Exhibit 99.1
PRESS RELEASE
First Community Bancorp
(NASDAQ: FCBP)
Contact: | | Matthew P. Wagner | | Victor R. Santoro |
| | President and | | Executive Vice President and |
| | Chief Executive Officer | | Chief Financial Officer |
| | 120 Wilshire Boulevard | | 120 Wilshire Boulevard |
| | Santa Monica, CA 90401 | | Santa Monica, CA 90401 |
Phone: | | 310-458-1521 x 271 | | 310-458-1521 x 288 |
Fax: | | 310-451-4555 | | 310-451-4555 |
FOR IMMEDIATE RELEASE | | January 27, 2005 |
FIRST COMMUNITY BANCORP ANNOUNCES RECORD EARNINGS FOR THE
FOURTH QUARTER AND FOR THE FISCAL YEAR 2004
— Net Earnings for 2004 Totaled $36.4 million, Up 13% Over 2003—
— 2004 Diluted EPS of $2.27 per Share, Up 12% Over 2003 —
— Net Interest Margin for 2004 is 5.58%, an Increase of 34 Basis Points Over 2003 —
— Organic Loan Growth was $312.5 Million for Fiscal 2004 —
Rancho Santa Fe, California . . . First Community Bancorp (Nasdaq: FCBP) today announced net earnings for the year ended December 31, 2004, of $36.4 million, or $2.27 per diluted share, compared to net earnings of $32.1 million, or $2.02 per diluted share, for 2003. Factors contributing to the earnings increase included organic loan growth of $312.5 million, a 34 basis point increase in the net interest margin to 5.58% for the year, and assets of $253 million added through acquisitions closed in 2004.
Fourth quarter 2004 net earnings were $10.4 million, or $0.65 per diluted share, compared to fourth quarter 2003 net earnings of $8.4 million, or $0.53 per diluted share. Fourth quarter earnings were fueled by loan growth of $62.5 million and an increase in the net interest margin to 5.84% for the fourth quarter of 2004 compared to 5.65% for the third quarter of 2004.
The comparability of financial information is also affected by our acquisitions. Operating results include the operations of acquired entities from the dates of acquisition. Verdugo Banking Company was acquired in August 2003, First Community Financial Corporation, or FC Financial, was acquired in March 2004, and Harbor National Bank, or Harbor, was acquired in April 2004.
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HIGHLIGHTS FOR THE FOURTH QUARTER OF AND FISCAL 2004
| | Fourth Quarter
2004 | | Fiscal 2004 | |
Net income increase over prior period in 2003 | | 23.8% | | 13.4% | |
Diluted EPS increase over prior period in 2003 | | 22.6% | | 12.4% | |
Organic loan growth | | $62.5 million | | $312.5 million | |
Net interest margin | | 5.84% | | 5.58% | |
Average deposit cost | | 0.33% | | 0.33% | |
Noninterest bearing deposits to total deposits at period end (1) | | 46% | | 46% | |
Nonaccrual loans to net loans at period end | | 0.42% | | 0.42% | |
(1) For purposes of calculating this ratio, period end deposits exclude a short-term $365 million interest-bearing deposit received on December 31, 2004.
Matt Wagner, President and Chief Executive Officer, stated, “We had a terrific 2004, and are very pleased with our fourth quarter and full year results. Net income and earnings per share reached record levels, driven by our organic loan growth and our high level of credit quality. The acquisitions of FC Financial and Harbor National Bank earlier in the year were accretive and also contributed to our growth. We will continue to focus on existing and new customers, and developing relationships that bring us quality loans and deposits.”
Mr. Wagner continued, “Our pricing discipline on both loans and deposits was key to the increase in our net interest margin. We met our loan growth goals despite competitive pressures to accept lower interest rates and to loosen underwriting standards. I believe these accomplishments highlight the unique ability of First Community to stimulate growth while maintaining our pricing and credit standards.”
Vic Santoro, Executive Vice President and Chief Financial Officer, also commented, “Fourth quarter trends were very positive, and we hope to continue to build on the loan growth momentum we experienced in 2004 and to preserve or increase our net interest margin in 2005. Our net interest margin increased 19 basis points during the quarter, driven by a 15 basis point increase in our loan yield to 7.06%. We increased certain deposit rates in response to market pressures, although we maintained our disciplined pricing policy. Our company remains asset sensitive, positioning us well for further increases in market interest rates.”
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YEAR TO DATE RESULTS
| | Year Ended December 31, | |
Dollars in millions, except per share
data | | 2004 | | 2003 | | % Change | |
| | | | | | | |
Diluted Earnings per Share | | $ | 2.27 | | $ | 2.02 | | 12.4 | % |
Net Earnings | | $ | 36.36 | | $ | 32.06 | | 13.4 | % |
Return on Average Assets (“ROA”) | | 1.35 | % | 1.41 | % | -4.3 | % |
Return on Average Equity (“ROE”) | | 10.4 | % | 9.8 | % | 6.1 | % |
Efficiency Ratio | | 57.1 | % | 54.8 | % | 4.2 | % |
Net income in 2004 included a gain on sale of an acquired charged-off loan, additional performance stock amortization due to earlier-than-originally-expected vesting, and settlement of a deferred compensation arrangement which when taken together reduced net income by $421,000, or $0.03 per diluted share. There were no similar items in 2003. Net income in 2003 included an insurance settlement, gain on sale of securities, and gain on sale of other real estate owned totaling $1.7 million after tax, or $0.11 per diluted share. There were no such items in 2004.
