Exhibit 99
FOR: REDWOOD EMPIRE BANCORP
APPROVED BY: Patrick Kilkenny
President and CEO
(707) 573-4911
For Immediate Release
REDWOOD EMPIRE BANCORP REPORTS
RECORD DILUTED EARNINGS PER SHARE FOR 2003
SANTA ROSA, Calif. (January 22, 2004) -- Redwood Empire Bancorp
(NASDAQ: REBC) today reported diluted earnings per share of $1.48, after a
fourth quarter charge of $.15 per diluted share for the reversal of certain
previously recognized net state tax benefits -related to the Company's Real
Estate Investment Trust (REIT). This compares with diluted earnings per share of
$1.47 for the twelve months ended December 31, 2002. Income before income tax
expense increased $318,000, or 10% and $728,000, or 6% for the three and twelve
months ended December 31, 2003, as compared to the same periods a year ago.
The Company reported net income of $1,367,000 or $.27 per diluted share
for the quarter ended December 31, 2003 after the $.15 per diluted share charge.
This compares with net income of $2,031,000 or $.38 per diluted share for the
same quarter a year ago. Annualized return on common equity was 19.85% in the
fourth quarter of 2003 as compared with 28.26% in the same quarter a year ago.
Annualized return on assets was 1.05% in the fourth quarter of 2003 as compared
to 1.57% one year ago. For the year ended December 31, 2003, net income was
$7,649,000. This compares with $7,961,000 for the twelve months ended December
31, 2002. Income before income tax expense increased $318,000, or 10% and
$728,000, or 6% for the three and twelve months ended December 31, 2003, as
compared to the same periods a year ago. On July 15, 2003, the Company's Board
of Directors declared a three-for-two stock split of its outstanding shares of
common stock. Earnings per share information for all prior periods presented
give effect to the stock split. The stock split was effected in the form of a
stock dividend and entitled each stockholder of record at the close of business
on July 28, 2003 three shares for every two shares of Redwood Empire Bancorp
common stock held on that date.
A summary of net income for the three and twelve months ended December
31, 2003 as compared to the same periods in 2002 is as follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
------------------------------ ----------------------------
Income before income tax expense $3,390 $3,072 $13,199 $12,476
Income tax expense 1,256 1,041 4,783 4,515
Reversal of REIT net state tax
benefit 767 - 767 -
------------------------------ ----------------------------
Net income $1,367 $2,031 $7,649 $7,961
============================== ============================
Included in 2003 fourth quarter net income was a charge of $767,000 to
income tax expense, or $.15 per diluted share related to the reversal of certain
previously recognized net state tax benefits related to the Company's Real
Estate Investment Trust (REIT). As a result of reversing this tax benefit, the
Company's effective tax rate increased by approximately 6% to 42% in 2003. The
California Franchise Tax Board has taken the position that certain tax
transactions related to REITs and regulated investment companies (RICs) will be
disallowed. Additionally there are indications that the State of California may
aggressively challenge certain strategies such as REITs, and California is
encouraging voluntary compliance with their announced positions with regard to
REITs through the passage of Senate Bill 614 and Assembly Bill 1601, which were
signed into law in the fourth quarter of 2003. The Company does not expect to
record any tax benefits relating to the REIT in 2004 unless the issue is
favorably resolved in the future. The Company believes it is appropriately
reserved for REIT tax benefits previously recognized.
As previously disclosed, the Company formed its REIT subsidiary on
January 15, 2002, with the assistance of a national accounting firm in
accordance with existing laws and regulations utilizing a structure employed by
many of the Company's peers. The purpose of the REIT was to provide an
additional vehicle to raise capital and to better organize marketing and
origination of real estate secured lending, and the Company began to recognize
state tax benefits related to the REIT in the first quarter of 2002. The Company
is not under examination by any taxing authority for this or any other issue.
The Company believes that the position taken in its California tax filings with
regard to the REIT has merit and will pursue its tax claims and defend its
position.
