SAN DIEGO, Nov. 5, 2007 (PRIME NEWSWIRE) -- 1st Pacific Bancorp (OTCBB:FPBN), the holding company for 1st Pacific Bank of California, today announced third-quarter 2007 results were impacted by the acquisition and integration of Landmark National Bank, which closed on July 1, 2007. Net income for the third quarter decreased 22% to $685,000 from $873,000 in the prior-year third quarter primarily as a result of nonrecurring expenses of $293,000 associated with the integration of Landmark and relocation of several existing offices. In connection with the acquisition, 1st Pacific issued approximately 1.0 million shares resulting in a 24.6% year-over-year increase in the number of average diluted shares outstanding for the quarter ended September 30, 2007. Consequently, third quarter diluted EPS of $0.13 declined 38% from $0.21 for the third quarter of 2006. For the nine months of 2007, net income totaled $2.0 million, or $0.44 per diluted share, compared with $2.4 million, or $0.57 per diluted share, for the nine months of 2006.
The acquisition of Landmark National Bank expands 1st Pacific Bancorp's geographic footprint to seven branches in San Diego county, increases its asset base to over $420 million and broadens its bank-service offerings. Upon closing, Landmark had branches in La Jolla and Solana Beach, $71.4 million of net loans, $81.8 million of deposits, and $109.5 million of total assets. On June 30, 2007, 1st Pacific Bancorp had five branch offices in San Diego county, net loans of $278.8 million, deposits of $273.2 million and assets of $312.1 million. "This past quarter, we have been primarily involved with the integration of Landmark Bank. We spent the quarter creating a common culture, standardizing policies and procedures, and transitioning to one bank with one platform and one set of goals. We have integrated our client relationships and our calling program without experiencing erosion of our combined customer base. We are on target to achieve full cost-savings by the end of this year," said Vincent Siciliano, president and chief executive officer of 1st Pacific Bancorp.
Highlights for the third quarter of 2007 include:
-- On a sequential quarter basis, nonperforming assets increased $1.6 million this quarter to $6.3 million, compared with $4.7 million at June 30, 2007. The ratio of nonperforming assets as a percent of total assets was unchanged at 1.5% for both the current and previous quarters. The growth in non-performing assets was proportional to the growth in total assets. In October, one of the two loans on non-accrual status totaling $683,000 was paid off with no loss. Losses are expected to be minimal. -- The net interest margin improved by 23 basis points compared with the second quarter due to several factors: an improved deposit mix and active asset/liability management, both of which contributed to an improved cost of funds; and the Bank's practice of structuring the pricing of commercial loans to include a floor, which serves to limit the impact of declining interest rates on loan yields. -- Assets increased $127.6 million, or 44% over the past twelve months, with loans up $94.6 million, or 37% and total deposits up $107.1 million, or 44%. -- Third quarter 2007 noninterest expense increased by $1.26 million, or 46%, above the second quarter. Approximately $293,000 of expenses related to the Landmark merger and relocation of three existing 1st Pacific banking offices were nonrecurring or expected to be reduced in the fourth quarter. The third quarter efficiency ratio was 76.8%; excluding the nonrecurring expenses, the efficiency ratio was 71.1%.
Total revenue, consisting of net interest income and noninterest income, was $5.21 million for the third quarter of 2007, an increase of $1.20 million, or 29.8 percent, over the prior-year third quarter. Compared to the prior-year third quarter, net interest income increased 29.9 percent to $5.03 million, reflecting a 45.0 percent increase in average earning assets, partially offset by a 58 basis point decline in net interest margin to 5.03 percent for the current quarter. Compared with the second quarter of 2007, the third quarter margin improved by 23 basis points. Mr. Siciliano commented, "We anticipate that the impact to our margin from the cuts in the overnight Fed Funds rate will be modest in the fourth quarter. Although we are slightly asset-sensitive, the impact is limited by the rate floors in many of our loan structures. Going forward, we will continue to focus on lower-cost deposits and FHLB loans to actively manage our margin, and continue to structure our loans to protect our loan yield."
