EXHIBIT INDEX
Exhibit Number Exhibit
- -------------- -------
Exhibit 99.1 Press Release Dated October 21, 2002
4
Exhibit 99.1
- ------------
October 21, 2002
FOR IMMEDIATE RELEASE
- ---------------------
MONTEREY BAY BANCORP, INC. ANNOUNCES:
THIRD QUARTER AND SEPTEMBER 30 YEAR TO DATE 2002 RESULTS;
RECORD LEVELS OF INCOME, ASSETS, LOANS, DEPOSITS, AND EQUITY
Common Stock Symbol: MBBC
NASDAQ National Market
Watsonville, CA. October 21, 2002. Monterey Bay Bancorp, Inc.
("Company"), the holding company for Monterey Bay Bank ("Bank"), today reported
record net income of $1.47 million, equivalent to $0.42 diluted earnings per
share, for the quarter ended September 30, 2002, compared to net income of $1.06
million, or $0.31 diluted earnings per share, for the same period in 2001. Net
income during the quarter ended June 30, 2002 (the immediately preceding
quarter) was $1.35 million, equivalent to $0.38 diluted earnings per share.
For the nine months ended September 30, 2002, net income was $4.02
million, equivalent to $1.15 diluted earnings per share. This compares to net
income of $2.61 million, or $0.79 diluted earnings per share, for the first nine
months of 2001. The 54.1% increase in net income for the first nine months of
2002 compared to the same period in 2001 primarily resulted from two key
factors:
o the continued implementation of the Company's strategic plan to
transform the Bank into a community commercial bank
o during the first nine months of 2001, the Company incurred pre-tax
operating costs of $447 thousand for the conversion of the core data
processing system and $284 thousand for legal expenses associated with
the arbitration of claims by a former executive
The third quarter of 2002 earnings were the highest of any quarter in
the Company's history. Annualized return on average stockholders' equity
improved from 8.76% during the third quarter of 2001 to 10.73% during the third
quarter of 2002. At September 30, 2002, the Company had record levels of loans,
assets, deposits, and stockholders' equity. Tangible book value per share
increased from $14.08 at December 31, 2001 to $15.45 at September 30, 2002.
During the third quarter of 2002, the Company continued the
implementation of its strategic plan of transforming the Bank into a community
focused commercial bank serving the financial needs of individuals, families,
local organizations, and businesses. Key accomplishments during the third
quarter of 2002 included:
o significant progress in shifting the composition of the loan portfolio
o increased local commercial banking business
o continued improvement in the Company's efficiency ratio
5
Monterey Bay Bancorp, Inc. Page 2
Press Release
October 21, 2002
Net interest income increased from $5.0 million and $14.5 million
during the third quarter and first nine months of 2001 to $5.8 million and $16.7
million during the same periods in 2002. These increases resulted from both
expanded spreads and greater average balances of interest earning assets and
liabilities. The Company's ratio of net interest income to average total assets
was 4.01% for the first nine months of 2002, up from 3.80% for the same period
in 2001. The increased spread in part stemmed from the Bank's continued
implementation of its strategic plan, which incorporates a higher ratio of loans
to total assets, a smaller percentage of total loans being comprised of
residential mortgages, and transaction accounts constituting a greater portion
of total deposits.
The Company recorded a $400 thousand provision for loan losses during
the third quarter of 2002, up from $275 thousand during the same period in the
prior year. This greater provision primarily resulted from the growth and change
in mix of the loan portfolio. For the first nine months of 2002, the Company
recorded $1.1 million in provisions for loan losses, increasing slightly from
the same period in 2001. Net charge-offs during the first nine months of 2002
totaled $33 thousand, of which less than $1 thousand occurred in the third
quarter. The Company's ratio of loan loss reserves to total loans increased from
1.41% at December 31, 2001 to 1.54% at September 30, 2002. The primary factors
contributing to the rise in this ratio included:
o the continued shift in the Company's loan mix away from its historic
concentration in residential mortgages
o the establishment of a specific reserve for a loan secured by a hotel
/ resort within the Company's primary market area, as subsequently
discussed
o the Company's updating its formula general reserve factors to reflect
current information regarding real estate valuations, business
conditions, rental and vacancy rates for various types of income
property, and other factors in estimating the amount of loss inherent
in the loan portfolio at September 30, 2002
Non-accrual loans increased from $2.3 million at December 31, 2001 to
$3.6 million at September 30, 2002 primarily due to the placement of a $2.3
million commercial real estate mortgage on non-accrual status. This credit is a
participation loan where the Bank is not the lead financial institution. The
loan is secured by a first deed of trust on a hotel / resort located within the
Company's primary market area and by a first deed of trust on a residential lot
located in California. The borrowers are directly personally indebted. The hotel
/ resort is a relatively new development that has experienced limited cash flow.
