Attached files
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EX-32 - PPBI 10-Q 2010 Q1 EX 32 - PACIFIC PREMIER BANCORP INC | ppbi_10q-2010q1ex32.htm |
EX-31.1 - PPBI 10-Q 2010 Q1 EX 31.1 - PACIFIC PREMIER BANCORP INC | ppbi_10q-2010q1ex311.htm |
EX-31.2 - PPBI 10-Q 2010 Q1 EX 31.2 - PACIFIC PREMIER BANCORP INC | ppbi_10q-2010q1ex312.htm |
UNITED
STATES SECURITIES AND EXCHANGE
COMMISSION
|
Washington,
DC 20549
FORM
10-Q
(Mark
One)
|
(X)
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended March 31, 2010
OR
(
) TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from _______ to _______
Commission
File Number 0-22193
(Exact
name of registrant as specified in its charter)
DELAWARE
|
33-0743196
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S
Employer Identification No.)
|
1600
SUNFLOWER AVENUE, 2ND
FLOOR, COSTA MESA, CALIFORNIA 92626
|
(Address
of principal executive offices and zip
code)
|
(714)
431-4000
|
(Registrant’s
telephone number, including area
code)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X ] No [_]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [_] No
[_]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “accelerated filer”, “large accelerated
filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange
Act).
Large
accelerated filer
|
[
]
|
Accelerated
filer
|
[
]
|
Non-accelerated
filer
|
[
]
|
Smaller
reporting company
|
[ X
]
|
(Do
not check if a smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2). Yes [ ] No [X]
The
number of shares outstanding of the registrant's common stock as of May 12, 2010
was 10,033,836.
PACIFIC
PREMIER BANCORP, INC. AND SUBSIDIARIES
FORM
10-Q
INDEX
FOR THE
QUARTER ENDED MARCH 31, 2010
PART 1 - FINANCIAL INFORMATION
Accompanying notes are an integral part of these consolidated financial statements.
Accompanying
notes are an integral part of these consolidated financial
statements.
The following table provides a summary of the changes in balance sheet carrying values associated with Level 3 financial instruments for the period indicated:
The following fair value hierarchy table presents information about the Company’s assets measured at fair value on a non-recurring basis at the date indicated:
The following table sets forth the Company’s allowance for loan losses and its corresponding percentage of the loan category balance and the percent of loan balance to total gross loans in each of the loan categories listed for the periods indicated:
Borrowings. At March 31, 2010, total borrowings amounted to $76.8 million, down $105.5 million or 57.9% from March 31, 2009 and $25.0 million or 24.6% from December 31, 2009. The reduction in borrowings during the first quarter of 2010 was due to the pay down of a fixed FHLB term advance, which carried a rate of 4.87%. At March 31, 2010, total borrowings represented 10.0% of total assets and were comprised of the following:
CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
|
||||||||||||
(dollars
in thousands, except share data)
|
||||||||||||
ASSETS
|
March
31, 2010
|
December
31, 2009
|
March
31, 2009
|
|||||||||
(Unaudited)
|
(Audited)
|
(Unaudited)
|
||||||||||
Cash
and due from banks
|
$ | 49,541 | $ | 59,677 | $ | 8,081 | ||||||
Federal
funds sold
|
29 | 29 | 28 | |||||||||
Cash
and cash equivalents
|
49,570 | 59,706 | 8,109 | |||||||||
Investment
securities available for sale
|
120,270 | 123,407 | 66,199 | |||||||||
FHLB
stock/Federal Reserve Bank stock, at cost
|
14,330 | 14,330 | 14,330 | |||||||||
Loans
held for sale, net
|
- | - | 652 | |||||||||
Loans
held for investment
|
547,051 | 575,489 | 619,336 | |||||||||
Allowance
for loan losses
|
(9,169 | ) | (8,905 | ) | (6,396 | ) | ||||||
Loans
held for investment, net
|
537,882 | 566,584 | 612,940 | |||||||||
Accrued
interest receivable
|
3,592 | 3,520 | 3,768 | |||||||||
Other
real estate owned
|
6,169 | 3,380 | 55 | |||||||||
Premises
and equipment
|
8,697 | 8,713 | 9,386 | |||||||||
Deferred
income taxes
|
11,546 | 11,465 | 9,891 | |||||||||
Bank
owned life insurance
|
12,060 | 11,926 | 11,527 | |||||||||
Other
assets
|
3,528 | 4,292 | 409 | |||||||||
TOTAL
ASSETS
|
$ | 767,644 | $ | 807,323 | $ | 737,266 | ||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||||||
LIABILITIES:
|
||||||||||||
Deposit
accounts:
|
||||||||||||
Noninterest
bearing
|
$ | 38,084 | $ | 33,885 | $ | 31,378 | ||||||
Interest
bearing:
|
||||||||||||
Transaction
accounts
|
174,644 | 161,872 | 66,596 | |||||||||
Retail
certificates of deposit
|
397,121 | 417,377 | 385,822 | |||||||||
Wholesale/brokered
certificates of deposit
|
3,052 | 5,600 | 9,554 | |||||||||
Total
deposits
|
612,901 | 618,734 | 493,350 | |||||||||
FHLB
advances and other borrowings
|
66,500 | 91,500 | 172,000 | |||||||||
Subordinated
debentures
|
10,310 | 10,310 | 10,310 | |||||||||
Accrued
expenses and other liabilities
|
3,812 | 13,277 | 3,395 | |||||||||
TOTAL
LIABILITIES
|
693,523 | 733,821 | 679,055 | |||||||||
STOCKHOLDERS’
EQUITY
|
||||||||||||
Preferred
Stock, $.01 par value; 1,000,000 shares authorized; no
shares outstanding
|
- | - | - | |||||||||
Common
stock, $.01 par value; 15,000,000 shares authorized; 10,033,836 shares at
March 31, 2010 and December 31, 2009, and 4,803,451 shares at March 31,
2009 issued and outstanding
|
100 | 100 | 47 | |||||||||
Additional
paid-in capital
|
79,928 | 79,907 | 64,373 | |||||||||
Accumulated
deficit
|
(4,308 | ) | (4,764 | ) | (3,767 | ) | ||||||
Accumulated
other comprehensive loss, net of tax of $1,118 at
March 31, 2010, $1,218 at December 31, 2009, and
$1,707 at March 31, 2009
|
(1,599 | ) | (1,741 | ) | (2,442 | ) | ||||||
TOTAL
STOCKHOLDERS’ EQUITY
|
74,121 | 73,502 | 58,211 | |||||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 767,644 | $ | 807,323 | $ | 737,266 |
Accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||||||
(dollars
in thousands, except per share data)
|
||||||||
(unaudited)
|
||||||||
Three
Months Ended
|
||||||||
March
31, 2010
|
March
31, 2009
|
|||||||
INTEREST
INCOME
|
||||||||
Loans
|
$ | 9,155 | $ | 10,165 | ||||
Investment
securities and other interest-earning assets
|
1,029 | 787 | ||||||
Total
interest income
|
10,184 | 10,952 | ||||||
INTEREST
EXPENSE
|
||||||||
Interest-bearing
deposits:
|
||||||||
Interest
on transaction accounts
|
413 | 255 | ||||||
Interest
on certificates of deposit
|
2,168 | 3,456 | ||||||
Total
interest-bearing deposits
|
2,581 | 3,711 | ||||||
FHLB
advances and other borrowings
|
868 | 1,861 | ||||||
Subordinated
debentures
|
75 | 103 | ||||||
Total
interest expense
|
3,524 | 5,675 | ||||||
NET
INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES
|
6,660 | 5,277 | ||||||
PROVISION
FOR LOAN LOSSES
|
1,056 | 1,160 | ||||||
NET
INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
|
5,604 | 4,117 | ||||||
NONINTEREST
INCOME
|
||||||||
Loan
servicing fees
|
70 | 159 | ||||||
Deposit
fees
|
188 | 212 | ||||||
Net
loss from sales of loans
|
(1,015 | ) | - | |||||
Net
gain from sales of investment securities
|
87 | - | ||||||
Other-than-temporary
impairment loss on investment securities, net
|
(326 | ) | 2 | |||||
Other
income
|
270 | 257 | ||||||
Total
noninterest income (loss)
|
(726 | ) | 630 | |||||
NONINTEREST
EXPENSE
|
||||||||
Compensation
and benefits
|
2,013 | 2,009 | ||||||
Premises
and occupancy
|
626 | 658 | ||||||
Data
processing and communications
|
184 | 155 | ||||||
Other
real estate owned operations, net
|
295 | (6 | ) | |||||
FDIC
insurance premiums
|
348 | 286 | ||||||
Legal
and audit
|
125 | 132 | ||||||
Marketing
expense
|
149 | 189 | ||||||
Office
and postage expense
|
123 | 80 | ||||||
Other
expense
|
459 | 427 | ||||||
Total
noninterest expense
|
4,322 | 3,930 | ||||||
NET
INCOME BEFORE INCOME TAX
|
556 | 817 | ||||||
INCOME
TAX
|
100 | 280 | ||||||
NET
INCOME
|
$ | 456 | $ | 537 | ||||
EARNINGS
PER SHARE
|
||||||||
Basic
|
$ | 0.05 | $ | 0.11 | ||||
Diluted
|
$ | 0.04 | $ | 0.09 | ||||
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
||||||||
Basic
|
10,033,836 | 4,852,895 | ||||||
Diluted
|
11,021,014 | 6,038,129 |
FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
|
||||||||||||||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||||||
Common
Stock Shares
|
Amount
|
Additional
Paid-in Capital
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive Income (Loss)
|
Comprehensive
Income
|
Total
Stockholders’ Equity
|
||||||||||||||||||||||
Balance
at December 31, 2008
|
4,903,451 | $ | 48 | $ | 64,680 | $ | (4,304 | ) | $ | (2,876 | ) | $ | 57,548 | |||||||||||||||
Comprehensive
Income:
|
||||||||||||||||||||||||||||
Net
income
|
537 | 537 | 537 | |||||||||||||||||||||||||
Unrealized
holding gains on securities
arising
during the period, net of tax
|
434 | |||||||||||||||||||||||||||
Net
unrealized gain on securities, net of tax
|
434 | 434 | 434 | |||||||||||||||||||||||||
Total
comprehensive income
|
971 | |||||||||||||||||||||||||||
Share-based
compensation expense
|
76 | 76 | ||||||||||||||||||||||||||
Common
stock repurchased and retired
|
(100,000 | ) | (1 | ) | (383 | ) | (384 | ) | ||||||||||||||||||||
Balance
at March 31, 2009
|
4,803,451 | $ | 47 | $ | 64,373 | $ | (3,767 | ) | $ | (2,442 | ) | $ | 58,211 | |||||||||||||||
Balance
at December 31, 2009
|
10,033,836 | $ | 100 | $ | 79,907 | $ | (4,764 | ) | $ | (1,741 | ) | $ | 73,502 | |||||||||||||||
Comprehensive
Income:
|
||||||||||||||||||||||||||||
Net
income
|
456 | 456 | 456 | |||||||||||||||||||||||||
Unrealized
holding gains on securities
arising
during the period, net of tax
|
94 | |||||||||||||||||||||||||||
Reclassification
adjustment for net loss on sale
of
securities included in net income, net of tax
|
48 | |||||||||||||||||||||||||||
Net
unrealized gain on securities, net of tax
|
142 | 142 | 142 | |||||||||||||||||||||||||
Total
comprehensive income
|
598 | |||||||||||||||||||||||||||
Share-based
compensation expense
|
21 | 21 | ||||||||||||||||||||||||||
Balance
at March 31, 2010
|
10,033,836 | $ | 100 | $ | 79,928 | $ | (4,308 | ) | $ | (1,599 | ) | $ | 74,121 |
Accompanying
notes are an integral part of these consolidated financial
statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
(in
thousands)
|
||||||||
(unaudited)
|
||||||||
Three
Months Ended
|
||||||||
March
31,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income
|
$ | 456 | $ | 537 | ||||
Adjustments
to net income:
|
||||||||
Depreciation
and amortization expense
|
247 | 252 | ||||||
Provision
for loan losses
|
1,056 | 1,160 | ||||||
Share-based
compensation expense
|
21 | 76 | ||||||
Loss
on sale and disposal of premises and equipment
|
12 | 24 | ||||||
Loss
on sale of other real estate owned
|
27 | - | ||||||
Write
down of other real estate owned
|
226 | (6 | ) | |||||
Amortization
of premium/discounts on securities held for sale, net
|
129 | 19 | ||||||
Gain
on sale of investment securities available for sale
|
(87 | ) | - | |||||
Other-than-temporary
impairment loss (recovery) on investment securities, net
|
326 | (2 | ) | |||||
Loss
on sale of loans held for investment
|
1,015 | - | ||||||
Proceeds
from the sales of and principal payments from loans held for
sale
|
- | 16 | ||||||
Deferred
income tax provision (benefit)
|
(81 | ) | 613 | |||||
Change
in accrued expenses and other liabilities, net
|
(1,227 | ) | (1,675 | ) | ||||
Income
from bank owned life insurance, net
|
(134 | ) | (132 | ) | ||||
Change
in accrued interest receivable and other assets, net
|
416 | 474 | ||||||
Net
cash provided by operating activities
|
2,402 | 1,356 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Proceeds
from sale and principal payments on loans held for
investment
|
28,670 | 17,372 | ||||||
Net
change in undisbursed loan funds
|
(2,471 | ) | (2,259 | ) | ||||
Purchase
and origination of loans held for investment
|
(2,922 | ) | (7,001 | ) | ||||
Proceeds
from sale of other real estate owned
|
489 | 45 | ||||||
Principal
payments on securities available for sale
|
3,216 | 1,963 | ||||||
Purchase
of securities available for sale
|
(32,795 | ) | (10,986 | ) | ||||
Proceeds
from sale or maturity of securities available for sale
|
24,351 | - | ||||||
Purchases
of premises and equipment
|
(243 | ) | (26 | ) | ||||
Net
cash provided by (used in) investing activities
|
18,295 | (892 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Net increase
in deposit accounts
|
(5,833 | ) | 36,222 | |||||
Repayment
of FHLB advances and other borrowings
|
(25,000 | ) | (37,900 | ) | ||||
Repurchase
of common stock
|
- | (384 | ) | |||||
Net
cash used in financing activities
|
(30,833 | ) | (2,062 | ) | ||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(10,136 | ) | (1,598 | ) | ||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
59,706 | 9,707 | ||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 49,570 | $ | 8,109 | ||||
SUPPLEMENTAL
CASH FLOW DISCLOSURES
|
||||||||
Interest
paid
|
$ | 3,403 | $ | 5,512 | ||||
Income
taxes paid
|
$ | 150 | $ | 475 | ||||
NONCASH
OPERATING ACTIVITIES DURING THE PERIOD
|
||||||||
Restricted
stock vested
|
$ | - | $ | 91 | ||||
NONCASH
INVESTING ACTIVITIES DURING THE PERIOD
|
||||||||
Transfers
from loans to foreclosed real estate
|
$ | 3,530 | $ | 55 |
Accompanying
notes are an integral part of these consolidated financial
statements.
