LOS ANGELES, March 6, 2007 (PRIME NEWSWIRE) -- National Mercantile Bancorp (Nasdaq:MBLA), the holding company for Mercantile National Bank and South Bay Bank, N.A., today reported record earnings for 2006 with strong asset growth. For 2006, net income grew 27% to $5.6 million, or $0.94 per share, compared to $4.5 million, or $0.75 per share, in 2005. Fourth quarter net income was $1.7 million or $0.28 per diluted share, compared to $1.2 million or $0.21 per share in the fourth quarter a year ago.
"The joint proxy statement for the proposed merger of equals with FCB Bancorp of Camarillo became effective in mid-February, and we have scheduled a special meeting of shareholders for March 12, 2007 at 10:00 am at the company's headquarters in Century City. We encourage all shareholders to review the materials being sent to them and to vote their proxies promptly. Should shareholders approve the transaction as anticipated, the merger is expected to close following the shareholders meeting," Montgomery added. "We are pleased to report two consecutive years of record earnings and continue to see expansion in the local economy." The combined banks are expected to have total assets of over $1 billion in 12 full service offices and 3 loan production offices in Los Angeles, Ventura and Orange Counties.
REVIEW OF OPERATIONS
With strong loan growth and higher securities balances, revenue in 2006 (net interest income before provision for credit losses plus non-interest income) increased 15% to $25.1 million in 2006 from $21.9 million in 2005. Net interest income before provision for credit losses increased 12% to $23.3 million in 2006, from $20.8 million in 2005. In the fourth quarter of 2006, net interest income grew 2% to $5.8 million from $5.7 million a year ago. In 2006, the net interest margin was 5.14% compared to 5.58% in 2005. Fourth quarter net interest margin was 4.86% compared to 5.09% in the third quarter of 2006, and 5.51% in the fourth quarter of 2005.
The provision for credit losses was $248,000 during 2006, due to the growth in the loan portfolio, compared to a benefit of $84,000 in 2005, due to recoveries from previously charged off assets. The fourth quarter 2006 provision for credit losses was $104,000 compared to $40,000 a year ago. Noninterest income jumped 60.3%, to $1.8 million and $1.1 million, respectively, reflecting a $705,000 insurance settlement received by the Company in the fourth quarter of 2006 from a claim relating to collateral for a loan.
Operating (non-interest) expense increased 5% to $15.0 million from $14.4 million a year ago. "Revenue growth continues to outpace operating expenses, generating positive operating leverage and contributing to strong profitability improvements," said David Brown, Chief Financial Officer. Operating expenses included an after-tax charge for stock options of $105,000 in 4Q06 and $395,000 year-to-date related to the adoption of SFAS 123R. In 2005, this cost was not included in GAAP earnings but was disclosed in footnotes to the financial statements, and totaled $267,000 for the year.
Profitability continued to improve with strong gains in productivity reflected in an efficiency ratio of 59.8% in 2006 compared to 65.6% in 2005. The company generated a return on average assets (ROAA) of 1.16% and a return on average equity of 13.84% during 2006, versus 1.10% and 12.15%, respectively, a year ago.
In the first quarter of 2007, the company refinanced its trust preferred securities (TPS). The debt extinguishment in the first quarter 2007 resulted in a pre-tax charge of $1.6 million for the payment of the redemption premium and the write-off of the unamortized debt issuance cost. (It was previously reported in our December 26, 2006 press release that we expected this charge would be a fourth quarter 2006 event.) "The replacement of our 10.25% trust preferred securities with a 6.80% issue that will save us over $500,000 pre-tax per year," said Scott A. Montgomery, President and CEO.
BALANCE SHEET PERFORMANCE
Total assets increased 12% to $501.6 million at December 31, 2006, from $448.5 million a year ago. The loan portfolio grew 8% to $366.6 million at December 31, 2006, compared to $339.6 million at December 31, 2005.
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Loan Portfolio Composition
(Dollars in thousands)
December 31,
2006 2005
------------------- -------------------
Amount % Amount %
-------- --- -------- ---
Commercial
loans -
secured and
unsecured $102,662 28% $ 89,474 6%
Real estate loans:
Secured by
commercial real
properties 141,741 39% 121,641 36%
Secured by
multifamily
residential
properties 17,602 5% 18,663 5%
Secured by one
to four family
residential
properties 8,790 2% 10,498 3%
-------- --- -------- ---
Total real
estate loans 270,795 74% 150,802 44%
Construction and
land development
loans 83,188 23% 92,077 27%
Consumer:
installment,
home equity
and unsecured 12,663 3% 7,239 2%
-------- --- -------- ---
Total loans
outstanding $366,646 100% $339,592 100%
======== === ======== ===
Total deposits increased 5% to $380.6 million at December 31, 2006, compared to $363.2 million a year earlier, fueled by strong growth in money market accounts, which grew 56% year-over-year and now represent 31% of total deposits, up from 21% a year earlier. Core deposits, of which money market accounts are the largest component and exclude time certificates $100,000 and over, accounted for 79% of total deposits at December 31, 2006, up from 76% a year ago.