Noninterest income for the third quarter of 2007 was $177,600 compared with $140,000 for the year-ago quarter, an increase of 27.2 percent due exclusively to higher service charges and fees; no fee income was earned from any other source during the current quarter compared with $80,500 and $40,200, respectively, of SBA-related income earned in the prior and year-ago quarters.
Noninterest expense was $4.00 million for the third quarter of 2007, an increase of $1.56 million, or 63.8 percent, above the year-ago period, and $1.26 million, or 46.1 percent, above the 2007 second quarter. The majority of the increase in expenses resulted from the acquisition of Landmark at the beginning of the third quarter. Salaries and benefits were $2.18 million for the 2007 third quarter, up $597,100 or 37.7 percent, from the preceding quarter. With the acquisition of Landmark, the Bank added 20 new permanent positions to staff Landmark's existing branches and supplement administrative support areas of the Bank. In addition, seven Landmark employees were retained in temporary positions to assist with the merger and related systems conversion; one-time salary and benefits expense related to these temporary positions totaled approximately $106,000 during the third quarter.
Occupancy and equipment expenses almost doubled from the previous quarter, increasing by $386,300 to $788,000. The increase was the result of two factors: the integration of Landmark's two banking offices in Solana Beach and La Jolla, which increased third quarter occupancy expense by $247,000, and the relocation of three of the Bank's six offices during the third quarter, which resulted in writing off approximately $117,000 in remaining lease obligations on vacated premises. Other operating expenses increased from $752,300 in the second quarter of 2007, to $1.03 million for the current quarter. Several factors contributed to increased third quarter other expenses, including: approximately $70,000 in costs associated with moving three offices during the quarter and costs of running two data processing systems, all of which is nonrecurring or expected to be eliminated after the system conversion; $49,000 related to amortization of Landmark's core deposit intangible; $30,000 related to increased board fees, partially associated with adding three new directors; and a $25,000 increase in FDIC insurance related to increased deposits.
Although non-performing assets increased $1.6 million from the second quarter, or 34.1 percent, to $6.3 million for the current quarter, the ratio was relatively unchanged at 1.5 percent as a percent of total assets for both the second and third quarters. At September 30, 2007, the Bank had two loans on non-accrual status, including a previously identified $4.7 million loan for a multi-unit residential housing project, and a $683,000 construction (C&D) loan added during the third quarter which was paid off in October. At September 30, 2007, the loan loss reserve was $4.5 million, or 1.28 percent of loans, more than sufficient based on 1st Pacific's loss history, which has been virtually zero over the past seven years.
At September 30, 2007, total assets were $421.2 million, up $127.7 million, or 43.5 percent, above year-ago levels; $109.5 million of the increase was added through the Landmark acquisition, including $12.1 million of goodwill and other intangible assets. Third quarter 2007 loans were $350.1 million, representing growth of $94.6 million, or 37.0 percent, year-over-year, and $67.9 million, or 24.0 percent, above the previous quarter.
Due to Landmark's similar loan mix, the consolidated portfolio composition for the third quarter was comparable to 1st Pacific's second quarter loan mix: 37.9 percent C&D; 34.7 percent CRE; 20.0 percent C&I; and 4.8 percent SBA. Mr. Siciliano added, "Neither Landmark nor 1st Pacific engage in residential mortgage lending, and consequently, we do not have any sub-prime mortgages in our portfolio."
