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NCAL BANCORP
2014 ANNUAL REPORT
To Our Shareholders, Clients and Friends,
NCAL Bancorp (the “Company”) and its subsidiary, National Bank of California, ended 2014 on a high note, as we completed the successful recapitalization of the Company. Concurrently, as previously announced, Mr. Alex Meruelo and the current directors and officers of NCAL Bancorp purchased and retired all outstanding shares of the Company’s fixed-rate cumulative perpetual preferred stock from the U.S. Department of the Treasury. Also in December, Alex Meruelo, Luis Armona, Xavier Gutierrez, and Ash Patel joined the Company’s board, with Mr. Patel elected Board Chairman.
We are pleased to have the financial and leadership support of Mr. Meruelo and his team. This im-portant achievement provides a solid capital base for new growth while helping us meet our regulato-ry commitments. This would not have happened without the tireless efforts of our founding Board of Directors and the management team. Since 1982, our dedicated directors have diligently served to set policy and provide direction, while maintaining active roles in the communities we serve. We wish to acknowledge and give special thanks to Daniel Dworsky, Jerald Friedman, Mark Lainer, and Stanley Treitel for their commitment and service over the years. While we will miss these dedicated individu-als and their contributions, a legacy of our founding remains on the Board, as Joe Kornwasser, Alfred Landolph, and Henry Homsher will continue their stewardship to revitalize and enrich the organiza-tion’s future success.
Thus begins a new chapter in the life of a great bank. While there is still much work ahead of us, some of the most capable people in banking are serving on the NCAL team. In 2014, net loans rose 3.5%, an increase of over $8 million from the $231,623,200 posted in 2013. Similarly, our core non-interest bearing deposits grew over $4.2 million this past year, and represent a healthy 61.2% of total depos-its. While we have not yet achieved the level of performance we seek, we are gaining momentum and improving results. As we move forward, we will continue to build on this solid foundation by increasing our portfolio of business and professional clients. We believe our experience and expertise in both traditional and electronic banking can be expanded upon to generate new sources of income for the bank and new benefits for our customers.
Looking ahead, we plan to give National Bank of California a new, fresh look including a new logo design, updated marketing materials, and a totally redesigned website. We want our clients and pro-spective clients to enjoy easy access to the information they need. There is much to do, but one primary objective will remain unchanged: our reputation for service excellence. You will continue to receive first-rate, personalized service from our friendly and experienced staff.
To our shareholders, our loyal customers, our dedicated board of directors, and our hardworking staff we sincerely say ----Thank you!
Ash Patel Henry P. HomsherChairman of the Board President/CEO
NCAL BANCORP AND SUBSIDIARY
Consolidated Statements of Financial Condition December 31, 2014 and 2013
The accompanying notes are an integral part of these consolidated financial statements. 2
2014 2013 ASSETS Cash and cash equivalents Cash and due from banks $ 75,823,600 $ 72,750,200 Federal funds sold 3,790,000 9,035,000
Total cash and cash equivalents 79,613,600 81,785,200 Interest‐bearing deposits in other financial institutions 5,480,000 4,828,000 Securities available for sale 8,543,600 9,155,800 Stock investments, restricted 2,695,800 2,814,100 Loans, net 239,677,300 231,623,200 Premises and equipment, net 838,600 1,164,200 Foreclosed assets ‐‐ 627,800 Bank‐owned life insurance 6,730,600 6,562,300 Other assets 4,223,200 4,381,200
Total assets $ 347,802,700 $ 342,941,800 LIABILITIES Deposits: Noninterest‐bearing demand $ 193,130,400 $ 188,876,400 Interest‐bearing demand 30,420,000 19,462,600 Money market and savings 82,668,300 99,105,500 Time 8,976,500 10,541,400