Shareholders' equity increased 18% to $45.1 million, equating to a book value per share of $7.73, at December 31, 2006, compared to $38.2 million, or $6.77 per share, at December 31, 2005. Tangible book value increased 19% to $7.03 per share at December 31, 2006, from $5.99 per share at December 31, 2005.
"Credit quality remains excellent this year following the sale of our only piece of other real estate owned," said Robert Bartlett, Chief Credit Officer. At quarter-end, non-performing assets totaled $303,000 or 0.06% of total assets, down from $1.4 million, or 0.32% of total assets at December 31, 2005. Net charge-offs were just $38,000 year-to-date. There were no loan delinquencies at December 31, 2006. National Mercantile's allowance for credit losses was 1.30% of gross loans at December 31, 2006, compared to 1.32% a year ago.
ABOUT NATIONAL MERCANTILE BANCORP
National Mercantile Bancorp is the holding company for Mercantile National Bank and South Bay Bank, with offices located in Century City, Encino, Torrance, El Segundo, Costa Mesa and Beverly Hills, all among California's highest value markets. The banks' focus is on business banking with specialty lending expertise in the entertainment, healthcare, professional services, real estate escrow, business and residential construction, property management industries and community-based non-profit organizations. The company is building a premier business banking franchise with experienced loan officers providing highly personalized service.
This press release contains forward-looking statements about the Company. Forward-looking statements consist of descriptions of plans or objectives for future operations, products or services, forecasts of revenues, earnings or other measures of economic performance and assumptions underlying or relating to any of the foregoing. Because forward-looking statements discuss future events or conditions and not historical facts, they often include words such as "believe," "potential," "confident," "encourage or encouraging," "will be," "anticipate," "estimate" or similar expressions. Do not rely unduly on forward-looking statements. They give the Company's expectations about the future and are not guarantees or predictions of future events, conditions or results. Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update them to reflect changes that occur after that date. Many factors, most beyond the company's control, could cause actual results to differ significantly from the Company's expectations. These factors include, among other things, changes in interest rates, which affect margins, impact funding sources or alter loan demand; increased competitive pressures; changes in national and local economic conditions; fluctuations in the California real estate markets; changes in fiscal policy, monetary policy, legislative or regulatory environments; changes in the credit quality of the Company's loan portfolio, the Company's abilities to realize further efficiencies and achieve growth targets, and finalization of year-end audit results. These and other factors are discussed in greater detail in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2005.
Additional Information
The proposed merger will be submitted to the shareholders of each of National Mercantile Bancorp and FCB Bancorp for their consideration. First California Financial Group, Inc. filed a registration statement with the SEC, which includes a joint proxy statement/prospectus that has been mailed to the shareholders of each of National Mercantile Bancorp and FCB Bancorp, and each of First California Financial Group, National Mercantile Bancorp and FCB Bancorp may file other relevant documents concerning the proposed merger with the SEC. Shareholders are urged to read the registration statement and the joint proxy statement/prospectus regarding the proposed merger and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain important information. You are able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about First California Financial Group, National Mercantile Bancorp and FCB Bancorp, at the SEC's website (http://www.sec.gov). You may also obtain these documents, free of charge, by accessing National Mercantile Bancorp's website (http://www.mnbla.com) under the tab "Investor Relations", or by accessing FCB Bancorp's website (http://www.fcbank.com) under the tab "About Us."
National Mercantile Bancorp and FCB Bancorp and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of National Mercantile Bancorp and FCB Bancorp in connection with the proposed merger. Information about the directors and executive officers of National Mercantile Bancorp is set forth in the proxy statement for its 2006 annual meeting of shareholders, as filed with the SEC on April 20, 2006. Information about the directors and executive officers of FCB Bancorp is set forth in its Annual Report on Form 10-K, as filed with the SEC on March 31, 2006. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the registration statement and the joint proxy statement/prospectus filed with the SEC regarding the proposed merger. You may obtain free copies of these documents as described above.
