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Plaza Bancorp, the Holding Company of Plaza Bank, Announces Financial Results for the Quarter Ended March 31, 2017 (unaudited)

IRVINE, CA--(Marketwired - Apr 19, 2017) - Plaza Bancorp ( OTC PINK : PLZZ )

Highlights for the quarter:

  • Earnings per diluted share increased 20% over last quarter and 50% over prior year quarter
  • ROAA 1.25%, ROAE 12.17%
  • Efficiency ratio improves to 59.3%
  • Net interest margin expands to 4.78%

Plaza Bancorp ( OTC PINK : PLZZ ) (the "Company"), the holding company of Plaza Bank (the "Bank"), reported unaudited net income for the quarter ended March 31, 2017 of $3.7 million or $0.12 per share on a diluted basis. This compares with net income of $3.0 million, or $0.10 per diluted share, for the fourth quarter of 2016 and net income of $2.3 million, or $0.08 per diluted share, for the first quarter of 2016.

For the three months ended March 31, 2017, the Company's return on average assets was 1.25% and return on average equity was 12.17%. For the three months ended December 31, 2016, the Company's return on average assets was 1.02% and the return on average equity was 10.33%. For the three months ended March 31, 2016, the Company's the return on average assets was 0.89% and the return on average equity was 8.53%.

Gene Galloway, Chief Executive Officer of the Company and the Bank, commenting on the Bank's results stated "I am pleased to announce that Plaza Bank has continued its streak of reporting profits. We are now at 27 straight quarters of profitability. The continuing financial improvement of the Bank would not have been possible without the loyalty of our clients, the dedication of our employees, and the support of our directors and the communities we serve."

Rick Sowers, President of the Company and Bank, added "Our core earnings continue to be strong, but we are experiencing a softer market in commercial real estate loan originations where production was off by $16 million, or 24%, compared to the prior quarter. This was partially offset by increased production in commercial lines of credit; however, monthly repayments speeds increased in the quarter by 57 basis points to 3.12% compared to the three months ending in 2016, leaving our loan growth flat for the quarter. We are addressing our loan growth by expanding our asset based lending and increasing the number and quality of our relationship manager teams."

Net interest income for the quarter ended March 31, 2017 totaled $13.4 million, an increase of $124,000, or 0.9%, from the fourth quarter of 2016. The increase in net interest income reflects higher average loan receivables of $11.5 million and a growth in the average loan yield of 10 basis points partially offset by the two fewer days in the first quarter of 2017 compared to the prior quarter and a slight increase in the cost funding of two basis points. For the quarter, loan interest income totaled $15.0 million, the average of total outstanding loans was $1.0 billion and the annualized yield was 5.92%. Interest expense for the quarter related to the $999.0 million in average deposits was $1.3 million, or 54 basis points annualized. The interest expense related to the subordinated debentures for the quarter was $453,000, or 7.245% annualized.

Net interest margin for the first quarter of 2017 was 4.78% compared with 4.57% from the fourth quarter of 2016. The first quarter of 2017 and the fourth quarter of 2016 net interest margin includes the benefit of loan prepayments, which added 12 and 8 basis points to each quarter, respectively. The 21 basis point margin increase was driven by the aforementioned increases in average loans outstanding and loan rate, plus a reduction in the lower yielding assets, cash and investment securities, partially offset by an increase in funding cost.

The Company recorded a $302,000 reversal to the provision for loan losses during the first quarter of 2017 compared to a provision of $243,000 for the fourth quarter of 2016. The $545,000 decrease in the provision is primarily due to slower loan growth in the first quarter compared to $24.2 million in the prior quarter along with lower loss factors that took effect in the first quarter.  

Noninterest income decreased $386,000, or 17.7%, for the three months ended March 31, 2017 as compared to the three months ended December 31, 2016. In the fourth quarter of 2016 the Bank reversed $400,000 from the reserve for sold mortgage loans with no further changes in this reserve during the first quarter of 2017. 

Non-interest expense totaled $9.2 million for the first quarter of 2017, a decrease of $869,000, or 8.7%, compared with the fourth quarter of 2016. The decrease was primarily driven by non-routine expenses recorded in 2016's fourth quarter in premises and occupancy of $242,000 and professional expenses of $150,000 plus a reduction in incentive compensation of approximately $450,000 primarily due to the decrease in loan volume during the first quarter of 2017. The Company had 169 full-time equivalent employees as of March 31, 2017.