PACIFIC
PREMIER BANCORP, INC. AND SUBSIDIARY
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
March 31,
2010
(UNAUDITED)
The
consolidated financial statements include the accounts of Pacific Premier
Bancorp, Inc. (the “Corporation”) and its wholly owned subsidiary, Pacific
Premier Bank (the “Bank”) (collectively, the “Company,” “we,” “our” or
“us”). All significant intercompany accounts and transactions have
been eliminated in consolidation.
In the
opinion of management, the consolidated financial statements contain all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the Company’s financial position as of March 31, 2010, December 31, 2009,
and March 31, 2009 and the results of its operations, changes in stockholders’
equity, comprehensive income and cash flows for the three months ended March 31,
2010 and 2009. Operating results for the three months ended March 31,
2010 are not necessarily indicative of the results that may be expected for any
other interim period or the full year ending December 31, 2010.
Certain
information and note disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission
(“SEC”). The unaudited consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and notes
thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2009.
The
Company accounts for its investments in its wholly owned special purpose entity,
PPBI Trust I, under the equity method whereby the subsidiary’s net earnings are
recognized in the Company’s statement of income.
Note
2 – Recently Issued Accounting Pronouncements
In
February 2010, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) No. 2010-09, Subsequent Events (Topic
855): Amendments to Certain Recognition and Disclosure
Requirements. The amendments remove the requirement for an SEC
registrant to disclose the date through which subsequent events were evaluated
as this requirement would have potentially conflicted with SEC reporting
requirements. Removal of the disclosure requirement did not have an
effect on the nature or timing of subsequent events evaluations performed by the
Company. ASU 2010-09 became effective upon issuance.
In
January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements. ASU 2010-06 revises two disclosure requirements
concerning fair value measurements and clarifies two others. It
requires separate presentation of significant transfers into and out of Levels 1
and 2 of the fair value hierarchy and disclosure of the reasons for such
transfers. It will also require the presentation of purchases, sales,
issuances, and settlements within Level 3 on a gross basis rather than a net
basis. The amendments also clarify that disclosures should be
disaggregated by class of asset or liability and that disclosures about inputs
and valuation techniques should be provided for both recurring and non-recurring
fair value measurements. The Company’s disclosures about fair value
measurements are presented in Note 6 – Fair Value of Financial
Instruments. These new disclosure requirements were effective for the
period ended March 31, 2010, except for the requirement concerning gross
presentation of Level 3 activity, which is effective for fiscal years beginning
after December 15, 2010. There was no significant effect to the
Company’s financial statement disclosure upon adoption of this ASU.
Note
3 – Regulatory Matters
As
defined in applicable regulations, at March 31, 2010, the Bank continued to
exceed the “well capitalized” standards for Tier 1 Capital to adjusted tangible
assets of 5.00%, Tier 1 risk-based capital to risk-weighted assets of 6.00% and
total capital to risk-weighted assets of 10.00%.
The
Bank’s and the Company’s (on a consolidated basis) capital amounts and ratios
are presented in the following table at the dates indicated:
Tier-1
Capital to
|
Tier-1
Risk-Based Capital to
|
Total
Capital to
|
||||||||||||||||||||||
Adjusted
Tangible Assets
|
Risk-Weighted
Assets
|
Risk-Weighted
Assets
|
||||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||||||
March 31, 2010
|
||||||||||||||||||||||||
Bank:
|
||||||||||||||||||||||||
Regulatory
capital
|
$ | 78,928 | 10.01 | % | $ | 78,928 | 13.96 | % | $ | 86,009 | 15.21 | % | ||||||||||||
Adequately
capitalized requirement
|
31,538 | 4.00 | % | 22,623 | 4.00 | % | 45,246 | 8.00 | % | |||||||||||||||
Well
capitalized requirement
|
39,423 | 5.00 | % | 33,934 | 6.00 | % | 56,558 | 10.00 | % | |||||||||||||||
Consolidated
regulatory capital
|
80,160 | 10.17 | % | 80,160 | 14.06 | % | 87,311 | 15.32 | % | |||||||||||||||
December 31, 2009
|
||||||||||||||||||||||||
Bank:
|
||||||||||||||||||||||||
Regulatory
capital
|
$ | 78,463 | 9.72 | % | $ | 78,463 | 13.30 | % | $ | 85,855 | 14.55 | % | ||||||||||||
Adequately
capitalized requirement
|
32,300 | 4.00 | % | 23,600 | 4.00 | % | 47,201 | 8.00 | % | |||||||||||||||
Well
capitalized requirement
|
40,375 | 5.00 | % | 35,401 | 6.00 | % | 59,001 | 10.00 | % | |||||||||||||||
Consolidated
regulatory capital
|
79,801 | 9.89 | % | 79,801 | 13.41 | % | 87,256 | 14.67 | % | |||||||||||||||
March 31, 2009
|
||||||||||||||||||||||||
Bank:
|
||||||||||||||||||||||||
Regulatory
capital
|
$ | 65,426 | 8.89 | % | $ | 65,426 | 10.94 | % | $ | 71,822 | 12.01 | % | ||||||||||||
Adequately
capitalized requirement
|
29,427 | 4.00 | % | 23,917 | 4.00 | % | 47,834 | 8.00 | % | |||||||||||||||
Well
capitalized requirement
|
36,784 | 5.00 | % | 35,876 | 6.00 | % | 59,793 | 10.00 | % | |||||||||||||||
Consolidated
regulatory capital
|
66,492 | 9.04 | % | 66,492 | 11.03 | % | 72,888 | 12.09 | % |
Note
4 – Subordinated Debentures
In March
2004, the Corporation issued $10.3 million of Floating Rate Junior Subordinated
Deferrable Interest Debentures (the “Subordinated Debentures”) to PPBI Trust I,
which funded the payment of $10.0 million of Floating Rate Trust Preferred
Securities issued by PPBI Trust I in March 2004. The net proceeds from the
offering of Trust Preferred Securities were contributed as capital to the Bank
to support further growth. Interest is payable quarterly on the
Subordinated Debentures at three-month LIBOR plus 2.75% per annum, for an
effective rate of 3.00% per annum as of March 31, 2010.
The
Corporation is not allowed to consolidate PPBI Trust I into the Company’s
financial statements. The resulting effect on the Company’s
consolidated financial statements is to report the Subordinated Debentures as a
component of liabilities.
Note
5 – Earnings Per Share
Basic
earnings per share excludes dilution and is computed by dividing net income or
loss available to common stockholders by the weighted average number of common
shares outstanding for the period, excluding common shares in
treasury. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted from the issuance of common
stock that would then share in earnings and excludes common shares in
treasury. For the three months ended March 31, 2010, stock options of
532,000 shares were not included in the computation of earnings per share
because their exercise price exceeded the average market price for their
respective periods. For the three months ended March 31, 2009, stock
options of 613,700 shares were excluded from the computations of diluted
earnings per share due to their exercise price exceeding the average market
price for their respective periods.
The
following table sets forth the Company’s unaudited earnings per share
calculations for the periods indicated:
Three
Months Ended March 31,
|
||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||
Net
|
Per
Share
|
Net
|
Per
Share
|
|||||||||||||||||||||
Income
|
Shares
|
Amount
|
Income
|
Shares
|
Amount
|
|||||||||||||||||||
(dollars
in thousands, except per share data)
|
||||||||||||||||||||||||
Net
income
|
$ | 456 | $ | 537 | ||||||||||||||||||||
Basic
income available to common
stockholders
|
456 | 10,033,836 | $ | 0.05 | 537 | 4,852,895 | $ | 0.11 | ||||||||||||||||
Effect
of warrants and dilutive stock options
|
- | 987,178 | - | 1,185,234 | ||||||||||||||||||||
Diluted
income available to common stockholders plus assumed
conversions
|
$ | 456 | 11,021,014 | $ | 0.04 | $ | 537 | 6,038,129 | $ | 0.09 |
Note
6 – Fair Value of Financial Instruments
Effective
January 1, 2008, the Company determines the fair market values of certain
financial instruments based on the fair value hierarchy established in GAAP
under ASC 820, “Fair Value Measurements and Disclosures”. GAAP
requires an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value and describes three levels of
inputs that may be used to measure fair value.
The
following provides a summary of the hierarchical levels used to measure fair
value:
Level 1 -
Quoted prices in active markets for identical assets or liabilities that the
reporting entity has the ability to access at the measurement date. Level 1
assets and liabilities may include debt and equity securities that are traded in
an active exchange market and that are highly liquid and are actively traded in
over-the-counter markets.
Level 2 -
Observable inputs other than Level 1 prices, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities. Level 2 assets and
liabilities may include debt securities with quoted prices that are traded less
frequently than exchange-traded instruments and other instruments whose value is
determined using a pricing model with inputs that are observable in the market
or can be derived principally from or corroborated by observable market data.
This category generally includes U.S. Government and agency mortgage-backed debt
securities, corporate debt securities, derivative contracts, residential
mortgage and loans held-for-sale.