Total deposits 315,195,200 317,985,900 Subordinated debt 10,310,000 10,310,000 Other liabilities 3,391,000 5,461,400
Total Liabilities 328,896,200 333,757,300 Commitments and contingencies (Notes 14 and 21) STOCKHOLDERS’ EQUITY Fixed rate cumulative preferred stock (authorized 10,500 shares), Series A, $1,000 liquidation preference, issued and outstanding zero shares at December 31, 2014 and 10,000 shares at December 31, 2013, 9% dividend after December 18, 2013 (5% dividend prior to December 18, 2013) ‐‐ 10,000,000 Series B, $1,000 liquidation preference, issued and outstanding zero shares at December 31, 2014 and 500 shares at December 31, 2013, 9% dividend ‐‐ 500,000 Common stock, no par value; authorized 200,000,000 shares; Issued and outstanding 29,424,714 and 2,405,245 shares at December 31, 2014 and 2013, respectively 28,527,000 7,132,400 Accumulated deficit (9,643,500) (8,392,700) Accumulated other comprehensive income (loss) 23,000 (55,200)
Total stockholders’ equity 18,906,500 9,184,500
Total liabilities and stockholders’ equity $ 347,802,700 $ 342,941,800
NCAL BANCORP AND SUBSIDIARY
Consolidated Statements of Operations Years Ended December 31, 2014 and 2013
The accompanying notes are an integral part of these consolidated financial statements. 3
2014 2013 INTEREST INCOME Interest and fees on loans $ 11,204,300 $ 12,716,000 Interest on certificate of deposit 33,700 27,100 Interest on due from banks 255,700 225,500 Dividends on stock investments 187,200 148,200 Interest on securities available for sale 104,300 70,700 Earnings on cash surrender value of bank‐owned life insurance 168,300 175,900 Interest on federal funds sold 9,100 30,500
Total interest income 11,962,600 13,393,900
INTEREST EXPENSE Interest on deposits and other borrowings 825,000 758,800
Total interest expense 825,000 758,800
Net interest income 11,137,600 12,635,100
Provision for loan losses ‐‐ 183,000
Net interest income after provision for loan losses 11,137,600 12,452,100
NONINTEREST INCOME Loan administration fees 219,700 124,600 Other service charges and fees 1,089,500 1,205,800 Gain on sale of guaranteed portion of loans 322,900 487,900 Gain (loss) on sale of securities available for sale, net ‐‐ 8,800 Gain on sale of foreclosed assets 163,900 93,700 Gain on sale of branch facilities ‐‐ 179,500 Other 695,700 921,200
Total noninterest income 2,491,700 3,021,500
NONINTEREST EXPENSES Salaries and employee benefits 7,506,700 7,664,900 Occupancy 2,008,800 2,002,000 Depreciation and amortization expense 457,400 523,600 Professional service expense 3,329,700 3,513,600 Data processing 701,500 657,200 Business promotion and advertising 213,700 182,700 Auto and transportation 99,100 106,000 Foreclosed assets, net (26,100) 20,400 Other operating expenses 2,131,200 2,786,700
Total noninterest expenses 16,422,000 17,457,100
Loss before income tax expense (2,792,700) (1,983,500)
Income tax expense 1,600 1,600
Net loss (2,794,300) (1,985,100) Preferred stock dividends (1,024,800) (729,100) Cancelation of accrued preferred stock dividends 2,568,300 ‐‐
Net loss attributable to common stockholders $ (1,250,800) $ (2,714,200)
Net loss per share ‐ basic $ (0.69) $ (0.83) Net loss per share ‐ diluted $ (0.69) $ (0.83)
NCAL BANCORP AND SUBSIDIARY
Consolidated Statements of Comprehensive Loss Years Ended December 31, 2014 and 2013
The accompanying notes are an integral part of these consolidated financial statements. 4
2014 2013 Net loss $ (2,794,300) $ (1,985,100) Other comprehensive income (loss) Reclassification adjustment for loss (gains) realized in income: Gain on sale of securities available for sale, net ‐‐ (8,800) Unrealized holding gains (loss) on securities 78,200 (93,800) Tax effects ‐‐ ‐‐ 78,200 (102,600) Total comprehensive loss $ (2,716,100) $ (2,087,700)
NCAL BANCORP AND SUBSIDIARY
Consolidated Statements of Stockholders’ Equity Years Ended December 31, 2014 and 2013
The accompanying notes are an integral part of these consolidated financial statements. 5