National Mercantile Bancorp and Subsidiaries
Selected Statement of Operations Data and Ratios:
(Unaudited)
(In thousands, except share data)
For the Three Months Ended
-------------------------------------------
Dec. 31, Sept. 30, June 30,
2006 2006 2006
===========================================
Interest income $ 9,288 $ 9,248 $ 8,913
Interest expense 3,483 3,387 2,947
------- ------- -------
Net interest income
before provision for
credit losses 5,805 5,861 5,966
Provision for credit
losses 104 72 40
------- ------- -------
Net interest income
after provision
for credit losses 5,701 5,789 5,926
Other operating income:
Deposit-related and
other customer
services 258 255 234
Other operating
income 865 573 (310)
Other operating
expenses 3,944 3,533 3,819
------- ------- -------
Income before
provision for
income taxes 2,880 3,084 2,031
Provision for income
taxes 1,196 1,328 885
------- ------- -------
Net income $ 1,684 $ 1,756 $ 1,146
======= ======= =======
Earnings per share:
Basic $ 0.30 $ 0.32 $ 0.21
Diluted $ 0.28 $ 0.29 $ 0.19
Weighted average
shares outstanding:
Basic 5,597,733 5,545,903 5,542,441
Diluted 6,004,100 5,985,837 6,035,527
RATIOS
Return on quarterly
average assets 1.34% 1.43% 0.94%
Return on quarterly
average equity 15.29% 17.05% 11.66%
Net interest margin
- average earning
assets 4.86% 5.09% 5.26%
Operating expense
ratio 3.13% 2.88% 3.14%
Efficiency ratio (b) 56.93% 52.82% 64.84%
For the Three Months Ended
-------------------------------------------
March 31, Dec. 31, Annual %
2006(a) 2005(a) Change
===========================================
Interest income $ 8,051 $ 7,585 22.5%
Interest expense 2,335 1,907 82.6%
------- -------
Net interest
income before
provision for
credit losses 5,716 5,678 2.2%
Provision for credit
losses 32 40 n/a
------- -------
Net interest income
after provision
for credit losses 5,684 5,638 1.1%
Other operating
income:
Deposit-related and
other customer
services 232 242 6.6%
Other operating
income (315) (194) -545.9%
Other operating
expenses 3,732 3,561 10.8%
------- -------
Income before
provision for
income taxes 1,869 2,125 35.5%
Provision for income
taxes 813 883 35.4%
------- -------
Net income $ 1,056 $ 1,242 35.6%
======= =======
Earnings per share:
Basic $ 0.19 $ 0.229619 30.7%
Diluted $ 0.18 $ 0.209591 33.6%
Weighted average
shares outstanding:
Basic 5,518,383 5,408,969
Diluted 6,002,461 5,925,829
RATIOS
Return on quarterly
average assets 0.93% 1.12%
Return on quarterly
average equity 10.82% 12.95%
Net interest margin
- average earning
assets 5.49% 5.51%
Operating expense
ratio 3.30% 3.22%
Efficiency ratio (b) 66.25% 62.19%
(a) As restated.
(b) Other operating expense divided by net interest income and other
operating income.
National Mercantile Bancorp and Subsidiaries
Selected Statement of Operations Data and Ratios:
(Unaudited)
(In thousands, except share data)
For the Year Ended
========================================
December 31, December 31, Annual %
2006 2005 Change
========================================
Interest income $35,500 $26,265 35.2%
Interest expense 12,152 5,483 121.6%
------- -------
Net interest income
before provision for
credit losses 23,348 20,782 12.3%
Provision for credit
losses 248 (84) -395.2%
------- -------
Net interest income
after provision for
credit losses 23,100 20,866 10.7%
Other operating income:
Deposit-related and
other customer services 979 1,060 -7.6%
Other operating income 813 58 -92.9%
Other operating expenses 15,028 14,376 4.5%
------- -------
Income before provision
for income taxes 9,864 7,608 29.7%
Provision for income
taxes 4,222 3,159 33.6%
------- -------
Net income $ 5,642 $ 4,449 26.8%
======= =======
Earnings per share:
Basic $ 1.02 0.96 6.3%
Diluted $ 0.94 0.75 25.3%
Weighted average shares
outstanding:
Basic 5,551,570 4,630,186
Diluted 6,007,186 5,897,758
Total shares
outstanding at
period 5,650,147 5,503,780
RATIOS
Return on average assets 1.16% 1.10%
Return on average equity 13.84% 12.15%
Net interest margin -
average earning assets 5.14% 5.58%
Operating expense ratio 3.10% 3.55%
Efficiency ratio (c) 59.78% 65.64%
(c) Other operating expense divided by net interest income and other
operating income.