Deposits were $352.2 million at September 30, 2007, up $107.1 million, or 43.7 percent, from twelve months ago. Compared with the prior quarter, deposits increased $79.0 million, or 28.9 percent; $81.8 million of these deposits were acquired on July 1 with Landmark. The third quarter deposit mix shifted toward noninterest-bearing demand deposits, which increased $26.4 million, or 51.1 percent, partially offset by slower growth of Savings and Money Market accounts, up $15.9 million, or 18.7 percent. Noninterest-bearing deposit accounts and Savings and Money Market accounts now contribute 22.2 percent and 28.6 percent, respectively, of total deposits in the 2007 third quarter compared with 18.9 percent and 31.1 percent, respectively, for the second quarter. As a result of changes in the mix and lower market rates on deposits, the average cost of deposits for the third quarter was 3.40 percent, a twenty-two basis point decline from 3.62 percent reported for the second quarter of 2007.
At September 30, 2007, shareholders' equity was $44.3 million, an increase of $19.4 million, or 78.3 percent, from twelve months ago, resulting primarily from the acquisition of Landmark. The tangible equity to assets ratio was 7.87 percent, compared with 8.46 percent the year earlier. Shares outstanding at September 30, 2007 were 4,916,003.
Mr. Siciliano concluded, "Our challenge going forward is to sustain our performance in light of a weaker economy. However, San Diego is sufficiently diversified that a slowdown in one sector, namely, residential housing, should not overwhelm overall growth and continued job creation. The Bank continues to pursue commercial real estate and construction lending and small-to-mid sized business lending, as well as deposit generation. We are maintaining our strong credit quality through difficult times, and we have successfully completed the integration of Landmark.
"On a more personal note," Mr. Siciliano added, "We were fortunate that our employees and our banking offices escaped the recent San Diego wildfires without injury, and I understand that our clients were unharmed as well. We have tried wherever possible to provide support to families and businesses affected by the recent fires, and will continue to do so wherever we are needed."
About 1st Pacific Bancorp
1st Pacific Bancorp is the holding company for 1st Pacific Bank of California, San Diego's leading local business bank. The Bank offers a full complement of business products and services to meet the financial needs of professional firms, small to mid-sized businesses, their owners and the people who work there. Including its recent acquisition of Landmark National Bank, 1st Pacific Bank has a total of seven banking offices located in San Diego County: one each in the University Towne Center area, the Tri-Cities area of Oceanside, Mission Valley, the Inland North County, El Cajon, La Jolla Village and Solana Beach. For additional information, visit the Company's web site at: http://www.1stpacificbank.com.
The 1st Pacific Bancorp logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3261
Forward-Looking Statements
This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices, levies and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in the national and local economy; and other factors, including risk factors, referred to from time to time in filings made by 1st Pacific Bancorp with the Federal Reserve Board. 1st Pacific Bancorp undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