The hotel / resort was also adversely impacted by the decline in tourism and
travel following the events of September 11, 2001 and the national economic
recession.
At September 30, 2002, the Company maintained a $475 thousand specific
reserve for this hotel / resort loan, based upon estimated net proceeds
following foreclosure and sale. This specific reserve was decreased from $754
thousand at June 30, 2002 due to payments received from the borrowers during the
third quarter, the borrowers providing additional real estate collateral (the
first deed of trust on the residential lot), and the Company's receipt of
updated valuation and financial information regarding the hotel / resort.
Although the loan was current in its payments at September 30, 2002, the Company
maintained the loan on non-accrual status at September 30, 2002 due to concern
about the future net cash flow of the hotel / resort following the peak summer
season, particularly in light of the status of the economy, the tourism
industry, and the outlook for business travel activity. These factors also
create particular volatility in the market value of the hotel / resort.
6
Monterey Bay Bancorp, Inc. Page 3
Press Release
October 21, 2002
Non-accrual loans at September 30, 2002 also included:
o An $846 thousand residential mortgage secured by a first deed of
trust. The borrowers have declared bankruptcy. There are significant
junior mortgages from other lenders secured by the subject collateral.
The Company is currently pursuing approval from the bankruptcy court
to proceed with foreclosure.
o One additional residential mortgage with a balance of $303 thousand.
o A $129 thousand loan secured by a first deed of trust on residential
land.
The Company does not anticipate recording a loss on any of the above
three non-accrual loans due to the estimated value of the underlying real estate
collateral. All non-accrual loans at September 30, 2002 were secured by real
estate. The Company had no foreclosed real estate at September 30, 2002.
Non-interest income totaled $490 thousand and $1.5 million during the
three and nine months ended September 30, 2002, down from $690 thousand and $2.0
million during the same periods in 2001.
Customer service charge income was $387 thousand and $1.1 million
during the three and nine months ended September 30, 2002, down from $401
thousand and $1.3 million during the same periods in 2001. In conjunction with
the conversion to the new core data processing system in March 2001, the Company
implemented a revamped consumer checking product line and an associated revised
fee and service charge schedule. These changes contributed to the closing of
certain lower balance, recurring overdraft, and / or higher transaction volume
consumer checking accounts beginning in the second quarter of 2001, as such
accounts began incurring increased service charges. The closure of these
accounts contributed to the reduced levels of customer service charge income,
but also decreased certain operating costs for the Company.
Commissions from the sale of non-FDIC insured investment products were
$25 thousand and $100 thousand during the three and nine months ended September
30, 2002, down from $35 thousand and $223 thousand during the same periods in
2001. This decrease was primarily due to vacancies in positions for licensed
investment sales representatives and the general state of the capital markets in
the first nine months of 2002. The Company expects revenue from these operations
to remain constrained during the fourth quarter of 2002.
Loan servicing income totaled $18 thousand and $47 thousand during the
three and nine months ended September 30, 2002, compared to $33 thousand and $77
thousand during the same periods in 2001. The Company continues to sell the vast
majority of its long term, fixed rate residential loan production into the
secondary market on a servicing released basis, and purchases more interest rate
sensitive loans as part of its interest rate risk management program. Additions
to loans serviced for others during 2002 have thus been limited to loan
participations sold to correspondent banks. As a result, the portfolio of loans
serviced for others is declining as loans pay off. At September 30, 2002, the
Company serviced $38.3 million in various types of loans for other investors,
compared to $42.6 million at December 31, 2001. The Company maintained loan
servicing assets of $39 thousand at September 30, 2002, and is thus limited in
its exposure of loan servicing income to the accelerated loan prepayment speeds
now occurring as a result of the low interest rate environment and high volume
of residential mortgage refinance activity.
