PASO ROBLES, Calif., Jan. 26, 2009 (GLOBE NEWSWIRE) -- Heritage Oaks Bancorp (Nasdaq:HEOP), the parent company of Heritage Oaks Bank, today reported that following a $6.0 million provision for loan losses, it had a net loss of $1.3 million, or $0.16 per diluted share, for the fourth quarter of 2008, compared to net income of $2.0 million, or $0.25 per diluted share, in the fourth quarter a year ago. For the full year, following a $12.2 million provision for loan losses, Heritage Oaks earned $1.6 million, or $0.21 per diluted share, compared to $6.9 million, or $0.96 per diluted share, in 2007.
"We continue to remain profitable, well capitalized and have high levels of liquidity to meet our customers' needs during this very difficult period in our core business. We are disappointed with our 2008 performance as it compares to previous years, but we are encouraged by the profitability of our core business net of loan loss provisions. Through diligence and constant effort in shaping our balance sheet, we have been able to keep our net interest margin at a level above that of our peers," stated Lawrence P. Ward, President and CEO. "We will continue to focus on asset quality and capital preservation, as we work through credit quality issues. Looking forward, we are progressing with various cost containment measures in an effort to mitigate the decline in income as a result of the substantial increase in the provisions to the allowance for loan losses in 2008. While not quantifiable at this point, we expect that the implementation of these measures will create additional efficiencies in 2009."
2008 Financial Highlights:
-- Net income for the year was $1.6 million, or $0.21 per diluted
share.
-- Net interest income increased 24% to $37.6 million compared to
a year ago.
-- Net interest margin was 5.21% for the year.
-- Added $12.2 million to the allowance for loan losses.
-- Net loans increased 10% to $668 million compared to a year ago.
-- Core deposits represent 69% of total deposits.
-- Remains well capitalized with total Risk-Based capital of 10.56%.
Asset Quality
"We continue to maintain diligent oversight of the loan portfolio and have been extremely proactive in monitoring credit quality," said Ward. "As such we have devoted considerable resources to this effort. Recently the loan portfolio has undergone a regulatory review, an internal review by staff as well as the regularly scheduled annual review performed by an independent asset quality review audit firm. In addition to our regular internal review of certain credits within the portfolio, we have concluded that an independent loan review will be conducted semi-annually in an effort to more quickly identify any additional problem assets and mitigate any potential loss to Heritage Oaks."
"We have also taken a very aggressive position with respect to the adequacy of the allowance for loan losses. The larger provision during 2008 was based not only on identified potential problem credits which have been accounted for at year-end, but also due to qualitative factors as a result of the current negative economic environment," added Ward.
"While the Bank's underlying business remains strong, the housing and general economic slowdown has led to an increase in non-performing loans, which makes it prudent to write-down these loans to their current fair market value and to strengthen our reserve position at this time," said Ward. "The collateral securing the loans charged-off during the fourth quarter include, among other things, real-estate within the Heritage Oaks market footprint and various forms of business assets. We are currently working with borrowers and collateral is being actively marketed to minimize future charge-offs."
It should also be noted that Heritage Oaks Bank has no direct exposure to sub-prime mortgage lending and minimal exposure to speculative construction for single family residences that have not already been identified as non-performing.
Loan Charge-offs
As announced on December 18, 2008, Heritage Oaks wrote down 23 loans, made to 12 borrowers, to the current fair market value of the underlying collateral during the fourth quarter. The following table provides a summary of those charge-offs as well as charge-offs the bank incurred for the full year of 2008 (differences in amounts in each category to those that were reported in the December 18, 2008 Press Release are due to re-slotting issues):
Q4 YTD
(dollars in thousands) 2008 2008
------------------------------------------------------------------
Commercial and industrial $2,995 $ 3,854
Construction 914 1,837
Land 1,434 1,434
1-4 family residential 556 555
Commercial real-estate 35 340
Other 7 56
------------------------------------------------------------------
Total 2008 charge-offs $5,941 $ 8,076
==================================================================
Loans the Bank charged-off during the quarter include the following:
-- Eleven loans classified as commercial and industrial made to
eight borrowers. A substantial portion of the balances
charged-off within this category is attributed to the write-down
of one loan in the amount of $2.1 million. Loans within this
category are secured by real-estate, land and various business
assets located within the Bank's market area. Additionally,
the Bank repossessed collateral securing one loan within this
category in the amount of $63,000 and is included in Other
Assets.