1st Pacific Bancorp CONSOLIDATED FINANCIAL HIGHLIGHTS Quarterly ----------------------------------------------------- (dollars in thousands except per 2007 2007 2007 2006 2006 share data) 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr ----------------------------------------------------- EARNINGS Net interest income $ 5,032 3,768 3,737 3,809 3,874 Provision for loan losses $ 37 74 77 10 86 NonInterest income $ 178 176 170 134 140 NonInterest expense $ 3,999 2,738 2,694 2,635 2,441 Net income $ 685 664 672 789 873 Basic earnings per share $ 0.14 0.17 0.17 0.20 0.23 Diluted earnings per share $ 0.13 0.16 0.16 0.19 0.21 Average shares outstanding 4,910,354 3,899,132 3,890,484 3,873,532 3,868,396 Average diluted shares outstanding 5,212,129 4,233,262 4,228,740 4,215,993 4,181,556 PERFORMANCE RATIOS Return on average assets 0.66% 0.83% 0.87% 1.04% 1.23% Return on average common equity 6.20% 9.84% 10.36% 12.32% 14.21% Net interest margin (fully tax- equivalent) 5.03% 4.80% 4.93% 5.20% 5.61% Efficiency ratio 76.76% 69.43% 68.95% 66.83% 60.82% CAPITAL Tangible equity to assets 7.87% 8.80% 8.46% 8.14% 8.46% Tangible book value per share $ 6.55 7.04 6.86 6.67 6.42 ASSET QUALITY Net loan charge-offs (recoveries) $ (0) (0) (0) 1 0 Allowance for loan losses $ 4,465 3,402 3,328 3,251 3,242 Allowance for losses to total loans 1.28% 1.21% 1.19% 1.18% 1.27% Nonperforming loans $ 6,336 4,724 0 0 0 Other real estate owned $ 0 0 0 0 0 Nonperforming assets to total assets 1.50% 1.51% 0.00% 0.00% 0.00% END OF PERIOD BALANCES Total Loans $ 350,128 282,249 280,032 275,266 255,560 Total assets $ 421,184 312,129 315,559 318,465 293,530 Deposits $ 352,158 273,150 268,793 261,838 245,011 Shareholders' equity $ 44,302 27,474 26,705 25,936 24,841 Full-time equivalent employees 101 77 71 77 73 AVERAGE BALANCES Total Loans $ 352,384 285,352 277,367 266,602 254,315 Earning Assets $ 397,059 314,564 307,220 290,730 273,920 Total assets $ 412,800 321,626 314,849 299,530 282,106 Deposits $ 354,492 264,022 266,117 253,378 244,637 Shareholders' equity $ 43,840 27,090 26,321 25,389 24,358 9 Months Year-To-Date (dollars in thousands except ----------------------- per share data) 2007 2006 ----------------------- EARNINGS Net interest income 12,538 11,434 Provision for loan losses 188 434 NonInterest income 524 404 NonInterest expense 9,432 7,338 Net income 2,022 2,387 Basic earnings per share 0.48 0.62 Diluted earnings per share 0.44 0.57 Average shares outstanding 4,233,323 3,862,596 Average diluted shares outstanding 4,558,044 4,185,541 PERFORMANCE RATIOS Return on average assets 0.77% 1.17% Return on average common equity 8.34% 13.59% Net interest margin (fully tax-equivalent) 4.94% 5.76% Efficiency ratio 72.21% 61.98% CAPITAL Tangible equity to assets 7.87% 8.46% Tangible book value per share 6.55 6.42 ASSET QUALITY Net loan charge-offs (recoveries) (0) 0 Allowance for loan losses 4,465 3,242 Allowance for losses to total loans 1.28% 1.27% Nonperforming loans 6,336 0 Other real estate owned 0 0 Nonperforming assets to total assets 1.50% 0.00% END OF PERIOD BALANCES Total Loans 350,128 255,560 Total assets 421,184 293,530 Deposits 352,158 245,011 Shareholders' equity 44,302 24,841 Full-time equivalent employees 101 73 AVERAGE BALANCES Total Loans 305,034 244,899 Earning Assets 339,614 265,446 Total assets 349,937 273,856 Deposits 294,710 240,422 Shareholders' equity 32,417 23,483 1st Pacific Bancorp CONSOLIDATED BALANCE SHEETS Sept 30, 2007 Dec 31, 2006 Sept 30, 2006 ------------- ------------ ------------- ASSETS Cash and due from banks $8,050,507 $9,099,447 $6,949,190 Federal funds sold 22,390,000 20,985,000 18,180,000 ------------------------------------------- Total cash and cash equivalents 30,440,507 30,084,447 25,129,190 Investment securities available for sale 17,604,764 8,998,338 9,365,311 FRB, FHLB and other equity stock, at cost 3,439,750 2,086,850 1,892,850 Construction & Land 132,666,956 116,389,134 97,495,583 Residential & Comm'l RE 121,601,613 81,130,349 81,999,650 SBA 7a & 504 Loans 16,727,294 19,883,247 21,141,858 Commercial Loans 70,201,589 52,796,722 50,557,980 Other Consumer 8,930,280 5,066,085 4,365,279 ------------------------------------------- Total