7
Monterey Bay Bancorp, Inc. Page 4
Press Release
October 21, 2002
Gains on the sale of loans were $33 thousand during the third quarter
of 2002, up from $18 thousand during the third quarter of 2001. For the first
nine months of 2002, gains on the sale of loans totaled $81 thousand, a 72.3%
increase from the $47 thousand recorded during the first nine months of 2001.
The Company anticipates continued favorable results from its mortgage banking
operations during the fourth quarter of 2002, stimulated by the availability of
thirty and fifteen year fixed rate residential mortgages at rates below 6.25%
and 5.75%, respectively, at the beginning of the quarter.
The Company recorded a loss of $8 thousand on the sale of an Agency
collateralized mortgage obligation ("CMO") during the third quarter of 2002,
compared to realizing a gain of $156 thousand on the sale of two non-Agency
CMO's during the third quarter of 2001. The recent sale was conducted in
conjunction with the Company's asset / liability management program. Gains on
sale of mortgage backed securities were $35 thousand during the first nine
months of 2002, compared to $190 thousand during the same period in 2001.
Although many of the Company's mortgage backed securities appreciated in fair
value during the first nine months of 2002 due to the decline in most capital
markets interest rates, the Company retained the securities as a means of
generating net interest income.
Non-interest expense totaled $3.4 million and $10.3 million during the
three and nine months ended September 30, 2002, comparing favorably to $3.6
million and $10.9 million during the same periods in 2001. Factors contributing
to the lower expenses included the Company's incurring significant costs in the
first nine months of 2001 associated with its data processing conversion and the
arbitration of claims by a former executive.
Compensation and employee benefits costs were higher in the three and
nine months ended September 30, 2002 than during the same periods the prior year
due to:
o compensation costs associated with the Los Angeles loan production
office which opened during the first quarter of 2002
o other staff additions and changes in support of the Company's
strategic plan, particularly in the Company's commercial banking,
income property lending, and information technology functions
o higher costs for the Bank's Employee Stock Ownership Plan due to the
greater average market price of the Company's common stock
o higher costs for payroll taxes on a greater compensation base
o increased expenses for worker's compensation insurance, which is a
general problem faced by businesses in the State of California
Deposit insurance premiums decreased from $50 thousand and $148
thousand for the three and nine months ended September 30, 2001 to $19 thousand
and $121 thousand during the same periods in 2002, despite the expansion in the
Company's deposit portfolio. The decline resulted from an adjustment in the
Company's insurance premium rate effective July 1, 2002. The lower insurance
premium rate will also favorably impact deposit insurance expenses during the
fourth quarter of 2002.
8
Monterey Bay Bancorp, Inc. Page 5
Press Release
October 21, 2002
Legal and accounting expenses were lower in the three and nine months
ended September 30, 2002 than during the same periods in 2001 primarily due to
the aforementioned arbitration in 2001 and due to the Company's utilizing more
cost effective providers for certain professional services in 2002.
Advertising and promotion costs totaled $52 thousand during the third
quarter of 2002, down from $86 thousand during the same period during the prior
year. The Company limited its print and broadcast advertising during the third
quarter of 2002 in light of the challenges of advertising for deposits with
interest rates at historic low levels. Advertising and promotion costs totaled
$214 thousand during the first nine months of 2002, up from $143 thousand during
the same period the prior year. These costs were unusually low in the first half
of 2001, as the Company postponed certain advertising and promotional activities
due to the implementation of the new computer systems environment. In
conjunction with the Company's strategic plan and as an alternative to print and
broadcast media, the Company's employees and Directors enhanced the Bank's
visibility during 2002 by their extensive participation in a significant number
of community events and organizations. As just one example, the Bank's employees
logged over 150 volunteer hours during the month of September participating in
various community events, the majority of which were fundraisers to support
local non-profit organizations in the Bank's primary market area.