-- Five loans classified as single family residential construction
- spec made to three borrowers. Loans within this category are
secured by real-estate in various stages of construction.
During the fourth quarter, the Bank received payments in the
approximate amount of $1.3 million related to one loan within
this category. Of the remaining balance for this loan,
approximately $0.4 million was charged-off and $0.5 million
moved to OREO status.
-- Three loans classified as land made to three borrowers.
Contributing significantly to charge-offs within this category
was the write-down of one loan in the amount of $1.2 million.
This loan as well as others within this category are secured by
land in the Bank's market area.
-- Three loans classified as residential 1-4 family. During the
quarter, the Bank moved the remaining balance of one loan in
the amount of $0.4 million to OREO status after writing down the
balance by approximately $0.3 million. Real-estate securing
loans within this category are located in the Bank's market area.
-- One loan in the category of commercial real-estate was partially
charged-off in the amount of $35,000. This loan is also secured
by real-estate in the Bank's market area.
Charge-offs, net of recoveries of $130,000 for all of 2008 totaled $7.9 million.
"We continue to closely monitor our credit quality, and as previously mentioned, have implemented additional precautionary measures that include pro-actively identifying credit weaknesses early in the collection cycle, increasing the oversight frequency of watch list credits and devoting additional internal resources to monitoring those credits," added Ward.
Non-Performing Assets
At year-end, non-accruing balances totaled $18.3 million, which is a decline of approximately $4.1 million from the $22.4 million reported at September 30, 2008. The majority of the change can be attributed to the charge-offs mentioned above, the addition of a $1.5 million loan to non-accruing status, and approximately $1.1 million in loan balances moving to other real estate owned ("OREO") status during the fourth quarter of 2008. Recent appraisals on real-estate for non-performing loans have been obtained and management is currently working with all borrowers where possible in order to bring a speedy resolution to these problem assets in an effort to minimize any future losses.
Non-performing assets declined to $20.0 million, or 2.48% of total assets at year end, compared to $22.6 million, or 2.87% of total assets, at the end of the previous quarter.
The following table provides a summary of certain key asset quality balances as of December 31, 2008 and September 30, 2008:
NON-PERFORMING ASSETS 12/31/2008 9/30/2008
--------------------------------------------------------------------
Loans on non-accrual status $18,327 $22,390
Loans more than 90 days delinquent, still
accruing 348 --
--------------------------------------------------------------------
Total non-performing loans 18,675 22,390
--------------------------------------------------------------------
Other real estate owned (OREO) 1,337 197
--------------------------------------------------------------------
Total non-performing assets $20,012 $22,587
====================================================================
Total non-performing assets to total assets 2.48% 2.87%
At December 31, 2008, the allowance for loan losses was $10.4 million, or 1.53% of total gross loans, compared to $10.4 million, or 1.55% of total gross loans as of September 30, 2008. Net charge-offs during the quarter were $5.9 million with recoveries of $3,000.
Heritage Oaks recorded a $6.0 million provision for loan losses in the fourth quarter of 2008, compared to a $3.2 million provision for loan losses in the previous quarter and a $140,000 provision for loan losses in the fourth quarter a year ago. For the full year Heritage Oaks recorded approximately $12.2 million in provisions for loan losses compared to $0.7 million in 2007.
Capital Position
On January 7, 2008, Heritage Oaks announced that it received preliminary approval to participate in the U.S. Treasury's voluntary Capital Purchase Program. The Treasury intends to purchase approximately $21 million in senior preferred stock of Heritage Oaks Bancorp and will receive warrants to purchase shares of our common stock subject to the standard terms and conditions of the program.
"Participation in the Capital Purchase Program affirms Heritage Oaks' position as a strong and healthy financial institution," said Ward. "This new equity will help us to preserve capital as well as to fortify our balance sheet by allowing us to do more lending, and it also affords us opportunities for future growth."
Heritage Oaks has over $68.9 million in Tier I capital and $78.2 million in Total Risk Based capital and remains "well capitalized" by regulatory standards with a Total Risk-Based capital ratio of 10.56% and a Tier One Risk-Based capital ratio of 9.31%. Tangible equity represented 6.94% of total assets at December 31, 2008.