Highlights for the year 2003 including the $767,000 fourth quarter charge
to income tax expense related to the REIT were as follows:
o Net Income of $7,649,000.
o Earnings Per Diluted Share of $1.48.
o Return on Average Common Equity of 27.25%.
o Return on Average Assets of 1.48%.
Highlights for the fourth quarter of 2003, including the $767,000 fourth
quarter charge to income tax expense related to the REIT were as follows:
o Net Income of $1,367,000.
o Earnings Per Diluted Share of $.27.
o Annualized Return on Average Common Equity of 19.85%.
o Annualized Return on Average Assets of 1.05%.
"We are extremely pleased with bottom line results," noted Patrick
Kilkenny, President and Chief Executive Officer. "Growing our franchise,
providing excellent service to customers and delivering outstanding returns to
our shareholders are our key objectives," said Kilkenny.
Total deposits amounted to $454,782,000 as of December 31, 2003 as
compared to $453,093,000 at December 31, 2002, which amounts to a $1,689,000 or
..4% increase. Total assets amounted to $528,900,000 as of December 31, 2003 as
compared to $513,181,000 at December 31, 2002, which amounts to a $15,719,000 or
a 3% increase. Total loans, excluding mortgage loans held for sale, amounted to
$414,521,000 as of December 31, 2003 as compared to $365,076,000 one year ago,
or a 14% increase.
Net interest income amounted to $5,775,000 in the fourth quarter of
2003, compared to $5,283,000 in the same period in 2002, which represents a
$492,000 or 9% increase. The increase in net interest income is attributable to
an improvement in the earning asset mix and a higher net interest margin.
Average earning assets amounted to $487,263,000 for the three months ended
December 31, 2003 as compared to $485,829,000 for the same period one year ago.
Earning asset growth was bolstered by strong loan demand. Average portfolio
loans amounted to $416,450,000 for the three months ended December 31, 2003 as
compared to $365,881,000 for the same period one year ago. The net interest
margin was 4.70% for the quarter ended December 31, 2003 as compared to 4.31%
one year ago. Net interest income amounted to $22,766,000 for the twelve months
ended December 31, 2003 as compared to $20,866,000 one year ago, an increase of
$1,900,000 or 9%.
There was no loan loss provision for the three and twelve months ended
December 31, 2003 and December 31, 2002. Net charge-offs were $383,000 or .37%
(annualized) and $238,000 or .06% (annualized) of average portfolio loans for
the three and twelve months ended December 31, 2003. This compares to net
charge-offs of $178,000 or .19% (annualized) and $180,000 or .05% (annualized)
one year ago. Non-performing assets at December 31, 2003 were $1,266,000 or .2%
of total assets, as compared to non-performing assets of $2,794,000, or .5% of
total assets, as of December 31, 2002. The allowance for loan losses to
nonperforming loans was 566% as of December 31, 2003 as compared to 265% as of
December 31, 2002.
Non-interest income amounted to $1,889,000 for the quarter ended
December 31, 2003 as compared to $1,849,000 in the same period in 2002 or a 2%
increase. Non-interest income amounted to $6,833,000 for the twelve months ended
December 31, 2003 as compared to $7,615,000 one year ago. Merchant draft
processing net revenues increased $109,000 from $1,311,000 in the fourth quarter
of 2002 to $1,420,000 in the fourth quarter of 2003. For the twelve-month period
ended December 31, 2003, merchant draft processing net revenues amounted to
$4,824,000, a decrease of $185,000 from $5,009,000 for the same period in 2002.