Selected Financial Condition Ratios:
(Unaudited)
(In thousands, except ratios and shares)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2006 2006 2006 2006 2005
-------- -------- -------- ------- --------
Average
quarterly
assets $499,378 $486,336 $487,372 $458,881 $438,715
Nonperforming
assets
Nonaccrual
loans -- 338 343 300 319
Loans 90 days
past due
and still
accruing -- -- -- -- --
Other real
estate owned -- -- -- -- --
Other
property
owned 303 -- -- -- 1,056
------- ------- ------- ------- -------
Total
nonperforming
assets 303 338 343 300 1,375
Loan to deposit
ratio 96.33% 94.58% 94.55% 87.45% 93.50%
Allowance for
credit losses
to total loans 1.30% 1.30% 1.32% 1.29% 1.32%
Allowance for
credit losses to
nonperforming
assets 1564.36% 1379.03% 1355.10% 1520.67% 324.95%
National Mercantile Bancorp and Subsidiaries
Selected Financial Condition Data:
(Unaudited)
(In thousands, except share data)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2006 2006 2006 2006 2005
---------------------------------------------------
ASSETS
Cash and due
from banks-
demand $ 11,438 $ 10,709 $ 15,002 $ 15,211 $ 13,507
Due from
banks-
interest
bearing 2,000 2,000 2,263 2,000 2,000
Federal funds
sold and
securities
purchased
under
agreements
to resell -- -- 600 2,790 685
Investment
securities 104,414 105,478 103,970 88,263 74,370
Loans
Commercial 102,662 100,757 91,485 93,517 89,474
Real estate 168,133 162,237 164,394 159,724 150,802
Construction
and land
development 83,188 88,407 88,717 96,121 92,077
Consumer and
other loans 12,663 7,434 7,686 5,133 7,239
-------- -------- -------- -------- --------
Total loans
outstanding 366,646 358,835 352,282 354,495 339,592
Deferred net
loan fees (928) (615) (1,053) (995) (1,034)
-------- -------- -------- -------- --------
Loans
receivable,
net 365,718 358,220 351,229 353,500 338,558
Allowance for
loan and
lease losses (4,740) (4,661) (4,648) (4,562) (4,468)
-------- -------- -------- -------- --------
Net loans
receivable 360,978 353,559 346,581 348,938 334,090
Goodwill and
intangible
assets 4,410 4,464 4,520 4,576 4,632
Accrued
interest
receivable
and other
assets 18,323 17,987 18,466 17,554 19,175
-------- -------- -------- -------- --------
Total assets $501,563 $494,197 $491,402 $479,332 $448,459
======== ======== ======== ======== ========
LIABILITIES & CAPITAL
Deposits:
Noninterest-
bearing
demand $115,745 $115,740 $115,650 $122,638 $115,924
Interest-
bearing
demand
deposits 26,372 27,768 30,973 31,716 36,018
Money market
accounts 118,704 109,210 97,578 91,885 76,334
Savings 22,463 24,435 24,102 26,336 28,208
Time certificates
of deposit:
$100,00
or more 80,080 84,094 86,756 114,296 87,468
Under
$100,000 17,250 18,171 17,516 18,481 19,256
-------- -------- -------- -------- --------
Total
deposits 380,614 379,418 372,575 405,352 363,208
Other borrowings 55,300 52,600 57,250 16,400 28,337
Junior
subordinated
deferrable
interest
debentures 15,464 15,464 15,464 15,464 15,464
Accrued
interest and
other
liabilities 5,116 3,938 7,077 3,414 3,288
-------- -------- -------- -------- --------
Total
liabilities 456,494 451,420 452,366 440,630 410,297
Total
shareholders'
equity 45,069 42,777 39,036 38,702 38,162
-------- -------- -------- -------- --------
Total
liabilities &
shareholders'
equity $501,563 $494,197 $491,402 $479,332 $448,459
======== ======== ======== ======== ========
Book value per
common share $ 7.73 $ 7.45 $ 6.89 $ 6.79 $ 6.72
Tangible book
value per
common share (d) $ 7.03 $ 6.75 $ 6.18 $ 6.07 $ 5.99
(d) Total common equity, less goodwill and other intangible assets;
divided by fully-diluted shares outstanding.