Exhibit 99.1
May 2, 2001
FOR IMMEDIATE RELEASE
MONTEREY BAY BANCORP, INC. ANNOUNCES:
FIRST QUARTER 2001 RESULTS;
COMPLETION OF COMPUTER SYSTEMS CONVERSION;
COLLECTION IN FULL IN APRIL ON TWO SIGNIFICANT NON-ACCRUAL LOANS;
PENDING ARBITRATION OF CLAIMS BY FORMER EXECUTIVE
Common Stock Symbol: MBBC
NASDAQ National Market
Watsonville, CA. May 2, 2001. Monterey Bay Bancorp, Inc. ("Company"),
the holding company for Monterey Bay Bank ("Bank"), today reported net income of
$602 thousand, equivalent to $0.18 diluted earnings per share, for the quarter
ended March 31, 2001, compared to net income of $799 thousand, or $0.25 diluted
earnings per share, for the first quarter of 2000. Net income during the quarter
ended December 31, 2000 was $709 thousand, equivalent to $0.22 diluted earnings
per share. As discussed below, earnings for the first quarter of 2001 were
impacted by $408 thousand in operating costs for the Bank's core systems
conversion.
During March 2001, the Bank completed the conversion of its primary
data processing system from an external service bureau to an in-house system
built upon client / server and relational database technology. The new system
supports a broader range of financial products and services than the prior
system while also presenting the potential for enhancing customer service and
improving operating efficiency. All of the Bank's loan and deposit accounts were
being serviced on the new system by March 31, 2001. The implementation of the
enhanced technology environment has been an important component of the Bank's
strategic plan of transforming a 75 year old savings & loan into a community
focused commercial bank.
In April 2001, the Bank collected in full on two loans that were on
non-accrual status at March 31, 2001. One loan was a commercial real estate
construction loan with an outstanding principal balance of $2.85 million. The
second loan was a commercial real estate mortgage loan with an outstanding
principal balance of $544 thousand. Both loans were located in the Bank's
primary market area. In conjunction with both payoffs, the Bank received all
principal, interest, fees, and expense reimbursements due.
The Company has an initial arbitration date established in June, 2001
to address claims by the former President and Chief Operating Officer regarding
payments due under his employment contracts. In the third quarter of 2000, the
Company established a $250 thousand reserve for the settlement of these claims.
At this time, the Company, following consultation with counsel, believes this
reserve to be adequate to cover its liabilities in this regard.
Net interest income increased from $4.5 million during the first
quarter of 2000 to $4.8 million during the first quarter of 2001 primarily due
to greater average balances of interest earning assets and liabilities. The
Company's ratio of net interest income to average total assets during the first
quarter of 2001 was 3.83%. This figure represented a decrease from 3.88% during
the first quarter of 2000, but an increase from 3.76% during the fourth quarter
of 2000.
5
Monterey Bay Bancorp, Inc. Page 2
Press Release
May 2, 2001
The Company recorded a $500 thousand provision for loan losses during
the first quarter of 2001, up from $250 thousand during the first quarter of
2000 and the same as the provision for the fourth quarter of 2000. The Company's
ratio of loan loss reserves to loans outstanding increased from 1.35% at
December 31, 2000 to 1.39% at March 31, 2001. No recoveries were realized during
the first quarter of 2001, and charge-offs during the period totaled $25
thousand. The Company's management remains concerned about the negative impacts
upon the amount of loss inherent in the loan portfolio at March 31, 2001 arising
from the following factors:
o the California energy crisis, with effects upon the availability and
price of electricity, business costs, consumer spending and disposable
income, and the pace of economic activity in the State
o the financial difficulties experienced by many technology related
companies in the Silicon Valley area adjacent to the Bank's primary
market areas
o the impact of lower technology stock prices on consumer spending,
liquidity, and investment, with a particular concern regarding the
effects on the demand and pricing for real estate in the Bank's primary
market areas
o the increasing number of layoffs announced during the first quarter of
2001 by California companies, including those in more mature industries
that have historically been profitable
o the general reduction in national economic growth
Non-accrual loans at March 31, 2001 totaled $4.7 million, essentially
unchanged from the level at December 31, 2000. The aforementioned two payoffs
received in April 2001 totaling $3.4 million will favorably impact this figure
for the second quarter of 2001. The Company had no foreclosed real estate at
March 31, 2001.