For the first quarter of 2017, the Company's effective tax rate was 41.6%, compared to 41.0% for the fourth quarter of 2016. The fourth quarter of 2016 effective tax rate benefited from the finalization and filing of the 2015 tax returns.

Loans held for investment totaled $1.0 billion at March 31, 2017, an increase of $184,000, or less than0.02%, from December 31, 2016, and an increase of $102.9 million, or 11.2%, from March 31, 2016.

Loan activity during the first quarter of 2017 included loan originations of $85.7 million, a decrease of $8.3 million or 8.8% compared to prior quarter. Originations of loan commitments included commercial real estate loan originations of $49.4 million, commercial and industrial loan originations of $29.0 million and indirect auto originations of $7.3 million. At March 31, 2017 the Company's loans held for investment to deposit ratio was 103.1%, compared with 101.7% and 103.5% at December 31, 2016 and March 31, 2016, respectively.

At March 31, 2017, the allowance for loan losses was $12.6 million, a decrease of $404,000 from December 31, 2016. A provision of $302,000 was reversed from the allowance during the first quarter of 2017 primarily due to reductions in the loss factors and two loans totaling $106,000 were charged off during the quarter that were previously reserved for in the prior quarter.

At March 31, 2017, the Bank's allowance for loan losses as a percent of nonaccrual loans was 215%, a decrease from 503% at December 31, 2016 and 838% at March 31, 2016, and the ratio of allowance for loan losses to loans held for investment was 1.23%, a decrease from 1.27% at December 31, 2016 and 1.32% at March 30, 2016. Including the loan fair market value discounts recorded in connection with the June 2009 change in control at Plaza Bank and four acquisitions, the allowance for loan losses to loans held for investment ratio was 1.39% at March 31, 2017, compared with 1.43% at December 31, 2016 and 1.59% at March 31, 2016.

Nonperforming assets totaled $6.0 million or 0.50% of total assets at March 31, 2017, compared to $2.8 million or 0.23% of total assets at December 31, 2016. During the first quarter of 2017, nonperforming loans increased $3.3 million to $5.8 million, and other real estate owned remained at $206,000. The increase in non-accrual loans is primary due to one real estate secured loan for $3.2 million that is 75% guaranteed by the SBA that is in foreclosure. Management does not expect a loss on this loan secured by a commercial building located in Newport Beach.

Loan delinquencies, defined as 30 days to and including 89 days past due, as of March 31, 2017 decreased to $537,000, or 0.05% of loans held for investment compared to $3.0 million, or 0.29% of loans held for investment at December 31, 2016. Loans that are 90 days or more past due total $4.8 million, or 0.5% of loans held for investment as of March 31, 2017 up from December 31, 2016 total of $1.7 million, or 0.2% of loans held for investment and are all classified as nonperforming assets.

At March 31, 2017, deposits totaled $990.3 million, a decrease of $14.2 million, or 1.4%, from December 31, 2016 and an increase of $102.5 million, or 11.5%, from March 31, 2016. At March 31, 2017, non-maturity deposits totaled $737.9 million, a decrease of $26.1 million, or 3.4%, from December 31, 2016 and an increase of $65.0 million, or 9.7%, from March 31, 2016. During the first quarter of 2017, deposit decreases included $29.2 million in noninterest bearing deposits and $1.9 million in retail certificates of deposit partially offset by increases in money market/savings deposits of $3.1 million and $13.8 million in wholesale/brokered certificates of deposit.

Total borrowings at March 31, 2017 amounted to $82.7 million, a decrease of $2.0 million or 2.4% from December 31, 2016 and an increase of $21.0 million from March 31, 2016. At March 31, 2017, total borrowings represented 6.9% of total assets, compared to 7.0% and 5.8%, as of December 31, 2016 and March 31, 2016, respectively.

At March 31, 2017, the Company's ratio of tangible common equity to total assets was 10.54%, with a tangible book value of $3.78 per share and $3.72 per diluted share.

At March 31, 2017, the Company had total risk based capital on a consolidated basis of approximately $147.6 million, and the Bank had total risk based capital of approximately $140.3 million. The federal banking regulators' capital ratios requirements for "well capitalized" banks are 5.00% for tier 1 leverage capital, 6.5% for common equity tier 1 capital, 8.00% for tier 1 capital and 10.00% for total capital. At March 31, 2017, the Bank exceeded all regulatory capital ratio requirements for well capitalized banks.