Merchant draft processing net revenues increased in the three months ended
December 31, 2003 as compared to the same period one year ago due to an increase
in processing volume and a decrease in processing costs. The decline in merchant
draft processing net revenues during the twelve months ended 2003, as compared
to the same period in 2002, is due the third quarter 2002 recognition of
approximately $120,000 in income associated with the renegotiation of the
Company's processing contract with First Data Resources and the recognition of
an additional $160,000 in revenue associated with a portfolio sale which
occurred the first and second quarters of 2002. Excluding net revenue from
merchant draft processing, non-interest income amounted to $469,000 and
$2,009,000 for the three and twelve months ended December 31, 2003 as compared
to $538,000 and $2,606,000 for the same periods one year ago. The decrease in
non-interest income during the three and twelve month periods ended December 31,
2003 as compared to the same periods one year ago was primarily due to and a
decrease of $35,000 and $136,000 in other income, a decrease of $19,000 and
$110,000 in loan servicing income and a $15,000 and $143,000 decrease in service
charges on deposits accounts. Additionally, the decline in non-interest income
for the year 2003 as compared to 2002 was due to the Company recording $294,000
during 2002 of net realized gains on investment securities available for sale as
compared to net realized gains of $86,000 during 2003.
Non-interest expense amounted to $4,274,000 for the quarter ended
December 31, 2003 as compared to $4,060,000 in the same period one year ago. The
Company's efficiency ratio for the fourth quarter of 2003 amounted to 55.77% as
compared to 56.93% one year ago. Non-interest expense amounted to $16,400,000
for the twelve month period ended December 31, 2003 as compared to $16,005,000
one year ago. This represents an increase of $395,000 or 2%. The efficiency
ratio for the Company's subsidiary, National Bank of the Redwoods was 51.64% for
the quarter ended December 31, 2003 as compared to 52.64% one year ago. For the
twelve months ended December 31,
2003, National Bank of the Redwood's efficiency ratio was 51.60% as compared to
50.95% for the same period one year ago. Salaries and employee benefits
increased $154,000 and $468,000 for the three and twelve months ended December
31, 2003 as compared to the same periods one year ago due to third and fourth
quarter 2003 expenses associated with the Company's executive search process,
the impact of normal annual salary increases and the increased costs associated
with health care and workers compensation insurance. Occupancy expense remained
unchanged at $538,000 for the three months ended December 31, 2003 and December
31, 2002, as compared to a decreased of $21,000 for the twelve months ended
December 31, 2003 when compared to the same period one year ago. Other expenses
increased $60,000 for the three months ended December 31, 2003 as compared to a
decrease of $52,000 for the twelve months ended December 31, 2003, when compared
to the same periods one year ago.
For the three and twelve months ended December 31, 2003, the net income
of the Company's community banking segment was $908,000 and $6,123,000 on
revenues of $6,107,000 and $24,070,000. This compares to net income of
$1,503,000 and $6,080,000 and revenues of $5,680,000 and $22,876,000 for the
same periods one year ago. The segment's 40% decrease in net income for the
three months ended December 31, 2003 as compared to the same period a year ago
was primarily due to not recognizing REIT state tax benefits during the fourth
quarter of 2003 and the 2003 fourth quarter reversal of $767,000 of tax benefits
that were previously recognized. The segment's income before income tax expense
increased $310,000 or 14% and $1,019,000, or 11% for three and twelve months
ended December 31, 2003, as compared to the same periods a year ago. The
segment's improvement in pre-tax income for the three and twelve months ended
December 31, 2003, as compared to the same periods in 2002, was primarily
attributable to increases in net interest income, of $496,000 and $1,791,000.
