Security California Bancorp Reports 31% Increase in Net Income for Third Quarter of 2015

RIVERSIDE, Calif., Oct. 22, 2015 (GLOBE NEWSWIRE) — Security California Bancorp (OTCBB:SCAF), the parent company of Security Bank of California, reported net income of $1.369 million, or 23 cents per share, for the third quarter of 2015, an increase of 31% from net income of $1.049 million, or 18 cents per share, for the third quarter of 2014.

For the nine months ended September 30, 2015, the Company reported net income of $3.879 million, or 66 cents per share, an increase of 34% from net income of $2.906 million, or 50 cents per share, for the same period in 2014.

Third Quarter 2015 Year-Over-Year Highlights

  • Total loans were $477 million, an increase of 16%
  • Total deposits were $648 million, an increase of 26%
  • Total assets were $733 million, an increase of 21%

“We are pleased to deliver one of the most profitable quarters in our history, with our net income increasing by 31% over the same period last year,” said James A. Robinson, Chairman and CEO of Security California Bancorp. “We are very excited about our pending merger with Pacific Premier Bancorp. We believe the combination of our two banks will result in a powerful commercial banking force in Southern California with a strong presence in the Inland Empire. We look forward to continuing to provide our customers with the same level of exceptional service they have come to expect from Security Bank, while giving them the greater borrowing capacity and broader suite of products and services that Pacific Premier can offer.”

Third Quarter 2015 Summary Results

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2015 was $6.2 million, an increase of 17% from $5.3 million in the third quarter of 2014. The increase in net interest income was primarily driven by growth in total loans outstanding.

Net interest margin was 3.54% in the third quarter of 2015, a decrease of 12 basis points from the prior quarter. The decrease in net interest margin was primarily attributable to a larger percentage of earning assets being invested in the securities portfolio.

Non-interest Income

Non-interest income for the third quarter of 2015 was $953,000, an increase of 28% from $745,000 in the same quarter of the prior year. The increase in non-interest income was primarily attributable to higher gains on sales of SBA loans.

Non-interest Expense

Non-interest expense was $4.7 million for the third quarter of 2015, an increase of 16% from $4.0 million in the year-ago period. The increase in non-interest expense was primarily due to premises and personnel expense added through the acquisition of the new Temecula/Murrieta branch, as well as $319,000 in merger-related expense.

Balance Sheet

Total Assets

Total assets were $733 million at September 30, 2015, an increase of 21% from $607 million at September 30, 2014, driven by strong growth in both loans and deposits.

Total Loans

Total loans were $477 million at September 30, 2015, an increase of 16% from $411 million at September 30, 2014. The increase in total loans was primarily driven by growth in the commercial and industrial, commercial real estate, and construction portfolios.

Total Deposits

Total deposits were $648 million at September 30, 2015, an increase of 26% from $514 million at September 30, 2014. The increase in total deposits was driven by the addition of new client relationships, as well as approximately $40 million in deposits added through the acquisition of the new Temecula/Murrieta branch.

Asset Quality

Total non-performing assets were $4.7 million, or 0.64% of total assets, at September 30, 2015, compared with $5.1 million, or 0.76% of total assets, at June 30, 2015.

At September 30, 2015, total non-accrual loans were $4.7 million, or 0.99% of total loans, compared with $5.1 million, or 1.08% of total loans, at June 30, 2015.

During the third quarter of 2015, the Company had $62,000 in net recoveries, compared with net recoveries of $33,000 in the second quarter of 2015.

The Company recorded a provision for loan losses of $76,000 in the third quarter of 2015 to reflect the growth in the loan portfolio. The allowance for loan losses as a percentage of gross loans was 1.54% at September 30, 2015, unchanged from 1.54% at June 30, 2015.

Capital

Security California Bancorp remained well capitalized as of September 30, 2015. All of the Company’s capital ratios exceeded minimum regulatory standards for “well capitalized” institutions. As of September 30, 2015, the Company’s Tier 1 leverage ratio was 11.00%, the Tier 1 risk-based capital ratio was 14.10%, and the Total risk-based ratio was 15.35%, compared with the regulatory minimum standards of 4%, 6% and 8%, respectively.

