Center Financial Maintains Momentum in 2003 Third Quarter; Results Reflect Double-Digit Growth of Loans, Deposits and Assets.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--Oct. 21, 2003 Center Financial Corporation (Nasdaq:CLFC CLFC Creating Lasting Family Connections (New Hampshire) CLFC Clear Lake Fencing Club (Texas) ), the holding company of Center Bank, a community bank focused on the Korean-American niche market A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. , today reported continued momentum in the third quarter ended September September: see month. 30, 2003, characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by strong loan and deposit growth and higher fee income contributions. Compared to a year ago, 2003 third quarter highlights include: -- Revenues increased 13% to $12.3 million -- Net interest income before loan loss provision increased 15% to $8.0 million -- Noninterest income increased by 9% to $4.2 million -- Customer service fees and other income advanced 22% and 65%, respectively -- Total gross and net loans increased 44% to $669.3 million and $661.3 million, respectively -- Total deposits grew 27% to $825.8 million -- Total assets were up 27% to $928.1 million Net income for the third quarter ended September 30, 2003 totaled $3.0 million, or $0.38 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with $2.8 million, or $0.36 per diluted share, in the corresponding 2002 period. (All per share figures have been adjusted to reflect the 8% stock dividend paid on March 28, 2003.) Return on average assets for the current third quarter was 1.30% and return on average equity was 16.53%, compared to 1.58% and 18.95% for the third quarter of 2002. "We are very pleased with our third quarter performance, particularly against a backdrop Backdrop may refer to:
1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in the U.S.," said Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. Seon-Hong Kim Kim orphan wanders streets of India with lama. [Br. Lit.: Kim] See : Adventurousness , president and chief executive officer. "We remained focused on our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. strategic objective of healthy growth of our balance sheets and achieved double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. expansion of our loans, deposits and total assets, as compared to a year ago." Net interest income before loan loss provision rose 15% in the current third quarter to $8.0 million from $7.0 million in the corresponding year-ago period. This increase is attributed principally to loan growth and a change in the interest-earning asset composition. Low yield interest-earning assets were replaced by higher yield loans, partially offsetting compression compression, external stress applied to an object or substance, tending to cause a decrease in volume (see pressure). Gases can be compressed easily, solids and liquids to a very small degree if at all. of net interest margins due to federal fund rate cuts of 50 and 25 basis points in November November: see month. 2002 and late June June: see month. 2003. Net interest margins contracted 48 basis points to 3.80% in the current quarter, as compared to 4.28% in third quarter of 2002. Center Financial added $800,000 to its provision for loan losses, compared to $400,000 in the third quarter a year ago. "To compensate for the expected industry-wide decline in net interest margins, we made a concerted effort to increase noninterest income and introduced innovative niche niche: see ecology. niche Smallest unit of a habitat that is occupied by an organism. A habitat niche is the physical space occupied by the organism; an ecological niche is the role the organism plays in the community of organisms found in the products that generated additional customer service fees and implemented a fee-based mortgage lending program," said Mr. Kim. Noninterest income in the 2003 third quarter increased 9% to $4.2 million, benefiting from a 65% rise in other income and a 22% gain in service fee income over the past year, primarily due to an increase in the number of account relationships. The company posted noninterest income of $3.9 million in the third quarter of 2002. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. rose 14% to $6.8 million over the year-ago period reflecting increased legal fees, as well as additional expenses related to the company's new Fullerton Fullerton, city (1990 pop. 114,144), Orange co., S Calif., SE of Los Angeles; founded 1887, inc. 1904. The city is named for George H. Fullerton, head of a land company, who arranged to route the San Diego–Los Angeles–Santa Fe RR through the settlement in branch opening at the beginning of the quarter and the recently announced relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. of the Western branch office. As a result, the efficiency ratio for the 2003 third quarter was slightly deteriorated at 55.35%, compared with 54.94% a year earlier. For the nine-month period ended September 30, 2003, net income rose 25% to $8.6 million, or $1.08 per diluted share, from $6.9 million, or $0.90 per diluted share, a year ago. Return on average assets for the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. period was 1.34% and return on average equity was 16.50%, as compared to 1.43% and 16.55% a year ago. Net interest income before provisions for loan losses grew 18% to $23.0 million for the 2003 nine-month period from $19.5 million for the same period a year ago. Net interest income after provisions for loan losses rose 14% to $21.3 million from $18.6 million in the first nine months of 2002. Noninterest income was $11.8 million for the