Level 3 -
Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities. Level 3 assets
and liabilities include financial instruments whose value is determined using
pricing models, discounted cash flow methodologies, or similar techniques, as
well as instruments for which the determination of fair value requires
significant management judgment or estimation. This category generally includes
certain private equity investments, retained residual interests in
securitizations, residential MSRs, asset-backed securities (“ABS”), highly
structured or long-term derivative contracts and certain collateralized debt
obligations (“CDO”) where independent pricing information was not able to be
obtained for a significant portion of the underlying assets.
The
Company’s financial assets and liabilities measured at fair value on a recurring
basis include securities available for sale and impaired
loans. Securities available for sale include mortgage-backed
securities and equity securities. Impaired loans include loans that
are in a non-accrual status and where the Bank has reduced the principal to the
value of the underlying collateral less the anticipated selling
cost.
Marketable
Securities. Where possible, the Company utilizes quoted market
prices to measure debt and equity securities; such items are classified as Level
1 in the hierarchy and include equity securities, US government bonds and
securities issued by federally sponsored agencies. When quoted market
prices for identical assets are unavailable or the market for the asset is not
sufficiently active, varying valuation techniques are used. Common
inputs in valuing these assets include, among others, benchmark yields, issuer
spreads, forward mortgage-backed securities trade prices and recently reported
trades. Such assets are classified as Level 2 in the hierarchy and
typically include private label mortgage-backed securities and corporate bonds.
Pricing on these securities are provided to the Company by a pricing service
vendor. In the Level 3 category, the Company is classifying all the
securities that its pricing service vendor cannot price due to lack of trade
activity in these securities.
Impaired
Loans. A loan is considered impaired when it is probable that payment of
interest and principal will not be made in accordance with the contractual terms
of the loan agreement. Impairment is measured based on the fair value of the
underlying collateral or the discounted expected future cash flows. The Company
measures impairment on all non-accrual loans for which it has reduced the
principal balance to the value of the underlying collateral less the anticipated
selling cost. As such, the Company records impaired loans as non-recurring Level
2 when the fair value of the underlying collateral is based on an observable
market price or current appraised value. When current market prices are not
available or the Company determines that the fair value of the underlying
collateral is further impaired below appraised values, the Company records
impaired loans as Level 3. At March 31, 2010, substantially all the Company’s
impaired loans were evaluated based on the fair value of their underlying
collateral based upon the most recent appraisal available to
management.
The
Company’s valuation methodologies may produce a fair value calculation that may
not be indicative of net realizable value or reflective of future fair
values. While management believes the Company’s valuation
methodologies are appropriate and consistent with other market participants, the
use of different methodologies or assumptions to determine the fair value of
certain financial instruments could result in a different estimate of fair value
at the reporting date.
The
following fair value hierarchy table presents information about the Company’s
assets measured at fair value on a recurring basis at the date
indicated:
March
31, 2010
|
||||||||||||||||
Fair
Value Measurement Using
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Assets
at
Fair
Value
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Assets
|
||||||||||||||||
Marketable
securities
|
$ | 115,218 | $ | 4,851 | $ | 201 | $ | 120,270 | ||||||||
Total
assets
|
$ | 115,218 | $ | 4,851 | $ | 201 | $ | 120,270 |
The following table provides a summary of the changes in balance sheet carrying values associated with Level 3 financial instruments for the period indicated:
Fair
Value Measurement Using Significant Other Unobservable
Inputs
|
||||
(Level
3)
|
||||
Marketable
securities
|
||||
(in
thousands)
|
||||
Beginning
Balance, January 1, 2010
|
$ | 623 | ||
Total
gains or losses (realized/unrealized):
|
||||
Included
in earnings (or changes in net assets)
|
(153 | ) | ||
Included
in other comprehensive income
|
(245 | ) | ||
Purchases,
issuances, and settlements
|
(24 | ) | ||
Transfer
in and/or out of Level 3
|
- | |||
Ending
Balance, March 31, 2010
|
$ | 201 |
The following fair value hierarchy table presents information about the Company’s assets measured at fair value on a non-recurring basis at the date indicated:
March
31, 2010
|
||||||||||||||||
Fair
Value Measurement Using
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Assets
at
Fair
Value
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Assets
|
||||||||||||||||
Impaired
loans
|
$ | - | $ | 7,930 | $ | - | $ | 7,930 | ||||||||
Other
real estate owned
|
- | 6,169 | - | 6,169 | ||||||||||||
Total
assets
|
$ | - | $ | 14,099 | $ | - | $ | 14,099 |
Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
FORWARD-LOOKING
STATEMENTS
This
Quarterly Report on Form 10-Q contain statements that are considered “forward
looking statements” within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements represent plans, estimates,
objectives, goals, guidelines, expectations, intentions, projections and
statements of our beliefs concerning future events, business plans, objectives,
expected operating results and the assumptions upon which those statements are
based. Forward-looking statements include without limitation, any
statement that may predict, forecast, indicate or imply future results,
performance or achievements, and are typically identified with words such as
“may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,”
“expect,” “intend,” “plan,” or words or phases of similar meaning. We
caution that the forward-looking statements are based largely on our
expectations and are subject to a number of known and unknown risks and
uncertainties that are subject to change based on factors which are, in many
instances, beyond our control. Actual results, performance or
achievements could differ materially from those contemplated, expressed, or
implied by the forward-looking statements.
The
following factors, among others, could cause our financial performance to differ
materially from that expressed in such forward-looking statements:
·
|
The
strength of the United States economy in general and the strength of the
local economies in which we conduct
operations;
|
·
|
The
effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal
Reserve System (the “Federal Reserve
Board”);
|
·
|
Inflation,
interest rate, market and monetary
fluctuations;
|
·
|
The
timely development of competitive new products and services and the
acceptance of these products and services by new and existing
customers;
|
·
|
The
willingness of users to substitute competitors’ products and services for
our products and services;
|
·
|
The
impact of changes in financial services policies, laws and regulations,
including laws, regulations and policies concerning taxes, banking,
securities and insurance, and the application thereof by regulatory
bodies;
|
·
|
Technological
changes;
|
·
|
The
effect of acquisitions we may make, if any, including, without limitation,
the failure to achieve the expected revenue growth and/or expense savings
from such acquisitions;
|
·
|
Changes
in the level of our nonperforming assets and
charge-offs;
|
·
|
Oversupply
of inventory and continued deterioration in values of California real
estate, both residential and
commercial;
|
·
|
The
effect of changes in accounting policies and practices, as may be adopted
from time-to-time by bank regulatory agencies, the SEC, the Public Company
Accounting Oversight Board, the Financial Accounting Standards Board or
other accounting standards setters;
|
·
|
Possible
other-than-temporary impairments of securities held by
us;
|
·
|
The
impact of current governmental efforts to restructure the U.S. financial
regulatory system;
|
·
|
Changes
in consumer spending, borrowing and savings
habits;
|
·
|
The
effects of our lack of a diversified loan portfolio, including the risks
of geographic and industry
concentrations;
|
·
|
Ability
to attract deposits and other sources of
liquidity;
|
·
|
Changes
in the financial performance and/or condition of our
borrowers;
|
·
|
Changes
in the competitive environment among financial and bank holding companies
and other financial service
providers;
|
·
|
Geopolitical
conditions, including acts or threats of terrorism, actions taken by the
United States or other governments in response to acts or threats of
terrorism and/or military conflicts, which could impact business and
economic conditions in the United States and
abroad;
|
·
|
Unanticipated
regulatory or judicial proceedings;
and
|
·
|
Our
ability to manage the risks involved in the
foregoing.
|
If one or
more of the factors affecting our forward-looking information and statements
proves incorrect, then our actual results, performance or achievements could
differ materially from those expressed in, or implied by, forward-looking
information and statements contained in this Quarterly Report on Form 10-Q and
other reports and registration statements filed by us with the
SEC. Therefore, we caution you not to place undue reliance on our
forward-looking information and statements. We will not update the
forward-looking statements to reflect actual results or changes in the factors
affecting the forward-looking statements. The above factors and other
risks and uncertainties are discussed in our 2009 Annual Report on Form 10-K as
supplemented by the risk factors contained in “Item 1A. Risk Factors” in Part II
of this Quarterly Report on Form 10-Q.
Forward-looking
statements should not be viewed as predictions, and should not be the primary
basis upon which investors evaluate us. Any investor in our common
stock should consider all risks and uncertainties disclosed in our filings with
the SEC, all of which are accessible on the SEC’s website at
http://www.sec.gov.
GENERAL
This
discussion should be read in conjunction with our Management Discussion and
Analysis of Financial Condition and Results of Operations included in the 2009
Annual Report on Form 10-K plus the unaudited consolidated financial statements
and the notes thereto appearing elsewhere in this report. The results
for the three months ended March 31, 2010 are not necessarily indicative of the
results expected for the year ending December 31, 2010.
We are a
California-based bank holding company incorporated in the state of Delaware and
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (“BHCA”). Our wholly owned subsidiary, Pacific Premier
Bank, is a California state chartered commercial bank. As a bank
holding company, the Corporation is subject to regulation and supervision by the
Federal Reserve. We are required to file with the Federal Reserve quarterly and
annual reports and such additional information as the Federal Reserve may
require pursuant to the BHCA. The Federal Reserve may conduct examinations of
bank holding companies and their subsidiaries. The Corporation is
also a bank holding company within the meaning of the California Financial Code
(the “Financial Code”). As such, the Corporation and its subsidiaries are
subject to examination by, and may be required to file reports with, the
California Department of Financial Institutions (“DFI”).
Under a
policy of the Federal Reserve, a bank holding company is required to serve as a
source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where it might
not do so absent such a policy. The Federal Reserve, under the BHCA, has the
authority to require a bank holding company to terminate any activity or to
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a
bank) upon the Federal Reserve’s determination that such activity or control
constitutes a serious risk to the financial soundness and stability of any bank
subsidiary of the bank holding company.
As a
California state-chartered commercial bank which is a member of the Federal
Reserve System, the Bank is subject to supervision, periodic examination and
regulation by the DFI and the Federal Reserve. The Bank’s deposits are insured
by the FDIC through the Deposit Insurance Fund (“DIF”). In general
terms, insurance coverage is currently unlimited for non-interest bearing
transaction accounts and up to $250,000 per owner for all other
accounts. This level of insurance is scheduled to revert to $100,000
on January 1, 2014. As a result of this deposit insurance
function, the FDIC also has certain supervisory authority and powers over our
bank as well as all other FDIC insured institutions. If, as a result of an
examination of the Bank, the regulators should determine that the financial
condition, capital resources, asset quality, earnings prospects, management,
liquidity or other aspects of the Bank’s operations are unsatisfactory or that
the Bank or our management is violating or has violated any law or regulation,
various remedies are available to the regulators. Such remedies include the
power to enjoin unsafe or unsound practices, to require affirmative action to
correct any conditions resulting from any violation or practice, to issue an
administrative order that can be judicially enforced, to direct an increase in
capital, to restrict growth, to assess civil monetary penalties, to remove
officers and directors and ultimately to request the FDIC to terminate the
Bank’s deposit insurance. As a California-chartered commercial bank, the Bank is
also subject to certain provisions of California law.
We
provide banking services within our targeted markets in Southern California to
businesses, including the owners and employees of those businesses,
professionals, real estate investors and non-profit organizations, as well as
consumers in the communities we serve. The Bank operates six depository branches
in Southern California located in the cities of Costa Mesa, Huntington Beach,
Los Alamitos, Newport Beach, San Bernardino, and Seal Beach. Our
corporate headquarters are located in Costa Mesa, California. Through
our branches and our web site at www.ppbi.com
on the Internet, we offer a broad array of deposit products and services for
both businesses, and consumer customers including checking, money market and
savings accounts, cash management services, electronic banking, and on-line bill
payment. We also offer a variety of loan products, including
commercial business loans, lines of credit, commercial real estate loans, U.S.
Small Business Administration (“SBA”) loans, residential home loans, and home
equity loans. The Bank funds its lending and investment activities
with retail deposits obtained through its branches, advances from the Federal
Home Loan Bank (“FHLB”) of San Francisco, lines of credit, and wholesale and
brokered certificates of deposits.
