanged
from third quarter 2008 at 1.02%;
-- Net loan charge-offs continued to be at nominal levels, totaling
$151,000 for Q4 2008;
-- The company received $25 million of new capital through the U.S.
Treasury's Capital Purchase Program which increased the parent company's
total risk-based capital ratio to 16.62% at year-end; and
-- The acquisition of the insured deposits of 1st Centennial Bank in
January 2009 enhances the bank's core deposit base and liquidity position.
Asset Quality
Total past due and non-accrual loans decreased by $4.6 million
to $11.5 million as of December 31, 2008 from $16.1 million at the
close of the 2008 third quarter. Non-accrual loans at year-end 2008
decreased slightly to $8.5 million from $8.6 million as of
September 30, 2008. Loans past due 90 days and accruing declined
sequentially to $429,000 at December 31, 2008 from $947,000 at the
end of the 2008 third quarter. Loans past due 30 to 89 days at
year-end 2008 decreased to $2.6 million from $6.6 million at
September 30, 2008, principally reflecting pay downs of residential
construction loans as a result of unit sales.
Net loan charge-offs continued to remain at nominal levels,
totaling $151,000 for the 2008 fourth quarter and $930,000 for the
full year ended December 31, 2008. The company recorded a loan loss
provision of $200,000 in the fourth quarter of 2008, totaling $1.2
million in loan loss provision for the full year. This compares
with no loan loss provision in 2007. The allowance for loan losses
as a percentage of total loans was 1.02% at December 31, 2008
compared with 1.05% at December 31, 2007.
First California does not hold any Federal National Mortgage
Association, also known as Fannie Mae or FNMA, or Federal Home Loan
Mortgage Corporation, also known as Freddie Mac or FHLMC, common or
preferred stock in its investment portfolio and did not incur any
other-than-temporary impairment charges during the year.
Results of Operations
Net income for the three months ended December 31, 2008 totaled
$1.1 million, equal to $0.10 per diluted common share. This
compares with the 2008 third quarter net income of $1.8 million, or
$0.15 per diluted common share, and net income of $2.7 million, or
$0.22 per diluted common share, for the 2007 fourth quarter.
For the year ended December 31, 2008, net income totaled $6.4
million, or $0.54 per diluted common share, compared with $7.1
million, or $0.66 per diluted common share, for 2007. The decrease
is principally a reflection of a dramatic change in the interest
rate environment during 2008. The company noted that its 2007
results reflect several items that affect comparability, including
a $2.4 million gain on the sale of two subsidiary bank charters, a
$1.6 million charge related to the refinancing of trust preferred
securities and approximately $5.4 million of integration and
conversion charges related to the merger of two holding companies
that created First California in March 2007. In addition, the
company's first quarter of 2007 included only approximately 19 days
of results for FCB Bancorp.
Loans at December 31, 2008 rose 6% to $787.9 million from $746.2
million at year-end 2007. Loans held for sale were $31.4 million at
December 31, 2008 and $11.5 million at year-end 2007. Deposits
increased 7% to $817.6 million as of December 31, 2008 from $761.1
million at year-end 2007. Total assets at December 31, 2008
increased 7% to $1.18 billion from $1.11 billion at December 31,
2007.
As anticipated, the company's net interest margin for the 2008
fourth quarter was pressured by reductions in the Federal Funds
Rate totaling 175 basis points during the three months ended
December 31, 2008 and declined to 3.90% from 4.17% in the
immediately preceding third quarter. Net interest margin for 2008
narrowed to 4.10% from 4.64% for 2007, principally reflecting a
total reduction of 400 basis points in the Federal Funds Rate
during 2008.
The efficiency ratio for the fourth quarter of 2008 was 83.63%,
compared with 69.72% in the third quarter of 2008 and 63.41% in the
2007 fourth quarter. The company attributed the higher efficiency
ratio for the 2008 fourth quarter primarily to expenses associated
with its new corporate headquarters in Westlake Village, California
and increased compensation expense as compared to the third quarter
which included the recapture of previously accrued benefit
obligations related to the departure of two senior officers.