The following table sets forth the capital ratios of the Company and the Bank at March 31, 2017:

                   
Plaza Bancorp   3/31/2017     12/31/2016     3/31/2016  
  Tier 1 leverage ratio   9.43 %   8.98 %   8.96 %
  Tier 1 risk-based capital ratio   10.22 %   9.85 %   9.49 %
  Common equity tier 1 capital ratio   10.22 %   9.85 %   9.49 %
  Capital ratio   13.74 %   13.40 %   13.29 %
                   
Plaza Bank                  
  Tier 1 leverage ratio   10.93 %   10.48 %   11.03 %
  Tier 1 risk-based capital ratio   11.85 %   11.44 %   11.75 %
  Common equity tier 1 capital ratio   11.85 %   11.44 %   11.75 %
  Capital ratio   13.06 %   12.69 %   13.01 %
                     
                     

About Plaza Bancorp
Plaza Bancorp is the holding company of Plaza Bank. Plaza Bank is a full service community bank serving the business and professional communities in Southern California and Southern Nevada. The Bank is committed to meeting the financial needs of small to middle market businesses and professional firms with loans for working capital, equipment and owner-occupied commercial real estate financing and a full array of cash management services. Plaza Bank meets its customers' needs through its seven regional offices located in the cities of El Segundo, Irvine, Las Vegas, Manhattan Beach, Montebello, Pasadena and San Diego. For more information, visit www.plazabank.com or call President Rick Sowers at (310) 606-8040 or CEO Gene Galloway at (949) 502-4309 or (702) 277-2221.

Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbors created by that Act. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are based on currently available information, expectations, assumptions, projections, and management's judgment about the Company, the Bank, the banking industry and general economic conditions. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely.

Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that might cause such differences include, but are not limited to: the Bank's ability to successfully execute its business plans and achieve its objectives; changes in general economic, real estate and financial market conditions, either nationally or locally in areas in which the Bank conducts its operations; changes in interest rates; new litigation or claims or changes in existing litigation or claims; future credit loss experience; increased competitive challenges and expanding product and pricing pressures among financial institutions; legislation or regulatory changes which adversely affect the Bank's operations or business; loss of key personnel; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies; and the ability to satisfy requirements related to the Sarbanes-Oxley Act and other regulation on internal control.

Plaza Bancorp  
Consolidated Condensed Statements of Financial Condition  
(Unaudited)  
             
(dollars in thousands, except share and per share data) March 31,   December 31,   March 31,  
ASSETS 2017   2016   2016  
             
Cash and cash equivalents $ 137,689   $ 137,095   $ 78,801  
Investment securities - available for sale   13,726     23,117     29,505  
                   
Loans held for sale   2,701     6,227     5,033  
                   
Loans held for investment   1,021,387     1,021,203     918,442  
Allowance for possible credit losses   (12,562 )   (12,966 )   (12,101 )
Net loans held for investment   1,008,825     1,008,237     906,341  
                   
Accrued interest receivable   3,872     3,815     3,295  
Other real estate owned   206     206     206  
Premises and equipment   7,669     7,787     7,651  
Deferred income tax   7,877     7,957     14,028  
Goodwill and other intangibles   8,794     8,963     9,489  
Mortgage servicing rights   3,093     2,963     2,778  
Idemnification asset   233     326     631  
Accrued interest and other assets   10,753     10,580     10,740  
                   
TOTAL ASSETS $ 1,205,438   $ 1,217,273   $ 1,068,498  
                   
LIABILITIES AND EQUITY                  
                   
Deposits                  
  Noninterest-bearing demand $ 281,839   $ 311,026   $ 270,810  
  Savings, now and money market accounts   456,069     453,009     402,068  
  Time deposits   252,426     240,515     214,930  
    Total Deposits   990,334     1,004,550     887,808  
                   
Borrowings   82,736     84,728     61,704  
Accrued interest and other liabilities   9,747     9,302     9,288  
    Total Liabilities   1,082,817     1,098,580     958,800  
                   
