News Details

Q4 2012 Summary:

• $21.5 million net income available to common stockholders, or $0.28 per diluted common share
• $227 million net increase in gross loans receivable, or 6% linked quarter
• $79 million increase in non-interest bearing deposits, or 7% linked quarter
• $5.6 billion in total assets, reflecting a 6% increase linked quarter
• Quarterly cash dividend of $0.05 per common share

LOS ANGELES--(BUSINESS WIRE)-- BBCN Bancorp, Inc. (the “Company”) (NASDAQ: BBCN), the holding company of BBCN Bank (the “Bank”), today reported net income available to common stockholders of $21.5 million, or $0.28 per diluted common share, for fourth quarter 2012. This compares with net income available to common stockholders of $2.9 million, or $0.05 per diluted common share, for fourth quarter 2011, and net income available to common stockholders of $18.4 million, or $0.24 per diluted common share, for third quarter 2012.

For the full 2012 year, the Company posted net income available to common stockholders of $77.6 million, or $0.99 per diluted common share. This compares with net income available to common stockholders of $22.5 million, or $0.53 per diluted common share, for 2011, which reflects the operations of 11 months of the former Nara Bancorp, Inc. and one month of combined operations following the merger with Center Financial Corporation (“Center”), completed November 30, 2011.

The Company also announced today that its Board of Directors declared a quarterly cash dividend for first quarter 2013. All stockholders of record as of February 8, 2013 will be paid a cash dividend of $0.05 per common share, payable on or about February 22, 2013.

“We completed our first full year of operations as the leading Korean American bank in the nation with strong performances on all fronts,” said Alvin D. Kang, President and Chief Executive Officer. “Fourth quarter 2012 new loan originations of $371.2 million exceeded the strong levels of the preceding quarter. This performance helped to mitigate the net interest margin compression in the current interest rate environment and supported a five percent linked quarter increase in our pre-tax pre-provision earnings, which amounted to 2.83% of average assets on an annualized basis. Combined with steadily improving asset quality trends, we reported another quarter of strong core profitability to complete the year. All-in-all, we believe BBCN is well positioned for continued profitability and growth.”

The Company noted that the Center merger impacts the comparability of operating results for fourth quarter 2012 versus fourth quarter 2011 and the preceding third quarter 2012, as well as the operating results for the full 2012 year versus 2011. Supplemental information, which the Company believes will aid in understanding past financial performance, is included in this press release.

Operating Results for Fourth Quarter 2012

As previously mentioned, the comparability of operating results with past performance is impacted by the merger. The Company believes the following supplemental information will be helpful in understanding past financial performance. Operating results for the three months ended December 31, 2012, September 30, 2012 and December 31, 2011 include the following pre-tax acquisition accounting adjustments related to the merger.

The increase (decrease) of major adjustments to pre-tax income is summarized below. The impact which these adjustments have to certain yields and costs are described in subsequent sections of this release.

In addition to the items listed above, acquisition accounting adjustments had the effect of reducing the yield on the securities portfolio in fourth quarter and third quarter 2012. The acquired securities portfolio of approximately $291 million was adjusted to fair value of $293 million as of the merger date, resulting in interest income on investment securities for that portfolio being recognized at a lower average yield, compared with the yield on the balance of the Company's securities portfolio.

Operating results were also impacted by merger and integration related expenses, which amounted to $505,000, $183,000 and $3.2 million, for fourth quarter 2012, third quarter 2012 and fourth quarter 2011, respectively. The Company noted that fourth quarter 2012 merger and integration related expenses primarily reflected expenses associated with the pending Pacific International Bancorp, Inc. acquisition.

Net Interest Income and Net Interest Margin. The following table summarizes the reported net interest income before provision for loan losses.

Fourth quarter 2012 net interest income before provision for loan losses rose 47% over fourth quarter 2011 and 2% over preceding third quarter 2012, principally reflecting the higher level of interest earning assets as a result of the net growth in loans receivable.

The net interest margin (net interest income divided by average interest-earning assets) and the impact of acquisition accounting adjustments are summarized in the following table:

Fourth quarter 2012 net interest margin was 4.61%, reflecting a 9 basis point improvement over fourth quarter 2011, largely attributable to the accretion of discounts on acquired loans. Excluding the effect of acquisition accounting adjustments, the core net interest margin for fourth quarter 2012 decreased 11 basis points from fourth quarter 2011 to 4.06%.

Compared with preceding third quarter, fourth quarter 2012 net interest margin declined 18 basis points, largely reflecting decreases in the weighted average yields on loans and investment securities. Excluding the effect of acquisition accounting, the core net interest margin for fourth quarter 2012 declined only 8 basis points from third quarter 2012.

