Bridge Capital Holdings Reports Financial Results For the Second Quarter and Six Months Ended June 3

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Bridge Capital Holdings Reports Financial Results For the Second Quarter and Six Months Ended June 30, 2013

Conference Call and Webcast Scheduled for Thursday, July 25, 2013 at 5:00 p.m. Eastern Time

SAN JOSE, Calif.--(BUSINESS WIRE)-- Bridge Capital Holdings , whose subsidiary is Bridge Bank, National Association, announced today its financial results for the second quarter ended June 30, 2013.


The Company reported net income of $1.8 million for the three months ended June 30, 2013, representing a decrease of $1.6 million, or 46%, from $3.4 million for the quarter ended March 31, 2013, and representing a decrease of $1.5 million, or 44%, from net income of $3.3 million for the same period one year ago.

For the quarter ended June 30, 2013, the Company reported earnings per diluted share of $0.12, which compared with $0.23 for the quarter ended March 31, 2013 and $0.22 for the quarter ended June 30, 2012.

The Company reported net income of $5.3 million for the six months ended June 30, 2013 representing a decrease of $752,000, compared to net income of $6.0 million for the same period one year ago. For the six months ended June 30, 2013, the Company reported earnings per diluted share of $0.35, compared to $0.40 for the six months ended June 30, 2012.

For the quarter ended June 30, 2013, the Company's return on average assets and return on average equity were 0.52% and 4.79%, respectively, and compared to 1.06% and 9.29%, respectively, for the quarter ended March 31, 2013 and 1.14% and 9.81%, respectively, for the same period in 2012.

"Despite continued robust growth in client acquisition, deposits, and loans, our second quarter net income was negatively impacted by the need for a larger than anticipated credit provision that was primarily driven by one commercial line of credit in our corporate banking line of business that we charged-off," said Daniel P. Myers, president and chief executive officer of Bridge Bank, N.A. and Bridge Capital Holdings. "Aside from this one issue, we saw continued growth in nearly all other areas of our operations. We continue to see brisk activity in all of our regional banking offices and business lines, which resulted in 38% annualized growth in deposits, 19% annualized growth in loans, and 22% year-over-year growth in revenue during the quarter. We are also particularly pleased with the support to revenue from noninterest income which is a reflection of the increasing diversity in our business. We expect to see a continuation of the strong business development trends that we have experienced, which should drive a return to a higher level of profitability in the second half of 2013 as our credit costs normalize."

Second Quarter Highlights

Second quarter 2013 results, compared to first quarter 2013 (unless otherwise noted), reflected strong performance across most areas of the Company's business and included the following:

  • Pre-tax, pre-provision net income of $8.4 million was an all-time quarterly high and represented an increase of $1.8 million, or 28%, from the prior quarter. For the six months ended June 30, 2013, pre-tax, pre-provision net income of $15.0 represented an increase of 21% over $12.5 million for the same period of 2012.
  • Total revenue of $21.3 million for the second quarter of 2013 was the highest level of quarterly revenue since the inception of the Company and represented an increase of $2.9 million, or 16%, from the prior quarter. Year-to-date revenue of $39.8 million represented an increase of 14% over the first six months of 2012. Net interest income of $16.6 million for the second quarter of 2013 compared to $15.5 million for the first quarter of 2013. Non-interest income of $4.7 million for the second quarter of 2013 compared to $2.9 million for the first quarter of 2013.
  • Total assets grew to $1.46 billion at June 30, 2013, with loans continuing to comprise 72% of the average earning asset mix, consistent with the prior quarter. Total deposits of $1.28 billion at June 30, 2013 represented the highest level of deposit balances since the inception of the Company, and compared to $1.17 billion at March 31, 2013.
  • Loan growth continued to be strong, particularly in the commercial lending portfolio. Average gross loans reached $984.0 million for the quarter ended June 30, 2013, representing an increase of $89.5 million, or 10%, compared to average gross loans of $894.6 million for the quarter ended March 31, 2013. Period-end loan balances increased $45.7 million, or 5%, to $999.8 million, compared to $954.2 million at March 31, 2013.
  • Allowance for credit losses represented 2.05% of total gross loans and 126.67% of nonperforming loans at June 30, 2013, compared to 2.15% of total gross loans and 214.26% of nonperforming loans at March 31, 2013. The provision for credit losses of $5.3 million for the second quarter of 2013 primarily related to a charge-off on one asset-based commercial line of credit and the strong growth in the loan portfolio. Net charge-offs were $5.4 million for the quarter ended June 30, 2013, compared to net charge-offs of $155,000 for the quarter ended March 31, 2013.
  • Nonperforming assets increased by $6.6 million to $16.2 million, or 1.11% of total assets, primarily due to the addition of one commercial real estate credit and one asset-based lending credit. Additionally, one real estate secured relationship was downgraded from a performing troubled debt restructuring to a nonperforming loan.
  • Net interest margin declined to 4.87% for the quarter ended June 30, 2013 compared to 5.05% for the first quarter of 2013.
  • Capital ratios remained strong and continued to support the Company's growth. Total Risk-Based Capital Ratio was 14.80%, Tier I Capital Ratio was 13.41%, and Tier I Leverage Ratio was 11.71% at June 30, 2013.