About Security California Bancorp and Security Bank of California

Security California Bancorp is the parent of Security Bank of California and is traded on the Over the Counter Bulletin Board (“OTCBB”) under the symbol SCAF.OB. Through its full service offices in Riverside, San Bernardino, Redlands, Orange, Palm Desert, and Murrieta/Temecula, Security Bank of California is a full service community bank, focusing on providing banking services for businesses, their owners and families, and successful individuals. The bank also has a Loan Production Office (“LPO”) in Irwindale. To learn more about the bank’s products and services, call 951-368-2265 or visit the company’s Web site at www.securitybankca.com.

Pacific Premier Bancorp, Inc. Merger Announcement

On September 30, 2015, Pacific Premier Bancorp, Inc., a Delaware corporation (“PPBI”), and Security California Bancorp entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) pursuant to which the Company will be merged with and into PPBI, immediately followed by the merger of the Company’s wholly-owned bank subsidiary, Security Bank of California, with and into Pacific Premier Bank, the wholly-owned bank subsidiary of PPBI. Pacific Premier Bank is a business bank primarily focused on serving small and middle market business in the counties of Los Angeles, Orange, Riverside, San Bernardino and San Diego, California. Pacific Premier Bank offers a diverse range of lending products including commercial, commercial real estate, construction, residential warehouse and SBA loans, as well as specialty banking products for homeowners associations and franchise lending nationwide. Pacific Premier Bank serves its customers through its 16 full-service depository branches in Southern California located in the cities of Corona, Encinitas, Huntington Beach, Irvine, Los Alamitos, Newport Beach, Palm Desert, Palm Springs, Riverside, San Bernardino, San Diego, Seal Beach and Tustin.

Forward Looking Statements

This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, and competition within the business areas in which the Bank is conducting its operations, including the real estate market in California and other factors beyond the Bank’s control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. Readers should not place undue reliance on the forward-looking statements, which reflect management’s view only as of the date hereof. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

Notice to Security California Bancorp and Pacific Premier Bancorp, Inc. Shareholders

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed acquisition of Security California Bancorp by PPBI, a registration statement on Form S-4 will be filed with the Securities and Exchange Commission (“SEC”) by PPBI. The registration statement will contain a joint proxy statement/prospectus to be distributed to the shareholders of Security California Bancorp and PPBI in connection with their vote on the acquisition. SHAREHOLDERS OF SECURITY CALIFORNIA BANCORP AND PPBI ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. The final joint proxy statement/prospectus will be mailed to shareholders of Security California Bancorp and PPBI. Investors and security holders will be able to obtain the documents free of charge at the SEC’s website, www.sec.gov. In addition, documents filed with the SEC by PPBI will be available free of charge by (1) accessing the PPBI’s website at www.ppbi.com under the “Investor Relations” link and then under the heading “SEC Filings,” (2) writing PPBI at 17901 Von Karman Avenue, Suite 1200, Irvine, CA 92614, Attention: Investor Relations or (3) writing Security California Bancorp at 3403 Tenth Street, Suite 830, Riverside, CA 92501, Attention: Corporate Secretary.

The directors, executive officers and certain other members of management and employees of PPBI may be deemed to be participants in the solicitation of proxies in respect of the proposed acquisition. Information about the directors and executive officers of PPBI is included in the proxy statement for its 2015 annual meeting of shareholders, which was filed with the SEC on April 27, 2015. The directors, executive officers and certain other members of management and employees of Security California Bancorp may also be deemed to be participants in the solicitation of proxies in favor of the acquisition from the shareholders of Security California Bancorp. Information about the directors and executive officers of Security California Bancorp will be included in the joint proxy statement/prospectus for the acquisition. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed acquisition when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.

Security California Bancorp and Subsidiaries
Consolidated Income Statements (Unaudited)
(Dollars in Thousands)
           
  Three months ended Nine months ended
  9/30/2015 6/30/2015 9/30/2014 9/30/2015 9/30/2014
INTEREST INCOME          
Loans, with fees  $ 5,805  $ 5,525  $ 4,900  $ 16,368  $ 14,041
Deposit with banks  30  30  23  86  67
Investment securities  830  683  766  2,213  2,474
Total interest income  6,664  6,238  5,688  18,667  16,583
           
INTEREST EXPENSE          
Deposits  495  420  392  1,307  1,084
Other  4  8  9  18  38
Total interest expense  499  428  401  1,325  1,122
           
Net interest income  6,165  5,810  5,287  17,343  15,461
Provision for loan losses  76  234  164  129  841
Net income after provision for loan losses  6,089  5,575  5,123  17,213  14,620
           
