Exhibit 99.1
Contact: |
| Scott A. Montgomery |
| David R. Brown |
|
| President/CEO |
| Executive Vice President & |
|
| National Mercantile Bancorp |
| Chief Financial Officer |
|
| (310) 282-6778 |
| (310) 282-6703 |
FOR IMMEDIATE RELEASE
NATIONAL MERCANTILE BANCORP ANNOUNCES
A 72.8% INCREASE IN ASSETS AND A 71.3% INCREASE IN DEPOSITS
FOR THE FIRST QUARTER ENDED MARCH 31, 2002
Los Angeles, California, June 5, 2002 — National Mercantile Bancorp (the “Company”) (NASDAQ: MBLA - Common Stock; MBLAP - Preferred Stock), parent company of Mercantile National Bank (“Mercantile”) and South Bay Bank, N.A. (“South Bay”), today reported net income of $175,000 for the first quarter ended March 31, 2002, or $0.06 basic earnings per share (“EPS”), while diluted EPS, when considering the Company’s convertible preferred stock, warrants and options, is $0.04, as compared to net income of $603,000 or $0.38 basic EPS and $0.19 diluted EPS for the quarter ended March 31, 2001.
The decrease in net income is a result of a $1.2 million increase in noninterest expense, primarily related to the acquisition of South Bay, a $384,000 minority interest in the trust preferred securities, a $150,000 provision for credit losses and a $93,000 increase in the income tax provision partially offset by a $1.2 million increase in net interest income and a $200,000 increase in noninterest income.
The Company completed its acquisition of South Bay on December 14, 2001. The acquisition was accounted for as a purchase, and thus the results of operations for fiscal 2001 reflect South Bay’s operations only after December 14.
1
Scott Montgomery, President and Chief Executive Officer of the Company, Mercantile and South Bay, commented, “We are pleased to report substantial growth in loans, deposits and total assets during the first quarter of 2002 as compared to the first quarter of 2001. The Company’s growth was a result of the acquisition of South Bay on December 14, 2001 and internal growth. The Company’s total assets increased 72.8% to $360.2 million at March 31, 2002 as compared to $208.4 million at March 31, 2001. Total loans increased 138.7% to $255.3 million, while total deposits increased 110.7% to $303.3 million.
“On April 5, 2002, the integration teams were successful in converting South Bay to the same operating system utilized by Mercantile. As a result, new services such as Visa debit/ATM cards and an enhanced teller system were introduced. The new teller system will enable clients of both banks to utilize the Company’s four locations to cash checks and make deposits. In the second quarter, additional client services will be introduced such as online home banking and cash management. Also, South Bay’s web site will become fully functional by June 30, 2002.
The conversion and acquisition enabled the Company to eliminate eleven positions or approximately 12.0% of the combined staff. In addition, four South Bay employees were offered and accepted new job opportunities within the Company. We believe that these staff reductions and job refinements will enable the Company to increase its efficiency and reduce costs during the third and fourth quarters of this year, resulting in improved earnings in future quarters.”
Shareholders’ Equity
Shareholders’ equity increased 16.3% to $25.5 million at March 31, 2002 as compared to $21.9 million at March 31, 2001 and increased slightly from the year ended December 31, 2001. The growth in shareholders’ equity includes the net income for the period ended March 31, 2002, plus a private placement of $1.0 million Series B Preferred Stock in December 2001 issued to provide a portion of the funding for the acquisition of South Bay, as well as $1.8 million related to beneficial conversion features in the Company’s common stock attached to South Bay’s preferred stock.
At March 31, 2002, the Company had (i) federal net operating loss carryforwards (NOLs) of $16.7 million, which begin to expire in 2009 and California NOLs of approximately $100,000 that
2
will expire in 2002. The Company has a deferred tax asset of $6.1 million representing the benefit of the NOLs. Prior to the acquisition of South Bay, the Company had a valuation allowance recorded against the deferred tax asset resulting in a net carrying value of zero.
As part of the accounting for the acquisition of South Bay, a portion of the purchase price was allocated to the reduction in the Company’s deferred tax valuation allowance (resulting in a corresponding reduction in recorded goodwill for South Bay). Prior to reducing the deferred tax asset valuation allowance, the Company recorded income tax provisions for only alternative minimum tax. Following the reduction in the valuation allowance, the Company records income tax provisions at the statutory federal and state corporate income tax rates with certain adjustments.