Liquidity and Capital Resources
The bank's primary source of funds continues to be core
deposits, and the bank posted a $19.5 million increase in retail
time deposits during the fourth quarter as a result of strategic
marketing campaigns. The bank also has access to alternate funding
sources and continued to utilize brokered deposits, FHLB borrowings
and State of California time deposits during the quarter. Brokered
deposits increased to $95.5 million at December 31, 2008 from $28.4
million at September 30, 2008. The change in the mix of funding
liabilities and the change in market rates during the quarter
contributed to a cost of interest-bearing deposits and a cost of
borrowed funds of 1.98% and 4.16%, respectively, for the fourth
quarter of 2008. These compare with cost of interest-bearing
deposits of 2.11% and cost of borrowed funds of 4.00% for the 2008
third quarter.
At December 31, 2008, the bank had total unsecured Federal Funds
facilities with other financial institutions of $31.0 million. In
addition, the bank has a $10.2 million secured borrowing facility
with the Federal Reserve Bank of San Francisco. These facilities,
along with the unused and available borrowing capacity on the
bank's secured FHLB borrowing facility in excess of $55.0 million,
provide the company with ample liquidity to support its operations
and strategic plan.
At December 31, 2008, total shareholders' equity increased to
$158.9 million from $136.9 million at December 31, 2007. As
reported on December 19, 2008, First California Financial Group,
Inc. received $25 million of new capital through the U.S. Treasury
Department's Capital Purchase Program ("CPP").
The company's net book value and tangible book value per common
share equaled $11.65 and $6.54, respectively at December 31, 2008.
This compares with net book value and tangible book value per
common share of $11.81 and $6.61, respectively, at December 31,
2007. The decreases result primarily from an increase in the
unrealized loss on investment securities during 2008.
First California Bank's total risk-based and leverage capital
ratios at December 31, 2008 were 12.27% and 9.26%, respectively.
Accordingly, the bank continues to exceed the "well-capitalized"
guidelines established by the regulatory agencies, which requires a
bank to have a total risk-based capital ratio of 10% or greater,
and a leverage ratio of 5% or greater.
First California's total risk-based and leverage capital ratios
at December 31, 2008 were 16.62% and 12.77%, respectively. First
California's tangible equity to tangible assets ratio increased to
8.92% at December 31, 2008 from 7.34% at the end of 2007.
1st Centennial Bank Transaction
The bank assumed the insured, non-brokered deposits of 1st
Centennial Bank, totaling approximately $270 million, as of the
close of business on January 23, 2009 from the Federal Deposit
Insurance Corporation ("FDIC"). The bank also purchased
approximately $164 million in cash and cash equivalents, $89
million in investment securities and $2 million in consumer loans
related to the transaction. In January 2009, the company
contributed $15 million of the CPP to the bank who in turn paid
approximately that sum to the FDIC for the assumption of those
deposits and the purchase of those assets. The addition of 1st
Centennial's six branches expanded First California Bank's
operations to 18 full-service branches throughout Southern
California. "This transaction enhances our already strong core
deposit base and the addition of six branches in attractive markets
is a significant addition to our franchise," said Kum.
Outlook
Kum concluded: "Looking ahead into 2009, we are operating in a
recessionary period that is now expected to be deeper and more
prolonged than originally anticipated, and we expect the
macroeconomic issues will continue to weigh on the financial health
of businesses and consumers in our core markets, as well as across
the nation. Particularly in light of the current economic
situation, we are gratified that First California stands today as
one of the strongest capitalized and financially sound community
banks in Southern California, well poised to continue supporting
our communities through prudent lending. We welcome our newest
customers from 1st Centennial to the First California family as we
prepare to celebrate our 30th anniversary this month. While we do
not expect to be totally exempt from the financial crisis, we are
confident that our experienced credit administration team,
conservative underwriting standards and proactive portfolio
management will enable First California to weather the storm and
prevail as an even stronger organization in the coming years."