Comparisons of net earnings, ROA and ROE for the year ended December 31, 2004, and 2003 are also affected by loan growth and our 2003 and 2004 acquisitions.
FOURTH QUARTER RESULTS
Dollars in millions, except per share
data | | Fourth
Quarter
2004 | | Third
Quarter
2004 | | %
Change | | Fourth
Quarter
2003 | | %
Change | |
| | | | | | | | | | | |
Diluted Earnings per Share | | $ | 0.65 | | $ | 0.60 | | 8.3 | % | $ | 0.53 | | 22.6 | % |
Net Earnings | | $ | 10.45 | | $ | 9.58 | | 9.1 | % | $ | 8.44 | | 23.8 | % |
ROA | | 1.47 | % | 1.37 | % | 7.3 | % | 1.36 | % | 8.1 | % |
ROE | | 11.4 | % | 10.8 | % | 5.6 | % | 10.1 | % | 12.9 | % |
Efficiency Ratio | | 56.8 | % | 55.9 | % | 1.6 | % | 53.9 | % | 5.4 | % |
The increases in net earnings, ROA, and ROE for the fourth quarter of 2004 compared to the third quarter of 2004 were due to our loan growth. The increases in net earnings, ROA, and ROE for the fourth quarter of 2004 compared to the fourth quarter of 2003 were due to both our loan growth and acquisitions.
BALANCE SHEET GROWTH
Loans, net of deferred fees and costs increased $522.3 million to $2.1 billion at December 31, 2004, from $1.6 billion at December 31, 2003. Such loan growth is composed of organic growth of $312.5 million and loans acquired in acquisitions of $209.8 million. Fourth quarter 2004 loan growth was $62.5 million, compared to $105.6 million, $100.7 million and $43.7 million for the third, second and first quarters of 2004. Deposits increased $482.7 million from year end 2003 to $2.4 billion at December 31, 2004. Included in the 2004 balance is a short-term $365 million interest-bearing deposit received
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on December 31, 2004, which has since been drawn down substantially by the customer. Excluding the $365 million deposit, deposit balances increased $117.7 million during 2004, reflecting the deposits from the Harbor acquisition of $156.8 million offset by planned run-off of acquired higher-costing deposits and the strong growth in demand deposits. During 2004, demand deposits increased $127.4 million, including $60.8 million from the Harbor acquisition. After excluding the $365 million deposit from the year-end 2004 balance, interest-bearing deposits decreased $9.6 million. Demand deposits represented 46% of total deposits at December 31, 2004, after deducting the short-term $365 million interest-bearing deposit from our total deposits.
We increased our borrowings by $36.3 million since year-end 2003 to meet loan demand. In early February 2004, we issued $60.0 million in trust preferred securities used to fund the FC Financial and Harbor acquisitions, thereby adding $61.9 million in subordinated debentures. Following the acquisition of FC Financial, we repaid $60.7 million of FC Financial debt from the proceeds of sales of investment securities.
NET INTEREST INCOME CONTINUES TO INCREASE
Net interest income increased $25.5 million, or 25.4%, for the year ended December 31, 2004, when compared to 2003. This growth was the result of the $339.7 million increase in average earning assets during 2004 which was fueled by loan growth and acquisitions. The yield on average earning assets increased to 6.22% for the year ended December 31, 2004, from 5.90% for 2003 due mainly to a change in the mix of earning assets. Average loans represented 84% of average earning assets for 2004 compared to 78% for 2003. The cost of our interest-bearing liabilities declined to 1.05% for the year ended December 31, 2004, from 1.06% for 2003. The increase in the dollar amount of interest expense in 2004 over 2003 was due to increased borrowings, including subordinated debentures, used to fund loan growth and acquisitions.
Net interest income increased 32.3% to $34.8 million for the fourth quarter of 2004, compared to $26.3 million for the same period of 2003. The year-over-year increase was driven by increased interest income from earning asset growth and improved net interest margin. Interest expense on borrowed funds, including subordinated debentures, increased $1.4 million for the fourth quarter of 2004 when compared to the same period of 2003, due to increased average borrowings, including subordinated debentures, used to fund loan growth and acquisitions.