In other words, the tax benefit was 34% or $6.1 million of $17.9 million, the amount of the remaining NOL and other components of the deferred tax asset at December 14, 2001, the date of the acquisition of South Bay. On that date, the deferred tax asset, which remains available to reduce taxes on income in future periods, decreased the goodwill from $11.6 million to $5.6 million in conjunction with the purchase of South Bay. The deferred tax asset will be reduced each quarter by the amount of the accrued tax liability.
Assets and Liabilities
Total assets increased 72.8% to $360.2 million at March 31, 2002, as compared to $208.4 million at March 31, 2001. The growth in assets was primarily attributable to the acquisition of South Bay and internal growth. The growth in liabilities includes a 110.79% or $159.3 million increase in deposits, a $27.5 million decrease in other borrowings and Fed funds purchased, the issuance of $15.0 million of trust preferred securities and the issuance of a $1.0 million 8.5% non-cumulative convertible preferred.
Interest and Fee Income
During the first quarter of 2002, total interest income increased 30.5% to $5.0 million from $3.8 million during the first quarter of 2001. The increase is related to the acquisition of South Bay.
3
The net interest margin decreased to 4.56% during the first quarter of 2002, down from 5.54% during the first quarter of 2001. The decrease is directly related to the Federal Reserve’s 425 basis point reduction in interest rates during the period.
Operating Expenses
Other operating expenses increased by 54.7% or $1.2 million during the quarter ended March 31, 2002 as compared to the same period in 2001. The increase was primarily the result of consolidating the operating expenses of the Company’s banks during the first quarter following the acquisition of South Bay.
Credit Quality
Total non-performing assets decreased 28.9% or by $2.7 million from $9.4 million to $6.7 million at March 31, 2002, including loans over 90 days delinquent and still accruing interest. During the quarter ended March 31, 2002, the Company’s loan charge-offs were $1,403,000, while recoveries were $160,000, resulting in net charge-offs of $1,243,000 during the first quarter of 2002. Also during the quarter a large non-accrual loan totaling $925,000 was collected in full. The reduction in non-performing assets was primarily related to loans at South Bay.
The Company’s allowance for loan and lease losses decreased to $5.5 million or 2.13% of total loans at March 31, 2002 from $6.5 million or 2.50% of total loans at December 31, 2001.
This press release contains statements which constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risk and uncertainties. Actual results may differ materially from the results in these forward looking statements. Factors that might cause such a difference include, among other things, fluctuations in interest rates, changes in economic conditions or governmental regulation, credit quality and other factors discussed in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001.
4
National Mercantile Bancorp is the holding company for Mercantile National Bank and South Bay Bank, N.A., members FDIC, with locations in Encino, Century City, El Segundo and Torrance, California. The banks offers a wide range of financial services to the real estate and real estate construction markets, the entertainment industry, the professional, healthcare and executive markets, community-based non-profit organizations, escrow companies and business banking.
“Redefining Business Banking”
#####
5
National Mercantile Bancorp
March 31, 2002 - FINANCIAL SUMMARY
($ in 000's, except share data)
SELECTED FINANCIAL |
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CONDITION DATA (Unaudited): |
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| December 31, |
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|
| 2002 |
| 2001 |
| 2001 |
| 2001 |
| 2001 |
| 2000 |
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Cash and Due from Banks |
| $ | 21,609 |
| $ | 12,688 |
| $ | 10,525 |
| $ | 11,959 |
| $ | 9,316 |
| $ | 7,897 |
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Federal Funds Sold and Securities Purchased under Agreements to Resell |
| 34,595 |
| 39,405 |
| 43,950 |
| 34,000 |
| 28,900 |
| 19,700 |
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Investment Securities-AFS, at Fair Value |
| 30,111 |
| 41,627 |
| 42,615 |
| 49,231 |
| 60,348 |
| 64,417 |
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Loans |
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Commercial |
| 215,852 |
| 222,882 |
| 97,611 |
| 100,592 |
| 101,361 |
| 104,960 |
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Real Estate Construction and Land |