About First California
First California Financial Group, Inc. (NASDAQ: FCAL) is an
emerging force in Southern California banking. With assets now
exceeding $1.4 billion, the company operates throughout Southern
California, primarily under the First California Bank brand. The
bank's focus is the commercial market, particularly small- and
middle-sized businesses, professional firms and commercial real
estate, development and construction companies. With a commitment
to provide the best client service available in its markets, the
bank offers a full line of quality commercial banking products now
through 18 full-service branch offices in Los Angeles, Orange,
Riverside, San Bernardino, San Diego and Ventura counties. The
holding company's website can be accessed at www.fcalgroup.com. For
additional information on First California Bank's products and
services, visit www.fcbank.com.
First California was a wholly owned subsidiary of National
Mercantile Bancorp formed to facilitate the reincorporation merger
with National Mercantile and the merger with FCB Bancorp, which
occurred on March 12, 2007. Accordingly, First California's
historical balance sheet and results of operations before the
merger are the same as the historical information of National
Mercantile. The company's results of operations include
approximately 19 days of FCB Bancorp's results for the 2007 first
quarter.
Forward-Looking Information
This press release contains certain forward-looking information
about First California 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, and
include statements related to the maintenance of First California
Bank's asset quality and capital position, the successful
integration of the 1st Centennial Bank acquisition, the company's
ability to enhance efficiencies and manage costs and the expected
continued progress in consolidating operations and the benefits of
those activities, the monitoring of and management of risks in
First California Bank's loan portfolio, the adequacy of sources of
liquidity to support First California's and First California Bank?s
operations and strategic plans, the monitoring of and response to
changing market conditions, and the status of the economy in the
Southern California communities served by First California and
First California Bank. Such statements involve inherent risks and
uncertainties, many of which are difficult to predict and are
generally beyond the control of First California. First California
cautions readers that a number of important factors could cause
actual results to differ materially from those expressed in, or
implied or projected by, such forward-looking statements. Risks and
uncertainties include, but are not limited to, revenues are lower
than expected, credit quality deterioration which could cause an
increase in the provision for credit losses, First California's
ability to complete future acquisitions, successfully integrate
such acquired entities, or achieve expected beneficial synergies
and/or operating efficiencies within expected time-frames or at
all, changes in consumer spending, borrowing and savings habits,
technological changes, the cost of additional capital is more than
expected, a change in the interest rate environment reduces
interest margins, asset/liability repricing risks and liquidity
risks, general economic conditions, particularly those affecting
real estate values, either nationally or in the market areas in
which First California does or anticipates doing business,
including the possibility of a U.S. recession, a slowdown in
construction activity, recent volatility in the credit or equity
markets and its effect on the general economy, loan delinquency
rates, the ability of First California and First California Bank to
retain customers, demographic changes, demand for the products or
services of First California and First California Bank, as well as
their ability to attract and retain qualified people, competition
with other banks and financial institutions, and other factors. If
any of these risks or uncertainties materializes or if any of the
assumptions underlying such forward-looking statements proves to be
incorrect, First California's results could differ materially from
those expressed in, or implied or projected by such forward-looking
statements. First California 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
the section titled "Risk Factors" in First California's Annual
Report on Form 10-K and any other reports filed by it with the
Securities and Exchange Commission ("SEC"). The documents filed by
First California with the SEC may be obtained at the SEC's website
at www.sec.gov. These documents may also be obtained free of charge
from First California by directing a request to: First California
Financial Group, Inc., 3027 Townsgate Road, Suite 300, Westlake
Village, CA 91361. Attention: Investor Relations. Telephone (805)
322-9655.