year-to-date period, up from $9.5 million for the comparable 2002 period. Noninterest expense grew to $19.5 million from $17.0 million in first nine months of 2002, primarily due to branch expansion and addition of highly experienced personnel. The efficiency ratio improved to 55.99% from 58.61%. This improvement in the efficiency ratio primarily resulted from the increased profit contributions and operating efficiencies at the six new branches opened during 2000 and 2001. Net loans grew to $661.3 million at September 30, 2003, representing a 44% increase from a year ago and a 27% increase from year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2002. The company recorded strong year-over-year growth across all loan categories, with the exception of real estate construction lending. Commercial real estate loans, the bulk of which represent owner-occupied adj. 1. lived in by the owner; - of dwellings. Adj. 1. owner-occupied - lived in by the owner; "one owner-occupied and three rental apartments" inhabited - having inhabitants; lived in; "the inhabited regions of the earth" business properties secured by first deeds deed n. 1. Something that is carried out; an act or action. 2. A usually praiseworthy act; a feat or exploit. 3. Action or performance in general: Deeds, not words, matter most. of trust, showed particular strength growing 41% over last year and representing 50.5% of Center Financial's loan portfolio. The balance of the portfolio included the following: commercial loans totaled 20.2%, SBA SBA abbr. Small Business Administration Noun 1. SBA - an independent agency of the United States government that protects the interests of small businesses and ensures that they receive a fair share of government loans amounted to 12.2%, trade finance and consumer loans each equaled 6.7%, and real estate construction contributed 2.6%. Total deposits increased 14% to $825.8 million at September 30, 2003, compared with $727.0 million at December December: see month. 31, 2002. The Bank posted balanced growth in the range of 35% to 37% in all categories of core deposits, which represented 56% of total deposits, up from 53% a year earlier. Total assets increased 13% to $928.1 million, compared with $818.6 million at December 31, 2002. Interest-earning assets grew 10% to $828.1 million and fee-generating assets, which are included in cash and due from bank, rose 3% to $20.0 million, compared with $753.5 million and none, respectively, at December 31, 2002. Total non-performing assets were $3.9 million at September 30, 2003, or 0.42% of total assets, compared to $2.4 million, or 0.30% of total assets at December 31, 2002, an increase of $1.5 million primarily because of one large construction loan in the amount of $2.2 million, which the company is optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op will be current by the year end. Center Financial increased its provision for loan losses to cover future losses by $850,000 to $1.8 million for the nine months ended September 30, 2003, as compared to $900,000 for same period a year ago. The allowance for loan losses also increased to $8.0 million primarily due to a growth in the loan portfolio, and represented 1.20% of gross loans at September 30, 2003, as compared to 1.28% at December 31, 2002. At September 30, 2003, Center Financial remains "well-capitalized" under all regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. categories, with a Tier 1 risk-based capital ratio Risk-based capital ratio Bank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset. of 10.18%, a total risk-based capital ratio of 11.30%, and a Tier 1 capital Tier 1 Capital A term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves. Notes: Equity capital includes instruments that can't be redeemed at the option of the holder. ratio of 8.62%. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. increased 16% to $75.8 million, from $65.2 million on December 31, 2002, and book value increased to $9.53 at September 30, 2003, compared to $8.48 per share at year-end 2002. Mr. Kim added: "Solid execution, even under difficult economic conditions, has resulted in continued momentum and growth, delivering quantifiable Quantifiable Can be expressed as a number. The results of quantifiable psychological tests can be translated into numerical values, or scores. Mentioned in: Psychological Tests value for our shareholders. We believe developing deep community relationships through outreach Outreach is an effort by an organization or group to connect its ideas or practices to the efforts of other organizations, groups, specific audiences or the general public. efforts, as in our commitment to FDIC's Money Smart financial education program, provides competitive advantage for Center Bank and positions us well to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. a growing niche market, particularly when the economy rebounds. Our confidence in Center Bank's market position is underscored by our ongoing investment in the skills and talent of our team." About Center Financial Corporation Center Financial Corporation is a financial holding company formed in 2002 and is the parent company of Center Bank. Founded in 1986, Center Bank is a community bank offering a full-range A Full-range loudspeaker drive unit is defined as a driver which reproduces as much of the audible frequency range as possible, with high-fidelity, within the boundaries imposed by the physical limitations of the specific design. of financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. . Center Bank changed its name from California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). Center Bank in December