Shareholders' equity was $70.0 million at year-end, compared to $69.5 million a year ago. Book value per share was $9.03 at December 31, 2008, compared to $9.04 per share a year earlier and tangible book value per share was $7.21 at December 31, 2008, compared to $7.00 a year earlier.
Liquidity
"Our liquidity remains strong, with a liquidity ratio of 6.1% at December 31, 2008, which we believe provides sufficient ability to meet the needs of our customers," Ward added. Additionally, the Bank has borrowing lines with the Federal Home Loan Bank ("FHLB") as well as credit arrangements with correspondent banks to provide liquidity for a variety of reasons, including the day to day demands of our depositors. At December 31, 2008, the Bank's remaining capacity to borrow against these lines was approximately $88.5 million. Additionally, the Bank has the ability to purchase brokered funds from a variety of sources, providing for additional secondary funding.
Balance Sheet
"Our market area along the Central Coast has historically been less affected by economic fluctuations and real-estate valuations, compared to other areas of California," said Ward. "While the economy in our primary markets of San Luis Obispo and Santa Barbara counties have not been immune to the negative impacts of both the national and state economies, the abundant tourism that has developed over the past decade in our market area, especially in the wine industry and coastal communities, has helped sustain our local economy in previous economic downturns."
Net loans grew 2% over the prior quarter and 10% year-over-year. Net loans were $668 million at December 31, 2008, compared to $654 million at the end of the preceding quarter and $605 million a year ago. "We continue to see good loan demand in our Santa Barbara market, especially in C&I lending," Ward said. "However, loan growth has slowed in San Luis Obispo County. While we are still making new loans, our underwriting criteria are very conservative and it takes a borrower with a very high credit rating to get approved for a loan. In addition, we remain very selective in the types of loans we choose to originate. Earlier in 2008 we chose not to originate single family speculative construction loans and have no plans to lend in this segment in the near future."
Total deposits were $604 million at December 31, 2008, compared to $589 million at September 30, 2008, and $645 million a year ago. Core deposits declined $10 million on a linked quarter basis and represent 69% of total deposits. "While we continue to concentrate on increasing core deposits in order to rely less on secondary funding sources and to maintain our healthy net interest margin, we have chosen not to participate in the irrational deposit pricing that has been going on in our markets.
"We strategically looked at the cost of deposits, and as such we have openly let high cost deposits leave the bank and supplemented them with FHLB borrowings at lower rates, which helped us to significantly reduce interest expense during the quarter," said Ward. "As a result our money market, NOW and savings account balances remain nearly unchanged from a year ago, and time deposits under $100,000 decreased 13% compared to a year ago."
Net Interest Margin
"Despite the 175 basis point decrease in the targeted Fed Funds Rate during the fourth quarter of 2008 we were able to effectively keep our margin in the 5% range," said Ward. "This is due in part to our relatively strong core deposit base and our balance sheet management." The net interest margin was 5.04% for the fourth quarter, compared to 5.18% during the preceding quarter and 5.44% for the fourth quarter a year ago. For the full year the net interest margin was 5.21%, compared to 5.53% in 2007.
Operating Results
Total revenue, consisting of net interest income before the provision for loan losses and non-interest income, was $10.9 million in the fourth quarter, compared to $11.0 million in the third quarter of 2008 and $10.2 million in the fourth quarter of 2007. For the full year total revenue increased 22% to $43.8 million, compared to $35.8 million in 2007. Net interest income was $9.4 million in the fourth quarter compared to $9.5 million in the previous quarter and $8.8 million in the fourth quarter a year ago. For the full year, net interest income increased 24% to $37.6 million compared to $30.4 million in 2007. Interest expense decreased 34% for the fourth quarter compared to the fourth quarter a year ago, and decreased 5% from the previous quarter. For the full year, interest expense decreased 15% compared to 2007.
Non-interest income was $1.5 million for the fourth quarter compared to $1.5 million in the previous quarter and $1.4 million in the fourth quarter a year ago. For all of 2008, non-interest income increased 16% to $6.2 million compared to $5.3 million in 2007. The increase year-over-year was largely a result of the increase in service charges on deposit accounts, which improved 18% in 2008 compared to 2007, as well as Visa IPO income of $273,000 in the second quarter of 2008.