Consulting expenses declined from $31 thousand and $336 thousand during
the three and nine months ended September 30, 2001 to $16 thousand and $59
thousand during the same periods in 2002. In 2001, the Company hired several
consultants to assist with the core systems conversion and the implementation of
complementary technology following the conversion.
Net income during the third quarter of 2002 was increased by $32
thousand associated with a non-recurring reduction in the Company's provision
for income taxes resulting from a change in California tax law. This one time
reduction contributed to the Company's reporting an effective book income tax
rate of 40.0% for the third quarter of 2002, compared to the Company's effective
book income tax rate of 40.8% for the first nine months of 2002.
The Company's efficiency ratio improved from 62.86% during the third
quarter of 2001 and 56.12% during the second quarter of 2002 to 54.77% during
the third quarter of 2002. While the Company continues to pursue a range of
alternatives to improve its efficiency and augment revenue, further progress in
this ratio will likely be tempered in coming quarters by the need to invest in
support of the continued implementation of the strategic plan.
Total assets increased from $537.4 million at December 31, 2001 to a
record $575.4 million at September 30, 2002.
Cash and cash equivalents decreased from $13.1 million at December 31,
2001 to $9.5 million at September 30, 2002 due to the use of cash equivalents to
fund expansions in the security and loan portfolios.
Investment and mortgage backed securities increased from $37.9 million
at December 31, 2001 to $50.1 million at September 30, 2002. The Company
purchased relatively short duration, AAA rated collateralized mortgage
obligations ("CMO's") during the first nine months of 2002 to serve as
collateral for certain deposits and to invest available liquidity. Throughout
2002, the Company has not owned any corporate bonds issued by companies
primarily in the telecommunications, technology, or energy industries. The
Company owned two corporate bonds at September 30, 2002, both of which were
variable rate, trust preferred securities issued by large financial
institutions. These bonds were rated "A" and "A-" by Standard & Poors at
September 30, 2002.
9
Monterey Bay Bancorp, Inc. Page 6
Press Release
October 21, 2002
Loans held for investment, net, increased from $465.9 million at
December 31, 2001 to a record $496.0 million at September 30, 2002. The increase
resulted from a combination of strong internal loan originations, including from
the Los Angeles loan production office, and from purchases of, or participations
in, individual income property and construction loans from correspondent banks.
Relatively high loan payoff volumes stemming from the low interest rate
environment restrained the rate of loan portfolio growth during 2002.
Total net loans as a percentage of total assets were 86.2% at September
30, 2002, down slightly from 86.8% at December 31, 2001. The Company has
targeted increasing this ratio to 90.0% as part of its strategy of supporting
its interest margin, fostering economic activity in its local communities, and
effectively utilizing the Bank's capital.
The loan portfolio product mix shifted during the first nine months of
2002 in conformity with the Company's strategic plan. Residential one to four
unit loans declined from 42.3% of gross loans at December 31, 2001 to 35.5% of
gross loans at September 30, 2002. In contrast, commercial real estate loans
rose from 22.6% to 23.9%, construction loans increased from 7.9% to 10.2%, land
loans increased from 2.5% to 4.1%, commercial loans rose from 1.8% to 3.1%, and
consumer loans (primarily home equity lines of credit) increased from 1.4% to
1.9%. This change in loan mix was facilitated by the commercial business
relationship officers the Company hired over the past year and by the new Los
Angeles loan production office, which concentrates on income property and
construction lending. The Company plans to continue decreasing the percentage of
its loan portfolio allocated to residential mortgages in favor of other
generally higher yielding and more interest rate sensitive types of loans.
The Company concluded the third quarter of 2002 with a significant loan
pipeline. Management anticipates for the fourth quarter of 2002:
o a further rise in loans outstanding and total assets
o an increase in the ratio of loans to assets
o residential mortgages comprising a smaller percentage of total gross
loans
Deposits increased from $432.3 million at December 31, 2001 to a record
$461.7 million at September 30, 2002. This increase was primarily due to:
o The Bank's issuance of its first brokered certificate of deposit
("CD"), for $20.0 million, during the second quarter of 2002. The
brokered CD was issued in order to provide funding for loan production
in the second and third quarters of 2002.
o A $9.0 million increase in deposits from the State of California time
deposit program during 2002. The State places funds with California
banks as a vehicle for encouraging employment and economic growth.