Our
principal source of income is the net spread between interest earned on loans
and investments and the interest costs associated with deposits and borrowings
used to finance the loan and investment portfolios. Additionally, the
Bank generates fee income from loan sales and various products and services
offered to both depository and loan customers.
Recent
Developments
General
Economic Developments. Although recent U.S. economic indicators have
indicated the health of the economy is improving, the economy may require an
extended period of time to recover from the recessionary period. The
financial markets, and the financial services industry in particular, suffered
significant disruption starting in 2008, which has resulted in many institutions
failing or requiring government intervention to avoid failure. These conditions,
brought about primarily by dislocations in the U.S. and global credit markets,
including a significant and rapid deterioration in mortgage lending and related
real estate markets, continue to negatively affect the U.S. economy and the
markets where we do business.
The
United States, state and foreign governments have taken extraordinary actions in
an attempt to deal with what was a global financial crisis and the severe
decline in the U.S. economy. There can be no assurance that any other
legislation or regulatory reform or initiatives will be effective at improving
economic conditions globally, nationally or in our markets, or that the measures
adopted will not have adverse consequences on our results of
operations.
CRITICAL
ACCOUNTING POLICIES
Management
has established various accounting policies which govern the application of
accounting principles generally accepted in the United States of America in the
preparation of our financial statements. Our significant accounting
policies are described in the Notes to the Consolidated Financial Statements in
our 2009 Annual Report on Form 10-K. Certain accounting policies
require management to make estimates and assumptions which have a material
impact on the carrying value of certain assets and liabilities; management
considers these to be critical accounting policies. The estimates and
assumptions management uses are based on historical experience and other
factors, which management believes to be reasonable under the
circumstances. Actual results could differ significantly from these
estimates and assumptions, which could have a material impact on the carrying
value of assets and liabilities at balance sheet dates and our results of
operations for future reporting periods.
We
consider the allowance for loan losses to be a critical accounting policy that
requires judicious estimates and assumptions in the preparation of our financial
statements that is particularly susceptible to significant change. For further
information, see “Allowances for Loan Losses” discussed later in this report and
in our 2009 Annual Report on Form 10-K.
FINANCIAL
CONDITION
At March
31, 2010, assets totaled $767.6 million, up $30.4 million or 4.1% from March 31,
2009. During the first quarter of 2010, assets declined $39.7 million
or 4.9% primarily due to decreases of $28.7 million in loans held for
investment, net and $10.1 million in cash and cash equivalents.
Loans
At March
31, 2010, net loans held for investment totaled $537.9 million, down $75.1
million or 12.2% from March 31, 2009 and down $28.7 million or 5.1% from
December 31, 2009.
The
following table sets forth the composition of our loan portfolio in dollar
amounts, as a percentage of the portfolio and gives the weighted average
interest rate by loan category at the dates indicated:
March
31, 2010
|
December
31, 2009
|
March
31, 2009
|
||||||||||||||||||||||||||||||||||
Amount
|
Percent
of Total
|
Weighted
Average Interest Rate
|
Amount
|
Percent
of Total
|
Weighted
Average Interest Rate
|
Amount
|
Percent
of Total
|
Weighted
Average Interest Rate
|
||||||||||||||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||||||||||||||||||
Real
estate loans:
|
||||||||||||||||||||||||||||||||||||
Multi-family
|
$ | 264,996 | 48.4 | % | 6.18 | % | $ | 278,744 | 48.4 | % | 6.20 | % | $ | 289,803 | 46.7 | % | 6.30 | % | ||||||||||||||||||
Commercial
investor
|
139,953 | 25.6 | % | 6.88 | % | 149,577 | 26.0 | % | 6.84 | % | 161,409 | 26.0 | % | 6.99 | % | |||||||||||||||||||||
One-to-four
family (1)
|
8,364 | 1.5 | % | 8.23 | % | 8,491 | 1.5 | % | 8.25 | % | 8,922 | 1.4 | % | 8.67 | % | |||||||||||||||||||||
Land
|
- | 0.0 | % | 0.00 | % | - | 0.0 | % | 0.00 | % | 2,550 | 0.4 | % | 0.00 | % | |||||||||||||||||||||
Business
loans:
|
||||||||||||||||||||||||||||||||||||
Commercial
owner occupied (2)
|
96,336 | 17.6 | % | 7.14 | % | 103,019 | 17.9 | % | 7.11 | % | 107,714 | 17.4 | % | 7.05 | % | |||||||||||||||||||||
Commercial
and industrial
|
33,166 | 6.1 | % | 6.87 | % | 31,109 | 5.4 | % | 6.98 | % | 43,604 | 7.0 | % | 7.19 | % | |||||||||||||||||||||
SBA
|
3,002 | 0.5 | % | 5.69 | % | 3,337 | 0.5 | % | 5.73 | % | 4,620 | 0.8 | % | 5.67 | % | |||||||||||||||||||||
Other
loans
|
1,770 | 0.3 | % | 1.29 | % | 1,991 | 0.3 | % | 1.33 | % | 2,010 | 0.3 | % | 2.13 | % | |||||||||||||||||||||
Total
gross loans
|
547,587 | 100.0 | % | 6.58 | % | 576,268 | 100.0 | % | 6.58 | % | 620,632 | 100.0 | % | 6.66 | % | |||||||||||||||||||||
Loans
held for sale
|
- | - | (652 | ) | ||||||||||||||||||||||||||||||||
Total
gross loans held for investment
|
547,587 | 576,268 | 619,980 | |||||||||||||||||||||||||||||||||
Less
(plus):
|
||||||||||||||||||||||||||||||||||||
Deferred
loan origination costs (fees) and premiums (discounts)
|
(536 | ) | (779 | ) | (644 | ) | ||||||||||||||||||||||||||||||
Allowance
for loan losses
|
(9,169 | ) | (8,905 | ) | (6,396 | ) | ||||||||||||||||||||||||||||||
Loans
held for investment, net
|
$ | 537,882 | $ | 566,584 | $ | 612,940 | ||||||||||||||||||||||||||||||
(1)
Includes second trust deeds.
|
||||||||||||||||||||||||||||||||||||
(2)
Secured by real estate.
|
Gross
loans held for investment totaled $547.6 million at March 31, 2010, compared to
$620.6 million at March 31, 2009 and $576.3 million at December 31,
2009. The decrease of $28.7 million in the current quarter was
primarily due to loan sales of $14.3 million, payoffs of $15.4 million and other
real estate owned (“OREO”) acquired in the settlement of loans of $3.5 million,
all of which exceeded originations of $2.9 million and the net change in
undisbursed loan funds of $2.5 million. Given the weakness in the
commercial real estate (“CRE”) markets where our loans are located, during the
first quarter of 2010, management implemented a strategy to sell performing CRE
loans to reduce their concentration in the loan portfolio. We also
sold delinquent and nonaccrual loans as part of our aggressive loss mitigation
strategies to minimize losses to our loan portfolio. From time to
time, management utilizes loan purchases or sales to manage its liquidity,
interest rate risk, loan to deposit ratio, diversification of the loan portfolio
and net balance sheet growth.
The
following table sets forth loan originations, purchases, sales and principal
repayments relating to our gross loans for the periods indicated:
Three
Months Ended
|
||||||||
March
31, 2010
|
March
31, 2009
|
|||||||
(in
thousands)
|
||||||||
Beginning
balance gross loans
|
$ | 576,268 | $ | 628,767 | ||||
Loans
originated:
|
||||||||
Business
loans:
|
||||||||
Commecial
and industrial
|
2,740 | 2,100 | ||||||
SBA
|
50 | - | ||||||
Other
loans
|
132 | 850 | ||||||
Total
loans originated
|
2,922 | 2,950 | ||||||
Loans
purchased:
|
||||||||
Multi-family
|
- | 4,051 | ||||||
Total
loans purchased
|
- | 4,051 | ||||||
Total
loan production
|
2,922 | 7,001 | ||||||
Principal
repayments
|
(15,395 | ) | (16,695 | ) | ||||
Change
in undisbursed loan funds
|
2,471 | 2,259 | ||||||
Sales
of loans
|
(14,290 | ) | - | |||||
Charge-offs
|
(859 | ) | (645 | ) | ||||
Transfer
to other real estate owned
|
(3,530 | ) | (55 | ) | ||||
Net
decrease in gross loans
|
(28,681 | ) | (8,135 | ) | ||||
Ending
balance gross loans
|
$ | 547,587 | $ | 620,632 |
The
following table sets forth the weighted average interest rates, weighted average
number of months to reprice and the periods to repricing for our multi-family
and commercial real estate loans and our commercial owner occupied loans at the
date indicated:
March
31, 2010
|
||||||||||||||||
Number
of Loans
|
Amount
|
Weighted
Average
Interest
Rate
|
Weighted
Average Months to Reprice
|
|||||||||||||
(dollars
in thousands)
|
||||||||||||||||
1
Year and less (1)
|
223 | $ | 217,626 | 6.21 | % | 3.86 | ||||||||||
Over
1 Year to 3 Years
|
123 | 143,449 | 6.78 | % | 25.47 | |||||||||||
Over
3 Years to 5 Years
|
46 | 55,220 | 6.54 | % | 45.23 | |||||||||||
Over
5 Years to 7 Years
|
12 | 15,549 | 6.97 | % | 72.09 | |||||||||||
Over
7 Years to 10 Years
|
18 | 15,158 | 7.47 | % | 94.76 | |||||||||||
Fixed
|
48 | 54,283 | 7.04 | % | - | |||||||||||
Total
|
470 | $ | 501,285 | 6.56 | % | 21.36 | ||||||||||
(1)
Includes three and five-year hybrid loans that have reached their initial
repricing date.
|
||||||||||||||||
Delinquent
Loans. When a borrower fails to make required payments on a
loan and does not cure the delinquency within 30 days, we normally record a
notice of default and, after providing the required notices to the borrower,
commence foreclosure proceedings. If the loan is not reinstated
within the time permitted by law, we may sell the property at a foreclosure
sale. At these foreclosure sales, we generally acquire title to the
property. At March 31, 2010, loans delinquent 30 or more days as a
percentage of total gross loans was 1.10%, down from 1.65% at year-end 2009 and
from 1.90% at March 31, 2009. The improvement in the ratio during the
first quarter of 2010 was primarily from the sale of $6.0 million of delinquent
commercial real estate loans.