"After a full year of operating with the Business First acquisition we have been able to keep expenses in line while successfully integrating Business First into our organization," said Ward. "We also kept salary and employee benefits in line and there were no bonuses accrued in 2008."
Total non-interest expense was $7.2 million for the fourth quarter compared to $7.1 million in the previous quarter and $6.9 million in the fourth quarter a year ago. For the year, total non-interest expense was $29.4 million compared to $23.9 million a year earlier.
The efficiency ratio was 66.43% in the fourth quarter of 2008 compared to 64.40% in the previous quarter and 66.89% in the fourth quarter a year ago. For the year the efficiency ratio was 67.27% compared to 66.67% in 2007. The efficiency ratio measures operating expenses as a percent of total net revenues.
About the Company
Heritage Oaks Bancorp is the holding company for Heritage Oaks Bank which operates as Heritage Oaks Bank and Business First, a division of Heritage Oaks Bank. Heritage Oaks Bank has its headquarters plus one branch office in Paso Robles, two branch offices in San Luis Obispo, single branch offices in Cambria, Arroyo Grande, Atascadero, Templeton, San Miguel and Morro Bay and three branch offices in Santa Maria. Heritage Oaks Bank conducts commercial banking business in San Luis Obispo County and Northern Santa Barbara County. The Business First division has two branch offices in Santa Barbara. Visit Heritage Oaks Bancorp on the Web at www.heritageoaksbancorp.com.
Statements concerning future performance, developments or events, expectations for growth and income forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to the ability to successfully integrate the operations of Business First National Bank, increased profitability, continued growth, the Bank's beliefs as to the adequacy of its existing and anticipated allowances for loan losses, beliefs and expectations regarding actions that may be taken by regulatory authorities having oversight of the Bank's operations, interest rates and financial policies of the United States government, the ongoing financial crisis in the United States, and the response of the federal and state government and our regulators thereto, general economic conditions and California's energy crisis. Additional information on these and other factors that could affect financial results are included in Heritage Oaks Bancorp's Securities and Exchange Commission filings. If any of these risks or uncertainties materialize or if any of the assumptions underlying such forward-looking statements proves to be incorrect, Heritage Oaks Bancorp's results could differ materially from those expressed in, implied or projected by such forward-looking statements. Heritage Oaks Bancorp assumes no obligation to update such forward-looking statements.
Heritage Oaks Bancorp
Consolidated Balance Sheets
Percentage
(un-audited) (audited) Change Vs.
--------------------------- ---------------
(dollar amounts in 12/31/ 9/30/ 12/31/ 9/30/ 12/31/
thousands) 2008 2008 2007 2008 2007
---------------------------------------------------------------------
Assets
Cash and due from banks $ 17,921 $18,914 $ 23,254 -5.3% -22.9%
Federal funds sold 6,650 8,835 23,165 -24.7% -71.3%
---------------------------------------------------------------------
Total cash and cash
equivalents 24,571 27,749 46,419 -11.5% -47.1%
---------------------------------------------------------------------
Interest bearing
deposits with other
banks 119 119 330 0.0% -63.9%
Securities available
for sale 50,762 52,634 47,556 -3.6% 6.7%
Federal Home Loan Bank
stock, at cost 5,123 5,006 3,045 2.3% 68.2%
Loans held for sale 7,939 2,955 902 168.7% 780.2%
Loans, net (1) 668,034 654,403 605,342 2.1% 10.4%
Property, premises and
equipment 6,827 6,769 6,390 0.9% 6.8%
Deferred tax assets 9,700 7,085 5,290 -8.8% 83.4%
Bank owned life
insurance 10,737 10,631 9,923 51.5% 8.2%
Goodwill 11,541 11,541 10,911 0.0% 5.8%
Core deposit intangible 3,691 3,906 4,551 -5.5% -18.9%
Other real estate owned 1,337 197 -- 578.7% --
Other assets 5,207 4,940 4,895 5.4% 6.4%
---------------------------------------------------------------------
Total assets $805,588 $787,935 $745,554 2.2% 8.1%
=====================================================================
Liabilities
Deposits
Non-interest bearing
demand $147,044 $155,267 $153,684 -5.3% -4.3%
Savings, NOW, and money
market 296,488 269,744 317,911 9.9% -6.7%
Time deposits of $100K
or more 75,111 75,657 75,966 -0.7% -1.1%
Time deposits under
$100K 84,878 88,583 97,247 -4.2% -12.7%