NET INTEREST MARGIN CONTINUES TO EXPAND
Our net interest margin increased to 5.58% for 2004 compared to 5.24% for 2003. The increase was driven by higher average loan balances during 2004. Higher average loan balances were the principal reason behind the increase in interest income in 2004 of $27.3 million and the increase in net interest income of $25.5 million. The total cost of interest-bearing liabilities declined 1 basis point during 2004 to 1.05% as borrowings and subordinated debentures represented a higher proportion of interest-bearing liabilities in 2004 compared to 2003. The increased borrowings and subordinated debentures were used to fund loan growth and acquisitions. The average cost of deposits declined to 0.33% for
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2004 from 0.51% for 2003 consistent with our focus on demand deposits and our pricing strategy on interest-bearing deposits.
The Company’s net interest margin for the fourth quarter of 2004 was 5.84%, an increase of 78 basis points when compared to the same period of 2003 and an increase of 19 basis points when compared to the third quarter of 2004. Yields on average earning assets were 6.54% and 5.63% for the fourth quarters of 2004 and 2003, respectively, and 6.28% for the third quarter of 2004. The increases in the yield on average earning assets and the increases in the net interest margin are attributable to loan growth. The increase in the net interest margin in the fourth quarter of 2004 over the third quarter of 2004 is due to higher loan balances offset by higher balances of borrowed funds. The average cost of deposits was 0.33% for the fourth quarter of 2004 compared to 0.40% and 0.31% for the fourth quarter of 2003 and the third quarter of 2004. The overall cost of interest-bearing liabilities increased to 1.16% for the fourth quarter of 2004 compared to 0.93% for the same period of 2003 and increased from 1.04% for the third quarter of 2004. These increases are primarily attributable to the increased balances for borrowed funds.
NONINTEREST INCOME ITEMS
Noninterest income was $16.9 million in 2004 compared to $19.5 million in 2003. The amount for 2003 included an insurance settlement, gain on sale of securities, and gain on sale of other real estate owned totaling $2.9 million ($1.7 million after tax). Although there were no similar amounts in 2004 other than the $6,000 loss on sale of securities, the 2004 amount included a gain on sale of an acquired charged-off loan of $975,000 ($566,000 after tax). Service charges and fees on deposit accounts declined because of increased earnings credits tied to market interest rates and changes in certain pricing structures.
Noninterest income for the fourth quarter of 2004 totaled $4.7 million compared to $4.1 million for the third quarter of 2004 and $4.4 million for the fourth quarter of 2003. Noninterest income for the fourth quarter of 2004 included the gain on sale of the acquired charged-off loan referred to above.
NONINTEREST EXPENSE CONSISTENT WITH BALANCE SHEET GROWTH
Noninterest expense increased to $81.5 million for 2004 from $65.6 million for 2003. Noninterest expense for the fourth quarter of 2004 totaled $22.4 million compared to $20.9 million in the third quarter of 2004 and $16.6 million in the fourth quarter of 2003. These increases are the result of the two acquisitions consummated early in 2004 and increased compensation expense and professional fees.
We acquired FC Financial in March 2004 and Harbor in April 2004. Operating results of these two entities are included with ours from the dates of acquisition, and all categories of noninterest expense are impacted.
The increased compensation expense for 2004 compared to 2003 is largely the result of an increased number of employees due to acquisitions, staff additions to support expanded
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lending activity, and the amortization of restricted and performance stock awarded after June 30, 2003. Our performance stock amortization expense is affected by estimated vesting dates for such awards. We currently estimate that of the 255,000 shares of performance stock awarded in 2003, 127,500 shares will vest during the first quarter of 2005. We have, therefore, fully amortized these awards during 2004. Of the remaining 127,500 shares of performance stock, we estimate that 63,750 performance shares will vest during the first quarter of 2006 and 63,750 will vest during the first quarter of 2007. These estimates are, however, subject to change based on progress toward achieving the underlying performance targets.
Compensation expense also increased due to settlement of a deferred compensation arrangement and additional performance stock amortization related to the performance stock awards estimated to vest earlier-than-originally expected. Professional fees increased in 2004 when compared to 2003 due to expenditures for compliance with the Sarbanes-Oxley Act and legal fees related to certain outstanding litigation. A summary of these noninterest expense items follows:
| | Fourth Quarter
2004 | | Fiscal 2004 | |
Additional performance stock amortization related to awards estimated to vest in 2006 and 2007 | | $ | 1,184,000 | | $ | 1,184,000 | |
| | | | | |
Settlement of deferred compensation arrangement | | 220,000 | | 516,000 | |
| | | | | |
Legal fees related to certain outstanding litigation | | 508,000 | | 648,000 | |
| | | | | |
Sarbanes-Oxley Act compliance | | 360,000 | | 620,000 | |
| | | | | | | |
Noninterest expense includes the following noncash item for the periods indicated:
| | Fourth Quarter
2004 | | Fourth Quarter
2003 | | Fiscal 2004 | | Fiscal 2003 | |
Intangible asset amortization | | $ | 837,000 | | $ | 722,000 | | $ | 3,253,000 | | $ | 2,529,000 | |
Restricted and performance stock amortization | | 3,109,000 | | 560,000 | | 7,518,000 | | 1,006,000 | |
Total | | $ | 3,946,000 | | $ | 1,282,000 | | $ | 10,771,000 | | $ | 3,535,000 | |
For 2005, intangible asset amortization is estimated to be $3.3 million and restricted and performance stock award amortization is estimated to be $4.5 million. These estimates are, however, subject to change.