The
following table sets forth delinquencies in the Company's loan portfolio as of
the dates indicated:
30
- 59 Days
|
60
- 89 Days
|
90
Days or More (1)
|
Total
|
|||||||||||||||||||||||||||||
#
of
Loans
|
Principal
Balance
of
Loans
|
#
of
Loans
|
Principal
Balance
of
Loans
|
#
of
Loans
|
Principal
Balance
of
Loans
|
#
of
Loans
|
Principal
Balance
of
Loans
|
|||||||||||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||||||||||||||
At
March 31, 2010
|
||||||||||||||||||||||||||||||||
Real
estate loans:
|
||||||||||||||||||||||||||||||||
Commercial
investor
|
- | $ | - | 2 | $ | 3,384 | - | $ | - | 2 | $ | 3,384 | ||||||||||||||||||||
One-to-four
family
|
2 | 31 | 2 | 25 | 2 | 65 | 6 | 121 | ||||||||||||||||||||||||
Business
loans:
|
||||||||||||||||||||||||||||||||
Commercial
owner occupied
|
- | - | - | - | 2 | 972 | 2 | 972 | ||||||||||||||||||||||||
Commercial
and industrial
|
1 | 38 | 1 | 400 | - | - | 2 | 438 | ||||||||||||||||||||||||
SBA
|
3 | 497 | 1 | 96 | 4 | 499 | 8 | 1,092 | ||||||||||||||||||||||||
Total
|
6 | $ | 566 | 6 | $ | 3,905 | 8 | $ | 1,536 | 20 | $ | 6,007 | ||||||||||||||||||||
Delinquent
loans to total gross loans
|
0.11 | % | 0.71 | % | 0.28 | % | 1.10 | % | ||||||||||||||||||||||||
At
December 31, 2009
|
||||||||||||||||||||||||||||||||
Real
estate loans:
|
||||||||||||||||||||||||||||||||
Multi-family
|
1 | $ | 3,149 | - | $ | - | 3 | $ | 2,073 | 4 | $ | 5,222 | ||||||||||||||||||||
Commercial
investor
|
1 | 694 | - | - | 1 | 1,851 | 2 | 2,545 | ||||||||||||||||||||||||
One-to-four
family
|
3 | 45 | - | - | 4 | 97 | 7 | 142 | ||||||||||||||||||||||||
Business
loans:
|
||||||||||||||||||||||||||||||||
Commercial
owner occupied
|
- | - | - | - | 2 | 996 | 2 | 996 | ||||||||||||||||||||||||
SBA
|
1 | 69 | 1 | 52 | 3 | 463 | 5 | 584 | ||||||||||||||||||||||||
Other
|
1 | 19 | - | - | - | - | 1 | 19 | ||||||||||||||||||||||||
Total
|
7 | $ | 3,976 | 1 | $ | 52 | 13 | $ | 5,480 | 21 | $ | 9,508 | ||||||||||||||||||||
Delinquent
loans to total gross loans
|
0.69 | % | 0.01 | % | 0.95 | % | 1.65 | % | ||||||||||||||||||||||||
At
March 31, 2009
|
||||||||||||||||||||||||||||||||
Real
estate loans:
|
||||||||||||||||||||||||||||||||
Multi-family
|
2 | $ | 3,940 | - | $ | - | - | $ | - | 2 | $ | 3,940 | ||||||||||||||||||||
Commercial
investor
|
- | - | 1 | 541 | 2 | 2,084 | 3 | 2,625 | ||||||||||||||||||||||||
One-to-four
family
|
7 | 158 | - | - | 6 | 333 | 13 | 491 | ||||||||||||||||||||||||
Land
|
- | - | - | - | 1 | 2,550 | 1 | 2,550 | ||||||||||||||||||||||||
Business
loans:
|
||||||||||||||||||||||||||||||||
Commercial
owner occupied
|
- | - | 1 | 517 | 1 | 317 | 2 | 834 | ||||||||||||||||||||||||
Commercial
and industrial
|
- | - | 1 | 15 | - | - | 1 | 15 | ||||||||||||||||||||||||
SBA
|
- | - | 5 | 1,077 | 3 | 278 | 8 | 1,355 | ||||||||||||||||||||||||
Total
|
9 | $ | 4,098 | 8 | $ | 2,150 | 13 | $ | 5,562 | 30 | $ | 11,810 | ||||||||||||||||||||
Delinquent
loans to total gross loans
|
0.66 | % | 0.34 | % | 0.90 | % | 1.90 | % | ||||||||||||||||||||||||
(1)
All 90 day or greater delinquency are on nonaccrual status and are
reported as part of nonperforming loans.
|
Allowance
for Loan Losses
The
allowance for loan losses represents an estimate of probable losses inherent in
our loan portfolio and is determined by applying a systematically derived loss
factor to individual segments of the loan portfolio. The adequacy and
appropriateness of the allowance for loan losses and the individual loss factors
is reviewed each quarter by management.
The loss
factor for each segment of our loan portfolio is generally based on our actual
historical loss rate experience with emphasis on recent past periods to account
for current economic conditions and supplemented by management judgment for
certain segments where we lack loss history experience. We also
consider historical charge-off rates for the last 10 and 15 years for commercial
banks and savings institutions headquartered in California as collected and
reported by the FDIC. The loss factor is adjusted by qualitative
adjustment factors to arrive at a final loss factor for each loan portfolio
segment. For additional information regarding the qualitative
adjustments, please see “Allowances for Loan Losses” discussed in our 2009
Annual Report on Form 10-K. The qualitative factors allow management
to assess current trends within our loan portfolio and the economic environment
to incorporate their affect when calculating the allowance for loan
losses. The final loss factors are applied to pass graded loans
within our loan portfolio. Higher factors are applied to loans graded
below pass, including classified and criticized assets.
No
assurance can be given that we will not, in any particular period, sustain loan
losses that exceed the amount reserved, or that subsequent evaluation of our
loan portfolio, in light of the prevailing factors, including economic
conditions which may adversely affect our market area or other circumstances,
will not require significant increases in the loan loss allowance. In
addition, regulatory agencies as an integral part of their examination process,
periodically review our allowance for loan losses and may require us to
recognize additional provisions to increase the allowance or take charge-offs in
anticipation of future losses.
At March 31,
2010, the Company’s allowance for loan losses was $9.2 million, an increase of
$2.8 million from the year ago quarter end and an increase of $264,000 from
year-end 2009. The current first quarter increase in the allowance
for loan losses was primarily due to the provision for loan losses of $1.1
million, partially offset by net loan charge-offs of $0.8 million, which were
down from the $1.4 million recorded in the fourth quarter of
2009. The increase in the allowance for loan losses from year end was
attributed to the continued slow economic growth in the economy, especially in
Southern California. At March 31, 2010, the allowance for
loan losses as a percentage of total loans increased to 1.68% from 1.55% at
December 31, 2009, while the allowance for loan losses as a percent of
nonperforming loans increased to 213.28% from 88.94% at December 31,
2009. At March 31, 2010, given the composition of our loan portfolio,
the allowance for loan losses was considered adequate to cover estimated losses
inherent in the loan portfolio.
The following table sets
forth the activity within the Company’s allowance for loan losses in each of the
loan categories listed for the periods indicated:
Three
Months Ended
|
||||||||
March
31,
|
||||||||
2010
|
2009
|
|||||||
(dollars
in thousands)
|
||||||||
Balance,
beginning of period
|
$ | 8,905 | $ | 5,881 | ||||
Provision
for loan losses
|
1,056 | 1,160 | ||||||
Charge-offs:
|
||||||||
Real
estate:
|
||||||||
Multi-family
|
334 | - | ||||||
One-to-four
family
|
10 | 99 | ||||||
Business
loans:
|
||||||||
Commercial
and industrial
|
515 | 356 | ||||||
SBA
|
- | 227 | ||||||
Other
loans
|
- | - | ||||||
Total
charge-offs
|
859 | 682 | ||||||
Recoveries
:
|
||||||||
Real
estate:
|
||||||||
One-to-four
family
|
20 | 21 | ||||||
Business
loans:
|
||||||||
SBA
|
43 | 12 | ||||||
Other
loans
|
4 | 4 | ||||||
Total
recoveries
|
67 | 37 | ||||||
Net
loan charge-offs
|
792 | 645 | ||||||
Balance
at end of period
|
$ | 9,169 | $ | 6,396 | ||||
Ratios:
|
||||||||
Net
charge-off to average net loans
|
0.14 | % | 0.10 | % | ||||
Allowance
for loan losses to gross loans at end of period
|
1.67 | % | 1.03 | % |
The following table sets forth the Company’s allowance for loan losses and its corresponding percentage of the loan category balance and the percent of loan balance to total gross loans in each of the loan categories listed for the periods indicated:
March
31, 2010
|
December
31, 2009
|
March
31, 2009
|
||||||||||||||||||||||||||||||||||
Balance
at End of Period Applicable to
|
Amount
|
Allowance
as a % of Category Total
|
%
of Loans in Category to Total Loans
|
Amount
|
Allowance
as a % of Category Total
|
%
of Loans in Category to Total Loans
|
Amount
|
Allowance
as a % of Category Total
|
%
of Loans in Category to Total Loans
|
|||||||||||||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||||||||||||||||||
Real
estate loans:
|
||||||||||||||||||||||||||||||||||||
Multi-family
|
$ | 3,910 | 1.5 | % | 48.4 | % | $ | 3,350 | 1.2 | % | 48.4 | % | $ | 1,773 | 0.6 | % | 46.7 | % | ||||||||||||||||||
Commercial
investor
|
1,688 | 1.2 | % | 25.6 | % | 1,585 | 1.1 | % | 26.0 | % | 2,021 | 1.3 | % | 26.0 | % | |||||||||||||||||||||
One-to-four
family
|
161 | 1.9 | % | 1.5 | % | 269 | 3.2 | % | 1.5 | % | 193 | 2.2 | % | 1.4 | % | |||||||||||||||||||||
Land
|
- | -- | 0.0 | % | - | -- | 0.0 | % | - | -- | 0.4 | % | ||||||||||||||||||||||||
Business
loans:
|
||||||||||||||||||||||||||||||||||||
Commercial
owner occupied
|
936 | 1.0 | % | 17.6 | % | 897 | 0.9 | % | 17.9 | % | - | 0.0 | % | 17.4 | % | |||||||||||||||||||||
Commercial
and industrial
|
2,052 | 6.2 | % | 6.1 | % | 2,384 | 7.7 | % | 5.4 | % | 2,386 | 5.5 | % | 7.0 | % | |||||||||||||||||||||
SBA
|
262 | 8.7 | % | 0.5 | % | 323 | 9.7 | % | 0.5 | % | - | 0.0 | % | 0.8 | % | |||||||||||||||||||||
Other
Loans
|
10 | 0.6 | % | 0.3 | % | 2 | 0.1 | % | 0.3 | % | 23 | 1.1 | % | 0.3 | % | |||||||||||||||||||||
Unallocated
|
150 | -- | -- | 95 | -- | -- | - | -- | -- | |||||||||||||||||||||||||||
Total
|
$ | 9,169 | -- | 100.0 | % | $ | 8,905 | -- | 100.0 | % | $ | 6,396 | -- | 100.0 | % |
Investment
Securities Available
for Sale
Investment
securities available for sale totaled $120.3 million at March 31, 2010, up from
$66.2 million at March 31, 2009, but down from $123.4 million at December 31,
2009. The decrease in the current quarter of $3.1 million or 2.54%
was primarily due to the sale of securities totaling $24.3 million and principal
received of $3.2 million, partially offset by purchases of $24.6
million. At March 31, 2010, the investment securities available for
sale consisted of $155,000 in U.S. Treasury securities, $95.8 million of
government sponsored enterprises (“GSE”) mortgage-backed securities, $19.3
million of municipal bonds and $5.1 million of private label mortgage-backed
securities. Within our private label securities, 32 or $1.2 million
were rated as investment grade while 55 or $3.9 million were rated as below
investment grade, which is any rating below “BBB”. All of our private
label mortgage-backed securities were acquired when we redeemed our shares in
certain mutual funds in 2008.
The
following table sets forth the amortized cost, unrealized gains and losses, and
estimated fair value of our investment securities held for sale portfolio at the
dates indicated:
March
31, 2010
|
||||||||||||||||
Amortized
Cost
|
Unrealized
Gain
|
Unrealized
Loss
|
Estimated
Fair
Value
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Securities
available for sale
|
||||||||||||||||
U.S.
Treasury
|
$ | 147 | $ | 8 | $ | - | $ | 155 | ||||||||
Municipal
bonds
|
19,177 | 176 | (60 | ) | 19,293 | |||||||||||
Mortgage-backed
securities:
|
||||||||||||||||
Government
Sponsored Enterprise
|
96,156 | 83 | (469 | ) | 95,770 | |||||||||||
Private
label securities
|
7,508 | 82 | (2,538 | ) | 5,052 | |||||||||||
Total
securities available for sale
|
122,988 | 349 | (3,067 | ) | 120,270 | |||||||||||
FHLB
stock
|
12,731 | - | - | 12,731 | ||||||||||||
Federal
Reserve Bank stock
|
1,599 | - | - | 1,599 | ||||||||||||
Total
equities held at cost
|
14,330 | - | - | 14,330 | ||||||||||||
Total
securities
|
$ | 137,318 | $ | 349 | $ | (3,067 | ) | $ | 134,600 | |||||||
December 31,
2009
|
||||||||||||||||
Amortized
Cost
|
Unrealized
Gain
|
Unrealized
Loss
|
Estimated
Fair
Value
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Securities
available for sale:
|
||||||||||||||||
U.S.