| 30,765 |
| 30,811 |
| 3,500 |
| 2,931 |
| 2,344 |
| 1,890 |
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Consumer and Others |
| 8,791 |
| 8,795 |
| 3,588 |
| 3,327 |
| 3,636 |
| 3,729 |
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Deferred Loan Fees, Net |
| (102 | ) | (520 | ) | (188 | ) | (180 | ) | (232 | ) | (331 | ) | ||||||
Total |
| 255,306 |
| 261,968 |
| 104,511 |
| 106,670 |
| 107,109 |
| 110,248 |
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Allowance for Credit Losses |
| (5,449 | ) | (6,541 | ) | (2,901 | ) | (2,363 | ) | (2,452 | ) | (2,597 | ) | ||||||
Net Loans |
| 249,857 |
| 255,427 |
| 101,610 |
| 104,307 |
| 104,657 |
| 107,651 |
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Intangible Assets |
| 5,616 |
| 5,616 |
| - |
| - |
| - |
| - |
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Other Assets |
| 18,447 |
| 19,602 |
| 5,337 |
| 4,974 |
| 5,206 |
| 5,178 |
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Total Assets |
| $ | 360,235 |
| $ | 374,365 |
| $ | 204,037 |
| $ | 204,471 |
| $ | 208,427 |
| $ | 204,843 |
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Deposits |
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Demand, Non-interest Bearing |
| $ | 100,674 |
| $ | 114,645 |
| $ | 63,794 |
| $ | 60,092 |
| $ | 61,545 |
| $ | 59,935 |
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NOW |
| 28,424 |
| 23,425 |
| 11,241 |
| 9,280 |
| 7,644 |
| 9,004 |
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MMDA |
| 46,618 |
| 40,033 |
| 39,736 |
| 39,400 |
| 34,038 |
| 32,351 |
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Savings |
| 36,206 |
| 31,184 |
| 1,483 |
| 1,263 |
| 1,344 |
| 1,144 |
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Time Certificates > $100 |
| 49,291 |
| 62,085 |
| 27,824 |
| 33,092 |
| 33,144 |
| 25,865 |
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Time Certificates < $100 |
| 42,091 |
| 37,768 |
| 4,177 |
| 3,387 |
| 6,266 |
| 6,248 |
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Total Deposits |
| 303,304 |
| 309,140 |
| 148,255 |
| 146,514 |
| 143,981 |
| 134,547 |
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Securities Sold under Agreements to |
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Repurchase and Other Borrowed Funds |
| 13,517 |
| 20,596 |
| 16,000 |
| 34,000 |
| 41,000 |
| 47,500 |
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Other Liabilities |
| 2,685 |
| 3,963 |
| 1,947 |
| 1,628 |
| 1,561 |
| 2,093 |
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Guaranteed Preferred Beneficial Interests in |
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Company's Junior Subordinated Debt |
| 14,517 |
| 14,513 |
| 15,000 |
| - |
| - |
| - |
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Minority Interest in Preferred Stock of South Bay Bank |
| 755 |
| 676 |
| - |
| - |
| - |
| - |
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Shareholders' Equity |
| 25,520 |
| 25,421 |
| 22,448 |
| 22,634 |
| 21,905 |
| 21,239 |
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Accumulated Other Comprehensive Gain (Loss) |
| (63 | ) | 56 |
| 387 |
| (305 | ) | (20 | ) | (536 | ) | ||||||
Total Liabilities and Stockholders' Equity |
| $ | 360,235 |
| $ | 374,365 |
| $ | 204,037 |
| $ | 204,471 |
| $ | 208,427 |
| $ | 204,843 |
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Average Quarterly Assets |
| $ | 361,435 |
| $ | 204,308 |
| $ | 202,510 |
| $ | 190,372 |
| $ | 195,666 |
| $ | 196,512 |
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Regulatory Capital-Tier I |
| $ | 19,547 |
| $ | 19,562 |
| $ | 29,930 |
| $ | 22,634 |
| $ | 21,905 |
| $ | 21,239 |
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Non-Performing Assets |
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Non-Accrual Loans |
| $ | 5,716 |
| $ | 7,807 |
| $ | 2,178 |
| $ | 449 |
| $ | 477 |
| $ | 683 |
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Loans 90 Days P/D & Accruing |
| - |
| 642 |
| - |
| 147 |
| - |
| - |
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OREO and Other Non-perfoming Assets |
| 968 |
| 953 |
| - |
| - |
| - |
| - |
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Total Non-Performing Assets |
| $ | 6,684 |
| $ | 9,402 |
| $ | 2,178 |
| $ | 596 |
| $ | 477 |
| $ | 683 |
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SELECTED STATEMENT OF |
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FINANCIAL CONDITION RATIOS: |
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| December 31, |
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| 2002 |
| 2001 |
| 2001 |
| 2001 |
| 2001 |
| 2000 |