The weighted average yield on loans and the impact of acquisition accounting adjustments are summarized in the following table:

The weighted average yield on loans for fourth quarter 2012 decreased 41basis points from fourth quarter 2011 and 72 basis points on a core basis excluding acquisition accounting adjustments. The reduction in the core yield, excluding the effect of acquisition accounting adjustments, is primarily attributed to the significant pricing pressures in the market place over the past year and the lower yielding acquired loan portfolio.

Compared with preceding third quarter 2012, the weighted average yield on loans declined 22 basis points, and 15 basis points on a core basis, excluding the acquisition accounting adjustments. The more moderate decrease in the core yield, excluding the effect of acquisition accounting adjustments, versus the year-over-year comparison, reflects a stabilization in the competitive pricing environment in the market place during fourth quarter 2012. The weighted average yield on new loans originated during fourth quarter 2012 was 4.54%, compared with 4.53% for third quarter 2012.

The composition of fixed and variable rate loans and the associated weighted average yield, excluding loan discount accretion, is summarized in the following table:

The increased composition of fixed rate loans as a percentage of total loans reflects the high demand for fixed rate commercial real estate loans in the current interest rate environment.

The weighted average yield on securities available for sale is summarized in the following table:

The weighted average yield on securities available-for-sale for fourth quarter 2012 declined 57 basis points from fourth quarter 2011 and 15 basis points from the preceding third quarter 2012. The reductions are primarily attributable to the replacement of maturing securities with lower yielding investments as market interest rates declined.

The weighted average duration and average life of the securities available-for-sale are summarized in the following table:

The weighted average cost of deposits and the impact of acquisition accounting adjustments are summarized in the following table:

The weighted average cost of deposits for fourth quarter 2012 improved 19 basis points to 0.52% from fourth quarter 2011, and improved 20 basis points on a core basis, excluding the amortization of premium on time deposits assumed in the merger. Fourth quarter 2012 weighted average cost of deposits benefited from reductions in the cost of most categories of interest-bearing deposits.

Compared with the preceding third quarter 2012, the weighted average cost of deposits for fourth quarter 2012 was the same, but improved 4 basis points on a core basis, excluding the amortization of premium on time deposits assumed in the merger.

The weighted average cost of FHLB advances and the impact of acquisition accounting adjustments are summarized in the following table:

For fourth quarter 2012, the weighted average cost of FHLB advances decreased 150 basis points to 1.31% from fourth quarter 2011, largely due to decreases in market interest rates. Excluding acquisition accounting adjustments, the weighted average cost of FHLB advances decreased 191 basis points, reflecting the addition of $380.0 million in new FHLB borrowings at a weighted average rate of 0.62%, which is substantially lower than the weighted average rate of the rest of the borrowings. The weighted average original maturity of the new borrowings was 2.66 years. In addition, a total of $301.1 million of FHLB borrowings, with a weighted average rate of 1.26%, matured during 2012.

Compared with preceding third quarter 2012, the weighted average cost of FHLB advances decreased 25 basis points, and 47 basis points on a core basis, excluding acquisition accounting adjustments. During fourth quarter 2012, the Company added $100.0 million in new FHLB borrowings at a weighted average rate of 0.64%, and the weighted average original maturity of these new borrowings was 2.59 years. In addition, a total of $140.0 million of FHLB borrowings, with a weighted average rate of 1.09%, matured during fourth quarter 2012.

Non-interest Income. Total non-interest income for fourth quarter 2012 amounted to $9.9 million, a 48% increase over $6.7 million for fourth quarter 2011, and a 29% increase over $7.7 million for third quarter 2012.

The various non-interest income items are summarized in the following table:

The 48% increase in non-interest income over fourth quarter 2011 largely reflects a full quarter of operations as a combined Company, compared with one month of operations as a combined Company during fourth quarter 2011.

Compared with third quarter 2012, non-interest income rose 29% and is primarily attributed to a $2.8 million net gain on sales of SBA loans. Given the historic high premiums currently available in the market, the Company sold $30.8 million in SBA loans during fourth quarter 2012 and recorded a net gain on sale of $2.8 million. The Company said it continues to consider capital, liquidity and other factors in determining on a quarterly basis whether to sell or hold such SBA loans, but that it expected to sell SBA loans so long as the premiums available in the market remain near historic highs.

Non-interest Expense. Total non-interest expense for fourth quarter 2012 decreased 4% to $30.6 million from fourth quarter 2011, but increased 6% when compared with preceding third quarter 2012.