---------------------------------------------------------------------
Total deposits 603,521 589,251 644,808 2.4% -6.4%
---------------------------------------------------------------------
Short term FHLB
borrowing 99,000 96,500 4,000 2.6% 2375.0%
Long term FHLB
borrowing 10,000 10,000 4,000 0.0% 150.0%
Securities sold under
agreements to
repurchase 2,796 1,235 1,936 126.4% 44.4%
Junior subordinated
debentures 13,403 13,403 13,403 0.0% 0.0%
Other liabilities 6,835 6,592 7,957 3.7% -14.1%
---------------------------------------------------------------------
Total liabilities 735,555 716,981 676,104 2.6% 8.8%
---------------------------------------------------------------------
Stockholders' equity
Common stock, no par
value; 20,000,000
shares authorized;
issued and outstanding:
7,753,078; 7,709,600
and 7,683,829
December 31, 2008;
September 30, 2008;
and December 31, 2007,
respectively 48,649 48,456 43,996 0.4% 10.6%
Additional paid in
capital 1,055 947 672 11.4% 57.0%
Retained earnings 21,420 22,675 24,598 -5.5% -12.9%
Accumulated other
comprehensive income (1,091) (1,124) 184 2.9% -692.9%
---------------------------------------------------------------------
Total stockholders'
equity 70,033 70,954 69,450 -1.3% 0.8%
---------------------------------------------------------------------
Total liabilities and
stockholders'
equity $805,588 $787,935 $745,554 2.2% 8.1%
=====================================================================
(1) Loans are net of deferred loan fees of $1,701; $1,647; $1,732 and
allowance for loan losses of $10,412; $10,350; $6,143 for
December 31, 2008, September 30, 2008, and December 31, 2007
respectively.
Heritage Oaks Bancorp
Consolidated Statements of Income
(un-audited) Percentage
For the Three Months Ended Change Vs.
(dollar amounts in ----------------------------- ------------------
thousands except 12/31/ 9/30/ 12/31/ 9/30/ 12/31/
per share data) 2008 2008 2007 2008 2007
---------------------------------------------------------------------
Interest Income
Interest and fees
on loans $11,484 $11,731 $12,337 -2.1% -6.9%
Investment
securities 728 786 609 -7.4% 19.5%
Federal funds sold
and commercial
paper 10 18 208 -44.4% -95.2%
Time certificates
of deposit 1 1 1 0.0% 0.0%
---------------------------------------------------------------------
Total interest
income 12,223 12,536 13,155 -2.5% -7.1%
---------------------------------------------------------------------
Interest Expense
NOW accounts 104 88 135 18.2% -23.0%
MMDA accounts 842 773 1,582 8.9% -46.8%
Savings accounts 17 25 169 -32.0% -89.9%
Time deposits of
$100K or more 611 620 926 -1.5% -34.0%
Other time
deposits 616 702 1,198 -12.3% -48.6%
Borrowed funds 681 803 364 -15.2% 87.1%
---------------------------------------------------------------------
Total interest
expense 2,871 3,011 4,374 -4.6% -34.4%
---------------------------------------------------------------------
Net interest income
before provision
for loan losses 9,352 9,525 8,781 -1.8% 6.5%
Provision for
loan losses 6,000 3,200 140 87.5% 4185.7%
---------------------------------------------------------------------
Net interest income
after provision
for loan losses 3,352 6,325 8,641 -47.0% -61.2%
---------------------------------------------------------------------
Non Interest Income
Service charges on
deposit accounts 797 878 829 -9.2% -3.9%
Other income 701 635 610 10.4% 14.9%
---------------------------------------------------------------------
Total non-interest
income 1,498 1,513 1,439 -1.0% 4.1%
---------------------------------------------------------------------
Non-Interest Expense
Salaries and
employee benefits 3,664 3,651 3,819 0.4% -4.1%
Occupancy and
equipment 1,198 1,076 1,130 11.3% 6.0%
Other expenses 2,346 2,381 1,925 -1.5% 21.9%
---------------------------------------------------------------------
Total non-interest
expenses 7,208 7,108 6,874 1.4% 4.9%
---------------------------------------------------------------------
Income before
provision for
income taxes (2,358) 730 3,206 -423.0% -173.5%
Provision for
income taxes (1,104) 196 1,228 -663.3% -189.9%
---------------------------------------------------------------------
Net income $(1,254) $ 534 $ 1,978 -334.8% -163.4%
=====================================================================
Average basic shares
outstanding 7,724,093 7,709,600 7,682,709
Average diluted
shares outstanding 7,785,211 7,798,321 7,887,206
Basic earnings per
share $ (0.16) $ 0.07 $ 0.26
Fully diluted
earnings per share $ (0.16) $ 0.07 $ 0.25
Heritage Oaks Bancorp
Consolidated Statements of Income
(unaudited) (audited)
For the Twelve Percentage
Months Ended Change Vs.