NON INTEREST INCOME          
Service charges on deposits  275  251  228  780  715
Gain on sale of securities  10  69  3  103  54
SBA gains on sales and fees  538  548  331  1,378  1,162
Other  130  245  182  501  536
Total non interest income  953  1,113  745  2,762  2,467
           
NON INTEREST EXPENSE          
Salaries & benefits  2,785  2,728  2,541  8,194  7,686
Premises & equipment  525  469  427  1,445  1,356
Other  1,390  1,240  1,068  3,701  3,032
Total non interest expense  4,701  4,436  4,036  13,341  12,073
           
Net income before taxes  2,341  2,252  1,832  6,635  5,013
Provision for income tax  972  934  782  2,756  2,107
           
NET INCOME  $ 1,369  $ 1,319  $ 1,049  $ 3,879  $ 2,906
           
EARNINGS PER SHARE          
Diluted earning per share  $ 0.23  $ 0.23  $ 0.18  $ 0.66  $ 0.50
Average outstanding common shares  5,768,061  5,670,916  5,670,174  6,039,257  5,670,174
           
PERFORMANCE INDICATORS          
Return on average assets 0.76% 0.81% 0.71% 0.78% 0.68%
Return on average equity 7.08% 7.20% 6.12% 7.00% 5.88%
Efficiency ratio 66.13% 64.73% 66.94% 66.70% 67.55%
 
 
Security California Bancorp & Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
           
   As of 
  9/30/2015 06/30/15 03/31/15 12/31/14 09/30/14
ASSETS          
Cash & due from banks  $ 13,448  $ 10,227  $ 12,554  $ 13,730  $ 12,097
Interest bearing deposits with banks  26,482  35,628  30,285  37,012  35,523
Investment Securities  204,766  142,367  136,486  137,323  138,272
Loans:          
Commercial & Industrial  174,634  177,425  168,128  157,447  157,448
Real Estate – Commercial  248,940  239,830  240,923  220,757  213,281
Real Estate – Construction  23,321  23,662  18,439  14,509  12,350
Real Estate – Consumer  25,203  21,809  22,382  23,747  22,579
Other  4,606  4,964  4,578  5,051  5,087
Total  476,704  467,690  454,450  421,512  410,745
Allowance for loan losses  (7,344)  (7,206)  (6,939)  (6,680)  (6,454)
Loans, net  469,360  460,484  447,511  414,832  404,291
Premises & equipment  5,343  4,002  4,003  4,075  3,821
Accrued interest   2,030  1,861  1,784  1,716  1,721
Other assets  11,716  10,414  9,208  9,554  11,175
           
TOTAL ASSETS  $ 733,145  $ 664,982  $ 641,831  $ 618,242  $ 606,900
           
LIABILITIES          
Deposits:          
Demand non interest bearing  $ 276,931  $ 247,984  $ 239,620  $ 232,187  $ 217,237
Demand interest bearing  24,035  25,659  42,519  29,737  21,427
Money market & savings  228,015  198,472  172,673  171,322  180,813
Time certificate  118,714  101,018  101,852  92,534  94,925
Total deposits  647,695  573,133  556,665  525,780  514,402
Other borrowings  4,500  18,300  11,000  19,000  22,000
Accrued interest & other liabilities  1,910  634  1,312  2,495  2,199
           
Total Liabilities  654,106  592,068  568,976  547,275  538,601
           
SHAREHOLDERS’ EQUITY          
Preferred stock  7,133  7,133  7,133  7,133  7,133
Common stock  60,189  56,626  56,616  56,607  56,596
Retained earnings  12,204  10,835  9,516  8,326  7,082
Accumulated other comprehensive income  (487)  (1,680)  (411)  (1,098)  (2,513)
           
Total Shareholders’ Equity  79,039  72,915  72,855  70,967  68,299
           
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY  $ 733,145  $ 664,982  $ 641,831  $ 618,242  $ 606,900
           
CAPITAL ADEQUACY          
Tier 1 leverage ratio 11.00% 11.31% 11.69% 11.84% 11.95%
Tier 1 risk-based capital ratio 14.10% 13.93% 13.93% 14.77% 14.89%
Total risk-based capital ratio 15.35% 15.18% 15.18% 16.02% 16.15%
Tangible Equity / Tangible Total Assets 10.68% 10.93% 11.31% 11.44% 11.21%
Outstanding common shares  6,039,257  5,670,916  5,670,916  5,670,916  5,670,916
Book value (total equity) per common share  $ 13.09  $ 12.86  $ 12.85  $ 12.51  $ 12.04
 
