Center Financial Posts Record Net Income for 2003; Results Reflect Strong Loan and Deposit Growth; Higher Fee Income Contributions.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--Jan. 27, 2004 Center Financial Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : 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 record financial results for the year ended December December: see month. 31, 2003. 2003 highlights, compared to a year ago, include: -- Revenues increased 21% to $48.6 million -- Net interest income before provision for loan losses increased 21% to $32.0 million -- Noninterest income increased 20% to $16.6 million -- Gain on sale of loans, customer service fees and other income increased 106%, 17% and 60%, respectively -- Total gross and net loans increased 38% to $728.7 million and $716.8 million, respectively -- Total deposits grew 19% to $867.9 million -- Total assets were up 25%, surpassing $1.0 billion "2003 was another banner year of achievements for Center Financial," 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 posted record earnings, with healthy growth in our balance sheets, loan portfolio and deposits. We increased our penetration in niche markets with a new branch office in Fullerton, California Fullerton is a city located in northern Orange County, California, United States. As of the 2000 census, the city had a total population of 126,003. It was founded in 1887 by George and Edward Amerige and named for George H. , and expanded our geographic reach with a new loan production office in Las Vegas Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. . Our contribution to and education curriculum surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. FDIC's Korean language Korean language Official language of North Korea and South Korea, spoken by more than 75 million people, including substantial communities of ethnic Koreans living elsewhere. version of `Money Smart' demonstrates our continued focus on forging strong ties with the Korean-American community and exemplifies our firm belief in relationship banking. The board of directors reiterated its confidence in the company by declaring a second quarterly dividend of $0.08 per share to shareholders of record as of January January: see month. 28, 2004, after initiating regular quarterly cash dividends in October October: see month. 2003. "We are extremely proud of the continued progress made in our first full calendar year on the NASDAQ National Market in executing our strategic expansion. We recognize the importance of attaining solid growth through prudent, sound management practices, quarter-by-quarter," Kim said. "Our fourth quarter results continued the momentum achieved throughout the year." For the three-month period ended December 31, 2003, net income rose 23% to $3.0 million, or $0.36 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, from $2.5 million, or $0.31 per diluted share, in the year-ago fourth quarter. (All per share figures have been adjusted to reflect the 8% stock dividend paid in 2003.) Return on average assets for the 2003 fourth quarter was 1.26%, and return on average equity was 15.71%, compared with 1.30% and 15.56% in the corresponding 2002 period. Net interest income before provision for loan losses grew 29% to $9.0 million for the 2003 fourth quarter from $7.0 million in the same period a year earlier, reflecting strong loan growth. The net interest margin benefited from the replacement of low yielding assets with higher-yielding loans and improved to 4.17% from 4.08% in the 2002 fourth quarter. Center Financial added $450,000 to its provision for loan losses during the fourth quarter of 2003, compared with $1.2 million in the corresponding year-earlier period. The company recorded $537,000 net recoveries in the 2003 fourth quarter from previously charged off loans, increasing the balance of allowance for loan losses. Noninterest income increased 11% to $4.8 million from $4.3 million in the 2002 fourth quarter, principally due to increased gain on sale of loans and service fee income. Noninterest expense totaled $8.5 million, compared with $6.4 million in the fourth quarter of 2002. The increase is attributed to additional 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. performance incentives awarded to employees who made outstanding contributions to Center Financial's progress, higher professional fees and settlement costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc certain long-standing long-stand·ing adj. Of long duration or existence: a long-standing friendship. long-standing Adjective existing for a long time legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. . As a result, the efficiency ratio increased to 62.00% from 56.42%. For the year ended December 31, 2003, net income increased 25% to a record $11.7 million, equal to $1.44 per diluted share or $1.49 per basic share, from $9.3 million, equal to $1.22 per diluted share or $1.25 per basic share, a year