Net Interest Income and Margin

Net interest income of $16.6 million for the quarter ended June 30, 2013 represented an increase of $1.0 million, or 7%, compared to $15.5 million for the quarter ended March 31, 2013 and an increase of $2.0 million, or 14%, compared to $14.5 million for the quarter ended June 30, 2012. The increase in net interest income from the prior quarter and the same period in 2012 was primarily attributable to an increase in average earning assets as a result of loan growth. Average earning assets of $1.36 billion for the quarter ended June 30, 2013 increased $115.7 million, or 9%, compared to $1.25 billion for the quarter ended March 31, 2013 and increased $257.9 million, or 23%, compared to $1.11 billion for the same quarter in 2012.

For the six months ended June 30, 2013, net interest income of $32.1 million represented an increase of $2.7 million, or 9.3%, from $29.4 million for the six months ended June 30, 2012 and was primarily attributed to an increase in average earning assets as a result of loan growth and excess liquidity generated from deposit growth. Average earning assets of $1.31 billion for the six months ended June 30, 2013 increased $204.5 million, or 19%, compared to $1.10 billion for the same period one year ago.

The Company's net interest margin for the quarter ended June 30, 2013 was 4.87%, compared to 5.05% for the quarter ended March 31, 2013, and 5.28% for the same period one year earlier. The decrease in net interest margin compared to the first quarter of 2013 and the same period one year ago was primarily due to a less favorable mix of earning assets and decreased leverage, partially offset by increased recurring loan fees. The Company's loan-to-deposit ratio, a measure of leverage, averaged 79.4% during the three months ended June 30, 2013, which remained relatively consistent compared to an average of 79.5% for the quarter ended March 31, 2013, but decreased in comparison to an average of 85.0% for the same period of 2012. The impact on the net interest margin from increased loan fees for the three months ended June 30, 2013 compared to the prior quarter and the same period one year ago was 11 basis points and 18 basis points, respectively. The negative impact of reversal or foregone interest due to nonperforming assets was 8 basis points in the second quarter of 2013, compared with 7 basis points in both the first quarter of 2013 and in the same period one year earlier.

The Company's net interest margin for the six months ended June 30, 2013 was 4.95%, compared to 5.36% for the same period one year ago. The decrease in net interest margin from the prior year was primarily due to a less favorable mix in average earning assets and decreased leverage. The Company's loan-to-deposit ratio, a measure of leverage, averaged 79.5% during the six months ended June 30, 2013, compared with 82.0% for the same period of 2012. The impact on the net interest margin from increased loan fees for the six months ended June 30, 2013 compared to the same period one year ago was 1 basis point. The negative impact of reversal or foregone interest due to nonperforming assets was 8 basis points for the first six months of 2013 and the same period one year earlier.

Non-Interest Income

The Company's non-interest income for the quarters ended June 30, 2013, March 31, 2013, and June 30, 2012 was $4.8 million, $2.9 million, and $3.0 million, respectively.