(dollar amounts in thousands ---------------------- ------------
except per share data) 12/31/2008 12/31/2007 12/31/2007
---------------------------------------------------------------------
Interest Income
Interest and fees on loans $47,038 $42,425 10.9%
Investment securities 2,964 1,956 51.5%
Federal funds sold and
commercial paper 140 785 -82.2%
Time certificates of deposit 8 8 0.0%
---------------------------------------------------------------------
Total interest income 50,150 45,174 11.0%
---------------------------------------------------------------------
Interest Expense
NOW accounts 447 262 70.6%
MMDA accounts 3,720 4,411 -15.7%
Savings accounts 208 238 -12.6%
Time deposits of $100K or more 2,436 2,046 19.1%
Other time deposits 2,892 4,914 -41.1%
Borrowed funds 2,861 2,880 -0.7%
---------------------------------------------------------------------
Total interest expense 12,564 14,751 -14.8%
---------------------------------------------------------------------
Net interest income before
provision for loan losses 37,586 30,423 23.5%
Provision for loan losses 12,215 660 1750.8%
---------------------------------------------------------------------
Net interest income after
provision for loan losses 25,371 29,763 -14.8%
---------------------------------------------------------------------
Non Interest Income
Service charges on deposit
accounts 3,284 2,774 18.4%
Other income 2,885 2,575 12.0%
Gain on sale of investment
securities 37 -- --
---------------------------------------------------------------------
Total non-interest income 6,206 5,349 16.0%
---------------------------------------------------------------------
Non-Interest Expense
Salaries and employee benefits 15,561 13,501 15.3%
Occupancy and equipment 4,542 3,381 34.3%
Other expenses 9,331 7,026 32.8%
---------------------------------------------------------------------
Total non-interest expenses 29,434 23,908 23.1%
---------------------------------------------------------------------
Income before provision for
income taxes 2,143 11,204 -80.9%
Provision for income taxes 497 4,287 -88.4%
---------------------------------------------------------------------
Net income $ 1,646 $ 6,917 -76.2%
=====================================================================
Average basic shares outstanding 7,708,353 6,984,174
Average diluted shares
outstanding 7,819,640 7,228,804
Basic earnings per share $ 0.21 $ 0.99
Fully diluted earnings per share $ 0.21 $ 0.96
Additional Financial Information
(dollar amounts For the Quarters Ended Percentage Change Vs.
