BBCN (ticker: CLFC, exchange: NASDAQ Global Select Market (.O))
News Release -
26-Jul-2004
Center Financial Reports Record Revenues for 2004 Second Quarter LOS ANGELES--(BUSINESS WIRE)--July 26, 2004--Center Financial
Corporation (NASDAQ: CLFC), the financial holding company of Center
Bank, a community bank focused on the Korean-American niche market,
today reported solid gains in loans, deposits and core fee income for
the three-month period ended June 30, 2004.
2004 second quarter highlights, compared with a year ago, include:
-- Revenues increased 19% to $14.4 million
-- Net interest income before provision for loan losses grew 25%
to $9.5 million
-- Noninterest income advanced 10% to $4.9 million
-- Net income totaled $3.2 million, equal to $0.20 per diluted
share
-- Net loans rose 45% to $869.2 million
-- Total deposits grew 34% to $1.1 billion
-- Total assets were up 33% to $1.2 billion
-- Branch network expanded with entry into new market of Chicago
-- Inland office relocated to a more prominent location
-- Quarterly cash dividend declared of $0.04 per share
"Record revenues in the 2004 second quarter demonstrate tangible
benefits of a growing network of branch offices and loan production
offices that are fueling the momentum of increases in noninterest
income and healthy growth of loans and deposits," said (Paul)
Seon-Hong Kim, president and chief executive officer. "Since the
second quarter of 2003, we have opened two full-service branches in
Fullerton, California and Chicago, Illinois, and one additional loan
production office in Las Vegas, Nevada. In addition, we have relocated
our Inland office and Western office to more prominent locations to
increase our franchise value."
"We have a strong track record of tremendous growth over the past
six years, with total assets now well over one billion dollars. We are
confident that our recently announced strengthened management team
will help to continue this momentum and support Center Bank through
its next stage of growth," Kim said.
For the three-month period ended June 30, 2004, net income totaled
$3.2 million, or $0.20 per diluted share, compared with $3.1 million,
or $0.19 per diluted share, in the corresponding period a year ago.
(All per share figures have been adjusted to reflect a two-for-one
stock split in March 2004.) Return on average assets and return on
average equity for the 2004 second quarter was 1.14% and 15.67%,
respectively, compared with 1.46% and 17.63% in the 2003 second
quarter, reflecting the company's expanded network of branch and loan
production offices and the expansion of its management infrastructure.
Net interest income before provision for loan losses increased 25%
in the 2004 second quarter to $9.5 million from $7.6 million in the
same period last year, benefiting from a 45% increase in net loans.
However, the company's average yield on loans was lower than second
quarter last year, mainly due to a 25 basis point reduction in prime
and market rates set by the Federal Reserve Board in late June 2003.
This pressured the net interest margin to contract 18 basis points to
3.73% from 3.91% in the 2003 second quarter. Center Financial added
$600,000 to its provision for loan losses during the 2004 second
quarter, compared with $550,000 in the corresponding prior-year
period.
Noninterest income rose 10% to $4.9 million from $4.4 million in
the 2003 second quarter, principally reflecting solid gains in service
fee income due to increases in customer account relationships and loan
and trade finance transactions.
Total noninterest expenses increased 29% to $8.6 million in the
current second quarter from $6.6 million in the corresponding
prior-year period. The increase reflects an increase in professional
service fees and higher occupancy and staff costs in accordance with
Center Bank's growing franchise. Professional service fees for the
second quarter of 2004 increased by $758,000 to $1.2 million from
$403,000 a year earlier, as a result of increased audit fees and
higher expenses associated with ongoing litigation. Compared to a year
ago, noninterest expenses for the current second quarter include
operational costs associated with two additional full-service branches
in Fullerton, California and Chicago, Illinois and one additional loan
production office in Las Vegas, Nevada, and the relocation of the
Inland office. Accordingly, the efficiency ratio equaled 59.48%,
compared with 54.91% for the quarter ended June 30, 2003.
For the first half of 2004, net income increased 17% to $6.5
million, or $0.40 per diluted share, from $5.6 million, or $0.35 per
diluted share, in the corresponding year-ago period. Return on average
assets and return on average equity for the 2004 six-month period were
1.21% and 16.22%, respectively, compared with 1.35% and 16.47% in the
prior-year period.
Net interest income before provision for loan losses grew 26% to
$18.9 million in the first six months of 2004 from $15.0 million a
year earlier. Net interest margin was 3.87%, compared with 3.92% in
the 2003 six-month period. The company posted $1.5 million in its
provision for loan losses to cover the growing loan base, compared
with $950,000 recorded for the first half of 2003.