INCOME TAXES
Our effective income tax rate was 40% for both calendar 2004 and 2003, and 39% for the fourth quarter of 2004. During the fourth quarter, we completed an analysis of income from certain loans and recorded an enterprise zone state tax credit of $373,000.
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CREDIT QUALITY REMAINS STRONG
The provision for loan losses was $465,000 in 2004 compared to $300,000 in 2003. Although credit quality measures continued to improve during 2004, the provision reflects increased loan balances.
The ratio of nonaccrual loans to loans, net of deferred fees and costs, declined to 0.42% at December 31, 2004, from 0.46% at December 31, 2003, and increased from 0.32% at September 30, 2004. Nonaccrual loans were $8.9 million at December 31, 2004, compared to $7.4 million at December 31, 2003, and $6.7 million at September 30, 2004. The increase in nonaccrual loans from September 30, 2004, resulted from two loans, a $1.1 million construction loan and a $1.5 million commercial loan, becoming past due more than 90 days.
At December 31, 2004, we reclassified a portion of our allowance for loan losses to a reserve for unfunded loan commitments included within accrued interest payable and other liabilities. At December 31, 2004, the allowance for loan losses was $26.7 million and the reserve for unfunded loan commitments was $2.8 million. Our allowance for loan loss methodology has consistently included an allocation of the allowance to unfunded loan commitments, and we expect such methodology to remain in effect. The accompanying December 31, 2003, balance sheet and the accompanying allowance for loan loss tables include the reclassification to conform to the presentation we adopted as of December 31, 2004.
REGULATORY CAPITAL MEASURES ARE ABOVE THE WELL-CAPITALIZED MINIMUMS
First Community and its wholly-owned banking subsidiaries, Pacific Western National Bank and First National Bank, each remained well capitalized at December 31, 2004. Regulatory capital ratios for the Banks and the consolidated company are as follows:
| | Pacific
Western | | First
National | | Consolidated
Company | |
Tier 1 leverage capital ratio | | 9.41% | | 9.68% | | 9.56% | |
Tier 1 risk-based capital ratio | | 9.46% | | 10.12% | | 9.72% | |
Total risked-based capital ratio | | 10.42% | | 11.37% | | 10.88% | |
We have issued and have outstanding trust preferred securities totaling $118.0 million which is treated as regulatory capital for purposes of determining the Company’s Tier I capital ratios. The Board of Governors of the Federal Reserve System, which is the Company’s banking regulator, has proposed to modify its rule on the amount of trust preferred securities that may be included in regulatory capital. As the final ruling has not been issued, it is not possible to estimate the effect, if any, such final rule would have on the Company’s Tier I regulatory capital.
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ABOUT FIRST COMMUNITY BANCORP
First Community Bancorp is a bank holding company with $3.0 billion in assets as of December 31, 2004, with two wholly-owned banking subsidiaries, Pacific Western National Bank and First National Bank. Through the Banks’ 35 full-service community banking branches, First Community provides commercial banking services, including real estate, construction and commercial loans, to small and medium-sized businesses. Pacific Western has 22 branches throughout Los Angeles, Orange, Riverside and San Bernardino Counties, and First National Bank has 13 branches across San Diego County. Through its subsidiary FC Financial, First National Bank provides working capital financing to growing companies located throughout the Southwest, primarily in the states of Arizona, California and Texas. Additional information regarding First Community Bancorp is available on the Internet at www.firstcommunitybancorp.com. Information regarding Pacific Western National Bank and First National Bank is also available on the Internet at www.pacificwesternbank.com and www.banksandiego.com, respectively.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking information about First Community that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of First Community. First Community cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to: the possibility that personnel changes will not proceed as planned; planned acquisitions and relative cost savings cannot be realized or realized within the expected time frame; costs and uncertainties related to the outcome of pending litigation; revenues are lower than expected; competitive pressure among depository institutions increases significantly; the integration of acquired businesses costs more, takes longer or is less successful than expected; the cost of additional capital is more than expected; a change in the interest rate environment reduces interest margins; general economic conditions, either nationally or in the market areas in which First Community operates, are less favorable than expected; legislative or regulatory requirements or changes that adversely affect First Community’s business or regulatory capital requirements, or that alter the regulatory capital treatment of the Company’s trust preferred securities; changes in the securities markets and other risks that are described in First Community’s public filings with the U.S. Securities and Exchange Commission (the “SEC”). If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, First Community’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. First Community assumes no obligation to update such forward-looking statements.