The various non-interest expense items are summarized in the following table:

Salaries and benefits expense for fourth quarter 2012 increased 54% over fourth quarter 2011, due in large part to the combined operations as BBCN for a full quarter in 2012. The number of full time equivalent employees (FTEs) was 704, 684 and 678 as of December 31, 2012, September 30, 2012, and December 31, 2011, respectively. The adjusted number of FTEs, as of the merger closing date of November 30, 2011, was 690. Compared with preceding third quarter 2012, salaries and benefits expense increased 4%.

The Company noted that merger and integration expenses for fourth quarter 2012 were principally associated with its previously announced acquisition of Pacific International Bancorp, Inc., which transaction is expected to be completed during first quarter 2013. Merger and integration expenses for fourth quarter 2011 reflects expenses associated with the Center merger.

Income Tax Provision. The effective tax rate for fourth quarter 2012 was 41.0%, compared with 32.2% for fourth quarter 2011 and 39.1% for third quarter 2012.

Balance Sheet Summary

Gross loans receivable totaled $4.30 billion at December 31, 2012, an increase of 6% compared with $4.07 billion at September 30, 2012 and an increase of 15% compared with $3.74 billion at December 31, 2011. Total loan originations for fourth quarter 2012 amounted to $371.2 million, including SBA loan originations of $84.3 million.

In comparison, new loan production during third quarter 2012 equaled $312.7 million, including SBA loan originations of $63.7 million.

Sales of SBA loans to the secondary market and gains derived from those sales are based substantially on the production of SBA 7(a) loans. Production of SBA 7(a) loans amounted to $27.5 million for fourth quarter 2012, compared with $33.9 million for third quarter 2012. During fourth quarter 2012, the Company sold $30.8 million of its SBA loans held for sale.

Aggregate loan pay-offs, pay-downs, amortization and other adjustments totaled $144.5 million during fourth quarter 2012, compared with $98.0 million during fourth quarter 2011 and $118.2 million during third quarter 2012.

Total deposits amounted to $4.38 billion at December 31, 2012, reflecting an increase of 8% over $4.05 billion at September 30, 2012, and an 11% increase over $3.94 billion at December 31, 2011. The increases reflect higher balances in non-interest bearing demand deposits, money market accounts and jumbo time deposits. The growth in total deposits was partially attributed to the successful completion of a fourth quarter 2013 marketing campaign celebrating BBCN's first anniversary. In addition, the Company added a net $139 million in wholesale deposits to support strong loan production activities and in anticipation of potential deposit outflows as a result of the expiration of the Federal Deposit Insurance Corporation's Temporary Account Guarantee (TAG) program, effective December 31, 2012. Non-interest bearing deposits at December 31, 2012 totaled $1.18 billion, or 27% of total deposits, compared with $1.11 billion at September 30, 2012, or 27% of total deposits.

Credit Quality

The provision for loan losses for fourth quarter 2012 was $2.4 million, compared with $9.1 million for fourth quarter 2011 and $6.9 million for preceding third quarter 2012. The fourth quarter 2012 provision reflects lower levels of net charge-offs relative to comparable quarters and improving historic loss rates.

For a more detailed understanding of the changes in the Allowance for Loan and Lease Losses (“ALLL”), the composition of the ALLL has been segmented for disclosure purposes between loans accounted for under the amortized cost method (referred to as “BBCN” loans) and loans acquired in the merger (referred to as “Acquired” loans). The acquired loans are further segregated between performing and credit impaired loans.

The composition of ALLL for the three months ended December 31, 2012, September 30, 2012 and December 31, 2011 is as follows:

Following are the Special Mention, Classified and Total Watchlist loan balances as of December 31 and September 30, 2012:

Non-performing loans (defined as loans past due 90 days or more and on non-accrual status, acquired loans past due 90 days or more and on accrual status, and accruing restructured loans) at December 31, 2012 was 73.6 million, or 1.71% of total loans, compared with $74.0 million, or 1.82% of total loans, at September 30, 2012. The reduction in the dollar amount of non-performing loans is attributed to charge-offs and pay-offs during the quarter.

Non-performing assets at December 31, 2012 were $76.3 million, or 1.35% of total assets, compared with $78.1 million, or 1.47% of total assets, at September 30, 2012, due largely to the decrease in other real estate owned.

Net loan charge-offs during fourth quarter 2012 totaled $1.4 million, or 0.13% of average loans on an annualized basis, compared with $6.5 million, or 0.64%, during third quarter 2012.

The allowance for loan losses at December 31, 2012 was $66.9 million, or 1.56% of gross loans receivable (excluding loans held for sale), compared with $66.0 million, or 1.62%, at September 30, 2012. The coverage ratio of the allowance for loan losses to non-performing loans (excluding acquired loans past due 90 days or more on accrual status) was 119% at December 31, 2012, compared with 128% at September 30, 2012.