During the second quarter of 2013, the Company recognized a gain from the sale of SBA loans of $1.3 million, compared to $400,000 for the first quarter of 2013 and $358,000 for the second quarter of 2012. During the second quarter of 2013, the Company also recognized a gain on the sale of securities in the amount of $804,000 while no gain was recognized in the first quarter of 2013, and a gain of $4,000 was recognized during the same period one year earlier. The Company recorded a gain on the sale of other real estate owned during the current quarter of $100,000, compared to $370,000 in the prior quarter and a net loss of $16,000 during the same period in the prior year. The Company received warrant income of $229,000 for the second quarter of 2013 compared to $13,000 in the first quarter of 2013, and $675,000 for the same period in 2012. During 2013, the Company implemented a Visa card program which contributed $226,000 to the second quarter results, compared to $174,000 in the first quarter.

Non-interest income for the six months ended June 30, 2013 and 2012 was $7.7 million and $5.5 million, respectively. The primary drivers for the increase in non-interest income was an increase in the gain on sale of SBA loans of $1.0 million, an increase in the gain on sale of other real estate owned of $486,000 and an increase in the gain on sale of securities of $481,000 in first six months of 2013 compared to the same period one year earlier.

Net interest income and non-interest income comprised total revenue of $21.3 million for the three months ended June 30, 2013, compared to $18.5 million for the three months ended March 31, 2013 and $17.5 million for the same period one year earlier. For the six months ended June 30, 2013, total revenue of $39.8 million represented an increase of $4.9 million, or 14%, from $34.9 million for the six months ended June 30, 2012.

Non-Interest Expense

Non-interest expense was $12.9 million for the quarter ended June 30, 2013, compared to $11.9 million and $11.4 million for the quarters ended March 31, 2013 and June 30, 2012, respectively. Overall, the increase in non-interest expenses reflects the Company's investments in new initiatives and personnel to support future growth.

Salary and benefits expense for the quarter ended June 30, 2013 was $8.2 million, compared to $7.6 million and $7.4 million for the quarters ended March 31, 2013 and June 30, 2012, respectively. Salary and benefits expense for the six months ended June 30, 2013 was $15.7 million compared to $14.4 million for the same period one year ago. The increase in salary and benefits expense compared to the same periods in prior year was primarily related to an increase in headcount to support growth and new initiatives, combined with annual salary increases necessary to remain competitive in the Company's core markets and increased stock-based compensation due to long term retention awards. As of June 30, 2013, the Company employed 220 full-time equivalents (FTE) compared to 218 FTE at March 31, 2013 and 200 FTE at June 30, 2012.

"Other real estate owned" and loan-related charges were $352,000 for the quarter ended June 30, 2013, compared to $208,000 and $234,000 for the quarters ended March 31, 2013 and June 30, 2012, respectively. "Other real estate owned" and loan-related charges were $560,000 for the six months ended June 30, 2013 compared to $425,000 for the same period one year ago. The increase in "other real estate owned" and loan related charges from prior year was primarily attributed to an increase in nonperforming assets.

Regulatory assessments related to participation in the Transaction Guarantee Program as well as FDIC insurance pertaining to deposit balances, totaled $294,000 for the quarter ended June 30, 2013, compared to $226,000 for the quarter ended March 31, 2013 and $176,000 for the same period one year ago. Regulatory assessments for the six months ended June 30, 2013 were $520,000 compared to $424,000 for the same period one year ago.

The Company's efficiency ratio, the ratio of non-interest expense to revenues, was 60.41%, 64.24%, and 64.85% for the quarters ended June 30, 2013, March 31, 2013, and June 30, 2012, respectively. The efficiency ratio was 62.18% for the six months ended June 30, 2013 compared to 64.28% for the same period one year earlier.

Balance Sheet

Bridge Capital Holdings reported total assets at June 30, 2013 of $1.46 billion, compared to $1.35 billion at March 31, 2013 and $1.17 billion on the same date one year ago. The increase in total assets of $298.1 million, or 26%, from June 30, 2012 was driven by an increase in deposit production which was primarily used to fund loan growth and increase the investment portfolio.