For a more complete discussion of risks and uncertainties, investors and security holders are urged to read First Community Bancorp’s annual report on Form 10-K and quarterly reports on Form 10-Q filed by the Company with the SEC. The documents filed by First Community with the SEC may be obtained at First Community Bancorp’s website at www.firstcommunitybancorp.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from First Community by directing a request to: First Community Bancorp c/o Pacific Western Bank, 275 North Brea Boulevard, Brea, CA 92821. Attention: Investor Relations. Telephone 714-671-6800.
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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| | December 31,
2004 | | December 31,
2003 | |
| | (Dollars in thousands, except per share data) | |
Assets: | | | | | |
Cash and due from banks | | $ | 72,581 | | $ | 101,968 | |
Federal funds sold | | 246,700 | | 2,600 | |
Total cash and cash equivalents | | 319,281 | | 104,568 | |
| | | | | |
Interest-bearing deposits in financial institutions | | 702 | | 311 | |
| | | | | |
Federal Reserve Bank and Federal Home Loan Bank stock, at cost | | 24,112 | | 14,662 | |
Securities available-for-sale | | 245,395 | | 417,656 | |
Total securities | | 269,507 | | 432,318 | |
| | | | | |
Gross loans | | 2,125,314 | | 1,600,606 | |
Deferred fees and costs | | (7,143 | ) | (4,769 | ) |
Loans, net of deferred fees and costs | | 2,118,171 | | 1,595,837 | |
Allowance for loan losses (1) | | (26,682 | ) | (24,152 | ) |
Net loans | | 2,091,489 | | 1,571,685 | |
Premises and equipment, net | | 14,919 | | 14,004 | |
Intangible assets | | 256,955 | | 221,956 | |
Cash surrender value of life insurance | | 52,283 | | 50,287 | |
Other assets | | 41,718 | | 33,231 | |
Total Assets | | $ | 3,046,854 | | $ | 2,428,360 | |
| | | | | |
Liabilities and Shareholders’ Equity: | | | | | |
Liabilities: | | | | | |
Noninterest-bearing deposits | | $ | 941,716 | | $ | 814,365 | |
Interest-bearing deposits | | 1,490,674 | | 1,135,304 | |
Total deposits | | 2,432,390 | | 1,949,669 | |
| | | | | |
Accrued interest payable and other liabilities | | 28,934 | | 27,630 | |
Borrowings | | 90,000 | | 53,700 | |
Subordinated debentures | | 121,654 | | 59,798 | |
Total Liabilities | | 2,672,978 | | 2,090,797 | |
| | | | | |
Shareholders’ Equity: | | | | | |
Common stock | | 318,880 | | 308,336 | |
Retained earnings | | 67,911 | | 44,706 | |
Unearned equity compensation | | (11,445 | ) | (13,811 | ) |
Accumulated other comprehensive income: | | | | | |
Unrealized loss on securities available-for-sale, net | | (1,470 | ) | (1,668 | ) |
Total Shareholders’ Equity | | 373,876 | | 337,563 | |
Total Liabilities and Shareholders’ Equity | | $ | 3,046,854 | | $ | 2,428,360 | |
| | | | | |
Shares outstanding (includes 585,416 shares at December 31, 2004, and 460,000 shares at December 31, 2003, underlying restricted stock awards) | | 16,267,862 | | 15,893,141 | |
Book value per share | | $ | 22.98 | | $ | 21.24 | |
(1) As of December 31, 2004, the company reclassified the reserve for unfunded loan commitments from the allowance for loan losses to other liabilities. Prior period amounts have been reclassified to conform to this presentation.
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
| | Quarter Ended
December 31, | | Year Ended
December 31, | |
| | 2004 | | 2003 | | 2004 | | 2003 | |
| | (In thousands, except per share data) | |
Interest income: | | | | | | | | | |
Interest and fees on loans | | $ | 36,839 | | $ | 25,733 | | $ | 130,175 | | $ | 101,879 | |
Interest on interest-bearing deposits in financial institutions | | 5 | | 1 | | 34 | | 12 | |
Interest on investment securities | | 2,055 | | 3,399 | | 9,584 | | 10,272 | |
Interest on federal funds sold | | 74 | | 141 | | 354 | | 718 | |
