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 AGOURA HILLS, Calif., Nov. 3 /PRNewswire/ -- Charter Pacific Bank today announced financial results for the third quarter and nine months ended Sept. 30, 1992. Allen Blum, president and chief executive officer, said, "As I reported to shareholders in the second quarter, our number one priority is to reduce our investment and exposure to the Southern California real estate market and to take a very conservative reserve position in light of the continued economic downturn.
 "We made progress on both fronts during the quarter, reducing our real estate holdings by $1.3 million and increasing our allowance for loan losses by almost 21 percent to 2.12 percent of total loans. As expected, these actions negatively impacted our earnings for the quarter. However, over the nine months, Charter Pacific continued to be profitable and, in fact, generated an impressive return on assets of 1.06 percent, once again placing us among the better performing banks in California."
 In other news, the bank announced that it has completed the filing of its F-1 registration statement with the Federal Deposit Insurance Corp. which will allow the company to list its shares on the NASDAQ system. Blum said, "We plan to apply for listing on the NASDAQ shortly and expect our shares to be listed early in 1993."
 Financial Performance
 For the quarter, the bank reported a net loss of $74,000, or approximately 2 cents per share, compared with earnings of $598,000, or 16 cents per share, in the third quarter of 1991. Year to date, net earnings were $690,000, or 19 cents per share, compared with reported net earnings of $1.4 million, or 39 cents per share in the same period a year ago.
 "It is important to note," said Blum, "that during the fourth quarter of last year we established considerable reserves. As a result, our net income for last year was $1.3 million, or 37 cents per share.
 "While we continue to face a difficult operating environment and non-performing loans have increased, our core banking operations continue to perform relatively well," Blum said. "For the nine months, net interest income has grown 12 percent to $2.8 million compared to the same period in 1991, as lower prevailing interest rates cut our interest expense more than they affected interest income. Even with a 38.3 percent increase in our provision for loan losses to $553,000, our net income from lending operations increased more than 7 percent to $23 million."
 Year to date, non-interest income of $6.3 million compares with $6.4 million in the same period last year. Bankcard operations account for a majority of non-interest income. "As previously reported, Charter Pacific instituted significantly stricter sales restrictions on its merchant customers in the first quarter of 1992 in order to reduce chargebacks. As a result, credit volume dropped in the first half of
1992 as we weeded out our customer base. We are now regaining momentum, adding higher quality customers and increasing processing volume. However, we don't expect to regain the high volume levels achieved in the third and fourth quarters of 1991 until sometime in the coming year," Blum explained.
 Non-interest expense was $7.4 million through the nine months, up from $6.0 million the year before, reflecting higher expenses for real estate owned and the expanded credit card operations. During the year, the bank established an anti-fraud group to monitor activity at all of its credit card merchant customers and significantly enhanced its credit card systems to enable the bank to process increased volume without a significant increase in headcount.
 Financial Position
 "The sluggish California economy continues to take a heavy toll on our borrowers," Blum reported. "Non-performing loans increased to $9.1 million, or approximately 15 percent of total loans at quarter end, up from $4.9 million, or 8 percent of total loans, at June 30, 1992. The majority of these loans are secured by real estate, and we limit loan values to less than 70 percent of appraised collateral. Therefore, unlike with a consumer loan, we believe we can recover a substantial amount of the loans currently categorized as non-performing.
 "As problem loans are resolved, we should see an increase in our profitability. Interest income will increase because we can make a new loan. However, interest expense will remain the same as we already have the deposits in house necessary to fund the non-performing loan. For example, if we recover only 80 percent of the $9.1 million -- less than 60 percent of the appraised value of the properties securing the loans -- that would allow us to make approximately $7.3 million in new loans. Even with current low interest rates, this would significantly increase income. At 7 percent annually, $7.3 million in loans could generate more than $500,000 in net interest income annually."
 Charter Pacific's exposure to real estate includes both real estate purchased for investment and other real estate owned acquired through foreclosure. Total real estate holdings have dropped almost 18 percent during the year to $5.9 million at Sept. 30, compared with $7.2 million at Dec. 30, 1991. During the quarter, the bank sold several parcels of land bringing real estate held for investment down to just under $3.0 million. However, several foreclosures increased the value of real estate owned to $2.9 million.
 Blum continued, "Of course, we are concerned by the current high level of non-performing loans. We are devoting considerable time and resources to resolving individual situations and monitoring our performing borrowers closely. In addition, we increased our reserve for loan losses by 21 percent during the quarter to $1.3 million, or 2.12 percent of total loans. Given Charter Pacific's strong capital position, our conservative lending practices, and our profitable credit card processing operations, we expect these problems can be resolved over the next several quarters."
 At Sept. 30, 1992, the bank's total capital to asset ratio was 12.18 percent and its total Tier 1 capital ratio was 10.53 percent. Both ratios remain considerably above the regulatory mandated level of 7.5 percent of assets.
 Charter Pacific remains one of the most profitable banks in California. Operating three branches in the affluent Southern California communities of Beverly Hills, Calabasas and Agoura Hills, the bank's experienced management team focuses on two key market areas, real estate lending to high-end residential developers and credit draft processing for specialty merchants. A conservatively managed core business coupled with aggressive expansion in fee-generating services has produced superior earnings growth over the last seven years while maintaining a strong capital base.
 -0- 11/3/92 R
 /CONTACT: Allen R. Blum, president and chief executive officer of Charter Pacific Bank, 818-991-8512; or Lise Needham of The Financial Relations Board, San Francisco, 415-986-1591, or John Muir of The Financial Relations Board, Los Angeles, 818-783-2400, for Charter Pacific Bank/ CO: Charter Pacific Bank ST: California IN: FIN SU: ERN

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Date:Nov 3, 1992

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