10
Monterey Bay Bancorp, Inc. Page 7
Press Release
October 21, 2002
The Company continues to pursue increases in transaction account
balances as a fundamental component of its strategic plan. Excluding the impact
of the aggregate $29.0 million increase in brokered and State certificates of
deposit, transaction accounts increased from 43.6% of total deposits at December
31, 2001 to 47.7% of total deposits at September 30, 2002. This shift in mix
contributed to the Company's reducing its weighted average cost of deposits from
2.41% during the second quarter of 2002 to 2.26% during the third quarter of
2002. This 15 basis point reduction in deposit cost was attained despite the
historically low level of interest rates and therefore the Company's limited
ability to decrease interest rates on many deposit products that are currently
priced between zero and one percent.
Management is, however, not satisfied with the volume of deposit
acquisition achieved by its eight full service retail branches in 2002,
particularly in light of general deposit inflows into the banking system from
investors leaving the equity markets. Management responded to this performance
by:
o designing new relationship oriented deposit products for introduction
during the fourth quarter of 2002 and the first quarter of 2003
o recruiting a Director of Branch Sales during the second quarter of
2002, whose primary responsibility is to implement and manage an
improved sales culture throughout the branch network
o altering branch staff compensation to provide for an increased
incentive opportunity based upon deposit growth and quality customer
service
Checking account balances increased from $63.6 million at December 31,
2001 to $68.5 million at September 30, 2002. The Company plans to introduce
several new consumer checking products during the first quarter of 2003, with a
particular focus on relationship pricing and providing increased choice and
options to customers. In addition, the Company's commercial lending officers
have increasing business demand deposit balances as a key component of their
sales objectives. During the third quarter of 2002, the Company introduced
"remote deposit" services to its business and high net worth individual
accounts. Via this new service, the Bank's customers can make deposits to their
Monterey Bay Bank checking account at any branch of a correspondent bank with
over 4,900 banking locations in 23 states. Remote deposit services were
implemented to offer improved convenience and assist the Bank in competing with
larger financial institutions with more extensive branch networks.
Money market deposits increased from $105.8 million at December 31,
2001 to $119.4 million at September 30, 2002. Factors supporting the rise in
money market balances in the first nine months of 2002 included the Company's
active cross-selling of this product in its branches and the desire by certain
customers to avoid committing funds to term certificates of deposit in the
current historically low interest rate environment. The Company plans to
introduce two new money market accounts in the latter part of the fourth quarter
of 2002: Investors Money Market and Business Money Market. Investors Money
Market is a highly tiered product targeted to attract funds from money market
mutual funds and brokerage firms. Business Money Market is a product designed
specifically for the Bank's local commercial customers seeking an attractive
return on liquid funds while also enjoying the many attractive attributes
provided by the Bank, including Internet banking, global ATM access, 24 hour
bilingual telephone banking, and, above all, superior customer service by local
bankers familiar with their business.
11
Monterey Bay Bancorp, Inc. Page 8
Press Release
October 21, 2002
The Company's ratio of net loans to deposits was 107.47% at September
30, 2002. In addition to the planned deposit related actions described above,
the Company intends to actively manage this ratio by:
o pursuing opportunities for additional branch locations, either de novo
or acquisition of existing branches from other financial institutions
o directing a higher percentage of the advertising and promotion budget
to deposit generation
Borrowings increased from $53.8 million at December 31, 2001 to $57.7
million at September 30, 2002. The increase was associated with funding the rise
in the loan and security portfolios. All of the Company's FHLB advances at
September 30, 2002 were fixed rate, fixed term or overnight borrowings without
call or put option features.
Monterey Bay Bank continues to be in the highest regulatory capital
classification of "Well Capitalized", with capital levels significantly in
excess of regulatory requirements.