Total interest income | | 38,973 | | 29,274 | | 140,147 | | 112,881 | |
Interest expense: | | | | | | | | | |
Interest expense on deposits | | 1,813 | | 2,021 | | 7,124 | | 9,579 | |
Interest expense on borrowings | | 593 | | 69 | | 1,144 | | 156 | |
Interest expense on subordinated debentures | | 1,762 | | 874 | | 6,149 | | 2,912 | |
Total interest expense | | 4,168 | | 2,964 | | 14,417 | | 12,647 | |
Net interest income | | 34,805 | | 26,310 | | 125,730 | | 100,234 | |
Provision for credit losses | | — | | — | | 465 | | 300 | |
Net interest income after provision for loan losses | | 34,805 | | 26,310 | | 125,265 | | 99,934 | |
Noninterest income: | | | | | | | | | |
Service charges and fees on deposit accounts | | 1,837 | | 2,362 | | 8,298 | | 8,994 | |
Other commissions and fees | | 902 | | 939 | | 3,690 | | 3,652 | |
Gain on sale of loans | | 1,265 | | 192 | | 1,804 | | 913 | |
Gain on sale of securities | | (36 | ) | — | | (6 | ) | 1,756 | |
Gain on sale of other real estate owned | | — | | — | | — | | 340 | |
Increase in cash surrender value of life insurance | | 444 | | 518 | | 1,898 | | 1,863 | |
Other income | | 267 | | 368 | | 1,230 | | 1,938 | |
Total noninterest income | | 4,679 | | 4,379 | | 16,914 | | 19,456 | |
Noninterest expense: | | | | | | | | | |
Compensation | | 12,758 | | 8,266 | | 45,220 | | 32,407 | |
Occupancy | | 2,629 | | 2,407 | | 10,458 | | 9,411 | |
Furniture and equipment | | 704 | | 853 | | 2,923 | | 3,257 | |
Data processing | | 1,264 | | 1,199 | | 4,476 | | 4,864 | |
Other professional services | | 1,592 | | 388 | | 4,126 | | 2,210 | |
Business development | | 300 | | 273 | | 1,251 | | 1,010 | |
Communications | | 492 | | 524 | | 2,009 | | 2,196 | |
Insurance and assessments | | 426 | | 370 | | 1,647 | | 1,507 | |
Cost of real estate owned | | — | | — | | — | | 168 | |
Intangible asset amortization | | 837 | | 722 | | 3,253 | | 2,529 | |
Other | | 1,426 | | 1,548 | | 6,157 | | 6,080 | |
Total noninterest expense | | 22,428 | | 16,550 | | 81,520 | | 65,639 | |
Earnings before income taxes | | 17,056 | | 14,139 | | 60,659 | | 53,751 | |
Income taxes | | 6,607 | | 5,701 | | 24,296 | | 21,696 | |
Net earnings | | $ | 10,449 | | $ | 8,438 | | $ | 36,363 | | $ | 32,055 | |
Per share information: | | | | | | | | | |
Number of shares (weighted average) | | | | | | | | | |
Basic | | 15,603.0 | | 15,425.0 | | 15,520.7 | | 15,382.1 | |
Diluted | | 16,071.6 | | 15,995.4 | | 15,987.1 | | 15,868.4 | |
Net earnings per share | | | | | | | | | |
Basic | | $ | 0.67 | | $ | 0.55 | | $ | 2.34 | | $ | 2.08 | |
Diluted | | $ | 0.65 | | $ | 0.53 | | $ | 2.27 | | $ | 2.02 | |
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UNAUDITED AVERAGE BALANCE SHEETS
| | Quarter Ended
December 31, | | Year Ended
December 31, | |
| | 2004 | | 2003 | | 2004 | | 2003 | |
| | (Dollars in thousands) | |
Average Assets: | | | | | | | | | |
Loans, net of deferred fees and costs | | $ | 2,075,962 | | $ | 1,564,686 | | $ | 1,897,755 | | $ | 1,493,211 | |
Investment securities | | 278,592 | | 438,318 | | 324,156 | | 349,837 | |
Federal funds sold | | 14,892 | | 57,772 | | 29,206 | | 68,742 | |
Interest-bearing deposits in financial institutions | | 929 | | 385 | | 1,560 | | 1,168 | |
Average earning assets | | 2,370,375 | | 2,061,161 | | 2,252,677 | | 1,912,958 | |
Other assets | | 449,449 | | 393,441 | | 437,893 | | 366,785 | |
Average total assets | | $ | 2,819,824 | | $ | 2,454,602 | | $ | 2,690,570 | | $ | 2,279,743 | |
| | | | | | | | | |
Average Liabilities and Shareholders’ Equity: | | | | | | | | | |
Average Liabilities: | | | | | | | | | |
Noninterest-bearing deposits | | $ | 987,467 | | $ | 820,620 | | $ | 933,418 | | $ | 733,536 | |
Interest-bearing deposits | | 1,195,760 | | 1,196,262 | | 1,194,167 | | 1,138,374 | |