Noninterest income for the year-to-date period increased 19% to
$9.0 million from $7.6 million a year ago, reflecting strong gains in
all core fee income categories. Total noninterest expenses for the
first six months of 2004 increased 24% to $15.8 million from $12.7
million in the 2003 six-month period, in large due to an increase in
professional service fees and an impairment loss of securities
available for sale of $540,000. The efficiency ratio equaled 56.58%
for the year-to-date period, compared with 56.33% a year ago.
At June 30, 2004, gross and net loans increased 21% each to $882.1
million and $869.2 million, respectively, from $728.7 million and
$717.0 million at year-end 2003, and grew 45% each from the close of
the second quarter of 2003.
On April 23, 2004, the company completed its acquisition of the
Korea Exchange Bank (KEB) Chicago branch, under which Center Bank, its
wholly owned subsidiary focused on the Korean-American niche market,
assumed $12.9 million in FDIC insured deposits and purchased $8.0
million in loans from the KEB branch. The company said it is
finalizing plans to relocate its Chicago branch to a new site central
to the Korean-American business community.
Commercial real estate loans recorded growth of 65% from a year
ago and accounted for 55% of the company's gross loans at the end of
the 2004 second quarter. Commercial loans totaled 20% of the loan
portfolio, increasing 45% from a year ago. Trade finance loans
increased 63% from prior-year levels and represented 10% of gross
loans. SBA loans equaled 8%, consumer loans amounted to 6% and real
estate construction totaled 2% of Center Financial's loan portfolio at
June 30, 2004.
"We believe our focus on developing and maintaining strong
relationships with our core ethnic Korean-American community has been
key to our ability to achieve these sustained loan growth rates," said
Kim. "This achievement, considering the increasingly competitive
marketplace that we operate in, underscores the strength of the Center
Bank franchise."
Total deposits grew to $1.1 billion at June 30, 2004, up 22% from
$867.9 million at year-end 2003. Core deposits represented 56% of
total deposits at the end of the current quarter, with non-interest
bearing, interest bearing and savings deposits increasing 39%, 33% and
28%, respectively, over prior-year levels. Non-interest bearing
deposits accounted for 31% of total deposits at June 30, 2004,
compared with 30% at the end of the 2003 second quarter. Time deposits
rose 31% over a year ago.
The average cost of deposits for the 2004 second quarter improved
to 1.92% from 2.10% a year earlier, and the average cost of funds was
reduced to 1.99% from 2.13%.
Total assets rose to $1.2 billion at the end of the 2004 second
quarter from $1.0 billion at December 31, 2003. Interest-earning
assets grew to $1.1 billion from $906.6 million at December 31, 2003.
The company continued to finance its growth of total assets through
increased deposits collected by its expanded network of branch
offices.
Total non-performing assets were reduced to $3.2 million, equal to
0.27% of total assets, at June 30, 2004 from $3.3 million, or 0.32% of
total assets, at December 31, 2003. Net charge-offs benefited by
$166,000 in net recoveries recorded during the second quarter of 2004,
improving to $210,000 for the first half of 2004 from $360,000 for the
same period of last year. The allowance for loan losses was increased
to $10.0 million in accordance with the strong growth in the company's
loan portfolio, representing 1.14% of loans, net of unearned income,
at June 30, 2004, compared with 1.21% at year-end 2003.
Center Financial's Board of Directors recently declared another
quarterly cash dividend of $0.04 per share. This cash dividend will be
paid on or about August 16, 2004, to shareholders of record at the
close of market on July 30, 2004.
Shareholders' equity at June 30, 2004 increased to $82.3 million
from $78.3 million at December 31, 2003. At the end of the 2004 second
quarter, Center Financial remained "well-capitalized" under all
regulatory categories, with a Tier 1 risk-based capital ratio of
11.32%, a total risk-based capital ratio of 10.32%, and a Tier 1
leverage ratio of 8.89%.
About Center Financial Corporation
Center Financial Corporation is the holding company of Center
Bank, a community bank offering a full-range of financial services.
Founded in 1986, Center Bank specializes in commercial and SBA loans
and trade finance products for multi-ethnic and small business
customers, and is one of the largest financial institutions in the
nation focusing on the Korean-American community. The Bank operates 14
full-service branches throughout Southern California and Chicago, as
well as five Loan Production Offices located in Phoenix, Seattle,
Denver, Washington D.C. and Las Vegas. Further information about the
company can be found at www.centerbank.com.