Accumulated Other Comprehensive Preferred Stock Common Stock Accumulated Income Shares Amount Shares Amount Deficit (Loss) Total Balance, December 31, 2012 10,500 $ 10,395,200 2,405,245 $ 7,118,800 $ (5,678,600) $ 47,400 $ 11,882,800
Dividends on preferred stock, Series A and B ‐‐ ‐‐ ‐‐ ‐‐ (624,200) ‐‐ (624,200)
Accretion of discount on preferred stock, Series A and B ‐‐ 104,800 ‐‐ ‐‐ (104,800) ‐‐ ‐‐
Comprehensive loss: Change in unrealized gain on securities available for sale, net of tax effect ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (102,600) (102,600)
Net loss ‐‐ ‐‐ ‐‐ ‐‐ (1,985,100) ‐‐ (1,985,100)
Stock‐based compensation ‐‐ ‐‐ ‐‐ 13,600 ‐‐ ‐‐ 13,600
Balance, December 31, 2013 10,500 10,500,000 2,405,245 7,132,400 (8,392,700) (55,200) 9,184,500
Dividends on preferred stock, Series A and B ‐‐ ‐‐ ‐‐ ‐‐ (1,024,800) ‐‐ (1,024,800)
Issuance of common stock (Note 19) ‐‐ ‐‐ 19,890,322 10,881,000 ‐‐ ‐‐ 10,881,000
Exchange of preferred stock for common stock (Note 19) (10,500) (10,500,000) 7,129,147 10,500,000 ‐‐ ‐‐ ‐‐
Cancelation of accrued dividends (Note 19) ‐‐ ‐‐ ‐‐ ‐‐ 2,568,300 ‐‐ 2,568,300
Comprehensive loss: Change in unrealized gain on securities available for sale, net of tax effect ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 78,200 78,200
Net loss ‐‐ ‐‐ ‐‐ ‐‐ (2,794,300) ‐‐ (2,794,300)
Stock‐based compensation ‐‐ ‐‐ ‐‐ 13,600 ‐‐ ‐‐ 13,600
Balance, December 31, 2014 ‐‐ $ ‐‐ 29,424,714 $ 28,527,000 $ (9,643,500) $ 23,000 $ 18,906,500
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Real Estate Loan Department
William F. Bowman Senior Vice President
Cathy Caruso Assistant Vice President
Angelina ShekAssistant Vice President,Senior Commercial Loan Underwriter
Small Business Administration Loan Department
Lou MalesciSenior Vice President, SBA Manager
Yolanda Del AguilaVice President
Market Makers
Burford Capital(800) 765-5558
Raymond James Financial(800) 248-8863
Wedbush Morgan Securities(800) 421-0251
Western Financial (619) 544-0260
Stock Registrar and Transfer Agent
Computershare(201) 680-2504
www.nbcal.com
Bank Administration
Lynn Jarmon Senior Vice President,Director of Operations
Mary Grace KaronisVice President,BSA/Compliance Officer
Randa D. Saleh Vice President, Controller
Catherine V. TominagaAssistant Vice President
Business Development
Richard E. Lawrence Executive Vice President
Kathy L. IrbyVice President
Credit Card Settlement
Vince K. LombardoVice President
Lerna CanikAssistant Vice President
Electronic Payment Department
Houri WartanianSenior Vice President, Cash Management
Nathan AstleAssistant Vice President
Information Technology
David Ward IT Systems Administrator
Note Department
Darr Russell-Smith Assistant Vice President
Donna L. Smith Assistant Vice President
Los Angeles Regional Office
145 S. Fairfax AvenueSuite 101Los Angeles, CA 90036 (323) 655-6001
David Weiss Regional Vice PresidentBayani L. ManansalaVice President
Becky CaceresVice President, Branch Administration
Nichole MontesAssistant Vice President
Kay SuzukiAssistant Vice President
Orange County Regional Office
575 Anton Blvd.Suite 140Costa Mesa, CA 92626(714) 437-7500
Patricia A. McAdamsRegional Vice President
Sherry D. GreerVice President
Cheryl A. VargasVice President, Operations Officer
San Fernando Valley Regional Office
14724 Ventura Blvd.Suite 100 Sherman Oaks, CA 91403(818) 386-9234
Randle T. SpearsSenior Vice President
Gabriela OrozcoVice President, Operations Officer
Directors
Ash PatelChairman of the Board
Henry P. HomsherPresident & Chief Executive Officer
Luis Armona
Xavier Gutierrez
Joseph K. Kornwasser
Alfred E. Landolph
Alex Meruelo
Executive OfficersAdministration
12121 Wilshire Blvd. 14th floorLos Angeles, CA 90025(310) 882-4800
Henry P. HomsherPresident & Chief Executive Officer
Peter Koos Executive Vice President & Chief Operation Officer
Jonathan E. Matalon Executive Vice President &Chief Financial Officer
Headquarters Office Brentwood
12121 Wilshire Blvd. Suite 101Los Angeles, CA 90025(310) 882-4800
Ricardo M. MateusRegional Vice President
Jennifer L. IrizarryVice President
Chanthan PomAssistant Vice President
National Bank of California
Board Members and Senior Management
National Bank of California Annual Report 2014