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Loans to Deposits Ratio |
| 84.17 | % | 84.74 | % | 70.49 | % | 72.81 | % | 74.39 | % | 81.94 | % | ||||||
Ratio of Allowance for Loan Losses to: |
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Total Loans |
| 2.13 | % | 2.50 | % | 2.78 | % | 2.22 | % | 2.29 | % | 2.36 | % | ||||||
Total Non-Performing Assets |
| 81.52 | % | 69.57 | % | 133.20 | % | 396.48 | % | 514.05 | % | 380.23 | % | ||||||
Earning Assets to Total Assets |
| 88.83 | % | 92.30 | % | 94.81 | % | 94.21 | % | 95.54 | % | 96.22 | % | ||||||
Earning Assets to Interest-Bearing Liabilities |
| 148.05 | % | 160.65 | % | 192.56 | % | 159.97 | % | 161.32 | % | 161.41 | % | ||||||
Capital Ratios Holding Company: |
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Total Risk-Based Capital |
| 12.13 | % | 11.53 | % | 31.92 | % | 19.23 | % | 18.93 | % | 18.26 | % | ||||||
Tier 1 Risk-Based Capital |
| 7.24 | % | 6.85 | % | 24.50 | % | 17.97 | % | 17.67 | % | 17.00 | % | ||||||
Tier 1 Leverage |
| 5.58 | % | 5.55 | % | 14.79 | % | 11.88 | % | 11.19 | % | 10.73 | % | ||||||
Risk Weighted Assets |
| $ | 322,342 |
| $ | 285,500 |
| $ | 122,154 |
| $ | 125,960 |
| $ | 123,951 |
| $ | 124,958 |
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Book Value per Share (1) (2) |
| $ | 6.80 |
| $ | 6.82 |
| $ | 7.06 |
| $ | 6.92 |
| $ | 6.83 |
| $ | 6.52 |
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Total Shares Outstanding (2) |
| 3,125,027 |
| 3,124,627 |
| 3,123,665 |
| 3,121,815 |
| 3,101,442 |
| 3,088,275 |
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(1) Includes the effect of dilutive options and warrants.
(2) Includes assumed conversion of currently convertible Series A preferred stock into common stock
6
National Mercantile Bancorp
March 31, 2002 - FINANCIAL SUMMARY
($ in 000's, except share data)
SELECTED STATEMENT OF OPERATIONS DATA AND RATIOS: |
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(Unaudited) |
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| First |
| Fourth |
| Third |
| Second |
| First |
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QUARTERLY DATA: |
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| Quarter |
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| 2002 |
| 2001 |
| 2001 |
| 2001 |
| 2001 |
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Interest Income |
| $ | 5,001 |
| $ | 3,299 |
| $ | 3,256 |
| $ | 3,404 |
| $ | 3,832 |
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Interest Expense |
| 1,299 |
| 731 |
| 811 |
| 1,031 |
| 1,303 |
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Net Interest Income before Provision for Loan Losses |
| 3,702 |
| 2,568 |
| 2,445 |
| 2,373 |
| 2,529 |
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Provision for Loan Losses |
| 150 |
| 67 |
| 450 |
| — |
| — |
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Net Interest Income after |
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Provision for Loan Losses |
| 3,552 |
| 2,501 |
| 1,995 |
| 2,373 |
| 2,529 |
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Net gain on Sale of Securities Available-for-Sale |
| — |
| 136 |
| 92 |
| 96 |
| 50 |
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Gain on Sale of OREO and Fixed Assets |
| — |
| 20 |
| — |
| — |
| — |
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Other Operating Income |
| 394 |
| 263 |
| 187 |
| 230 |
| 159 |
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Other Operating Expense |
| 3,281 |
| 2,380 |
| 2,100 |
| 2,059 |
| 2,122 |
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Net Income before Provision for |
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Minority Interest and Income Taxes |
| 665 |
| 540 |
| 174 |
| 640 |
| 616 |
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Minority interest of the Company's junior subordinated deferrable interest debentures |
| 384 |
| 393 |
| 329 |
| — |
| — |
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Net Income before Provision for Income Taxes |
| 281 |
| 147 |
| (155 | ) | 640 |
| 616 |
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Provision for Income Taxes |
| 106 |
| 3 |
| 42 |
| 34 |
| 13 |
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Net Income |
| $ | 175 |
| $ | 144 |
| $ | (197 | ) | $ | 606 |
| $ | 603 |
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Basic Earnings Per Share (2) |
| $ | 0.06 |
| $ | 0.09 |
| ($0.12 | ) | $ | 0.38 |
| $ | 0.38 |
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Diluted Earnings Per Share |
| $ | 0.04 |
| $ | 0.04 |
| ($0.12 | ) | $ | 0.19 |
| $ | 0.19 |
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Weighted Avg Common Shares O/S (3) |
| 1,627,166 |
| 1,622,974 |