Average deposits | | 2,183,227 | | 2,016,882 | | 2,127,585 | | 1,871,910 | |
Other interest-bearing liabilities | | 228,507 | | 68,314 | | 172,459 | | 51,967 | |
Other liabilities | | 43,403 | | 36,448 | | 39,608 | | 30,145 | |
Average liabilities | | 2,455,137 | | 2,125,644 | | 2,339,652 | | 1,954,022 | |
Average equity | | 364,687 | | 332,958 | | 350,918 | | 325,721 | |
Average liabilities and shareholders’ equity | | $ | 2,819,824 | | $ | 2,454,602 | | $ | 2,690,570 | | $ | 2,279,743 | |
| | | | | | | | | |
Yield Analysis: | | | | | | | | | |
Average earning assets | | $ | 2,370,375 | | $ | 2,061,161 | | $ | 2,252,677 | | $ | 1,912,958 | |
Yield | | 6.54 | % | 5.63 | % | 6.22 | % | 5.90 | % |
Average interest-bearing deposits | | $ | 1,195,760 | | $ | 1,196,262 | | $ | 1,194,167 | | $ | 1,138,374 | |
Cost | | 0.60 | % | 0.67 | % | 0.60 | % | 0.84 | % |
Average deposits | | $ | 2,183,227 | | $ | 2,016,882 | | $ | 2,127,585 | | $ | 1,871,910 | |
Cost | | 0.33 | % | 0.40 | % | 0.33 | % | 0.51 | % |
Average interest-bearing liabilities | | $ | 1,424,267 | | $ | 1,264,576 | | $ | 1,366,626 | | $ | 1,190,341 | |
Cost | | 1.16 | % | 0.93 | % | 1.05 | % | 1.06 | % |
| | | | | | | | | |
Interest spread | | 5.38 | % | 4.70 | % | 5.17 | % | 4.84 | % |
Net interest margin | | 5.84 | % | 5.06 | % | 5.58 | % | 5.24 | % |
| | | | | | | | | |
Average interest sensitive liabilities | | $ | 2,411,734 | | $ | 2,085,196 | | $ | 2,300,044 | | $ | 1,923,877 | |
Cost | | 0.69 | % | 0.56 | % | 0.63 | % | 0.66 | % |
LOAN CONCENTRATION
| | As of the Dates Indicated | |
| | 12/31/04 | | 9/30/04 | | 6/30/04 | | 3/31/04 | | 12/31/03 | |
| | (Dollars in thousands) | |
Loan Category: | | | | | | | | | | | |
Domestic: | | | | | | | | | | | |
Commercial | | $ | 604,995 | | $ | 571,271 | | $ | 542,052 | | $ | 494,394 | | $ | 426,796 | |
Real estate-construction | | 410,167 | | 436,232 | | 429,652 | | 358,212 | | 347,321 | |
Commercial real estate-mortgage | | 967,270 | | 914,775 | | 855,447 | | 749,875 | | 712,390 | |
Consumer | | 42,723 | | 44,325 | | 41,087 | | 31,503 | | 31,383 | |
Foreign: | | | | | | | | | | | |
Commercial | | 88,428 | | 82,740 | | 74,191 | | 71,993 | | 67,821 | |
Other | | 11,731 | | 13,294 | | 14,355 | | 15,553 | | 14,895 | |
Gross Loans | | 2,125,314 | | 2,062,637 | | 1,956,784 | | 1,721,530 | | 1,600,606 | |
Less deferred fees and costs | | (7,143 | ) | (6,936 | ) | (6,683 | ) | (5,925 | ) | (4,769 | ) |
Less allowance for loan losses (a) | | (26,682 | ) | (26,620 | ) | (27,619 | ) | (25,368 | ) | (24,152 | ) |
Total Loans | | $ | 2,091,489 | | $ | 2,029,081 | | $ | 1,922,482 | | $ | 1,690,237 | | $ | 1,571,685 | |
11
CREDIT QUALITY MEASURES (a)
| | As of or For the Periods Ended | |
| | Year
12/31/04 | | 9 Months
9/30/04 | | 6 Months
6/30/04 | | 3 Months
3/31/04 | | Year
12/31/03 | |
| | (Dollars in thousands) | |
| | | | | | | | | | | |
Loans past due 90 days or more and still accruing | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
Nonaccrual loans and leases | | 8,911 | | 6,674 | | 8,559 | | 7,678 | | 7,411 | |
Other real estate owned | | — | | — | | — | | — | | — | |
Nonperforming assets | | $ | 8,911 | | $ | 6,674 | | $ | 8,559 | | $ | 7,678 | | $ | 7,411 | |
| | | | | | | | | | | |
Impaired loans, gross | | $ | 8,911 | | $ | 6,674 | | $ | 8,559 | | $ | 7,678 | | $ | 7,411 | |
Allocated allowance for loan losses | | (561 | ) | (1,100 | ) | (1,772 | ) | (1,668 | ) | (2,267 | ) |
Net investment in impaired loans | | $ | 8,350 | | $ | 5,574 | | $ | 6,787 | | $ | 6,010 | | $ | 5,144 | |
| | | | | | | | | | | |
Charged-off loans year-to-date | | $ | (3,607 | ) | $ | (3,440 | ) | $ | (1,794 | ) | $ | (1,525 | ) | $ | (4,476 | ) |
Recoveries year-to-date | | 2,078 | | 1,754 | | 1,372 | | 573 | | 3,005 | |
Net charge-offs | | $ | (1,529 | ) | $ | (1,686 | ) | $ | (422 | ) | $ | (952 | ) | $ | (1,471 | ) |
