PMBC Reports First Quarter 2011 Earnings of $1.4 Million (4/19/11)
COSTA MESA, Calif., April 19, 2011 (GLOBE NEWSWIRE) -- Pacific Mercantile Bancorp (Nasdaq:PMBC) today reported its results of operations for the first quarter ended March 31, 2011.
During the quarter ended March 31, 2011, the Company generated net earnings of $1.7 million, of which $1.4 million, or $0.13 per diluted share, was allocable to the Company's common stockholders and $300,000 was allocable to accrued but unpaid dividends on the Company's Series A Preferred Stock. By comparison, in the first quarter of 2010, we reported net earnings of $126,000, and a loss allocable to common stockholders of $82,000, or $0.01 per common share, as $208,000 was allocated to accrued but unpaid dividends on the Series A Preferred Stock. This improvement was primarily attributable to a $1.2 million, or 100%, reduction in the provision for loan losses, a $159,000 or 2% increase in net interest income and an $83,000, or 1%, reduction in non-interest expense, as compared to the first quarter of 2010.
"I am pleased to be able to report our return to profitability in our first quarter of year 2011. I believe our positive results to be the product principally of four major factors; the continued economic recovery, as evidenced by four consecutive quarters of GDP growth with a forecast of 2.6% GDP growth for the quarter ended March 31, 2011; the planning, dedication and efforts of our senior management team; the unflagging support of our Board of Directors; and the hard work of the Company's entire team of employees," stated Raymond E. Dellerba, President and CEO. "The last two years have indeed been difficult ones for the financial sector, and we have had to make some difficult decisions during this period of time such as closing one office, and eliminating raises, bonuses and the match to our 401K plan. I want to take this opportunity to thank our employees for their dedication, unwavering faith in the Company and staying true to our goals, all of which were major contributors to the significant year-over-year improvement in our first quarter 2011 operating results. I have asked much of them and thank each and every one of them," continued President Dellerba.
"We also are making progress in our efforts toward raising the additional capital as called for by the state regulatory order," added Mr. Dellerba.
Results of Operation
Net Interest Income. Net interest income, which is a primary determinant of bank profitability, increased in the first quarter of 2011 by $159,000, or 2%, to $8.6 million, from $8.4 million in the first quarter of 2010, due to a reduction in interest expense of $2.3 million, or 45%, which more than offset a decrease of $2.2 million, or 16.1%, in interest income. The reduction in interest expense was primarily attributable to a Bank strategy implemented in the last six months of 2010 to de-leverage the balance sheet by reducing higher cost time deposits by $141 million, or 22%, to $505 million at March 31, 2011 from $646 million at March 31, 2010. As a result, as a percentage of total deposits, time deposits declined to 61% at March 31, 2011 from 65% at March 31, 2010. The decrease in interest income in the first quarter of 2011 was primarily due to a $102 million, or 12%, decrease in average gross loans outstanding during the first quarter of 2011, as compared to the same quarter of 2010.
"During the first quarter of 2011, our net interest margin improved by 64 basis points to 3.60%, up from 2.96% in the same quarter of 2010, as interest rates paid on time deposits, and other borrowings from the Federal Home Loan Bank declined by 66 basis points and 190 basis points, respectively, and the interest rates earned on loans decreased by 25 basis points," said Nancy A. Gray, Senior Executive Vice President and Chief Financial Officer.
Provision for Loan Losses. During the three months ended March 31, 2011, we made $265,000 in net recoveries of previously charged-off loans, which were added back to the allowance for loan losses. Due to those recoveries, a $16.9 million, or 37.7%, decrease in non-performing loans and a reduction in outstanding loans at March 31, 2011 as compared to March 31, 2010, we made a determination that the allowance for loan losses was adequate and, therefore, that it was not necessary to make any provisions for loan losses in this year's first quarter. By comparison, in the first quarter of 2010, we recorded net loan charge-offs of $682,000 and made provisions for loan losses totaling $1.2 million. Even though we did not make any provisions for loan losses during this year's first quarter, the allowance for loan losses at March 31, 2011 totaled nearly $18.4 million, or 2.56% of the loans then outstanding, as compared to $18.1 million, or 2.44% of the loans outstanding at December 31, 2010 and $20.9 million, or 2.57% of the loans outstanding at March 31, 2010.
Non-interest Income. Non-interest income increased by $13,000, or 1.0%, to nearly $1.4 million in the first quarter of 2011, from $1.3 million in the first quarter of 2010, primarily as a result of a $270,000, or 47.5%, increase in income generated by the mortgage banking division and a $107,000 gain on the sale of other real estate owned, offset by a $194,000 decrease in gains on sales of securities held for sale.
Non-Interest Expense. Non-interest expense declined by $83,000, or 1%, in the three months ended March 31, 2011, as compared to the same three months of 2010. That decline was, for the most part, due to a reduction of $360,000, or 8%, in salaries and employee benefits and a $107,000, or 8.3%, decrease in other non-interest expenses, which were attributable primarily to cost cutting measures that we initiated in February 2010 which included a work force reduction of the core bank, a freeze on salaries, elimination of a management bonus program for 2010 and the suspension of the Company's 401K plan matching contributions. Those decreases were substantially offset, however, by a $344,000, or 75.1%, increase in FDIC deposit insurance premiums and increases of $48,000, or 5.3%, and $40,000, or 12.0%, in professional fees and OREO expenses, respectively. Our efficiency ratio (non-interest expense as a percentage of total revenues) improved to 83.1% in the first quarter of 2011 from 85.5% in the same quarter of 2010. http://globenewswire.com/newsroom/news.html?d=219196