in thousands)-------------------------------- ----------------------
LOANS 12/31/2008 9/30/2008 12/31/2007 9/30/2008 12/31/2007
---------------------------------------------------------------------
Real Estate
Secured
Multi-family
residential $ 16,206 $ 13,997 $ 12,779 15.8% 26.8%
Residential
1 to 4
family 23,910 29,031 24,326 -17.6% -1.7%
Home equity
lines of
credit 26,409 22,247 17,470 18.7% 51.2%
Commercial 285,631 281,269 274,266 1.6% 4.1%
Farmland 10,723 10,630 11,557 0.9% -7.2%
Commercial
Commercial
and indus-
trial 157,674 151,323 133,981 4.2% 17.7%
Agriculture 13,744 13,059 11,367 5.2% 20.9%
Other 620 662 732 -6.3% -15.3%
Construction
Single
family
residential 11,414 12,897 10,239 -11.5% 11.5%
Single
family
residential
- Spec. 15,395 17,469 18,718 -11.9% -17.8%
Tract 2,431 1,999 1,664 21.6% 46.1%
Multi-
family 5,808 7,803 9,054 -25.6% -35.9%
Hospitality 18,630 14,177 16,784 31.4% 11.0%
Commercial 21,484 25,624 30,677 -16.2% -30.0%
Land 61,681 55,704 31,064 10.7% 98.6%
Installment
loans to
individuals 7,851 7,889 7,977 -0.5% -1.6%
All other
loans
(including
overdrafts) 536 620 562 -13.5% -4.6%
---------------------------------------------------------------------
Total gross
loans $ 680,147 $ 666,400 $ 613,217 2.1% 10.9%
---------------------------------------------------------------------
Deferred
loan fees (1,701) 1,647 1,732 -203.3% -198.2%
Allowance
for loan
losses (10,412) 10,350 6,143 -200.6% -269.5%
---------------------------------------------------------------------
Net loans $ 692,260 $ 654,403 $ 605,342 5.8% 14.4%
=====================================================================
Loans held
for sale $ 7,939 $ 2,955 $ 902 168.7% 780.2%
ALLOWANCE For the Quarters Ended For the Years Ended
FOR -------------------------------- ----------------------
LOAN LOSSES 12/31/2008 9/30/2008 12/31/2007 12/31/2008 12/31/2007
---------------------------------------------------------------------
Balance,
beginning
of period $ 10,350 $ 8,128 $ 4,720 $ 6,143 $ 4,081
Provision
expense 6,000 3,200 140 12,215 660
Credit
losses
charged
against
allowance (5,941) (1,033) (213) (8,076) (249)
Recoveries
of loans
previously
charged off 3 55 115 130 270
Credit from
purchase
of Business
First Bank -- -- 1,381 -- 1,381
---------------------------------------------------------------------
Balance, end
of period $ 10,412 $ 10,350 $ 6,143 $ 10,412 $ 6,143
=====================================================================
Net (charge-
offs)/
recoveries $ (5,938) $ (978) $ (98) $ (7,946) $ 21
Net charge-
offs/average
loans out-
standing 0.88% 0.15% 0.02% 1.21% 0.00%
Allowance
for loan
losses/
total loans
outstanding 1.53% 1.55% 1.00%
Percentage Change Vs.
NON-PERFORMING ----------------------
ASSETS 12/31/2008 9/30/2008 12/31/2007 9/30/2008 12/31/2007
---------------------------------------------------------------------
Loans on
non-accrual
status $ 18,327 $ 22,390 $ 338 -18.1% 5322.2%
Loans more
than 90
days delin-
quent, still
accruing 348 -- -- -- --
---------------------------------------------------------------------
Total non-
performing
loans 18,675 22,390 338 -16.6% 5425.1%
---------------------------------------------------------------------
Other real
estate owned
(OREO) 1,337 197 -- 578.7% --
---------------------------------------------------------------------
Total non-
performing
assets $ 20,012 $ 22,587 $ 338 -11.4% 5820.7%
=====================================================================
Total non-
performing
assets to
total assets 2.48% 2.87% 0.05% -13.3% 5379.5%
Percentage Change Vs.