The special residential loan pool which the Company purchased in 1998
has paid down significantly in recent months. This pool is comprised of loans
that present a borrower credit profile and / or a loan to value ratio outside of
(less favorable than) the Company's normal underwriting criteria. To mitigate
the credit risk for this portfolio, the Company obtained, at purchase, a
scheduled principal / scheduled interest loan servicing agreement from the
seller. This agreement also contains a guaranty by the seller to absorb any
principal losses on the portfolio in exchange for the seller's retention of a
portion of the loans' yield through loan servicing fees. While the seller has
met all its contractual obligations through April, 2001, the Company has
allocated certain reserves to this pool due to concerns regarding the potential
losses by the seller in honoring the guaranty, the present delinquency profile
of the pool, and the differential between loan principal balances and current
appraisals for foreclosed loans and loans in the process of foreclosure. The
original balance of the special residential loan pool in 1998 was $40.0 million,
which has been paid down to $10.1 million by April 20, 2001.
6
Monterey Bay Bancorp, Inc. Page 3
Press Release
May 2, 2001
Non-interest income totaled $643 thousand during the first quarter of
2001, comparing favorably to $501 thousand during the first quarter of 2000.
Service charge income rose from $280 thousand during the first quarter of 2000
to $409 thousand during the first three months of 2001 in part because of the
new fee and service charge schedule implemented with the new computer system.
Sales of mortgage backed and investment securities generated a pre-tax gain of
$34 thousand during the first quarter of 2001, versus a pre-tax loss of $79
thousand during the first quarter of 2000. Loan servicing income declined from
$37 thousand during the first quarter of 2000 to $2 thousand during the first
quarter of 2001 due to the continued reduction in the size of the portfolio of
loans serviced for others and greater amortization of originated mortgage
servicing rights during the first quarter of 2001 because of faster prepayments.
Less favorable capital market conditions contributed to a decline in commissions
from sales of non-insured investment products, which fell from $207 thousand
during the first quarter of 2000 to $117 thousand during the first quarter of
2001. A new non-insured investment program manager was hired by the Bank in
February 2001 with the objective of improving the program's profitability.
Non-interest expense increased from $3.3 million during the first
quarter of 2000 to $3.8 million during the first quarter of 2001 primarily due
to $408 thousand in operating costs during the first quarter of 2001 associated
with the computer systems conversion. These operating costs included
deconversion charges from the service bureau, travel and training costs for Bank
employees, printing and postage for additional customer mailings, and consultant
fees. The Company anticipates a lower level of similar expenses during the
second quarter of 2001, as the new primary system is complemented with other new
technologies.
Total assets increased from $486.2 million at December 31, 2000 to a
record $505.6 million at March 31, 2001.
Investment and mortgage backed securities increased from $50.3 million
at December 31, 2000 to $54.6 million at March 31, 2001, as the Company added
securities to its balance sheet early in 2001 in anticipation of the lower
interest rate environment and a potential increase in future prepayments on
mortgage related assets. In addition, $1.0 million of the securities purchased
by the Bank during the first quarter of 2001 were Agency mortgage backed
securities comprised of loans to low to moderate income borrowers in the Bank's
delineated lending area. The Bank conducts such purchases in support of its
local communities and as part of its proactive efforts under the Community
Reinvestment Act.
Loans held for sale totaled $877 thousand at March 31, 2001. The
Company's pace of mortgage banking activity has accelerated in 2001 in
conjunction with the Federal Reserve's interest rate cuts and declines in
mortgage rates from their levels of one year ago, generating borrower impetus to
refinance. The Company sells most of its long term, fixed rate residential
mortgage production into the secondary market on a servicing released basis.
7
Monterey Bay Bancorp, Inc. Page 4
Press Release
May 2, 2001
Loans held for investment, net, increased from $391.8 million at
December 31, 2000 to $414.4 million at March 31, 2001. The increase resulted
from a combination of loan originations and pool purchases of California real
estate loans, as the Bank sought to leverage the $2.1 million in capital
downstreamed from the Company during the fourth quarter of 2000. Net loans as a
percentage of total assets increased from 80.6% at December 31, 2000 to 82.1% at
March 31, 2001, in conjunction with the Company's strategy supporting its
interest margin, fostering economic activity in its local communities, and
effectively utilizing the Bank's capital. The Company slowed its long term loan
portfolio diversification away from residential mortgages during the first
quarter of 2001 in part due to management's concerns about the future status of
the California economy. During the first quarter of 2001, the Bank adopted a
more restrictive credit stance for, in particular, construction loans.
Premises and equipment, net, increased from $7.4 million at December
31, 2000 to $8.0 million at March 31, 2001 primarily due to hardware and
software purchases in support of the new core processing system. In future
periods, third party data processing expenses are expected to decrease due to a
reduction in service bureau charges, while depreciation and amortization
expenses are expected to increase in conjunction with the new fixed assets.
Deposits increased from $407.8 million at December 31, 2000 to $415.5
million at March 31, 2001, with the increase spread among all major product
categories. Following the computer systems conversion, the Company experienced
an increase in the rate of deposit account closures, with the account closures
concentrated in lower balance accounts that are now subject to service charges
in conjunction with a new fee and service charge schedule implemented with the
computer systems conversion.