of 2002. It specializes in commercial and SBA loans and trade finance products for multi-ethnic Adj. 1. multi-ethnic - involving several ethnic groups multiethnic social - living together or enjoying life in communities or organized groups; "a human being is a social animal"; "mature social behavior" and small business customers. The Bank operates 13 branches throughout Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, and four Loan Production Offices located in Phoenix, Seattle Seattle (sēăt`əl), city (1990 pop. 516,259), seat of King co., W Wash., built on seven hills, between Elliott Bay of Puget Sound and Lake Washington; inc. 1869. , Denver Denver, city (1990 pop. 467,610), alt. 5,280 ft (1,609 m), state capital, coextensive with Denver co., N central Colo., on a plateau at the foot of the Front Range of the Rocky Mts., along the South Platte River where Cherry Creek meets it; inc. 1861. and Washington Washington, town, England Washington, town (1991 pop. 48,856), Sunderland metropolitan district, NE England. Washington was designated one of the new towns in 1964 to alleviate overpopulation in the Tyneside-Wearside area. D.C. It is one of the largest financial institutions in the nation focusing on the Korean-American community. Further information about the Company can be found at www.centerbank.com. This release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which are included in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 and accordingly, the cautionary statements contained in Center Financial Corp.'s Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended Dec. 31, 2002 (See Business, and Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial ), 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)
09/30/03 09/30/02 12/31/02
---------------------------------
Assets
Cash and due from banks $68,336 $32,515 $38,877
Federal funds sold 21,270 37,535 35,500
Money market funds and interest-
bearing deposits in other banks 21,300 20,000 40,000
Securities available-for-sale 115,046 141,753 140,998
Securities held-to-maturity 9,212 15,746 15,741
Loans (net of unearned income) 669,290 465,194 527,977
Allowance for loan losses (8,017) (6,216) (6,760)
---------------------------------
Net loans 661,273 458,978 521,217
Fixed assets 10,831 8,960 9,988
Other assets 20,851 16,419 16,303
---------------------------------
Total assets $928,119 $731,906 $818,624
=================================
Liabilities and
Shareholders' Equity
Deposits
Non-interest bearing deposits $259,724 $189,448 $207,092
Interest bearing deposits 566,064 458,789 519,928
---------------------------------
Total deposits 825,788 648,237 727,020
Borrowed funds 15,904 12,295 17,565
Other liabilities 10,589 9,525 8,833
---------------------------------
Total Liabilities 852,281 670,057 753,418
Shareholders' Equity 75,838 61,849 65,206
---------------------------------
Total Liabilities & Shareholders'
Equity $928,119 $731,906 $818,624
=================================
Book value per share(a) $9.53 $8.08 $8.48
Number of common shares outstanding
at period end(a) 7,956,329 7,655,678 7,692,421
=================================
(a) Adjusted to reflect eight percent stock dividend paid in 2003.
CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(In thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
----------------------------------------------------------------------
Interest income $10,916 $9,967 $31,758 $27,496
Interest expense 2,905 3,007 8,744 8,007
----------------------------------------
Net interest income before
provision for loan losses 8,011 6,960 23,014 19,489
----------------------------------------
Provision for loan losses 800 400 1,750 900
----------------------------------------
Net interest income after
provision for loan losses 7,211 6,560 21,264 18,589
Noninterest income
Customer service fees 1,900 1,555 5,254 4,441
Fee income from trade
finance transactions 691 740 1,966 2,106
Wire transfer fees 170 153 501 440
Gain on sale of loans 656 710 1,593 1,051
Net (loss) gain on sale of
securities available for
sale (9) 172 330 172
Loan service fees 322 252 948 671
Other income 510 309 1,205 608
----------------------------------------
Total noninterest income 4,240 3,891 11,797 9,489
----------------------------------------
Noninterest expenses
Salaries and employee
benefits 3,160 3,126 9,767 9,191
Occupancy 537 436 1,480 1,302
Furniture, fixtures, and
equipment 347 276 988 769
Net other real estate owned
expense (income) - - - (98)
Data processing 445 382 1,278 1,149
Professional service fees 757 491 1,422 1,087
Business promotion and
advertising 467 355 1,321 1,070
Stationery and supplies 146 116 450 276
Telecommunications 122 113 359 310
Postage and courier service 135 119 386 346
Security service 157 148 451 417
Other operating expenses 508 399 1,588 1,166
----------------------------------------
Total noninterest expenses 6,781 5,961 19,490 16,985
----------------------------------------
INCOME BEFORE INCOME TAX
PROVISION 4,670 4,490 13,571 11,093
INCOME TAX PROVISION 1,666 1,683 4,963 4,230
----------------------------------------
Net income $3,004 $2,807 $8,608 $6,863
========================================
Other comprehensive (loss)
income(a) (138) 1,057 (514) 1,590
Total comprehensive income $2,866 $3,864 $8,094 $8,453
========================================
Income per share, basic(b) $0.39 $0.37 $1.11 $0.93
Income per share, diluted(b) $0.38 $0.36 $1.08 $0.90
Basic average common shares
outstanding(b) 7,793,301 7,406,086 7,758,196 7,374,543
Diluted average common shares
outstanding(b) 8,040,932 7,744,263 7,965,016 7,636,018
(a) 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.