earlier. The difference between earnings per diluted share and earnings per basic share increased to $0.05 in 2003, as compared to $0.03 in 2002. This increase was triggered by the 41% increase in the company's average stock price in 2003. Return on average assets for 2003 was 1.32%, and return on average equity was 16.28%, compared with 1.39% and 16.27%, respectively for 2002. Net interest income before provision for loan losses in 2003 grew 21% to $32.0 million in 2003 from $26.5 million last year. This increase was principally attributed to Center Financial's expansion of its loan portfolio, offset by the effects of compressed net interest margins due to a Fed funds fed funds See federal funds. rate cut of 25 basis points in late June June: see month. 2003. The net interest margin contracted 34 basis points to 3.96% for 2003, compared with 4.30% last year. The company added $2.2 million to its provision for loan losses, compared with $2.1 million in 2002. Noninterest income rose 20% in 2003 to $16.6 million from $13.8 million in 2002, benefiting from a greater than two-fold increase on gain on sale of loans, a 17% rise in service fee income and a 60% increase in other income over the past year. The company said fee increases on customer deposit accounts, a higher number of account relationships and new fee income generating products, including Center Bank's mortgage referral program and ATM funding program, helped to boost noninterest income. 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. in 2003 grew 20% to $28.0 million from $23.3 million in 2002, reflecting the previously mentioned additional year-end performance incentives, higher professional fees and settlement costs, as well as additional expenses related to opening of the 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 office at the beginning of the third quarter and the 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. Benefiting from increased profit contributions and operating efficiencies of new branches opened over the past five years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time efficiency ratio for 2003 improved to 57.69%, compared with 58.00% a year ago. "The year-over-year increases in revenues, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and net income for Center Financial in 2003 underscore The underscore character (_) is often used to make file, field and variable names more readable when blank spaces are not allowed. For example, NOVEL_1A.DOC, FIRST_NAME and Start_Routine. (character) underscore - _, ASCII 95. the soundness of management's vision and the dedication of our employees," said Kim. "We believe we are only beginning to reap the benefits from these efforts and we are well positioned to continue our growth." Net loans at December 31, 2003 increased 38% to $716.8 million from $521.2 million at year-end 2002. The company recorded strong year-to-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, recorded the greatest year-over-year growth, posting a 60% increase over 2002 and represented 53% of Center Financial's loan portfolio at December 31, 2003. The balance of the portfolio included the following: commercial loans 20%; 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 9%; trade finance 8%; consumer loans 7%; and real estate construction 3%. Total deposits grew 19% to $867.9 million at December 31, 2003, compared with $727.0 million a year ago. Center Financial's core deposits represented 56% of total deposits at year-end, with solid growth in non-interest bearing and savings deposits Savings deposits Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand. , and a modest reduction in interest bearing checking deposits. Non-interest bearing deposits increased to 31% of total deposits at December 31, 2003 compared with 28% at the end of 2002. Time deposits rose 25% over levels at year-end 2002. Total assets rose 25% topping the $1.0 billion mark, compared with $818.6 million at December 31, 2002, and increased 11% from the immediately preceding 2003 third quarter. Interest-earning assets grew 20% to $906.4 million from $753.5 million at year-end 2002. Fee-generating assets at December 31, 2003, which included $20.0 million participation in the ATM funding program and $10.0 million of cash surrender value The amount of money that an insurance company pays the insured upon cancellation of a life insurance policy before death and which is a specific figure assigned to the policy at that particular time, reduced by a charge for administrative expenses. of bank-owned life insurance, totaled $30.0 million, compared with none a year earlier. The growth of total assets was financed by the increase of 140.9 million in deposits, $33.0 million of Federal Home Loan Bank borrowing and the issuance of 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. subordinated debenture subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before at the end of 2003 of $18.0 million in "pass-through pass-through