 
Security California Bancorp & Subsidiaries
Consolidated Average Balance Sheets and Yield Data (Unaudited)
(Dollars in thousands)
             
  Three months ended – 2015
  September 30 June 30
    Yields Interest   Yields Interest
  Average or Income/ Average or Income/
  Balance Rates Expense Balance Rates Expense
ASSETS            
Interest earning assets            
Loans, with fees  $ 470,987 4.89%  $ 5,805  $ 461,734 4.80%  $ 5,525
Interest bearing with banks  38,184 0.31%  30  35,193 0.34%  30
Investment securities  183,457 1.81%  830  139,150 1.96%  683
Total interest earning assets  692,628 3.82%  $ 6,664  636,076 3.93%  $ 6,238
             
Non interest earning assets            
Cash & due from banks  12,317      11,887    
All other assets  8,369      6,710    
Total non interest earning assets  20,686      18,597    
             
TOTAL ASSETS  $ 713,314      $ 654,674    
             
LIABILITIES & SHAREHOLDERS’ EQUITY            
Interest bearing liabilities            
Deposits            
Demand interest bearing  $ 25,598 0.14%  $ 9  $ 29,765 0.14%  $ 10
Money market & savings  216,628 0.51%  276  186,753 0.52%  242
Time certificate  112,969 0.74%  211  101,087 0.67%  168
Other borrowings  7,524 0.20%  4  15,766 0.19%  8
Total interest bearing liabilities  362,719 0.55%  $ 499  333,371 0.51%  $ 428
             
Non interest bearing liabilities            
Demand deposits  272,149      247,360    
Accrued interest & other liabilities  1,736      514    
Total non interest bearing liabilities  273,884      247,873    
Shareholders’ equity  76,711      73,429    
             
TOTAL LIABILITIES & SHAREHOLDERS’S EQUITY  $ 713,314      $ 654,674    
             
NIM and NET INTEREST INCOME    3.54%  $ 6,165   3.66%  $ 5,810
 
 
Security California Bancorp & Subsidiaries
Consolidated Average Balance Sheets and Yield Data (Unaudited)
(Dollars in thousands)
             
  Three months ended September 30,
  2015 2014
    Yields Interest   Yields Interest
  Average or Income/ Average or Income/
  Balance Rates Expense Balance Rates Expense
ASSETS            
Interest earning assets            
Loans, with fees  $ 470,987 4.89%  $ 5,805  $ 402,385 4.83%  $ 4,900
Interest bearing with banks  38,184 0.31%  30  25,227 0.36%  23
Investment securities  183,457 1.81%  830  144,694 2.12%  766
Total interest earning assets  692,628 3.82%  $ 6,664  572,307 3.95%  $ 5,688
             
Non interest earning assets            
Cash & due from banks  12,317      10,783    
All other assets  8,369      6,824    
Total non interest earning assets  20,686      17,607    
             
TOTAL ASSETS  $ 713,314      $ 589,914    
             
LIABILITIES & SHAREHOLDERS’ EQUITY            
Interest bearing liabilities            
Deposits            
Demand interest bearing  $ 25,598 0.14%  $ 9  $ 21,835 0.14%  $ 8
Money market & savings  216,628 0.51%  $ 276  166,958 0.54%  228
Time certificate  112,969 0.74%  $ 211  93,727 0.66%  156
Other borrowings  7,524 0.20%  $ 4  27,180 0.13%  9
Total interest bearing liabilities  362,719 0.55%  $ 499  309,699 0.51%  $ 401
             
Non interest bearing liabilities            
Demand deposits  272,149      210,248    
Accrued interest & other liabilities  1,736      1,985    
Total non interest bearing liabilities  273,884      212,233    
Shareholders’ equity  76,711      67,982    
             
TOTAL LIABILITIES & SHAREHOLDERS’S EQUITY  $ 713,314      $ 589,914    
             
NIM and NET INTEREST INCOME    3.54%  $ 6,165   3.67%  $ 5,287
 
 
Security California Bancorp & Subsidiaries
Consolidated Average Balance Sheets and Yield Data (Unaudited)
(Dollars in thousands)
             