Treasury
|
$ | 148 | $ | 6 | $ | - | $ | 154 | ||||||||
Municipal
bonds
|
17,918 | 200 | (153 | ) | 17,965 | |||||||||||
Mortgage-backed
securities:
|
||||||||||||||||
Government
Sponsored Enterprise
|
100,104 | 244 | (738 | ) | 99,610 | |||||||||||
Private
label securities
|
8,196 | 63 | (2,581 | ) | 5,678 | |||||||||||
Total
securities available for sale
|
126,366 | 513 | (3,472 | ) | 123,407 | |||||||||||
FHLB
stock
|
12,731 | - | - | 12,731 | ||||||||||||
Federal
Reserve Bank stock
|
1,599 | - | - | 1,599 | ||||||||||||
Total
equities held at cost
|
14,330 | - | - | 14,330 | ||||||||||||
Total
securities
|
$ | 140,696 | $ | 513 | $ | (3,472 | ) | $ | 137,737 | |||||||
March
31, 2009
|
||||||||||||||||
Amortized
Cost
|
Unrealized
Gain
|
Unrealized
Loss
|
Estimated
Fair
Value
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Securities
available for sale
|
||||||||||||||||
U.S.
Treasury
|
$ | 148 | $ | 15 | $ | - | $ | 163 | ||||||||
Government
Sponsored Enterprise
|
37,809 | 1,457 | (9 | ) | 39,257 | |||||||||||
Mortgage-backed
securities:
|
||||||||||||||||
Private
label securities
|
32,390 | 511 | (6,122 | ) | 26,779 | |||||||||||
Total
securities available for sale
|
70,347 | 1,983 | (6,131 | ) | 66,199 | |||||||||||
FHLB
stock
|
12,731 | - | - | 12,731 | ||||||||||||
Federal
Reserve Bank stock
|
1,599 | - | - | 1,599 | ||||||||||||
Total
equities held at cost
|
14,330 | - | - | 14,330 | ||||||||||||
Total
securities
|
$ | 84,677 | $ | 1,983 | $ | (6,131 | ) | $ | 80,529 |
The following
table sets forth the fair values and weighted average yields on our investment
securities available for sale portfolio by contractual maturity at the date
indicated:
March
31, 2010
|
||||||||||||||||||||||||||||||||||||||||
One
Year
|
More
than One
|
More
than Five Years
|
More
than
|
|
||||||||||||||||||||||||||||||||||||
or
Less
|
to
Five Years
|
to
Ten Years
|
Ten
Years
|
Total
|
||||||||||||||||||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||||||||||||||||||||
Fair
|
Average
|
Fair
|
Average
|
Fair
|
Average
|
Fair
|
Average
|
Fair
|
Average
|
|||||||||||||||||||||||||||||||
Value
|
Yield
|
Value
|
Yield
|
Value
|
Yield
|
Value
|
Yield
|
Value
|
Yield
|
|||||||||||||||||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||||||||||||||||||||||
Investement
securities available for sale:
|
||||||||||||||||||||||||||||||||||||||||
U.S.
Treasury
|
$ | - | 0.00 | % | $ | 78 | 3.53 | % | $ | 77 | 4.15 | % | $ | - | 0.00 | % | $ | 155 | 4.04 | % | ||||||||||||||||||||
Municipal
bonds
|
- | 0.00 | % | - | 0.00 | % | - | 0.00 | % | 19,293 | 4.34 | % | 19,293 | 4.37 | % | |||||||||||||||||||||||||
Mortgage-backed
securities:
|
||||||||||||||||||||||||||||||||||||||||
Government
Sponsored Enterprise
|
- | 0.00 | % | 4,775 | 2.60 | % | 213 | 5.46 | % | 90,782 | 3.36 | % | 95,770 | 3.31 | % | |||||||||||||||||||||||||
Private
label securities
|
- | 0.00 | % | - | 0.00 | % | - | 0.00 | % | 5,052 | 6.29 | % | 5,052 | 6.18 | % | |||||||||||||||||||||||||
Total
investment securities available for sale
|
- | 0.00 | % | 4,853 | 2.61 | % | 290 | 5.11 | % | 115,127 | 3.65 | % | 120,270 | 3.60 | % | |||||||||||||||||||||||||
Stock:
|
||||||||||||||||||||||||||||||||||||||||
FHLB
|
12,731 | 0.83 | % | - | 0.00 | % | - | 0.00 | % | - | 0.00 | % | 12,731 | 0.83 | % | |||||||||||||||||||||||||
Federal
Reserve Bank
|
1,599 | 6.00 | % | - | 0.00 | % | - | 0.00 | % | - | 0.00 | % | 1,599 | 6.00 | % | |||||||||||||||||||||||||
Total
stock
|
14,330 | 1.41 | % | - | 0.00 | % | - | 0.00 | % | - | 0.00 | % | $ | 14,330 | 1.41 | % | ||||||||||||||||||||||||
Total
securities
|
$ | 14,330 | 1.41 | % | $ | 4,853 | 2.61 | % | $ | 290 | 5.11 | % | $ | 115,127 | 3.65 | % | $ | 134,600 | 3.37 | % |
Each
quarter, we review individual securities classified as available for sale to
determine whether a decline in fair value below the amortized cost basis is
other-than-temporary. If it is probable that we will be unable to
collect all amounts due according to the contractual terms of the debt security,
an OTTI write down will be recorded against the security and a loss
recognized. During the quarter ended March 31, 2010, we took a net
$326,000 OTTI charge against our private label mortgage-backed securities deemed
to be impaired, compared to a small recovery of OTTI charges during the same
period last year. These impaired private label mortgage-backed
securities are classified as substandard assets with all the interest received
since the date of impairment being applied against their principal
balances.
Nonperforming
Assets
Nonperforming
assets consist of loans on which we have ceased accruing interest (nonaccrual
loans), restructured loans and real estate acquired in settlement of loans
(OREO). It is our general
policy to account for a loan as nonaccrual when the loan becomes 90 days
delinquent or when collection of interest appears doubtful.
Nonperforming
assets totaled $10.5 million or 1.36% of total assets at March 31, 2010,
compared to $7.6 million or 1.04% of total assets at March 31, 2009 and $13.4
million or 1.66% of total assets as of December 31, 2009. The 2010
first quarter decline was primarily from loan sales of $3.4 million and net loan
charge offs of $0.8 million coupled with other real estate owned sales of $0.5
million and property write downs of $226,000. These declines in
nonperforming assets were partially offset by additions to nonperforming loans
of $2.3 million as the weak California economy continues to affect our
borrowers. During the quarter ended March 31, 2010, we transferred
$3.5 million of nonaccrual loans to OREO. At March 31, 2010, nonperforming
assets consisted of $4.3 million of nonaccrual loans and $6.2 million of
OREO. Of our total nonaccrual loans, $2.1 million represented
borrowers who were current on their loan payments. Within OREO, we had five
properties consisting of two commercial real estate properties totaling $2.4
million, one commercial land property of $2.1 million and two multi-family
properties totaling $1.7 million. Of the five properties, two
commercial real estate properties and one multi-family property totaling $2.5
million were in escrow at March 31, 2010 and schedule to be sold in the second
quarter of 2010.
The
following table sets forth our composition of nonperforming assets at the dates
indicated:
March
31, 2010
|
December
31, 2009
|
March
31, 2009
|
||||||||||
(dollars
in thousands)
|
||||||||||||
Nonperforming
assets
|
||||||||||||
Real
estate:
|
||||||||||||
Multi-family
|
$ | 2,032 | $ | 5,223 | $ | - | ||||||
Commercial
investor
|
- | 1,851 | 5,627 | |||||||||
One-to-four
family
|
74 | 107 | 333 | |||||||||
Business
loans:
|
||||||||||||
Commercial
owner occupied
|
972 | 996 | 317 | |||||||||
Commercial
and industrial
|
438 | 955 | 15 | |||||||||
SBA
(1)
|
783 | 880 | 1,300 | |||||||||
Total
nonaccrual loans
|
4,299 | 10,012 | 7,592 | |||||||||
Other
real estate owned
|
6,169 | 3,380 | 55 | |||||||||
Total
nonperforming assets, net
|
$ | 10,468 | $ | 13,392 | $ | 7,647 | ||||||
Allowance
for loan losses
|
$ | 9,169 | $ | 8,905 | $ | 6,396 | ||||||
Allowance
for loan losses as a percent of total nonperforming loans,
gross
|
213.28 | % | 88.94 | % | 84.25 | % | ||||||
Nonperforming
loans as a percent of gross loans receivable (2)
|
0.79 | % | 1.74 | % | 1.22 | % | ||||||
Nonperforming
assets as a percent of total assets
|
1.36 | % | 1.66 | % | 1.04 | % |
(1)
|
The
SBA totals include the guaranteed amount, which was $588,000 as of March
31, 2010, $624,000 as of December 31, 2009, and $652,000 as of March 31,
2009.
|
(2)
|
Gross
loans include loans receivable held for investment and held for
sale.
|
Liabilities
and Stockholders’ Equity
Total
liabilities were $693.5 million at March 31, 2010, compared to $679.1 million at
March 31, 2009 and $733.8 million at December 31, 2009. The decrease
during the first quarter of 2010 was primarily due to a decrease in FHLB
advances and other borrowings of $25.0 million, accrued expenses and other
liabilities of $9.5 million and total deposits of $5.8 million. The
decrease in accrued expenses and other liabilities was primarily from investment
securities available for sale of $8.2 million that were purchased and not
settled at year-end 2009.
Deposits. Total
deposits were $612.9 million as of March 31, 2010, up $119.6 million or 24.2%
from March 31, 2009, but down $5.8 million or 0.9% from December 31,
2009. The decline in deposits during the current quarter was
comprised of decreases in retail certificate of deposits of $20.3 million and
wholesale/brokered certificates of deposits of $2.5 million, partially offset by
increases in interest-bearing transaction accounts of $12.8 million and
noninterest bearing accounts of $4.2 million. As of March 31, 2010, we had
$143.0 million of certificate of deposits scheduled to reprice in the next
quarter.
The
following table sets forth the distribution of the Company’s deposit accounts at
the dates indicated and the weighted average interest rates on each category of
deposits presented:
March
31, 2010
|
December
31, 2009
|
March
31, 2009
|
|||||||||||||||||||||||||||||||||||
Balance
|
%
of Total Deposits
|
Weighted
Average Rate
|
Balance
|
%
of Total Deposits
|
Weighted
Average Rate
|
Balance
|
%
of Total Deposits
|
Weighted
Average Rate
|
|||||||||||||||||||||||||||||
(dollars
in thousands)
|
|||||||||||||||||||||||||||||||||||||
Transaction
accounts:
|
|||||||||||||||||||||||||||||||||||||
Non-interest
bearing checking
|
$ | 38,084 | 6.2 | % | 0.00 | % | $ | 33,885 | 5.5 | % | 0.00 | % | $ | 31,377 | 6.4 | % | 0.00 | % | |||||||||||||||||||
Interest
bearing checking
|
21,067 | 3.4 | % | 0.34 | % | 22,406 | 3.6 | % | 0.39 | % | 19,321 | 3.9 | % | 0.95 | % | ||||||||||||||||||||||
Money
market
|
89,927 | 14.7 | % | 0.95 | % | 77,687 | 12.6 | % | 1.17 | % | 28,917 | 5.9 | % | 1.89 | % | ||||||||||||||||||||||
Regular
passbook
|
63,650 | 10.4 | % | 1.11 | % | 61,779 | 9.9 | % | 1.33 | % | 18,359 | 3.7 | % | 1.86 | % | ||||||||||||||||||||||
Total
transaction accounts
|
212,728 | 34.7 | % | 0.77 | % | 195,757 | 31.6 | % | 0.93 | % | 97,974 | 19.9 | % | 1.12 | % | ||||||||||||||||||||||
Certificates
of deposit accounts:
|
|||||||||||||||||||||||||||||||||||||
Less
than 1.00%
|
47,655 | 7.8 | % | 0.53 | % | 30,867 | 5.0 | % | 0.82 | % | 98 | 0.0 | % | 0.31 | % | ||||||||||||||||||||||
1.00 - 1.99 | 67,956 | 11.1 | % | 1.69 | % | 91,207 | 14.7 | % | 1.63 | % | 19,183 | 3.9 | % | 1.82 | % | ||||||||||||||||||||||
2.00 - 2.99 | 280,833 | 45.8 | % | 2.43 | % | 292,689 | 47.3 | % | 2.44 | % | 99,333 | 20.1 | % | 2.47 | % | ||||||||||||||||||||||
3.00 - 3.99 | 731 | 0.1 | % | 3.47 | % | 3,427 | 0.6 | % | 3.29 | % | 202,290 | 41.0 | % | 3.61 | % | ||||||||||||||||||||||
4.00 - 4.99 | 1,679 | 0.3 | % | 4.44 | % | 3,463 | 0.6 | % | 4.40 | % | 72,680 | 14.7 | % | 4.27 | % | ||||||||||||||||||||||
5.00
and greater
|
1,319 | 0.2 | % | 5.34 | % | 1,324 | 0.2 | % | 5.34 | % | 1,792 | 0.4 | % | 5.42 | % | ||||||||||||||||||||||
Total
certificates of deposit accounts
|
400,173 | 65.3 | % | 2.10 | % | 422,977 | 68.4 | % | 2.18 | % | 395,376 | 80.1 | % | 3.37 | % | ||||||||||||||||||||||
Total
deposits
|
$ | 612,901 | 100.0 | % | 1.64 | % | $ | 618,734 | 100.0 | % | 1.79 | % | $ | 493,350 | 100.0 | % | 2.92 | % |
Borrowings. At March 31, 2010, total borrowings amounted to $76.8 million, down $105.5 million or 57.9% from March 31, 2009 and $25.0 million or 24.6% from December 31, 2009. The reduction in borrowings during the first quarter of 2010 was due to the pay down of a fixed FHLB term advance, which carried a rate of 4.87%. At March 31, 2010, total borrowings represented 10.0% of total assets and were comprised of the following:
·
|
One
FHLB term borrowing of $38.0 million at an interest rate of 4.92%,
collateralized by pledges of certain real estate loans with an aggregate
principal balance of $470.8 million and FHLB stock totaling $12.7 million,
and that matures in November 2010;
|
·
|
Three
inverse putable reverse repurchase agreements totaling $28.5 million at a
weighted average rate of 3.04% and secured by approximately $45.4 million
of mortgage backed securities issued by the Federal Home Loan Mortgage
Corporation, Government National Mortgage Association, and Federal
National Mortgage Association; and
|
·
|
Subordinated
debentures used to fund the issuance of trust preferred securities in 2004
of $10.3 million with a rate of
3.00%.