The Company reported total gross loans outstanding at June 30, 2013 of $999.8 million, which represented an increase of $45.7 million, or 5%, over $954.2 million at March 31, 2013 and an increase of $149.4 million, or 18%, over $850.4 million at June 30, 2012. The increase in total gross loans from March 31, 2013 and June 30, 2012 was broad-based throughout the portfolio, with the most significant growth reflected in the commercial lending portfolio.

The Company's total deposits were $1.28 billion as of June 30, 2013, which represented an increase of $110.3 million, or 9%, compared to $1.17 billion at March 31, 2013 and an increase of $291.1 million, or 30%, compared to $985.6 million at June 30, 2012. The increase in deposits from March 31, 2013 and June 30, 2012 was primarily attributable to continued growth in non-interest bearing demand deposit accounts and money market and savings accounts.

Demand deposits represented 62.6% of total deposits at June 30, 2013, compared to 62.4% at March 31, 2013 and 66.1% for the same period one year ago. Core deposits represented 96.0% of total deposits at June 30, 2013, compared to 95.8% at March 31, 2013 and 95.9% at June 30, 2012.

Credit Quality

Nonperforming assets increased to $16.2 million, or 1.11% of total assets, as of June 30, 2013, compared to $9.6 million, or 0.71% of total assets, as of March 31, 2013 and $12.3 million, or 1.06% of total assets, at June 30, 2012. The nonperforming assets at June 30, 2013 consisted of loans on nonaccrual or 90 days or more past due totaling $16.2 million, and OREO valued at $31,000. The increase in nonperforming assets during the second quarter of 2013 was primarily due to the addition of one commercial real estate credit and one asset-based lending credit. Additionally, one real estate secured relationship was downgraded from a performing troubled debt restructuring to a nonperforming loan.

Nonperforming loans at June 30, 2013 were comprised of loans with legal contractual balances totaling approximately $23.5 million reduced by $1.8 million received in non-accrual interest and impairment charges of $5.5 million which have been charged against the allowance for credit losses.

Nonperforming loans were $16.2 million, or 1.62% of total gross loans, as of June 30, 2013, compared to $9.6 million, or 1.00% of total gross loans, as of March 31, 2013, and $9.2 million, or 1.08% of total gross loans, at June 30, 2012.

The carrying value of OREO was $31,000 as of June 30, 2013 and March 31, 2013, and $3.1 million as of June 30, 2012.

The allowance for loan losses was $20.5 million, or 2.05% of total loans, at June 30, 2013, compared to $20.5 million, or 2.15% of total loans, at March 31, 2013 and $19.5 million, or 2.30% of total loans, at June 30, 2012. The provision for credit losses for the second quarter of 2013 was $5.3 million, compared to $750,000 for the first quarter of 2013 and $500,000 for the same period one year ago. The provision for credit losses for the second quarter of 2013 primarily related to a charge-off on one asset-based commercial line of credit and the strong growth in the loan portfolio.

The Company charged-off $5.4 million in loan balances during the three months ended June 30, 2013, compared to $350,000 charged-off during the three months ended March 31, 2013 and $553,000 charged-off during the three months ended June 30, 2012. Approximately $4.3 million of the charge-offs in the second quarter of 2013 were related to one asset-based commercial line of credit.

"Charge-off activity for the quarter was largely isolated to one commercial credit and we remain confident of the overall health of our portfolios," said Thomas A. Sa, executive vice president and chief financial officer of Bridge Capital Holdings. "As has been our practice in the past, we recognized a conservative charge on a commercial loan in an active workout. Historically, this has served us well by providing flexibility to maximize the outcome of a workout and we have achieved significant recoveries. In addition, this practice underscores the conservative posture of our reserves, which still provide coverage of 127% of nonperforming loans after the charge."

During the three months ended June 30, 2013, the Company recognized $26,000 in loan recoveries compared to $195,000 and $290,000, respectively, in loan recoveries for the three months ended March 31, 2013 and June 30, 2012.