The net income of the Company's bankcard segment was $459,000 and
$1,526,000 for the three and twelve months ended December 31, 2003 versus
$528,000 and $1,881,000 in 2002. The decrease in the segment's net income for
the three and twelve months ended December 31, 2003 was primarily due to a
decrease in merchant draft processing net revenues for the year 2003 and
increases in non-interest expense and the effective tax rate for the three and
twelve months ended December 31, 2003 as compared to the prior year. The
segment's increase in non-interest expense was primarily attributable to an
increase in salaries and employee benefits expense. The increase in the
segment's salaries and employee benefits expense was due to a build-up in sales
development personnel. The segment's effective tax rate increased from 33% and
36% for the three and twelve months ended December 31, 2002 to 42% for the same
periods in 2003 due to the segment not recognizing any benefit in 2003 from a
lower consolidated tax return rate as was experienced in 2002 from the
recognition of tax benefits related to the REIT. The bankcard segment's net
income comprised 34% and 20% of the Company's consolidated net income for the
three and twelve months ended December 31, 2003, compared to 26% and 24% of the
Company's consolidated net income for the three and twelve months ended December
31, 2002. The bankcard segment's income before income tax expense comprised 23%
and 20% of the Company's consolidated pre-tax income for the three and twelve
months ended December 31, 2003, compared to 25% and 23% for the same periods in
the prior year.
In August 2001, the Company announced an authorization to repurchase
533,250 shares, as adjusted for the three-for-two stock splits declared
September 20, 2001 and July 15, 2003. In August 2003, the Company announced an
authorization to repurchase an additional 496,500 shares, for a total
authorization of 1,029,750. To date, 525,900 shares have been repurchased under
the current authorizations, as adjusted for the three-for-two stock splits
declared September 20, 2001 and July 15, 2003. Under the repurchase program, the
Company plans to purchase shares from time to time on the open market and/or in
privately negotiated transactions.
Total assets were $528,900,000 at December 31, 2003. Common book value
per share was $5.59. The Company's Tier 1 capital to average assets ratio was
6.74% as of December 31, 2003.
Redwood Empire Bancorp, through its principal operating subsidiary,
National Bank of the Redwoods, provides diverse financial products and services.
The Company offers commercial banking services primarily to businesses and
professionals in the North Coast counties of California. The Company's business
strategy includes the development of fee-based products and services, which will
provide insulation to the Company's results from changes in interest rates.
Except for historical information contained herein, the statements
contained in this press release, including statements concerning future
increases in the value of Redwood Empire Bancorp stock, are forward-looking
statements within the meaning of the "safe harbor" provisions of Section 27A of
the Securities Act of 1933, as amended, and section 21E of the Securities
Exchange Act or 1934, as amended. These forward-looking statements are subject
to risks and uncertainties. Actual results may differ materially from those set
forth in or implied by forward-looking statements. These risks are described
from time to time in Redwood Empire Bancorp's Securities and Exchange Commission
filings, including its Annual Reports on Form 10-K and quarterly reports on Form
10-Q. Redwood Empire Bancorp disclaims any intent or obligation to update these
forward-looking statements.
(Tables to follow)
REDWOOD EMPIRE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands except for earnings per share and share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
------------------------------------------------
Total interest income $7,446 $7,587 $30,134 $30,536
Total interest expense 1,671 2,304 7,368 9,670
------------------------------------------------
Net interest income 5,775 5,283 22,766 20,866
Provision for loan losses - - - -
------------------------------------------------
Net interest income after provision for loan losses 5,775 5,283 22,766 20,866
------------------------------------------------
Service charges on deposit accounts 263 278 1,045 1,188
Merchant draft processing, net 1,420 1,311 4,824 5,009
Loan servicing income 48 67 158 268
Net realized gains on investment securities available for sale - - 86 294
Other income 158 193 720 856
------------------------------------------------
Total noninterest income 1,889 1,849 6,833 7,615
------------------------------------------------
Salaries and employee benefits 2,427 2,273 9,435 8,967
Occupancy and equipment expense 538 538 2,105 2,126
Other 1,309 1,249 4,860 4,912
------------------------------------------------
Total noninterest expense 4,274 4,060 16,400 16,005
------------------------------------------------
Income before income tax expense 3,390 3,072 13,199 12,476
Income tax expense 2,023 1,041 5,550 4,515
------------------------------------------------
Net income $1,367 $2,031 $7,649 $7,961
================================================
Basic earnings per share:
Net income available for common stock shareholders (1) $0.28 $0.39 $1.52 $1.53
Weighted average shares (1) 4,955,000 5,145,000 5,026,000 5,211,000
Diluted earnings per share:
Net income available for common stock shareholders (1) $0.27 $0.38 $1.48 $1.47
Weighted average shares (1) 5,117,000 5,327,000 5,158,000 5,400,000
Selected Ratios
Annualized Return on Average Total Equity 19.85% 28.26% 27.25% 28.98%
Annualized Return on Average Total Assets 1.05% 1.57% 1.48% 1.62%
(1) Adjusted for three-for-two stock split declared on July 15, 2003.