|
The following table sets
forth certain information regarding the Company's borrowed funds at the dates
indicated:
March
31, 2010
|
December
31, 2009
|
March
31, 2009
|
||||||||||||||||||||||
Balance
|
Weighted
Average Rate
|
Balance
|
Weighted
Average Rate
|
Balance
|
Weighted
Average Rate
|
|||||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||||||
FHLB
advances
|
$ | 38,000 | 4.92 | % | $ | 63,000 | 4.90 | % | $ | 143,500 | 4.74 | % | ||||||||||||
Reverse
repurchase agreements
|
28,500 | 3.04 | % | 28,500 | 3.04 | % | 28,500 | 2.43 | % | |||||||||||||||
Subordinated
debentures
|
10,310 | 3.00 | % | 10,310 | 3.00 | % | 10,310 | 3.84 | % | |||||||||||||||
Total
borrowings
|
$ | 76,810 | 3.96 | % | $ | 101,810 | 4.19 | % | $ | 182,310 | 4.33 | % | ||||||||||||
Weighted
average cost of
borrowings
during the period
|
4.14 | % | 4.36 | % | 4.13 | % | ||||||||||||||||||
Borrowings
as a percent of total assets
|
10.0 | % | 12.6 | % | 24.7 | % |
Stockholders’
Equity. Total equity was $74.1 million as of March 31, 2010,
up from $58.2 million at March 31, 2009 and $73.5 million at December 31,
2009. The current quarter increase of $619,000 was primarily due to
net income of $456,000, an increase in the accumulated adjustment to
stockholders’ equity of $142,000 due to an increase in the unrealized value of
our investment portfolio. The increase in total equity from the end
of the first quarter of 2009 to the end of the first quarter of 2010 was
primarily due to a successful capital raise in the fourth quarter of 2009,
whereby the Company raised gross proceeds of $15.5 million from the sale of
5,030,385 shares of common stock at a public offering price of $3.25 per
share. At March 31, 2010, the Company’s tangible common equity to
total assets ratio was 9.66%, basic book value per share was $7.39 and diluted
book value per share was $6.80.
RESULTS
OF OPERATIONS
In the
first quarter of 2010, we recorded net income of $456,000, or $0.04 per diluted
share, compared to net income of $537,000 or $0.09 per diluted share for the
first quarter of 2009. All diluted earnings per share amounts have
been adjusted to reflect the dilutive effect of all warrants and stock options,
except for those options whose exercise price exceeds the closing market price
as of March 31, 2010. See “Note 5 – Earnings Per Share”, in our Notes
to Consolidated Financial Statements contained herein.
The
Company’s pre-tax income decreased $261,000 for the quarter ended March 31,
2010, compared to same period in 2009, which was primarily due to:
·
|
A
$1.0 million loss on the sale of $14.3 million of commercial real estate
loans in 2010, which loss was essentially all derived from the sales of
$6.0 million of delinquent loans, compared with no sales activity in
2009;
|
·
|
A
$326,000 other-than-temporary impairment (“OTTI”) loss taken on private
label securities in 2010, compared to small recovery of loss in 2009;
and
|
·
|
A
$301,000 increase in other real estate owned operations, net, primarily
related to current period write
downs.
|
Partially
offsetting these unfavorable items was a $1.4 million increase in net interest
income due to a higher net interest margin and level of interest earning
assets.
For the
three months ended March 31, 2010, our return on average assets was 0.23% and
return on average equity was 2.47%, compared to our return on average assets of
0.29% and return on average equity of 3.73% for the same comparable period of
2009. Our basic book value per share increased to $7.39 at March 31,
2010 from $7.33 at December 31, 2009. Our diluted book value per
share increased to $6.80 at March 31, 2010 from $6.75 at December 31, 2009,
reflecting an annualized increase of 3.0%.
Net
Interest Income
Our
earnings are derived predominately from net interest income, which is the
difference between the interest income earned on interest-earning assets,
primarily loans and securities, and the interest expense incurred on
interest-bearing liabilities, primarily deposits and borrowings. The
spread between the yield on interest-earning assets and the cost of
interest-bearing liabilities and the relative dollar amounts of these assets and
liabilities principally affect net interest income.
Net
interest income totaled $6.7 million in the first quarter of 2010, up $1.4
million or 26.2% from the same period in the prior year. The increase
reflected a higher net interest margin of 3.56% in the current quarter from
3.00% in the prior year quarter and a higher level of average interest-earning
assets amounting to$748.8 million in the current quarter, compared to $703.1
million in the prior year quarter. The 56 basis point increase in the
current quarter net interest margin reflected the average costs on
interest-bearing liabilities decreasing more rapidly than the average yield on
interest-earning assets. The lower cost on our interest-bearing
liabilities resulted primarily from a decline in our cost of deposits of 143
basis points during the current quarter. The lower yield on our
current quarter interest-earning assets was primarily associated with the
unfavorable impact of a higher proportion of average cash and cash equivalents
held and a lower yield on investment securities of 137 basis
points. The lower yield on our investment securities was primarily
due to the decision to reduce our credit risk exposure in our securities
portfolio by selling private label securities with higher credit risk and
replacing them with lower yielding, lower credit risk GSE
securities. These GSE securities also enhanced our regulatory capital
as they have a lower asset risk weighting than private label
securities.
The
following table presents for the periods indicated the average dollar amounts
from selected balance sheet categories calculated from daily average balances
and the total dollar amount, including adjustments to yields and costs,
of:
·
|
Interest
income earned from average interest-earning assets and the resultant
yields; and
|
·
|
Interest
expense incurred from average interest-bearing liabilities and resultant
costs, expressed as rates.
|
The table
also sets forth our net interest income, net interest rate spread and net
interest rate margin for the periods indicated. The net interest rate
margin reflects the relative level of interest-earning assets to
interest-bearing liabilities and equals our net interest rate spread divided by
average interest-earning assets for the periods indicated.
Three
Months Ended
|
Three
Months Ended
|
|||||||||||||||||||||||
March
31, 2010
|
March
31, 2009
|
|||||||||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||
Assets
|
Balance
|
Interest
|
Yield/Cost
|
Balance
|
Interest
|
Yield/Cost
|
||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Cash
and cash equivalents
|
$ | 59,761 | $ | 34 | 0.23 | % | $ | 9,390 | $ | 4 | 0.17 | % | ||||||||||||
Federal
funds sold
|
29 | - | 0.00 | % | 5,743 | 4 | 0.28 | % | ||||||||||||||||
Investment
securities
|
133,910 | 995 | 2.97 | % | 71,780 | 779 | 4.34 | % | ||||||||||||||||
Loans
receivable, net (1)
|
555,106 | 9,155 | 6.60 | % | 616,182 | 10,165 | 6.60 | % | ||||||||||||||||
Total
interest-earning assets
|
748,806 | 10,184 | 5.44 | % | 703,095 | 10,952 | 6.23 | % | ||||||||||||||||
Noninterest-earning
assets
|
43,340 | 34,803 | ||||||||||||||||||||||
Total
assets
|
$ | 792,146 | $ | 737,898 | ||||||||||||||||||||
Liabilities
and Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Transaction
accounts
|
$ | 207,533 | $ | 413 | 0.81 | % | $ | 93,340 | $ | 255 | 1.11 | % | ||||||||||||
Retail
certificates of deposit
|
405,128 | 2,150 | 2.15 | % | 367,470 | 3,304 | 3.65 | % | ||||||||||||||||
Wholesale/brokered
certificates of deposit
|
4,352 | 18 | 1.68 | % | 20,210 | 152 | 3.05 | % | ||||||||||||||||
Total
interest-bearing deposits
|
617,013 | 2,581 | 1.70 | % | 481,020 | 3,711 | 3.13 | % | ||||||||||||||||
FHLB
advances and other borrowings
|
82,133 | 868 | 4.29 | % | 182,693 | 1,861 | 4.13 | % | ||||||||||||||||
Subordinated
debentures
|
10,310 | 75 | 2.95 | % | 10,310 | 103 | 4.05 | % | ||||||||||||||||
Total
borrowings
|
92,443 | 943 | 4.14 | % | 193,003 | 1,964 | 4.13 | % | ||||||||||||||||
Total
interest-bearing liabilities
|
709,456 | 3,524 | 2.01 | % | 674,023 | 5,675 | 3.41 | % | ||||||||||||||||
Non-interest-bearing
liabilities
|
8,708 | 6,285 | ||||||||||||||||||||||
Total
liabilities
|
718,164 | 680,308 | ||||||||||||||||||||||
Stockholder
equity
|
73,982 | 57,590 | ||||||||||||||||||||||
Total
liabilities and equity
|
$ | 792,146 | $ | 737,898 | ||||||||||||||||||||
Net
interest income
|
$ | 6,660 | $ | 5,277 | ||||||||||||||||||||
Net
interest rate spread (2)
|
3.43 | % | 2.82 | % | ||||||||||||||||||||
Net
interest margin (3)
|
3.56 | % | 3.00 | % | ||||||||||||||||||||
Ratio
of interest-earning assets to interest-bearing liabilities
|
105.55 | % | 104.31 | % |
(1)
|
Average
balance includes loans held for sale and nonperforming loans and is net of
deferred loan origination fees, unamortized discounts and premiums, and
allowance for loan losses.
|
(2)
|
Represents
the difference between the yield on interest-earning assets and the cost
of interest-bearing liabilities.
|
(3)
|
Represents
net interest income divided by average interest-earning
assets.
|
Changes
in our net interest income are a function of changes in both volumes and rates
of interest-earning assets and interest-bearing liabilities. The
following table presents the impact the volume and rate changes have had on our
net interest income for the periods indicated. For each category of
interest-earning assets and interest-bearing liabilities, we have provided
information on changes to our net interest income with respect to:
·
|
Changes
in volume (changes in volume multiplied by prior
rate);
|
·
|
Changes
in interest rates (changes in interest rates multiplied by prior volume);
and
|
·
|
The
net change or the combined impact of volume and rate changes allocated
proportionately to changes in volume and changes in interest
rates.