Borrowings increased from $32.6 million at December 31, 2000 to $42.6
million at March 31, 2001, primarily due to $10.0 million in new one year FHLB
advances utilized to fund the increase in the loan portfolio.
Monterey Bay Bank continues to be in the highest regulatory capital
classification of "Well Capitalized". The Bank remains well in excess of the
institution specific regulatory capital requirements imposed by the Office of
Thrift Supervision during the first quarter of 2000 in conjunction with the
special residential mortgage pool.
Consolidated stockholders' equity increased from $43.8 million at
December 31, 2000 to $45.8 million at March 31, 2001 due to a combination of net
income, continued amortization of deferred stock compensation, Directors
receiving their fees in Company stock, and the exercise of vested stock options
by former employees. The Company did not conduct any share repurchases during
the first quarter of 2001. The Company's tangible book value per share increased
from $12.54 at December 31, 2000 to $12.80 at March 31, 2001.
8
Monterey Bay Bancorp, Inc. page 5
Press Release
May 2, 2001
In reviewing the most recent quarter, C Edward Holden, Chief Executive
Officer & President, commented "During the first quarter of 2001, the Company
achieved a number of milestones in its strategic plan of transforming a 75 year
old savings & loan into a community based financial services firm. The new core
processing system presents the Company with the capacity to offer a broader
range of financial products and services with better customer service and
improved internal efficiency. The hiring of a seasoned commercial banker to lead
Retail Banking, Professional Banking, and our alternative investment program
completed the Bank's new management team. In conjunction with the implementation
of the new computer system, we introduced an improved product menu to our
customers, including an expanded roster of tiered deposit products and bilingual
telephone banking. In addition, the revised fee and service charge schedule
implemented with the new system allows the customer to select the products and
services which best meet their financial needs while aligning the revenue from
the various products with the Bank's costs of providing them."
Mr. Holden continued "The collection in full on two significant
non-accrual loans during April, 2001 improved the Company's credit profile and
will favorably impact earnings during the second quarter of 2001. However, in
light of economic events occurring nationally and especially in California, the
Company has, I believe, prudently adjusted its underwriting criteria and
increased its allowance for loan losses in both nominal and percentage terms.
While our posture may somewhat slow the transition of the loan portfolio toward
higher yielding income property, construction, and commercial credits, we
believe a certain measure of caution is appropriate at this point in the
economic cycle and given the uncertainty facing California businesses and
consumers this summer when energy requirements traditionally peak."
McKenzie Moss, Chairman of the Board of Directors, commented "The Board
of Directors strongly appreciates the importance of building stockholder value
and producing a competitive return on stockholders' equity. We share the
disappointment of many stockholders in the Company's recent levels of return on
equity. Many of the initiatives integral to the strategic transformation of the
Company, however, require up front operating costs and initial capital
investments before associated revenues may be realized. We believe our
transformation strategy, effectively executed by the new management team and
monitored with quality Board oversight, presents the best current opportunity to
enhance long term stockholder value. As evidence of our personal and
professional support for the Company, the Directors have voted to continue
receiving their retainer fees in Company stock."
The Company has previously announced that Eugene R. Friend and P. W.
Bachan are retiring from the Company's Board of Directors at the 2001 annual
meeting of stockholders, following many decades of service to the Company and
Bank. The Board of Directors intends to reduce its size to ten members
immediately following the two retirements.
The 2001 annual meeting of stockholders will take place on Thursday,
May 24, 2001 at 9:00 AM Pacific Standard Time at the Watsonville Women's Club in
Watsonville, California. All stockholders are cordially invited to attend, and
are requested to timely return their Proxy cards so that a quorum may be
obtained.
9
Monterey Bay Bancorp, Inc. page 6
Press Release
May 2, 2001
The Company's common stock is listed on the NASDAQ National Market
under the symbol "MBBC". The Company and the Bank are headquartered in
Watsonville, California. The Bank operates through its administrative offices in
Watsonville and eight full service branches located in the Greater Monterey Bay
Area of Central California. The Bank's deposits are insured by the Federal
Deposit Insurance Corporation up to the maximum allowed by law.
This news release contains certain forward-looking statements that are
subject to various factors that could cause actual results to differ materially
from such statements. Such factors include, but are not limited to, the
economic, business, and real estate market conditions in the Company's market
areas, competition, regulatory actions, the possibility that the Company will
not be successful in achieving its strategic objectives, the performance and
contributions of new employees, the successful future utilization and efficacy
of new technology, and other factors discussed in documents filed by the Company
with the Securities and Exchange Commission from time to time. The Company does
not undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences or unanticipated events or
circumstances after the date of such statements.
