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California First National Bancorp Reports Operating Results (10-Q)

May 14, 2009 | About:

California First National Bancorp (CFNB) filed Quarterly Report for the period ended 2009-03-31.

California First National Bank is a FDIC-insured national bank that gathers deposits using telephone the Internet and direct mail from a centralized location and will lease capital assets to businesses and organizations and provide business loans to fund the purchase of assets leased by third parties. California First National Bancorp has a market cap of $129.2 million; its shares were traded at around $12.72 with a P/E ratio of 16.4 and P/S ratio of 3.8. The dividend yield of California First National Bancorp stocks is 3.7%.

Highlight of Business Operations:

Net earnings for the third quarter ended March 31, 2009 were up 61% to $2.4 million from the net earnings of $1.5 million for the third quarter of fiscal 2008. For the nine months ended March 31, 2009, net earnings were up 26% to $6.7 million from the $5.3 million for the first nine months of fiscal 2008. The increase in net earnings for the third quarter and nine months of fiscal 2009 is primarily due to a reduction in selling, general and administrative (SG&A) expenses, higher income earned on the investment portfolio along with reduced rates paid on deposits and borrowings, and gains from the sale of leases.

New lease bookings of $117.3 million for the first nine months of fiscal 2008 increased 8.2%, and along with commercial loans boarded of $48.2 million contributed to a 33% increase in loan and lease assets booked to $165.6 million during the nine months ended March 31, 2009, compared to $124.3 million for the first nine months of fiscal 2008. As a result, the net investment in leases and loans of $286.5 million at March 31, 2009 increased 9.2% from June 30, 2008 and increased 14.1% from the balance at March 31, 2008.

The Bank s investment in leases and loans of $203.7 million at March 31, 2009 represented 71% of the Company s consolidated investment, and was up 21% from June 30, 2008. In addition, the Bank increased its investment securities portfolio to $85.1 million at March 31, 2009 from $2.6 million at June 30, 2008. The investments include certain U. S. agency mortgage-backed securities, investment grade bank issued trust-preferred securities and corporate bonds that offer a better yield than federal funds sold and other short-term investments. To fund this portfolio, demand, money market and time deposits increased by 32% to $205.5 million from $156.2 million at June 30, 2008, and the Bank used its availability under credit lines at the FHLB and the FRB through borrowings of $45.4 million at an average annual interest rate of 0.78%.

Summary -- For the third quarter ended March 31, 2009, net earnings of $2.4 million increased $899,000, or 61%, compared to $1.5 million for the third quarter ended March 31, 2008. For the first nine months of fiscal 2009 net earnings of $6.7 million increased $1.4 million, or 26% compared to the nine months ended March 31, 2008. Diluted earnings per share increased 83% to $0.23 per share for the third quarter of fiscal 2009 compared to $0.13 per share for the third quarter of the prior year. For the nine months ended March 31, 2009, diluted earnings per share of $0.64 increased 38%, compared to $0.46 per shared for the same prior year period. Earning per share comparisons in both periods benefited from the Company s August 2008 purchase of common stock pursuant to a modified Dutch auction tender offer that reduced the fully diluted shares outstanding in the third quarter by 12% to 10.2 million.

Net direct finance, loan and interest income was $5.9 million for the quarter ended March 31, 2009, a $472,000, or 8.7% increase compared to the same quarter of the prior year. Total direct finance, loan and interest income for the third quarter ended March 31, 2009 increased 11.0% to $7.6 million from $6.9 million earned during the third quarter of fiscal 2008. The increase was primarily due to an $803,000 increase in income earned on the commercial loan portfolio that stood at $70.4 million at March 31, 2009 and an $891,000 increase in investment income earned on average total cash and investments which had increased 128% to $128.3 million. Together, this income offset a $938,000 decrease in direct finance income that resulted from a 9% decline in the average net investment in leases. The average yield on leases held in the Company s own portfolio decreased 72 basis points to 9.8% while the average yield on loans decreased 40 basis points to 5.8%. With the expanded investment strategy, the average total investment in cash and securities increased to $128.3 million from $56.3 million for the third quarter of fiscal 2008, and the average yield earned on such investments increased 78 basis points to 4.34%. During the third quarter of fiscal 2009, interest expense paid on deposits and FHLB and FRB borrowings increased by $284,000 or 20% reflecting a 64% increase in average deposit balances to $193.2 million that was offset by a 150 basis point drop in average interest rates paid. During the third quarter, CalFirst Bank borrowed under Federal Home Loan Bank and Federal Reserve Bank lines at an average cost of 0.78%, and reduced its total average funding cost to 2.99% for the three months ended March 31, 2009 compared to 4.9% for the third quarter of fiscal 2008.

For the nine months ended March 31, 2009, net direct finance and interest income was $17.0 million, an $809,000 or 5.0% increase from the $16.2 million earned during the same period of the prior year. Total direct finance, loan and interest income increased 7.5% to $22.0 million for the first nine months of fiscal 2009 compared to the same period of the prior year. The increase was due to a $2.5 million increase in income earned on the commercial loan portfolio and a $1.5 million increase in investment income, which was offset by a $2.4 million decline in direct finance income related to leases. The average yield on leases held in the Company s own portfolio decreased by 60 basis points to 10.0% and the average yield on commercial loans decreased 148 basis points to 6.9%. The increased investment income reflected a 91% increase in the average investment in cash and securities to $97.3 million, with the average yield up 17 basis points to 4.1% for the nine months ended March 31, 2009. For the nine months ended March 31, 2009, interest expense on deposits and FHLB and FRB borrowings increased by $730,000 to $5.0 million, reflecting a 159 basis point decrease in the average interest rates paid on average deposit and borrowing balances that increased by 71% from the year before to $191.4 million.

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