|
Three
Months Ended March 31, 2010
|
||||||||||||
Compared
to
|
||||||||||||
Three
Months Ended March 31, 2009
|
||||||||||||
Increase
(Decrease) due to
|
||||||||||||
Rate
|
Volume
|
Net
|
||||||||||
(in
thousands)
|
||||||||||||
Interest-earning
assets
|
||||||||||||
Cash
and cash equivalents
|
$ | 1 | $ | 29 | $ | 30 | ||||||
Federal
funds sold
|
(2 | ) | (2 | ) | (4 | ) | ||||||
Investment
securities
|
(303 | ) | 519 | 216 | ||||||||
Loans
receivable, net
|
- | (1,010 | ) | (1,010 | ) | |||||||
Total
interest-earning assets
|
(304 | ) | (464 | ) | (768 | ) | ||||||
Interest-bearing
liabilities
|
||||||||||||
Transaction
accounts
|
(85 | ) | 243 | 158 | ||||||||
Retail
certificates of deposit
|
(1,464 | ) | 310 | (1,154 | ) | |||||||
Wholesale/brokered
certificates of deposit
|
(49 | ) | (85 | ) | (134 | ) | ||||||
FHLB
advances and other borrowings
|
67 | (1,060 | ) | (993 | ) | |||||||
Subordinated
debentures
|
(28 | ) | - | (28 | ) | |||||||
Total
interest-bearing liabilities
|
(1,559 | ) | (592 | ) | (2,151 | ) | ||||||
Change
in net interest income
|
$ | 1,255 | $ | 128 | $ | 1,383 |
Provision
for Loan Losses
During
the first quarter of 2010, the provision for loan losses totaled $1.1 million, a
decrease of $104,000 from the first quarter of 2009. Net loan charge
offs amounted to $0.8 million for the first quarter of 2010, an increase of
$147,000 from the same period in the prior year. The recent loan
charge offs we have experienced are related to the continued general economic
weakness in the California economy, as reflected in high unemployment figures,
sluggish commercial real estate markets and other economic factors, which
adversely affect our borrowers, our borrower’s businesses and the collateral
securing our loans.
Our Loss
Mitigation Department continues collection efforts on loans previously written
down and/or charged-off to maximize potential recoveries. See
“Allowance for Loan Losses” discussed above in this report.
Noninterest
Income
In the
first quarter of 2010, we had a noninterest loss of $0.7 million, compared to
noninterest income of $0.6 million in the first quarter of 2009. This
unfavorable change between quarters was primarily due to $1.0 million loss on
the sale of loans in the current quarter, virtually all derived from the sales
of $6.0 million of delinquent loans, compared with no loan sales activity in the
prior year quarter and net OTTI charges of $326,000 in the current quarter,
compared to a small recovery of loss in the prior year quarter. Given
the weakness in the CRE markets where our loans are located, during the first
quarter of 2010, management implemented a strategy to sell performing CRE loans
to reduce their concentration in the loan portfolio. We also sold
delinquent and nonaccrual loans as part of our aggressive loss mitigation
strategies to minimize losses to our loan portfolio. The OTTI charges
were on private label securities we acquired when we redeemed our shares in
certain mutual funds in 2008.
Noninterest
Expense
Noninterest
expense totaled $4.3 million in the first quarter of 2010, up $392,000 from the
same period in the prior year. The increase primarily related to
higher costs within other real estate owned operations, net of $301,000, due to
an increase in write downs of $226,000 and, to a lesser extent, an increase in
the number of foreclosed properties. The number of full-time
equivalent employees at March 31, 2010 was 90 compared to 89 at December 31,
2009.
Income
Taxes
For the
three months ended March 31, 2010, we had a tax provision of $100,000, compared
to $280,000 for the same period in 2009. The change in income taxes
was primarily due to a reduction in net income before taxes of
$261,000. At March 31, 2010, we had no valuation allowance against
our deferred tax asset of $11.5 million based on management’s analysis that the
asset was more-likely-than-not to be realized.
CAPITAL
RESOURCES AND LIQUIDITY
Our
primary sources of funds are deposits; advances from the FHLB and other
borrowings; principal and interest payments on loans; and income from
investments. While maturities and scheduled amortization of loans are a
predictable source of funds, deposit inflows and outflows as well as loan
prepayments are greatly influenced by general interest rates, economic
conditions, and competition.
Our
primary sources of funds generated during the first three months of 2010 were
from:
·
|
Proceeds
of $28.7 million from the sale and principal payments on loans held for
investment; and
|
·
|
Proceeds
of $24.4 million from the sale of securities available for
sale.
|
We used
these funds to:
·
|
Reduce
borrowings by $25.0 million; and
|
·
|
Purchase
of $32.8 million of securities available for
sale.
|
Our most
liquid assets are unrestricted cash and short-term investments. The
levels of these assets are dependent on our operating, lending and investing
activities during any given period. At March 31, 2010, cash and cash
equivalents totaled $49.6 million and the market value of our investment
securities available for sale totaled $120.3 million. If additional
funds are needed, we have additional sources of liquidity that can be accessed,
including FHLB advances, Federal Funds lines, the Federal Reserve’s lending
programs and loan sales. As of March 31, 2010, the maximum amount we
could borrow through the FHLB was $361.1 million, of which $275.5 million was
available for borrowing based on collateral pledged of $470.8 million in real
estate loans and FHLB Stock of $12.7 million. Considering our
existing FHLB advance of $38.0 million, the Company had $237.5 million of
available funds to borrow. In addition to the FHLB advances, the Bank had
unsecured lines of credit on which to draw funds with other financial
institutions, including the Federal Reserve Bank, for a total of $34.8
million. At March 31, 2010, no funds had been drawn against these
lines.
To the
extent 2010 deposit growth falls short of satisfying ongoing commitments to fund
maturing and withdrawalable deposits, repay maturing borrowings, fund existing
and future loans, or make investments, we may access funds through our FHLB
borrowing arrangement, unsecured lines of credit or other
sources. For the quarter ended March 31, 2010, our average liquidity
ratio was 19.93%, up from a ratio 9.40% for the same period in
2009.
Contractual
Obligations and Commitments
The
Company enters into contractual obligations in the normal course of business as
a source of funds for its asset growth and to meet required capital
needs.
The
following schedule summarizes maturities and payments due on our obligations and
commitments, excluding accrued interest, as of the date
indicated:
March
31, 2010
|
||||||||||||||||||||
Less
than
|
1 - 3 | 3 - 5 |
More
than
|
|||||||||||||||||
1
year
|
years
|
years
|
5
years
|
Total
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||||||
Contractual
obligations
|
||||||||||||||||||||
FHLB
advances
|
$ | 38,000 | $ | - | $ | - | $ | - | $ | 38,000 | ||||||||||
Other
borrowings
|
- | - | - | 28,500 | 28,500 | |||||||||||||||
Subordinated
debentures
|
- | - | - | 10,310 | 10,310 | |||||||||||||||
Certificates
of deposit
|
277,077 | 117,555 | 4,813 | 728 | 400,173 | |||||||||||||||
Operating
leases
|
635 | 1,257 | 1,192 | 3,310 | 6,394 | |||||||||||||||
Total
contractual cash obligations
|
$ | 315,712 | $ | 118,812 | $ | 6,005 | $ | 42,848 | $ | 483,377 |
As of
March 31, 2010, we had commitments to extend credit of $8.9million, compared to
$13.0 million at December 31, 2009.
The
following table summarizes our contractual commitments with off-balance sheet
risk by expiration period at the date indicated:
March
31, 2010
|
||||||||||||||||||||
Less
than
|
1 - 3 | 3 - 5 |
More
than
|
|||||||||||||||||
1
year
|
years
|
years
|
5
years
|
Total
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||||||
Other
unused commitments
|
||||||||||||||||||||
Home
equity lines of credit
|
$ | - | $ | - | $ | - | $ | 475 | $ | 475 | ||||||||||
Commercial
lines of credit
|
5,431 | 1,027 | - | 513 | 6,971 | |||||||||||||||
Other
lines of credit
|
256 | - | - | 196 | 452 | |||||||||||||||
Standby
letters of credit
|
1,000 | - | - | - | 1,000 | |||||||||||||||
Total
commitments
|
$ | 6,687 | $ | 1,027 | $ | - | $ | 1,184 | $ | 8,898 |
Regulatory
Capital Compliance
The
Company owns all of the capital stock of the Bank. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
to be considered adequately capitalized by regulatory agencies, a bank must meet
a minimum ratio of Tier 1 capital to tangible total assets (leverage ratio) of
4.0%, of Tier 1 capital to risk-adjusted assets of 4.0% and of total capital to
risk-adjusted assets of 8.0%. The minimum leverage ratio is lowered
to 3.0% for a bank rated at the highest level of safety and soundness by
regulators. Despite these guidelines, the regulators still have the
discretion to increase these minimum capital ratios for specific institutions,
if deemed appropriate. At March 31, 2010, the Bank exceeded all
regulatory capital requirements with a ratio for Tier 1 leverage capital of
10.01%, Tier 1 risked-based capital of 13.96% and total risk-based capital of
15.21%. These capital ratios exceeded the more stringent “well
capitalized” standards defined by the federal banking regulators of 5.00% for
Tier 1 leverage capital, 6.00% for Tier 1 risked-based capital and 10.00%, for
total risk-based capital. At March 31, 2010, the Company had a ratio
for tier1 leverage capital of 10.17%, Tier 1 risked-based capital of 14.06% and
total risk-based capital of 15.32%. For further information, see
“Note 3 - Regulatory Matters” in our Notes to Financial Statements contained
herein.
Item 3. Quantitative and Qualitative Disclosure About
Market Risk
Management
believes that there have been no material changes in our quantitative and
qualitative information about market risk since December 31,
2009. For a complete discussion of our quantitative and qualitative
market risk, see “Item 7A. Quantitative and Qualitative Disclosure About Market
Risk” in our 2009 Annual Report on Form 10-K.
Item 4T. Controls and Procedures
Evaluation
of
Disclosure Controls and Procedures
Our Chief
Executive Officer and its Chief Financial Officer, after evaluating the
effectiveness of our disclosure controls and procedures as defined in Rules
13a-15(c) and 15-d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), as of the end of the period covered by this report (the
"Evaluation Date") have concluded that as of the Evaluation Date, our disclosure
controls and procedures were adequate and effective to ensure that material
information relating to us and our consolidated subsidiaries would be made known
to them by others within those entities, particularly during the period in which
this quarterly report was being prepared. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that it
files under the Exchange Act is accumulated and communicated to its Management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required
disclosure.
Changes
in Internal Controls
There
have not been any changes in our internal control over financial reporting (as
such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act)
during the fiscal quarter to which this report relates that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Item 1. Legal
Proceedings
We were
not involved in any legal proceedings other than those occurring in the ordinary
course of business, except for the “James Baker v. Century Financial, et al”
which was discussed in “Item 3. Legal Proceedings” in our 2009 Annual Report on
Form 10-K. Management believes that none of these legal proceedings,
individually or in the aggregate, will have a material adverse impact on our
results of operations or financial condition.
Item 1A. Risk Factors
There
are no material changes from the risk factors set forth under Part 1A. “Risk
Factors” in the Company’s 2009 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior
Securities
None
Item 4. Reserved
Item 5. Other
Information
None
Item 6. Exhibits
Exhibit
31.1 Certification of Chief Executive
Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Exhibit
31.2 Certification of Chief Financial
Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|
Exhibit
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
|
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
PACIFIC
PREMIER BANCORP, INC.,
May
12, 2010
|
By:
|
/s/
Steven R. Gardner
|
Date Steven R. Gardner
President
and Chief Executive Officer
(principal
executive officer)
May
12, 2010
|
/s/
Kent J.
Smith
|
Date
Kent J. Smith
Senior
Vice President and Chief Financial Officer
(principal
financial and accounting officer)
Index to
Exhibits
Exhibit
No. Description
of Exhibit
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of
2002
|
32 Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act.