(b) Adjusted to reflect eight percent stock dividend paid in 2003.
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(In thousands)
For the nine For the year
months ended ended
September 30, December 31,
2003 2002 2002
-------------------------------
Average gross loans outstanding during
period $597,064 $422,427 $439,493
Total loans outstanding at end of
period(a) 669,290 465,194 527,977
Non-performing assets
Loans past due 90 days or more and
still accruing interest $- $- $-
Non-accrual loans 3,905 2,032 2,428
-------------------------------
Total non-performing loans 3,905 2,032 2,428
Other Real Estate Owned - - -
-------------------------------
Total Non-performing assets $3,905 $2,032 $2,428
========= ========= ===========
Allowance for Loan Losses
Balance as of January 1, $(6,760) $(5,540) $(5,540)
Reserve for losses on commitments to
extend credit(b) - 43 43
Provision for loan losses (1,750) (900) (2,100)
Net loan charge-offs and (recoveries) 493 181 837
-------------------------------
Balance as of September 30, $(8,017) $(6,216) $(6,760)
========= ========= ===========
Quarter Nine Months
Ended Ended Year Ended
September September December
Selected Ratios 30, 30, 31,
For the Period 2003 2002 2003 2002 2002
Return on average assets 1.30% 1.58% 1.34% 1.43% 1.39%
Return on average equity 16.53 18.95 16.50 16.55 16.27
Interest rate spread 3.22 3.49 3.25 3.62 3.52
Net interest margin 3.80 4.28 3.88 4.44 4.30
Yield on earning assets 5.18 6.13 5.36 6.27 6.11
Cost of deposits 1.93 2.63 2.08 2.64 2.59
Cost of funds 1.96 2.64 2.11 2.65 2.60
Noninterest expense/average assets 0.74 0.85 2.26 2.65 3.80
Efficiency ratio 55.35 54.94 55.99 58.61 58.00
Net charge-offs/(recoveries) to
average loans 0.02 0.01 0.08 0.04 0.19
Period End
Period Ended
September 30, Year Ended
December 31,
2003 2002 2002
Tier 1 risk-based capital ratio 10.18% 10.99% 10.34%
Total risk-based capital ratio 11.30 12.14 11.44
Tier 1 leverage ratio 8.62 8.55 9.48
Non-accrual loans to gross loans 0.58 0.44 0.46
Non-performing assets to total loans and
OREO 0.58 0.44 0.46
Non-performing assets to total assets 0.42 0.28 0.30
Allowance for loan loss to gross loans 1.20 1.34 1.28
Allowance for loan losses to nonperforming
assets 205.30 305.91 278.42
(a)Total loans are net of deferred loan fees and discount on SBA loan
sold.
(b)The reserve for losses on commitments to extend credit and letters
of credit is primarily related to lines of credit. The Company
evaluates credit risk associated with the loan portfolio at the
same time it evaluates credit risk associated with commitments to
extend credit and letters of credits. However, as of December 31,
2002 and thereafter, the reserve necessary for the commitments is
reported separately in other liabilities in the accompanying
statements of financial condition, and not as part of the allowance
for loan losses, as presented above.
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA (Unaudited)
(In thousands)
For the nine months
ended
September 30, Year Ended
Loans December
2003 2002 % chg 31, 2002
---------------------------------------
Real estate-construction $17,361 $21,607 -19.6% $20,669
Real estate-commercial 339,095 210,700 60.9% 241,252
Commercial 135,916 99,617 36.4% 108,540
Consumer 44,876 39,171 14.6% 41,463
Trade finance 45,147 35,216 28.2% 50,106
SBA 81,738 59,965 36.3% 67,489
Other 7,503 1,122 568.7% 129
---------------------------------------
Total loans-gross 671,636 467,398 43.7% 529,648
Unearned Income (2,346) (2,204) 6.4% (1,671)
Allowance for loan losses (8,017) (6,216) 29.0% (6,760)
---------------------------------------
Total loans-net $661,273 $458,978 44.1% $521,217
Deposits
Non-interest bearing $259,724 $189,448 37.1% $207,092
Interest bearing checking 149,875 110,697 35.4% 168,562
Savings 56,698 41,449 36.8% 45,408
Time deposits 359,491 306,643 17.2% 305,958
---------------------------------------
Total deposits $825,788 $648,237 27.4% $727,020
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