  Nine months ended September 30,
  2015 2014
    Yields Interest   Yields Interest
  Average or Income/ Average or Income/
  Balance Rates Expense Balance Rates Expense
ASSETS            
Interest earning assets            
Loans, with fees  $ 455,855 4.80%  $ 16,368  $ 387,641 4.84%  $ 14,041
Interest bearing with banks  35,632 0.32%  86  22,323 0.41%  67
Investment securities  152,845 1.93%  2,213  146,085 2.26%  2,474
Total interest earning assets  644,333 3.87%  $ 18,667  556,050 3.99%  $ 16,583
             
Non interest earning assets            
Cash & due from banks  11,857      10,519    
All other assets  7,247      7,794    
Total non interest earning assets  19,104      18,313    
             
TOTAL ASSETS  $ 663,437      $ 574,363    
             
LIABILITIES & SHAREHOLDERS’ EQUITY            
Interest bearing liabilities            
Deposits            
Demand interest bearing  $ 30,389 0.14%  $ 33  $ 19,279 0.14%  $ 20
Money market & savings  191,801 0.51%  735  158,448 0.52%  619
Time certificate  104,447 0.69%  539  91,386 0.65%  445
Other borrowings  13,065 0.18%  18  38,644 0.13%  38
Total interest bearing liabilities  339,703 0.52%  $ 1,325  307,757 0.49%  $ 1,122
             
Non interest bearing liabilities            
Demand deposits  248,249      199,010    
Accrued interest & other liabilities  1,421      1,557.83    
Total non interest bearing liabilities  249,670      200,567    
Shareholders’ equity  74,065      66,039    
             
TOTAL LIABILITIES & SHAREHOLDERS’S EQUITY  $ 663,437      $ 574,363    
             
NIM and NET INTEREST INCOME    3.60%  $ 17,343   3.72%  $ 15,461
 
 
Security California Bancorp & Subsidiaries
Consolidated Asset Quality and Credit Data (Unaudited)
(Dollars in thousands)
           
   As of 
  09/30/15 06/30/15  03/31/15   12/31/14   09/30/14 
           
TOTAL ASSETS  733,145  664,982  641,831  618,242  606,900
GROSS LOANS  476,704  467,690  454,450  421,512  410,745
           
ALLOWANCE FOR LOAN LOSSES          
Beginning of period  $ 7,207  $ 6,939  $ 6,680  $ 6,454  $ 6,160
Quarterly movement:          
Provision for loan losses 76  234  (181)  99  164
Charge-offs (35)  (20)  (176)  —   — 
Recoveries 97  53  616  127  130
End of period  $ 7,344  $ 7,207  $ 6,939  $ 6,680  $ 6,454
           
NON PERFORMING ASSETS          
Loans accounted for on a non-accrual basis  $ 4,698  $ 5,050  $ 4,994  $ 5,169  5,261
Loans with principal and/or interest contractually past due 90 days and still accruing interest  —   —   —   —   — 
           
Non performing loans  4,698  5,050  4,994  5,169  5,261
Other real estate owned  —   —   —   —   — 
           
Non performing assets  4,698  5,050  4,994  5,169  5,261
           
Loans restructured and in compliance with modified terms  1,206  1,975  1,298  563  659
           
Non performing assets and restructured loans  $ 5,903  $ 7,025  $ 6,292  $ 5,732  $ 5,920
           
Non Performing Loans by Asset Type          
Commercial & Industrial  $ 3,751  $ 3,916  $ 3,935  $ 4,093  $ 4,162
SBA  95  272  179  185  193
Consumer  852  862  880  891  906
Other  —   —   —   —   — 
           
Total non performing loans by asset type  $ 4,698  $ 5,050  $ 4,994  $ 5,169  $ 5,261
           
ASSET QUALITY          
Allowance for loan losses / gross loans 1.54% 1.54% 1.53% 1.58% 1.57%
Allowance for loan losses / non performing loans 156.35% 142.71% 138.95% 129.24% 122.67%
Non performing assets / total assets 0.64% 0.76% 0.78% 0.84% 0.87%
Non performing loans /gross loans 0.99% 1.08% 1.10% 1.23% 1.28%
Net quarterly charge-offs / gross loans -0.01% 0.00% -0.04% 0.00% 0.00%
CONTACT: Tony Rossi
         Financial Profiles for Security California Bancorp
         (310) 622-8221
         trossi@finprofiles.com
         
         Thomas M. Ferrer
         EVP & Chief Financial Officer
         (951) 368-2268
         tferrer@securitybankca.com