Consolidated stockholders' equity increased from $50.2 million at
December 31, 2001 to a record $54.8 million at September 30, 2002 due to a
combination of:
o net income
o continued amortization of deferred stock compensation
o additional paid-in capital generated from the Employee Stock Ownership
Plan
o Directors continuing to receive their retainer fees in Company common
stock
o the exercise of 46,963 vested stock options
The above factors more than offset the impact of depreciation in the
aggregate fair value of securities classified as available for sale and
acquisitions of common stock under the Company's repurchase program. The
depreciation in the portfolio of securities classified as available for sale was
concentrated in reduced market prices for the Company's two corporate trust
preferred securities. The Company repurchased 5,000 shares of the Company's
common stock at $16.25 per share during the first quarter of 2002, none during
the second quarter of 2002, and 25,000 shares during the third quarter of 2002
at prices ranging from $17.10 to $17.36 per share. At September 30, 2002, there
were 84,035 remaining shares authorized for repurchase under the Company's
current repurchase program. The Company plans to repurchase additional shares
during the fourth quarter of 2002 should market conditions prove favorable, as
repurchases at the recent price of the Company's common stock are accretive to
earnings per share.
12
Monterey Bay Bancorp, Inc. Page 9
Press Release
October 21, 2002
In reviewing the most recent quarter, C. Edward Holden, the Company's
Chief Executive Officer and President, commented: "We are pleased to report the
sixth consecutive quarter of increased earnings per share, and the achievement
of record levels of loans, assets, deposits, and tangible book value per share.
These results reinforce the importance of the Company's continuing to progress
in our strategy of transforming the Bank into a community based financial
services firm. The Bank's focus on increasing income property, construction, and
commercial lending led to a meaningful shift in the composition of the loan
portfolio toward higher yielding and more interest sensitive types of loans,
which in turn contributed to the record spreads reported by the Company. This
change in loan volume and mix was accomplished through our relationship oriented
approach to providing financial services; and was accompanied by suitably higher
nominal and relative levels of loan loss reserves and Bank capital."
Mr. Holden continued: "While our progress from just one year ago is
substantial, we recognize the need to further improve earnings and profitability
to levels generated by better performing peer financial institutions. This
objective continues to be made challenging by the state of the economy and by
the Company's continued need to invest in employee recruitment and training,
technology, product development, and augmented distribution and service
channels. However, our status as one of the oldest and largest local community
banks in Central California, combined with our unrelenting focus on providing
knowledgeable and timely financial solutions to our customers, furnishes us with
the opportunity to enjoy continued success. I believe our future success will
also evolve from the extensive community contributions provided by the Company,
and its employees and Directors. It's very rewarding to make a positive
difference in the quality of life in your local community as a key component of
your job."
McKenzie Moss, Chairman of the Board of Directors, remarked: "The Board
continues its strong commitments to quality corporate governance and enhancing
stockholder value. For example, the recent addition of Rita Alves as a Director
provides the Audit Committee with a second highly experienced Chief Financial
Officer in addition to Diane Bordoni. CEO Holden is the only inside Director on
a Board of well-qualified, independent executives. The Board's commitment to
stockholder value is exhibited by the Directors' ongoing support of the Company
via business referrals, personal stock purchases, local community outreach,
authorization of Company stock repurchases, endorsement of the growth of the
Company, and payment of Director retainer fees and certain Management incentive
compensation in Company common stock. We will continue to seek additional equity
analyst coverage of the Company, as a means of both communicating the progress
being achieved in regards to the strategic plan and reducing the discount in
relative valuation the Company currently experiences versus peer bank holding
companies."
Rita Alves, the Company's newest Director, commented: "I look forward
to contributing to the success of the Company. The significant ownership
position in the Company by the employees and Directors fosters teamwork and
results. This orientation, and the Bank's strong commitment to community
service, attracted me to the opportunity to join the Company's Board."