----------------------
DEPOSITS 12/31/2008 9/30/2008 12/31/2007 9/30/2008 12/31/2007
---------------------------------------------------------------------
Non-interest
bearing
demand $ 147,044 $ 155,267 $ 153,684 -5.3% -4.3%
---------------------------------------------------------------------
Interest-
bearing
demand 72,952 71,601 69,558 1.9% 4.9%
Regular
savings
accounts 21,835 22,484 41,599 -2.9% -47.5%
Money market
accounts 201,701 175,659 206,754 14.8% -2.4%
---------------------------------------------------------------------
Total
interest-
bearing
transaction
& savings
accounts 296,488 269,744 317,911 9.9% -6.7%
---------------------------------------------------------------------
Time deposits 139,872 144,011 160,692 -2.9% -13.0%
Brokered time
deposits 20,117 20,229 12,521 -0.6% 60.7%
---------------------------------------------------------------------
Total
deposits $ 603,521 $ 589,251 $ 644,808 2.4% -6.4%
=====================================================================
PROFITABILITY/ Three Months Ended Twelve Months Ended
PERFORMANCE -------------------------------- ----------------------
RATIOS 12/31/2008 9/30/2008 12/31/2007 12/31/2008 12/31/2007
---------------------------------------------------------------------
Operating
efficiency 66.43% 64.40% 66.89% 67.27% 66.67%
Return on
average equity -6.93% 2.94% 12.09% 2.29% 12.68%
Return on
average tangi-
ble equity -8.65% 3.71% 13.54% 2.91% 14.25%
Return on
average assets -0.63% 0.27% 1.12% 0.21% 1.16%
Other operating
income to
average assets 0.75% 0.76% 0.90% 0.80% 0.92%
Other operating
expense to
average assets 3.61% 3.59% 3.97% 3.78% 3.99%
Net interest
income to
average assets 4.68% 4.81% 5.04% 4.82% 5.06%
Non-interest
income to
total net
revenue 13.81% 13.71% 15.16% 14.17% 15.39%
ASSET QUALITY
AND CAPITAL
RATIOS
Non-performing
loans to
total gross
loans 2.75% 3.36% 0.13%
Non-performing
loans as a
% of ALLL 179.36% 216.33% 13.58%
Non-performing
loans as a
% of total
assets 2.32% 2.84% 0.05%
Non-performing
loans to
primary capital 26.67% 31.56% 1.19%
Leverage ratio 8.84% 9.01% 10.69%
Tier I Risk-
Based Capital
Ratio 9.31% 9.67% 11.65%
Total Risk-
Based Capital
Ratio 10.56% 10.92% 12.58%
AVERAGE
BALANCES AND
RATES Three Months Ended Twelve Months Ended
(dollars in -------------------------------- ----------------------
thousands) 12/31/2008 9/30/2008 12/31/2007 12/31/2008 12/31/2007
---------------------------------------------------------------------
Average
investments $ 57,135 $ 60,474 $ 38,166 $ 59,373 $ 39,964
Average federal
funds sold 5,774 3,342 29,447 6,583 15,117
Average loans 675,742 667,441 466,749 656,105 468,007
---------------------------------------------------------------------
Average earning
assets 738,651 731,257 534,362 722,061 523,088
---------------------------------------------------------------------
Average non-
earning assets 66,340 65,230 46,858 65,359 52,443
Average for
loan losses (10,002) (8,664) (4,600) (7,845) (4,401)
---------------------------------------------------------------------
Average
assets $ 794,989 $ 787,823 $ 576,620 $ 779,575 $ 571,130
=====================================================================
Average
non-interest
bearing demand
deposits $ 153,432 $ 155,582 $ 133,432 $ 151,529 $ 137,706
Average
interest
bearing
deposits 461,162 442,799 353,845 452,559 318,118
Average other
borrowings 101,012 109,721 26,804 95,973 56,700
Average other
liabilities 7,388 7,585 9,098 7,766 6,525
---------------------------------------------------------------------
Average
liabilities 722,994 715,687 523,179 707,827 519,049
---------------------------------------------------------------------
Average equity 71,995 72,136 53,441 71,748 52,081
---------------------------------------------------------------------
Average
liabilities
and equity $ 794,989 $ 787,823 $ 576,620 $ 779,575 $ 571,130
=====================================================================
Interest rate
yield on
loans 6.76% 6.99% 8.55% 7.17% 8.60%
Interest rate
yield on
investments 5.08% 5.18% 4.44% 5.01% 4.45%
Interest rate
yield on
federal funds
sold 0.69% 2.14% 5.19% 2.13% 5.10%
Interest rate
yield on
interest
earnings
assets 6.58% 6.82% 8.07% 6.95% 8.18%
Interest rate
expense on
deposits 1.42% 1.47% 2.55% 1.61% 2.31%
Interest rate
expense on
other
borrowings 2.68% 2.91% 6.08% 2.98% 5.93%
Interest rate
expense on
interest
bearing
liabilities 2.03% 2.17% 3.69% 2.29% 3.70%
Average equity
to average
assets 9.06% 9.16% 9.27% 9.20% 9.12%
Net interest
margin 5.04% 5.18% 5.44% 5.21% 5.53%