Total stockholders' equity   122,621     118,693     109,698  
                   
TOTAL LIABILITIES AND EQUITY $ 1,205,438   $ 1,217,273   $ 1,068,498  
                   
BASIC BOOK VALUE PER SHARE $ 4.07   $ 3.95   $ 3.65  
                   
BASIC BOOK VALUE PER DILUTED SHARE $ 4.00   $ 3.91   $ 3.62  
                   
TANGIBLE BOOK VALUE PER SHARE $ 3.78   $ 3.65   $ 3.34  
                   
TANGIBLE BOOK VALUE PER DILUTED SHARE $ 3.72   $ 3.61   $ 3.31  
                   
BASIC SHARES OUTSTANDING   30,101,101     30,039,244     30,034,244  
                   
DILUTED SHARES OUTSTANDING   30,639,512     30,393,232     30,262,209  
                   
                   
Capital Ratios End of Period:                  
  Tier 1 leverage ratio   9.43 %   8.98 %   8.96 %
  Tier 1 risk-based capital ratio   10.22 %   9.85 %   9.49 %
  Common equity tier 1 capital ratio   10.22 %   9.85 %   9.49 %
  Total capital ratio   13.74 %   13.40 %   13.29 %
                   
                   
Plaza Bancorp  
Consolidated Condensed Statements of Operations  
For the Quarter  
(Unaudited)  
                   
    March 31,     December 31,     March 31,  
    2017     2016     2016  
                   
(dollars in thousands, except share and per share data)                        
Interest income   $ 15,225     $ 15,096     $ 13,183  
Interest expense     1,844       1,838       1,490  
  Net Interest Income     13,381       13,258       11,693  
                         
Provisions for loan losses     (302 )     243       587  
Net interest income after                        
  Provisions for Loan Losses     13,683       13,015       11,106  
                         
Non-interest income:                        
  Loan servicing and other fees     393       400       372  
  Bank and other fee income     266       279       305  
  Net gain from loan sales     816       644       732  
  Other income     320       858       877  
  Total non-interest income     1,795       2,181       2,286  
                         
Non-interest expense:                        
  Compensation and benefits     6,223       6,473       6,278  
  Premises and occupancy     913       1,241       1,063  
  Data processing     586       660       614  
  Other real estate owned expenses     -       2       -  
  FDIC insurance premiums     101       39       149  
  Professional fees     520       753       626  
  Marketing expense     244       134       171  
  Other expenses     582       736       811  
  Total non-interest expense     9,169       10,038       9,712  
Income before income taxes     6,309       5,158       3,680  
Provisions for income taxes     2,622       2,117       1,356  
Net income (loss)   $ 3,687     $ 3,041     $ 2,324  
                         
EARNINGS (LOSS) PER SHARE - BASIC   $ 0.12     $ 0.10     $ 0.08  
                         
EARNINGS (LOSS) PER SHARE - DILUTED   $ 0.12     $ 0.10     $ 0.08  
                         
BASIC WEIGHTED AVERAGE SHARES     30,055,956       30,039,244       30,034,244  
                         
DILUTED WEIGHTED AVERAGE SHARES     30,653,562       30,324,375       30,262,209  
                         
RETURN ON AVERAGE ASSETS     1.25 %     1.02 %     0.89 %
                         
RETURN ON AVERAGE EQUITY     12.17 %     10.33 %     8.53 %
                         
                   
Plaza Bancorp  
Loans Held for Investment Portfolio Composition  
(Unaudited)  
                   
    March 31,     December 31,     March 31,  
    2017     2016     2016  
(dollars in thousands, except share and per share data)                        
Construction and land development   $ 12,130     $ 10,574     $ 11,960  
Commercial real estate and other     651,455       637,932       558,048  
Commercial     169,161       181,115       167,381  
Residential real estate     122,025       125,248       130,106  
Consumer     70,429       70,148       59,566  
Total     1,025,200       1,025,017       927,061  
Allowance for loan losses     (12,562 )     (12,966 )     (12,101 )
Deferred loan fees and discounts, net of costs     (3,813 )     (3,814 )     (3,586 )
Total net loans   $ 1,008,825     $ 1,008,237     $ 911,374  
                         
                         
                         
      Non-Performing Assets  
         
      March 31,       December 31,       March 31,  
      2017       2016       2016  
(dollars in thousands)                        
Non-Accrual Assets                        
Loans   $ 5,839     $ 2,579     $ 1,014  
OREO     206       206       206  
                         
Delinquency Loans                        
30 - 89 Days past due   $ 537     $ 2,978     $ 1,757  
90 days and greater     5,125       1,819       2