This release may contain forward-looking statements, which are
included in accordance with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 and accordingly, the
cautionary statements contained in Center Financial Corp's Annual
Report on Form 10-K for the fiscal year ended Dec. 31, 2003 (See
Business, and Management's Discussion and Analysis), and other filings
with the Securities and Exchange Commission are incorporated herein by
reference. These factors include, but are not limited to: the effect
of interest rate and currency exchange fluctuations; competition in
the financial services market for both deposits and loans; Center
Financial's ability to efficiently incorporate acquisitions into its
operations; the ability of Center Financial and its subsidiaries to
increase its customer base; and regional and general economic
conditions. Actual results and performance in future periods may be
materially different from any future results or performance suggested
by the forward-looking statements in this release. Such
forward-looking statements speak only as of the date of this release.
Center Financial expressly disclaims any obligation to update or
revise any forward-looking statements found herein to reflect any
changes in the Company's expectations of results or any change in
events.
CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(In thousands, except share and per share data)
ASSETS 06/30/04 06/30/03 12/31/03
Cash and due from banks $65,539 $36,237 $76,926
Federal funds sold 46,010 31,925 41,635
Money market funds and interest-
bearing deposits in other banks 40,000 40,000 22,400
Securities available-for-sale 103,414 140,910 110,126
Securities held-to-maturity 12,856 14,583 15,390
Loans (net of unearned income) 879,224 608,398 725,812
Allowance for loan losses (10,044) (7,350) (8,804)
Net loans 869,180 601,048 717,008
Fixed assets 11,160 10,441 11,063
Bank-owned life insurance
-- cash surrender value 10,238 -- 10,034
Goodwill 1,253 -- --
Other assets 26,327 17,300 22,784
Total assets $1,185,977 $892,444 $1,027,366
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing deposits $330,672 $237,362 $268,534
Interest bearing deposits 731,237 556,758 599,331
Total deposits 1,061,909 794,120 867,865
Borrowed funds 11,726 17,156 50,671
Long-term subordinated debenture 18,557 -- 18,557
Other liabilities 11,489 9,997 12,012
Total Liabilities 1,103,681 821,273 949,105
Shareholders' Equity 82,296 71,171 78,261
Total Liabilities &
Shareholders' Equity $1,185,977 $892,444 $1,027,366
Book value per share(1) $5.11 $4.57 $4.88
Number of common shares
outstanding at period end(1) 16,119,751 15,575,934 16,048,520
(1) Adjusted to reflect 2 for 1 stock split in 2004.
CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(In thousands, except share and per share data)
Quarter Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Interest income $13,124 $10,510 $25,686 $20,842
Interest expense 3,595 2,873 6,768 5,839
Net interest income
before provision for
loan losses 9,529 7,637 18,918 15,003
Provision for loan
losses 600 550 1,450 950
Net interest income
after provision for
loan losses 8,929 7,087 17,468 14,053
Noninterest income
Customer service fees 1,994 1,743 3,910 3,355
Fee income from trade
finance transactions 915 640 1,618 1,275
Wire transfer fees 213 177 398 331
Gain on sale of loans 890 937 1,267 937
Net (loss) gain on sale
of securities
available for sale (6) 93 (6) 340
Loan service fees 458 339 1,009 624
Other income 426 509 779 695
Total noninterest
income 4,890 4,438 8,975 7,557
Noninterest expenses
Salaries and employee
benefits 3,675 3,435 7,357 6,607
Occupancy 672 504 1,209 943
Furniture, fixtures,
and equipment 329 318 650 641
Data processing 506 443 974 834
Professional service
fees 1,161 403 1,305 665
Business promotion
and advertising 604 423 925 854
Stationery and
supplies 127 176 233 304
Telecommunications 157 110 283 237
Postage and courier
service 158 130 287 251
Security service 167 151 322 294
Impairment loss of
securities available
for sale -- -- 540 --
Other operating
expenses 1,021 538 1,698 1,079
Total noninterest
expenses 8,577 6,631 15,783 12,709
INCOME BEFORE INCOME TAX
PROVISION 5,242 4,894 10,660 8,901
INCOME TAX PROVISION 2,043 1,815 4,114 3,297
Net income $3,199 $3,079 $6,546 $5,604
Other comprehensive
(loss) income(1) $1,097 $2,510 $5,019 $5,229
Total comprehensive
income $1,097 $2,510 $5,019 $5,229
Earning per share,
basic(2) $0.20 $0.20 $0.41 $0.36
Earning per share,
diluted(2) $0.20 $0.19 $0.40 $0.35
Basic average common
shares outstanding(2) 16,092,044 15,709,795 16,069,639 15,449,010
Diluted average common
shares outstanding(2) 16,609,256 16,138,693 16,472,776 15,834,784
(1) Comprehensive income represents the change in unrealized gain
(loss) on securities available for sale and, interest rate swaps,
net of tax, from the previous period end.