| | | | | | | | | | | |
Allowance for loan losses to loans, net of deferred fees and costs (a) | | 1.26 | % | 1.29 | % | 1.42 | % | 1.48 | % | 1.51 | % |
Allowance for total credit losses to loans, net of deferred fees and costs (b) | | 1.39 | % | 1.43 | % | 1.56 | % | 1.64 | % | 1.61 | % |
Allowance for loan losses to nonaccrual loans and leases (a) | | 299.4 | % | 398.9 | % | 322.7 | % | 330.4 | % | 325.9 | % |
Allowance for total credit losses to nonaccrual loans and leases (b) | | 331.1 | % | 439.8 | % | 354.6 | % | 365.4 | % | 347.5 | % |
Allowance for loan losses to nonperforming assets (a) | | 299.4 | % | 398.9 | % | 322.7 | % | 330.4 | % | 325.9 | % |
Allowance for total credit losses to nonperforming assets (b) | | 331.1 | % | 439.8 | % | 354.6 | % | 365.4 | % | 347.5 | % |
Nonperforming assets to loans and OREO | | 0.42 | % | 0.32 | % | 0.44 | % | 0.45 | % | 0.46 | % |
Annualized net charge-offs to average loans | | (0.08 | )% | (0.12 | )% | (0.05 | )% | (0.24 | )% | (0.10 | )% |
Nonaccrual loans to loans, net of deferred fees and costs | | 0.42 | % | 0.32 | % | 0.44 | % | 0.45 | % | 0.46 | % |
ALLOWANCE FOR LOAN LOSSES (a)
| | For the Periods Ended | |
| | Year
12/31/04 | | 9 Months
9/30/04 | | 6 Months
6/30/04 | | 3 Months
3/31/04 | | Year
12/31/03 | |
| | (Dollars in thousands) | |
| | | | | | | | | | | |
Balance at beginning of period | | $ | 24,152 | | $ | 24,152 | | $ | 24,152 | | $ | 24,152 | | $ | 23,234 | |
Loans charged-off: | | | | | | | | | | | |
Commercial | | (2,830 | ) | (2,788 | ) | (1,218 | ) | (1,013 | ) | (3,331 | ) |
Real estate – construction | | — | | — | | — | | — | | — | |
Real estate – mortgage | | (128 | ) | (37 | ) | (30 | ) | — | | — | |
Consumer | | (305 | ) | (271 | ) | (202 | ) | (171 | ) | (1,145 | ) |
Foreign | | (344 | ) | (344 | ) | (344 | ) | (341 | ) | — | |
Total loans charged-off | | (3,607 | ) | (3,440 | ) | (1,794 | ) | (1,525 | ) | (4,476 | ) |
| | | | | | | | | | | |
Recoveries on loans charged-off: | | | | | | | | | | | |
Commercial | | 1,653 | | 1,435 | | 1,149 | | 461 | | 2,453 | |
Real estate – construction | | — | | — | | — | | — | | — | |
Real estate – mortgage | | 64 | | 56 | | 45 | | 5 | | 84 | |
Consumer | | 311 | | 229 | | 163 | | 92 | | 468 | |
Foreign | | 50 | | 34 | | 15 | | 15 | | — | |
Total recoveries on loans charged-off | | 2,078 | | 1,754 | | 1,372 | | 573 | | 3,005 | |
Net loans charged-off | | (1,529 | ) | (1,686 | ) | (422 | ) | (952 | ) | (1,471 | ) |
Provision for credit losses (c) | | 438 | | 533 | | 268 | | 68 | | (183 | ) |
Additions due to acquisitions | | 3,621 | | 3,621 | | 3,621 | | 2,100 | | 2,572 | |
Balance at end of period | | $ | 26,682 | | $ | 26,620 | | $ | 27,619 | | $ | 25,368 | | $ | 24,152 | |
12
RESERVE FOR UNFUNDED LOAN COMMITMENTS
| | For the Periods Ended | |
| | Year
12/31/04 | | 9 Months
9/30/04 | | 6 Months
6/30/04 | | 3 Months
3/31/04 | | Year
12/31/03 | |
| | (Dollars in thousands) | |
| | | | | | | | | | | |
Balance at beginning of period | | $ | 1,600 | | $ | 1,600 | | $ | 1,600 | | $ | 1,600 | | $ | 1,060 | |
Provision (c) | | 27 | | (68 | ) | (68 | ) | (68 | ) | 483 | |
Additions due to acquisitions | | 1,198 | | 1,198 | | 1,198 | | 1,158 | | 57 | |
Balance at end of period | | $ | 2,825 | | $ | 2,730 | | $ | 2,730 | | $ | 2,690 | | $ | 1,600 | |
(a) As of December 31, 2004, the company reclassified the reserve for unfunded loan commitments from the allowance for loan losses to other liabilities. Prior period amounts have been reclassified and the ratios have been revised to conform to this presentation.
(b) The allowance for total credit losses represents the sum of the allowance for loan losses and the reserve for unfunded loan commitments.
(c) Includes reclassification from (to) the reserve for unfunded loan commitments.
13