(Financial Tables Follow)
First California Financial Group
Unaudited Quarterly Financial Results
(in thousands except
for share data and
ratios)
As of or for the
quarter ended 31-Dec-08 30-Sep-08 30-Jun-08 31-Mar-08 31-Dec-07
---------- ---------- ---------- ---------- ----------
Income
statement
summary
Net interest
income $ 9,836 $ 10,348 $ 10,335 $ 10,263 $ 10,658
Service
charges, fees
& other income 1,146 1,043 903 818 854
Loan
commissions &
sales 69 143 185 54 586
Operating
expenses 9,398 8,041 8,460 8,016 7,813
Provision for
loan losses 200 300 200 450 -
Amortization of
intangible
assets 298 298 297 298 372
Loss on sale of
securities (9) (13) - - -
Gain (loss) on
derivatives 186 (1) (367) 1,225 224
---------- ---------- ---------- ---------- ----------
Income before
tax 1,332 2,881 2,099 3,596 4,137
Tax expense 200 1,120 815 1,407 1,475
---------- ---------- ---------- ---------- ----------
Net income $ 1,132 $ 1,761 $ 1,284 $ 2,189 $ 2,662
========== ========== ========== ========== ==========
Balance sheet
data
Total assets $1,183,401 $1,125,294 $1,125,096 $1,134,507 $1,108,842
Shareholders'
equity 158,923 136,680 136,229 138,256 136,867
Common
shareholders'
equity 133,553 135,680 135,229 137,256 135,867
Earning assets 1,057,198 994,212 991,740 1,005,653 988,982
Loans 787,920 783,496 773,544 754,419 746,179
Loans - held
for sale 31,401 - - 23,927 11,454
Securities 202,462 209,736 217,896 227,032 231,095
Federal
funds sold
& other 35,415 980 300 275 255
Interest-bearing
funds 822,285 784,452 790,202 794,225 759,367
Interest-
bearing
deposits 628,584 563,244 566,664 540,919 563,818
Borrowings 167,000 194,520 196,863 226,644 168,901
Junior
subordinated
debt 26,701 26,688 26,675 26,662 26,648
Goodwill and
other
intangibles 58,551 58,848 59,146 59,444 59,859
Deposits 817,595 757,765 754,115 729,819 761,080
Asset quality
data and
ratios
Loans past due
30 to 89 days
and accruing $ 2,644 $ 6,560 $ 1,502 $ 4,646 $ 4,746
Loans past due
90 days and
accruing 429 947 1,081 1,480 2,848
Nonaccruing
loans 8,475 8,636 6,627 5,720 5,720
---------- ---------- ---------- ---------- ----------
Total past due
and nonaccrual
loans $ 11,548 $ 16,143 $ 9,210 $ 11,846 $ 13,314
========== ========== ========== ========== ==========
Repossessed
personal
property $ 107 $ 154 $ 154 $ 161 $ 197
Other real
estate owned 220 120 - - -
---------- ---------- ---------- ---------- ----------
Total
foreclosed
property $ 327 $ 274 $ 154 $ 161 $ 197
========== ========== ========== ========== ==========
Net loan
charge-offs $ 151 $ 194 $ 15 $ 570 $ 262
Allowance for
loan losses $ 8,048 $ 7,999 $ 7,894 $ 7,708 $ 7,828
Allowance for
loan losses to
loans 1.02% 1.02% 1.02% 1.02% 1.05%
Common
shareholder
data
Basic earnings
per share $ 0.10 $ 0.15 $ 0.11 $ 0.19 $ 0.23
Diluted
earnings per
share $ 0.10 $ 0.15 $ 0.11 $ 0.19 $ 0.22
Book value per
share $ 11.65 $ 11.84 $ 11.78 $ 11.95 $ 11.81
Tangible book
value per
share $ 6.54 $ 6.71 $ 6.62 $ 6.77 $ 6.61
Shares
outstanding 11,462,964 11,456,464 11,477,086 11,485,220 11,500,520
Basic weighted
average shares 11,436,152 11,466,375 11,480,271 11,484,749 11,621,958
Diluted
weighted
average shares 11,727,614 11,744,823 11,756,817 11,757,532 11,887,269
Selected ratios
Return on