Capital Adequacy

The Company's capital ratios at June 30, 2013 substantially exceed the regulatory definition for being "well capitalized" with a Total Risk-Based Capital Ratio of 14.80%, a Tier I Risk-Based Capital Ratio of 13.41%, and a Tier I Leverage Ratio of 11.71%. Additionally, the Company's tangible common equity ratio at June 30, 2013 was 10.52% and book value per common share was $9.79, representing an increase of $0.18, or 1.8%, from $9.61 at March 31, 2013 and an increase of $0.80, or 8.9%, from $8.99 at June 30, 2012.

Conference Call and Webcast

Management will host a conference call today at 5:00 p.m. Eastern time/2:00 p.m. Pacific time to discuss the Company's financial results and answer questions.

Individuals interested in participating in the conference call may do so by dialing 877.941.1466 from the United States, or 480.629.9772 from outside the United States and referencing conference ID 4630493. Those interested in listening to the conference call live via the Internet may do so by visiting the Investor Relations section of the Company's Web site at www.bridgebank.com.

A telephone replay will be available through August 1, 2013, by dialing 800.406.7325 from the United States, or 303.590.3030 from outside the United States, and entering conference ID 4630493. A webcast replay will be available for 90 days.

About Bridge Capital Holdings

Bridge Capital Holdings is the holding company for Bridge Bank, National Association. Bridge Capital Holdings was formed on October 1, 2004 and holds a Global Select listing on The NASDAQ Stock Market under the trading symbol BBNK. For additional information, visit the Bridge Capital Holdings website at http://www.bridgecapitalholdings.com.

About Bridge Bank, N.A.

Bridge Bank, N.A. is Silicon Valley's full-service professional business bank. The Bank is dedicated to meeting the financial needs of small, middle market, and emerging technology businesses. Bridge Bank provides its clients with a comprehensive package of business banking solutions delivered through experienced, professional bankers. For additional information, visit the Bridge Bank website at http://www.bridgebank.com.

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 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 Company'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 Company conducts its operations; changes in interest rates; new litigation or changes in existing litigation; future credit loss experience; increased competitive challenges and expanding product and pricing pressures among financial institutions; legislation or regulatory changes which adversely affect the Company'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.

The reader should refer to the more complete discussion of such risks in Bridge Capital Holdings' annual reports on Forms 10-K and quarterly reports on Forms 10-Qon file with theSecurities and ExchangeCommission.The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

-Financial Tables Follow -

 
BRIDGE CAPITAL HOLDINGS AND SUBSIDIARY
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (Dollars in Thousands)
          
 
Three months endedSix months ended
06/30/1303/31/1306/30/1206/30/1306/30/12
 
INTEREST INCOME
Loans$15,926$14,471$13,365$30,397$26,934
Federal funds sold69433111278
Investment securities 1,221  1,634  1,694  2,855  3,403 
Total interest income 17,216  16,148  15,090  33,364  30,415 
 
INTEREST EXPENSE
Deposits367338232705465
Other 272  266  317  539  563 
Total interest expense 639  604  549  1,244  1,028 
 
Net interest income16,57715,54414,54132,12029,387
Provision for credit losses 5,300  750  500  6,050  2,250 
Net interest income after provision
for credit losses 11,277  14,794  14,041  26,070  27,137 
 
NON-INTEREST INCOME
Service charges on deposit accounts9208738341,7931,639
International Fee Income6726356591,3071,376
Gain on sale of SBA loans1,2784003581,678358
Other non-interest income 1,886  1,010  1,121  2,897  2,142 
Total non-interest income 4,756  2,918  2,972  7,675  5,515 
 
OPERATING EXPENSES
Salaries and benefits8,1557,5617,39015,71514,429
Premises and fixed assets9979829871,9791,923
Other 3,736  3,317  2,981  7,052  6,084 
Total operating expenses 12,888  11,860  11,358  24,746  22,436 
 
Income before income taxes3,1455,8525,6558,99810,216
Income tax expense1,3022,4312,3463,7344,200
     
NET INCOME$1,843 $3,421 $3,309 $5,264 $6,016 
 
 
EARNINGS PER SHARE
Basic earnings per share$0.13 $0.24 $0.23 $0.37 $0.42 
Diluted earnings per share$0.12 $0.23 $0.22 $0.35 $0.40 
Average common shares outstanding 14,427,497  14,411,008  14,383,214   Read Full Story

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