loans and leases 350,127,732 275,265,537 255,560,350 Allowance for Loan Losses (4,464,714) (3,251,002) (3,242,372) ------------------------------------------- Total loans and leases, net 345,663,018 272,014,535 252,317,978 Premises and Equipment, net 3,847,837 1,604,318 1,674,390 Goodwill and Other Intangible Assets 12,090,626 0 0 Accrued Interest and Other Assets 8,097,004 3,676,110 3,150,008 ------------------------------------------- Total Assets $421,183,506 $318,464,598 $293,529,727 =========================================== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing demand $78,140,129 $46,099,641 $47,509,107 Interest bearing checking 17,376,099 13,323,197 12,097,749 Savings and Money Market 100,729,028 87,783,374 73,602,309 Time Deposits 155,912,934 114,632,266 111,802,138 ------------------------------------------- Total Deposits 352,158,190 261,838,478 245,011,303 Subordinated Debentures 10,155,000 5,000,000 5,000,000 Other borrowed money 10,000,000 24,010,000 17,500,000 Accrued interest and other liabilities 4,568,134 1,679,866 1,177,291 ------------------------------------------- Total liabilities 376,881,324 292,528,344 268,688,594 Shareholders' Equity: Common stock and additional paid-in capital 37,019,375 20,741,995 20,460,617 Retained Earnings 7,205,963 5,183,858 4,395,357 Accumulated other comprehensive income(loss) 76,844 10,401 (14,841) ------------------------------------------- Total shareholders' equity 44,302,182 25,936,254 24,841,133 ------------------------------------------- Total liabilities and shareholders' equity $421,183,506 $318,464,598 $293,529,727 =========================================== 1st Pacific Bancorp CONSOLIDATED REPORTS OF INCOME THREE MONTHS ENDED NINE MONTHS ENDED Sept 30, Sept 30, 2007 2006 2007 2006 ----------- ----------- ----------- ----------- INTEREST INCOME Loans, including fees $ 7,710,800 $ 5,831,068 $19,968,504 $16,404,137 Investment securities 318,829 137,227 595,402 236,635 Federal funds sold 244,431 109,842 726,897 479,202 ----------- ----------- ----------- ----------- Total interest income 8,274,060 6,078,137 21,290,803 17,119,974 ----------- ----------- ----------- ----------- INTEREST EXPENSE Deposits 3,040,899 2,029,974 7,838,216 5,313,888 Subordinated debt and other borrowings 200,810 174,444 915,007 372,292 ----------- ----------- ----------- ----------- Total interest expense 3,241,709 2,204,418 8,753,223 5,686,180 ----------- ----------- ----------- ----------- Net Interest Income 5,032,351 3,873,719 12,537,580 11,433,794 Provision for Loan Losses 37,000 86,000 188,000 434,000 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 4,995,351 3,787,719 12,349,580 10,999,794 NON INTEREST INCOME Service charges, fees and other income 177,618 99,781 395,631 300,111 Brokered loan fees and gains on loan sales 0 40,200 128,283 104,270 ----------- ----------- ----------- ----------- Total non interest income 177,618 139,981 523,914 404,381 NON INTEREST EXPENSE Salaries and benefits 2,181,582 1,451,822 5,395,816 4,515,440 Occupancy and equipment 787,989 399,205 1,589,834 1,156,568 Other expense 1,029,544 590,266 2,446,208 1,665,751 ----------- ----------- ----------- ----------- Total non interest expense 3,999,115 2,441,293 9,431,858 7,337,759 ----------- ----------- ----------- ----------- Income before income tax expense 1,173,854 1,486,407 3,441,636 4,066,416 Income tax expense 488,629 613,900 1,419,532 1,679,400 ----------- ----------- ----------- ----------- Net Income $685,225 $872,507 $2,022,104 $2,387,016 =========== =========== =========== =========== Basic earnings per share $0.14 $0.23 $0.48 $0.62 Diluted earnings per share $0.13 $0.21 $0.44 $0.57 Average shares outstanding 4,910,354 3,868,396 4,233,323 3,862,596 Average diluted shares outstanding 5,212,129 4,181,556 4,558,044 4,185,541