Impaired loans (defined as loans for which it is probable that not all principal and interest payments due will be collectible in accordance with the contractual terms) increased modestly to $85.4 million at December 31, 2012 from $82.3 million at September 30, 2012. The increase was primarily related to two commercial real estate loans aggregating $4.6 million.

Specific reserves for impaired loans were $9.2 million, or 10.7% of the aggregate impaired loan amount, at December 31, 2012, compared with $8.7 million, or 10.6% of the aggregate impaired loan amount, at September 30, 2012. Excluding specific reserves for impaired loans, the allowance coverage on the remaining loan portfolio was 1.37% at December 31, 2012, compared with 1.44% at September 30, 2012.

Capital

At December 31, 2012, the Company continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” institution, as summarized in the following table.

Tangible common equity per share and as a percentage of tangible assets improved over prior comparable periods, as summarized in the following table:

During fourth quarter 2012, the Company announced a definitive agreement to acquire Seattle-based Pacific International Bancorp, Inc. in an all stock transaction valued at approximately $8.2 million. Pacific International had total assets of $197.6 million as of September 30, 2012, and its primary subsidiary, Pacific International Bank, a state-chartered bank, has four bank locations in the Seattle metropolitan area. The transaction is expected to be completed during first quarter 2013.

The transaction is subject to regulatory approval, the approval of the shareholders of Pacific International, and other customary closing conditions.

As previously announced, upon the departure of President and Chief Executive Officer Alvin D. Kang on January 31, 2013, Executive Vice President and Chief Operating Officer Bonita I. Lee will have the additional title of Acting President and lead an Executive Council, which will carry out the duties of the Chief Executive until an appointment is made by the Board of Directors.

“We began 2013 with tremendous momentum as the premier Korean American bank in the nation and expect to deliver another solid year of profitability,” said Ms. Lee. “We look forward to completing the merger of Pacific International later this quarter and believe BBCN is well poised to capitalize on strategic opportunities.”

Additional Information and Where to Find It

In connection with the proposed merger, BBCN Bancorp, Inc. filed a Registration Statement with the Securities and Exchange Commission (“SEC”) on Form S-4 that includes a proxy statement/prospectus, as well as other relevant documents concerning the proposed transaction. Shareholders are urged to read the Registration Statement, including the proxy statement/prospectus regarding the proposed transaction, and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain important information. Shareholders may obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about BBCN Bancorp at the SEC’s Internet site (www.sec.gov). Shareholders may also obtain these documents, free of charge, by directing a request to BBCN Bancorp, Attention: Investor Relations, 3731 Wilshire Blvd, Suite 1000, Los Angeles, Calif. 90020, or on the BBCN website at www.bbcnbank.com in the “Investor Relations” section under the heading “SEC Filings.”

Investor Conference Call

The Company will host an investor conference call on Tuesday, January 29, 2013 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for fourth quarter 2012. Investors and analysts may access the conference call by dialing 866-713-8562 (domestic) or 617-597-5310 (international), passcode 57196640. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of BBCN Bancorp's website at www.BBCNbank.com.

After the live webcast, a replay will be archived in the Investor Relations section of BBCN Bancorp's website for one year. A telephonic replay of the call will be available at 888-286-8010 (domestic) or 617-801-6888 (international) through February 5, 2013, passcode 38035327.

About BBCN Bancorp, Inc.

BBCN Bancorp, Inc. is the parent company of BBCN Bank, the largest Korean American bank in the nation with $5.6 billion in assets as of December 31, 2012. The Company is a result of the merger of equals of Nara Bancorp, Inc. and Center Financial Corporation completed on November 30, 2011. Headquartered in Los Angeles and serving a diverse mix of customers mirroring its communities, BBCN operates 40 branches in California, New York, New Jersey, Washington and Illinois, along with five loan production offices in Seattle, Denver, Dallas, Atlanta and Northern California. BBCN specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and business lending, SBA lending and international trade financing. BBCN Bank is a California-chartered bank and its deposits are insured by the FDIC to the extent provided by law. BBCN is an Equal Opportunity Lender.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about future operations and projected full-year financial results that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include but are not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services, and pricing. Readers should carefully review the risk factors and the information that could materially affect the Company's financial results and business, described in documents the Company files from time to time with the Securities and Exchange Commission, including its quarterly reports on Form 10-Q and Annual Reports on Form 10-K, and particularly the discussions of business considerations and certain factors that may affect results of operations and stock price set forth therein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.