n. 1. An opening between two rooms, especially a shelved space between a kitchen and dining room that is used for passing food. 2. A route through which something is permitted to pass. 3. " trust preferred securities. Total non-performing assets were $3.3 million at December 31, 2003, or 0.32% of total assets, compared with $2.4 million, or 0.30% of total assets at year-end 2002. Center Financial slightly increased its provision for loan losses to $2.2 million for 2003, as compared with $2.1 million for 2002. The company recorded net recoveries of $44,000 during 2003 compared with net charge-offs of $837,000 in 2002. The allowance for loan losses increased to $9.0 million, primarily due to the strong growth in the loan portfolio, and represented 1.24% of gross loans at December 31, 2003, compared with 1.28% a year earlier. At December 31, 2003, Center Financial remains "well-capitalized" under all regulatory 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 11.71%, a total risk-based capital ratio of 12.76%, and a Tier 1 leverage ratio of 10.78%. The company's issuance of long-term subordinated debenture of $18 million in "pass-through" trust preferred securities increased 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. by 23%. Although the trust preferred securities currently qualify as Tier I capital under the applicable regulatory guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. , no assurance can be given that this treatment will continue to apply in the future. 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. at year-end 2003 increased 19% to $77.8 million, from $65.2 million on December 31, 2002. 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 five Loan Production Offices located in Phoenix, Seattle, Denver, Las Vegas and Washington 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)
12/31/03 12/31/02
Assets
Cash and due from banks $76,926 $38,877
Federal funds sold 41,635 35,500
Money market funds and interest-bearing
deposits in other banks 22,400 40,000
Securities available-for-sale 110,126 140,998
Securities held-to-maturity 15,390 15,741
Loans (net of unearned income) 725,812 527,977
Allowance for loan losses (9,004) (6,760)
Net loans 716,808 521,217
Fixed assets 11,063 9,988
Bank-owned life insurance -- cash
surrender value 10,034 --
Other assets 22,634 16,303
Total assets $1,027,016 $818,624
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing deposits $268,534 $207,092
Interest bearing deposits 599,331 519,928
Total deposits 867,865 727,020
Borrowed funds 50,671 17,565
Long-term subordinate debenture 18,557 --
Other liabilities 12,172 8,833
Total Liabilities 949,265 753,418
Shareholders' Equity 77,751 65,206
Total Liabilities & Shareholders'
Equity $1,027,016 $818,624
Book value per share (1) $9.69 $8.48
Number of common shares outstanding at
period end (1) 8,024,260 7,692,421
(1) 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)
Quarter Ended Year Ended
December 31, December 31,
2003 2002 2003 2002
Interest income $11,900 $10,011 $43,658 $37,507
Interest expense 2,899 3,037 11,643 11,044
Net interest income
before provision for
loan losses 9,001 6,974 32,015 26,463
Provision for loan losses 450 1,200 2,200 2,100
Net interest income after
provision for loan
losses 8,551 5,774 29,815 24,363
Noninterest income
Customer service fees 1,910 1,706 7,164 6,147
Fee income from trade
finance transactions 723 713 2,689 2,819
Wire transfer fees 197 166 698 606
Gain on sale of loans 1,088 249 2,681 1,300
Net (loss) gain on sale
of securities available
for sale -- -- 330 171
Gain on sale of premises
and equipment -- 738 -- 738
Loan service fees 348 274 1,296 945
Other income 489 453 1,694 1,062
Total noninterest
income 4,755 4,299 16,552 13,788
Noninterest expenses
Salaries and employee
benefits 3,851 3,103 13,618 12,294
Occupancy 518 437 1,998 1,739
Furniture, fixtures,
and equipment 333 281 1,321 1,050
Net other real estate
owned expense (income) -- -- -- (98)
Data processing 477 501 1,755 1,650
Professional service fees 982 288 2,404 1,375
Business promotion and
advertising 494 483 1,815 1,553
Stationery and supplies 136 144 586 420
Telecommunications 131 145 490 455
Postage and courier
service 159 139 545 485
Security service 162 159 613 576
Other operating expenses 1,286 680 2,874 1,846
Total noninterest
expenses 8,529 6,360 28,019 23,345
INCOME BEFORE INCOME TAX
PROVISION 4,777 3,713 18,348 14,806
INCOME TAX PROVISION 1,733 1,229 6,696 5,459
Net income $3,044 $2,484 $11,652 $9,347
Other comprehensive
(loss) income (1) (1,031) 73 (1,544) 1,663
Total comprehensive
income $2,013 $2,557 $10,108 $11,010
Earning per share,
basic (2) $0.38 $0.32 $1.49 $1.25
Earning per share,
diluted (2) $0.36 $0.31 $1.44 $1.22
Basic average common
shares outstanding (2) 8,012,346 7,657,445 7,837,825 7,460,999
Diluted average common
shares outstanding (2) 8,208,256 7,946,808 8,092,127 7,673,560
(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 eight percent stock dividend paid in 2003.