13
Monterey Bay Bancorp, Inc. Page 10
Press Release
October 21, 2002
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, one stand-alone loan production office in Los Angeles, and eight
full service branches located in the Greater Monterey Bay Area of Central
California. The Bank operates 11 ATM's including two at remote (non-branch)
sites. The Bank also offers customer access via bilingual telephone banking,
Internet banking, and worldwide ATM networks. The Bank's deposits are insured by
the Federal Deposit Insurance Corporation ("FDIC") to the maximum extent allowed
by law.
Certain of the statements contained herein that are not historical
facts are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. Forward-looking statements are typically
identified by words or phrases such as "believe", "expect", "anticipate",
"intend", "estimate", "target", "plan", "may increase", "may fluctuate", "may
result in", "are projected", and similar expressions. The Company's actual
results may differ materially from those included in the forward-looking
statements. These forward-looking statements involve risks and uncertainties
including, but not limited to, the economic, business, and real estate market
conditions in the Company's market areas, competition, regulatory and
legislative actions, the possibility that the Company will not be successful in
achieving its strategic objectives, actions by investment banking firms, the
performance and contributions of employees and Directors, the Company's ability
to recruit high caliber bankers, expected loan payments, loan originations, and
future collateral values, 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, including the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001
and the quarterly Form 10-Q's filed by the Company . 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.
This news release is available at the www.montereybaybank.com Internet
site for no charge and is included as an Exhibit to a Form 8-K filed with the
Securities & Exchange Commission that is available at the www.sec.gov Internet
site.
For further information contact:
--------------------------------
C. Edward Holden Mark R. Andino
Chief Executive Officer or Chief Financial Officer
President Treasurer
(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 ---
14
MONTEREY BAY BANCORP, INC.
(NASDAQ: MBBC)
Consolidated Financial Highlights
Unaudited
(Dollars In Thousands)
September 30, December 31,
Financial Condition Data 2002 2001
- ------------------------------------------ ---- ----
Cash and cash equivalents $ 9,513 $ 13,079
Investment securities available for sale 7,060 7,300
Mortgage backed securities available for sale 43,000 30,644
Loans held for sale 170 713
Loans receivable held for investment:
Residential one to four unit real estate loans 187,484 204,829
Multifamily five or more units real estate loans 112,407 103,854
Commercial and industrial real estate loans 126,606 109,988
Construction loans 54,207 38,522
Land loans 21,598 11,924
Commercial loans 16,650 8,843
Other loans 9,944 6,980
--------- ---------
Sub-total gross loans held for investment 528,896 484,940
(Less) / Plus:
Undisbursed construction loan funds (24,935) (12,621)
Unamortized purchase premiums, net of purchase discounts 568 435
Deferred loan fees and costs, net (781) (202)
Allowance for loan losses (7,742) (6,665)
--------- ---------
Loans receivable held for investment, net 496,006 465,887
Investment in capital stock of the Federal Home Loan Bank 3,347 2,998
Accrued interest receivable 3,024 2,915
Premises and equipment, net 7,278 7,618
Core deposit intangibles, net 1,003 1,514
Real estate acquired via foreclosure, net -- --
Other assets 5,029 4,723
--------- ---------
Total assets $ 575,430 $ 537,391
========= =========
Non-interest bearing demand deposits $ 24,898 $ 21,062
Interest bearing NOW checking accounts 43,561 42,557
Savings accounts 18,703 19,127
Money market accounts 119,398 105,828
Certificates of deposit 255,118 243,765
--------- ---------
Total deposits 461,678 432,339
FHLB advances and other borrowings 57,654 53,800
Other liabilities 1,328 1,090
--------- ---------
Total liabilities 520,660 487,229
--------- ---------
Stockholders' equity 54,770 50,162
--------- ---------
Total liabilities and stockholders' equity $ 575,430 $ 537,391
========= =========
15
MONTEREY BAY BANCORP, INC.