For further information contact:
C. Edward Holden Mark R. Andino
Chief Executive Officer or Chief Financial Officer
(831) 768 - 4840 (831) 768 - 4806
ed.holden@montereybaybank.com mark.andino@montereybaybank.com
General communication:
INFO@MONTEREYBAYBANK.COM
www.montereybaybank.com
Phone: (831) 768 - 4800
Fax: (831) 722 - 6794
--- financial data follows ---
10
MONTEREY BAY BANCORP, INC.
Consolidated Financial Highlights
Unaudited
(Dollars In Thousands Except Per Share Amounts)
March 31, December 31,
Financial Condition Data 2001 2000
- ------------------------ ----------- -----------
Cash and cash equivalents $ 15,781 $ 25,159
Investment and mortgage backed securities available
for sale 54,643 50,310
Loans held for sale 877 --
Loans receivable held for investment:
Residential one to four unit real estate loans 170,843 160,155
Multifamily five or more units real estate
loans 84,358 76,727
Commercial and industrial real estate loans 105,727 102,322
Construction loans 57,857 59,052
Land loans 14,668 16,310
Other loans 11,720 9,379
----------- -----------
Sub-total gross loans held for investment 445,173 423,945
(Less) / Plus:
Undisbursed construction loan funds (24,757) (26,580)
Unamortized purchase premiums, net of purchase
discounts 49 21
Deferred loan fees and costs, net (191) (202)
Allowance for loan losses (5,839) (5,364)
----------- -----------
Loans receivable held for investment, net 414,435 391,820
Investment in capital stock of the Federal Home Loan
Bank 2,932 2,884
Accrued interest receivable 3,042 2,901
Premises and equipment, net 8,043 7,375
Core deposit premiums, net 2,025 2,195
Real estate acquired via foreclosure, net -- --
Other assets 3,801 3,546
----------- -----------
Total assets $ 505,579 $ 486,190
=========== ===========
Non-interest bearing demand deposits $ 17,814 $ 17,065
Interest bearing NOW checking accounts 42,180 41,859
Savings accounts 21,173 16,503
Money market accounts 88,850 87,651
Certificates of deposit 245,495 244,710
----------- -----------
Total deposits 415,512 407,788
Borrowings 42,608 32,582
Other liabilities 1,677 1,983
----------- -----------
Total liabilities 459,797 442,353
----------- -----------
Stockholders' equity 45,782 43,837
----------- -----------
Total liabilities and stockholders' equity $ 505,579 $ 486,190
=========== ===========
Three Months Ended March 31,
------------------------------------
Operating Data 2001 2000
- -------------- ----------- -----------
Interest income $ 9,995 $ 9,050
Interest expense 5,243 4,557
----------- -----------
Net interest income before provision for loan losses 4,752 4,493
Provision for loan losses 500 250
----------- -----------
Net interest income after provision for loan losses 4,252 4,243
Non-interest income 643 501
Non-interest expense 3,842 3,337
----------- -----------
Income before income taxes 1,053 1,407
Provision for income taxes 451 608
----------- -----------
Net income $ 602 $ 799
=========== ===========
Shares applicable to basic earnings per share 3,227,241 3,138,424
Basic earnings per share $ 0.19 $ 0.25
=========== ===========
Shares applicable to diluted earnings per share 3,274,559 3,150,825
Diluted earnings per share $ 0.18 $ 0.25
=========== ===========
11
MONTEREY BAY BANCORP, INC.
Selected Ratios And Other Data
Unaudited
(Dollars In Thousands)
Three Months Ended March 31,
----------------------------
2001 2000
---- ----
Profitability Ratios
- ------------------------------------------
Return on average assets 0.49% 0.69%
Return on average equity 5.55% 8.10%
Interest rate spread during the period 3.66% 3.64%
Net interest income / average total assets 3.83% 3.88%
Net interest margin 4.04% 4.06%
Efficiency ratio 71.22% 66.82%
Other Information
- ------------------------------------------
Average total assets $ 496,090 $ 462,691
Average interest earning assets 470,539 442,541
At At
March 31, December 31,
2001 2000
---- ----
Asset Quality Information
- ------------------------------------------
Non-accrual loans $ 4,653 $ 4,666
Non-performing loans 4,653 4,741
Real estate acquired via foreclosure -- --
Allowance for loan losses 5,839 5,364
Allowance for loan losses / loans 1.39% 1.35%
outstanding
Allowance for loan losses / non-accrual 125.49% 114.96%
loans
Bank Regulatory Capital Ratios
- ------------------------------------------
Tangible capital ratio 7.93% 8.03%
Core capital ratio 7.93% 8.03%
Tier one risk based capital ratio 10.98% 11.03%
Total risk based capital ratio 12.23% 12.28%
Other Information
- ------------------------------------------
Full-service customer facilities 8 8
Number of ATM's 11 11
Loan to deposit ratio 99.95% 96.08%
Tangible book value per share $12.80 $12.54
Shares outstanding 3,419,764 3,321,210
12