CENTER FINANCIAL CORPORATION
SELECTED FINANCIAL DATA
(Unaudited)
(In thousands)
For the year ended
December 31,
2003 2002
Average gross loans outstanding
during period $620,302 $439,493
Total loans outstanding at end of
period (1) 725,812 527,977
Non-performing assets
Loans past due 90 days or more and
still accruing interest $-- $--
Non-accrual loans 3,327 2,428
Total non-performing loans 3,327 2,428
Other Real Estate Owned -- --
Total Non-performing assets $3,327 $2,428
Allowance for Loan Losses
Balance as of January 1, $(6,760) $(5,540)
Reserve for losses on commitments to
extend credit (2) -- 43
Provision for loan losses (2,200) (2,100)
Net loan charge-offs and (recoveries) (44) 837
Balance as of December 31, $(9,004) $(6,760)
Quarter Ended Year Ended
Selected Ratios December 31, December 31,
2003 2002 2003 2002
For the Period
Return on average assets 1.26% 1.30% 1.32% 1.39%
Return on average equity 15.71 15.56 16.28 16.27
Interest rate spread 3.62 4.07 3.35 3.52
Net interest margin 4.17 4.08 3.96 4.30
Yield on earning assets 5.51 5.81 5.40 6.11
Cost of deposits 1.86 2.37 2.02 2.59
Cost of funds 1.89 2.40 2.05 2.60
Noninterest expense/average
assets 0.89 0.84 3.16 3.48
Efficiency ratio 62.00 56.42 57.69 58.00
Net charge-offs/(recoveries)
to average loans (0.08) 0.13 (0.01) 0.19
Year Ended December 31,
Period End 2003 2002
Tier 1 risk-based capital ratio 11.71% 10.34%
Total risk-based capital ratio 12.76 11.44
Tier 1 leverage ratio 10.78 9.48
Non-accrual loans to gross loans 0.46 0.46
Non-performing assets to total loans and OREO 0.46 0.46
Non-performing assets to total assets 0.32 0.30
Allowance for loan loss to gross loans 1.24 1.28
Allowance for loan losses to nonperforming
assets 270.60 278.42
(1) Total loans are net of deferred loan fees and discount on SBA loan
sold.
(2) 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 twelve
months ended
December 31,
2003 2002 % chg
Loans
Real estate-construction $18,464 $20,669 -10.7%
Real estate-commercial 384,824 241,252 59.5%
Commercial 147,368 108,540 35.8%
Consumer 49,530 41,463 19.5%
Trade finance 61,886 50,106 23.5%
SBA 66,487 67,489 -1.5%
Other 179 129 38.8%
Total loans-gross 728,738 529,648 37.6%
Unearned Income (2,926) (1,671) 75.1%
Allowance for loan losses (9,004) (6,760) 33.2%
Total loans-net $716,808 $521,217 37.5%
Deposits
Non-interest bearing $268,534 $207,092 29.7%
Interest bearing checking 156,928 168,562 -6.9%
Savings 61,251 45,408 34.9%
Time deposits 381,152 305,958 24.6%
Total deposits $867,865 $727,020 19.4%
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