(NASDAQ: MBBC)
Consolidated Financial Highlights, Continued
Unaudited
(Dollars In Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- --------------------------
Operating Data 2002 2001 2002 2001
- ------------------------------------------ ---- ---- ---- ----
Interest income $ 8,979 $ 9,758 $ 26,625 $ 29,464
Interest expense 3,184 4,743 9,917 14,924
--------- --------- --------- ---------
Net interest income before provision for loan losses 5,795 5,015 16,708 14,540
Provision for loan losses 400 275 1,110 1,075
--------- --------- --------- ---------
Net interest income after provision for loan losses 5,395 4,740 15,598 13,465
--------- --------- --------- ---------
Non-interest income:
Customer service charges 387 401 1,130 1,282
(Loss) gain on sale of mortgage backed securities (8) 156 35 190
Commissions from sales of non-insured products 25 35 100 223
Gain on sale of loans held for sale 33 18 81 47
Income from loan servicing 18 33 47 77
Other income 35 47 112 209
--------- --------- --------- ---------
Total non-interest income 490 690 1,505 2,028
--------- --------- --------- ---------
Non-interest expense:
Compensation and employee benefits 1,960 1,739 5,697 5,052
Occupancy and equipment 444 440 1,277 1,222
Deposit insurance premiums 19 50 121 148
Data and item processing 146 133 423 746
Legal and accounting 107 274 328 724
Supplies, postage, and telecommunications 158 158 505 510
Advertising and promotion 52 86 214 143
Amortization of intangible assets 170 170 511 511
Consulting 16 31 59 336
Other 370 505 1,176 1,556
--------- --------- --------- ---------
Total non-interest expense 3,442 3,586 10,311 10,948
--------- --------- --------- ---------
Income before provision for income taxes 2,443 1,844 6,792 4,545
Provision for income taxes 977 787 2,772 1,937
--------- --------- --------- ---------
Net income $ 1,466 $ 1,057 $ 4,020 $ 2,608
========= ========= ========= =========
Shares applicable to basic earnings per share 3,384,522 3,293,853 3,369,532 3,261,032
Basic earnings per share $ 0.43 $ 0.32 $ 1.19 $ 0.80
========= ========= ========= =========
Shares applicable to diluted earnings per share 3,509,118 3,385,556 3,494,528 3,320,237
Diluted earnings per share $ 0.42 $ 0.31 $ 1.15 $ 0.79
========= ========= ========= =========
16
MONTEREY BAY BANCORP, INC.
(NASDAQ: MBBC)
Selected Ratios And Other Data
Unaudited
(Dollars In Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- --------------------------
Profitability Ratios [1] 2002 2001 2002 2001
- ------------------------------------------ ---- ---- ---- ----
Return on average assets 1.03% 0.80% 0.97% 0.68%
Return on average equity 10.73% 8.76% 10.11% 7.51%
Interest rate spread during the period 4.02% 3.64% 3.96% 3.64%
Net interest income / average total assets 4.07% 3.79% 4.01% 3.80%
Net interest margin 4.27% 3.99% 4.21% 4.01%
Efficiency ratio 54.77% 62.86% 56.62% 66.08%
Other Information
- ------------------------------------------
Average total assets $ 569,194 $ 529,964 $ 555,326 $ 510,046
Average interest earning assets $ 542,728 $ 502,611 $ 528,612 $ 483,298
September 30, December 31,
2002 2001
---- ----
Asset Quality Information
- ------------------------------------------
Non-accrual loans $ 3,554 $ 2,252
Non-performing loans $ 3,554 $ 2,252
Real estate acquired via foreclosure, net -- --
Allowance for loan losses $ 7,742 $ 6,665
Non-performing loans /
total assets 0.62% 0.42%
Allowance for loan losses /
loans outstanding 1.54% 1.41%
Allowance for loan losses /
non-accrual loans 217.84% 295.96%
Bank Regulatory Capital Ratios
- ------------------------------------------
Tangible capital ratio 8.57% 8.24%
Core capital ratio 8.57% 8.24%
Tier one risk based capital ratio 11.76% 11.38%
Total risk based capital ratio 13.01% 12.64%
Other Information
- ------------------------------------------
Full-service customer facilities 8 8
Stand alone loan production offices 1 --
Number of ATM's 11 11
Loan to deposit ratio 107.47% 107.92%
Tangible book value per share $15.45 $14.08
Shares outstanding 3,480,756 3,456,097
- -------------------------------------------------------
[1] All applicable ratios reflect annualized figures.
17