average assets 0.39% 0.63% 0.46% 0.80% 0.99%
Return on
average equity 3.22% 5.14% 3.72% 6.47% 8.01%
Equity to
assets 13.43% 12.15% 12.11% 12.19% 12.34%
Tangible equity
to tangible
assets 8.92% 7.29% 7.23% 7.33% 7.34%
Efficiency
ratio 83.63% 69.72% 76.52% 64.85% 63.41%
Net interest
margin (tax
equivalent) 3.90% 4.17% 4.17% 4.14% 4.34%
Total
risk-based
capital ratio:
First
California
Bank 12.27% 12.89% 12.59% 12.15% 11.98%
First
California
Financial
Group, Inc. 16.62% 14.01% 13.81% 13.46% 13.35%
First California Financial Group
Unaudited Financial Results (cont'd)
YTD YTD
(in thousands except for share data and ratios) 31-Dec-08 31-Dec-07
----------- -----------
Income statement summary
Net interest income $ 40,782 $ 40,244
Service charges, fees & other income 3,910 3,248
Loan commissions & sales 451 2,199
Operating expenses 33,752 29,008
Provision for loan losses 1,150 -
Amortization of intangible assets 1,191 1,029
Gain on derivatives 1,043 224
Gain on sale of charters - 2,375
Loss on sale of securities (22) -
Integration/conversion expense 163 5,443
Expense of early termination of debt - 1,564
----------- -----------
Income before tax 9,908 11,246
Tax expense 3,542 4,158
----------- -----------
Net income $ 6,366 $ 7,088
=========== ===========
Balance sheet data
Total assets $ 1,183,401 $ 1,108,842
Shareholders' equity 158,923 136,867
Common shareholders' equity 133,553 135,867
Earning assets 1,057,198 988,982
Loans 787,920 746,179
Loans - held for sale 31,401 11,454
Securities 202,462 231,095
Federal funds sold & other 35,415 255
Interest-bearing funds 822,285 759,367
Interest-bearing deposits 628,584 563,818
Borrowings 167,000 168,901
Junior subordinated debt 26,701 26,648
Goodwill and other intangibles 58,551 59,859
Deposits 817,595 761,080
Asset quality data and ratios
Loans past due 30 to 89 days and accruing $ 2,644 $ 4,746
Loans past due 90 days and accruing 429 2,848
Nonaccruing loans 8,475 5,720
----------- -----------
Total past due and nonaccrual loans $ 11,548 $ 13,314
=========== ===========
Repossessed personal property $ 107 $ 197
Other real estate owned 220 -
----------- -----------
Total foreclosed property $ 327 $ 197
=========== ===========
Net loan charge-offs $ 930 $ 466
Allowance for loan losses $ 8,048 $ 7,828
Allowance for loan losses to loans 1.02% 1.05%
Common shareholder data
Basic earnings per share $ 0.56 $ 0.68
Diluted earnings per share $ 0.54 $ 0.66
Book value per share $ 11.65 $ 11.81
Tangible book value per share $ 6.54 $ 6.61
Shares outstanding 11,462,964 11,500,520
Basic weighted average shares 11,457,231 10,467,620
Diluted weighted average shares 11,844,049 10,731,694
Selected ratios
Return on average assets 0.56% 0.66%
Return on average equity 4.63% 5.34%
Equity to assets 13.43% 12.34%
Tangible equity to tangible assets 8.92% 7.34%
Efficiency ratio 73.43% 63.18%
Net interest margin (tax equivalent) 4.10% 4.64%
Total risk-based capital ratio:
First California Bank 12.27% 11.98%
First California Financial Group, Inc. 16.62% 13.35%
For further Information: At the Company: Ron Santarosa
805-322-9333 At PondelWilkinson: Angie Yang 310-279-5980 Corporate
Headquarters Address: 3027 Townsgate Road, Suite 300 Westlake
Village, CA 91361
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