Selected Balance Sheet
Data
(In Thousands)
(Unaudited)
December 31, December 31,
2003 2002
-------------------------
Total Loans, Excluding Mortgage Loans Held for Sale $414,521 $365,076
Allowance for Loan Losses 7,162 7,400
Total Assets 528,900 513,181
Total Deposits 454,782 453,093
Subordinated Debentures (Trust Preferred Debt) 20,000 10,000
Total Shareholders' Equity 27,680 28,807
Nonperforming Assets 1,266 2,794
REDWOOD EMPIRE BANCORP AND SUBSIDIARIES
BUSINESS SEGMENTS
(Unaudited)
(Dollars in thousands)
Three Months Ended Three Months Ended
December 31, 2003 December 31, 2002
----------------------------------------------------------
Community Community
Banking Bankcard Banking Bankcard
----------------------------------------------------------
Total interest income $7,446 $ --- $7,587 $ ---
Total interest expense 1,670 1 2,299 5
Interest income (expense) allocation (138) 138 (146) 146
----------------------------------------------------------
Net interest income 5,638 137 5,142 141
----------------------------------------------------------
Provision for loan losses --- --- --- ---
Service charges on deposit accounts 263 --- 278 ---
Merchant draft processing, net --- 1,420 --- 1,311
Loan servicing income 48 --- 67 ---
Net realized gains on investment securities available for
sale --- --- --- ---
Other income 158 --- 193 ---
----------------------------------------------------------
Total noninterest income 469 1,420 538 1,311
----------------------------------------------------------
Salaries and employee benefits 1,911 516 1,834 439
Occupancy and equipment expense 489 49 492 46
Other 1,108 201 1,065 184
----------------------------------------------------------
Total noninterest expense 3,508 766 3,391 669
----------------------------------------------------------
Income before income tax expense 2,599 791 2,289 783
Income tax expense 1,691 332 786 255
----------------------------------------------------------
Net income $908 $459 $1,503 $528
==========================================================
Twelve Months Ended Twelve Months Ended
December 31, 2003 December 31, 2002
----------------------------------------------------------
Community Community
Banking Bankcard Banking Bankcard
----------------------------------------------------------
Total interest income $30,134 $ --- $30,536 $ ---
Total interest expense 7,337 31 9,641 29
Interest income (expense) allocation (736) 736 (625) 625
----------------------------------------------------------
Net interest income 22,061 705 20,270 596
----------------------------------------------------------
Provision for loan losses --- --- --- ---
Service charges on deposit accounts 1,045 --- 1,188 ---
Merchant draft processing, net --- 4,824 --- 5,009
Loan servicing income 158 --- 268 ---
Net realized gains on investment securities available for
sale 86 --- 294 ---
Other income 720 --- 856 ---
----------------------------------------------------------
Total noninterest income 2,009 4,824 2,606 5,009
----------------------------------------------------------
Salaries and employee benefits 7,516 1,919 7,231 1,736
Occupancy and equipment expense 1,920 185 1,943 183
Other 4,066 794 4,153 759
----------------------------------------------------------
Total noninterest expense 13,502 2,898 13,327 2,678
----------------------------------------------------------
Income before income tax expense 10,568 2,631 9,549 2,927
Income tax expense 4,445 1,105 3,469 1,046
----------------------------------------------------------
Net income $6,123 $1,526 $6,080 $1,881
==========================================================