(2) Adjusted to reflect 2 for 1 stock split in 2004.
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(In thousands)
For the Six Months For the Year
Ended June 30, Ended Dec. 31,
2004 2003 2003
Average gross loans outstanding
during period $818,427 $577,985 $620,302
Total loans outstanding at end
of period(1) 879,224 608,398 725,812
Non-performing assets
Loans past due 90 days or more
and still accruing interest $-- $-- $--
Non-accrual loans 3,152 1,655 3,327
Total non-performing loans 3,152 1,655 3,327
Other Real Estate Owned -- -- --
Total Non-performing assets $3,152 $1,655 $3,327
Allowance for Loan Losses
Balance as of January 1, $(8,804) $(6,760) $(6,760)
Provision for loan losses (1,450) (950) (2,000)
Net loan charge-offs and
(recoveries) 210 360 (44)
Balance as of June 30, $(10,044) $(7,350) $(8,804)
Quarter Six Months Year
Selected Ratios Ended Ended Ended
June 30, June 30, Dec. 31,
For the Period 2004 2003 2004 2003 2003
Return on average assets 1.14% 1.46% 1.21% 1.35% 1.32%
Return on average equity 15.67 17.63 16.22 16.47 16.28
Interest rate spread 3.14 3.25 3.31 3.26 3.35
Net interest margin 3.73 3.91 3.87 3.92 3.96
Yield on earning assets 5.14 5.38 5.26 5.45 5.40
Cost of deposits 1.92 2.10 1.88 2.16 2.02
Cost of funds 1.99 2.13 1.95 2.19 2.05
Noninterest expense/average
assets 0.76 0.78 1.45 1.52 3.19
Efficiency ratio 59.48 54.91 56.58 56.33 58.10
Net charge-offs/(recoveries)
to average loans (0.02) 0.06 0.03 0.06 (0.01)
Period Ended Year Ended
Period End June 30, Dec. 31,
2004 2003 2003
Tier 1 risk-based capital ratio 10.32% 10.03% 11.56%
Total risk-based capital ratio 11.32 11.11 12.67
Tier 1 leverage ratio 8.89 8.32 10.69
Non-accrual loans to gross loans 0.36 0.27 0.46
Non-performing assets to total loans
and OREO 0.36 0.27 0.46
Non-performing assets to total assets 0.27 0.19 0.32
Allowance for loan loss to gross loans 1.14 1.21 1.21
Allowance for loan losses to
nonperforming assets 318.65 444.08 264.62
(1) Total loans are net of deferred loan fees and discount on SBA loan
sold.
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(In thousands)
For the Six Months Year Ended
Ended June 30, Dec. 31,
Loans 2004 2003 % chg 2003
Real estate-construction $17,515 $16,590 5.6% $18,464
Real estate-commercial 482,631 292,462 65.0% 384,824
Commercial 175,905 121,204 45.1% 147,368
Consumer 53,351 42,798 24.7% 49,530
Trade finance 86,114 52,987 62.5% 61,886
SBA 66,578 83,989 -20.7% 66,487
Other 50 43 16.3% 179
Total loans-gross 882,144 610,073 44.6% 728,738
Unearned Income (2,920) (1,675) 74.3% (2,926)
Allowance for loan losses (10,044) (7,350) 36.7% (8,804)
Total loans-net $869,180 $601,048 44.6% $717,008
Deposits
Non-interest bearing $330,672 $237,362 39.3% $268,534
Interest bearing checking 199,332 149,453 33.4% 156,928
Savings 69,932 54,458 28.4% 61,251
Time deposits 461,973 352,847 31.0% 381,152
Total deposits $1,061,909 $794,120 33.7% $867,865
CONTACT: Center Financial Corporation
James Ryu, 213-251-2206
or
PondelWilkinson Inc.
Angie Yang/Cecilia Wilkinson, 310-279-5967
investor@pondel.com
SOURCE: Center Financial Corporation
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