| 1,621,751 |
| 1,613,383 |
| 1,574,440 |
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Return on Quarterly Average Assets |
| 0.19 | % | 0.29 | % | -0.39 | % | 1.28 | % | 1.25 | % | |||||
Return on Quarterly Average Equity |
| 2.76 | % | 2.46 | % | -3.37 | % | 10.94 | % | 11.32 | % | |||||
Net Interest Margin - Avg Earning Assets |
| 4.56 | % | 5.34 | % | 5.10 | % | 5.31 | % | 5.54 | % | |||||
Operating Expense Ratio |
| 3.60 | % | 4.72 | % | 4.12 | % | 4.34 | % | 4.40 | % | |||||
Efficiency Ratio |
| 80.10 | % | 79.68 | % | 77.09 | % | 76.29 | % | 77.50 | % | |||||
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Quarterly operating ratios are annualized. |
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FOR THE TWELVE MONTHS ENDED DECEMBER 31: |
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| 2001 |
| 2000 |
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Interest Income |
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| $ | 13,791 |
| $ | 14,460 |
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Interest Expense |
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| 3,876 |
| 5,023 |
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Net Interest Income before Provision for Loan Losses |
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| 9,915 |
| 9,437 |
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Provision for Loan Losses |
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| 517 |
| (576 | ) | |||||
Net Interest Income after |
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Provision for Loan Losses |
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| 9,398 |
| 10,013 |
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Net Gain (Loss) on Sale of Securities Available-for-Sale |
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| 374 |
| 18 |
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Gain on Sale of OREO and Fixed Assets |
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| 20 |
| 69 |
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Other Operating Income |
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| 839 |
| 781 |
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Other Operating Expense |
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| 8,661 |
| 7,870 |
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Net Income (Loss) Before Minority Interest and |
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Provision for Income Taxes |
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| 1,970 |
| 3,011 |
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Minority interest of the Company's junior subordinated deferrable interest debentures |
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| 722 |
| — |
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Net Income (Loss) Before Provision for Income Taxes |
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| 1,248 |
| 3,011 |
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Provision for Income Taxes |
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| 92 |
| 67 |
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Net Income (Loss) |
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| $ | 1,156 |
| $ | 2,944 |
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Basic Earnings Per Share |
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| $ | 0.72 |
| $ | 2.77 |
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Diluted Earnings Per Share (1) |
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| $ | 0.28 |
| $ | 1.08 |
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Weighted Avg Common Shares O/S (3) (4) |
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| 1,608,307 |
| 1,061,133 |
| |||||
Return on Average Assets |
|
|
|
|
|
|
| 0.59 | % | 1.64 | % | |||||
Return on Average Equity |
|
|
|
|
|
|
| 5.13 | % | 20.49 | % | |||||
Net Interest Margin - Avg Earning Assets |
|
|
|
|
|
|
| 5.32 | % | 5.48 | % | |||||
Operating Expense Ratio |
|
|
|
|
|
|
| 4.20 | % | 4.39 | % | |||||
Efficiency Ratio |
|
|
|
|
|
|
| 77.69 | % | 76.37 | % |
(1) The weighted average number of common shares and common share equivalents outstanding used in computing diluted earnings per share for the twelve months ended December 31, 2001 and 2000 was 4,161,504 and 2,556,196, respectively.
(2) The 2002 period is based upon income available to common shareholders (net income less accretion of discount on preferred stock from beneficial conversion rights.
(3) Shares used to compute Basic Earnings per share.
(4) Increase from previous periods is due to issuance of Common Stock and conversion of Preferred Stock into Common Stock.
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